OSB Group Stock

Hello, and welcome to the OSB Half Year Results for 2026. [Operator Instructions] I will now hand to Andy Golding to start proceedings.

Good morning, and thank you for joining OSB Group 2026 half-year results presentation. This morning, I'll take you through the key highlights for the first half, providing view and outlook for the remainder of 2026 and beyond, before finishing off with insights into the macro drivers supporting our business. Then I'll hand over to Victoria for the financials in more detail, before returning for concluding remarks.

Starting with a high-level view of the business, in March 2025, at the investor update, we set out our strategy to remain the number one specialist lender and also our plan to improve RoTE in the medium term. I'm pleased with the resilient financial and operational performance the group has delivered in the first half. We have done what we said we would do, particularly against the backdrop of ongoing macroeconomic and geopolitical uncertainty, rising oil prices and the resulting volatility in swap rates and the impact on retail cost of funds.

This slide highlights our three familiar themes. Firstly, we continue to deliver against our lending growth plan. Net loan book growth of 1.3% reflects our discipline in maintaining attractive returns from new lending. Due to strong demand, we wrote more than GBP 1 billion of new business in Buy-to-Let in the first half at sustainable margins. And this subsegment, therefore, remained at 68% of the portfolio. Despite that backdrop of macroeconomic uncertainty, originations in our higher-yielding subsegments also grew moderately. As expected, net interest margin reduced compared to the prior period, and I'll come back to that shortly.

The strength of our underwriting expertise continues to be demonstrated in our low loan loss ratio and despite recent volatility remains in line with our long-term average. Secondly, we've maintained our cost discipline and efficiency while also creating capacity for investment. Our culture of challenging cost helped contain core costs, which were down by 0.4%. Cost-to-income and managed ratios reflect our investment in the transformation program and are in line with our expectations.

Finally, delivering attractive RoTEs and capital returns to shareholders continues to be our primary objective. The GBP 187 million of profit before tax translates to a first half RoTE of 13.3% and TNAV per share of 584p, up from 579p at the year-end. Our commitment to rewarding shareholders is underlined by the 5% increase in the interim dividend. In addition, the GBP 100 million share buyback program that we announced in March is progressing well with circa GBP 69 million of shares repurchased so far. This will bring total capital distributions to shareholders over the last 18 months to GBP 360 million, demonstrating the strength of our capital generation and our commitment to shareholder returns. In summary, I'm pleased with our resilient performance in the first half and the progress we've made on transformation.

Turning to our portfolio in greater detail. We remain disciplined in how we grow, balancing volume, capital allocation and returns. Those of you who have been following OSB will be familiar with our graphic equalizer concept that demonstrates our progress in delivering our lending growth plan. Our Buy-to-Let franchise performed well, enhanced by the launch of the Rely brand towards the end of last year.

Residential originations were broadly flat in the first half, although we expect momentum to build in the second half following the full rollout of our residential proposition on the new platform. Originations grew moderately in our high-yielding subsegments despite the uncertain macroeconomic environment and the impact of higher mortgage rates on borrowers' purchase decisions.

That said, our commitment to optimizing and diversifying the loan book remains unchanged, but this journey won't be linear as we continue to manage the business to optimize risk-adjusted returns. Taken together, I'm pleased with how we've responded to the challenging market conditions while continuing to execute our plan. We've made good progress in the first half and continue to expect full year growth to be in line with 2025.

We're on track with our transformation program. Management actions taken continue to deliver tangible benefits across the group with the investments we've made over the last 3.5 years now translating into stronger commercial performance, better customer outcomes and greater efficiency. As you can see from the chart, the new platform gives us greater pricing agility, helping us respond more dynamically to market conditions in both savings and lending while maintaining our focus on returns.

The combination of the new platform and the Rely brand has significantly enhanced the broker experience. For example, we can now deliver an agreement in principle in under 10 minutes and complete cases in as little as two hours. We're also seeing meaningful operational benefits with higher levels of automation and accelerated processing times.

For example, automated valuations are now being used for around 10% of our cases originated through the new platform compared with none previously, improving both efficiency and customer outcomes. In savings, we continue to expand the range of products on the new platform. The technology is enabling much faster execution with actions that previously took weeks now completed in around an hour. Importantly, these benefits extend well beyond operational efficiency. Over time, the platform will enable us to respond more quickly to changing market conditions, improve customer and broker retention through a better service proposition and generate greater operational leverage as the business grows. Together, these capabilities strengthen our ability to protect margins, improve productivity and deliver sustainable returns over the medium term.

Looking ahead, momentum continues into the second half. In savings, we'll continue to broaden the product offering, complete the migration of Kent Reliance customers onto the new platform and prepare for the transfer of Charter Savings Bank onto the new platform as well.

In lending, our residential mortgage proposition, which is currently in soft launch phase will be rolled out more broadly to our broker network under the Precise brand, bringing the benefits we've already seen through the Buy-to-Let Rely launch to our residential customers. Overall, I'm pleased with the progress we're making. The program remains on track. Key milestones are being delivered successfully and costs are absolutely in line with the plan.

The investments I've described are also creating the foundations for our adoption of AI. In our contact centers, AI is reducing notetaking time by around 35% and saving colleagues time on complex calls. AI is also helping us reduce fraud and support document verification, preventing fraudulent applications worth approximately $8 million. We're also using AI to support brokers by helping colleagues navigate complex credit policies more quickly and consistently, while internally, we're seeing productivity improvements across software engineering and routine administrative tasks.

Importantly, this is not about replacing the expertise that differentiates OSB. Specialist lending will always rely on human judgment. We see AI as a tool that supports our people, helping them make better informed decisions and spend more time focused on our customers. Looking ahead, we'll continue to build on the data and technology foundation we've created, exploring opportunities in areas, including pricing, customer service and back-office efficiency. While still at an early stage, we believe AI can further enhance the strength that already differentiate OSB and support improved outcomes over time.

Looking at what we can control in our business. We've made good progress in the half. We set out our plan in March '25, our guidance was based on stable funding costs and a more favorable set of macroeconomic assumptions. This slide highlights the elevated cost of retail funding as well as the volatility in the rates that we saw in H1 '26. It also shows how the macro environment has significantly changed since the plan start point in March '25 and for 2026 and more so in '27 across GDP growth, HPI, inflation and interest rates.

The top right-hand chart shows the spread between average top quoted pay rates on one-year fixed rate deposits versus one-year fixed swap rates. The spread was widest in February and then narrowed briefly in March to provide a short window for more attractive funding costs for us. Since March, the rate has widened again, and now it is at a similar level to February, resulting in higher-than-anticipated cost of funding in the market.

We've highlighted a number of times and most recently at the full year 2025 and Q1 '26 that our ability to deliver the full year '26 NIM of circa 225 basis points would depend on three factors: front book margin, back book dynamics and the cost of retail funds, the cost of funds being the most uncertain and hardest to forecast. The cost of funding in H1 '26 did average a circa SONIA plus 30 basis points, in line with our full year expectation. However, the volatility in funding costs in the half and market competition effect on the savings back book recycling was a headwind on NIM with an H1 NIM of 223 basis points versus 226 basis points for the full year '25.

As we stand here today, we see no indication that the cost of retail funds will normalize this year. On this basis, we've revisited our NIM guidance and no longer assume normalization of cost of funds. We've updated our 2026 NIM guidance to 215 to 220 basis points from 225, preferring a range rather than a single number to reflect that level of uncertainty in the market. As a consequence of this change, we're now expecting to deliver a RoTE of closer to 12.5% for 2026.

However, as we look into the medium term, the mechanical nature of factors which enable an RoTE uplift together with the management actions underway, mean that our guidance of mid-teens RoTE in 2028, rising to the upper end of mid-teens RoTE in '29 still stands. Let me spend some time taking you through the return drivers together over the plan to 2029 and why we have confidence in this delivery.

We see five key drivers. The first driver has a near-term impact and is market-driven, the cost of retail funds. As I explained, as a consequence of the funding headwind, we now expect 2026 RoTE to be closer to 12.5%. If the funding cost pressures seen so far this year continue, this could result in a modest impact on our 2027 mid-teens RoTE aspiration.

Beyond ' 27 and into '28 and '29, there are four positive drivers that we've already discussed with you. The first two in green are mechanical back book roll-off. The high-margin back book will roll off this year and the low-margin back book will roll off into 2028, and this becomes increasingly supportive by 2028. Next, MREL debt with call dates in September '27 and January '29 will reduce our cost of funding. Both of these result in a mechanical uplift in our RoTE outlook as the drag from these factors disappears. The next two in blue are within management's control and hence, also areas we're confident about. The return-enhancing portfolio diversification into higher-margin areas as the Buy-to-Let book reduces to 60% of the loans over the period is a driver of RoTE enhancement.

As is our transformation program, investment will conclude in '27 with increasing benefits accruing thereafter, bringing the operational leverage benefits we're already seeing from the Kent Reliance savings of Rely Buy-to-Let to the rest of the business. The operating environment has become more volatile than we anticipated when we first laid out our medium-term aspirations. Interest rate expectations, swap rate movements and customer behavior have all become slightly less predictable.

While this can influence the pace at which margins recover quarter-to-quarter, it does not alter the strategic action we are taking or our confidence in the medium-term earnings power of the franchise. Mechanical and management control positive RoTE drivers give us high confidence in our '28 mid-teens RoTE and '29 high end of mid-teens RoTE aspirations.

Our objective remains to sustainably deliver mid-teens returns on tangible equity. The question is one of timing rather than destination. With that, I'll hand over to Victoria for further insights into the financial.

Thank you, Andy, and good morning, everyone. The first half delivered resilient financial performance in line with our expectations. I will now walk through the detail.

Turning first to the P&L. Let me call out a few key items. Net interest income was GBP 340 million for the first half, up 1% compared with the prior period, and I will provide more color on the NIM dynamics on the next slide. The fair value loss on hedging activities reduced to GBP 2.5 million compared to GBP 14.3 million in the prior period. The key driver behind the loss was again fair value movements on our mortgage pipeline swaps.

Total administrative expenses, of which core costs were GBP 117.4 million increased by 4% as we continue to invest in our transformation program. However, our core costs were down 0.4% compared to the prior period. This resulted in a 5% increase in profit before provisions and impairments to GBP 204 million for the first half. An impairment charge of GBP 16 million was recognized this half year. I will cover this charge in more detail later on.

Finally, profit before tax for the first six months of the year was GBP 187 million, down 3% on prior period, and basic EPS grew to 38.4p per share, up 3%, primarily due to the lower weighted average number of shares.

Looking at the NIM movement from H2 2025, NIM reduced by 3 basis points to 223 basis points this half year. Higher cost of funds caused downward pressure as our retail savings book continued to recycle on to more costly spreads to SONIA compared to those in the second half of 2025. The higher cost of retail funds was partially offset by lending spreads as back book dynamics rolled through in parallel to another six months of new business written at sustainable margins.

We have also shown NIM, excluding liquid assets, which was 262 basis points in the first half. This presentation of our NIM better reflects the performance of the underlying business. It also allows for a more meaningful comparison with our closest peers. As Andy mentioned, we have updated our 2026 NIM guidance to a range of 215 to 220 basis points. The new guidance is based on the assumption of SONIA plus 40% for retail funding costs in the second half of 2026. This is an increase from our previous assumption as a result of strong competition and volatility we are currently seeing in the market. Our updated NIM guidance is shown on the right-hand side of the chart.

This slide provides an overview of our funding franchise. The overall makeup of the group's funding remained broadly unchanged. As at the 30th of June, 89% of our total funding came from retail deposits that we raised under our two savings brands, Kent Reliance and Charter Savings Bank. Retail deposits grew by 3% in the first six months of the year, reaching nearly GBP 25 billion. The proportion of our fixed rate bonds versus easy access accounts remained broadly unchanged compared to year-end with fixed rate savings accounts representing 55%. The remainder of our funding came from debt and wholesale issuance, providing diversification and adding duration to our funding requirements.

As at the 30th of June, Central Bank funding reduced to GBP 250 million, providing us with significant capacity and flexibility to draw more in line with our funding requirements and improve our overall cost of funds as we manage our way through the final nine months of deposit migration to our new more flexible platform.

Moving on to costs. A key part of our plan is that we tightly manage our cost base to allow us to invest in transformation. We demonstrated that we achieved this in the first half of the year. This in the following page highlights our cost discipline and transformation spend. Administrative expenses were in line with expectations at GBP 136.5 million, up 4% compared to the first half of 2025. The main driver of the growth was the cost of the transformation program with a GBP 5 million increase compared to H1 2025. On the next slide, we provide more detail on our spend to date. I am pleased that the core costs reduced by 0.4% compared to the prior period as we optimize our U.K. real estate footprint.

The cost-to-income ratio remained broadly flat at 40.1% compared to 40.3% in the prior period, and the management expense ratio was unchanged at 88 basis points. Looking forward, for 2026, we continue to expect administrative expenses of circa GBP 280 million, excluding the costs of our new CEO. We remain disciplined in our core cost management, and we'll continue to invest in our transformation program in line with our plan.

Andy outlined earlier the benefits of 3.5 years of investment in transformation. On this slide, we summarize our expenditure since the start of the program for your reference. There is no change to the expected spend on the program until it completes at the end of 2027. On a semiannual basis, you can see that the total transformation spend, including intangible asset movement, has passed its peak in H2 2025. This slide presents the progress against our lending plan, combined with a disciplined approach to risk that we presented at the investor update in March 2025.

