OSB Group PLC's (LSE:OSB) half-year results on Wednesday offered further evidence that the specialist lender may be emerging from a difficult few years.
Panmure Liberum, which has a “buy” rating and a 625p target price, called the update “another welcome signpost that the company is back on track”.
Pre-tax profit of £192m was around 4% ahead of both its and the market’s forecasts, helped by stronger net interest income of £337m compared with expectations of £328m.
Net interest income is the spread between income from loans and the cost of customer deposits, and has been a pressure point in recent periods.
Costs and loan impairments also came in lower than expected, offsetting a £14m drag from losses on hedging contracts known as unmatched swaps.
The loan book grew 1.2% to £25.4bn, slightly ahead of forecasts, while net interest margin rose to 230 basis points versus a consensus of 224.
Panmure noted that guidance for the full year has been reiterated, underlining confidence in consensus forecasts. It also highlighted regulatory changes that could lower future capital requirements.
With the shares still trading below book value and on less than eight times forward earnings, the broker believes the rating “remains too low for the potential growth and capital returns on offer”.
The shares fell 1.5% to 538p.