Nigel Terrington: ‘I like to have plenty of choices — on a menu and in business'

Times

2 days ago

It is a gloriously sunny day in the City of London and Nigel Terrington has something to celebrate.
Last month was the 30th anniversary of his appointment as chief executive of Paragon Banking Group, a milestone that makes the 65-year-old one of the longest-serving bosses on the London stock market.
To mark the occasion we've gone to lunch at Hispania, one of his favourite restaurants, which is nestled in the heart of the Square Mile in the old Lloyds Bank building a stone's throw from the Bank of England.
The Spanish restaurant is a grand affair befitting the former headquarters of one of Britain's biggest lenders, with high ceilings and a striking staircase that leads up to our table on the first floor. Its combination of small and large plates is also perfect for Terrington, who admits he has 'a bad reputation at home for over-ordering' and whose mantra when it comes to running Paragon — and eating — is 'optionality'.
'I like choices,' he explains. 'And actually, it's a great discipline about how to run a business'.
This desire to have options has driven Terrington's transformation of Paragon since taking charge of the FTSE 250 group, first by turning it into one of Britain's biggest buy-to-let lenders and then by pushing it into commercial lending to small and mid-sized businesses and property developers, as well as into motor finance.
It has also gone from a lender that was reliant on securitisation for funding before the 2007-9 financial crisis, a weakness that was almost its undoing when wholesale markets dried up during the credit crunch, to a fully-fledged deposit-taking bank. This has taken Paragon a long way from its origins in 1985 as a lender of owner-occupier residential mortgages that was called National Home Loans Corporation (NHLC).
The Solihull-based Paragon, which also has offices in London's Walkie Talkie skyscraper, now has a net loan book of £16 billion, of which £13.7 billion is in mortgages, and has amassed £15.8 billion in deposits thanks to the banking licence it secured in 2014. Valued by the stock market at more than £1.8 billion, it represents a remarkable recovery from 2007, when the lender avoided collapse only after Terrington and his team orchestrated an emergency £287 million rights issue, a near-death experience that taught him the value of having options.
It has also meant that keeping the same job for three decades has been far from dull.
'People have said 'it must be boring running the same business for 30 years',' he says. 'But it's not the same business. We've reinvented ourselves several times and we'll continue to do so.'
Having a focus on buy-to-let can have its drawbacks, however.
Landlords are seen by some of the public as 'bad people', Terrington concedes, an image that is not helped by soaring rents, which hit a record average of £1,349 per calendar month outside London in the first quarter of this year, while within the capital they reached an all-time high of £2,698, according to Rightmove, the property search website.
Sir Keir Starmer also said last year that he did not consider those who made money from property as being 'working people', an idea that is rejected by Terrington.
'If you're a landlord, and this is your only business, that's your job,' the Paragon boss says over the hum of the restaurant, which is now busy with City types enjoying long lunches.
Having snacked on bread, our small plates, picked by Terrington, have arrived: Iberico ham croquettes, prawns swimming in a garlic sauce, a portion of padron peppers and a side of bread soaked in tomatoes, washed down with still Hildon mineral water.
The conversation turns to the financial health of Paragon's core customer base of professional landlords, defined in the industry as those with four or more properties, who have proved resilient despite the sharp rise in interest rates since last 2021, which spurred speculation the buy-to-let market might come under strain.
While arrears rates in the industry moved higher after the Bank of England lifted its base rate to a 16-year peak, they have remained low by historical standards.
At Paragon, arrears have also been better than industry averages, with the proportion of its buy-to-let book more than three months behind on payments ticking up to 0.68 per cent last year and then falling back to 0.51 per cent as of the end of March.
'The credit quality has been phenomenal,' Terrington says.
He has spent his entire career in banking, having been drawn to the industry when he was a teenager. Initially set on becoming an engineer like his father, Terrington's interest in banking was piqued at the age of 16 while playing cricket at Cheam Cricket Club, in southwest London, during the summer of 1976, when the 'coolest guy on the team' was the wicket keeper, who was a foreign exchange trading-merchant banker and drove a soft-top sports car.
'I don't know whether to be proud or embarrassed by this story,' Terrington admits. 'By the time that summer finished I wanted to be an investment banker.'
So he left school at 18 and joined Keyser Ullman, a now defunct merchant bank, where he worked for five years until joining UBS, where one of his clients was NHLC. He then joined NHLC in 1987 and was its treasurer and then finance director before becoming its chief executive in 1995 and overseeing its pivot towards buy-to-let mortgages, as well as its name change.
Terrington has spent the years since the 2007-9 financial meltdown diversifying the business, creating a commercial lending division through a series of acquisitions and taking deposits. Paragon also this year raised £500 million from its maiden covered bond sale, opening up a new source of funding, and unveiled a new savings app to broaden its depositor base.
Like other lenders, Paragon has been caught in the recent scandal over motor finance commissions and in June said it had set aside £6.5 million to potentially compensate borrowers. This is much smaller than other players in this area: Lloyds, one of the UK's biggest car loans providers, has earmarked £1.15 billion for redress costs. Terrington said that Paragon had deliberately limited the motor finance business it had written because 'some of the commission structures were just a bit aggressive'.
'We were prepared to compromise the growth in the business to ensure it was safe.'
We have now moved on to our main course of pork cheeks on a bed of truffle mash potato, which is Terrington's favourite dish, and I ask about future acquisitions.
Britain's banking industry has been swept by a wave of dealmaking since last year, including the £2.65 billion purchase of TSB by Santander this week, Nationwide Building Society's recent £2.9 billion takeover of Virgin Money, and moves by NatWest and Barclays to buy banking businesses from Sainsbury's and Tesco, respectively.
• Should I buy Paragon shares right now?
Terrington says that 'we definitely see ourselves as a consolidator, for want of a better word' but won't be drawn on commenting on possible bid targets, although he notes that Paragon's niche is as a specialist lender.
There are also plenty of other issues to keep him busy. The Renters' Rights Bill, which will introduce wide-ranging changes for landlords and is likely to push up their costs, is making its way through parliament.
Separately, the government's ambition to bolster the economy by paring back post-crisis regulation on banks and other financial firms, which many City executives complain has become a burden in recent years, could potentially help Paragon if ministers fulfil their promise to cut red-tape.
'You'd expect over time for [regulation] to come back towards maybe a middle ground, to be a bit more proportionate, and it hasn't really, yet.'
It seems likely that Terrington, who has a quick double espresso before we leave, will still be working in finance to find out if the government follows through on its deregulation pledge.
Is he thinking about retiring? 'No, I'm not. I mean, I do get asked that question a lot.'
'People say 'you've been here 30 years and the business is doing really well, so surely now must be the time?'
But running Paragon keeps him on his toes. It's a good thing, too, because, as he notes, 'If you did the same thing for 30 years, you might just go stale.'
CV
Age: 65
Education: Wimbledon College. After leaving school he went straight into banking.
Career: 1978-1983: Keyser Ullman, a British merchant bank that ran into trouble and was rescued by rival Charterhouse in 1981; 1983-1987: UBS, where Paragon, which was then called National Home Loans Corporation, was a client; 1987-present: Paragon, where he was treasurer and finance director before being appointed as chief executive in 1995.
Family: Married with four children and nine grandchildren
• Croquetas de jamon £12.30• Padron peppers £9.70• Pan con tomate £8.00• Gambas al ajillo £19.00• Carrilleras de cerdo £26.00• Racion de pan £7.40• Hildon still water x 2 £13.00• Double espresso £3.80• Service charge £5.95
Total: £105.15