Net loan book grew by 1.3% in the first half to GBP 26.3 billion, with Buy-to-Let subsegment representing 68% of total gross loans. We remain committed to our medium-term loan book diversification strategy and continue to see opportunities in these subsegments. The growth in the loan book was supported by originations of GBP 2.3 billion, an increase of 10% compared to the first half of 2025. We saw strong new business volumes in our core subsegments of Buy-to-Let and residential. Originations grew moderately in our high-yielding subsegments despite macroeconomic uncertainty and elevated mortgage rates. For 2026, we continue to expect net loan book growth to be broadly similar to that achieved in 2025.

The next slide provides a waterfall of the movement in the impairment provision in the first half as well as the credit quality metrics of our secured loan book. As you can see from the chart, balance sheet ECL provisions increased in the period due to a net charge of GBP 7 million. The charge was the result of an increase in provision for macroeconomic scenarios, accounts with arrears of three months or more, new lending and individually assessed provisions. These were partially offset by provision releases for model enhancements and PMA updates as well as stage migrations.

Overall, the P&L charge totaled GBP 15.8 million and represented a loan loss ratio of 12 basis points compared to 2 basis points in the prior period. It was broadly in line with a long-term average loan loss ratio of 10 basis points. You can see that our balance sheet total coverage ratio increased to 50 basis points at the end of June compared with 47 at the end of 2025. Our provision balance continues to be more than 10x higher than the average yearly write-offs in the last five years.

Moving on to arrears. For the first six months of 2026, three months plus arrears decreased slightly to 1.6% from 1.7% at the end of 2025 as more Stage 3 accounts exited our 12-month cure period. We remain comfortable with our risk profile and our impairment provisions. We show here that if we were to move our IFRS 9 weighting 100% to our downside scenario that our ECLs would only increase by GBP 19 million.

Next, capital. This half demonstrated another period of strong capital generation. Group CET1 ratio remained robust at 15.2% at the end of June. Our profitability net of loan book growth in the period was 90 basis points, up 10 basis points compared to the prior period. Before the effect of the GBP 100 million share repurchase program announced in March, the CET1 would have been 16% and the share repurchase had a 0.8% impact on the ratio. The group continues to generate enough capital to support loan book growth and a progressive dividend. The Board remains committed to returning excess capital to shareholders as we progress towards our new CET1 target of 13% to 13.5% post Basel 3.1.

This slide prevents movements in net loans and RWAs. In the first half of 2026, loan book grew by 1.3% and RWAs increased by 1.1%. The chart on the right shows that loan book growth accounted for a GBP 0.2 billion increase in RWAs, while mix and other items had a neutral impact on RWAs in the period. We continue to expect the implementation of Basel 3.1 rules as written would reduce the CET1 ratio as of the 30th of June 2026 by 1.2% as a result of a 9% uplift in RWAs. This is compared to just over 1.3% and 9%, respectively, as at the 31st of December '25. This would mean that after the impact of Basel 3.1 rules, the pro forma CET1 ratio as of the 30th of June 2026 would be 14%.

From this pro forma position, the drivers to our 13% to 13.5% post-Basel CET1 range will include RWA growth and shareholder returns underpinned by our profitability. I will now pass back to Andy.

Thank you, Vic. So in summary, the group has delivered a resilient performance in the first half despite that macroeconomic uncertainty. We've continued to grow and diversify the loan book at sustainable margins, leading to attractive RoTEs, and we prioritize returns to shareholders.

Looking ahead, as we've explained this morning, we have updated our '26 full year NIM guidance to reflect the competitive pressure we've seen in the retail deposit market. And as a result, we've updated the '26 RoTE guidance to circa 12.5% However, we remain confident in the earnings power of the business. That confidence is underpinned by the mechanical benefits from MREL and back book roll-off alongside the strategic actions we're taking to diversify the lending book and the benefits the business will realize from the transformation program. These positive RoTE drivers give us confidence in our 2028 mid-teens RoTE and our 2029 high-end mid-teens RoTE aspirations.

With that, we'll now turn to Q&A. And operator, could we please have...

[Operator Instructions] Our first question comes from Benjamin Toms.

Can you hear me?

Andy, can you hear Benjamin?

I think it's possible that participants can hear us here in the boardroom. Unfortunately, we can't hear anything coming back from the operator. We have just been asked by the technical company to stand by. [Technical Difficulty]

Our apologies. One moment. We will get this sorted. Benjamin, if you could go ahead again and see if we can be heard in the room at [Whitfield Street]. We still have a bit of an audio issue. One moment. We will get this sorted. [Technical Difficulty]

Ben, can you now hear me through the line?

I can hear you, Andy. Can you hear me?

Yes, I can. And I'm actually -- the appears to have failed. So I'm now doing it through a laptop that we have managed to flag on to the system. But I think -- apologies, everybody, because I hate being let down by technical issues. But Ben, I think you were first with a question. So why don't you dive in, and we'll try and get it fixed while we do it this way around.

And I think if this is the last time we hear from you, Andy, all the best in your future endeavors. And I guess parting gift is two questions on the net interest margin, which maybe Victoria will pick up. But I appreciate the management were really clear that deposit competition was a key risk to NIM. However, your new 2026 NIM guidance implies an exit NIM of 207 to 217 basis points and investors will need to decide how much of that to flow into 2027. Can you just provide some color on what has to happen to be at the top and bottom end of the guidance range for half 2? If SONIA -- if pricing went back to SONIA plus 30 basis points today, does that get [Technical Difficulty] That was my first question. Should I go with my second?

Yes. Sorry. So the first one is what are the factors that gets us to the top and the bottom end of the implied rate. So Victoria will cover that one in a minute. And what was the second one there?

And just more of a broader question really. What's driving deposit competition? Do you think it's structural hedge tailwinds for the bigger banks? And if that's the case, could the headwind persist until 2030, which is the date when structural hedges stop being additive to the big banks top lines?

Yes. So why don't I tackle the second one first and talk about some of the generic factors, and then we'll come back to Vic on more specifics around the numbers. So I mean, look, we're in a position at the moment where normally we can duck and dive a bit in terms of deposit competition. But we are doing a number of things as a function of the transformation program right now.

So you can see from our numbers, we've skinned down the amount that we're borrowing from the Bank of England on long-term repo, and that's because we want to have lots of collateral headroom for the point when we get to doing the migration of the Charter Savings Bank portfolio, which is a significant retail savings portfolio across onto the new system. So we'll not have products on sale under that brand for a period. So we'll need to have additional sources of liquidity. So that's why we've created that headroom.

That's a bit of a headwind to us because actually long-term index repo funding is a little bit cheaper than where the retail market is right now. So that's having a bit of downward pressure for us. The market is -- there is a lot of competition. There's quite a few new providers that are piggybacking on the back of other people's banking licenses, et cetera, and with a view to pulling in retail funding with high shiny rates and then hoping they can convince the savers to become bond customers, et cetera. And I think everyone is just making sure that they've got plenty of liquidity.

And we're in a position where we are just about to migrate all of the Kent Reliance ISA customers across onto the new platform. That's the last of the Kent Reliance migrations which means for a little while, we haven't really had ISA products on sale and ISAs are one of the cheaper forms of retail funding. So we've been at a slight disadvantage or we're at a slight disadvantage as we come into half 2 that is having a bit of tailwind impact -- sorry, headwind impact in terms of the overall NIM.

But as we move through '27 and complete that migration, we'll be in a much more BAU position and can get back to ducking and diving and optimizing as we go through the market. So hopefully, that gives you a bit of a steer in terms of the competitive dynamic and some of our positioning in it right now. Vic, do you want to touch on the other ones?

Yes. Ben, so in terms of your question about the range, yes, as you say, mathematically, that is the sort of NIM range you would come to. I mean the reason we've gone for a range is just due to the amount of uncertainty that there is there around cost of funding in our NIM guidance. As we've talked about before, there are three drivers of our main drivers of our NIM. We will continue on writing sustainable front book margins. The back book dynamics, as we've talked about before, we have got some of the high margin rolling off in '26 and then the low margin starts to roll off in '27 and beyond. But the main reason, as we sit here today and look at what's going to drive the -- where we exit and how that rolls into '27 is going to be that cost of funding.

And that comprises we have front book, which we have said is that sort of SONIA plus 40% level. And if we look back at the average in H1, we were up at that level at the start of the year. It came down for a month to sort of SONIA plus 10%. So it is very volatile out there, and that's why we've gone with the range. We have got the retention mix and also you've got back book churn. So part of that in H1 is we saw probably, it's the last year for ISAs, as we saw more of the back book people churning from perhaps lower rate, easy access into more fixed rate bonds. So it is hard to predict, and I guess that's why we've gone for a range, but top or bottom predominantly will be driven by that cost of funds.

We have pointed out, as you say, that if it really is too early to tell for '27. There's a lot that can happen between now and year-end. But hence, we sort of just pointed out, look, if that funding persists, it's a slight downward pressure on our 2027 aspiration of that medium term mid-teens RoTE.

Our next question comes from Rob Noble. Can you hear me okay?

Yes, we can. Good. So just a few small questions. So I see you paid down Central Bank facilities substantially in H1. So given that cost of retail funding you've been talking about, what's stopping you using that more -- or what's been stopping you using it more extensively this half? And can you use it more extensively going forward? Then on the EIR gain in H1, I think there's a gain at group level and there's a loss in the CCFS book. So what's actually going on there? And how long are you now assuming customers spend on the reversion rates in each of the books? And then just on costs. So I see the cost guidance as a footnote, excluding the CEO buyout costs. Can you give us an idea of how much they are? I presume it's sort of more than GBP 5 million for it to be literally explicitly separated from the cost guide.

Yes. Okay. Thanks, Rob. I'll touch on the first one in terms of Central Bank. I mean we have got bucket loads of collateral largely with the Bank of England ready to draw on, but we are using that for safety and security from a liquidity management perspective when we have to effectively shut acquisition down under the Charter Savings Bank brand and do the migration across to the new platform. So we're just basically creating a surety and a safety set of headroom by having paid down the facilities now at the point that we don't need the liquidity and then we'll ramp that facility back up at the point that we can't gather liquidity through the Charter Savings Bank brand while we do the migration. So that's the logic behind that one.

And I think it is just -- it's a good liquidity management decision. And I think -- well, I hope shareholders would rather me as the CEO of this bank, worry about making sure we've got access to plenty of cash than 1 or 2 basis points of NIM here and there. So that's the thinking behind that one. I'll ask Victoria to cover the ER gain and probably wouldn't be appropriate for me to talk about CEO costs. So I'll ask her to cover that one as well.

Thanks for those questions. So yes, as you say, there was a GBP 4.6 million gain on EIR. We always look at the -- each half at the latest behaviors. And so some of that is the alignment to current behaviors. As you've noted, yes, there was an up-down between CCFS and Kent Reliance, our two entities. We are continually enhancing our modeling. So some of the work we did in this first half is we were down to the fine lines around what points people pay in the month around reversion and really looking to align how we model and build those curves going forward.

So I would say, whilst we also did the behaviors, we are looking to sort of really refine and build out our modeling. So we've got the best sort of balanced forecast and views of this going forward. And it was that second sort of modeling piece that gave us the -- more of the up-down and some of the tail assumptions on Kent Reliance versus Precise.

In terms of where the -- those weighted average lives are now, so the most sensitive historically we've had was the five-year Precise Buy-to-Let portfolio. So -- that's down to about three months now. It's just under. I think previously, last year when we updated it was 3.6. So that's down just under 3. And then Kent Reliance has always been it's about 2.2 months. That hasn't really moved much in the four years that I've been here. So that's at 2.2. We're still noting the sensitivity to that two-month move is down to about GBP 16 million, and it's really this year's cohort and some of next year that's the most sensitive. So it is chipping down. But as you're seeing now we're down to that sort of three-ish months and Kent at 2. We expect that variability to keep on reducing. So that was the EIR.

Cost of the new CEO, I mean, we haven't disclosed that as yet as he's not arrived. It will be in the DRR reporting next year's ARA. You'll notice we have kept cost guidance at the GBP 280 million. There's a lot happening in H2, including new CEO arrival. We've got go-live of the residential and ISAs, residential mortgages and ISAs in our transformation. So we will always be looking to absorb what we can into that GBP 280 million, but it's all too early to commit at the minute. So that's why we've kept it to GBP 280 million, and we'll comment on the CEO transition costs as we get closer and he arrives.

Our next question comes from Grace Dargan.

And again, just to reiterate the comments, I guess, best of luck, Andy, going forward. So on my two questions, maybe firstly, just on the transformation. I know you just talked about the Charter Savings change. I guess, looking forward, should we expect any other disruptions? How long will you be out the market on that savings product? And is there anything else we should be thinking about? And indeed, as a result of those transformations, do we have another lever to help support 27% RoTE? And then on the second side, just thinking about lending, maybe you could talk about the pipeline into H2 on the specific areas, so thinking about development finance, asset finance, et cetera, what you're seeing there?

Sure. Yes. Look, I mean, on transformation, we are trying to -- and the Board have a very low risk appetite for getting it wrong, right? I think you've heard me say before, Grace, none of us want to do a TSP where you do a system change and everything falls over and your customers get very annoyed with you, which is why we are doing it product by product set, cohort by cohort.

