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LONDON, July 7 (Reuters) - British financial services group OSB's shares fell by more than 20% on Friday after it said it would take a net income hit of up to 180 million pounds ($229 million) as mortgage customers switched from higher rate products.
Sharply rising interest rates in Britain have raised the cost of mortgage repayments, driving the markets watchdog to make changes to its rules to enable banks to help customers who are struggling with a cost of living crisis.
OSB, whose brands include Kent Reliance and Charter Savings Bank, said in a trading update on Thursday that customers were refinancing their mortgages more quickly than it had expected.
It estimated this could lead to an adverse underlying effective interest rate adjustment of 160-180 million pounds in the first half. The bank will release interim results on Aug 10.
OSB's shares were down 24% to 357 pence at 0934 GMT, their lowest level since Nov 2020 and making them the worst performer in the FTSE 250 index.
RBC analysts cut their target price on the stock to 700 pence from 750 pence, but reiterated their "outperform" rating and said weakness presented a buying opportunity.
KBW analysts said that "anything that casts doubt on the credibility of published earnings in a sector already facing significant market challenges is unlikely to be ignored".
However, KBW analysts reiterated their "market perform" rating and said they did not see an obvious read-across to other banks, as OSB's mortgages had a different structure to most.
NatWest was up 0.172% and Lloyds down 0.439%, while specialist lender Paragon fell 1.9%. ($1 = 0.7855 pounds) (Reporting by Alun John and Carolyn Cohn; Editing by Amanda Cooper and Alexander Smith)
