OSB Group PLC’s chief executive said on Thursday he was ‘disappointed’ with the firm’s half year results as the mortgage lender recorded a sharp drop in profit due to an ‘adverse’ effective interest rate adjustment.

The Chatham, England-based mortgage lender reported a pretax profit of £76.7 million in the first half of 2023, down 71% from £268.1 million the previous year.

Net interest income fell 30% to £237.5 million from £343.4 million. OSB’s net interest margin dropped to 171 basis points from 280 basis points.

In the half, the company recorded a £44.6 million impairment on financial assets compared to an impairment of just £1.6 million the year prior. The firm’s administrative expenses climbed to £110.2 million from £91.3 million.

OSB’s common equity tier 1 capital ratio stood at 15.7% at June 30, down from 18.3% at December 31.

The company declared an interim dividend of 10.2 pence, up year-on-year 8.7p.

‘I am disappointed by the results which reflect the adverse [effective interest rate] adjustment announced in early July, against a backdrop of otherwise strong operational and financial performance in the first half,’ commented Chief Executive Andy Golding.

‘We continue to do the right thing by our customers by offering a full range of mortgage products, despite the volatile rate environment, resulting in strong demand and higher retention, driving net loan book growth of 4% in the period.’

Golding added that he remains ‘cognisant’ of the uncertain macroeconomic outlook and the potential impact of the higher cost of living and borrowing on the mortgage market and customer affordability.

‘However the strength and resilience of our business model, our strong capital and liquidity positions, high-quality secured loan book and strong customer franchises and risk-management capabilities, position us well to deliver attractive and sustainable returns across the cycle and I look to the future with confidence,’ he said.

Shares in OSB were up 3.5% at 389.20p on Thursday morning in London.

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