And as I said, ISA is the one from the Kent brand, which is occurring at the moment. Charter will be done in blocks, but there will be relatively large cohort blocks of product type. And therefore, some products will be off sale for a month or so. So we won't have ISAs for a month and a bit, then we won't have easy access for a month and a bit. We won't have bonds for a month and a bit.

But once it's done, all bets are back on basically and the entire range with app functionality and with a significantly enhanced customer proposition and that ability to broaden the product range and price much more agile -- in a much more agile style across the entire range, that will be there as soon as it's done. And that does give us operational benefit in terms of being a bit more selective about how we fund and where we fund. And we think it will also give us a strong customer retention benefit.

So once we come out the other side of it, I think that's a tailwind to net interest margin in terms of helping us manage the funding cost going forward. So I think that's the first thing I'd say, which is very positive.

You asked me about pipeline. I mean our pipeline is very good. You specifically mentioned development finance. That's one where the opportunities that are being put in front of us, if they are from an existing borrower who's got plenty of cash to put in the scheme, we can see the salability of the scheme we're still lending. So the team in development finance will make good money this year in terms of their contribution to the group's overall profit. But we are not out there looking at schemes where there's not a lot of cash around and the resale doesn't look good and all of that sort of stuff.

We're just being a little bit risk off on it because the market is pretty soggy right now for trading stock out. And we've seen some of the large house builders having to heavily discount or end up with sort of tail-end ramps of schemes that they're just really struggling to sell. So we're obviously being a bit careful.

The commercial market softened in the first half of the year, but we've picked and choose -- chosen our way, sorry, through that and have grown the commercial book a little bit. The bridging market is still active because when there is sogginess in residential transaction market as there has been, sometimes bridging is the solution to that particular problem. And we want to continue to drive that up, particularly once we switch over all of our residential proposition under the Precise brand to the new platform. That will just give us much quicker product development, pricing ability to drop into the components of the market.

So our pipeline looks healthy. We're going into the second half or we're well into the second half now with a healthy pipeline. The teams are very focused on that diversification play. And Buy-to-Let has continued to be a store where our borrowers have wanted to refinance and some of that's come to us on the way through. So it looks in pretty good shape.

Our next question comes from Ed Firth.

I suppose just a couple of supplementary questions. The one, in terms of the Central Bank funding because that's obviously a marked divergence with some of your peers or one of your peers in particular.

I think I have explained why though, Ed.

Yes. No, no, absolutely. It makes complete clear. So all I was asking -- all I wanted to ask was, have you got a sense as to what that impact was on your margin? If you had been able to fully utilize that as you would have done in a normal business-as-usual manner, have you got some sort of sense as to -- was that a 5, 10 basis point hit to margin? Or just some quantum would be super helpful for us to sort of try and understand exactly what that difference makes.

It's not a set of numbers we published, but I mean, if I did the fact pack it maths right now, we've got GBP 2 billion, GBP 2.5 billion worth of drawing capacity that we could utilize under the index long-term repo scheme. And LTR is SONIA plus 15 basis points. And at the moment, the planning assumption for retail is only plus 40. So that gives you an idea of the delta.

Yes, that's very easy. That's absolutely perfect. Okay. That's very helpful. And then the second one was in terms of your chart, that very helpful bridge chart you showed Slide 9 to the mid-teens RoTE. In terms of the cost of funding that you're assuming there, are you assuming the cost of retail funds remains as it is today? Or are you assuming some sort of normalization or benefit going forward? So I'm just trying to sense, is that mid-teens RoTE. Is that like a business as usual today that you can hit it? Or we do still need some benefit there?

Sorry, yes. So yes, I mean, in that mid-teens, I guess, there's a range in that. So I suppose we are -- as we look, we're pretty confident in the other four drivers that can drive benefit to get into that range. And that would include a slightly higher -- not as high as plus 40 all the way through for the next four years, but a more elevated cost.

Naturally, we will strive to optimize as we go through in the other four, and it's those other four that give us that sort of confidence to delivery despite some more elevated cost of funds. But that will deliver us within that range of that mid-teens.

But I suppose the question I'm asking is if the world stays at SONIA plus 40%%, and we can look around the market and see some very big beasts that are offering amazing savings rates at the moment. And I can't see them going anywhere in the next three or four years. So if we stay at SONIA plus 40%%, I guess the question is, is that mid-teens still deliverable? Or should we be assuming there's going to be some haircut on that?

Yes. I mean mid-teens, as you say, is a range. So yes, we would say it's still deliverable. I guess we would look at it's that position in the range. But if it stays at SONIA plus 40%%, I mean, I'm sure Andy would have a view as well as there is that piece of -- we are looking at the lending book diversification, asset margins, ultimately, you would pass some of that on. I don't think for years, everyone can sustain just having that squeeze margin. But I mean...

Yes. I mean I would just also say that once we've done the transformation, a better platform and better customer set experiences means that you're not always pricing your back book to the maximum within the market because actually your customers are valuing the convenience and the proposition that you're offering. So there's something there that is a bit different.

Clearly, we would be making use of Central Bank facilities. And OSB, while funding is a massive input cost to us, we make our money out of the lending that we do, and we have a clear diversification plan that means long term, the business has a sustainable future even if we are in a SONIA plus 40% world on retail funding because we can move our margins as we replatform everything on the lending side and compensate for that.

Yes. Because I suppose that's one of the concerns is I've always felt that you had pricing power in your core Buy-to-Let market. Are we saying that that's probably not as evident? I mean, because over like a 3- or 4-year period, if it stays at SONIA plus 40%%, you're very strong in the Buy-to-Let market. Can't you reprice the Buy-to-Let loans to offset that?

Yes, absolutely, we can. And that's why in the first half of the year, we actually did a bit more Buy-to-Let than we originally planned to do because we felt the margins in it were decent. And we have -- particularly since we launched the Rely brand and it's such a fantastic broker proposition, actually the convenience play of doing business with the Rely brand for a broker and the broker's customer is superb, and that does give you the ability to control your pricing in the upward direction.

So once all the resi is on the same platform, once the commercial is on the same platform and resi includes the bridging, which is highly remunerative, then we've got a bigger pricing control stick to beat on those aspects of the asset side of the equation as well. So there's lots of good stuff to come. It's just we're right in the midst of the journey, and I can't give it to you yet, but it's there, which is why I think I've reiterated this morning that kind of 28%, 29% position where there are some structural things like MREL disappearing and other elements that are super beneficial in terms of NIM.

Actually, we'll have completely done the job of work on transformation. We'll have a more stable retail savings franchise that enables us to focus on the retention of the back book in a slightly different way, and we'll have much better platforms across the entirety of the lending range, and that stands us in really good stead.

Yes. Okay. That's great. Can I ask steal one more question? Is that all right? I got time? Yes. I mean, I guess the final one is, if I look at the sort of whole challenger bank space, I don't know, a McKinsey's consultant looking at it would say, why are you guys all separate? You should all be getting together. Some of you have got cheap funding, some of you have got good asset pricing. Arguably, there are questions about whether some or others have got critical mass. What would be your comments around that and your view about that?

So I mean, firstly, I think we have got critical mass. I mean the OSB balance sheet is a pretty big balance sheet, right? And we are probably one of the only organizations in the market that has experience doing some of that get together trade. And while you undoubtedly inherit a bunch of benefits and some scale, for doing those kind of trades you always inherit a few things that you didn't quite anticipate in the DD process, et cetera. I don't want to mention the EIR adjustment that you know well about it, but those kind of things you do find as you start to open covers in a business that wasn't your original business.

I mean I guess regulation is a bit of a hamper to it. Any of the banks that you would put into our peer group, so the Shawbrook, the Paragon, et cetera, you put any of those two together and you immediately drop that bank back into the MREL threshold, and that is a bit of a pain, and we've experienced the pain at the cost of those issuances. And therefore, you have to think carefully about whether as you start to get near to those thresholds, actually, is it better to create and trade a few assets out and keep the balance sheet scale managed -- or is it better to double down and blow through the threshold?

I think at the moment, most people are in the former camp, not the latter one. My successor will do a strategic review, I'm sure, with the Board at some point in the future, and that may well change. But I don't see everyone clamoring to get together in the market as it currently stands.

Our next question and last question comes from Gary Greenwood.

I've just got two probably quite short ones actually. So first one is just on your guidance. You've given a range in respect of NIM, but you've given a sort of point guidance in respect of the RoTE. So is that because you think there's sort of things that will offset sort of variability in the NIM sort of levers that you can pull elsewhere to sort of home in on that 12.5%? Or am I reading a bit too much into that in terms of the circa? That's the first question.

And the second question was just a clarification on the Basel 3.1 CET1 ratio range of the 13% to 13.5% and whether that takes into account sort of any potential Pillar 2A offset or whether that could get further reduced in time if that was to come through?

Yes. So I guess, Gary, on the circa 12.5%, again, I mean, there is the -- as we've talked about the cost of funding element, I would say, as we entered this year, we didn't anticipate all the swap market volatility and sort of debate around where the macro is going to land. So we have said circa mainly just because, again, as we look forward, we'll get macroeconomic assumptions for ECL in December.

Swap rates get extremely volatile and that drives -- it can drive gains and losses on our mark-to-market pipeline swaps. So circa really, again, is just back to that. We've still got five months to go a lot has happened in the last three months that we didn't anticipate sort of four, five months ago. So we just -- we almost don't want to pin it down too tightly when there's so many moving parts. So that's...

More the opposite really, and the RoTE guidance seem to be a little bit more focused than the NIM guidance.

Well, I guess we said circa on both. So I guess -- it's the range. And I guess we said little low teens that we saw as the 13%. So we bumped down slightly. I mean, whilst NIM will give us some variability, hopefully, things like costs, we will be looking hard at the year-end and come back to you. But yes, that's the reason for why we said the circa 12.5%.

And then the 13% to 13.5%, I guess, when we set it, we knew that the Pillar 2A offset was coming. I suppose we've made an estimation of that. Once we get our sort of fully calibrated revised Pillar 2A under Basel, and we go through that for half year. Obviously, the Board naturally, we will -- we always look and evaluate where our capital target stands and how that compares to our requirements. So at the minute, no view to change, but we will come and update you if there's any board discussion and that moves. But we...

When do you expect to hear from the regulator on that? I think some banks have already heard, haven't they?

Yes. We have -- we're going through a fuller process. I guess, the banks that are the most impacted by Basel, and we have flagged to the regulator for a few years that it is a heavier impact. Instead of having the sort of estimated that most banks are getting, we're having our sort of biannual CSR process. So we will, in H2, have a fuller evaluation and get that view more probably towards right at the end of the year. Whereas what they're doing from all the banks that less impact is doing that sort of Pillar 2A estimated calc until they get their full capital review.

Gary, I mean I think I would just add because I know where you're coming from with the question. I mean, I leave at the end of this month, right, as the CEO of this organization. But if I wasn't doing or if I were the incoming CEO to this organization, we all know there are levers you can pull on equity.

One of the levers I'd be pulling post Basel 3.1, I think, is to really reflect and review on where our capital targets are because those are somewhat higher than some of our peers. And therefore, if you lower your capital target slightly, once you've gone through that process, then you can buy back more of the stock, and that helps from an RoTE perspective.

And two, I think we should continue to evaluate as an organization whether we want to early buy out and clear the decks on the MREL instruments. And I think there is potentially some optionality for the Board to consider that one. But it's -- that's one for the new CEO and the Board to make. But there are always levers you can pull on supporting RoTE, and I thought it was just worth making that point.

That's great. And best of luck for the future.

Thank you very much, Gary. I think that was our final question. So I just would like to do two things in closing. One is to apologize for the debacle of technology that ended up doing all your ears in with that horrible echoing and inability for us to hear you, et cetera. We managed to scan our way around it with a laptop, and I'm looking at its battery. It's just about going to last, I think, till the end.

But finally, I wanted to say thank you all for the support and the interest you've shown in the group over the years. I've been the CEO of this organization for 14 years. I'm immensely proud of it. I have worked with a very talented bunch of colleagues. Those colleagues are staying on to keep this organization moving forward. And I leave here confident the group has a strong strategy, clarity of thinking and a leadership team that are capable of taking it on to an even better future. So thank you for your support. And of course, I wish this group every success in the future because my interest for quite some time will be aligned with our shareholders. Thank you very much.

Well, good afternoon, everybody, and welcome to those of you that are joining us here in the auditorium and of course, remotely via the webcast. This is the first in a series of OSB investor spotlight events where we'll share deeper insights into the key aspects of our business. Today, with some of my experienced ExCo team, I'm excited to present to you OSB's market-leading Buy-to-Let franchise, the largest segment within our portfolio.

After this presentation, we'd like you to have a better understanding of the professional Buy-to-Let market in the U.K., our position in that market, and our right to win, supported by our transformation program. In this first section, I'll provide an overview, then Jon Hall, our MD of Mortgages and Savings will take you through the structural drivers supporting the market and how we can successfully compete. Next, Matt Baillie, the Group Chief Operating Officer, will talk to the investment that we're making in the business to ensure that we remain a leader in this segment. And then finally, I'll wrap up and there will be an opportunity for Q&A with the team, including myself and Victoria, but I'd ask you, if you don't mind, to hold your questions until that point in the session.

Let me start by highlighting the key messages we'll be emphasizing throughout today's session. The U.K. private rented sector is not a short-term opportunity, this is a large and structurally embedded part of the U.K. housing market. Robust demand, coupled with constrained supply, continue to make this an attractive market for investment.

