 Hey everyone, I'm Lewis Malay. Welcome to the podcast. This episode was originally recorded on one of my live streams. If you want to watch or listen to more of my content, please follow me on the various social media channels. Please leave a review, subscribe, and I hope you enjoy it. Hey everyone, welcome to the show. So today it's really a pleasure to be joined by Graham Hartop, who is the CEO of Hamden Private Bank. So many people have been thinking about personal finance, what to do, how house prices are going to go, interest rates, mortgages, you know, all of those things. So I thought I'd get an expert. And so let me get Graham. Graham, thank you very much for joining me. Delighted to be here. Thanks, Lewis. Pleasure. Where are you? Are you in the office? You at home? I'm in my dining room as I have been for the last nine months in Edinburgh. Right. And that's how, I mean, just to start with, how have you found the pandemic? How's it been? Well, I mean, first of all, in terms of the technology side of things and moving to this remote working, it's actually been remarkably successful. And we took a decision even prior to the official lockdown to just start testing that out with all our staff. And it's been remarkably successful and we've had lots of comments coming in from our clients just saying how much they appreciate still being able to contact us in the same way. So I think that that has been a very positive factor. I guess the negative factor is the fact that you have much less contact with your colleagues. And, you know, and that quite often sparks conversations. We've also had about 10 people joining the bank since lockdown. So they've actually joined. And their only experience is meeting their colleagues online, which is quite an unusual situation. It's quite because, you know, a lot of people are like, you know, what's the culture like? You know, I haven't been in their office. They haven't taken my coat. They've not made me a coffee. I haven't even tried their biscuits. You know, just like feeling you get of what a place is like. So it's been it's been really interesting recruiting over the pandemic as well, all of it virtual. How have you found, given your leading leading the bank, how have you found, say, building it over the pandemic and maybe getting across building this virtual culture? Yeah, I mean, it has been very interesting. And, you know, we have we build our bank on relationships. And, you know, normally, prior to March of last year, that was, you know, nearly always on a face to face basis. So, you know, that clearly changed the way that we were dealing with people. But because we've got very good modern technology, that communication with our clients and and prospective clients are still being extremely good. And, you know, although it's built on relationships, we have got that good technology there. And we can still deliver the same level of service. So actually, what we've seen over it's nearly a year now is that much more business has been referred our way because we can continue to deliver that to relationship service. And I know in some of the bigger banks, it's more of a challenge and getting through to call centres. And, you know, that's the sort of feedback that we get. So our existing clients are very happy with the service they're given, they're being given. And they are then introducing us into their contact bases. And so the client base has really grown over the last year. Wow, interesting. So you've found that the customers have happily transitions to, is it video call you're doing or telephone app? Yeah, it's a mixture. And essentially, we try to allow our clients to contact us in the way that suits them. Now, a lot of our clients would have used telephone in the past, and they will continue to use telephone, a lot of course, user digital channels. And, you know, we've got good internet banking and digital banking capability. And a lot have actually adopted a new video technology quite well too. And particularly for new client situations, I think that's very important to get to know people and using that video conferencing capability. Because, you know, it's interesting because obviously private bank versus high street bank, you know, I expect and people expect from you know, like, you know, five star service without wanting to be cheesy, but, you know, that real, that real like high degree of service, personal touch and things like that. Have you, have you found you've been able to deliver that just as effectively online versus again, seeing them face to face, you know, wearing a suit and tie, I guess it's been unusual for you not to wear the suit and tie. It's been, yeah, have you found that transition? Yeah, I mean, it has been very interesting. And you're absolutely right about the suit and tie. I haven't taken a suit out of the wardrobe since last March. I hope the mops haven't eaten them all. But, you know, in terms of service, we it's been relatively seamless for us. You know, the difference for us is that we don't get that face to face contact. And, you know, quite normally, we're out and about seeing our clients. And, you know, we have them along at events and things like that. So that that's obviously diminished or completely stopped. But in terms of the service, our clients get what they really value is being able to contact the private banker at any point in time, particularly when they've got a more difficult situation to deal with. And that sort of communication channel hasn't changed for them. So that our clients really value that. And that's why so much business has been referred to us. Brilliant, brilliant. And do you think just, I guess, post COVID era sounds like pre-World War, post-World War, now doesn't that? Do you see this trend of like almost digitalising the way you offer and provide your services? Do you see that continuing? Yes, very much so. And, you know, what, you know, our main service proposition is about the relationships. But we want to allow our clients to contact us through the mechanisms of their choice. And a lot more people are much more comfortable using digital technology nowadays. And that's great for, you know, 90% of your transactions. And we'll continue to develop