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Newcastle Building Society CFO on value of the mutual model

David Samper, finance chief of the top ten building society, explains in an interview how finance is critical to a purpose-driven growth model

In the age of coronavirus, building societies are playing a key role. The mutual model which is run for the benefit of members, means they are well placed to provide a valuable service in a period when normal economic certainties are under threat.

For David Samper, CFO of Newcastle Building Society, the challenge of the role he began in November 2018 was how to support growth of the society whilst adhering to a set of core values.

In 2019 the Society measured ninth in terms of size of assets – £3.69bn and eighth in total number of members at 366,000, with 27 branches.

Those twin objectives have become increasingly important during the pandemic. In order to support individuals and businesses building societies needs to grow funds, but need to do so in a responsible manner.

Samper is playing a big part in making this happen by developing a finance function that can support these aims, drawing on his experience of a decade in senior finance roles at high street giant Royal Bank of Scotland (RBS) and five years as interim CFO of Sainsbury’s Bank.

When he arrived at Newcastle Building Society he found an ambitious board keen to drive growth after commercial decisions made in the wake of the 2008 global financial crisis had held it back. “The organisation was poised for growth, with a very strong, purpose-driven core strategy.

“It’s still focused on community which others are not- it’s still trying to help people own their own home, to build relationships with people rather than just push them away from the high street into a digital space.

Samper says Newcastle Building Society was able to grow quickly in 2019 with resources becoming available once the pre-2008 legacy book was brought under control, with commercial and finance teams working together to price products effectively, reflecting a robust approach to predictive risk.

“We have continued to invest in our network, opening new branches and acquiring other branches, when others were walking asway from the high street, which plays back to our core strategy- which is to support the communities we operate in,” he says.

That progress was challenged by the pandemic, which prompted a pivot to “safety and resilience”, says Samper. “We had to think, how do we support our colleagues, how do we support members. Some of them need to go to a branch on a regular basis, so we can’t just close the branches. We want them to feel safe”, he says.

The society then turned to what Samper describes as a “tactical stabilising of the business.” He says this refers to decisions made in an environment that is impossible to predict, on areas such as  supporting customers making mortgage payment holidays.

“We’re now moving into a conversation around a strategic repositioning for the longer term looking at what a new normal could be and what our customers want and colleagues would need. We’re asking questions such as: What should strategic connectivity and digital mean for us in a predictive new norm?

“We’re now looking at our business through four lenses: What’s the revised base, upside, downside and stress downside? As we’re now spending more time in scenario planning, a single line on a chart now becomes multiple lines and multiple scenarios,” he adds.

Samper says that the Society was able to make adjustments based on capital strength, liquidity strength and financial performance. He says “the regulator’s move earlier this year to release the counter-cyclical buffer- from two percent at the end of the year to zero, that gives us capital head room to lend aupport our current and prospective customers at this challenging time,” he says.

Banking background

Samper’s career kicked off at Big Four firm EY (then Ernst & Young) after studying accountancy and finance at Edinburgh’s Herriot-Watt University, transferring for three years to the firm’s Australian office, arriving with “no network, no friends, no family, and essentially nopermaent place to live.”

But the experience of working with TMT (technology, media. telecoms) clients including Unisys, Time Warner and Fairfax Media, helped build resilience. After returning to the UK, where he gravitated to financial services clients, Samper then moved back to Edinburgh to a role in group accounting at RBS.

Within weeks RBS had acquired its larger rival Natwest to begin under CEO Fred Goodwin an extraordinary period that saw the merged bank become one of the world’s biggest – and later collapse under a debt mountain after it acquired Dutch giant ABN Amro in 2008.

But for Samper it was a personal career journey in which hard work paid off and from preparing group financial reporting, year-end accounts and US and UK listings documents, he moved to working across RBS’s divisions. “I worked my way into retail, Ulster Bank, corporate banking, shared services,” he says.

At RBS, Samper says most colleagues were hugely motivated. “There were many people prepared to give up anything to support RBS. I was working through the night on various occasions, and not thinking twice about doing it,” he says.

When the crash came in 2008, Samper was being bounced between retail and Ulster after originally being made financial controller of the former, before being finally drafted into Ulster Bank after he identified major challenges in the accounts of the subsidiary.

There he was given the task, alongside Ulster Bank CFO Jim Hickey, of unravelling a series of migrations onto retail and corporate platforms, and then returning financials back to a solid footing. “It was very complex and a near horrific task, especially if something had been through two system migrations,” he says.

The varied roles at RBS were both challenging and intellectually rewarding, but after a decade at the bank, Samper decided to move on to fresh pastures, finishing time there transitioning shared service functions (SSF) to India.

A call to join Sainsbury’s Bank, a joint venture between the grocery giant and Lloyds Banking Group, was a chance to “gain value from experiencing more things, in different ways, and having to personally adapt,” says Samper.

A key aspect of his role as deputy CFO was helping Sainsbury’s buy out the bank’s half of the joint venture, a process that saw his finance team increase ten-fold while Sainsury’s Bank staff came to number thousands.

There were plenty of challenges ahead, not least with the regulator’s concerns with the takeover. “The most senior banking knowledge was with the bank, not with the retail group, so therefore if we were no longer connected with Lloyds Banking Group, we needed to ensure we had exceptional in-house capability,” says Samper.

When Sainsbury’s Bank CFO David Arden left, Samper became interim CFO – playing a key role in a challenging systems migration whilst working to gain support from the Sainsbury’s board. But the decision to appoint a permanent CFO went to an external candidate, perhaps influenced by the departure of the bank’s CEO Peter Griffiths.

Building the society

On arrival at Newcastle Building Society, Samper was able to begin finessing the finance function, a critical requirement for boosting the society’s overall performance. He says he is in the process of investing in every system including general ledger, treasury, asset liability management systems and forecasting.

“RPA (robotic process automation) and process re-engineering offer significant opportunity, not just for the finance function, but across the whole business. I did a fair bit of robotics at Sainsbury’s, essentially software that can copy your process overnight.

Samper, who is also responsible for legal, treasury, data, property, commercial and supplier management, as well as the core finance function, says developing each area is all part of the challenge he sought. “I didn’t want a role where I would pick up sticks from someone else and the business was in a brilliant place and would continue to be that,” he says.

That challenge is exacerbated by the pandemic on which he says: “We will end up with increasing credit losses, Economic forecasts all point to falling GDP and rising unemployment. The range of outcomes currently centre on about a two year timeline to return to pre-Covid 19 conditions,” he says.

“We all will come back, but it’s how do we do the right thing. What will our legacy be after this crisis? What will we be remembered for? Will we be remembered for shutting the door and cutting costs or will we be remembered for putting our arm around people and helping them in their time of need?”

He says many finance leaders he talks to are obsessed with controlling costs in the current environment. “They say if I can’t control my income, I can at least control my costs, and in this environment how do I reduce?

“But at some point, we’ll come out the other side, so we also need to be investing in predictive medium to long term capability. If you lift your head, the opportunities will present themselves.

Samper says: “We’re perfectly positioned to genuinely help all of our customers through this time, in some cases do more to help our individuals and our members back from this place we are in now. I think that approach differentiates the mutual from other perspectives,” he adds.

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