Specialist lender OSB’s current valuation is unfair and doesn’t recognise the company’s stability and resilience, making it a company that should be considered by both income and value investors.
Results for the six months ended 30 June 2026, released in early August, were robust and highlighted a business ploughing ahead despite concerns around the UK buy-to-let market, where it earns the majority of its income through the provision of mortgages.
Profit held broadly steady, the loan book edged higher, capital stayed strong, and the dividend rose again. The company yields 6.8% and trades at just 7x forward earnings.
Yes, margin outlook was downgraded, but the market reaction looks overdone and could present an opportunity.
What OSB actually does
OSB is not a high-street bank and has no ambition to be one. It is a specialist lender and retail savings group that lends where the big banks either cannot or will not, and funds that lending almost entirely with deposits from British savers.
The group runs two banking arms. OneSavings Bank, the OSB segment, is built around professional Buy-to-Let, commercial and semi-commercial mortgages, development finance and asset finance, originated through brands including Rely and InterBay. Charter Court Financial Services (CCFS) segment handles specialist residential lending and short-term bridging through Precise.
Deposits come in through Kent Reliance and Charter Savings Bank, two well-established savings names that give the group a stable, diversified funding base.
OSB take a slightly different approach to lending. Where mainstream lenders lean on automated credit scoring, OSB uses experienced underwriters to price the potential risk of real-world market participants: the limited-company landlord with a portfolio, the House in Multiple Occupation, the semi-commercial unit.
That approach allows the group to operate in higher-yielding niches with returns that mass-market lending rarely offers.
In 2025 it was the largest independent Buy-to-Let lender in the country, with a 4.3% share of gross new lending.
Financials
OSB delivered a return on tangible equity of 13.3% for the first half of 2026, down only marginally from 13.7% a year earlier.
The Common Equity Tier 1 ratio finished the period at 15.2%, comfortably above the group’s own 13% to 13.5% target once Basel 3.1 lands. OSB has returned more than £1.3bn to shareholders since 2019, and it is midway through a second £100m buyback, having repurchased close to £70m of stock by early August.
Income investors should be attracted by an interim dividend that went up 5% to 11.8p, in line with policy.
Credit quality is reassuring. This is a fully secured lender with a weighted-average loan-to-value ratio of 67% across the book. Arrears of three months or more actually improved in the period, easing to 1.6% from 1.7% at the year-end.
And despite softer economic conditions in the U, total originations grew 10% to £2.3bn. OSB Buy-to-Let originations jumped 23%, and CCFS residential lending through Precise leapt 81% as the group improved its product range.
Retail deposits rose 3% to £25.0bn, with retention rates of 95% at Kent Reliance and 90% at Charter Savings Bank, a sign that savers are sticky even in a fiercely competitive market.
Margin
The pressure point is funding. The retail savings market has been intensely competitive, sharpened by changes to ISA allowances, and OSB has had to pay up for deposits. More costly spreads to SONIA on new retail funding dragged net interest margin down to 223 basis points, from 230 a year earlier.
Management has taken a cautious view on the outlook and was punished by the market. Rather than banking on the pressure easing, it has assumed it will persist and cut full-year NIM guidance to 215 to 220 basis points from around 225. Return on tangible equity guidance for 2026 came down with it, to roughly 12.5% from the previous low-teens framing. Both revisions exclude the costs of the incoming chief executive.
The other soft spot is impairments. The charge rose to £15.8m from just £2.0m a year earlier, lifting the loan loss ratio to 12 basis points.
That sounds dramatic in percentage terms, but the starting point was unusually low; the ratio remains modest, and part of the increase reflects individual provisions against a small number of borrowers rather than any broad deterioration. Arrears, as noted, improved.
A value and income play
OSB is not going to excite anyone looking for a growth story. The margin guidance cut is a real kick in the teeth. But the valuation is very attractive, and the dividend policy supports a long-term income play.
The question for investors is whether the funding squeeze proves temporary or structural, and how quickly the new chief executive can show the market it makes no difference to how OSB operates.
While OSB Group shares offer good fundamental value, one should keep an eye on the 480p level for a technical breakdown that could see shares head lower.