Annual report and accounts 2017

The experts in specialist lending

OneSavings Bank is a specialist lender, primarily focused on carefully selected sub-sectors of the mortgage market. Our specialist lending is supported by a stable retail savings franchise with 150 years of heritage.

Download full annual report 2017 (PDF 3.5mb)

CEO’s Statement

Continued strong

I am delighted to report another excellent year for OneSavings Bank (‘OSB’). The Group’s clear strategy and unique business model have proven robust as we successfully navigated significant regulatory and tax changes during the year. Underlying basic earnings per share grew by 23% to 51.1 pence with underlying pre-tax profit up by 21% to £167.7m. We finished the year with a strong balance sheet, a high quality secured asset portfolio and an excellent reputation for customer service. Our strategy continues to provide the platform for us to grow and develop our business.

The Group grew its loan book by 23% to £7.3bn in 2017, whilst maintaining its strong discipline on understanding and pricing for risk, and delivering a stable net interest margin (‘NIM’) of 3.16% for the year.

Balance sheet growth was achieved whilst delivering a best in class return on equity of 28% and a low cost to income ratio of 27%. Our Common Equity Tier 1 (‘CET1’) capital ratio increased to 13.7% from 13.3% in 2016, demonstrating the strength of our organic capital generation capability to support significant growth through profitability. I am very pleased that we further optimised our capital structure through the issuance of £60m of Additional Tier 1 securities (‘AT1 securities’) in May 2017.

The Board is recommending a final dividend of 9.3 pence per share. Together with the interim dividend of 3.5 pence this gives a total dividend per share for the year of 12.8 pence, in line with our stated dividend policy.

Best specialist lender

OneSavings Bank continued to grow its loan book through its specialist lending brands, with total organic origination up by 14% in 2017 to £2.6bn. Our core Buy-to-Let lending subsegment grew by 39% to £5.0bn, with our target audience of professional landlords continuing to deliver strong application and completion volumes.

This performance has been achieved despite the overall Buy-to-Let market shrinking in response to tax and regulatory changes. These changes have reduced the attractiveness of the sector to amateur investors, whilst largely maintaining the interest of professional landlords, and have driven the reduction in gross advances from £40.6bn in 2016 to £35.8bn1 in 2017. In this context, the Bank’s performance demonstrates the sustainable strength of our proposition targeted at professional landlords, particularly our specialist, manual underwriting, and our deep relationships with mortgage intermediaries.

New Buy-to-Let mortgage origination increased during 2017, reflecting our specialism and expertise in lending to limited companies and large portfolio landlords. Professional/multi-property landlords accounted for 80% of completions for OSB by value during 2017, up from 75% in 2016.

We have also seen significant growth in the commercial side of our Buy-to-Let/SME segment. Organic origination grew to £176m, as we focused on innovation and building scale in our established InterBay Commercial business. In March, we successfully piloted an entry to the bespoke bridging market, again leveraging the Bank’s strengths in asset risk assessment and manual underwriting.

We saw a reduction in originations in the residential segment in 2017. This contributed to the first charge gross loan book reducing to £1,241m from £1,322m in 2016, with new organic lending more than offset by redemptions in the back book and acquired mortgages in run-off. However, we see opportunities for growth in the residential market in 2018 and beyond.

I am pleased that our more cyclical commercial businesses continued to perform strongly. The Bank’s Heritable Development Finance business provides development finance to smaller residential developers, with a preference for forging relationships with those active outside prime central London. The business continued to grow in 2017, in spite of new entrants to the market, as customers sought an experienced and pragmatic lender.

In addition, we have also grown the provision of secured funding lines to other lenders that operate in certain high yielding, specialist sub-segments, such as residential bridge finance and asset finance.

Whilst we continue to carefully consider inorganic acquisition opportunities, market pricing did not meet our high return targets during the year.

Our broker net promoter score (‘NPS’) recovered from the short-term negative NPS of -7 in the first half of the year, the result of a surge in Buy-to-Let volumes. For the second half of the year, our NPS was +25.

