Magazine article Management Today

Managing Mutuality

Magazine article Management Today

Managing Mutuality

Article excerpt

Donald, Kirkham, Group Chief Executive of Woolwich since 1986, has the sort of fastidious attention to detail that, at times, can be quite unnerving.

We are at the end of an interview of an hour and a half. Kirkham is telling me that the biggest change he has seen is the change that has come in the housing market in the last couple of years.

"That was the biggest challenge. We were not expecting house prices to fall. That constituted the end of civilisation for most people, whether professionals like us, or individuals like you. But what happened last year, was that while our profits went up by 10% to 150 million [pounds], our mortgage loan provisions were of the order of 145 million [pounds]. Ten years ago I was providing 20,000 [pounds] - hardly worth mentioning."

Then he paused, got up, went to a filing cabinet behind his desk and dug out the 1982 file. "Sorry, 47,500 [pounds] in 1982. Still hardly worth mentioning."

The point about this anecdote is that another chief executive would have given me the 20,000 [pounds] figure, then asked me to check it with his PRO. Kirkham, who weighs his words with care, wanted to do it himself.

In many ways that tells us a great deal both of the man and his society. The Woolwich has always had a good image. But what has happened in the last few years is that his dear old cosy building society has also become a formidable financial institution. Kirkham, himself, describe it a "mutual bank". The inside of a building society is like the inside of a bank. We are more strictly comparable to banks on the Continent like Credit Agricole. Mutual status for banks is a much more common culture on the Continent than it is here."

This evolution of Woolwich into a "mutual bank" has been helped by its diversification into a number of areas: estate agency, life and general insurance, unit trusts, housing development, independent financial advice and overseas lending subsidiaries. A Woolwich customer can now use the Woolwich for his offshore assets through Woolwich Guernsey and there are Woolwich customers in France as well as Italy. As Kirkham says "It is more attractive to have an office in Nice, than in Huddersfield".

The golden rule that the Woolwich has followed in these Continental acquisitions is "when we diversify geographically we don't diversify on the product front at the same time. Our French company Banque Woolwich, was bought from the Midland and is in the business of mortgage lending. Woolwich Spa in Italy is also in the same field. In both cases we are servicing local customers. In the main, as in this country, we are in the market to lend against the security of residential houses."

France and Italy are making the Woolwich name known on the Continent and Kirkham is particularly pleased that the Woolwich is able to compete in these markets.

Woolwich Guernsey, having been started in the days when people wanted interest gross without the deduction at source of the composite rate tax, has grown to service the needs of British expatriates who want to keep their money in an organisation they know and trust.

Woolwich went into estate agency in the late 80's, mainly starting up its own offices from scratch. In early 1991 it bought up the Prudential agencies for 21m [pounds] - a sixth of the price the Pru paid when they started in 1988. At the time of deregulation, a number of building societies and even insurance companies moved into estate agency. "At that stage" says Kirkham, "we didn't want to buy at the prices being asked. …

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