The Newcastle Building Society is headquartered in an anonymous office block in the city centre of Newcastle. However, once inside all is not as it seems, because integrated within the concrete block is a much older building from a time when Newcastle was more famous for coal than for football.
It is in this part of the building that Robert Hollinshead, chief executive of the society, has his office. Being ushered into his office gives the impression of stepping back in time to when the office of a chief executive was a sight to behold. The room is decked out in gold-framed prints, wood panelling, an enormous desk and, of course, an executive washroom.
All in all it is a relief to find that the choice was the previous incumbent’s and that Hollinshead is an approachable man, who, while he displays no obvious allegiances to football, is very much the driving force behind a progressive building society.
Prior to his current role Hollinshead was an accountant in the banking sector for most of his career and his first taste of the building society sector came in 1991 when he joined Town & Country Building Society.
Having joined as finance director he found there were quite a few problems with arrears, and having successfully tackled these he found that when the chief executive and deputy chief executive left he was left to run the company, and oversee the infamous merger with the Woolwich.
“It was a great opportunity to get something done, taking an organisation in some serious trouble and seeing it safely into the Woolwich. But the effect it had on innocent people was surprising, a lot of people lost their jobs through no fault of their own and it brought home to me the enormous responsibility you have to others when you run a large organisation. It was really sad and certainly changed my views forever,” says Hollinshead.
Things are in much better shape at the Newcastle. The society no longer has its lending base in the North East, which accounts for only about 30% of its total lending. As Hollinshead points out, the North East is big in geographical terms but there are not actually an awful lot of people. The society has branches in Scotland, the Midlands and Gibraltar and, because of the internet and call centres, sells a lot in the South.
But if anything the calling card of the Newcastle is technology. Hollinshead explains: “Of all the positives we have in this business, technology is perhaps the most important; we are one of the few organisations that actually writes its own software. This gives us a lot of independence to do what we want to do. For example at the moment we have online offset mortgages. There are few organisations with that, but rather than be unique we would like to provide that service for other organisations. Technology gives you choices.”
The society offers a range of outsourcing services to other organisations, including mortgage processing and broking, call centres and product development through its subsidiary Newcastle Strategic Solutions Limited. “This bit of our business is growing in importance and we are getting to the stage where we are processing more for others than we are for ourselves,” explains Hollinshead.
Surprisingly, given this level of technology, he is not keen on total automation. While recognising the need for brokers to have a slick service he believes this is not so important for the man in the street. He says: “People who go to our site can get decisions in principle but what we really want them to do is press the call me button, so we actually get to talk to them. One of the dangers of automating systems is that you don’t actually get to build a relationship with the customer. But brokers and packagers need all the waste taken out of the system – and the certainty that if we take cases then we can place them.
“Brokers and packagers can go online and check progress but we are still quite keen on the more personal touch. So we still rely on regular telephone calls.”
Based on his earlier experience it is easy to see why Hollinshead places a lot of importance on relationships, and it is a theme that crops up repeatedly in discussion with him. It is one of his defences against demutualisation. Newcastle run the now common scheme where new joiners’ windfalls are signed over to charity, but relies on much more.
“Ultimately the defence must always be being a successful business, we have to grow and make profits to invest,” says Hollingsworth. He continues: “But being a mutual allows us to do things that banks would not be able to do, for example we can keep branches open that, in all honesty, will never be profitable but that are important in the community.”
There are, of course other advantages. Branches have also become virtual call centres. By way of example he tells of Mary Agnew in Newton Stuart, a small Scottish town where the branch is under utilised. “Mary is fantastic dealing with customers in the South, proving that you can still have contact while being remote from the customer,” he says.
“Of course customers are concerned about rates and so on but they also see the benefits that mutuality can bring. The danger is that with the growth of the internet that bond may not remain as strong, which is why we want customers to press the ‘call me’ button.”
He is also not interested in benefiting from the conditions creating the present round of building society consolidations as its business model makes it keen to work with other societies, providing services.
“The challenge for the building society sector is to work closer together without threatening each other’s independence. There is a definite change in the industry due. I think it has to make sense as a survival mechanism for some of the smaller societies, if you look at Europe they are much better at working together. Why should we all have our own back office, processing mortgages? The technology to bring all of that together exists already,” says Hollinshead.
In more general terms, in common with many in the industry, he is irritated at the amount of regulation currently in various pipelines. He says: “I think we are all being swamped with regulation. It is not the fault of the Financial Services Authority; it is also European directives and the Government with its various initiatives. In addition I think a lot of the planned changes are a problem, as the man on the street has no chance of understanding them.
“This is where the relationship with customers becomes important. There is an attempt to provide more and more consumer protection but there is a danger that it will become far too confusing for the general public.”
On mortgages he states a belief that the Mortgage Code is working. “There is an argument for regulating equity release and arguably sub prime, as people may be a bit more vulnerable. But for the remortgage market I am not convinced that they need more protection than at present. We have nothing to fear from regulation, we can all do it, but it is just another thing to do.”
Equity release is one area Hollingsworth is in favour of regulating and he sees it as one of the great growth areas, but not for all.
“Equity release roll up products were sold badly in the early 1990s but going forwards for a lot of people it is going to be the only way they are going to survive. Pensions are just not going to be big enough. However, if you are an intermediary and a member of a network, I wonder if you would really want to sell equity release.
“It is a significant step up from arranging a normal mortgage, involving assessing a range of benefits available from the Government, which can be impacted on by taking out a loan. It is also potentially bringing in investment problems. I think equity release will become a skilled and specialised niche, I am not sure that the majority of mortgage advisers will make the jump.”
Although the Newcastle has made the jump into processing as a core skill, the key to its future, as Hollinshead sees it, is to remain a building society. He says: “I think we need to have a long term run into the future. For us that will be processing, we have the technology and the people, we need to leverage these skill in as many ways as we can. There are a lot of businesses out there, I am optimistic.”