Birch, chief executive of the former building society, has splashed out more than pounds 1.6bn in the space of a fortnight, first paying pounds 285m for First National Finance Corporation, then pounds 1.35bn for the National & Provincial Building Society. Neither deal has gone down well in the City. Banking analysts believe Abbey paid top whack in each case. That morning, the influential Lex column in the Financial Times even suggested the Abbey might be getting into spendthrift habits.
Birch, 57, stoutly defends the N&P deal: "If we hadn't paid that price, we wouldn't have got the business. We've been told by a very reliable source that we got it by a whisker. It's easy for Lex to say we paid a full price, but there's more to life than paying a full price."
The deal is the latest rumble in the once-quiet building society industry and the last in a number of tremors created by Birch. It was he who in 1989 took the pioneering step of converting Abbey from a mutually owned building society to a shareholder-controlled bank, demonstrating that the unthinkable was indeed possible. It was he who made a cash bid for the Scottish Mutual, another first. And with the N&P deal, he has shown that hostile bids for building societies are possible.
For hostile it was, in all but name. Birch began his overtures to N&P nine years ago, wooing the then chairman Alan Kerry at a conference in Vienna. Nothing came of that. "We were before our time, like Concorde," says Birch. Talks continued on and off. Eighteen months ago, they fell apart again on price. After N&P's abortive merger talks with the Leeds Permanent, Abbey tried yet again and was again rebuffed. It was then that the story was leaked - not by the Abbey, it insists - to the fury of N&P. It had little choice but to put itself on the auction block.
For Birch, clinching the N&P deal is a coup. The takeover gives Abbey an additional 3 million customers and pounds 13bn of assets. And in the mortgage business, where demand is weak and margins thin, volume is the name of the game. Says Birch: "The Halifax and the Abbey National are now leaders in the mortgage market, just as Tesco and Sainsbury's are leaders in the grocery market."
The wait was tantalising. "We never thought we had it in the bag. I had my fingers crossed, my toes crossed, it was agonising. We'd been on tenterhooks since April."
Absorbing N&P will not be easy. Building society mergers have been marred by culture clashes, systems incompatibility and management infighting. But Birch pledges to cut the cost/income ratio - a key measure of efficiency - from 46 per cent to 40 per cent within two years.
He sees the deal as the last big piece in the jigsaw for Abbey. Since his arrival there in 1984, he has transformed the organisation. A sales and marketing man by background, he was attracted by Abbey's enormously strong franchise. But it was a sleepy place, where cost controls were lax and profits were called surpluses. "Surpluses are for choirboys," he announced as he set about modernising the society and taking the hatchet to costs.
Eleven years later, the Abbey is a quoted bank and the 25th largest company in Britain, with a market value of pounds 6.3bn. The millions of saving and borrowing members, who were each given pounds 130 of free shares on conversion, now have rather larger nest eggs of pounds 492.
Birch has personally benefited too. "I bought 100,000 shares in Abbey National with my own money within three months of conversion. And I've still got them today. Those shares are now worth pounds 492,000." Paid pounds 408,000 last year, he is also sitting on a paper profit of more than pounds 650,000 on share options.
Peter Gibbs Birch was born in 1937 in Manchester. His father was the chief chemist at Robertsons, the jam makers. His parents died when he was young and he was packed off to boarding-school, Allhallows in Devon. He was called up for National Service and went to the West Indies to recruit for a putative Jamaica Regiment, which never got off the ground.
Returning to Britain aged 20, he joined the food group Nestle as a trainee. "I decided I didn't want to go to university. I wanted to get on and earn some money." It was at Nestle in Switzerland that he met his future wife, Gillian, who was his boss's secretary. He was soon sent off the the Far East. Gillian had to type out his contract, which said he couldn't get married for three years. In 1964, he joined Gillette as a regional sales manager and continued life as an expatriate. He had dozens of assignments, from Indonesia to Kenya. He once told a friend he attributed much of his success to his willingness to be posted anywhere. His last job before the Abbey was as managing director of Gillette UK.
He has a singular reputation at the Abbey. Everyone agrees he is incredibly focused. His admirers say he has the knack of discarding inessentials and concentrating on the bottom line. One colleague praises his delegation skills. "He lets you get on with the job. He doesn't like lots of meetings. He's calm and unruffled."
His enemies claim that the extraordinarily narrow focus is because he is, to put it bluntly, not too brainy. According to one former colleague, "He's ruthless but intellectually lightweight: he knows precisely where he wants to go, but he hasn't a clue what's under the bonnet."
John Bayliss, his number two for 10 years, now retired, says: "He sees things very simply. The thing he'll be remembered for is conversion. He had no time for mutuality. Had one of the rest of us got the job of chief executive, I can't say we would have converted in 1989." He adds, "He's a nicer guy than he appears."
Birch's strict control of costs, and his readiness to sack underperformers, won him the nickname of "the Smiling Cobra" at Gillette. Soon after arriving at the Abbey, he arranged a brainstorming session. He kicked off the meeting by announcing, "Right, we're pounds 40m over budget on costs. Any suggestions?" There was much foot-shuffling and a few half-hearted ideas. Birch stormed out of the room, announcing that he was going off to read the newspaper, and that by the time he came back he wanted that pounds 40m saved. He got the savings.
It was one of the few times he is known to have lost his temper. Colleagues are more accustomed to his buttoned-up manner. Rather unkindly he has been likened to a Thunderbirds puppet. There is undeniably something faintly robotic about him. He has no small talk.
He is ascetic and not at all clubbable. He detests smoking and excessive drinking. A fanatical keep-fitter, he swims half a mile a day in summer and cycles five miles a day in winter. There is no conspicuous consumption, apart from the 7- series BMW he drives to work each day. For years the family - he has three sons and one adopted daughter - lived in the same modest house in Cobham, Surrey. Only when a grander place in the same road that he had had his eye on for years came up for sale did they move. Friends say money is important to him. He plays the stock market. A share price screen sits beside his desk. He's well-informed about companies far removed from the mortgage business and sits on the boards of Argos and Dalgety.
His recipe for success is simple. "I really subscribe to the view that if you're going to succeed in business, you have to be different. You get no prizes for being a follower." Birch doubtless has more surprises up his sleeve. First, however, he has to convince Abbey shareholders that his latest spree was worth it.Reuse content