"We continue to deliver exceptional performance and reinforce our position as a leading specialist lender, supported by our stable, long-standing retail savings franchise and efficient, scalable back office function."

We made significant investment in our sales capability and continued to gain recognition from mortgage customers and intermediaries, winning multiple awards during the year. I am particularly pleased that OSB won the Mortgage Strategy Awards, Best Specialist Lender and The Mortgage Introducer Awards, Specialist Lender of the Year in 2017.

To encourage greater levels of retention amongst borrowers reaching the end of their initial product term, OSB offers a mortgage product transfer scheme (‘Choices’). Under this programme, borrowers are encouraged to engage with their broker to receive advice and select from a bespoke product set. Since the implementation of the scheme in mid-2016, we have seen a consistently strong proportion of our borrowers choose a new product within three months of their initial product ending, at around 60% by December 2017. This is driven by success in switching borrowers who were otherwise remaining on standard variable rate (‘SVR’) and who, by definition, were therefore in the market for other lenders.

Sustainable funding model with award-winning savings

Our stable and award-winning retail funding franchise continues to support lending growth, with retail deposits up 12% to £6.7bn during the year. Over 27,000 new savings customers joined the Bank during 2017 and our successful programme of creating long-term savings relationships by offering market competitive rates to all customers, including those with maturing fixed rate bonds and ISAs, continued to deliver a very strong 90% retention rate. The strength and fairness of our retail savings proposition, coupled with excellent customer service and high retention rates, continues to allow the Bank to raise significant funds without needing to price at the very top of the best buy tables and provides a consistent and stable source of liquidity.

I am delighted that Kent Reliance has been recognised by Moneyfacts in 2017 as the Best Cash ISA Provider for the fifth year running. The Bank also received the ISA Provider of the Year Award from Consumer Moneyfacts for the second consecutive year. These awards are a testament to our savings proposition and to the outstanding customer service delivered by our staff.

We continue to gain recognition among customers and intermediaries, winning multiple awards during the year.

The Bank remained predominantly retail funded during 2017, with a loan to deposit ratio for the year of 92%2 delivering on our strategy to primarily fund our loan book using retail deposits. We continued to make judicious use of the Bank of England’s Funding for Lending Scheme (‘FLS’) and the Term Funding Scheme (‘TFS’), drawing down additional net funding of £624m in the year. The Bank completed its planned transition out of the FLS into the TFS by year end. As at 31 December 2017, TFS drawdowns stood at £1.25bn.

Leveraging our unique business model

As the Group has grown, costs and efficiency have remained a key focus for the business, resulting in a stable cost to income ratio of 27% (2016: 27%3) despite significant investment during the year. We continued to invest in our risk management and modelling capabilities in preparation for IFRS 9 and our planned internal ratings-based (‘IRB’) application. We also invested in technology to offer an automated solution to brokers to help the Bank meet the PRA’s new specialist underwriting rules in an efficient way.

OSBIndia continues to undertake a range of primary processing services at a significantly lower cost than an equivalent UK-based operation and with very high quality levels. I am especially pleased that we achieved this whilst maintaining our focus on customers, borne out by an increase in customer NPS to an outstanding 62 (2016: 59).

We continue to differentiate ourselves from the competition by offering well-defined propositions in high margin, underserved markets, where we have the experience, as well as the internal and intermediary infrastructure, to successfully develop and service those markets.

Building our business for the future

The Group continued to exercise strong diligence over loan and customer assessment. The loan loss ratio fell to 7bps in the year to 31 December 2017 (2016: 16bps) mainly due to assumption updates that took place in 2016. We remain particularly pleased with the performance of the front book of mortgages. From more than 38,500 loans totalling £8.3bn of new organic originations since the Bank’s creation in February 2011, we have only 137 cases of arrears over three months in duration, with an aggregate balance of £18.4m and an average loan to value (‘LTV’) of 63%, reflecting the continued strength of the Bank’s underwriting and lending criteria.

The weighted average LTV of the overall mortgage book remained low at 64% at the end of 2017, with an average LTV of 69% on new origination during the year.

