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OSB Osb Group Plc

-6.20 (-1.53%)
08 Dec 2023 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Osb Group Plc LSE:OSB London Ordinary Share GB00BLDRH360 ORD 1P
  Price Change % Change Share Price Shares Traded Last Trade
  -6.20 -1.53% 399.80 558,784 16:35:03
Bid Price Offer Price High Price Low Price Open Price
399.80 401.00 405.40 390.20 396.40
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Last Trade Time Trade Type Trade Size Trade Price Currency
18:10:17 O 2 401.10 GBX

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Date Time Title Posts
06/12/202310:45OSB-a hidden gem1,328
21/10/201910:59OneSavings Bank9

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Posted at 24/11/2023 16:50 by apple53
I have always seen OSB as a growth stock. My small concern (priced in tenfold) is that rapid growth in loans is beautifully correlated with bad debts 2-6 years later. However, a) this is less likely to be true when you are taking market share in a market which is growing only modestly, and b) the REAL growth in the portfolio will actually be pretty modest.

The great resilience, as I keep banging on about, is the stunningly low cost income ratio, so that even if bad debts spike (or more likely OSB's internal models demand a big boost to the stock of provisions even without an actual large increase in credit losses), the impact on profits is much lower than its peers.
It also means profit growth driven by falling provisions is lower than peers (check out marketscreener for what happened to STB's eps forecasts, ie spiking and collapsing as dopey analysts failed to normalise provisions).

STB is cheaper on a PE and my holding is larger, but I still see OSB as the quality stock.
Posted at 14/11/2023 19:24 by pj84
We sold this bank, then the shares lost 25pc – now we’ll buy again

Questor share tip: buy-to-let specialist does not deserve to be lumped in with lowly valued high street giants

Algy Hall
13 November 2023 • 6:00am

In March, Questor advised readers to sell OSB and was right to do so – shares in the specialist buy-to-let mortgage lender have lost a quarter of their value since.

This column is relieved to have sold before a profits warning in July that sent OSB shares tumbling. The lender disclosed a £180m hit because mortgage borrowers were refinancing more quickly. Broader investor unease about the banking sector, which prompted our advice to sell, has meanwhile persisted.

Now, however, we’re recommending the shares again, guided by the investment decisions of some of the world’s best-performing fund managers.

Ten of these professional investors – each among the top-performing 3pc of the 10,000 equity fund managers tracked by the financial publisher Citywire – own shares in OSB. As a result the stock is rated AA – just below a top AAA rating – by Citywire Elite Companies, which rates companies on the basis of their backing by the best-performing fund managers.

What’s more, many of those investors have been adding to their stakes over the past few months. They include Matthew Tillett, who bought more shares for his Premier Miton UK Value Opportunities fund in July. Tillett took over the fund in November last year after delivering four times the market return over three years on the fund he ran before.

He told his investors that shares in specialist lenders such as OSB were trading on valuations as low as those of Britain’s biggest banks, yet they were “less dependent on the interest rate environment to sustain high levels of profitability”.

Trading at just 0.6 times forecast book value, shares in OSB are close to the cheapest they have ever been on that measure and 30pc cheaper than when we advised readers to sell in March. A forecast dividend yield over the next 12 months that stood at 7.1pc when we sold has meanwhile climbed to 9.9pc – a level that suggests the market expects a cut.

But a trading update earlier this month indicates that the bank may be putting its problems behind it. There was no worsening of the situation that caused that big hit to profits from earlier in the year, when OSB was burned by borrowers spending less time between fixed-rate mortgages on stop-gap “reversion” rates that are lucrative for the bank.

Reassuringly, it left unchanged guidance for this year’s underlying “net interest margin” – the difference between the interest rates a bank earns on the loans that it makes and the rates it pays to depositors – at 2.6 percentage points. That would mark a recovery from the first half of the year, when the hit to profits resulted in a slump from 3 percentage points to 2.

That’s not to downplay the difficult trading conditions for banks and the particular challenges posed by the buy-to-let market, in which OSB specialises.

With interest rates starting to plateau, heightened competition between banks is curtailing rates on loans while the rates banks need to offer to attract depositors are rising. Increasing bad debts after the surge in mortgage costs, coupled with the impact of tightening regulation on the buy-to-let market, are adding to investors’ fears.

