Making a big decision about a thriving company takes courage. Making it when cynics are predicting it will destroy the company takes bravery bordering on foolhardiness.
But that was the predicament facing Bradford & Bingley when it decided to assign Chris Gillespie the management of its specialist lender Mortgage Express, in addition to his remit as B&B’s group lending director, last March.
Gillespie had been overseeing operations at B&B for just six months when Mortgage Express founder and managing director Tim Dawson decided to take early retirement. The decision was taken not to replace Dawson – a call many in the industry thought signalled the end for the respected lender.
But Gillespie was unfazed and the recent success of the company has proved he was right not to pay attention to the speculation.
Gillespie says his philosophy is that “life goes on” and he has learned to live with the changes – something he has done throughout his career.
Gillespie left school at 16. A typical teenager, he admits he hated it. When a job at his local Barclays Bank branch came up he jumped at the chance to leave education for the world of work. Initially the tea boy, Gillespie worked his way up through the ranks.
After Barclays, he spent two years as a group director at HFC Bank, running its core consumer and secured lending businesses through branches, direct and intermediaries. In September 2005, Gillespie moved to Bradford & Bingley to become managing director of wholesale banking.
Gillespie was then Dawson’s boss despite never having dealt with mortgages. Gillespie insists that wasn’t a problem.
“I have spent my career lending money in one form or another – sec-ured, unsecured, commercial, personal – although I’d never run a mortgage business before,” he says. “However, I don’t think we are a typical mortgage business.
“A typical mortgage company deals with standard remortgage and house purchase-type products but the market we’re in is more like traditional lending.
“With specialist mortgage markets such as buy-to-let, you’re lending money to people who are going to buy houses although they’re not going to live in them. It’s a different lending transaction, so I think my background fits rather well,” he adds.
As fitting as Gillespie’s experience was, the industry press instead chose to focus on alleged unrest in the ranks.
The media speculated that by not replacing Dawson, B&B was showing a lack of commitment to Mortgage Express. Gillespie is keen to put that idea to rest.
“Tim and the team did a fantastic job of building Mortgage Express,” he says. “He and a number of other people went into it at the end of the last recession. Initially it was a turnaround situation, and it was only in the mid-1990s that it started to move forward again.
“Tim and the team built Mortgage Express into an excellent business and brand but life goes on, the world moves on and people move on – especially someone like Tim, who reached his 50s and decided to take early retirement. The question then came up of whether or not to replace him and we decided not to.”
Gillespie says that the business had reached a point where the management wanted to broaden the skills set that within the group. So they decided to invest to strengthen Mortgage Express’ product and marketing team.
“We have brought in some great people,” he adds.
Gillespie also bolstered its product and marketing areas, and invested heavily in data analysis.
“This was to improve our understanding of the markets and business that we’re in so we can grow the firm”, he says. “Any notion that B&B is not committed to Mortgage Express is wrong.”
Gillespie is adamant that the decision not to replace Dawson was not made to release extra capital to extend the team, saying that the expansion was a separate matter.
“We didn’t believe we needed a managing director for Mortgage Express,” he says. “What we’ve got now is a team of what we think are top class people who report to me.
“We think we can drive forward B&B’s lending business as a whole, including Mortgage Express.”
Although the new set-up is working well, Gillespie admits that taking the reins from a stalwart such as Dawson wasn’t easy.
“Tim had effectively built Mortgage Express from scratch and when you’ve got somebody who’s done that, it’s always difficult to follow them,” he says. “I never pretended to try to step into Tim’s shoes. I just think we’d reached a point where we wanted to run things differently. What we’re doing now is leveraging the capabilities we’ve got right across the group.
“It’s a different business now compared with what it was, but I have never pretended to replace Tim. It would have been foolhardy of me to try to emulate him.”
Of course, Dawson is not the only Mortgage Express veteran to leave the lender in recent months. Tim Sturley, head of mortgage distribution, decided to move on in September last year. Gillespie’s ‘roll with the changes’ attitude is apparent once again.
“Sturley had been with Mortgage Express almost as long as Dawson,” he says. “And he too was a well known figure in the industry. Has it made a difference? We miss him but we’ve brought in a number of good people and we’re moving forward as a business. Has it left a hole? Personally it has, but organisationally life goes on.”
Gillespie says he is happy with the Mortgage Express structure and claims it is a better business than before. Preliminary results support that claim. Underlying profit before tax was up 8% and residential lending balances up 19% to 31.1bn for the 12 months to December 31 2006.
Buy-to-let balances grew by 20% year-on-year, giving it a market share of 19.2%, and B&B predicts strong growth in its main specialist markets – buy-to-let and self cert – throughout 2007.
So what plans does Gillespie have to back up the group’s prediction? He smiles at the question.
“We’ve got our foot on the accelerator,” he says. “A lot of this is what we’ve already talked about – bringing in new people. These people are really getting going now.
“We’ve also done quite a lot with our products – we’ve brought in riskbased pricing in self-cert, which has enabled us to do more business both at higher and lower LTVs than we were doing before. That has gone well for us.
“We’ve also positioned our equity release lifetime offering which has been well received. We’ve done quite a bit around buy-to-let and there’s a lot more to come in 2007.
“We’ve hired the right people and now we’ve got to get cracking. We want to grow this business.”
B&B Group is a specialist mortgage lender and expansion across the board is high on the agenda, adds Gillespie.
“We were arguably the first – certainly one of the first – to do mainstream buy-to-let lending,” he says “We believe we are still the biggest and we want to stay that way. That means we have to grow our business because the buy-to-let market is growing. We are the market leader and we want to stay there.”
The same goes for self-cert, Gillespie adds. “Self-cert has been a fantastic growth market for us. We have grown our share of the market and will continue to do so.”
Lifetime is a further niche that Gillespie has identified as an area of growth. A big fish in a small pond at the moment, he is confident the pond is going to get bigger and Mortgage Express will be well placed to grow with it.
“If you look at lifetime, we believe that it will be a growth market. We are among the top three players in what is a comparatively small market at the moment, but it’s one we believe will grow and we’re going to hang in there.
“And some of the other slightly less than standard markets we’re in are good sectors that we think will grow too.”
Gillespie won’t be drawn further on this subject but experience has shown that he has strategies to take a business to the next level, even when the signs say otherwise. When asked for more details on his plans, he simply says “Watch this space”.
And you can bet the specialist mortgage market will be doing just that.