In 2017 we saw the market adjusting to the new Buy-to-Let underwriting standards, including ensuring that lenders reflect the changes to personal tax on landlords within their affordability assessments. We have seen a clear trend for borrowers to seek to mitigate this by opting to borrow via a limited company during 2016 and 2017, with a continued increase in the proportion of purchase applications via limited companies for our main Buy-to-Let brand, Kent Reliance, to 69% in 2017. The Group has always specialised in lending to limited companies, and given market trends, this gives us a competitive advantage over those lenders without such a capability.

From 1 January 2017, The Prudential Regulation Authority (‘PRA’) required lenders to adopt more stringent affordability assessments. We have always assessed affordability for borrowers through our specialist underwriting model and applied stringent stress tests, so were well-placed to benefit from these changes. This can be seen in our weighted average interest coverage ratio (‘ICR’) for Buy-to-Let origination during 2017, which increased to 185%, demonstrating our cautious approach to the assessment of customer affordability.

Further market-wide measures to strengthen underwriting standards were implemented from October 2017. We already substantively met the regulatory requirements for assessment of landlords with four or more mortgaged properties, and sought to enhance this proposition through the use of technology, creating a simple and automated way of providing comprehensive portfolio information. This has been embedded within our underwriting process to create a strong proposition for brokers and borrowers alike.

These measures, and an expectation of further interest rate rises, also caused a shift in the demand amongst our professional landlords towards five-year fixed rate products which accounted for c.43% of our Buy-to-Let completions in 2017. Competition has increased in this area, and the market has not yet fully repriced following the Bank of England base rate rise in November 2017 or for subsequent widening of swap spreads, putting pressure on margins.


Trading conditions in our core markets are positive and current application levels are strong. In line with UK Finance forecasts, the overall Buy-to-Let market is expected to contract further in 2018, however, we expect to continue to grow market share through the relevance of our proposition to professional landlords.

The Group’s IFRS 9 models and first generation IRB models were delivered on schedule in late 2016 and we ran the models in parallel throughout 2017. We remain pleased with progress towards our IRB application and also welcomed the recalibration of risk weights in the final revisions to the Basel III reforms on standardised capital requirements published in December 2017. We believe that these new calibrations combined with the final IRB output floor will be beneficial to the Bank’s capital requirements, however we remain cautious until the final rules are adopted.

The market sub-segments targeted by OSB, principally professional landlords, including limited companies, have remained strong despite the overall slowdown in the Buy-to-Let market in 2017. We remain confident in the underlying strength of the Private Rented Sector and believe that we are well-placed as the Buy-to-Let market continues to professionalise in response to tax and regulatory changes. We will continue to concentrate on what we have proven we do best: using our relationships, manual underwriting expertise and secured lending strategy to lend responsibly to our customers.

We see opportunities for growth in other segments of the lending market where we already have expertise and a platform to build from. In particular, we expect to grow commercial and bridge finance lending through our InterBay Commercial brand and see further opportunities to grow our residential lending franchise.

We will remain predominantly retail funded, aiming to fund our loan book through our Kent Reliance savings brand. In addition, we intend to invest in our online savings platform during 2018 to attract a broader customer base and grow SME and other lower cost deposits in future years. Our additional liquidity will continue to come from wholesale funding, and we intend to return to the securitisation market during 2018 following the closure of the TFS in February. We drew down an additional £250m in 2018 before the scheme closed, bringing the total balance to £1.5bn. Over time we will use these different funding sources to optimise our cost of funds.

The pipeline of regulatory change continues to grow, with GDPR and PSD 2 both going live in 2018 and work continuing on IRB and other smaller regulatory projects. We expect to expense c.£7m on regulatory projects in 2018, around double the total in 2017. In addition, we plan to continue to invest in our technology infrastructure, mortgage origination system and online savings platforms to support our future growth strategy and enable us to broaden our reach into adjacent markets, such as sub-segments of residential mortgages, where we see opportunities, particularly once we transition to IRB. All of these projects are expected to lead to a significant increase in operating costs in 2018. However, we expect to offset this in part, by delivering further efficiencies in the cost of running the Bank on a ‘business as usual’ basis, by continuing to focus on cost discipline and leveraging our unique operating platform in India.

