I’ve been following articles and blog posts by Jeff Prestridge; he’s personal finance editor of Financial Mail on Sunday, thus a pretty influential guy. And he’s said some very complimentary things lately about the building society sector, especially by contrast with major banks. If I were in charge of media relations at one of those banks, I’d have found it uncomfortable reading.
One of his articles was in “Moneywise” (May 2011); on the front cover, the piece was flagged up with the words “why selfish banks put themselves first” and my first reaction was that this was just another blast at the major banks; justified, maybe, but not news. Well, yes, but there was more: a good-news story about building societies.
Customer service excellence
Prestridge’s title praised the excellent customer service records of two particular building societies, especially by contrast with the majority of banks. They were Coventry Building Society, a mutually-owned bank, and Yorkshire Building Society, who are the country’s second-largest building society, with assets of £30 billion. That’s small by comparison with the £1.9 trillion assets of RBS in 2008, making it then the world’s largest company (did you know that?), but large by most other measures.
(I knew RBS’s total assets were larger than the entire GDP of the UK, then £1.7 trillion, but largest company in the world? As John Lanchester says in his fascinating book (see below), that’s “freakishly large”. Yet we had to bail them out. That’s scary)
Both scored highly in several categories of Moneywise’s own Customer Service Survey Awards but they were nonetheless profitable organisations. The article’s title was “Banks that look after us look after themselves”, the point being that caring for the customer makes commercial sense.
Executive pay restraint
The article also compares top management pay packages. Ian Corning, CEO of Yorkshire BS, donated both his entire 2010 bonus and his annual increase to the Society’s charitable foundation. That compares very favourably with the well-known and astronomical levels of pay and bonuses at the top clearing banks. (at RBS, bonus of £4.5 million, apart from salary).
According to a Bank of England study by Andrew Haldane and quoted by Lanchester, the bank directors were paying themselves these monster bonuses simply as result of taking bigger punts; “there was no skill, efficiency, intelligence or judgment involved: just riskier bets”. And we all know who picked up the tab if the bets went wrong: the taxpayer.
Compared with this, the relative restraint at the building societies seems even more admirable.
Because Moneywise is a monthly, Jeff Prestridge must have written that piece in April. Writing slightly later, i.e. for the Mail on Sunday’s 8 May edition, he says, talking pithily about the PPI scandal:
“Payment protection insurance has been a blot on the financial services landscape for far too long. It has angered those who bought it only to discover it wasn’t worth the paper its terms and conditions were written on.
It has nearly brought the Financial Ombudsman Service to its knees dealing with a deluge of complaints. And it has done untold damage to the already tarnished reputation of the banks that sold it by the shovelful.”
He then goes on, by contrast:
“BUILDING societies remain a key part of the financial landscape, providing consumers with a much-needed alternative to the banks, especially in the savings and stricken mortgage markets.
Although the credit crunch has not left the industry untouched, resulting in a bout of consolidation (that will continue for a while), there are signs that some bigger societies are emerging from the financial crisis stronger than ever.
Yorkshire and Coventry are leading the way. Both have managed to absorb smaller stressed societies into their fold over the past three years – Barnsley, Chelsea and probably Norwich & Peterborough by the end of the year in the case of Yorkshire, while Coventry has snapped up Stroud & Swindon.
Crucially, they have managed to do this without compromising either customer service or the competitiveness of their products.
The strength of these two organisations is such that both have declared an interest in acquiring Northern Rock – complete with 75 branches – from the taxpayer.
Given that the building society industry has survived the crunch with its reputation intact and without falling back on taxpayers for support (the demise of Dunfermline was its only blemish), it would be a great fillip for the sector and great news for consumers if Northern Rock (once a building society) were to be remutualised.
As David Webster, outgoing chairman of the Building Societies Association, said last week at its conference in Birmingham, building societies are primarily customer-focused businesses – which sets them apart from most banks (Metro excepted).”
At the end of his “Moneywise” article, Prestridge concluded: “Given a choice between Yorkshire, Coventry and any of the big banks, I know where my money would go any day. To the Coventry and the Yorkshire. They care about you – rather than themselves.”
I think he makes the point very well that this is enlightened self-interest; by caring for the customer they help themselves build a more sustainable business. What a pity not all businesses view the world in those terms.
WANT TO KNOW MORE?
Jeff Prestridge’s 8 May article in the Mail on Sunday: http://www.fmwf.com/media-type/ask-an-expert/2011/05/jeff-prestridge-banks-must-end-the-ppi-debacle-to-win-our-trust/
John Lanchester’s book “Whoops: why everyone owes everyone and no one can pay”: http://www.amazon.co.uk/Whoops-Why-everyone-owes-one/dp/1846142857/ref=sr_1_2?ie=UTF8&qid=1305882016&sr=1-2
“Back to the Black: how to become debt-free and stay that way”, is available on the following retail sites:
Kindle Store: http://www.amazon.com/dp/B004PLMAQM
Smashwords store for other e-formats, including .pdf: http://www.smashwords.com/books/view/22886