OSB GROUP PLC – Q3 Trading Update

OSB GROUP PLC: Trading update

Published: 2.11.2023

OSB GROUP PLC

Trading update

OSB GROUP PLC (OSBG or the Group), the specialist lending and retail savings group, today issues its trading update for the period from 1 July 2023 to date.

Highlights

The Group delivered strong financial and operating performance in the three months to 30 September 2023

Organic originations were £1.3bn in the third quarter of 2023 (Q3 2022: £1.6bn)

Underlying1 and statutory net loans increased by 7% in the nine months to 30 September 2023 to £25.2bn (31 December 2022: £23.5bn and £23.6bn, respectively)

The Group’s three months plus arrears balances remained broadly stable at 1.3% as at 30 September 2023 (30 June 2023: 1.2%). There was no material change in the Group’s forward-looking macroeconomic scenarios in the third quarter

EIR accounting assumptions remain broadly consistent, with no material change in behavioural trends in the period

The Group has substantially completed its £150m share repurchase programme2

The Group successfully completed an inaugural £300m senior debt issuance, an important milestone on its journey to meet its interim MREL requirement of 22.5% (including regulatory buffers) by July 2024, and supporting further distributions once the capital stack is optimised fully

The Group is cognisant of the rising cost of retail funds and the impact of planned future MREL issuance, but remains on track to deliver its 2023 full year guidance of an underlying1 net interest margin of c.2.6% and underlying1 cost to income ratio of c.33%. Given the strong lending performance to date, particularly in retentions, we now expect to deliver underlying1 net loan book growth of c.9%

• Underlying refers to results which exclude exceptional items, integration costs and other acquisition-related items arising from the Combination with CCFS
• As at market close on 1 November 2023

Andy Golding, CEO of OSB GROUP PLC, said:

“I am pleased with the Group’s strong performance in the third quarter, despite the continued macroeconomic uncertainty. We have once again proven to be a trusted partner to our borrowers and savers.

Our customer franchises performed very well. We completed £1.3bn of new lending during the third quarter demonstrating our strong relationships and attractive propositions in the market, and we are seeing borrowers continue to refinance with the Group through our retention programmes.

Retail deposits increased by 5% in the three months to 30 September as savers continued to choose our consistently fair products, and we have repaid £250m of the Bank of England’s TFSME funding using retail deposits.

The credit performance of our borrowers remained strong, with broadly stable three months plus arrears and no material change in the Group’s macroeconomic scenarios in the third quarter, albeit we continue to review these scenarios in light of ongoing uncertainty in the UK macroeconomic outlook.

I am pleased that the Group successfully issued £300m of MREL qualifying debt securities in September, as we progress towards our interim MREL requirement by July 2024. This and further anticipated issuances of qualifying MREL debt securities support the optimisation of the Group’s capital composition as well as further capital returns to shareholders.

The Group is cognisant of the rising cost of retail funds and the impact of planned future MREL issuance, but remains on track to deliver its 2023 full year guidance of underlying net interest margin of c.2.6% and underlying cost to income ratio of c.33%. Given our strong lending performance to date, particularly in retentions, we now expect to deliver full year underlying net loan book growth of c.9%.

Looking ahead, whilst the outlook for the UK economy and the overall mortgage market remains somewhat unclear, the fundamental drivers of demand in the private rented sector continue to be robust. Our strong capital and liquidity position, secured loan book and proven risk management capabilities, as well as our focus on professional and portfolio landlords, position us well to continue to generate attractive and sustainable returns for shareholders through the cycle.”

Financial calendar for 2024*

* All dates are subject to change

OneSavings Bank (OSB)

Charter Court Financial Services Group (CCFS)

Important disclaimer

Non-IFRS performance measures

OSB believes that any non-IFRS performance measures included in this document provide a more consistent basis for comparing the business' performance between financial periods and provide more detail concerning the elements of performance which OSBG is most directly able to influence or which are relevant for an assessment of OSBG. They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by the Board. However, any non-IFRS performance measures in this document are not a substitute for IFRS measures and readers should consider the IFRS measures as well. For further details, refer to the Alternative performance measures section in the OSBG Annual Report and Accounts 2022. Copies of this are available at www.osb.co.uk and on request from OSBG.