But OSB appears to be coping well with the pressures. Alongside the maintained net interest margin guidance, the bank reported a 5pc increase in deposits in the three months to the end of September. But the biggest positive from the third quarter was lending growth.

OSB reported that in the first nine months of the year it had achieved 7pc loan growth. This was previously the target for the whole of 2023 and guidance for the year has now been raised to 9pc.

Its ability to win market share thanks to its specialist focus is a key long-term attraction. It is also a reason to think it could weather tougher markets better than most as the specialist focus is reflected in the bank’s strong reputation for risk management.

On this front, there’s reassurance from low levels of problem loans and average rent-to-interest cover of 178pc on OSB loans and 154pc for its Charter Court Financial brand, which accounts for about 45pc of gross lending. Meanwhile, a scarcity of rental properties makes landlords well placed to pass rising interest costs on to tenants.

OSB’s resilience should also be helped by its bias to professional landlords who use corporate structures to secure tax and property management advantages.

This buy-to-let specialism keeps costs down compared with mainstream banks. OSB expects its costs to amount to around a third of its income this year, compared with more than half for many larger rivals.

The branchless bank’s low-cost model underpins its attractive levels of return on tangible equity. Even after the profit hit in the first half of this year, analysts expect the metric to reach 15.2pc in 2023 before rebounding to the high teens from next year.

It is not hard to see why, following the slump in the shares this year, top fund managers are betting that OSB’s valuation offers protection from further share price falls and the potential for significant gains should the third-quarter results prove to be a taste of things to come.

Questor says: buy
Ticker: OSB
Share price at close: 347.2p
Posted at 03/10/2023 13:07 by apple53
I wonder if there is an element of anticipation of end of buybacks. I wonder if they can find some more cash, NB this from half-year statement

"The Board is confident that the Group’s strategy and proven capital generation capability can support both strong net loan book growth and further capital returns to shareholders."

3x forward earnings.
24 and 25 forecasts have NOT been cut, despite a) 23 profit warning, b) knock-on effect of the type of issue that caused profit warning, ie there should be lower revenue recognition on new mortgages, c) increase in funding costs, etc.
So either analysts are dopey and we have some cuts to come (which are just a teensy bit priced in), or.....

In any event it would take a massive earnings hit to justify £3.

What it comes down to is that there is no marginal buyer. Too small for institutions, and retail investors may not understand the impact of an extremely low cost income ratio (ie much less bottom line impact from bad new). Charter Court deal was prescient I guess otherwise they would be even further from the radar screen.

Well I've just increased my position by almost 50%, and so I've repurchased more than I sold between 4.6 and 5.6. Extracted the cash from ICGT, which has recovered modestly. Admittedly ICGT remains very cheap (30%+ discount), but OSB is at a 50-70% discount to 'fair value', and the PE investment trusts seem to be oscillating between 30 and 45% discounts at the moment. Remarkably, I sold ICGT at a profit.

I suppose OSB could get taken private.
Can anyone make a guess for a takeover?
Posted at 08/9/2023 17:11 by pj84
Key stats
Market capitalisation £1,442m
Dividend yield 9.36%

OSB profit warning reaction may be ‘excessive’

Share price falls in buy-to-let lender OSB Group (OSB) could be ‘excessive’ if the bank can confine its profit hit to this year, says Columbia Threadneedle’s David Moss.

Moss holds the challenger bank in his £117m CT High Income (CHI) investment trust but said it had been a ‘key reason for the portfolio lagging the market’ in August following a profit warning.

‘The update described positive current trading for the company but did warn there would be a substantial hit to this year’s profit as a result of the rapid rise in interest rates,’ said Moss.

The bank highlighted the rapid interest rate rises, which have changed borrower behaviour.

‘The move away from floating towards fixed interest rates is less profitable for OSB, hence the profit warning,’ said Moss.

Citywire Elite Companies AA-rated OSB has indicated that the impact is likely to be around 30% of last year’s profits, or less than 10% of market capitalisation of the company pre-warning.

‘The loss should largely be restricted to this year, which, if true, would make the fall in the share price excessive,’ said Moss.

‘However, after an upset of this scale and nature, it would only be natural for investors to demand evidence of a successful recovery before reassessing and rerating the shares.’

