Chris Hilton, chairman, Newcastle Building Society

Apr 29 2010 by Peter McCusker, The Journal

Chairman Chris Hilton recently helped steer the Newcastle Building Society through meltdown of the global financial system and is now stepping down after 30 years on the board. Peter McCusker reports.

AS the Northern Rock grew rapidly in the years prior to its collapse, across the city in the boardroom of Newcastle's other main financial institution, eyebrows were being raised over its expansion.

In fact, the board of the Newcastle Building Society were becoming increasingly concerned about the house price bubble and the ambitious approach of Northern Rock.

Its outgoing chairman Chris Hilton explains: “The Rock was in a phase of maximum performance and expectations. Between 2003 and 2006, it was the darling of the City – but it was doing it in a way with which we at the Newcastle could not compete.

“It had a very aggressive approach, with 125% loans and lending to six times a salary. As this house price bubble continued to expand, we began to back out of residential lending.”

Does this mean the Newcastle saw the crash coming?

He says: “Well, we believed that what was happening in the market was unsustainable and we reined in our residential lending before the housing bubble burst so, yes, I think you could say we thought we saw it coming.”

However, Hilton is realistic enough to acknowledge that, while the Newcastle’s fleet-footedness helped it avoid the difficulties of financial institutions such as the Rock, it has been a tricky few years.

“The last two years have been difficult for all of us, but the society has been robust enough to come through that,” he adds.

One of the difficulties faced by the Newcastle was the £26m loss it suffered in 2008 after depositing £43m with Icelandic banks Kaupthing and Lanskbanki before their devastating collapse.

But Mr Hilton believes the Newcastle’s policy of spreading its £1bn of investment across a wide range of institutions was the right one and blames the credit rating agencies for not spotting the looming problems in Iceland.

The Newcastle has so far recovered £6.7m from the administrators of the Icelandic banks’ UK subsidiaries but it will be a few more years before it claws back the rest, with the society eventually expected to reclaim around 80% of what it lost.

Born and bred in the North East, Hilton is a shipping lawyer by profession and practises with Eversheds law firm in Newcastle, where he was formerly managing partner.

He joined the board of the Newcastle over 30 years ago and is also a director with the Sunderland Marine Mutual Insurance Company, and company secretary at Cardiff-based shipping company Graig Shipping Plc.

Hilton became chairman of the mutual in June 2001 following the retirement of Eric Davey. He says his decision to stand down now is mainly due to the best practice guidelines of the City that a chairman should only serve in the post for nine years, but is also related to the fact he is approaching his 60th birthday.

One of the many challenges he has faced over his 30 years on the board has been the rush for building societies to demutualise, which became very fashionable in the 1990s.

Hilton recalls a succession of AGMs over that time when so-called carpetbaggers attempted unsuccessfully to push through resolutions forcing the society to relinquish its mutual status.

The last two years has also seen many building societies taken over by the larger players in the market as a result of the global financial crisis, but speculation the Newcastle may yet be snapped up by a larger rival has been dismissed by the mutual.

New chief executive Jim Willens said recently he expects the society will return to profit this year and stressed that, despite continuing consolidation in the sector, he had no intention of discussing a sale of the Newcastle.

The building society has avoided the many pitfalls of the last few years and Hilton says it is in great shape for the future.

It took on a record 50,000 new members in 2009 and secured a record income of £490m on savings products.

Earlier this year, the region’s largest mutual saw a change of chief executive, with Colin Seccombe retiring to be replaced after 12 years at the society by Mr Willens, who was most recently chief executive of the Dunfermline Building Society.

Hilton says: “The Newcastle is in great shape. Colin Seccombe did a really good job steering the business through two years of turmoil in the global financial system.

“With Jim coming from a sales and marketing background, he will look at the organisation from a different perspective.” And the new chief executive has been fulsome in his praise of the outgoing chairman.

Willens said: “Chris has made an immense contribution to the Newcastle’s success over the last three decades.

“He has played a central part in progressing our evolution from a traditional building society into a modern, forward-thinking and diverse financial institution.”

Hilton believes the development by the Newcastle of its Strategic Solutions Division has given an additional string to its bow. The Strategic Solutions Division, which performs back-office functions for other finance companies, employs around 200 of its 1,100-strong workforce.

He added: “The growth of the society in recent years means we are the eighth largest in size in the UK.

“The success of the society can be attributed to the quality of its staff and the business model we have adopted with the development of the Strategic Solutions business.

“The Newcastle is a regional franchise which focuses on the communities we serve.

“We are still a business that is based in Newcastle and we are well-placed for an exciting future.”