Importantly, this market is becoming more professionalized, which plays directly to OSB's strength as the U.K.'s leading specialist Buy-to-Let lender.

Turning next to an overview of the market and our position within it. The private rented sector is financed by a range of providers with specialist lenders and High Street banks representing the largest share. Institutional investors and private equity also play a role, although in the U.K., their activity is concentrated largely in the build-to-rent segment in areas such as city center developments, a segment we don't typically finance.

Drilling down to look at Buy-to-Let specifically, as you can see at the top center chart, the total Buy-to-Let market is valued at nearly GBP 300 billion, and that's up from GBP 250 billion in 2019, and it constituted the second-largest segment in the U.K. after first-time buyers.

Of the almost GBP 300 billion today, around 2/3 was held by the High Street banks and some building societies, and they tend to focus on the simpler and more commoditized business, while GBP 72 billion was written by the specialist lenders who typically focus on landlords with more complex needs.

OSB is the U.K.'s largest specialist Buy-to-Let lender, holding a 24% share of the market that is forecast to expand to GBP 96 billion by 2029. The chart at the bottom left here illustrates our growth. Since 2019, the Buy-to-Let book has delivered a CAGR of 6%, which has been achieved despite the GBP 1.2 billion deconsolidation transaction we completed at the end of 2024.

And in December '25, our Buy-to-Let book stood at GBP 17.7 billion. And as you can see in the next chart, this was the largest segment in our portfolio, representing 68% of the total loan book. In line with our plans as we expand our higher-yielding lending segments and specialist residential, Buy-to-Let will reduce over time to circa 60%.

And while there's no precise definition of a professional landlord, the 2 metrics in the bottom right illustrate how portfolio is professionalizing over time. First, the proportion of originations from landlords buying properties within a limited company structure has increased from just 40% in 2015 to 92% last year. And whilst the share of new business from multi-property landlords has also increased, but from 60% up to 92% as well.

OSB is a scale lender in the specialist Buy-to-Let market. And during today's session, we will explain why Buy-to-Let will remain a structurally attractive market for us and why it will remain a key component of our loan book.

Let me take a moment to explain why the professional Buy-to-Let segment is an attractive space for landlords and for us. The market is seeing strong and sustained demand for rental housing, driven by that shortage of homes, population growth and continued affordability pressure for first-time buyers. As housing supply gradually increases, the opportunity to lend into the sector will expand accordingly. At the same time, renting offers the flexibility that many households now require.

For landlords, this creates deep, resilient asset classes in which to invest with long-term yields and the potential for capital appreciation. And for OSB, it's exactly where we outperform professional, more complex cases, HMOs, multi-property portfolios, limited company structures, they all provide enhanced margin, strong credit quality and play directly to our specialist underwriting capabilities. So the fundamentals are strong, landlords are well positioned, and OSB is uniquely equipped to win in the specialist segment.

Before I hand over to Jon, let me briefly recap on the plan that we set out last March. Buy-to-Let fits squarely within this strategy, levering our strong intermediary relationships and our specialist in-house credit expertise. Buy-to-Let is also our first lending segment to benefit from the investment we've made in our transformation program, which is helping us optimize returns and stay focused on delivering strong RoT -- RoTE, sorry, our North Star.

With that, I'll hand over to Jon.

Thanks, Andy, and good afternoon, everyone. I welcome the opportunity to bring to life the U.K. Buy-to-Let market, also referred to as the private rented sector. This is a market with strong structural advantages, providing attractive fundamentals for those that participate in it, and is increasingly being consolidated by professionals investing in the homes for the U.K. and the lived experience of their tenants.

This slide outlines the key messages I'd like you to take away today. Firstly, as Andy said, the U.K. needs more houses. Housing growth is undershooting housing demand, and I'll outline this in more detail shortly, but the headline here is that we have a shortage of 4.3 million homes in the U.K. And with 19% of homes in the U.K. provided by the private rented sector, renting is a flexible choice of tenure and Buy-to-Let, which is the most substantial U.K. lending subsegment after first-time buyers is making a positive economic and societal contribution.

The third structural driver is huge intergenerational wealth transfer, and this will bring property and cash assets into a new generation, a number of whom are already starting to become the next generation of landlords. The supply of properties are from professional landlords. These rental businesses have become the driving force in the Buy-to-Let market, navigating the changing regulatory and taxation environment and delivering a quality source of homes. As Andy mentioned, these professional property landlords complement the institutional build-to-rent investors in terms of asset type and target tenants.

The needs of these landlords brings additional complexity. It used to be, if you could process an owner-occupied loan, you could turn your hands and Buy-to-Let, and that hasn't been the case for a decade. Professional landlords demand a specialist, and later, I'll explain why and OSB has been instrumental in providing the finance in this market and these borrowers for decades. It's a market relying on intermediaries where OSB has a proven advantage. We have embedded the deep experience we have in meeting the professional landlord needs for speed, flexibility, certainty and simplification into products, service experience and a market-leading platform, all underpinned by a strong funding base and effective risk management.

This slide covers the supply shortage further. 4.9 million properties are rented privately in the U.K., as I said, 19% of U.K. homes. And to put the shortage of housing in the U.K. at 4.3 million homes into context, we're building 200,000 a year against the government target of 300,000 and 400,000 to 500,000 new homes needed each year. So that shortfall is set to grow. Unsurprisingly then, homes rented price have stayed consistent for over a decade. The headlines of landlords selling up are in reality, a trend of landlords buying from landlords.

Amazon landlords do continue to exit the market, but are selling mostly to professional landlords with only 10% of homes listed for sale having previously been let, and this is a long-term average. I mentioned at the end here that buying remains difficult for first-time buyers, and I'll pick that point up further now as we move on to look at long-term rental demand.

Renting is a housing choice for all generations in the U.K. made positively based on factors, including flexibility, access to location and, of course, affordability, and our own research predicts that tenant demand will increase by circa 15% over the coming years.

Renting privately is a more prevalent choice for younger age groups who are the fastest-growing cohort in the U.K. Availability of rental properties that meet the needs of this group is partly a factor in first-time buyers increasingly accessing homeownership later in life. And this positive choice to rent is demonstrated by the OSB research with tenants and recent homeowners that shows 78% of tenants so they feel at home, 54% say they feel that they live in an area they want to, and 61% of recent buyers saying ownership has restricted their areas to live in, and it's actually less flexible than renting. So given the supply and demand imbalance, there is a positive underpin to the economics of being a landlord.

However, like all successful businesses, there's a careful balance between maintaining an attractive product for tenants, the home, at an accessible price point in terms of rent. And whilst managing the increased overhead associated with being a landlord, these graphs, which cover rental increases and yields, which are typically between 6% and 6.5% in our view, demonstrate the effectiveness of landlord strategies in achieving that balance.

It gives confidence as to the future resilience of the Buy-to-Let market, having navigated the impact of significant events, including interest rate and economic cycles, including global financial crisis, Brexit, a global pandemic and an emergency budget. Yet all of this is reflected in 87% of landlords that surveyed last year have a positive outlook for tenant demand and rental growth and 85% of landlords report deriving a profit from their lettings activity.

I wanted to end this section with the views of 2 tenants that were included in our research last year. These bring to life the attractiveness of renting privately, whether a positive personal experience for young people gaining their first steps into independence or supporting their location to enable their working lives or a less stressed option over maintaining a property. We use the phrase professional landlords in a positive context as if everybody should be able to picture who these are. and be aware of their needs, plus appreciate quite why we position them as a positive factor.

In this section, I want to make this world of professional landlords more understandable. And then I'll turn to how OSB delivers every day against their current needs and is investing to maintain this reputation for the future. This is David, a successful professional landlord. He started in 2016, so he's probably in the second wave of professional landlords. He's grown a portfolio of properties within a tax-efficient limited company structure, and he focuses on a market he understands deeply. He's invested in his properties, and he's diversified his portfolio.

He invests in homes for multiple occupation, and these are homes for shared occupants, which are professional workers, key workers or students. They provide greater returns in rents and capital yields and diversify the risk of voids through greater flexibility and tenancy arrangements, clearly, in locations focused on education or sources of commuting for work.

OSB has financed David from his early days and continue to do so, working closely with him and his adviser. And that finance partner through growth, complexity and changing portfolio demand is what OSB delivers. David is characteristic of the wider group of professional landlords using incorporation to build a higher average portfolio size and diversifying their portfolios. Approximately 75% of Buy-to-Let purchases were made via a limited company in 2025, up from around 50% in 2021.

This is because the structure is a more flexible and efficient mechanism to hold properties. Approximately 50% of Buy-to-Let properties in the U.K. are in portfolios of greater than 4-plus properties with the average size of a limited company portfolio being 12.8 properties. This gives better cost leverage and property diversification increasing portfolio yield and total profitability. And 21% of landlords hold at least one house for multiple occupation, which increases to 35% for portfolios of 4 or more properties.

This is OSB core market and is demonstrated by the profile of our loan book shown here. Therefore, we have deep specialist expertise. In the near and medium-term horizon, there are some taxation and regulatory changes that professional landlords are well positioned for and in a lot of cases, have already addressed. Professional landlords are generally able to adapt more successfully to the taxation changes announced in the U.K. autumn budget last year because a limited company can deduct mortgage interest and pay corporation tax rates, and their responses tend to involve tax structuring and portfolio strategy or financing choices, often moving ahead of future property tax changes to mitigate the impacts.

Secondly, the Renters' Rights Act comes into force in May and is a complex set of measures for all involved in the private rental sector, tenants, agencies, licensing authorities and, of course, landlords, but professional landlords have several advantages to adapt successfully. For instance, professional compliance, allowing multiple properties to be managed, including correct licensing, often employing property management teams, and they have longer-term investment horizons so linked to longer tenancies, stable rental income and tenant retention. And what's impressed me when talking to professional landlords is their focus on tenant satisfaction and the tenant lived experience. And that is totally aligned to the ethos of the act.

And finally, the third trend here is the investment in energy-efficient properties, as demonstrated by David, professional landlords see the advantage of upgrading their properties, well ahead of any legislation changes improves the desirability of their asset portfolio and its yield generated. Also, having a portfolio approach means a more effective spreading of cost, a lower unit outlay, and also potentially ability to manage the gaps in rental whilst the work is being undertaken.

To get -- taken together, this is why when we survey professional landlords, a strong majority report optimism in navigating the environment, and are positive for the future. The other structural shift we're seeing is through intergenerational wealth transfer, which will see circa GBP 3 billion of property wealth and 2 million properties move to the younger generation, some of which will be existing Buy-to-Let from portfolios. This is enabling the next generation of landlords. So whilst the next generation of landlords will comprise a significant proportion of current seasoned landlords who remain focused on being a landlord for another decade at least, significantly, this will be alongside millennials and Gen Z.

And in our research, this could comprise nearly 50% of the landlord market in the near and medium term. Indeed, they are already made a material makeup of landlords. 70% of future landlords site inheritance as a route to achieving what is viewed as a positive journey as a professional landlord. And this is likely to be an increasing trend, which OSB is well positioned to support. And when we ask these future landlords about what motivates them, and their views on being a landlord, what's clear is that the positive response that resulted in us defining professional landlords as landlord leaders is even more evident in the next generation of landlords, playing a positive role in their community on their tenants' lives and in providing housing are positive messages.

OSB has delivered a forward-looking research program that can bring to life the view of landlords, tenants and brokers. This is a live and ongoing program and is part of OSB delivering deep expertise into the value chain for professional Buy-to-Let and enabling a successful future for the private rented sector. So if you do want to learn more, we have a landlord leader site that captures our engagement with all participants in the private rented sector.

So on to OSB as #1 specialist. We presented at our 2025 Investor Day, our leadership with intermediaries as a trusted partner. And we are relied upon by intermediaries because we are trusted by their clients. Professional landlords, a position built over many years, and this is brought to life by these 3 case studies. For an experienced landlord operating over 25 years, OSB is the only lender he uses for his portfolio of more than GBP 28 million. For a landlord offering homes across the life stages of their tenants, we've grown to financing 87 mortgage properties of it 370. And for a leading provider of build-to-rent, we've provided more than GBP 100 million over the past few years. And in each of these cases, we work closely with the landlord, and their intermediary in a trusted tripartite relationship.

On the screen here, these are the key themes that intermediaries, and their professional landlord clients use when showing the advantage that OSB has, referencing relationship, scale, reputation, the faster handling of both the nonstandard and the complex and flexibility. And on the next few slides, I will show how we've built this into our DNA.

OSB has proven capabilities in 4 areas that enable us to outperform our competitors in the Buy-to-Let market. Firstly, being #1 specialist trusted by intermediaries is our secret sauce. This is delivered by an expert, experienced and scaled sales team, representing a single Buy-to-Let brand. This sales capability delivers a single access point to the group's lending across the range of mortgage intermediaries in the U.K. It is equivalent to a high-street lender that deployed healthy into specialist segments like professional Buy-to-Let.

Secondly, we have developed our products against clearly defined needs for professional landlords, all through a single Buy-to-Let platform. This means our products are flexible, accessible for complex needs, and are personalized to landlord needs differently to other lenders. For instance, specialist property types, such as HMOs or semi-commercial are a core capability. We offer a short-term loan to enable refurbishment of a property before moving to a term Buy-to-Let mortgage, all in a single underwrite and a single loan facility covering multiple properties, enables landlords to have efficient management as they are growing their portfolios.