OSB Group shares were trading at £3.22 on Thursday.
Posted at 10/8/2023 15:16 by welshbob48
OK ! I am a fool and someone will explain to me what I am missing in my thinking.
How can a share price behave this way. 85% sellers 15 % buyers and a V big increase in the share price
This is not uncommon with OSB and sometimes I have put down to the buy back but after many years of investing this is really odd.
Posted at 04/8/2023 07:50 by apple53
We can calculate how much they saved by hammering the share price - may claw back £40m+.
Still I'm amazed by how little effect it's had on the share price. A tricky balance between taking advantage of the low price and not driving it up tooooooo quickly. I wonder who makes the key decisions.
Posted at 18/7/2023 09:18 by thebutler
1.3 million shares were traded yesterday, and almost 300k were purchased by OSB (via broker) on the LSE. So if we have a buy for every sell, the 1.3 million trades suggests approx 600k each for sells and buys equating to OSB buying half the total shares yesterday.

If my sums are correct (can't see why they're not, please correct me if so), consistently taking such a chunk out of the Market bodes well for future positive sentiment returning.

14 million shares bought back so far, so guessing an average price of £5 per share (probably lower than this now), equals approx £70 million so there's another £80 million to go, which benefits OSB buying at such a lowly share price
Posted at 10/7/2023 06:34 by jonnybig
There's still another 100 million quids worth of the share buybacks to go so I suppose this lowly share price will see osb buy back many more than anticipated.
Posted at 17/5/2023 08:46 by apple53
PEG ratios don't normally work for banks. The big swing factor is normally provisioning, which is normally low ex-post, while any analyst worth his/her salt will have provisions (at least) 'normalising' (ie to cross-cycle levels) over the next year or two, which will inherently depress the eps growth rate. However, as long as analysts do this then the forward PE (let's say 2024-5) should be a good indication of underlying value. And with OSB's super low cost income ratio one can even put provision charges on 50% above cross-cycle to allow for some housing market challenges, and it will still be ridiculously cheap.

For me the challenge is allocating cash across the bank sector as they are all so cheap. I think STB is cheapest below £7 so my largest holding, but a decent bounce and I would shift a chunk to OSB (while keeping an eye on Virgin and even Barclays).

I'd say OSB is the most bullet proof listed financial in the UK in terms of earnings (not share price, since market doesn't get this). Check out where financials' shares are vs Covid low. All bounced like crazy but on a quick check I think OSB has done best (in holding on to its rebound).
Posted at 03/11/2022 07:17 by masurenguy
OSB (LSE: OSB) is a lender specialising in professional buy-to-let and residential mortgages. The group is one of a handful of so-called challenger banks that emerged after the financial crisis. With a market capitalisation of around £1.8bn, it is relatively small compared to the big high street banks, which means it tends to fly under the radar of most investors. Its size has not held it back. Since 2016, the group’s loan book and value of customer deposits have nearly quadrupled in size. Meanwhile, operating profit has increased from £163m in 2016 to £465m.

As profits have grown, OSB has been able to return more cash to investors. Its dividend per share more than doubled between 2016 and 2021 and is expected to hit 35p in 2023, giving a projected dividend yield of 8.3% on the current share price. Shares in OSB are also selling at what appears to be a dirt-cheap multiple of just 4.5 times forward earnings and a price/book (p/b) ratio of below one.

The stock has been under pressure recently following the now-defunct mini-Budget at the end of September. As a specialist mortgage lender, OSB is highly exposed to higher mortgage rates and possible defaults if borrowers are struggling to meet their repayments. It seems likely the business will have to deal with loan losses as interest rates rise, but it should also benefit from higher interest rates.

The company reported a net interest margin (the difference between the rate it pays to depositors and charges borrowers) of 302 basis points in the first half of 2022, up from 268 basis points in the same period last year. As this margin expands, it should feed through into OSB’s bottom line. On top of its rising profit margins, OSB also has a healthy balance sheet with a tier 1 equity capital ratio (a measure of banking solvency) of 18.9%. That’s far above the regulatory and industry minimum which averages the low double-digits. As dividend stocks go, OSB appears to tick all the boxes."

Moneyweek: 2 November 2022
Osb share price data is direct from the London Stock Exchange

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