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From cellist to conductor of the Scottish Building Society

AS A musical youth Mark Thomson planned to play his cello for a living until he heard another career calling while he was in a bank in Falkirk.

STRINGS TO HIS BOW: Scottish Building Society chief executive Mark Thomson has no regrets about giving up on his music career. Picture:  Steve Cox
STRINGS TO HIS BOW: Scottish Building Society chief executive Mark Thomson has no regrets about giving up on his music career. Picture: Steve Cox

Mr Thomson worked in a branch of Royal Bank of Scotland in his home town with the intention of saving up for music college, only to find the job offered benefits he got used to.

"Once I started earning a wee bit of money and the sort of social aspects, alcohol, cigarettes, girls, the usual it was a lot easier to stay in the bank," says Mr Thomson.

Fast forward 30 years and Mr Thomson shows no regrets about deciding to forsake music for the money business, in which he has enjoyed no little success.

Mr Thomson took over as chief executive of the Scottish Building Society in May last year, putting him at the helm of a 165-year-old organisation that can claim to have touched the lives of generations of savers and home-buyers.

The society is the last independent building society in Scotland.

With £397 million assets at the financial year end in January, it is pretty small by financial services industry standards. However, while many bigger lenders have come to grief in recent years, the society has shown its stability, albeit in a pretty low key way.

Mr Thomson is happy to admit that the fact the organisation was not seen as very racy did not deter him when he was approached about becoming number two to former chief executive Gerry Kay in 2012.

"I'm not very racy myself," he admits, memories of youthful antics fading.

Part of the appeal in the SBS job for Mr Thomson was the prospect of eventually stepping into the conductor's shoes at the mutually-owned society.

He joined following a 16-year career at Scottish Widows bank where he ended up a director.

He was ready to move on amid unease that decision-making had been moving to London from Edinburgh under the ownership of Lloyds Banking Group.

The building society job gave Mr Thomson a chance to use his skills close to his home in Fife, and in an organisation he admired. Mr Thomson had offers from two banks to consider, but really liked the idea of working for a mutual owned by its members that operated a simple business model. This involves pooling the savings entrusted to the society and lending them on to people as mortgages for home purchases.

While companies with shareholders tend to be run in the short term interests of those owners, Mr Thomson says mutual values are about pulling together for the long term.

He believes Scottish Building Society is able to follow an approach which puts the interests of customers first.

Asked what that means in practice, the 48-year-old notes the society assesses mortgage applications individually, rather than using automated scoring procedures.

This doesn't just mean declining more cases than others might.

"It allows us to lend on a lot of things that your Halifaxes etcetera are not keen on doing because it's labour intensive," he reckons, noting Scottish Widows Bank followed a similar approach when he worked there and had arrears that were 10% of the industry average.

"Being small we are quite agile and can develop products and change rates quite fast."

Sitting in his compact office in the society's Edinburgh HQ, Mr Thomson says there have been culture shocks to deal with after spending 20 plus years with giants.

"I would say who does that and people would say it's you."

But he has been quick to make his mark on the organisation.

Mr Thomson axed a number of accounts with what he calls fancy names, like Harvest Gold, to simplify the range under headings like instant access, regular saver and ISA.

In the interests of fairness to members, he is adjusting the interest rates paid on savings in some cases to narrow the gap between those offered on different accounts.

"If all members own the society they should get the same rates, and it's good from an operations perspective and for training."

If the Bank of England raises the base rate from the historic low of 0.5 per cent next year as expected, Mr Thomson says the society does not intend to widen lending margins.

The society grew underlying profits by 60 per cent in the year to January, to £1.6m from £1m.

His time in charge has not been plain sailing, however.

Member numbers fell by around 1,000 in the year to January, to 35,000. Most of these live in Scotland.

Mr Thomson says the society was prepared to lose certain customers. Some had accounts for savers paying 4 per cent, when others may have been getting less than 1 per cent .

He says mortgage lending volumes have been pretty flat.

With the Scottish mortgage market still fragile, Mr Thomson has no fears that a house price bubble may be developing in Scotland, at least outside Aberdeen and parts of Edinburgh. Scottish Building Society has declined to do some business that rivals have because Mr Thomson believes selling loss-making products is not in members' interests.

"It's quite easy to go for vanity over sanity."

However, he concedes the society needs to work on developing relationships with intermediaries who sell mortgages after merging with the tiny Edinburgh-based Century Building Society. The merger took effect in February last year.

"When we did the Century merger quite a lot of resource that could have been used doing mortgage business was used doing the merger."

Mr Thomson says part of the rationale for the deal was that Century was having to devote too much time to dealing with regulatory changes rather than serving customers.

However, he has no fear that Scottish Building Society will be overwhelmed.

He says many of the recent regulatory changes were intended to ensure lenders were doing the kind of prudent things the society was already doing.

Mr Thomson is not worried about requirements for lenders to hold more capital as he thinks the society is well- capitalised.

While Scottish Building Society can access wholesale funding, current mortgage activity is funded by savers.

Mr Thomson knows some customers may have opened accounts in the hope of getting a takeover windfall one day but has no concerns that carpet-baggers will try to demutualise the society.

He is confident that so long as it fulfils the relatively simple needs of savers and mortgage borrowers and remains rooted in the communities in which they live the society will be around for years.

Moves into new markets like small business lending are not on the agenda.

With the local identity in mind, Mr Thomson has urged staff to come up with new ways of getting involved in their communities. The Edinburgh HQ collects donations of shopping for a food bank in the city.

Mr Thomson wants to engage with more customers. The annual general meeting on Wednesday will be held in Perth.

He is adamant the society should stay independent and Scottish but says the referendum on independence for Scotland is a matter for the people.

On the practical implications, he says independence may offer opportunities and pose threats. For example, might people in England be less inclined to become customers, would people in Scotland be more inclined to join?

It is too soon to know what independence might mean for regulation.

Whatever the outcome, Mr Thomson is in for the long haul at the society.

"I see my future here, I'm not looking to use it as a stepping stone to another job."

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