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New SBS chief confident for the future
11:00am Saturday 7th February 2009 in Dales Folk
The credit crunch is a “once-in-a-lifetime opportunity”, says Skipton Building Society’s new chief executive, and he has no intention of letting it pass him by.
David Cutter, the 47-year-old who is currently overseeing a merger with the smaller Scarborough Building Society, is confident SBS will emerge as one of the winners after the recession is over.
Not surprisingly, he is scathing about the “irresponsible” actions of lenders such as the Bradford and Bingley and Northern Rock and is keen to draw a distinction between his organisation’s business model and that of the banks.
Just three weeks into his new job, speaking from his plush, open-plan base at the company’s head office in Skipton, Mr Cutter said he had big plans for the future.
“We are in the process of merging with the smaller Scarborough Building Society, which is due to complete on March 30, and I’m keen to participate in other merger opportunities which I believe will arise,” he said.
“There is a once-in-a-lifetime opportunity for building societies to get the message across to customers that there is a big difference between us and the banks. Banks are owned by shareholders who demand dividends and are not necessarily customers.
“Building societies are mutual organisations owned by their customers and run for the long-term benefit of their customers. We don’t give dividends to shareholders, which means we give better rates to our savers and charge lower rates to our lenders.”
But Mr Cutter said he could not have predicted the extent of the banking crisis. “No one foresaw how sudden and severe this crisis would be,” he said. “The events of last autumn were unbelievable and it amazed me that reputable businesses such as HBOS could have ended up in such a mess.
“What events have proved is that the demutualisation involving the carpetbaggers of the 1990s was an unmitigated disaster.”
He believes it will be at least the summer of 2010 before growth in the economy will be evident and, meanwhile, he said, “It will be a deep and uncomfortable recession.”
Mr Cutter said SBS mortgage applications had been slashed in half, but it was savers who were really paying the price. “We are mainly funded by retail depositors so we have been far less exposed to the closure of the wholesale money markets compared to the banks,” he said.
“The dramatic reduction in interest rates has really impacted on savers. To say that we are living in unprecedented times is often an over-used phrase, but the bank base rates have never been as low as this since the Bank of England was founded in 1699.
“Savers will definitely be noticing it. They used to get five per cent and now it’s down to one-and-a-half per cent. It seems ironic and unfair that savers are now being penalised by earning such low rates as a result of irresponsible bankers and inappropriate regulation.
“Building societies are also paying a disproportionate amount of the financial compensation levy to bail out the failures of the Bradford and Bingley and the Icelandic banks.
“There is anger in the building society sector that societies who have a traditionally safe business model are picking up disproportionately high costs to cover the failings of banks who ran aggressive, riskier models.
“We are owned by members, we are mutual and at the end of the day the increased costs will be born by all our customers.”
He said SBS, like all other lenders, had scaled down its lending plans, leading to minimal growth. Currently there was a two per cent growth in the mortgage book, whereas in previous years it had been 20 per cent. The number of house repossessions had increased, but only slightly, with 38 homes repossessed by the society as of last December.
Mr Cutter believes the decline in house prices has some way to go and predicts a further drop of around 15 per cent. But he said the fall in the value of homes would benefit first-time buyers, particularly when interest rates were so low.
“It would be a good thing to burst the asset bubble which built up in the UK and around the world as a result of individual banks and governments borrowing beyond their means and it will be a good thing when we return to normality,” he said.
As far as local credentials go, Mr Cutter has more than his fair share and is revelling in such a high-profile role in his home town. He was brought up on a farm in Eshton and his mother, Val, is a former chairman of Craven District Council. He is a former pupil of Gargrave Primary School and attended school in Rugby before studying economics at Durham University.
After graduating, he spent a year in Australia before training to become a chartered accountant at major accountancy firm KPMG. He joined SBS in 1993 as an auditor.
Mr Cutter lives in Bradley with his wife Carol and his sons Kit, Oliver and James. He is a former international hockey player and still plays for his local club, as well as enjoying golf and playing the piano.
“It was a great honour to get the chief executive’s job,” he said. “It’s a very interesting time to take over. Fortunately I’ve been here for 15 years and therefore am really aware of what the issues are.
“It’s an exciting time in terms of what’s happening in the finance and banking sectors and it’s a great time to be taking over.
“SBS has been here for 155 years and we are confident that we will be here for many, many more years to come.
“We are a mutual and we will be around for the long term. We are conscious that we need to run a tight ship during the economic downturn. We don’t envisage increasing employment during 2009, but we have no redundancies planned.”
The SBS and its subsidiaries employ a total of 1,000 staff at the head office on The Bailey, Skipton. Nationally, the SBS has 85 branches in towns stretching from Aberdeen to Plymouth.