It can’t have been easy taking over the reins of a bank in the midst of a global pandemic – with offices shut and staff adapting to working from home.
Since the start of 2021 Donald Kerr has been based in his family home near Edinburgh – some achievement as the business bank he now heads, Cambridge and Counties, has its head office 300 miles away in Leicester.
The world has changed, but it’s not stopped him getting to grips with the business or stopped the bank helping its customers with their financial decisions during the biggest economic upheaval since the credit crunch.
The niche business bank has been operating for almost a decade, specialising in secured lending and deposit accounts for small and medium sized businesses, with a big emphasis on real estate.
Jointly owned by Trinity Hall, a College of the University of Cambridge, and Cambridgeshire Local Government Pension Fund, it reported a near 9 per cent rise in loans and advances in 2020 to £828 million.
That upturn followed a tough 2019, described as the bank’s most challenging year yet, due to a combination of political uncertainty, a general economic slowdown – even before the coronavirus hit – and a lack of confidence in consumer markets.
Mr Kerr stepped into the shoes of Mike Kirsopp, a well-known figure in the business community, at the end of last year.
He had been managing director of SME banking at the Co-operative Bank for 18 months and prior to that was head of small business at Clydesdale and Yorkshire Bank, having been at Lloyds for 16 years in various senior roles.
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As the Leicester office slowly reopens to more staff, he says the last year or so had been a testing but exciting time for Cambridge and Counties with a “refreshed” management team in place – including David Holton who joined from EY as chief transformation officer and Tina Hayton-Banks coming in as chief operating officer from Nottingham Building Society.
Mr Kerr said: “You could say we joined at the right time and the wrong time – so for us Covid was all about colleagues being able to operate remotely and safely, and then focussing on really supporting customers.
“We took a decision not to offer bounce back or CBILS loans, so focussing on that core market helped us deliver growth in 2020 which had been absent in the last couple of years.
“We’d flat-lined the two years before that and that growth in 2020 gave us the platform and the belief more than anything that we could grow again.”
Mr Kerr said 90 per cent of its business is with clients investing in property and it was lending 50 per cent more this year – on the back of a 40 per cent rise in lending in 2020 – which he said had given Cambridge and Counties “real confidence going forward”.
The bank is also expanding its geographical reach, with new or growing teams in Scotland, the south west and Midlands, and plans to move into the south and south east.
He said: “Forty per cent of the money we lend is for residential investment – professional landlords renting out to customers – and 60 per cent is commercial, mostly mixed use, distribution and logistics because we’ve not been doing much retail or pubs and clubs for obvious reasons.
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“In fact we’ve been really focussed on supporting our existing retail, and pubs and clubs customers, rather than taking on new ones.
“Interestingly we’ve just reviewed the hospitality sector internally, and do now have appetite to go back in because, and I don’t know about you, but we were all desperate to get back to pubs and restaurants. There’s definitely pent-up demand.”
He said despite the pandemic and changing nature of retail, forward-thinking businesses would always be able to find opportunities in town and city centres, helping reshape the high street with investment in things such as residential and leisure schemes.
He said: “I think there will be some opportunities. There will absolutely be some downsides in the changing consumer behaviour – out-of-town secondary shopping centres will, I think, struggle, and I think we’ve seen that already, so that will need careful management.
“But I always say never say never, and we’ll never say we will never do, say retail deals or hospitality or office deals, because the one thing that Cambridge and Countries Bank is, is small enough to be really close to our customers and understand the added value we are going to bring. We don’t have a one-size-fits-all.
“Every deal is manually underwritten here, and we are proud of that because that is one of our USPs. We spend time getting to know business operators, or know them already and get to know their plans.
“We’ve always had a sensible approach to lending. We always say we need to look at the track record of management pre-Covid as well as during Covid, and how successful they were in normal times. Did they understand the assets they are buying? How successful were they in managing tenants? Have they got good local knowledge? All the things traditional local banking is about.
“We’ve got a very professional and sensible customer base who have taken some opportunities to acquire, and our assessment of credit quality is that those deals we are doing are lower risk than we would have done historically – it’s better quality business.
“I have a theory that part of that is because some of our competitors were busy underwriting bounce-back and CBILS loans and have left voids that we could fill. We are happy about that because it means we can continue to support businesses without increasing our risk appetite.”
The average Cambridge and Counties loan size is around £1 million, he said, making SMEs the bank’s bread and butter.
It has around 180 staff, which is about a dozen more than at the start of lockdown, and is “actively looking for the right people” to join.
Over the next year or so that could be another 15 staff joining the bank’s ranks.
Despite lockdown, and staff working from home, Mr Kerr also said the bank had launched a dozen new deposit products remotely.
One of the other focusses for the business in recent months has been supporting classic and sports car enthusiasts – providing funding for people to invest the huge amounts needed to pursue their passion, and potentially profit as values rise.
Mr Kerr said: “It’s a relatively young part of the business and is a particular passion of a number of my colleagues.
“From a standing start we’ve done about £20 million in total loans. The average values of these cars is about £150,000, but that masks a full range of values. I’m pretty sure we’ve done loans of over £1 million in that space.
“It’s not too dissimilar to the property business. It’s about people who understand the business really well, who understand the assets they are buying and the underlying value, and what to look out for.
“I have to say as someone who isn’t really a petrol-head I’ve been fascinated by it. Some of these assets are more museum pieces than cars.
”I saw a statistic that the average classic car is driven for less than 100 miles a month – but then again if I paid £1 million for a car I’d probably not want to take it out very far.”