Back when spear fishing for his meals on a Fijian island during a gap year with Voluntary Service Overseas, the idea of heading up the largest building society in the UK would have had Philip Williamson in stitches. Now chief executive of Nationwide Building Society he gives a wry smile at how things have turned out. A ready-talking Liverpudlian with an easy-going character, he brings a little of all his past experiences to present situations and clearly enjoys life.
Williamson came to Nationwide in 1991 after stints with Lloyds TSB and UK Land. They were troubled times for Nationwide as Williamson explains: ‘In the late 80s and early 90s Nationwide got itself into a bit of a pickle. The best analogy is to liken it to the way snakes can swallow pigs, or open their jaws and eat things bigger than themselves ‘ Nationwide was a bit like that. It got itself into some deep water and a series of people were recruited to help resolve some of the difficulties, and I was one of them. So really from 1991 to 1995 most of the senior team was on the back foot trying to resolve earlier errors of judgement. We had to get ourselves into good shape before we could drive the business forward again. There was quite a lot of regrouping in the first part of my time here and for some years our residential mortgage business was flat.’
This is no longer the case, and Nationwide recently reported retail mortgage net advances of £7.3bn for the year ended 4 April 2003, compared with £1.8bn for the previous year. With just over 8% of the UK’s residential mortgage market, Nationwide is the biggest building society in the country. However, as Williamson points out, the mantle was not won by Nationwide, but rather inherited as competitors such as Abbey National and Halifax converted to banks.
Nevertheless Williamson is proud of Nationwide’s position, and is keen to maintain its status. In terms of mutuality, he gives the stock answers about not having shareholders, not answering to city analysts and not being driven purely by profit, as to why the model works so well, and is not for turning.
As long as Nationwide runs a tight ship, Williamson believes he will always beat his banking competitors on price, and points to the mutual’s standard variable rate of 4.54%, which he says is 100 basis points below its main competitors. It is not merely the rates offered, but also the tighter retail spread ‘ the difference between the average rate paid to savers, and that paid by borrowers ‘ that will help Nationwide fight its competition. Williamson comments: ‘We operate on a retail spread of about 1.3%. Lloyds TSB’s for example, is about 3%. I think this will be squeezed over time, but for Lloyds to come back to our level they are going to have to forgo a huge amount of profit and I do not think they are prepared to do that, and so we should always be able to compete.’ To help protect the mutual model, Nationwide put in place the Nationwide Charitable Foundation. It was established in November 1997 and since then, every new member has had to assign their potential windfall to it should the society convert to a bank. As an option, the popularity of demutualising is waning in Williamson’s view, although he is clearly taking no chances.
Nationwide has over 700 branches servicing customers directly, but still gets around 40% of its mortgage business from intermediaries. However, Williamson is not averse to branches and intermediaries competing for the same business, and believes there is more than enough for both.
He comments: ‘When someone comes off a deal at Nationwide we always invite them in, whether they are introduced, an existing customers or whatever. I want them to know that they can choose anything from us, and when introduced customers come in it allows us the opportunity to talk to them about other things. The introducers are trying to get them [the borrower] in just as much, and have systems like diary cards and we have got to make sure we get them in first. We have got to be just as nimble footed as the brokers.’
Customer ownership has been a prickly issue for lenders in the past, but Williamson believes the competition has not soured any of Nationwide’s relationships. He continues: ‘I do not think it creates a problem and I believe we have very good relationships with all of our intermediaries. In the last 12 months we have won 14 mortgage awards. A lot of awards have been won for our mortgage processing service. You have to have good products, but introducers are interested in good processes and good relationships and I think they value the support they get from Nationwide enormously. It is a big market and there is a lot of liquidity. Right now there are three million borrowers paying a standard variable rate 100 basis points more than us. If everyone were to remortgage to Nationwide they would save a billion pounds a year. There is plenty for the introducers to have a go at and there is enough to go round.’
In terms of offering discounts or exclusives to intermediaries, networks or clubs, Williamson says it is not something Nationwide will do while he is at the helm. He simply does not believe it is fair that all products are not available to all members, and will not exclude them from being able to get every product Nationwide offers over the branch counter.
However, Nationwide intends to keep its specialist intermediary lender UCB Home Loans, for the broker market only. In terms of future development Williamson is aware of the extensions that many of the other specialists are making to their product ranges, but says UCB will not rush into anything. With UCB doing well, he will not ruin a winning formula, and says any decision to change it will not be taken lightly or without due consideration. Although cautious, Williamson is not afraid of development, and has a clear vision of how he sees the mortgage market developing as it incorporates and integrates new technology.
He says: ‘You go into a broker or a Nationwide branch, and maybe you already have an existing relationship with us. You want a mortgage for £100,000, over 25 years, on a two-year fixed rate product. We have all the other information about you, and we ask a few other questions like do you want various insurances. We have data about which house you want to buy, and because we have the house price index we know what is happening to its value, and we know you are going for 75% LTV.’ If after running the application through the system there and then, everything adds up he says: ‘We will just say: ‘Yes, OK, where do you want us to electronically transfer this money to you today?” This type of instant decision and transferral of approved funds is what Nationwide is aiming at. It is not going to be available tomorrow, but is where Williamson believes technology can take the market.
Elsewhere, Williamson thinks it unlikely, the review by Professor David Miles into long-term fixed rate mortgages will show any appetite in the UK for such products. If such a switch is to occur, there would have to be a change in how the market operates, and a huge culture change, which he sees as unlikely in the present climate. How for example can people think of taking out 25 year fixed rate mortgages, when we do not even know if we will be in Europe in the next five years? Why would borrowers want to tie themselves in for so long, and what sort of penalties would have to be in place to deliver such products, he asks.
For his own future, Williamson says he wants to be at Nationwide at least until he is 60 (he will be 56 in December), although he is aware that the wrong corporate move on his part could take the decision out of his hands. He is clearly proud of the job he does, the people he works with and what he is trying to achieve.
He comments: ‘I have enjoyed the opportunity to ‘captain the team’ whether that be at school or university or in life. I enjoy the responsibility of leadership and am very proud of the people I work with here at Nationwide. They are so supportive of what we are trying to do and are unbelievable ambassadors for the brand, and believe in it totally.
‘It is very uplifting and humbling at the same time to know that you are responsible for 15,000 people and I think they know I care about them as individuals. I do not mean that in any sort of soft way, but I do care about them and I want them to enjoy what they are doing and have a good work/life balance.’