When independence is the stuff of dreams

The Monday Interview: Brian Davis

When he sleeps, Brian Davis sometimes dreams about his work. A good dream for the chief executive of Nationwide is when his building society, the UK's second-largest, trounces the opposition. In particular, a good dream means beating those societies, including Halifax, which plan to float on the stock market next year.

"My nice dream is where I see Halifax having converted to a plc and every member takes their money or shares next year and moves their savings to Nationwide because of our better rates," Mr Davis says.

The nightmare scenario, he concedes, is that his society might be forced to follow the others and de-mutualise.

"The bad dream is that short-termism might take over. That members might say, 'Well, look, we would rather have the pounds 500. We don't really care about building societies or the long term'. If that were to happen it would be a great shame."

Mr Davis's dreams, good and bad, encapsulate the dilemma facing the building societies movement, of which Nationwide is poised to become the largest member once Halifax de-mutualises next year.

Building societies dominated the home loans market as recently as 1994. But control of mortgage lending in the UK is set to pass into the hands of the banking sector, perhaps within the next 18 months. The radical transformation of the market will not be the product of a stand-up, knock- down fight between banks and building societies. Rather, nearly all the UK's top 10 societies are themselves crossing over to the other side.

The stampede to de-mutualise, signalled by Abbey National in 1989, accelerated two years ago when Cheltenham & Gloucester announced it would be taken over by Lloyds Bank.

Since then, Halifax, Leeds Permanent, Woolwich and Alliance & Leicester have all announced that they too will make the change.

National & Provincial has been swallowed up by Abbey National, while Bristol & West has also thrown in the towel and plans to be taken over by Bank of Ireland.

In the process, more than 16 million society members are to share in a free cash-and-shares bonanza worth up to pounds 20bn.

The challenges ahead have special meaning for Nationwide, and even greater poignancy for Mr Davis himself, as he prepares to become chairman of the Building Society Associations, which holds its annual conference in Birmingham from Wednesday.

The Nationwide chief's emergence as a leading defender of mutuality strikes some observers as surprising. Certainly there is little in his background to suggest he would become a dyed-in-the-wool mutalist. A scientist by training, he earned a doctorate in a rocket-fuel technology. He spent his early working life at Esso, gradually moving up the oil company's management ladder before joining Nationwide in 1986 as general manager in charge of technology.

His promotion to chief executive followed the departure of Tim Melville- Ross, who left to head the Institute of Directors.

Mr Davis has not always been so pro-mutuality. Nationwide was pipped by Abbey National in the race to take over N&P last year. Had the two societies merged, they would have announced their own plans to convert to a bank, Mr Davis admits.

The irony, Mr Davis says, is that the experience of talking to N&P confirmed Nationwide's decision to stay mutual. "We learnt a lot more about what conversion entails. I had to say that I think it has worked out the right way and we are happy to stay the way we are."

Since then, Nationwide has moved to assert the benefits of mutuality by handing back more than pounds 200m of annual profits to members in the form of mortgage rate cuts and savings rate increases. At 6.74 per cent, the society's variable lending rate is half a percentage point cheaper than all the "wannabe" banks, cutting up to pounds 40 a month off the cost of an average pounds 50,000 mortgage.

Mr Davis dismisses claims by competitors that Nationwide's rates are a short-term headline-grabbing stunt. Nor does he accept the argument that flotation and the disciplines of shareholder democracy are the key to a well-run institution.

"That is one of the things people talk about. But we have improved our efficiency year on year for seven or eight years without the disciplines of the City. We don't need to go through the two-year pain and the expense of giving pounds 100m to merchant banks to discover that discipline," he says.

In any event, he believes any handicaps societies may have faced in the past will soon be overcome by the new Building Societies Act, aimed at enabling them to widen the services they provide. He intends to use his year at the helm of the BSA to promote the passage of the Bill through Parliament.

Nic Cicutti

PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

Iran is shifting from pariah to possible future policeman of the Gulf

Robert Fisk on our crisis with Iran
The young are the new poor: A third of young people pushed into poverty

The young are the new poor

Sharp increase in the number of under-25s living in poverty
Greens on the march: ‘We could be on the edge of something very big’

Greens on the march

‘We could be on the edge of something very big’
Revealed: the case against Bill Cosby - through the stories of his accusers

Revealed: the case against Bill Cosby

Through the stories of his accusers
Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

The Meaning of Mongol

Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible