OSB Group lowers margin outlook amid elevated retail funding costs

OSB Group PLC on Thursday lowered 2026 net interest margin expectations reflecting strong competition in the retail savings market and elevated retail funding costs so far this year and warned of further possible impacts ahead.

"Whilst it is too early to be more precise, if the funding cost pressures seen so far this year continue, this could result in a modest impact on our 2027 mid-teens [return on tangible equity] aspiration," the Chatham, England-based specialised mortgage lender said.

For 2026 as whole, OSB now expects RoTE to be around 12.5%, compared to 'low teens' growth forecast before assuming the elevated costs of funds continue.

In addition, OSB now expects net interest margin for 2026 to be 215 basis points to 220bps, reduced from prior guidance of 225bps.

"We have seen strong competition in the retail savings market and elevated retail funding costs so far this year," said outgoing Chief Executive Andy Golding.

Enrique Labiano will take over as CEO on September 1, succeeding Golding.

Shares in OSB were marked down 13% to 497.40 pence each in London on Thursday afternoon.

Pretax profit reduced to £187.2 million in the six months ended June 30 from £192.3 million, due to a higher impairment charge and higher administrative expenses which more than offset an increase in net interest income.

Impairments ballooned to £15.8 million from £2.0 million the year before, while administrative expenses increased 3.9% to £136.5 million from £131.4 million. Net interest income edged up to £339.8 million from £337.0 million.

Basic earnings per share increased to 38.5 pence from 37.3p primarily due to a lower weighted average number of shares outstanding.

RoTE fell to 13.3% from 13.7% a year ago, and the CET1 capital ratio declined to 15.2% from 15.8%.

An interim dividend of 11.8p per share was declare, up from 11.2p a year ago.

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