Thirdly, people expertise is absolutely key. We've hardcoded our understanding of professional landlord needs built over many years into the end-to-end landlord journey, credit policies, data-led decisioning alongside human relationship management in cases that need it with real estate professionals in-house. Some of where these benefits felt for landlords include crucially getting the right valuation route day 1.

For complex properties, we link with valuer experts. And if it's more standard, it's automated through automated valuations. Our dedicated specialist finance team can support to structure a more complex loan arrangement. And often, this involves our transactional credit committee of senior decision-makers enabling responsive decision-making giving confidence for intermediaries and for OSB warranting a premium return for offering flexibility and speed having an effective product transfer process and high net worth relationship managers also means we keep our professional landlords and achieve repeat business.

In summary, through our people, we have a reputation for delivering certainty and decisioning through relationships with solution-focused expertise. And this matters more than headline rate in specialist Buy-to-Let supporting sustainable margins and enabling advantage for future growth. And then finally, on top of this, we have built our transformed experience for intermediaries and colleagues through the new platform. This simplification and acceleration of the lending decision with the product flexibility makes us the first place intermediaries want to go for their Buy-to-Let clients and Matt will bring this to life shortly, but this has been described as a game-changer by intermediaries.

Also in times of volatility, like in recent weeks, it enables the group to rapidly deploy a newly priced range, mitigating risk whilst having products in the market whilst others have withdrawn. And I mentioned our single Buy-to-Let brand, and we launched Rely in November 2025, having soft launch with brokers over 6 months last year, which has immediately seen an uplift in group Buy-to-Let volumes. The brand identity is led by intermediaries for its freshness, clarity and confidence and the fact it conveys a promise to give landlords the winning edge, a promise back by years of us doing just that.

And this consolidated Buy-to-Let entry point has further reduced leakage, widened the advisers using OSB for Buy-to-Let and enabled us access to a diverse innovative product range. In future, also having all of our customer data in a single place enables us to launch connected services for landlords and deepen our relationships further. We have measured how all of this investment OSB has made creates an advantage we have with intermediaries.

Our third-party research in early 2025, even before launching Rely on the new platform, has shown, we scored higher than the market across a number of key criteria in areas that matter to brokers and customers, processing time, consistency, ease of dealing and product flexibility.

So the key 3 points to end on would be the U.K. has a housing shortage and the Buy-to-Let market is critical to providing homes across all generations. Professional landlords are the driving forces in drive -- in providing quality homes and a strong tenant experience in a resilient and future-proof model. And OSB is a trusted partner in this market and has played and will play a key role in financing the U.K. Buy-to-Let market. We are the specialist for Buy-to-Let that this market demands. Thanks for being generous with your time and attention. Before we go to the next update from Matt, I'd just like you to hear from some of our borrowers and brokers personally on our impact for them. Thank you.

[Presentation]

Good afternoon, everyone. Thanks, Jon, and an even bigger thank you to our brokers for sharing their reflections. As a reminder, last year, we spoke about the breadth of transformation and the structured approach we're taking to deliver it.

Year 1 was focused on laying the foundations, establishing our cloud center of excellence and building our technology ecosystem. Year 2 was about building out the platform, developing the capabilities and infrastructure required to support a modern, scalable business. This saw the launch of our new savings offering. Year 3, we successfully launched Buy-to-Let and introduce Rely, our new brand. This was an important milestone for OSB and demonstrated our ability to execute against the road map. This year is about scaling and we're excited to bring residential mortgages to market later this year. We've built a scalable platform supported by our growing in-house engineering capability, increasing capacity where it adds strategic value without increasing overall group headcount.

More broadly, we've evolved as an organization, becoming a more technology-enabled business with a modern architecture and operating model designed for the future. We deliberately partnered with best-in-breed providers across both fintech specialists and larger technology firms to deliver a fully integrated end-to-end customer and colleague experience. This ensures we benefit from specialist innovation whilst maintaining strong control over our technology stack. The advantage is that many of the capabilities developed for Buy-to-Let are reusable, allowing us to accelerate delivery of the residential platform. This ensures colleagues and brokers benefit from a consistent look and feel aligned to the experience they've enjoyed and Rely.

Together, these capabilities ensure the platform not only supports our growth today, but also positions us well for the future. We're also embedding AI-driven capabilities, which I'll come back to later in the presentation. Importantly, our group-wide transformation remains firmly on track, delivering within budget with strong operational stability and building the foundations of a bank fit for the future.

Moving to our customer-centric lending platform. What's important here is that we haven't just transformed a single process. We've improved the entire end-to-end journey. Leading to a better experience for brokers, customers and colleagues. We've moved from complex fragmented systems to a modern, digitally enabled platform built around data-driven automation. The process headlines may sound familiar, application, underwriting, completions, but every one of them has been simplified and strengthened. Each incremental improvement compounds to make a meaningful difference.

All Buy-to-Let business for the bank is now processed through the new platform. We have in excess of 4,500 registered brokers, resulting in 2,500 full mortgage applications, and are proud to have already achieved in excess of 500 customer completions. We put data at the heart of our organization to support better decision-making. This frees up our experts to focus their time, where it truly adds value across more complex cases. Ultimately, transformation helps our people apply their expertise and judgment where it matters most, ensuring we deliver the best possible outcomes.

Moving to delivering operational efficiencies. Here, you can see the same processes brought to life with tangible examples. We've seen significant improvements in the originations journey, reducing the effort required for brokers by more than half and introducing a single registration that works across all of our brands. At the same time, underwriting has evolved from a model where every case required manual review to one increasingly driven by data-led decisioning, ensuring our experts focus their time where they add the most value. In simple terms, think of this as an 80-20 shift.

We've automated much of the repeatable manual activity allowing our experts to concentrate on the more complex value-add cases. That combination of automation, data and expert oversight is where we believe, differentiates us in the market. We'll now move to a short video where our colleagues share their perspectives on the new platform and what it means in practice.

[Presentation]

As you've heard from our colleagues, we're driving efficiency through an accelerated mortgage process. Application in principle decisions can now be delivered in under 10 minutes supported by more than 14 data integrations, increasing both speed and decision certainty. Customers can now receive an offer in as little as 2 hours, and we have seen a 30% reduction in the average number of days it takes to get from application to offer. This isn't just about speed, faster, more consistent decisions, enhance risk control and improve capital allocation.

At the same time, we're delivering clear commercial benefits. Our time to reprice and the ability to introduce new lending criteria has reduced from weeks to hours, materially increasing our agility and speed to market. This capability has been demonstrated over the past 2 weeks of market volatility. We've been able to withdraw existing products and simultaneously launch new ones, reinforcing our agility and delivering a clear competitive advantage. Taken together, this positions us as a faster, more data-driven and capital-efficient lender.

AI is an important part of future-proofing the platform and is already being developed and deployed across the group. We're applying AI across areas such as fraud prevention, income verification and data validation, strengthening risk and control. Internally, it's enhancing software development through code creation and automated testing improving both developer productivity and release reliability.

Together, these capabilities improve accuracy and help us deliver faster and more consistent outcomes for brokers and customers. Alongside this, we're investing in our people through a partnership with Cambridge Spark. We took 50 senior leaders to Cambridge University earlier this year to start a 6-month program on leading in the age of data and AI.

In summary, the group's multiyear transformation is delivering as planned, moving from foundations to a scalable technology-enabled platform now ready to support growth, including the launch of residential later this year. A modern end-to-end digital lending platform has replaced legacy complexity, improving broker, customer and colleague experience through automation and data-led decisioning.

This is driving significant operational efficiency with faster processing times, reduce manual effort and experts focused on higher-value cases. Crucially, the platform materially enhances agility, enabling rapid product changes and faster time to market, even in a volatile condition. Together, we have embedded AI capabilities, this positions the business as a more scalable data-driven and capital-efficient lender in the future.

I'll pause there and hand back to Andy. Thank you.

Thank you, Matt, and thank you, Jon. I hope you've enjoyed hearing a little bit more about our market and our expertise in it as well as our technology stack. As we draw towards the close, I'll summarize a few key themes from today. The U.K. absolutely faces a long-standing and structural shortage of housing. Professional landlords play a critical role in meeting demand by providing high-quality, flexible, energy-efficient and well-maintained homes. OSB is uniquely positioned to win new business from those professional landlords.

Our scale enables us to support landlords as their portfolios grow backed by deep expertise through the mortgage credit and life cycle. This is strengthened by strong intermediary relationships and this adoption of advanced technology, a transformation that will also be a game-changer for other lending segments, beginning with residential later this year. We've worked closely with our customers and the brokers for over a decade now, taking the time to listen and respond to their increasingly complex needs. Through targeted product innovation, investment in tech, we've remained at the forefront of this market. And I'm absolutely confident that it will continue.

Now we're going to give you the opportunity to ask us any questions that you'd like to. We'll take from the room first, and then, of course, hand over to the operator to see if we have any questions from the webcast, but I'd like to invite my colleagues to join me on stage. Thank you.

Ben Toms from RBC. The first question is in respect to Buy-to-Let mortgage repricing. A year ago, I think you were able to reprice your products that quickly. But post the recent investments in the business, maybe you could talk about how much faster you can now reprice? And has that allowed to boost you to boost your margin and volumes during the recent rate volatility? And then second, on digitalization of mortgages, and I don't mean like applying for a mortgage on the Internet, I mean turning a mortgage into a digital asset sitting on blockchain with an embedded smart contract for end-to-end digitalization. For retail, I think we're a couple of years away from that if you listen to the big banks. How far are we away from that do you think in the Buy-to-Let space?

Thanks, Ben. A couple of excellent questions. Jon, do you want to take that first one?

Thanks, Ben. So yes, if you move back kind of a year, particularly focusing on the kind of platforms for Buy-to-Let, it would have taken 48 hours plus to kind of get a product rebuilt and reout to market. As I think Matt was saying, we're able to kind of pull a product and simultaneously launch a new one. So within hours, we get a new product onto the market. It's still managed based upon the service delivery that we want to provide to our intermediaries to give them some confidence. We can tighten that at our own request, and we did that through the period that we've been experiencing in the last kind of 2 or 3 weeks. What it does enable us to do though is instead of kind of cutting the range and/or not getting a product back out there, we're able to reprice and get higher rates as others have pulled out of the market. And we have seen to your point there that we've been able to get that flow then, the market capacity is provided at higher rates and push that through. But the primary purpose in these instances has clearly been about protection and making sure that we're able to respond to volatile conditions.

I'll just add on that. I guess the other point is what Rely has also given us is more breadth of pricing. So I think we now can price for different risks. So there is speed, but there is also breadth. And I think that's something else when we talk about more efficient capital allocation, it is around pricing for the right risk and capital usage. So I think that's another piece of the new technology that's given us is that flexibility.

And probably worth adding before I hand over to Matt to take the second, most difficult question that you find. Actually, we've got that same capability on the liability side of the balance sheet. So again, in volatile swap markets, we've been able to price and take advantage of that to make sure that we're funding the volumes as it comes through. So having that on both sides of the balance sheet has been beneficial in this kind of bumpier period that we've seen in terms of swap rates. Matt, do you want to have a stab on the other one? Or should we ask our CIO, who sat at the back to give it a bash?

I mean, ordinarily say, thank you for the question. But wow, a question to get us going. I suppose the first thing I would call out is our transformation journey started back end of '22 by laying out a strategy for the next 5 years. As part of that, we're now in year 4, and it's fair to say that we've made major inroads. And I'm just going to use a really specific example around our ability to disburse money. Previously, that would take in the event of a completion up to 3 to 5 working days. We can now do that instantly. Now what we've done in modernizing our core tech stack, has enabled us to then embrace new technologies as they come into play.

So if we were to see the move that you're describing into blockchain technologies, we've laid the foundations to enable us to keep pace with customer demand and expectation. And as Jon has well articulated, our very premise is to serve the customers that we've been serving for a number of years in the method and mode that they most want. And that, therefore, means as we exit this cycle in 2027, the next version of our kind of ongoing transformation the team are enduring, they're there and can obviously embrace any next technology wave that we believe that we're going to having to go down.

You spoil me. Rae Maile, Panmure Liberum for a bit longer. Quick, investment in technology is always one of those ones, which always sounds marvelous when anyone ever displays it. The problem is that we're not brokers, we're not some people here might be professional Buy-to-Let landlords as well, but we don't actually see these things in action. So obviously, you've shown quite a lot of data about how much better this is than it was previously. But competitively, what are your brokers telling you about how this compares with where the rest of the industry was already because presumably, the rest of the industry isn't standing still either.

No, it's not. And I'll hand over to Jon in a minute. But I mean, Jon has a fact book and regularly shares quotes we get incoming from brokers. I mean, I think, you used the phrase earlier in your presentation, all the brokers said this is a game-changer. And actually, there's a guy who's been -- he used to work for me years ago, who is a really hot mortgage broker in the Buy-to-Let market, operating out of London. He did a mortgage with us for one of his clients and the feedback to me directly was, "I can't believe it. I've never seen a mortgage done so quickly. This is just unbelievable. When you get that kind of response from a broker, that's telling you, you're doing something your competition. And I'm sure Jon can talk about the way we monitor what our competition are up to and they're nowhere near it.

