Profile - Peter Hill

The new chief executive of Leeds Building Society spends a lot of time on what he calls grey-skies thinking.

It involves thinking about the worst-case scenarios and asking himself and his colleagues just how bad things might get.

That doesn’t mean Peter Hill is a pessimist, as he explains.

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“These are things we think are unlikely to happen. But nevertheless, a requirement for us is we think about the unthinkable.

“We think about what would happen and are we strong enough to withstand the worst things?”

He describes the process of stress testing.

“You take a measure and consider how volatile that measure can get. If it is interest rates; how high can they go? How low can they go?

“What happens if there’s a collapse of the euro? How does that ripple through? What happens if that crosses the Channel and gets to the UK? What happens if it gets all the way up to Leeds?”

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Leeds has a high level of capital, says Hill, which means it remains in a very strong position.

It is one of three mutuals judged by the credit agencies to be worthy of an A rating when it borrows money from wholesale investors, judged on capital strength, asset quality and profitability.

Hill, a youthful 50-year-old with white spiky hair, replaced the long-serving CEO Ian Ward, who stepped down after nearly 16 years in August. His move into the top-floor office coincided almost precisely with the flaring up of the European debt crisis.

“It’s been an interesting period,” he says, sitting in his new office, which has been slightly rearranged since Ward’s departure.

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“You can’t understate how turbulent the environment has been, how volatile it has been. This is where having a plan comes in handy.”

His 10-year plan is this: for Leeds to continue be an independent, successful building society.

Hill then engages in some semantics. “What does successful mean? What did it mean in the past and what will it mean in the future? Leeds has been a very successful institution in the past. But I think looking ahead 10 years, successful will look different.”

Some measures of success will look the same, he says. These include strong profit, strong capital, consistent growth, advanced risk management techniques; all conventional yardsticks.

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In the longer term, success is what he terms “stronger member affinity”. He wants people to see the value in being a member of Leeds Building Society.

“Being a mutual is not just about having a different ownership structure, it’s very much about people being able to explain why they like to be a member.

“Some people might feel they get best service. It might be that they feel when they telephone the society the phone is answered very quickly by someone who understands what they are talking about and able to deal with that.

“It might be about great value products. It can be a whole range of different things.”

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In the short term though, he has had to contend with the threat of another financial crisis.

“We have had to look at our counter-party exposures,” says Hill. “We are taking a very cautious view with that. You bring your exposures closer to home in times of uncertainty.”

Consequently, most of Leeds’ liquidity is held with the Bank of England and the UK Government. Hill sums up his strategic approach: “It’s about living with uncertainty, rather than planning for a certain future.”

Alongside this day-to-day risk management, the assiduously well-prepared CEO has been building a new senior management team to carry the institution forth over the coming years.

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Later this month, Leeds reports on its 2011 financial performance and is expected to reveal a strong set of figures.

Hill asserts that the society is very much open for business and plans to increase lending this year.

“We were originally founded to help get people on the property ladder,” he says. “We are continuing to be successful in our original mission.”

He mentions It’s a Wonderful Life, the Hollywood classic starring James Stewart as the manager of a family-run savings and loan association in smalltown USA.

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The fundamental business model is no different to Leeds, he says. They both look after people’s savings and lend them out to people who want to buy their own homes.

The skill in running the institution lies in managing the transition between short-term savings and long-term lending.

Hill learned all about “transformation risks” when he became a member of the assets and liabilities committee, on joining Leeds Building Society a decade ago.

The committee – Alco – makes important judgments about the strength, position and risks of the society’s balance sheet and how to mitigate against these.

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The appointment set him on course for a senior position within Leeds. He had joined the building society as general manager for sales after two decades at NatWest and rose to become the mutual’s operations director. He was probably being lined up for the top job in a few years’ time but the CEO designate David Pickersgill fell ill and took early retirement, triggering the search for a replacement.

Hill, the son of a metalwork teacher and a sewing machinist from Stockport, emerged victorious from the process.

The middle child of five, Hill was good at school and maths in particular. He remembers one of his biggest arguments with his parents took place when he wanted to see Black Sabbath in concert at the Manchester Apollo the night before his maths O-level. They were set against it and he missed the show. But he passed his exam and went on to do maths at A-level, helping him to win a job as bank clerk at 18.

“The good news is though the guys are reforming and I’ve already got my name down for tickets so hopefully I’ll get the opportunity to see the original line-up in 2012,” says Hill optimistically.

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He marked himself out as one to watch when he passed his banking exams at 21; he worked in branches, area offices, regional offices and then head office, moving steadily up the ladder until the Royal Bank of Scotland takeover when he could see no way forward for himself. Along came Leeds and the rest, as they say, is history.

Hill is a convert to the mutual movement. He points out that many shareholder-owned financial institutions needed rescuing by the taxpayer in the financial crisis, driven into difficulties by the demands of the business model, but the building society sector by and large looked after its own.

“It’s a reflection of the generally cautious and prudent approach that’s taken by building societies,” says Hill.

“Building societies have very strong levels of capital.”

Peter Hill Factfile

Title: Chief Executive

Date of birth: 28/7/ 1961

Education: St Ambrose Primary School, Stockport, and Stockport Grammar School

First job: Bank Clerk

Favourite holiday destination: Corsica

Last book read: Promised Land: The Reinvention of Leeds United by Anthony Clavane

Car driven: Mercedes C Class Blue Efficiency

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