OSB Group reports record profit before tax

The FTSE 250 company said its statutory profit before tax also increased, by 14% to £531.5m.

It said the strong performance in the 12 months ended 31 December was mainly driven by growth in its loan book, an improved net interest margin, and net fair value gains on financial instruments.

Underlying and statutory net loan books increased 12% to £23.5bn and £23.6bn, respectively, supported by organic originations of £5.8bn, a 29% increase year-on-year.

The firm’s underlying net interest margin was 303-basis points, an increase from 282-basis points in 2021, and its statutory net interest margin rose to 278-basis points from 253-basis points, benefiting from base rate rises.

However, OSB’s underlying cost-to-income ratio increased to 25%, and its statutory cost to income ratio rose to 27%, due to higher fair value gains partially offsetting the impact of higher administrative expenses.

The group said its underlying loan loss ratio was 14-basis points, and its statutory loan loss ratio was 13-basis points in 2022, reflecting a worsening economic outlook, including the potential impact of higher cost-of-living and borrowing on affordability.

Despite that, arrears remained stable with balances greater than three months at 1.1%, which was in line with December 2021.

The group's underlying return on equity was unchanged from the prior year at 24%, while its statutory return on equity increased to 21% from 20% due to strong profitability.

Its underlying basic earnings per share came in at 99.6p, up from 86.7p, and statutory basic earnings per share improved to 90.8p from 76p.

OSB Group’s capital remained strong, with a Common Equity Tier 1 ratio of 18.3% in 2022, down from 19.6% in 2021, and a total capital ratio of 19.7%, a decrease from 21.2% in 2021.

The company said it would kick off a share repurchase programme of £150m on 17 March.

Its board announced a recommended final dividend of 21.8p per share, along with a special dividend of £50m or 11.7p per share.

The dividend, together with the interim dividend of 8.7p per share, represented a payout ratio of 30% of underlying earnings attributable to ordinary shareholders.

“Our business model and strategy continue to deliver strong outcomes,” said group chief executive officer Andy Golding.

“We are capitalising on continued demand for our specialist lending products and are identifying opportunities to further digitise our business operations to deliver additional efficiencies.

“We will continue to invest in the group to ensure it remains well-positioned to meet the changing needs of our customers, brokers and wider stakeholders. I remain confident in the outlook for the group and our ability to deliver sustainable and attractive returns for our shareholders.”

At 1005 GMT, shares in OSB Group were up 9.59% at 521p.

Reporting by Josh White for Sharecast.com.