I'll give Matt a little bit of time to think of the really good answers to that question as well, right? But I mean, fundamentally, the approach that we've adopted is to actually look at the whole end-to-end and replatform everything. And I think what that gives is you can do app to offer or kind of app to decision in a matter of hours and offers in a matter of hours. But as Rachel kind of gave in that video, that whole completion was in 8 days. I mean, the market itself used to be out to -- is out to offering closer to 20. So we are halving the time and the effort, the intermediaries are having to do. And it may well be -- we put a lot of effort into the property assessment upfront in the portal and make sure that the data collection is really clear on the way through, but that's all the way through the underwrite process, all the way through the completion process.

And so that consistency and speed and acceleration goes all the way through. What we've seen in terms of our competitors is they tended to invest in one part or another, but not the whole end-to-end. So they may well have done something around property or they might well have upped their portal experience that, that whole experience, where the whole underwriter and that whole kind of completion exercise is all part of the same journey is the bit that intermediaries are going, we're just not seeing this. And that kind of is bearing fruit for the kind of the end-to-end view that we've taken. I don't know that, Matt.

I mean, my only build would be our approach to this transformation is fundamentally different to where a number of our competitors have started, i.e., to Jon's point, they've started by looking at the application process, and then they've moved on to how do they underwrite that, how do they complete rather than getting right underneath and starting, as I described in year 1, we're laying the foundations around having a cloud network and infrastructure in place. By building on a modern core technology stack, you then get speed all the way through the process.

Now the other bit I would call out is the compound effect. So if everything is operating a little bit faster or a little bit better than your competitors, the end-to-end solution ends up feeling slick, seamless and the outcome, ultimately, not just the speed of decision, but also the certainty that you can give differentiates us.

Now we obviously look at all of our competitors, and we attempt to benchmark the fragmented nature of the mortgage application process means it's quite difficult to do that because we still have to interact with solicitors that take slightly longer than others and so on. But through the work that we've done with savings or in the savings space, where the platform has now got in excess of GBP 4 billion on there, we can see that we are moving the dial at a rate over and above that of the core competition. And that's a really exciting place to be.

I mean just to build on that as well because there's so many builders, to be honest. Yes, we first launched the platform in November. And actually, by the beginning of January, we'd already identified the areas that intermediaries are fed back, and we then put that through live within a month. Previously, those sorts of time horizons would be 3 to 6 months to make those sort of changes.

So instantaneously, intermediaries are going, actually, we quite like to see this. We're able to kind of shape it and get it to market within a short space of time. And they go, actually, I want to even move past what are you doing next? What are you doing next? And that kind of excitement comes from kind of the platform, but also the whole kind of presentation of the delivery and the brand as well.

As you can tell, we're passionate -- any more in the room or shall we? Operator, would you mind asking if there are any questions on the webcast?

At present, we have no questions on the webcast.

Okay. I'll come back to you, Ben.

This is Aman from Barclays. I wanted to pick up on the points around AI. Agentic AI feels like a really quite important development stating the obvious, but also for a lot of the work that you guys did, right, the kind of hybrid approach to the complex underwriting that you're doing. I'm interested in, how would you encourage us to think about Agentic AI for the kind of future role of the hybrid underwriting that you do? Because it seems like it could dramatically transform that relationship about how much is done by Agentic workflows versus human beings. And is there any sense you can kind of give us on what this might mean for the profile of, you showed the slide around headcount? So presumably, there's pretty strong operating leverage in this business. Is it that we should think about the business growing strongly without the platform having to grow, and in terms of the profile of people that work within the firm, if there's any kind of color you can give us on that?

Yes. It's a really good question. I'm actually back in -- I'll come to you, Matt, on the specific AI points, but back in March last year when we set out at the Investor Day, the way in which we were planning to develop the business through using the platform that we were building. We set this stall out very clearly that we see as we remember, at the moment, we're running two platforms, right? We're running a new one, and we're still running the legacy, but actually, we see real operational jaws in what we're building that will enable us to continually scale the balance sheet of the business without always adding headcount.

And we gave a couple of examples during the course of the presentation around the 80-20 sort of rule where underwriters are now focusing on the 20% of stuff, which is risk-based, and we really need them to do it. They're not doing core boring mortgage processing, and you heard that from one of our underwriters on the screen. The obvious knock-on effect of that is you don't need as many underwriters. So we actually have reduced headcount in some of those areas, but it means we can keep putting more stock through the engine. Matt, do you want to talk specifically about the AI point?

I mean, as I described, the journey we're on in the first instance is around education and moving from a culture of fear around what AI can bring to one of opportunity. The work that is happening on the ground is to partner along with the basic tools like CoPilot, ChatGPT and such forth in order to have colleagues be assisted in some of the more mundane routine activity that happens. To the point you make, we see Agentic workflows as a near-term opportunity, and we're embedding that where we feel comfortable as an organization. And that's not just in kind of underwriting, also things like fraud prevention, document verification and so forth.

For us, as Andy described, and as you saw in the earlier slide that I had, as we grow our technology footprint, we'll evolve the broader operations organizational part of the team to find that balance where we're not increasing overall headcount, but we're changing the mix in terms of the colleague skill set that we have. And we have a really well created future-fit journey that we're operating with colleagues at all levels to support them on that transition journey.

I really appreciate that. I mean just to kind of round out this discussion, I guess, in the market at the moment, more broadly, not OSB-specific, there's a lot of focus on the disruptive and the competitive threats that AI could pose to a number of business models. And I'm just kind of interested for your take on the enduring -- I hate to use this word, but the moat of OSB, which I've understood to be the complex underwriting process and skill set that you bring to complex cases perhaps balanced with the strong relationships you have with your brokers that perhaps can't be replicated in an AI world, I'm kind of interested in your take on that, please?

Yes. So I mean, let me start by saying that my general counsel is in the room, and he has often scolded me when I use phrases like, lawyers, you know you're gone, because AI can do this kind of stuff now. I am jesting with him slightly for effect, but there are a lot of components of stuff that can be done. But one of the things law firms realize is they need that human intervention to do the double checking and to actually get to the point where it is genuinely fit to face a client and work with.

And look, markets always have things that change, right? So let's look at the retail savings market. I mean I was running a deposit-taking organization when Best Buy tables become super prevalent. And everyone was, "Oh my God, the best buy tables, that means we're not going to attract any deposits because everyone is going to go with the top payer, while people still continue to attract deposits. And then platforms came online, Hargreaves and many others that you'll be familiar with.

I mean, obviously, we use those platforms. We have product on there, and they haven't disrupted the savings market. What they've done is actually given organizations like us differentiated distribution channel to get into a different customer base than would ordinarily be a traditional retail deposit takers customer base. And I think AI will do the same in those kind of areas. We all hear stories of AI. We'll be able to tell people where to put their money, what to do with it move it around, if you give it mandate, all that sort of stuff. That's fine. But it still needs product providers with a banking license to have the product on the shelf.

We need funding because we need to fund the lending book, and we'll make use of those evolving tools as they continue to do so. Yes, it will help you get operational leverage. Yes, it will help you to reduce the number of people doing mundane tasks in an organization, but you'll still need overlay, you'll still need governance, and you'll still need somebody to serve up to a customer who wants a human interaction, and that's not going to go away overnight without doubt, in my view.

Ben Toms again from RBC. Three quick ones, please. One for Jon. You mentioned in the slides gross rental yield of 6.4%. I think we've talked about this before, but can you give us an idea about what you think the net rental yield is, i.e., post mortgage costs for professional landlords?

I think your research probably talked to that actually doesn't then does as well. So I mean, I think the key measure on there is about profit in overall terms. And I think it's -- I mean, each model has got a different dynamic. And I think for me, the key stat on there is the 85% are profitable. And so they find a way of kind of managing within that kind of gross yield. And when you look at the spread across multiple properties in that way, you can see kind of the leverage that we're able to get from that perspective. So it depends on which model you want to look at. Each of the 3, for instance, and even David, you talk about -- they've all got different models that all have different parameters. But fundamentally, they're all making their models work and significantly so as well.

Yes, 3. The second one is in relation to the professional versus amateur market. And I always see that front book stat quoted of around 90%, but I don't see the sector back book stack-published. Do you have an idea about what the sector back book professional versus amateur is, i.e., how long and how much is that tailwind from the switch from amateur to professional going to last fall?

Without a doubt, it's still going on. I mean, I think, Jon talked in his section around we are seeing what I call dinner party landlords pulling out of the market because it's too hard, too difficult tax regime is not pleasant, et cetera, et cetera, but they're not pulling out of the market and typically just selling it right back into the resi market. You've got professional landlords buying up, 2s and 3s of those sort of things with a bit of a deal to be done to expand their professional portfolios.

And I mean, I think, that professionalization of the market will continue. I think unless, I mean, we've shown a relatively stable picture over the last 4 years or so in terms of the number of properties that are in the private rented sector, even though we've had dinner party landlords kind of selling out and hemorrhaging, the professionals have picked up that tab.

I think as we continue to experience a supply and demand mismatch of the number of properties built and served up in the U.K. versus population expansion, the drivers for professional landlords wanting to acquire more rental property will continue for a while yet. And I think as long as you're a lender that can service that need and grow with your borrower, the guy you saw on the video, we were lending to him in a building site, I ran back in 2009 and he was building his portfolio.

And back then, I thought his portfolio was enormous. It was GBP 37 million Quinnsworth of West London. It's now a couple of hundred million Quinnsworth of West London. This is someone who just continues to expand the business. And he has mapped up a fair bit of property from amateurs wanting to come out, and he's making that work. So I think there's legs in it yet. And I think the drivers and the yield stats that we showed you through this presentation support that it's a profitable business. I mean, good rule of thumb on the kind of net piece, it's kind of 20% profitability on it because most people are leveraged to about a 70% LTV mark, maybe 75% LTV mark. There's a bit of cost and fee that goes with letting and all of that sort of stuff, 20% of that gross yield is profit. So it's not a bad business to be in when you couple into that capital appreciation that long term goes with property.

And then last one to Victoria. Because I know you should have prepared for the question. In relation to deposits, and you talked to full-year results about SONIA plus kind of around 45 basis points. Maybe you could just give us an update about where you see kind of pricing in the deposit market a couple of weeks after your results given the recent volatility.

Yes. I was going to say I'd say Feb tempered down a little bit. So obviously, we said that to hit our guidance, we needed funding costs to come down. So Feb, we did see it drift down slightly. I mean March is a bit -- I would say we're tactically now trying to pull forward some of the volume from April, looking to take opportunities because fixed rate is cheaper for now. It will depend on how market dynamics move into the ISA season. So I'd say with the increase in SONIA rates, we are now trying to tactically grab some funding at probably slightly lower rates. I mean it's still higher than probably long-term averages, but slightly cheaper than what we anticipated. But I mean, it's early days, and we will see how the next few months as we go into the ISA season and how they evolve.

But I would say early days from Jan and Feb did sort of come down as we anticipated. We have migrated and put live our maturity journeys now for all of the Kent Reliance customers. So we see, again, the ability to price faster to when they choose for a better product selection. Again, the transformation deliveries also that are helping us to deliver that are on track as well. So yes, I mean, as I say, it's an assumption, and we will keep moving as well as tactically trying to leverage where the market goes. But in the last few weeks, it's quite hard to call.

Thank you. If there are no further questions in the room, and I don't see any hands flying up. I would like to thank you all for attending, and thank you to those on the webinar. OSB was an organization that was born out of adversity a building society that found itself in a difficult position. We have come through along with our borrower base, lots of things that U.K. plc have been through, Brexits and pandemics and wars in Ukraine and cost of living crisis. And now we're in a slightly volatile market dynamic off the back of our friend across the pond doing what he thinks is the right thing to do.

The professional landlord segment will endure through that. It's demonstrated its resilience as will OSB. And cream always flips to the top. I hope we've shown you that in this market, we're pretty creamy. So thank you very much.

Okay. I think on that basis, we're a little bit past the 9:30 kickoff time just to allow people a bit of time to get in. So, let's kick off. Good morning and thank you for joining OSB Group's 2025 Full Year Results Presentation.

This morning, I'd like to take you through the key highlights for the year, provide an update on strategy that we presented back in March last year and insights into the macro drivers that are supporting our business. Then I'll hand over to Victoria for the financials in detail before returning to summarize the outlook.

Starting with a high-level view of the business. As I said to you back at the half year, we're on track. A year ago at our investor update, we set out our strategy to remain the #1 specialist lender and also provide short-term guidance and medium-term aspirations. I'm very pleased that we have delivered in line with our 2025 guidance, the first year of our transition period.

As you can see on the right-hand side, we have achieved all of our targets, and we are building well towards our medium-term plan. This slide highlights our 3 familiar themes that demonstrate progress against our strategy and continues to reflect our current transitionary phase.

Firstly, we set out at the Investor Day our optimized lending growth plan, and we successfully delivered against this during the year. Net loans grew at 3.2%, and that reflects our discipline in maintaining attractive RoTEs in new lending, supported by particularly strong growth in commercial lending.

Our medium-term loan book optimization strategy is reflected in the 53% growth in originations from higher-yielding segments that we delivered in 2025. As expected, net interest income has reduced compared to 2024, and Victoria will cover this in more detail later. The strength of our underwriting expertise applied across all of our lending activity is demonstrated in our low loan loss ratio.