We are now live with IFRS 9 after a successful parallel run throughout 2017. The day one impact of the implementation of IFRS 9 is an increase in the provisions of c.£4m, representing 9bps on the Bank’s CET1 ratio as at31 December 2017, on an end game basis, reflecting the strength of security underpinning our loan book.

Our achievements in 2017 are a testament to the management and staff of OSB and I would like to thank my colleagues for their hard work and commitment throughout the year.

Looking forward to 2018

Over the coming year, organic lending through the Buy-to-Let segment will remain the key driver of loan book growth, but we expect to grow our residential lending, and our commercial and bridge finance lending through our InterBay Commercial brand.

We expect to deliver net loan book growth in the mid teens in 2018 and NIM of c.3%, reflecting current asset pricing, in particular for five-year fixed loans and an expectation of a rising cost of retail funds after the end of TFS. We anticipate a cost to income ratio of c.30%, reflecting the significant increase in the cost of regulation and planned additional investment in the business.

We start 2018 with a fully loaded CET1 ratio of 13.7% and a proven organic capital generation capability through profitability. We anticipate maintaining a CET1 ratio at a minimum of 12% going forward. Our dividend policy remains a payout ratio of at least 25% of underlying profit after taxation attributable to ordinary shareholders.

Our primary growth strategy remains organic origination, but we continue to look at inorganic opportunities, including portfolio purchases, where they meet the Bank’s return hurdles.

I believe that OneSavings Bank is well placed to take advantage of opportunities that arise and we remain capable of generating attractive returns for our shareholders.

Andy Golding

Chief Executive Officer

15 March 2018

1. UK Finance, New and outstanding buy-to-let new mortgages, 2 Feb 2018. 2. Excluding the impact of TFS/FLS drawdowns. The unadjusted ratio was 109% as at 31 December 2017 (2016: 100%). 3. Prior to 2017, OSB deducted coupons on equity Perpetual Subordinated Bonds (‘PSBs’) accounted for as dividends from underlying profit before and after tax, net interest margin and cost to income ratio. Following a review of market practice in advance of the Bank’s AT1 issue in May 2017, OSB no longer deducts these coupons from the calculation of these key performance indicators. The comparatives have been restated accordingly. Interest payments on AT1 securities classified as dividends are treated in the same way.
Download Chief Executive Officer's statement (PDF 3.5mb)


1. In 2016, profit before tax included net gain from exceptional items of £24.9m.

2. Prior to 2017, OSB deducted coupons on equity Perpetual Subordinated Bonds (‘PSBs’) accounted for as dividends from underlying profit before and after tax, net interest margin and cost to income ratio. Following a review of market practice in advance of the Bank’s AT1 issue in May 2017, OSB no longer deducts these coupons from the calculation of these key performance indicators. The comparatives have been restated accordingly. Interest payments on AT1 securities classified as dividends are treated in the same way.

At a glance

Our business

  • Buy-to-let and SME lending
  • Residential mortgage lending
  • Retail savings
  • Our trading brands
Buy-to-let and SME lending

Buy-to-let mortgages

We provide loans to limited companies and individuals, secured on residential property held for investment purposes. Our target market is experienced and professional landlords or high net worth individuals with established and extensive property portfolios.

Commercial Mortgages

We provide loans to limited companies and individuals, secured on commercial and semi-commercial properties held for investment purposes or for owner occupation.

Residential development

We provide development loans to small and medium sized developers of residential property. Loans are staged, with monitoring surveyors signing off each stage of the development before funds are released.

Funding lines

The Bank provides funding lines (loans) to non-bank finance companies secured against portfolios of financial assets, principally mortgages and leases.

Residential mortgage lending

First charge

We provide loans to individuals, secured by a first charge against their residential home. Our target market includes high net worth and complex income customers. We are also experts in shared ownership, lending to first-time buyers and key workers buying a property in conjunction with a housing association.

