OSB hikes dividend, launches buyback after fall in profit

(Sharecast News) - OSB Group reported a decline in annual profit for 2025 on Thursday as higher administrative costs and an impairment charge weighed on earnings, though the specialist lender said loan growth and originations increased and it announced a £100m share buyback alongside a higher dividend. The FTSE 250 group posted profit before tax of £382.5m for the year ended 31 December, down from £418.1m a year earlier, primarily reflecting an impairment charge compared with an impairment credit in the prior year, as well as higher administrative expenses and fair value losses.

Basic earnings per share fell to 75.6p from 77.6p in 2024, while return on tangible equity declined to 13.7% from 14.9%.

Net loan book growth reached 3.2% to £25.9bn, supported by a 19% increase in originations to £4.7bn as the lender expanded into higher-yielding segments.

Retail deposits rose 2% to £24.3bn, while the group repaid its term funding scheme with additional incentives for SMEs borrowings in full in September.

Net interest income was £679.4m, down from an underlying £690.6m in 2024, with net interest margin easing slightly to 228 basis points from 230 basis points.

The lender said the decline reflected higher retail funding costs linked to wider spreads to SONIA, which more than offset resilient performance from the back book and sustainable margins on new lending.

Administrative expenses rose to £270.1m from £258.1m, pushing the cost-to-income ratio to 40.4% from 38.7%, largely due to continued investment in the group's transformation programme.

Core administrative expenses increased by 0.8% year-on-year.

Credit quality remained stable, with the loan loss ratio at 5 basis points compared with a negative four basis points a year earlier, while loans three months or more in arrears held steady at 1.7%.

The lender maintained a strong capital position, with its Common Equity Tier 1 ratio at 15.8%, down slightly from 16.3% a year earlier.

Tangible net asset value per share increased to 579p from 544p, reflecting a lower number of shares outstanding.

"The group delivered resilient financial performance in the first year of the transition period, which was in line with our 2025 guidance," said chief executive Andy Golding.

"We also made tangible progress against our strategy that we set out at the Investor update last year."

He added that diversification of the loan book continued to gather pace, noting that combined originations in higher-yielding sub-segments rose 53% during the year.

Buy-to-let lending accounted for 68% of the gross loan book, down from 70% a year earlier, as the group works towards its 2029 diversification target.

Golding also highlighted progress on the group's technology overhaul.

"I am particularly pleased with the launch of our new lending platform, a new brand dedicated to buy-to-let borrowers, Rely, as well as a successful migration of some of our existing savers onto the new savings platform.

"All this was achieved on time and to budget," he said.

The board recommended a final dividend of 24.1p per share, up from 22.9p a year earlier, bringing the total dividend for 2025 to 35.3p per share, a 5% increase on the prior year.

Alongside the results, the group announced plans to launch a share repurchase programme of up to £100m starting on 6 March.

The buyback would be executed by Jefferies International on the London Stock Exchange or other recognised exchanges, with shares acquired intended to be cancelled in order to reduce the company's share capital.

The programme was expected to run until no later than 6 March 2027 and could involve the repurchase of up to 37,035,134 shares.

Golding said the group had also benefited from regulatory clarity, noting that its minimum requirement for own funds and eligible liabilities resolution strategy had been reclassified to "Transfer from Bail-in," which would support the later stages of its capital plan.

The board set a new Common Equity Tier 1 target of 13% to 13.5% following implementation of Basel 3.1 rules.

Looking ahead, OSB said it expected net loan book growth in 2026 to be broadly similar to the 2025 outcome, with net interest margin around 225 basis points.

Administrative expenses were projected to be about £280m, with core costs rising no faster than inflation as the transformation programme continues.

The group anticipated a low-teens return on tangible equity in 2026, with dividends expected to rise by around 5%, while targeting mid-teens returns between 2027 and 2028 and the top end of the mid-teens by 2029.

At 1113 GMT, shares in OSB Group were up 1.67% at 577p.

Reporting by Josh White for Sharecast.com.