Secondly, we maintain cost discipline and efficiency while creating capacity for investment. Our culture of challenging costs has contained core cost growth to only 0.8%. The cost income and manage ratios are in line with our expectations, and these reflect the impact of our transformation expenditure as we invest in the future of the business to deliver efficiency over the medium term.

Finally, delivering attractive RoTEs and capital returns to shareholders continues to be our primary objective. The GBP 383 million of profit before tax translates to an RoTE of 13.7% and a TNAV per share of 579p, up from 544p last year. And our commitment to rewarding shareholders is underlined by the 5% increase in full year dividend. And in addition, I'm delighted to announce a further GBP 100 million share buyback program for 2026, and we have now completed successfully on the 2025 buyback program.

In summary, I'm pleased with our progress in 2025 and our delivery against targets in the first year of our transition period. Next, I'll take a moment to remind you of the plan that we presented this time last year. Through the planning horizon, we'll leverage our core strengths of high-quality and meaningful broker relationships, deep product and credit expertise and a track record of delivery at scale. All of this will be supported by and accelerated by a significant tech transformation, now entering the fourth year of our 5-year plan. That will take us ahead of our competition and will enable us to grow more efficiently.

Combining this transformation with our key strengths will enable us to drive growth in our savings and lending platforms, accelerating our diversification into higher-yielding asset classes, delivering an optimized lending mix and with a more favorable cost of acquisition. In the medium term, this will cement our position as the leading specialist lender, delivering improving net interest income, positive cost jaws and most importantly, delivering growth in RoTE, our North Star.

Next, I'll take a look at the broader market landscape and the key developments we've seen during the year. Beginning with interest rates. We're pleased to see reductions in bank base rates, including the most recent cut in December. Lower rates should stimulate demand for borrowing across our lending segments. And while we saw some volume growth in the year, we expect that any further reductions in rates from here should encourage more buyers back into the market. Volume across the Buy-to-Let market gradually recovered over the year with a pause in the run-up to the budget. And fundamental indicators for professional landlords continue to show strength, including a 4% increase in rents recorded during the year to December.

The chart on the right-hand side illustrates the level of competition we're experiencing in Buy-to-Let. We've continued to see elevated levels of competition, particularly from current account-funded high street competitors. However, as you can see across our brands, we've continued to exercise pricing discipline, playing to our strength of lending to professional landlords whose complex needs cannot be met by the high street.

Looking to the lower half of the slide, opportunities remain attractive in our target higher-yielding subsegments. Bridging finance has seen good growth with the size of the market increasing by 52% year-on-year. Commercial property has also performed well, delivering average returns across the market of 7.1% in the year, underpinned by a balance of capital appreciation and growth in rental returns.

Having looked at the market, I'll now turn to the group's performance and levers for successfully delivering our optimized lending strategy. We're starting from a position of strength with trusted relationships established with over 19,000 brokers across the country who have access to a sales team of more than 100. These personal relationships supported by technology give the group a clear competitive advantage in winning business. We provide a one-stop shop to support brokers in finding solutions to often complex customer requirements. That's an arena in which we excel.

We continually evolve and innovate our product set to target the areas in which we want to grow in line with our credit appetite whilst ensuring we meet and exceed customer expectations. To give just 2 examples, during 2025, we launched a range of new mortgages and implemented criteria adjustments to broaden the appeal of our residential products under the Precise brand. Whilst in bridging, we expanded our dedicated sales team and enhanced our product offering.

Our credentials as a leading specialist lender are demonstrated by the stats at the bottom of the page. Professional multi-property landlords represented 92% of the Kent Reliance Buy-to-Let completions in 2025, and we are continuing to attract customers who trust us with their complex needs, evidenced by a 23% increase in HMO completions.

Our strong broker relationships, together with our agile targeted approach to product innovation, supported by technology allows us to actively balance the growth and composition of our lending book. We are very disciplined in how we choose to grow, balancing return and opportunity to optimize our book. As you can see here from our graphic equalizer chart, we have delivered as we said we would, within our risk appetite, adjusting the mix and the returns to optimize across the loan portfolio, pursuing growth in a focused way.

I'm pleased with the progress we've made in adjusting the mix of the book with step-ups in the pace of originations across our high-yielding subsegments. Taken together, I'm pleased with the execution of our optimal growth plan. This considered, disciplined approach delivered loan growth of 3.2% in 2025, and we're anticipating a similar rate of growth in '26.

The successful delivery of our plan is underpinned by our transformation program, and I'm pleased that we sustained the momentum in '25 as we completed the third year of that transformation program. The foundations are in place, and we're rolling out functionality at pace. In savings, we've continued to launch more products on the new platform, including joint accounts and easy access. We're pleased with the favorable response received from deposit customers who particularly value the ability to self-serve across 13 different product features, removing the friction from processes that previously would have required contacting us by telephone.

On the lending side, we launched our new platform, starting with Buy-to-Let mortgages. And this has been really well received by brokers, appreciating the enhanced functionality, streamlined processes and significantly accelerated time lines. Alongside the new platform, we launched a Rely, Buy-to-Let brand, a first step in simplifying our mortgage offering. Rely creates a Buy-to-Let powerhouse, drawing on the same expertise and experience that our broker partners are already familiar with.

The combination of the new Rely brand on the new modern lending platform has been a game changer for our operations and the quality of engagement with brokers. We're now able to deliver agreements in principle in under 10 minutes and mortgage offers, in some cases, in less than 2 hours. And this marked improvement in turnaround times is resonating strongly with brokers who value fast, efficient case progression for their customers. Whilst our enhanced data flows help support strong credit risk decisions for the more complex cases.

As of today, over 40% of our mortgage applications are now processed on that new platform, we successfully delivered against milestones and importantly, delivered within budget. Looking ahead, we remain committed to sustaining the momentum we built over the past 3 years. In savings, we'll continue to expand our product offering under the Kent Reliance brand on the new platform, and we'll complete the migration of all existing Kent Reliance accounts, of which 40,000 have already successfully been transferred. We will also move the Charter Savings Bank operations in-house and onto our new platform.

In lending, I'm excited about the opportunities ahead as we expand the platform into other lending lines, bridging -- sorry, bringing the operational efficiencies, commercial benefits and enhanced customer and broker experience that we've seen so far in Buy-to-Let to the other segments in which we lend.

The development of residential mortgages on the new platform is well underway, and we will launch later this year under that Precise brand. New cloud and data structures, a key element of our transformation position -- positions us well, sorry, to benefit from the use of AI and advanced analytics, as we, example, successfully piloted new AI tools to prevent fraud.

Our transformation program is now fully integrated into our day-to-day technology operating model under the leadership of the group CIO and the group COO is focused on embedding the functionality being delivered into our group operations teams. The program is on track and on budget. The business is already benefiting from the investment. And as the rollout continues, we'll keep you informed of our progress and the value it's delivering for both the business and our customers. We look forward on giving you more details of this at our Buy-to-Let spotlight session, which is due to take place on the 25th of March.

With that, I'll hand over to Victoria for further insights into the financials.

Thank you, Andy, and good morning, everyone. I want to start by saying that I'm pleased with these financial results that are in line with our 2025 guidance.

Turning first to the P&L. Please note that these are the first full year results prepared on a statutory basis as the final acquisition-related items rolled off in December 2024. However, the equivalent comparative for 2025 statutory results are the 2024 underlying results as neither have any impact of acquisition-related items.

Net interest income was GBP 679.4 million for the year, down 2% compared to the prior year and NIM was down 2 basis points. I will provide more color on the NIM dynamics on the next slide. The fair value loss on hedging activities was GBP 22 million compared to a loss of GBP 2.7 million in the prior year. The key driver behind the loss, which will reverse over the life of the swaps continue to be the fair value movements on our pipeline mortgage swaps due to the movements in the SONIA forward curve.

Administrative expenses increased by 5% to GBP 270.1 million in the year, in line with our guidance and an impairment charge of GBP 13 million was recognized for 2025 compared to an impairment credit of GBP 12.8 million in 2024. I will cover both of these items in more detail later.

Finally, profit before tax for the year was GBP 382.5 million, and basic EPS was 75.6p per share. For the second half of the year, net interest income increased by 4% and profit before tax was only marginally lower at GBP 190.2 million. This outcome delivered an EPS that was up 6% to 37.8p per share. NIM improved 10 basis points to 226 basis points and RoTE was 13.7%.

Looking at NIM year-on-year, please note that 2024 NIM is on an underlying basis as this makes it a more meaningful comparative to 2025 statutory NIM. NIM reduced from 230 basis points in 2024 to 228 in 2025. Higher cost of funds caused downward pressure year-on-year as our savings book continued to recycle on to more costly spreads versus SONIA compared to those in the prior year. The higher cost of funds was broadly offset by an improvement in the lending spreads as the lending back book dynamics rolled through in parallel to another year of business written at sustainable margins.

We have also, for the first time, shown NIM, excluding liquid assets, which was 267 basis points in 2025. This presentation of our NIM better reflects the performance of the underlying business, and it also allows for a more meaningful comparison with our closest peers. We have provided the calculation in more detail in the appendix.

This slide presents our 2026 NIM guidance and the drivers behind it. In 2026, as we continue through the transition period, we expect the same key drivers to those in 2025 to deliver NIM of circa 225 basis points for the year. As we told you last year, the lending back book dynamics will continue to influence the lending contribution to margin, which is illustrated by the upper chart. On the front book, we will remain disciplined on the pricing of new loans.

The lower chart provides more context on the deposit market we're operating in, showing spreads to SONIA of the average top 10 quoted pay rates across the market for 4 key savings products. You can see that in early 2025, the average market spreads moved above SONIA, including on easy access products. This was more pronounced in the second half of the year. We can also see a widening in the cost of fixed deposits versus easy access.

We saw cost of funding increased further in Q4 '25, and this elevated level has persisted so far into 2026. Our 2026 circa 225 basis points NIM guidance is based on our expectation that funding costs will normalize from today's elevated levels, and we will update you on the cost of funding progression over the coming quarters.

This slide presents an overview of our strong funding franchise. The group remained predominantly funded by retail deposits sourced under our 2 well-established brands of Kent Reliance and Charter Savings Bank. As at the 31st of December, retail deposit balances were GBP 24.3 billion, an increase of 2% from the prior year, supporting loan book growth of 3.2%. The remainder of the group's funding was broadly unchanged in the year and came from debt and wholesale issuances, providing diversification and duration to our funding requirements.

In addition, the group continued to utilize the Bank of England's funding facilities, having fully repaid its TFSME drawings in September. Our index long-term repo balance as at the 31st of December grew to GBP 1.5 billion. The makeup of the group's total funding is shown in the 2 pie charts on the right. We continue to optimize our funding mix and the proportion of our fixed rate bonds versus easy access accounts continue to reduce compared to 2024.

Moving on to costs. A key part of our plan is that we tightly manage our cost base to allow us to invest in the transformation program. In 2025, the administrative expenses or expenses met our guidance and the transformation spend was on target. This and the following page highlight our cost discipline and transformation spend.

Expenses were GBP 270.1 million, up 5% compared to 2024. Despite a higher level of inflation, our core U.K. and India costs increased by only 0.8% compared to the prior year. The main driver of the growth was further investment in the transformation program with a GBP 9.4 million increase in the P&L charge compared to 2024.

On the next slide, we provide more detail on our spend to date. The cost-to-income ratio increased to 40.4% from 38.7% in the prior year, and the management expense ratio also increased to 90 basis points from 85 basis points both in line with our expectations.

Looking forward, we will maintain strong cost discipline. And for 2026, we expect group expenses of circa GBP 280 million. We expect that core costs will increase at no more than the rate of inflation and the investment in the transformation program will continue to increase in line with our plan.

Andy outlined earlier key milestones that we have achieved in our transformation program since we presented it to you at the investor update last year. On this slide, we summarize our spend in the last 3 years as we enter the final 2 years of the program with around GBP 85 million of investment to come. There is no change to our expected total spend on the program of circa GBP 190 million until it completes in 2027.

This slide presents our progress against the optimized lending growth plan, combined with a disciplined approach to risk that we announced at the investor update. The net loan book grew by 3.2% in 2025, supported by GBP 4.7 billion of originations, an increase of 19% compared to 2024. Originations in the higher yielding subsegments of commercial, asset finance, residential development and bridging increased by 53% from 2024. Higher-yielding segments made up 12% of the total loan book versus 9% in 2024. And consequently, Buy-to-Let accounted for 68% of the book, remaining the largest part of our lending. Finally, our guidance for 2026 is that we expect net loan book growth broadly similar to that achieved in 2025.

This slide provides a waterfall of the movement in the impairment provision in the year as well as the credit quality metrics of our secured loan book. As you can see on the chart, the total ECL balance sheet provision reduced to GBP 123.6 million as at the end of 2025. The larger releases comprised model enhancements and PMAs and the positive impact from borrowers moving through the ECL stages. These were partially offset by increases in provisions for accounts with arrears of 3 months or more, new lending and other charges.

Moving on to arrears. For 2025, the 3 months plus arrears remained unchanged from 1.7% at the end of 2024. As you can see on the right-hand side of the page, our balance sheet total coverage ratio reduced to 47 basis points, and our provision balance was 8x higher than the average yearly write-offs in the last 5 years.

We remain comfortable with our risk profile and our impairment provisions. We show here that if we were to move to our IFRS 9 weighting 100% to the downside scenario, the ECLs would only increase by GBP 25 million. Finally, as you can see at the bottom, new Buy-to-Let lending interest coverage ratios remained high.