Second charge

We provide loans to individuals seeking to raise additional funds secured by a second charge against their residential home. We predominantly target good credit quality borrowers.

Funding lines

We provide funding lines to non-bank lenders who operate in high yielding, specialist subsegments such as residential bridge finance.

Retail savings


We attract retail savings deposits via the internet.


The direct channel sources savings products via the telephone and post.

High street branches

Our Kent Reliance branded network operates in the South East of England and offers a variety of fixed, notice, easy access and regular savings products, including ISAs.

Our trading brands

Our trading brands

OneSavings Bank is made up of a family of specialist financial services brands.


Largest lending business in the Group, offering Buy-to-Let and first charge residential loans.

Kent Reliance is also an established, stable and awardwinning savings franchise. Its strong customer focus delivers high levels of customer satisfaction, resulting in strong customer loyalty and retention.


Experienced team providing specialist residential development finance to small and medium sized developers with a proven track record (commenced trading in January 2014).


Specialist semi-commercial and commercial mortgage lender providing Buy-to-Let loans, alongside owner-occupied and investor commercial mortgages throughout England and Wales (acquired in August 2012).


Long-standing second charge lender, which offers an awardwinning range of specialist secured loans throughout England, Scotland and Wales (acquired in September 2012).


Based in Bangalore, India, and a wholly-owned subsidiary of OneSavings Bank, OSBI provides primary processing for our Kent Reliance, Jersey and Guernsey brands.

Download at a glance (PDF 3.5mb)

In focus

We focus on specialist mortgage lending to consumers, entrepreneurs and SMEs in subsectors of the UK market where we have identified opportunities for high returns on a risk-adjusted basis and where we can take a leading position.

Sub-sector market specialisation

The markets we focus on are:
  • Buy-to-Let
  • commercial and semi-commercial
  • residential development
  • bespoke specialist residential
  • second charge residential
  • shared ownership, and
  • bridging and short term loans.

OSB also provides funding lines to other lenders. The funding lines business is secured against pools of loan collateral with indirect access to certain highyielding, specialist sub-segments, such as asset finance and residential bridging finance.

Intermediary relationships

Access to our specialist products and multiple brands is via intermediaries. Relationships are key and partnerships continue to flourish with our panel of selected specialist mortgage intermediaries, who are leaders in their sub-sectors.

We listen and work with the intermediaries to develop new opportunities and bespoke solutions for our clients. In the year, we developed joint marketing and education campaigns and provided dedicated marketing support.

Our sales team was awarded The Best Business Development Team in 2017 by The Mortgage Strategy Awards.

Inorganic growth

The Group is focused on organic origination as its core growth strategy. In addition, we continue to evaluate selective inorganic opportunities that provide long-term value and meet our strategic objectives. In 2017, the Group made no portfolio acquisitions as market pricing did not meet the Group’s stringent return conditions.

Bespoke underwriting

All of our loans are underwritten by experienced and skilled underwriters. At OSB, we do not use automated or scorecard-based processes. We take each loan on its own merits, responding quickly and flexibly to offer the best solution for each of our customers. For this bespoke approach, expertise and going out of our way for our clients, we received the Best Specialist Lender award at The Mortgage Strategy Awards and Specialist Lender of the Year from Mortgage Introducer Awards.

To support this manual and bespoke approach, in 2017 we implemented new technology to reduce administrative burdens on our underwriters and mortgage intermediaries. This provides a simple and speedy solution to enable landlords and brokers to meet the PRA’s underwriting standards for portfolio landlords. Implemented in October 2017, the system provides valuations and verifications of entire portfolios in seconds, giving our underwriters high levels of confidence in their valuations

No case is too complex for us and for those borrowers with more tailored or larger borrowing requirements our Transactional Credit Committee meets twice a week and in 2017 met 103 times to demonstrate our responsiveness to broker needs.

What we will do

We will continue to develop our sales and underwriting teams through attracting the top talent and then nurturing it through training and coaching programmes. We will also ensure that our relationships with intermediaries continue to flourish and that we deliver a high-quality differentiated service for our clients.