that. So we've got a good digital platform there. There's always things that we want to do to evolve and develop that platform. But nonetheless, we will still retain that relationship, human contact because quite a lot of our clients have got quite complex affairs. And they need to talk to people about, you know, how they best resolve a particular situation. And that is hugely valued by our client base. How are you seeing the economy right now? I mean, we've had the COVID, Brexit is on the way now. Dan, actually. What's your outlook this year? Yeah, I mean, I, you know, I'm kind of naturally an optimist. But, you know, there's a lot of positive signs there in terms of, you know, got a bit more political stability. The economy was starting to pick up before COVID. And clearly, it's been a huge issue over the last nine or 10 months. But there's no doubt about it that with the vaccine coming in, there's a bit of optimism there that things can start to get back to normal. There is no doubt that there's a lot of people that have managed to save a lot of extra money over the period of lockdown. And, you know, and I think that will be utilised in quite a way once we do get back to a position where lockdown has ended. So I think that all goes quite well for the economy. A very important aspect for us is where interest rates are in a bank. And, you know, we're obviously sitting at base rates close to zero and 10 basis points, which has never been the case in 300 years of the Bank of England. And, you know, that's, that's quite a challenge for a private bank like ours. Yeah. And so for those that don't know, why is that? So obviously, I put my money in, you try, I get almost zero interest, you're lending money, and getting very, very minimal interest back. So what's the one of the dynamics around this low interest rates for you? Yeah. So, so, fortunately, in the UK, we haven't gone into negative rates, and where we've seen that in quite a number of other countries and currencies that what normally happens with a with a private bank, normally some of your net interest margin would come through from your deposit book. And private banks are, we've got a conservative balance sheet tends to be, we have a higher level of deposits than we would have lending. And you'd normally get a net interest margin to be able to service that deposit base, and generate a bit of profitability coming through from that deposit book. When interest rates are down at zero or very close to zero, you've therefore got no interest margin A to service those deposits, and B obviously to make a bit more profitability in them. But it's hugely important, and we're building this business for the long term to continue to grow our deposit book. And of course, what we need that for is then to, for us to be able to undertake our lending activities. And we're getting great success in that. What we have real specialism in in the lending side is what I would refer to as complex but low risk lending, you know, it's to private the private banking world, people have complex affairs. And it's, it's about getting our very experienced bankers to understand the affairs. So we don't have an automated mechanism to make the lending decisions. It's about experienced bankers making those decisions. So again, that's been something that has been very popular over this period of people being able to discuss their lending needs with us. Right. So it's quite a lot of stuff to unpack there. So if you're in, I mean, I think just to wind back, if you're in, if you've been employed during the pandemic, you would have found actually you've got more cash at the end of each month, right? You're not commuting, you're not not going out as much, no entertainment. So, you know, being employed, I think you've got more cash. What's interesting is given it's the low interest rates of people actually keeping their money in a bank account earning zero, in fact, within with inflation over time, the money, the value of money goes down over time. So are people just leaving in there? Or are they investing in the stock market and doing other interesting things with it now? Yeah, I think it's been a mixture actually. And if you go back right at the beginning of the pandemic period, I think there's more just staying in cash. But I think as the vaccine has come through, people are starting to feel more optimistic. So there's more money going into alternative investments, going back into the stock market or looking for other forms of investment rather than leaving in cash, which as you rightly say, is earning virtually zero at this stage. Yeah, it's going to be interesting. I think it feels like in fact, my wife has just had the vaccine. She works in the NHS. My dad's just had it. He's 76 or seven. So it feels like once you start to know people that have had the vaccine, then you're right, you feel so much of this is confidence, isn't it? And you feel like it's getting better. I just can't help but feel given a year or two, it might be like the 1920s, you know, it's going to come roaring back because people are people want to feel like they want to go out and spend money. They want to have fun with their friends. They want to entertain and I feel it will come back strongly. Yeah, I absolutely share that. And, you know, it's just the things that we took for granted pre COVID that, you know, we went out to restaurants and, you know, you socialize with your friends and did other other things that people are just so looking forward to getting back to doing these things, which will really help boost the economy. And, you know, so I do think we'll get a quick bounce back. I think so. And just hopefully, I think, you know, because the other side of this, because, you know, if you are fortunate enough to be in, be in employment, you know, and you have more money, that's great. We always just have to bear in mind, there's an awful lot of people that, you know, have fallen on the other side, you know, lost their jobs, having to pivot, think about new careers. So, you know, hopefully there's a lot of work done around, around creating new jobs as well. Absolutely. You know, and I absolutely feel that, you know, particularly, you know, some of the industries