OSB Group reported full-year 2025 results that met management expectations and simultaneously revised its capital target and medium-term profitability guidance. The specialist UK lender reduced its CET1 ratio target to 13-13.5% from 14%, a move the company said will free up in excess of £100m of capital phased in over a glide path.
At the end of FY25 the bank's CET1 ratio was 15.8% prior to the announcement of a £100m share buyback. Management also confirmed that OSB met all of its FY25 guidance, with net interest margin finishing the year at 228 basis points, marginally above the circa 225 basis points target. NIM in the second half of 2025 was 226 basis points.
Looking ahead, the bank reiterated a return on tangible equity (ROTE) target for FY26 of low teens, supported by expectations of a NIM around 225 basis points, loan growth of circa 3.2%, and adjusted administrative costs of roughly A3280m. For FY27 and FY28, OSB maintained ROTE guidance in the mid-teens and added a FY29 target at the top end of the mid-teens.
OSB's loan book expanded by 3.2% in FY25. Within the portfolio, buy-to-let lending accounted for 68% of the book, down from 70% a year earlier, while commercial lending rose to 7% from 5%.
The bank set out the expected impact of incoming regulatory changes, estimating that implementation of Basel 3.1 will increase capital requirements by circa 130 basis points, equivalent to about a 9% rise in risk-weighted assets. That change is expected to take effect from January 1, 2027. OSB said it continues to engage with the Prudential Regulation Authority regarding its internal ratings-based application.
Management reiterated that its FY26 NIM assumption of circa 225 basis points reflects mortgage margin compression anticipated to ease in the second half of 2026, alongside a gradual normalization in retail funding costs from current elevated levels. The guidance package, combined with the lowered CET1 target, underpins the decision to free capital and proceed with shareholder returns.
OSB's package of updated targets and guidance provides a clearer multi-year profitability trajectory while signalling a willingness to return capital to shareholders. The bank's maintained lending growth and shifting book composition toward a slightly higher commercial share are key operational details alongside regulatory headwinds from Basel 3.1 and ongoing engagement with the PRA.