Like many building societies, The Hanley has worked hard in recent years to demonstrate true member-engagement using various initiatives to keep in touch with our members and to invite dialogue. Our website,our member newsletters and our quarterly Customer Forums with myself and board colleagues have proven very valuable in ensuring that we are steering the business on a course which members can understand and support. Again this year we were proud to achieve 24% of members voting on our AGM resolutions as this level of voting will be amongst the very highest in the building society sector. These voting members gave the board outstanding backing with 97% in support of our annual report& accounts for our financial year 08/09,96% in support of the re-election of directors and 91% in favour of our remunerations policy. We are extremely grateful to our members for their unstinting loyalty and support, which we never take for granted and we know we must continue to earn in such difficult recessionary times. May I take this opportunity to wish all our members a very happy Christmas and a healthy and fulfilling 2010.

BSA ANNUAL LUNCH

Last week I attended the annual lunch hosted by the Building Societies Association (BSA) in London, along with Chief Execs from about 20 other building societies and representatives from regulators, government departments and business partners. The lunch itself was punctuated by a very strong and thought-provoking speeech given by Graham Beale, Chairman of the BSA, whose day job is Chief Exec of Nationwide. Graham spotlighted the resilience of building societies in the face of the current economic storm and our ability to just get on with doing what we always do, despite unfair and heavily-subsidised competition from those banks which are part or wholly owned by the government following their financial collapse last year. I know that Hanley members are bemused by the savings rates being offered by the likes of Northern Rock and Natwest banks as I have first hand experience of trying to explain how our own self-sufficiency makes it impossible to match those deals! Graham also focused on the future threat to the building sector as a whole if FSA proposals to reclassify certain external capital products (known as PIBS) come to fruition. All in all a very earnest mood was in the air. However I found my own enjoyment of the lunch was enhanced greatly by the fact that I sat next to Loretta Minghella , Chief Exec of the FSCS. As well as being a very interesting professional with a legal background and a sound grasp of the challenges facing small building societies like The Hanley, Loretta is also the sister of the late Anthony Minghella,one of Britains finest ever Film Directors with a body of work that includes Cold Mountain, The English Patient and The Talented Mr Ripley. Anthony died aged only 54 in March 2008 . I was completely captivated by Loretta's stories about her brother and her candour and warmth put some of our business challenges into very clear perspective for me.

MORTGAGE MARKET REVIEW

The FSAs recent discussion paper on the future shape of the UK mortgage market is a sobering read.Restrictions on self cert lending and fast-track loans alongside an increased focus on "toxic" combinations of risk and on granular checks on affordability are a predictable regulatory reaction to the perceived shortcomings of lenders and intermediaries. Lets not be coy; a review is necessary. There have been significant failures in the mortgage market, an absence of risk-pricing and over-supply of easy credit.A review is needed to understand what happened and to make sure the big mistakes are not repeated in future. BUT the UK mortgage market was not uniformly flawed nor was it full of failed business models. The market has been innovative, competitive and effective in helping many people buy their own home. The review is timely but it needs to take a proportionate and measured view of the mortgage market, so that a healthy baby is not hastily despatched with the bathwater. My hope would be that we all learn lessons from the events of the past 2 years but that we also acknowledge the value in the choice, competition and diversity in the UK mortgage market so that a refreshed market emerges rather than the unintended consequence of restricted customer access to suitably tailored products.

FTSE ON THE MEND?

Whilst few people are claiming that the UK economy is on an inevitable pathway toward sustained recovery , the FTSE index has given us plenty recent signs of optimism. The FTSE 100 index has actually risen by just over 50% since its low level in March this year and in the most recently reported quarterly growth figures investors have seen gains of over 20% in just 3 months, the best quarterly performance in the FTSEs 25 year history! Of course the damage done to stock markets around the world by the credit crunch and recessionary conditions means that the base point of comparison is a low one, but that doesn't alter the fact that recent investors in FTSE stocks have had a very fine 2009. This compares very starkly with the historically low interest rates on traditional savings accounts.Of course the risks and rewards are different when you compare a building society account with a FTSE related product and that is why anyone contemplating an investment in the latter should undertake a full fact-find with an Independent Financial Adviser(IFA) to establish the most suitable portfolio based on their risk appetite. But clearly our customers will want help in weighing up all their options and so I'm proud that The Hanley is one of only a handful of building societies with its own subsidiary IFA business (Hanley Financial Services) so that our members and customers can get exactly that sort of professional,trustworthy advice. Retail savings from high street providers can co-exist with FTSE linked investments.......the link is the customer need and the provision of independent financial advice.

FTSE ON THE MEND?

