Wearing an open necked shirt, Angus Porter is framed by the City backdrop of his glass-walled office at Abbey”s head office in central London. Porter, director of customer propositions at Abbey, has been in the job four months, and comes across as a relaxed, measured individual.
Abbey is currently restructuring, rebranding and rewording its customer offering. And, with responsibility for marketing, product strategy, pricing, brand and communications, Porter is largely responsible for delivering the goods over the next three years. The changes will not take effect immediately and many still have to be implemented. However, he is aware City analysts will not be satisfied unless Abbey moves forward quickly, and expects strengthening performance to be a feature of Abbey”s results from the second half of next year.
Although Abbey has had trouble in many areas of its business, it has maintained a strong residential mortgage market share. According to its figures for Q3, net lending was up 55% to £6.5bn on last year, and accounted for an estimated 9.4% of the market.
Porter believes much of this growth has been driven by Abbey”s preoccupation with price, and is keen that this does not remain the lender”s sole focus. He says: “What we have to do is keep that focus, while making sure we bring something more rounded to the market. In addition to buying on price, we want people buying from Abbey because the products are well designed and well delivered and the service that they get is good – for both intermediaries and customers. They should all feel that we are doing the job very professionally. I think we are some way short of where we would like to be but getting the basics right is a hugely important first step.”
Porter”s knowledge of the phone industry – he was previously with BT – has made him painfully aware of the perils of fighting for new business on price alone. He warns against believing that borrowers will stay with lenders long enough to counteract the initial loss leading deals they were given and says it is not something Abbey is not prepared to do anymore. As he puts it: “It is virtually impossible to make money when people are offering introductory deals that are at or below base rate – the arithmetic simply does not work. A huge amount of acquisition is being done in the hope money will be made from the customer further down the line. I think we all have to work very hard otherwise the only people who are doing well are the customers who switch.”
Abbey is not alone in worrying about price, and Porter highlights the likes of Nationwide, which he says has re-priced its front and back books, and Northern Rock, which is charging borrowers up front. Porter claims: “The front book/back book issue is one of the single biggest ones for our industry. Fundamentally, you cannot fix the back book problem simply by making it equal to the front book as you end up not being competitive on the front book and being expensive on the back book in relative terms. I think there are lenders that have done intelligent things such as Northern Rock, which has recognised that you do not make that much money on a mortgage and so they will make it in an upfront fee. I think there will be an increasing trend towards upfront fees to mitigate this question of customer switch.”
He feels there will come a time when borrowers are not given the freedom to roam the market as they have in recent years. Lenders, he believes, will look at a borrower”s record and, if they are serial rate chasers, will simply not offer a mortgage.
Porter accepts that many of the changes taking place at Abbey will not directly affect intermediaries. However, he hopes they will send out a signal of Abbey”s intent and that, in time, they will see the lender as both a well priced and well serviced proposition. He says: “We have already had some discussions with intermediaries who made it very clear that, from their perspective, it was hugely important that Abbey is strong and successful in the mortgage market. They would be concerned if they felt that Halifax was getting too much its own way and so I suppose the rebrand per se is not going to have a direct impact. However, it is a signal of a reinvigorated Abbey that it is going back to what it always did particularly well – both in terms of leading and the market and being a lot more innovative.”
He continues: “I think we have lost our way in the last three or four years. But if you go back five or 10 years, we were, for example, the first people to do mortgages over the telephone – there are a number of things that Abbey can say “well we did that first” and that is where we are striving to get back to.”
It is easy to say such things, but getting a culture change in place at an organisation with around 27,000 employees is not a simple task. An all-staff email is not going to do the trick. This, as much as anything else, was behind the timing of the rebranding announcement, according to Porter. He explains: “In some ways it was a little bit early for us to be announcing a new Abbey, but we could not wait much longer, the key reason being we had to get all of our people to understand what it is we are trying to do – all 27,000 Abbey people. We had to give them some signals of things that we are changing and to get them on board in anticipation. There is a new clarity in the business of what it is we are going to try and do. So simplifying the language in which we speak to customers is hugely important.”
He continues: “It is only the start, because what we are doing is giving a signal to 27,000 people about the way we want to do business, so that when they are having a conversation with a customer they recognise that our job is to make financial services understandable and digestible and not baffling.”
Porter does not expect the changes to cause too many problems for staff and in many ways says it has been lead by them. He says: “We are doing what Abbey people have been saying we ought to be doing and so it was just a question of responding. They have been saying: “This is too complicated. How can we possibly explain this mortgage range to customers? How can we do our job when we can”t see the logic in what we are trying to do?” So the first step was to simplify what we offer and then present it in a much more logical way.”
Not coming from a financial services background, Porter is not constrained by the market”s past, and does not subscribe to the philosophy that the mortgage market has been as innovative as many would have us believe. He says: “There are opportunities for the market to be more outward looking and to identify where this market is going. If you look at the scale of innovation then I do not think there has actually been that much. There has been a lot of noise around the likes of offsets, but these have been around in other countries for a long time. I do not think there has been any real ground breaking stuff here in the UK.”
Porter is not prepared to say exactly what Abbey has up its sleeve, but mentions the development of “wrap” products, where individual entities can be kept separate, although being maintained in a single portfolio for the purpose of providing a consolidated financial report. In the past this has been used for investment products, but Porter says there are other possibilities relating to the mortgage market.
He says: “In principle you could take the different cash elements people have in their investments and then use that for some form of offset. This opens up all sorts of possibilities on product design which we are only just beginning to contemplate. We are not close to launching anything yet but once we establish the principles we can get into some quite interesting areas.”
Technology will also have a part to play for Abbey going forward with the vast majority of Abbey”s intermediary business coming through its introducer internet. Abbey already backs sourcing system Trigold, and is keeping it mind open to further its future investments according to Porter. Again he will not be specific on future plans but says: “We will be determined by what makes most sense to our customers.” He adds: “The principle for me is that it is not about technology, it is about what works best for intermediaries – although technology can obviously help.”
Much of what Porter says reflects the fact that Abbey lost its way in delivering its core business and is now trying to play to its core customers before it loses them. Putting this into practice is where the problems begin, and only when it has been done effectively will any credence be given to it. Porter certainly does not have time to admire the view from his window.