Mutual attraction

The Friday Interview:Fergus Murphy was watching developments at EBS with interest long before he became chief executive of the building society at the beginning of the month, writes Simon Carswell.

In 2002, while in charge of Rabobank in Ireland, he floated the idea of an alliance between the Dutch bank and the building society. Lengthy talks on setting up a joint venture between the Irish mutual and the Dutch co-op came to nothing but it piqued Murphy's interest in EBS. He recognised the strength of its brand.

Five years on, Murphy felt it was time to take control of a ship that he could steer on his own. After 13 years working for a global player such as Rabobank and its Irish bank, ACC Bank, he liked the autonomy that being EBS chief would bring and began talking to the society.

"The attraction of joining EBS was of being able to shape one of the few financial institutions in Ireland that you could shape. I am unlikely to become the CEO of Bank of Ireland or AIB because they come from within their organisations. If you want to be involved in financial services in Ireland, there was potential in EBS to make a difference."

However, his recruitment to EBS wasn't straightforward. While still in talks with the building society, Murphy decided to join Shelbourne Developments, the property company owned by his friend, Garrett Kelleher. Shelbourne is behind the plans for the ambitious Chicago Spire skyscraper in the US.

After only a month in the job, Murphy decided, for personal reasons, he was unable to travel as much as the position required and he resigned to take the reins at EBS.

Murphy is not three weeks into the EBS job and is facing major challenges. The housing sector is in a downturn and the mortgage market is declining as lending criteria have tightened and demand for loans has fallen. The credit crunch has made the business of lending expensive and the financial crisis is slowly spilling over into a general economic malaise.

Despite the gloom, Murphy is upbeat about prospects in 2008. He says that, based on reports from his staff, lending has risen slightly in the first weeks of the year. He expects EBS to increase its share of the €30 billion mortgage market from 10-11 per cent in 2007 to 12-13 per cent this year.

"I don't see it being a sellers' market for some time. I think sellers may decide to stay in their house and renovate it or put on an extension. There is also a chance that the first-time buyer market will come back."

Higher funding costs, driven up by the credit crunch, have forced some lenders to raise variable rates on mortgages, but Murphy says EBS has avoided increasing its own rates.

"That shows our consistency of pricing. We are not jumping to every whim. I see why some of the banks have done this; they are trying to recoup some of the money market strains they have felt over the last six months. We are taking a more long-term approach. We are comfortable with our pricing and have no plans to increase pricing."

Questions have been asked about whether EBS can make a difference as a mutual in such a competitive market when its members can secure similar or better deals elsewhere.

Murphy believes EBS will retain and attract customers by offering a full "suite" of products and strong customer service, as well as consistent pricing. "It shows you are going to be good value long term. That will become more important."

Given how Murphy previously tried to form an alliance between Rabobank and EBS, it will come as no surprise that he believes the building society should have an "an open mind to look at the best expression of mutuality".

"Is there potential for mutuality to evolve into a 21st-century version of mutuality? I am sure there is. Will the organisation look exactly as it does now in five or 10 years' time? Probably not. It would be, in my view, ridiculous if the organisation said that we are wed to a 1930s version of mutuality.

"Will it evolve? Probably. How? I think the options are open. We have the luxury of having a decent brand. I, and the team, need to look at what is best for the members and what is best for the organisation, and make sure we remain competitive."

Murphy believes his counterpart at the State's only other mutual society, Michael Fingleton at Irish Nationwide, has been "very unlucky" with the timing of his sale process given how financial stocks have fallen.

As for a potential suitor for EBS, Murphy says AIB's interest in buying the business in late 2006 was "flattering".

"It shows we are in a strong position. It wouldn't surprise me if someone else came along to have a chat because banks will be looking at how they will build their businesses. EBS has to make sure it is doing the right thing."

Murphy also believes the building society has to do the right thing if it is to avoid the boardroom tussles and politics that plagued EBS last year. A process to appoint a new independent director at the group is ongoing.

"We have to learn the lessons of the last year. It is a very democratic organisation. The constitution of the organisation allows it to be very democratic. We have got to embrace the board and embrace the members of the board, whoever is appointed.

"I don't care who is on the board as long as I can have a positive, professional discussion with them on building the business from where it is now. That's all that matters."

ON THE RECORD

Name:Fergus Murphy

Age:43

Job:EBS chief executive

Lives:Enniskerry, Co Wicklow.

Family:Married to Catherine, with three children.

Why he is in the news:He took over as chief executive of EBS on January 7th.

Background:A senior executive with Rabobank for 13 years, Murphy moved to Singapore in 2004 to take charge of the Dutch bank's Asian office.

He returned to Ireland last year to become chief executive of ACC Bank, which is owned by Rabobank.

He joined the property company Shelbourne Developments briefly in November before moving to EBS last month.

Something you might expect:He is a career banker - he has been working in banking for 22 years.

Something that might surprise:He likes cooking Indonesian food after living in Asia for three years.