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Investing.com -- Shares of OSB Group PLC (LON:OSBO) ticked up modestly by 0.2% as the lender maintained its focus on margins over volume in the first quarter, resulting in flat loan growth and stable retail deposits.
The bank’s strategic decision to prioritize higher-margin, complex buy-to-let (BTL) and specialist commercial lending over less specialized mortgages was evident in the marginal loan growth of approximately 0.3%.
OSB’s commitment to its financial targets reassured investors, with the bank reiterating its short and medium-term goals. Management expects to achieve a return on tangible equity (ROTE) in the low teens, approximately 13-14%, by FY25-26E, supported by a net interest margin (NIM) of around 2.25% and loan growth starting from low single digits. Cost growth is projected at about 5% to roughly £270m in FY25, with a slight increase expected in FY26.
The bank’s capital position remains robust, with a CET1 ratio of 14.5% after accounting for a £100m buyback program and the anticipated impact of Basel 3.1 regulations. This is comfortably above its target ratio of approximately 14% and significantly higher than the regulatory requirement.
Investors were also attracted by OSB’s promise of attractive shareholder returns. The bank anticipates a 5% per annum growth in dividend per share (DPS) for FY25-26E and plans to continue progressive dividend payments into the medium term.
Additionally, OSB expects to return approximately £695m to shareholders over the next three years through dividends and buybacks, representing about 40% of the bank’s market capitalization.
RBC analysts commented on OSB’s first-quarter performance, maintaining a 600p price target and reiterating an Outperform rating. "We update our estimates following OSB’s Q1’25 results, maintaining our 600p PT and reiterating our Outperform rating. Our FY26 PBT estimates remain broadly unchanged. Following a strategic update in Mar’25, at this stage no new news is good news, in our view," they stated.