We deliver straightforward products that meet customers’ needs for cash savings. We offer good and consistent value to attract and retain a loyal customer base.

Stable funding platform

OSB’s proposition for savers is simple; we offer consistently good value savings products to attract and retain a loyal customer base, providing a stable funding platform for the business to grow its loan book. Our retail savings franchise has been a valued and recognised brand for over 150 years.

Transparent savings products

We deliver straightforward products that meet customer needs for cash savings. We offer good and consistent value, without having to price at the very top of the best buy tables. We do not offer ‘new customer only’ products, and existing customers benefit from loyalty rates.

Our clients can access savings products directly via post, online and in our nine branches. The products offered include fixed term bonds, ISAs, easy access and regular savings accounts. We also offer a childrens’ account which supports one of our chosen charities, Demelza Hospice for Children.

We attracted over 27,000 new savings customers during 2017, and retained 90% of maturing fixed term deposit balances, demonstrating the strength of our long-term proposition.

The savings proposition to small and medium businesses, launched in 2016, has been very well received and continues to grow with an average balance per account of nearly £78k.

In 2017, we were recognised by Consumer Moneyfacts as the ISA Provider of the Year and by Moneyfacts as Best Cash ISA Provider for the fifth year running.

Customer-focused philosophy

By maintaining our strong customercentric approach we are rewarded with a loyal customer base that recognises long-term good value.

We reward our people based on the quality of service they provide to customers, further protecting our retail savings franchise. We measure customer satisfaction and net promoter score (‘NPS’) through regular customer surveys using independent experts. These measures are aligned to our business strategy and the client NPS score increased to +62 for the year, up from +59 in 2016.

We will continue to invest in enhancing our service in 2018, based on using technology and modern practices to support the brand traits customers have told us they prefer – heritage, trustworthy and traditional. We will also use our real-time customer feedback capability to identify and act on ideas for new products and service improvements.

We work to an overarching risk appetite and single Group lending policy spanning all our brands and deliver our services with the aim of providing an excellent customer experience. We put customers’ needs first

Integrated multi-brand approach

We capitalise on our cross-company expertise, operating under a common operating framework that supports our key lending brands. Distribution, sales and risk processes operate under a simple, coordinated management structure giving us the ability to present our multiple lending brands with great efficiency.

We work to an overarching risk appetite and a single Group lending policy spanning all our brands using our experience in specialist lending to enhance policy. We ensure that risks are modelled and that the comprehensive risk pricing model reflects latest market conditions and forecasts. This modelling ensures all product pricing goes through the same rigorous analysis, according to core principles set by our Group Assets and Liabilities Committee, comprised of senior management.

Cost-efficient operations

Our administrative functions, based in our wholly-owned subsidiary OSBIndia, support the strategic intent of delivering excellent customer experience. We drive continuous customer-focused improvement through our flexible and cost-effective operating platform, putting customer needs first.

Real-time customer satisfaction surveys inform a programme of continuous improvement.

We benchmark our processes against industry best practice, challenging what we do and eliminating customer pain points as they arise. We continue investing in developing skills that enable highly efficient service management, matching those to business needs both in India and the UK.

Investment in infrastructure and systems

We aim to deliver efficient, scalable and resilient infrastructure to support our business strategy objectives. We invest in complementary systems, both proprietary and industry standard, to deliver excellent service (measured against peers by industry experts), outstanding resilience and strong governance. OSB focuses on being a nimble bank with very few legacy issues

We continue to invest in IT security, supported by market leading data security and resilience experts.

We will continue to leverage infrastructure investment across the Group in 2018, maximising customer and efficiency benefits. We will also ensure infrastructure and systems are regularly reviewed and tested, maximising their security and resilience using industry experts with particular focus on cyber security.

Business Model

The Group leverages our unique business model to differentiate ourselves from the competition, offering well-defined propositions in our chosen markets. We apply a specialist, personal and flexible approach to our intermediary and customer relationships, focusing on delivering long-term value.

1. Resources and relationships

Brands and heritage

We have a family of specialist lending brands supported by our savings franchise with a 150-year heritage.