BSA DEPUTY CHAIRMAN

Last week I was privileged to be elected Deputy Chairman by fellow members of the Building Societies Association Council. The present Chairman is Graham Beale the Chief Executive at Nationwide so I'm delighted to be in such exhalted company! My brief will be to assist the Chairman in promoting and protecting the interests of the building society sector during this period of seismic change in our financial landscape. Specifically I want to represent small,local building societies whose franchise with customers remains very strong despite the turbulence in financial markets and whose traditional business model should be nurtured and strengthened , and certainly not damaged by the inevitable regulatory focus which will (rightly) emerge as a consequence of the demise of some of our larger UK banks. Small building societies have a key role in providing choice and distintiveness in our marketplace .If the credit crunch and the recession have taught us one lesson it should be that big isn't necessarily beautiful. What matters is the quality of a business and it's proximity to customers needs , not it's asset-size, and that is another great reason for mutuals to be optimistic about thriving in the emerging new financial services world.

HAPPY NEW YEAR

For historical reasons our financial year begins on 1st September, which makes us unique amongst UK building societies where most favour a match with calendar year-end in December or tax year- end in March. However, we quite enjoy being different, especially as this will give is the chance to display how well we have hurdled over the various barriers that 2009 has presented us with. This week we'll spend many hours crunching the final figures for our year just gone but we already know that we have much to be proud of in generating a strong surplus (profit) and continuing to cut our costs. We've completed less mortgages than in previous years but that wont surprise anyone, given the fragility of the housing market and our reputation for avoiding risky lending.We've also lost some retail balances to the part-nationalised banks, which is a bit galling as they've been able to use taxpayers subsidies to artifically inflate their interest rates on some accounts. But our strong local membership remains intact and our tremendous confidence in a bright future for The Hanley is undiminished. In fact our annual report and accounts for year ending 31/08/09 will confirm that we are a strong, local building society in fine fettle, well-prepared for the inevitable challenges of the coming year and beyond. A very happy new year to all Hanley members and to all our future customers.

"TRANQUILITY BASE,THE EAGLE HAS LANDED"

I was 10 years old when Buzz Aldrin announced that Apollo 11 had landed on the moon surface and Neil Armstrong took those small steps and giant leaps. I remember the fuzzy TV images and the sense of wonderment that men were exploring another planet. Forty years later we can reflect on perhaps the most theatrical example of mans scientific progress and also the most amazing testimony to the fulfillment of a politicians pledge. President John F Kennedy had promised in 1961 that America would reach the moon and return it's astronauts safely to earth. In our current era where pledges and manifestos are less like tablets of stone, more like pillars of chalk,it is hard to know where JFK got his sheer ambition and bare faced cheek! Maybe part of the answer is that he was a true leader, a statesmen and a man with purpose to match his vision. It's hard to see where our generation of leaders will plant their flag. In 40 years it would be a revelation to think that 2009 was the junction point where bold intentions on climate change, 3rd world poverty or cures for cancer were implemented and not just talked about.

A LANDMARK DAY

This really is a landmark day for The Hanley Economic Building Society. Today we are moving to our brand new, tailor-made head office at the other side of Festival Park. It's not a long distance to travel ( we can even keep the same postcode) but it signifies our optimism and ambition for our future as a thriving local, independent mutual. It is invigourating to demonstrate our belief in this great business at a time when so many others in our marketplace are having to retract and to limit their future-planning. The new building is a contemporary,open-plan design with an emphasis on spatial and energy efficiency, and ease of access for customers and staff. We have been in our current building since 1992 and the market environment for all building societies has changed markedly in the years since then but my sense is that the next few years will see an equally radical change in the financial services landscape.However The Hanley is very well placed to seize the opportunities that change inevitably brings, and we will relish the chance to continue demonstrating our strength as a business with local roots and a modern verve.
But just for today our main task is transporting boxes and setting up our new home.

CAPITAL CHANGE

The recent events at West Bromwich Building Society led to a collective sigh of relief in our sector. For some weeks there has been speculation that the West Brom could go the way of the Dunfermline Building Society and some of the media seemed to extract glee from the difficulties faced by another mutual. Thankfully West Brom has confounded these cynics by gaining access to a new form of capital which will allow the society to swap some subordinated debt for a new instrument called Profit Participating Deferred Shares. (PPDS). This means that the West Brom ( and presumably other societies) can benefit from the flexibility and percieved higher quality of tier 1 capital through PPDS rather than rely on the more rigid and less favoured (as the name suggests) subordinated debt which typically exists in the form of long term loans with a fixed interest rate payable.
However the new PPDS leaves the West Brom (and the building society sector) with a new conundrum. Mutuals don't have to maximise profits for shareholder yield.But holders of PPDS may well seek maximum returns.How will societies with PPDS balance the needs of mutual members ( savers and borrowers) with the potentially divergent needs of PPDS holders? Watch this space!

