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One Savings: Weak Margin, Unhelpful For UK Mortgage Lenders

FINANCIALS

One Savings Bank (OSB LN) results included a big margin disappointment which is a key stress point for all the UK mortgage lenders. This is a small datum but negative for Lloyds, Nationwide and the peers, we feel.


  • Key credit metrics: credit losses have dropped to just 3bp in 2H23 (from 37bp in 1H23) and non-performers are 1.4% (from 1.3% at Jun-23). CET is 16.1% (consensus: 15.9% and 15.7% at Jun-23). So these metrics are solid and the issuer has met its MREL requirement for Jun-24 already.
  • The net interest margin (NIM) is the key issue here: on 2-Nov-23 mgmt restated its expectation of 2.6% for FY23 and has just reported 2.51% which, for the recency, is a very significant miss, we fear.
  • Outlook: mgmt is looking for a flat NIM in 2024 (consensus has 2.79%) so quite a downgrade there but guidance for 5% loan book growth is inline with expectations. This NIM guidance is quite specific to this BTL (buy-to-let) lender which is having to grow into its MREL requirements but is nonetheless a minor negative for the UK mortgage majors (Lloyds, Nationwide).
Conf call is 0930 at https://streamstudio.world-television.com/994-1437-39173/en
Credit BulletsHomepagemarkets-real-timeCreditBank Of England (BOE) Market NewsBulletUK

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