Portman's move last week to acquire Sun Bank marks a major milestone both for the society and the mutuality movement.
It comes at a time when many mainstream lenders are looking to boost profits through the specialist lending sector but until now only monolithic mutuals such as Nation- wide and Britannia could boast a non-conforming offshoot.
Portman, the UK's fourth-biggest building society, could hardly be described as diminutive but the surprise expressed since its £95m acquisition of Sun Bank has more to do with its image than the depth of its pockets.
Group operations director Matthew Wyles soon dispels any industry myth that Portman is a somewhat sleepy building society with nothing more than Bournemouth pier on its horizons.
“We looked at the potential for organic growth and deci-ded that if we wanted to make a quantum leap we would have to make an acquisition.
“We considered a number of players in the specialist market but the nature of Sun Bank's business allowed us to diversify our current proposition in the way that we wanted. It is a good start, but we still have an appetite for more.”
Although he refuses to reveal who might be next in Portman's sights, Wyles says he considers Sun Bank to be an excellent buy.
He also admits it was something of an opportunistic acquisition as the bank's former parent, Sun Life Financial of Canada, is known to be keen to leave the UK market.
Sun Bank is a non-conforming lender, focusing on the buy-to-let and complex prime sectors, in which borrowers with unusual income patterns – what Wyles describes as van-illa business with a complicated story – have a decent chance of securing a loan.
When the deal was first mooted, Wyles says Portman was keen to ensure Sun Bank was not actually a sub-prime lender masquerading under the moniker of complex prime.
After some digging though, he says Portman managed to satisfy itself that complex lending was a genuine market sector and that the bank did not come with an alarming attitude to risk. But Wyles is clear that Sun Bank is a subsidiary and will do what is asked of it, although he says there are no plans for a rebrand under the Portman name.
He says: “Sun Bank will enjoy its own independence and brand management but there is no question that it will do its own thing – there will be a clear understanding of the vision of the overall group plan.”
He compares the set-up with that of Halifax and Birmingham Midshires, the latter having recently launched into the sub-prime market. He is also at pains to point out that Sun Bank will not be going down that route.
There are, however, certain similarities in distribution between the two groups, an area in which Portman plans to fundamentally change the way it does business.
Wyles says the main thrust of this shift is for Sun Bank to become the intermediary brand of the Portman group over the next few years, while the society will gradually evolve into the retail brand.
He believes the process is likely to take several years but emphasises Sun Bank already boasts enviable brand strength among IFAs.
“Ultimately, we have to respond to our customers in both sectors, so it makes sense for there to be a split in focus between the two. We want Sun Bank to be the introducerdriven lender – which it already is, with 95 per cent distribution through IFAs and mortgage brokers – while the building society concentrates on dealing direct with consumers,” he says.
It is an arrangement which clearly appeals to Sun Bank as much as Portman, with the bank's marketing director Chris Cummings expressing his belief that the move will prove to be the catalyst for phenomenal growth.
He says: “Everyone at the bank is very impressed by the ambition of Portman and believes its plans can help us expand rapidly. We estimate the business will grow by between 400 and 500 per cent over the next two years as a result of the deal.”
Cummings says the bank is currently reviewing its product range and may eventually focus more on the specialist lending sector, in which it already has an significant presence.
But there will be no major drives into other markets, according to Wyles, as Portman does not want to commit too deeply to particular areas of the market.
Although it may only be the first of many acquisitions for Portman, Wyles believes its purchase of Sun Bank could prove to be highly significant, not only for the society but also for the mutual sector, of which it is a leading member.
He says: “The signal we are sending to the market is that there is a strong future for a mutual group. I think this goes a long way to showing building societies can grow through intelligent acquisitions and do not have to rely on organic growth.”