OneSavings Bank (OSB) has sought to increase liquidity levels ahead of an anticipated economic downturn, drawing an additional £645m through the Bank of England’s Index Long-Term Repo scheme and applying for access to a potential £1.7bn from the Term Funding Scheme for SME.
The cost of holding those additional funds, together with the impact of the reduction in the base rate, will drag on the lender’s net interest margin this year. The group has granted payment holiday requests for just over a quarter of the mortgage book by value, above an industry norm of around 17 per cent, according to Peel Hunt analysis. While it is too early to predict how borrowers will behave after the end of the payment holiday, management said, provisions for bad loans could double from December’s balance of £42.9m, based upon a series of adverse scenarios.
