Ahead of OSB Group PLC's (LSE:OSB) half-year numbers next Friday, analysts at Panmure Liberum suggested the specialist lender is finally emerging from a difficult period marked by earnings downgrades, internal issues, and regulatory capital challenges.
While shareholders have faced years of frustration, the broker, which reiterated its ‘buy’ rating, said if the lender can sew together a series of updates that prove this, confidence should be restored -- though "patience is required" still.
The building blocks are now in place for a longer-term recovery story, a recent strategic update from OSB signalled, as the FTSE 250-listed bank moves away from crisis management and toward steady improvement.
The focus is on accelerating growth in higher-margin segments, leveraging operational efficiency through a transformation programme, though profit growth is not expected to materialise until 2027, once low-spread loans written during the Truss-Kwarteng swap rate volatility of 2022-23 have run off.
Consensus estimates do not yet reflect OSB’s medium-term guidance, the analyst noted, though they believe they are "highly credible".
If delivered, the broker estimates EPS could grow at a compound annual rate of 15% to 2029, well ahead of its own base case of 6%.
Despite lingering caution, the stock trades on 7x forward earnings and offers an estimated 7% dividend yield.
"Delivery in line with guidance should help restore its reputation with the market and drive a re-rating. Together with potential earnings upgrades and additional capital distributions, there are material returns on offer for shareholders," the broker concluded.