Cautious building society has the last laugh

BELFAST BRIEFING:DARINA ARMSTRONG is the exception to the rule. Not many chief executives of financial institutions are looking forward to sending out company Christmas cards this year.

But Armstrong, boss of the Progressive Building Society, is different. She will undoubtedly be smiling when she sits down to write her Royal National Lifeboat Institution cards.

The society, in keeping with its strong ethos of supporting local businesses and services, is selling the Royal National Lifeboat Institution’s Christmas cards at its 12 branches across Northern Ireland.

Like every other financial institution, Progressive Building Society has battled strong headwinds amid the fallout from the global banking storm.

But unlike many of its competitors including Northern Bank, Bank of Ireland, Ulster and AIB-owned First Trust, the society has been decidedly profitable since the banking crisis broke.

Its last published financial results show the society, one of the North’s largest mortgage providers, doubled its pretax profits last year to £3.1 million.

During that time Progressive Building Society also grew its new mortgage lending to £107 million and boosted its total asset base to £1.666 billion.

So how has the society managed to weather a storm that has almost capsized its competitors?

The ever-modest Armstrong, who in January celebrates her first anniversary as the only female chief executive of a substantial financial institution in the North, is in no doubt why the society is today the envy of its peers.

“From our point of view, we were always a very cautious organisation. We always insisted on deposits for mortgages which, to us, is a no-brainer,” says the 19-year society veteran.

While some institutions were lending without deposits and even lending over and above the agreed loan to allow for furniture to be bought, Progressive’s approach was “if you don’t have a deposit, you’re not coming here”.

Armstrong said the society’s commitment to its values has helped ensure its balance sheet remains in the black.

“As an organisation, we didn’t rush with the excitement and flurry with everybody else into the riskier-type lending and that’s how our results have ended up so good.

“We also have the huge advantage of being a mutual organisation – we are not allowed to do some of the riskier things that banks were doing. We only lend if it is secured on property – ultimately we have that security. We also don’t do personal lending on a whim.”

She believes Progressive Building Society’s “old-fashioned” approach to business has proved to be its saviour.

“We had a low-risk profile and we were never under the pressure of having to return high dividends to shareholders – we don’t have shareholders. We weren’t being compelled to keep increasing our return to them, and taking the risk. Because if you have to pay out a high return, you have to take high risks to be able to afford that high return.

“We were more slow and steady, and the funny thing is that because of that we were perceived as being extremely boring and conservative – I suppose we felt that we were the lowly relation – we were so unfashionable,” Armstrong says.

But as every follower of fashion knows it can come back to bite you at a later stage. Progressive is now happy to be the current catwalk queen.

“Every financial institution is now looking to be where we are – we are suddenly in fashion. We were out of fashion for quite a while so it is quite amazing where we are now,” Armstrong remarks.

Progressive has not emerged from the shakedown in the property market without a few scratches. But the locally-owned building society appears to be in remarkably good shape compared to where their other Irish, Danish and British-owned competitors are clawing their way back from.

According to its financial reports, by the close of 2010 Progressive Building Society had 31 mortgage accounts 12 months or more in arrears.

The total amount outstanding on these accounts was £5.4 million – including arrears of £377,000.

When you consider that the society has around 100,000 savers and mortgage holders and that just 18 of the properties held by its customers had been repossessed by December 2010, it puts into perspective what some of its other competitors have been up to in Northern Ireland.

Progressive set aside £5 million as a provision for losses on all loans and advances in 2011. It has not disclosed yet just how this has played out this year. But Armstrong is confident that the customer-focused approach and its “sensible, reliable and cautious staff” will have helped the society to continue to grow.

“The beauty of our organisation is that we are very local. You can touch and feel us,” she says.