SCOTTISH Building Society unveiled its new chief executive at its annual meeting last night, where it told members the mutual has grown the size of its mortgage book for a fifth year in a row.
Paul Denton, formerly of the Co-operative Bank and Royal Bank of Scotland, will succeed Mark Thomson in the top job at the society, subject to regulatory approval. His appointment was announced to members at The Royal College of Physicians in Edinburgh.
Chairman Raymond Abbott made the announcement as he reported the latest financial results for the society, which revealed a 2.8 per cent or £8.9 million rise in mortgage balances to £327.3m. The growth of the mortgage book was higher than the year before, when it expanded by 2.3%, in spite of tough competition in the market.
That competitiveness was illustrated last week by Tesco Bank, which revealed it was exiting the mortgage market and putting its book up for sale. Royal Bank of Scotland had earlier this year highlighted “unprecedented pressures” in the market, amid continuing, ultra-low interest rates.
Mr Abbott acknowledged that the society faced similar challenges from the low base rate, which has been sitting at 0.75 per cent since edging up by 0.25% in August. But, pointing out the difference between the mutual and high street banks, said that the society focused more on serving customers’ individual needs than catering for a mass audience.
Much of its mortgage business comes from first-time buyers, self-builds or its retirement interest only (RIO) mortgage, rather than on the algorithm-generated renewals market.
Mr Abbott, who also highlighted the society's success in retaining customers, said: “We’ve had quite a lot of interest in our retirement interest only mortgages. We have also been selling self-built mortgages, for example, and commercial mortgages. Some [applications from] guest houses have been coming our way. Basically, it is that straightforward, serviced approach [where] we assess you as an individual, rather than an algorithm in a computer.”
Around 70% of the society’s mortgages are sold through its 35-strong network of brokers, with 30% sold direct from its five high street branches.
Last year its net interest margin edged up to 1.64% from 1.62%. That came as savings balances increased by 1.7% to £379.9m.
Mr Abbott said: “We keep pushing up the mortgage book. That’s 13 or 14 months of consecutive growth in a tough market. We would not like to say the market is not tough – it is.”
The society, believed to be the oldest remaining one of its kind, reported pre-tax profits of £1.03 million for the period, down from £1.3m the year before but “ahead of plan”. It noted that the fall in profits reflected investment in its digital capability, which helped it launch a new online saver account in July. Mr Abbott said the society, which has 33,000 members, planned to promote the product more heavily in the next 12 to 18 months. Mortgages and other products will also be marketed more assertively online over the next year to year and a half.
Mr Abbott said: “We are not tied to increasing profits year on year; we are tied to making a good service for our members. We try and manage our profit to a number which allows us to pay as much as we can on savings interest… and charge a reasonably competitive rate on the mortgages. It’s getting the fine balance between our mortgage book and our savings book and a profit which allows us to keep our financial strength, so we can do these things.”
Meanwhile, Mr Abbott said he was sorry to see Mr Thomson depart the society after seven successful years at the helm. But he said his successor Mr Denton, who is returning to Scotland to take on the role, brings a “wealth of experience” to the organisation. Mr Thomson will remain in post until Mr Denton arrives on June 17.
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