If you are going to do a job, you might as well be well paid for it, and Matthew Wyles makes no bones about choosing a career in financial services because of the remuneration it offered.
He explains: “I always set out to be in the financial services industry. I made a decision that was where I wanted to be, probably for completely ignoble reasons. I think with a fair degree of veracity I imagined that organisations that held all the money probably paid better, and I think that is actually broadly true.”
Wyles is now the group development director at Portman Building Society and oversees all of its front-end operations. He says: “I am responsible for all mortgage origination, both direct and intermediated, and for the underwriting. I am also responsible for our 150 branches, which handle the vast bulk of our retail savings and investments business and our offshore deposit taker, Portman Channel Islands, as well as strategic and operational marketing.”
Beginning his financial services career at Eagle Star, Wyles is proud of his progression into senior management, and points out that he was its youngest inspector, then aged 21. And, although he has moved away from the day-to-day interaction with clients, Wyles says he does not miss it.
He says: “I have migrated away from the sharp end, but the thing that gives me a kick out of what I do is being able to influence events. When I say that I mean not just influencing strategy within the organisation, but participating in market debates and giving a voice to Portman’s view on a number of key issues. There is nothing about jobs I have done in the past that could compensate me for not doing what I do at the moment.”
Wyles most notably aired his views on the industry while speaking to the BBC’s Money Programme, which was looking into fast-track mortgages and problems within the self-certification market.
At the time he was criticised by some in the industry but looking back on the programme, he says: “It became apparent to us at the time the BBC was making its programme that there were abuses in the market. It was not altogether surprising that these abuses were developing because affordability was increasingly becoming an issue with price inflation running ahead of wage inflation. It was not surprising that a minority of customers were short-circuiting the affordability issue by taking advantage of the fast-track process where there was no verification of income. I am at a loss to understand why anyone would want to deny that, and all I did in the Money Programme was say that.”
He goes on: “There is no doubt a proportion of fast-track loans are going through on incomes that have been misstated and you can speculate about what proportion that is. If we see a sustained rise in interest rates, which might be coupled with a fall in prices, then some of those loans potentially will be vulnerable to default. What I did not say is that those defaults would necessarily create credit losses to the lenders, but it might result in an increase in arrears.”
Despite the risks involved with the fast-track market, Wyles feels that Portman has protected its members’ money adequately. He admits Portman does lend on fast-track mortgages, but only up to 65% loan to value. He says: “All the analysis we have shows that all loans below 65% generally perform very robustly in adverse economic conditions. On top of that, everything we underwrite on fast track is credit searched and credit scored and so we are convinced that our portfolio will perform well even if there is an element of income misstatement in there. But to deny that people have not been misstating their income seems to be an exercise in the futile.” What that element of misstatement is Wyles does not know, but its impact over the coming months when rates are forecast to rise further will be minimal if he is correct.
The biggest impact on Portman’s mortgage business over recent years has been its acquisition of Sun Bank, which it re-branded to The Mortgage Works at the start of the year.
Discussing the rationale behind the move, Wyles says: “We had been interested in broadening our proposition into other markets and we were looking for a platform from which to do that. We could have grown it from scratch, but thought that we could get off the ground more quickly if we made an acquisition and in the end, after a brief negotiation with Sun Life of Canada we agreed to buy Sun Bank, and we have, frankly, transformed it. It is no longer based in Stevenage and we have closed that operation and virtually replaced all of the people.”
Explaining the change of personnel, Wyles says: “We decided we wanted to move the business to Bournemouth and because of this it was inevitable a significant proportion of people would not want to make the move. But also when you make an acquisition of a standalone business like this there is a large amount of duplication and one of the main gains for us in acquiring it was being able to drive out a huge amount of cost.”
Portman has also recently merged with the Staffordshire Building Society, making it the fourth largest building society in the country and now has £14.1bn in total assets, with around 50% of mortgage business coming from intermediaries. Size is important, and Wyles feels it brings a lot to Portman’s offering.
He explains: “As margins are compressed, the burden of regulation increases and the costs of technology continue to spiral, it is apparent that scale is becoming hugely important. That said, a lot of the smaller players and particularly the smaller building societies have got pretty good at being small and I think it would be premature to suggest that none of those operators will survive in a post regulatory environment.”
Looking at what will determine who survives the market changes, Wyles expands: “I think it is impossible to generalise and ultimately it is all down to quality of management. I do not think that for a medium-sized organisation there is any reason why it should fail just because of the way the market is evolving. It will need to be nimble, astute and commercial and some will succeed in that regard and some will not.”
Looking to the future, Wyles says: “Portman is very clear about which customers it wants in the markets in which it operates. Having been clear on who you want, you have to be clear on what levers you have to pull to obtain and retain them. Customer relations can either be a massive value creation exercise or a massive value destruction exercise, particularly in the mortgage market.”
He says he remains keenly aware that the money Portman uses comes from its members and must be put to best use: “We have finite capital and we have to make sure it works optimally for us. We have to be very clear about the markets we are in and I think you will see Portman broadening its proposition in the mortgage market, but we believe that knowledge comes first and entry comes second.”
There will be no quick jump into new markets although the offering will grow. For Wyles the maxim knowledge is power is one he holds dear, and one that is put into practice when working on Portman’s strategy. Discussing the possibilities of using branded lending as a way of expanding Portman’s activities in the mortgage market, this becomes clear.
He says: “We have no appetite at the moment to hand over the underwriting pen – I cannot see how delegating underwriting authority to a third party is likely to teach you much about underwriting. I think you have to recruit people with the right skills and enter any new segments of the market cautiously and experimentally so you are not introducing unacceptable levels of risk to your business as a whole.”
Wyles denies this is being overly worried about future risks, but is being rather prudent. And when discussing developments with people’s money other than his own he is quick to defend the mutual sector in general against being backwards in coming forward and comments: “There is nothing un-modern about being risk aware and I would rather use that term than risk averse.”