Our team of highly-skilled employees possess expertise and in-depth knowledge of the property and savings markets.


We benefit from cost advantages provided by our wholly-owned subsidiary OSBIndia.

Relationships and intermediaries

We have strong and deep relationships with the mortgage intermediaries who distribute our products.


We have a strong equity Tier 1 capital ratio which can support significant loan book growth.

2. What we do

Attractive retail savings

We deliver straightforward products that meet customer needs for cash savings. We offer good and consistent value to attract and retain a loyal customer base, without having to price at the top of the best buy tables.

Our proven retail savings performance provides a stable, long-term funding platform to grow our loan book.

How we do it

Our channels:

Online 36%
Direct 41%
High street branches 23%

Specialist lending business

We focus on specialist mortgage lending to consumers, entrepreneurs and SMEs in sub-sectors of the UK market where we have identified opportunities for high returns on a risk-adjusted basis and where we can take a leading position.

We adopt an expertise-based, bespoke approach to underwriting in each market sub-sector, specifically geared to each individual customer. We do not use automated or scorecard-based processes for underwriting new loans.

How we do it
Our segments are:
Buy-to-let/SME lending) 77%
Residential lending 23%

Unique operating model

We capitalise on our cross-company expertise, operating under a common operational framework that supports our key lending brands. Distribution, sales, credit and risk processes operate under a simple, coordinated management structure giving us the ability to present our multiple lending brands with great efficiency.

We put customer needs first and drive continuous customer-focused improvement through our flexible and cost-effective operating platform.

Our customer service administrative functions are based in our wholly-owned subsidiary OSBIndia.

Cost to income ratio 27%

3. Outcomes and value creation

For shareholders

We aim for strong EPS growth and a dividend payout of at least 25% of underlying earnings.

EPS 51.1p
DPS 12.8p

For customers

We provide a great customer experience and deliver high levels of customer satisfaction.

Customer NPS +62
Customer retention2 90%

For employees

We invest in their training and development and employee engagement activities to make OSB the best work place it can be.

Employees promoted in 2017 76
Employees who attended learning events in 2017 685

For communities

We have well-established community services programmes in the UK and India.

Sponsorship and donations £209k

1. 25% of underlying profit after tax attributable to ordinary shareholders.
2. Retention is defined as monthly average ratio of maturing contractual retail deposits which withdraw their funds on maturity.

Download business model (PDF 3.5mb)

Strategic framework

Our strategic objective

To be a leading specialist lender in our chosen sub-sectors, supported by a strong retail savings franchise.

Our goals

Grow profitable load origination in key markets

  • Deliver strong end-to-end propositions in target markets
  • Deliver incremental non-organic business
  • Invest in highly responsive, customer-focused culture
  • Innovate to secure sustainable long term market leadership

2017 progress

  • Buy-to-Let/SME origination up 23% to £2.4bn
  • £176m originations in commercial lending through our InterBay brand
  • Received multiple awards including Best Specialist Lender (Mortgage Strategy Awards) and Best Specialist Lender of the Year (The Mortgage Introducer Awards)

Looking forward

  • Focus on organic growth in underserved sub-sectors
  • Further develop commercial lending opportunities
  • Enhance proposition in residential lending in light of progress to IRB
  • Develop further opportunities in bridge finance
  • Identify new market sub-sectors with high returns on a risk-adjusted basis

Key risks

  • Market conditions affecting long term demand
  • Increased regulatory pressure
  • Continued political uncertainty
  • New specialist lenders entering the market


Loan book £7.3bn

Our goals

High quality decisions protecting the business

  • Skilled manual underwriting supported by clever technology
  • Deliver a high quality differentiated service supported by highly responsive decision-making
  • Clear decisions recognised by intermediaries for their quality and fairness – a critical friend
  • Integrated underwriting across all brands

2017 progress

  • More than 38,500 loans totalling £8.3bn originated since the Bank’s creation in 2011 with only 137 cases of arrears over 3 months, with an aggregate balance of £18.4m and an average LTV of 63%
  • New technology solution for assessing multi-property portfolios
  • Transactional Credit Committee met 103 times to assist with more complex or larger new mortgage applications

