Shares in OneSavings Bank (OSB) plummeted this morning after the lender revealed it would take a hit of up to £180m from a “step change” in customer behaviour.
In a statement released after market close last night, the FTSE 250-listed bank said customers in a certain part of the loan book were choosing to refinance earlier than expected at the end of their fixed-rate deal.
This meant they were spending less time on the higher reversion rate, the rate mortgages revert to after the end of a fixed rate deal.
“Once a change in customer behaviour becomes apparent, and is expected to persist, the group is required to recognise an immediate adjustment to the carrying value of the loan book through net interest income,” it said.
This change in behaviour means the bank expects to take a hit of between £160m to £180m when it announces results for the first half in August.
It stressed that its “capital and liquidity positions remain strong”.
Shares in OSB Group – which specialises subsections of the mortgage market like Buy-to-Let – tanked by nearly a quarter to trade at 358.24 pence.
Analysts at Jefferies said “we do not think there is read-across to other parts of OSB, nor to Paragon Bank, but OSB’s underwriting looks less good in this light than before.”
Excluding that adjustment, OSB expects its net interest margin to be slightly ahead of expectations. It also said it was on track to deliver around seven per cent growth in its underlying loan book.