"If you think change is tough........"

The sheer scale of the changes announced yesterday by the Lloyds Banking Group take your breath away. The closure of all 164 Cheltenham & Gloucster (C&G) branches with the loss of 1,660 jobs is acute enough but news that Intelligent Finance will move out of the market for new mortgage business and Bank of Scotland will exit the intermediary mortgage market simply intensifies the sense that these once great "brands" are now collateral damage in the rationalisation of the group. When I first joined the building society sector 20 years ago C&G was my fiercest local competitor.They had slick systems and a fine reputation as a progressive building society but now like others who converted to PLC ( eg. Alliance&Leicester, Bradford &Bingley, Halifax, Northern Rock) their logos will soon become the stuff of nostalgia. But for me our financial services landscape in the UK is much poorer for the absence of such locally-established players.The local flavour offered by our thriving building society sector in 2009 remains something to be of which we should be very proud and protective. But clearly we need to adapt and to get even closer to what our members need by getting even better at the stuff we do well. As someone once said, "if you think change is tough,wait till you try irrelevance".......

This week my wife treated me to a fantastic birthday gift of a trip to see Eric Clapton at the Royal Albert Hall. The venue was spectacular and the gig was really superb. We also took time during the afternoon to visit the Victoria & Albert museum which is a favourite place to view the glittering heritage of wonderful art that we have in this country. During our trip around the British art segment we were both taken aback by the volume of magnificent works which were manufactured right here in Stoke on Trent. Majestic pieces from Minton, Wedgwood, Spode and others grace the halls of the V&A and remind us of just what a powerhouse city Stoke on Trent once was and how pivotal it's businesses were in the late 18th and 19th century.
Inevitably this made me think about how the city has coped with the pace of change and how leadership over many decades has allowed the contemporary world to overtake the local, traditionally strong industries.Of course change is inevitable and nowhere is immune.But change can be managed, and opportunities seized. In relation to The Hanley, we strive to combine the verve of a modern, customer-focused business with the traditions and roots of a locally-based building society. The pace and depth of change in our sector remains challenging and frenetic at times but we are extremely optimistic that this local building society is not a museum-piece,but rather is a vibrant contributor to a diverse financial services sector where we like to glance back occasionally but where we much prefer to look forward and seek ways to make our own mark.

TRUST US

Party politics interests me about as much as crocheting or skydiving, but it's just impossible to ignore the spectacle of our elected MPs scuttling to repay those expenses that are now deemed excessive. Frankly if they think this will recapture public trust I think we need to tell them that horse bolted long ago. Trust is hard-earned but fragile. Financial services firms ache to be trusted by their customers and the credit crunch has undoubtedly damaged that trust. But putting things right after you've made a blunder is only one part of rebuilding trust. I think people generally want to see real contrition and a genuine will to do better in the future.Politicians proclaiming that they "didn't break any rules" are missing the point;it's not legality that is the issue ,it's greed.
Building societies have a long history of earning the trust of their members and we work really hard to preserve that trust. We don't seek the moral high ground nor do we get it right all the time but I believe that Hanley members can expect us to be trustworthy, transparent and fair and can call us to account if we slip up.

BRITANNIA MEMBERS SAY "YES"

With a resoundingly positive member-vote at their AGM this week in favour of the merger with Cooperative Financial Services (CFS) our near-neighbours the Britannia open a new chapter in their history as they become a £70billion "super-mutual " with 9 million customers and over 12,000 staff. The Britannia /CFS merger has been a topic of much discussion amongst my business contacts and our staff here at The Hanley. The main question asked is;how will the merger impact The Hanley? My answer is simple; I fully understand the logic of the merger and the synergies between those 2 businesses, but we are a local building society with a fiercely proud intention of carving an even stronger niche as our competitors grow larger. The combined Britannia/CFS will be 200 times the asset-size of The Hanley and so it would be foolish for us to just mimic what they're offering. We will focus on our north Staffs roots and on our ability to offer genuinely tailored,personal service to each of our customers.....no call centres,no hierarchy , just a local,mutual building society working hard to earn and deserve the trust of all our customers old and new. As I said, simple really.....

HOW MUCH?

Watching the BBC coverage at lunchtime of the Chancellors budget my over-riding emotion was sheer incredulity at the size of the numbers quoted. Government debt to be funded by gilts and bonds will top £220 billion. I doubt I can really grasp what that number means, other than in terms of its relativity to previous levels of debt, and in that regard it is simply huge. All those zeros at the end of a few digits probably diminish the meaning for most people, but what is pretty clear is that it will take many years for the UKs ratio of debt to GDP to return to levels previously regarded as "prudent" and of course politicians will be focused on their own recipes for recovery. In a week where a ratings agency has reacted very aggressively to some rated building societies I wonder how well-protected the AAA rating of UK PLC is right now. Any threat to the reputation of our economy as worthy of investment will be very damaging, and not just for the government in its efforts to offlload all those gilts and bonds.