Next, capital. 2025 was another year of strong capital generation of 150 basis points, and the group's CET1 ratio remained robust at 15.8% at the end of December. Our profitability in the year increased the ratio by 2.3% and supported growth in the net loan book and the ordinary dividend. Before the effect of the GBP 100 million share buyback program announced in March 2025, the CET1 would have been 16.6%, and the share buyback had a 0.8% impact on the ratio.

With greater clarity over the Basel 3.1 rules and our confirmed MREL status, the Board set a new CET1 ratio target in the range of 13% to 13.5%. The group continues to generate enough capital to support loan book growth and a progressive dividend. The Board remains committed to returning excess capital to shareholders as we progress towards our new CET1 target post Basel 3.1.

On this slide, we laid out the movement in our net loans and RWAs over the last 2 years. You can see that as the loan book grew by 3% in 2025, the RWAs increased by 5% as more lending came from high-yielding subsegments, which attract higher risk weighting. The loan book mix accounted for a GBP 0.5 billion increase as shown in the right on the chart. We continue to expect that the implementation of Basel 3.1 rules as written would reduce the CET1 ratio as at the 31st of December 2025 by 1.3% as a result of a 9% uplift in RWAs. This is compared to just over 1% as at the 31st of December 2024. The increase in impact on the CET1 ratio is largely due to the growth and change in the mix of the group's loan book.

This slide presents the group's capital resources and capital requirements. The group is well in excess of the minimum regulatory capital requirements. As the group's resolution strategy for MREL was changed to transfer, the minimum regulatory capital requirement now also equals the group's MREL requirement. As you know, the group currently has GBP 700 million of MREL securities and the change in the MREL resolution strategy should start to positively impact RoTE from September 2027 when the first of the securities reaches its call date. We continue to evaluate the optimal approach to our existing MREL securities.

Finally, on this slide, we remain focused on RoTE, and we continue to expect low teens RoTE in 2026, mid-teens in 2027 and 2028, increasing to the top end of mid-teens in 2029.

I will now pass back to Andy.

Thank you, Victoria. So, in summary, today, we presented a resilient financial performance, combined with good strategic progress. Our headroom to grow has been demonstrated by our 3.2% net loan book growth, and we've continued to shift the portfolio mix to optimize returns. There has been solid capital generation with attractive shareholder returns as we increased our full year dividend per share by 5% and announced that further GBP 100 million share buyback.

Finally, turning to the outlook. There was upward pressure on funding costs in H2 2025, and we have, to date, been able to compensate through loan book performance, producing strong asset yields as evidenced in our 2025 full year NIM. It is very early in '26. And whilst we've seen sector noise this year on funding costs, our assumption is that the cost will begin to normalize through the year, and our NIM guidance of circa 225 basis points is given on that basis.

Our focus remains laser-like on RoTE, and we continue to expect low teens in '26, mid-teens in '27 and '28, increasing to the top end of mid-teens in 2029, driven by the successful execution of our strategy, capital optimization and the MREL instruments reaching their respective call dates.

With that, we will now hand over to Q&A.

We'll start by taking questions in the room, and there are microphones, I think, to be passed around and Ben Toms has immediately gone up, and then we'll go over to people on the phone.

Ben Toms from RBC. Firstly, on your RoTE guidance, you've reiterated your 2028 RoTE guidance of mid-teens. Since you struck that guidance, you've had 2 positive pieces of news or tailwinds in relation to the RoTE, the MREL story and a lower capital base. Is the right way to think about your 2028 RoTE guidance that you're increasingly optimistic around hitting that number? Or are there other headwinds which will offset those tailwinds that we need to think about?

And then secondly, on your 225 basis points NIM guidance, you made the point twice that it's predicated on elevated funding costs falling back down to your planning assumption. If they don't fall back down, what will be the headwind to your NIM guidance and what offsetting levers do you have?

Okay. Thanks, Ben. I'll let Victoria talk to the NIM point. But -- I mean, on RoTE, we've reiterated the mid-teens for 2028, but I think we've slightly upped in terms of 2029 saying the top end of mid-teens. So, I think what that tells you is that we can see the clear path to rising RoTE as those MREL instruments fall due and fall away from the balance sheet because they're quite a significant cost.

And obviously, one of the Board's key drivers is to make sure we're returning adequate capital to shareholders and therefore, optimizing the capital down to a sensible level of CET1, all things being equal, given what might or might not be going on in the macro economy. I think what we're setting out here in our guidance is that we're optimistic about that glide path towards that sort of high end of the mid-teens.

On the NIM, Vic?

Yes. So, I mean, on the NIM, as we stand today, we're comfortable with that circa 225. That is predicated on the same 3 drivers that we've talked about. So, we -- sustainable front book margins. We know that the back book will continue to roll through. And then it is the cost of funding. In terms of the rate that that is predicated on, we are looking at an average blended front book and retention of SONIA plus 30 and that is lower than current market levels, but naturally higher than last year. We do expect that to normalize over the year, and that is the average level that we're saying blended for the year.

In terms of offsetting levers, obviously, as we came in, we set out 2 years of saying, look, we have a lot of things running through the P&L, and we expect those all to offset to that circa 225 basis points. The back book has been resilient over the last year and probably performed better and contributed more than we had originally anticipated. So, we are assuming that will continue.

Within the cost of funding, we have got our transformation deliveries. So, we are looking to refine further our cost of funding and improve it through faster repricing and more product diversity. So, we are very focused on those drivers within the P&L. So, yes, and then front book, we are -- we do manage the business from returns. So, looking at where we can optimize that value, and we will continue on with that route.

So, I mean it's early on in the year, and we will have to see how the market plays out. But we are obviously very focused on optimizing and delivering to our mid-teen -- low teens RoTE in '26.

Grace?

Grace Dargan from Barclays. Maybe just picking up on NIM again, thinking about the trajectory in '26 then and really out beyond, because I guess if -- now you're talking about same guidance, but a normalization of those deposit costs, are you pointing to more of a pickup towards the back end of the year and therefore, maybe a better base to start from in '27?

And then secondly, I guess, the point on glide path around capital, how quickly do you think you can get to the, within -- operating within the 13% to 13.5% target? Should we be thinking of that by '28 or is that a longer glide path?

Okay. Do you want to talk about the NIM and then I'll touch on the...

Yes. Yes, I mean, as we look out, I suppose we're not guiding at the minute on 2027. Those 3 drivers, as we noted in the slides, you've got the '26, the last high-margin book rolls off. In '27, we have got -- '27 and '28 is where the lower margin and that will roll through. I mean, I would say we are expecting that normalization of cost of funds. I mean, at the minute, if I compare it to what I thought in December to what I thought now to what I thought this week, there is a lot of changing -- a lot of discussions we're having about base rate reductions and cost of funding.

So, I would say it's extremely hard to call sort of '26 at the moment, let alone '27, but we do expect through transformation and just the December base rate rise really just wasn't passed through to customers, you sort of think that has to normalize over the year. So, yes, we are expecting it to temper down. But in '27, we still have those drivers. So, we're not guiding on that yet. And I do feel we need to wait till we're a bit further into the year to start to understand where '27 may land.

Yes. And then I mean, on the capital glide path, clearly, you probably don't expect me to give you a date at which point we're going to arrive at 13.25% or something like that but, I mean, the Board are committed to that. I think we consider that to be a sensible target for CET1, higher than we see in some other peers, but we think sensible given all factors.

Clearly, we've got to get through Basel 3.1 at the beginning of '27. And also, there's a bit going on from a macro perspective, and you've always got to have a weather eye on your capital ratios as to what might or might not be happening from unemployment or inflation indeed driven by the current problems in the Middle East, et cetera. So, the Board will continue to monitor economic signals and what we're doing in terms of book mix and growth and opportunity, of course.

And once we're through the other side of Basel 3.1, that glide path is eventually where we want to get to. I'm not saying we're going to take years to get there. But clearly, we have to manage capital carefully and kind of understand that in the context of the broader market. Yes?

It's Jonathan Pierce from Jefferies. Two questions. The first is on deposits. The margin on the deposit stock, are you able to tell us where that is at the moment so we can compare it to your sort of SONIA plus 30% for the new business coming in this year? And connected to that, can you give us a sense of your appetite for using ILTR, because obviously, that is significantly cheaper than the deposit cost that you're paying at the moment. So obviously, you ramped that up over the last 6 to 12 months, but GBP 1.5 billion, could that go appreciably higher than that?

And then the second question is on capital. Foundation IRB on the mortgage book, what sort of time frame do you think we should be thinking about for that? Is it likely to be a speedier process than the more advanced IRB type approvals? I don't know if you can give us a sense of how big that might be? And are your RoTE plans further out to 2029 predicated in any way on getting those FIRB approvals on mortgages?

Okay. Do you want to take the first 2 and then I'll talk about IRB.

Yes. So, I guess on deposits, Jonathan, I know you asked that question at the interims. I guess we are looking at those disclosures, but it's not something at the minute that we are releasing in terms of the stock levels. In terms of our appetite for ILTR, as you say, yes, it is -- we do see it as within our tools for funding. And yes, we did choose to use more of that in Q4. I guess we see it as more an ability to manage peaks and troughs. So, we certainly do look at using that, as you say, GBP 1.5 billion.

We have multibillions of collateral with the Bank of England. So we have those options. So we will continue to use it. But as we look forward, it's not so much I think just holding a static number. It's going to be, as we saw in December, suddenly, you have a late base rate reduction, you had the budget, we would say, look, we'll just take some and that's what we'll see us over the 6 months as we manage through peaks and troughs.

So yes, it's definitely something that we see in our sort of armory of funding that we will use going forward. I wouldn't comment on how comfortable or how many billions will we get because it's one of those live conversations we just manage as the peaks and troughs go through.

Yes. I mean that's a really good point. I kind of view the repo scheme as a bit of a smoothing talk more than a kind of massive part of the funding that you do. So when retail is a bit more expensive than you want it to be, you'll make use of it. And when retail comes in at a better price, you'll use less of it.

But clearly, we have encumbrance limits around how many assets we want to pledge with the bank as well. And no, we don't print the stock number, but our retention pricing is less than front-end acquisition pricing. So it gives you some sense about how the book might be positioned.

On the Foundation IRB, interestingly, I was actually having a conversation with the regulator about that very topic on Monday afternoon. And they still haven't given the industry absolute clarity around the size of the price versus the effort equation. And that's the one that my CRO and team really want to get into with the regulator because we have been running the organization as an IRB firm for some years now.

So, we run all the models that you would have to do for that and we govern the organization in that way. We need to really understand the size of the prize for Foundation IRB versus full-blown IRB to determine which are the 2 routes we want to go down. I think it's fair to bet we want to go down one of them, but we do need that clarity from the regulator before we make the decision. And then the Board will review the wise way forwards on effort and reward, and that will drive us down a particular route.

And there's also that conversation with the regulator, which, again, I started with them or have with them on Monday, which is, look, if we go down the route of foundation, do you see that as a genuine kind of door opener into then a full-blown application once you've got resources to take us through that. And that's another question we need to answer before we commit one way or the other.

But you haven't struck any other plans on that assumption?

No, no, no. None of our assumptions are based on being -- they're all based on being standardized under Basel 3.1.

Thank you.

Any more in the room? Or shall we open up to any questions on the phone? Operator, do we have questions coming in on the phone?

We currently have no questions on the phone right now. Sorry, we do have one question come through. Our first question comes from Edward Firth from KBW.

Can you hear me, okay?

We can.

I just had 2 questions. You mentioned the plan was struck on an average funding cost, deposit cost of SONIA plus 30. Could you tell us roughly what it's running at now? That would be the first question.

And then the second question was, I think in the past, last year, you were talking about front book margins at around 240 basis points or you're writing business at 240 basis points. Could you tell me roughly what that is now? Just those 2 questions.

Thanks, Ed. Let me talk about front book margin briefly. We always said that front book margin blended across the kind of originations that we're writing is actually somewhere between 240 and 280, and that continues to be the case. Some months, it's at the upper end of that depending on the mix of business that completes in the month; and in some months, it's at the lower end, but very much in that 240 to 280 territory. So, hopefully, that gives you some comfort on that.

Do you want to talk about the SONIA plus 30?

Yes. I mean the market, as we showed in the chart, it does -- I would say it's a good sort of 10-plus basis points above that at the minute. If you do look at the spread, though, what we are actively managing, fixed rate bonds are more expensive than that, easy access. So, it is a bit of a blend around balancing sort of fixed versus easy access, retention versus front book. But I think if you look at the Best Buy, we're not pricing right at the top of Best Buy and our blend is -- I would say it's a good 10% to 15% above that presently.

And I suppose on the -- just on the lending, I guess, we do write, obviously, in our lending, you have the multiyear so that we do make funding assumptions in that. So naturally, we're very comfortable with the sustainable sort of front book margins and then it is how funding flows throughout the year that would have that impact on NIM.

Any further questions, operator, on the phone?

We currently have no further questions on the line.

Okay. Well, on that basis, I'm delighted that we appear to have bored people into not being able to ask questions. And boring is good, right? Because it means we -- to steal a line from my learned colleague here, did exactly what we said on the tin, which was the plan. So, yes, we're on track. We've had a decent year. We'll work hard at having another one. Thank you very much for your questions and thank you for your attendance.