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(Alliance News) - Shares in OSB Group PLC plummeted on Thursday as analysts prepared for "sizeable" cuts to consensus forecasts following softer-than-expected earnings guidance.
Shares in OSB fell 18% to 379.00 pence each in London on Thursday morning.
The Chatham, England-based mortgage lender, formerly known as OneSavings Bank, said pretax profit fell 30% to GBP374.3 million in 2023 from GBP531.5 million in 2022, as net interest income declined by 7.2% to GBP658.6 million down from GBP709.9 million.
Chief Executive Andy Golding explained that, as previously disclosed, the results were significantly hurt by the adverse effective interest rate adjustment, relating primarily to a shorter time spent on the reversion rate by its Precise Mortgages customers.
Net interest margin narrowed to 231 basis points from 278bps in 2022, while the cost to income ratio rose to 36% from 27%. The return on equity decreased to 14% from 21%.
OSB reported an increase in impairment charges to GBP48.8 million from GBP29.8 million.
Basic earnings per share fell to 66.1 pence from 90.8p.
Despite the lower profit, OSB increased its annual dividend to 32.0p per share from 30.5p, though in 2022 OSB also paid a special dividend of 11.7p.
Looking ahead, OSB said it expects its underlying net interest margin to be broadly flat compared to the 2023 underlying NIM of 251bps, reflecting the impact of a higher cost of funds and the full-year impact of some lower margin lending in 2023.
The underlying cost to income ratio is expected to be broadly flat compared to 2023, and OSB expects to deliver underlying net loan book growth of around 5% for 2024.
Shore Capital banking analyst Gary Greenwood said loan growth is "in line with our expectations, but net interest margin is about 30bps lower than what we have modelled in and consequently the [cost to income] ratio is higher".
Greenwood provisionally expects this to result in adjusted pretax profit forecasts falling to a range of GBP450 million to GBP470 million. This compares to his current forecast of GBP560 million.
"These are sizeable downgrades," he noted.
OSB said it would launch a new share buyback programme of GBP50 million over the next six months to commence on Friday.
OSB confirmed April Talintyre will retire as chief financial officer on May 9.
Victoria Hyde, the deputy CFO will become the acting CFO, whilst the ongoing process to appoint a permanent replacement for Talintyre is completed.
Greenwood at Shore Capital said he understood that Hyde was a leading candidate for the role but thinks "investors may prefer an external appointment".
Greenwood said he expects to reduce his fair value for OSB shares to around 700p per share from 835p.
By Jeremy Cutler, Alliance News reporter
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