MICHELLE OBAMA IS COOL !

She electrified the teenage girls of the Elizabeth Garrett Anderson school in Islington yesterday when she dropped in on a surprise visit and Michelle Obama probably did more for their motivation and focus on learning than any amount of curriculum revision could ever do. She told the girls that "being smart is cooler than anything in the world" and urged them to "control their own destiny" by working hard on their education. Wow! So as well as being elegant, poised and graceful, America's First Lady is also blessed with leadership skills too.She knows that the post- G20 world will be a better place if more of our children can be urged to blossom through education.
Thankfully her husband seems like a cool guy too.

BOARD STRATEGY DAY

Yesterday the Hanley Board spent a full day reviewing our business strategy and planning our key strategic goals for the next few years. We do this annually. Our aim is to assess business performance and refresh our thinking on how best to continue with our successes as an independent local mutual. We have an unusual financial year which ends on 31st August so we were able to discuss our very creditable results at the half- year end as a platform for evaluating our priorities in the short and medium term. We also discussed our distribution plans, our IT strategy and the impact on the society of a sustained period of low interest rates.
It is a day that I personally relish It reinforces my belief in the strength of our Society and in the distinctive part we can play in our heartland marketplace, and it also makes me realise just how much we are still capable of achieving for our members and customers. The next job is to translate our strategic goals into ongoing implementation plans, all of which I can assure you will be positive for Hanley members and will demonstrate our optimism for the future.Watch this space!

VARIETY IS THE SPICE

If ever a single day can encapsulate the fantastic variety in my job then it has to be today.Let me explain. Having been away from my desk since Wednesday morning I spent a couple of hours first thing today sifting my post and responding to various correspondence and emails, before heading to Keele University for an annual meeting of the Nominations Committee that I am privileged to sit on. I really enjoy ricocheting into the world of academia and the people at Keele are great. I returned to my office at lunchtime to compete in the putting and boules competitions being organised by our Customer Services team to raise funds for Comic Relief. I made sure that I was victorious at putting by playing until I got the hang of the tricky contours of the green, ie. the bobbly carpet. Clutching my box of Roses as a hard earned prize I then spent 2 hours in a meeting with some of my senior management team discussing how we should alter our savings rates and SVR mortgages following last weeks 0.5% cut in bank base rate. We have become accustomed to agonising over the delicate balancing of the needs of savers and borrowers, challenging ourselves to be always transparently fair and still remain commercially astute with the interests of the Society at the core of every decision we make. I am always hugely impressed by how hard we strive to do the best we can for our customers and today was no different. Next up is a review of the week with my Finance Director and a first read of some proposals on a strategic paper which we plan to take to Board on 25th March. It has been a varied day for sure.

SIZE ISN'T EVERYTHING

This week has been all about contrasts in scale.The magnitude of the losses declared by RBS and by the Lloyds Group is almost too huge to digest. These banks have competed for the title of Biggest Loss Makers in UK corporate history and the press has been full of tales of corporate largesse and individual greed. Meanwhile back on planet- mutual, I had the privilege of attending the AGM of our local competitor The Stafford Railway Building Society whose results for 2008 demonstrate that, by sticking to the business that you know about, you can achieve profits, growth and efficiency even in a turbulent market. Stafford Railway is less than half the asset size of The Hanley and has only one branch (in Stafford) but I have more admiration for their business acumen and customer focus than I could ever muster for the banking giants of the financial services sector. Maybe now the hackneyed image of a local building society as a crusty relic of a more benign era, will be shed once and for all. Surviving and thriving in a contemporary market is about how good you are not how big you are. Both the Stafford Railway and The Hanley will I'm sure work hard to continue proving that point.

WHY BLOG NOW?

An odd time to post your first blog, you may think. And understandably so.At a time when the financial services industry is emblazoned across newspaper headlines and as lead story in numerous TV broadcasts (and for all the wrong reasons) why would any CEO choose to break cover and encourage 2 way communication!!?? Well aside from the obvious kudos of being able to tell my children that I've joined the 21st century information super-highway from the sliproad of traditional communications methods, I genuinely believe that small, local, mutual building societies like The Hanley, can be beneficiaries of the changing public mood. Virtues such as trust, reliability, solidity and security are now high on the customers wish list. I can recall plenty of occasions in recent years where commentators viewed small building societies as crusty and dull, more akin to a Hovis advert than a contemporary financial services business. But not any more.We have plenty to offer.In truth we always did. I intend to use my blog to comment on how we will thrive in the emerging new landscape.