OSB Group PLC (LSE:OSB) posted record interim profits on the back of rising base rates and lifted its margin guidance for the full year.
The specialist lender reported underlying pre-tax profits in the half-year ended 30 June 2022 of £294.1mln, up 16% on the corresponding period last year.
And underlying net interest margin improved to 302 basis points from 268 basis points, benefitting from base rate rises.
The FTSE 250 company also raised its full-year underlying net interest margin guidance and now expects it to be broadly flat to the first half.
The underlying cost-to-income ratio improved in the first half to 23% from 25%.
OSB said its loan book performed strongly in the period with the underlying net loan book growing 3% to £21.6bn, reflecting the robust rental market.
CEO Andy Golding said demand in OSB’s core lending segments remains robust with a record pipeline of applications.
The underlying loan loss ratio was 2 basis points in the first half compared with -15 points previously, while arrears remained stable with balances greater than three months at 1.1%.
The company acknowledged borrowers could be impacted by the rising cost of living and higher interest rates, but stressed most customers have fixed-rate mortgages and “are therefore entering the uncertain economic environment with clarity over their mortgage repayments”.
“The group recognises the somewhat uncertain outlook for the UK economy and the impact of inflation and increasing cost of living on us all. We continue to monitor our lending book closely for any early signs of stress, however the credit performance of our portfolio to date remains strong,” Golding said.
“We remain confident in delivering underlying net loan book growth of c. 10% for 2022 based on current pipeline and applications. We continue to expect the underlying cost-to-income ratio for full-year 2022 to increase marginally from 2021,” said CEO Golding.
The company declared an interim dividend of 8.7p, representing a third of the total 2021 dividend.
Shares climbed 4.93% to 574.50p.