Looking forward

  • Identify additional technology to support decision making
  • Continue training and coaching to further strengthen the underwriting expertise of our team
  • Maintain focus on consistent decision making outcomes
  • Find ways to be even more responsive to intermediaries and borrowers whilst remaining a critical friend

Key risks

  • Changing regulation for underwriting
  • More complex underwriting requirements
  • Difficulty in recruiting experienced staff
  • Increasing intermediary demands
  • Demands of ever-changing technology


Loan loss ratio 7bps

Our goals

Increase partner reach in response to demand

  • Provide access to specialist products developed by listening to intermediary partners
  • Be accessible and available to intermediaries
  • One distribution model across all brands
  • Gain intermediary recognition for delivering long-term sustainable proposition
  • Deliver bespoke solutions to meet intermediary and customer needs

2017 progress

  • Introduced high tech solution to ease the burden for assessing multi-property portfolios
  • Success of Choices programme in increasing retention rates in 2017
  • Restructured relationship team to increase levels of engagement
  • Attended c.150 intermediary events across our target geographies
  • Enhanced marketing and brand support for intermediaries
  • Published periodic market leading ‘Buy-to-Let Britain’ reports

Looking forward

  • Develop enhanced intermediary education programme
  • Continue to deliver direct relationships with high quality intermediaries
  • Deliver deeper relationships with more of our target intermediaries
  • Deliver best in class service performance as we grow and enter new market sub-sectors

Key risks

  • Loss of key broker relationships
  • Competition reducing pricing below OSB’s risk-adjusted return appetite
  • More complex underwriting requirements slowing the process


Gross new lending £2.6bn

Our goals

Stable, high quality funding platform

  • Be primarily funded through attracting and retaining a loyal retail savings customer base
  • Provide access to our service for customers through their channel of choice
  • Ensure liquidity requirements are met through the economic cycle
  • Deliver a proposition offering transparent, straightforward savings products, providing long-term value combined with excellent service levels

2017 progress

  • Gained c.27,000 new savings customers
  • Achieved 90% customer retention
  • Received multiple awards for savings products including ISA Provider of the Year and Best Cash ISA Provider
  • Loan to deposit ratio of 92%1

Looking forward

  • Enhance service proposition by investing in technology for digital transformation
  • Continue to invest in and diversify distribution channels from branches to digital
  • Broaden savings propositions further to include wider savings needs

Key risks

  • Increased competition for retail funds
  • Potential NS&I/government intervention in the market
  • Increased customer expectation for technology compared to difficulty and cost of delivery
  • Increased burden of regulatory compliance – for example, Open Banking (which currently does not apply to OSB)

1. Excluding impact of TFS/FLS drawdowns.


Customer NPS +62

Our goals

Best in class customer service

  • Put customer service at the heart of everything that we do
  • Extend activity in OSBIndia developing high-quality areas of excellence
  • Create structure delivering solutions using cross-company expertise
  • Deliver cost efficiencies through excellent process design and management

2017 progress

  • Investments in training and process development contributed to enhanced customer NPS of +62
  • Increased OSBI headcount by 33% to 366

Looking forward

  • Extend measurement by benchmarking to best in class
  • Introduce robotics technology and improve workflows to further enhance service in primary servicing
  • Increase change capacity through enhanced end-to-end project management capability

Key risks

  • Difficulty in continuous service improvement as OSB grows
  • Global economic uncertainty increasing costs in India
  • Increasing complexity from compliance with changing regulation
  • Lack of operational resilience due to rapid growth


Cost to income ratio 27%

1. Prior to 2017, OSB deducted coupons on equity Perpetual Subordinated Bonds (‘PSBs’) accounted for as dividends from underlying profit before and after tax, net interest margin and cost to income ratio. Following a review of market practice in advance of the Bank’s AT1 issue in May 2017, OSB no longer deducts these coupons from the calculation of these key performance indicators. The comparatives have been restated accordingly. Interest payments on AT1 securities classified as dividends are treated in the same way.