that have been so badly impacted over this time, it is going to take a bit of time to build those back. And, you know, we spoke about the hospitality industry there and looking around in Edinburgh, there are a number of businesses that have been around for a long, long time, who've actually permanently closed now, which I think is just tragic. But, you know, that's a reflection of what has happened over the last year. But, you know, I'm hopeful that there'll be lots of new businesses that will spring up once we do get back to that bit of normality. Yeah, now I heard some great stats and I can't remember exactly what they were. So I'm not going to quote them verbatim, but there's been a lot of new businesses that have started. I mean, a lot have failed and closed, as you said. But I think also in times like this, people are being quite entrepreneurial. You know, if you've lost your job as an employee, what can you do? Can you start a business? Can you start an online business? So there might be another wave of entrepreneurship this year, I think, which would be really cool. Yeah, I absolutely agree with that. And, you know, technology has really helped in that and, you know, getting some new ideas, new business activities coming through. So I think, you know, in some respects, some of the businesses, you know, it's good to get that rejuvenation coming through. But you know, there's no doubt about it. There's a lot of good businesses that have been badly impacted by this. But I'm sure we will get a lot of good new businesses coming through once we're through the pandemic. Definitely. You mentioned negative interest rates. So you can explain that. So what what's a scenario when when a government might have to to drop it even further? And then what does the effect? Am I am I essentially paying you to keep my money? How does it work? Yes, well, well, that is the case. And, you know, it really is, you know, quite a quite a bizarre situation, which we've never seen that in the UK. My own take on where we are in the UK at the moment is that I think it's unlikely we'll move into negative rate territory. But certainly the regulators, you know, they it is there as a tool to use it should they think it is the right thing to do. But I think it's unlikely. But you're absolutely right. So on a negative interest rate, and we've seen it in other currencies, the euro is a good example at the moment, where there are negative rates in the euro so that certainly for bigger depositors, if they deposit monies into a bank, then they will be charged to actually hold those deposits. And actually, you know, on the other side of that balance sheet, there have been one or two situations where borrowers have actually been paid to undertake lending. So it is perverse, but that is really a reflection of these negative interest rates. And it is, you know, it's designed to to help the economy and and help banks to continue lending out into the community and, you know, to deter people storing up savings to use it in other ways. Interesting. Well, that made us nicely onto the housing market. Because again, that's a huge, a huge topic for so many people. And it's interesting to see what your perspective on it. I've heard recently that the housing market's done pretty well in the UK. And I guess that's driven by people wanting to move out of London. And I think a lot of people have been trying to buy properties in the country and things like that. What have you seen from your perspective? Yeah, I mean, it's been very buoyant over the last year. And if we look back, say, look at 2019, actually, the housing market was stronger in Scotland in compared to London and the Southeast, where we tend to have a lot of a lot of business. Although it was still at a reasonable level, it was stronger in Scotland in 2019. In 2020, actually, we've seen it being very strong down in London and the Southeast. There's definitely quite a bit of people trying to upscale, move from central London locations and into more rural or, you know, smaller towns out with London. So people just looking for, understandably, looking for that bit of space. But definitely, the market has been pretty buoyant. Stamp duty holiday has helped in that regard. That is due to end at the end of March this year, which will have some form of impact. Quite a lot of the commentators, particularly the estate agents are, you know, they're still reasonably optimistic, but a few commentators looking as though there may be price falls over the course of this year once the stamp duty holiday ends. But actually, we saw the highest rates of house price inflation last year that we've seen for some time. So I think the average was about 7, 7 and a half percent across the country, which is a pretty significant uplift. And London itself, actually, for the first time, the average house price is over half a million pounds. Has it even went up this year? Interesting. Yeah. It feels like, yeah, I don't know, it feels like it feels like it might be a little bit more tricky this year with the housing market, I think. We've seen we've seen we've seen a rental income go down. Rate and rents are going down in London. You know, from people I speak to, you know, maybe 10, 15 percent. So so that will be interesting. It feels like it's funny, I speak to a few friends that have moved out to the countryside and it feels like people might end up moving back to the city because the thing with the city is this debate between country versus city. But, you know, during a pandemic, it's lovely to be in the countryside, but you don't there's a lot of less people around. So there's a lot less things to do. You know, city life is so you can go for walk. It's quite vibrant, even during a pandemic. So I think it'll be interesting to see if there's a flow back to a city like London or if the countryside and mobile areas remain strong. Yeah. I mean, I share your view and optimism about that. London will continue to thrive. We have seen a bit of a change at the moment. Once we're through the pandemic, you know, I'm pretty hopeful that we'll get back to sort of some kind of normality that we saw pre pandemic pandemic because, you know, it is such an attractive place to live in London. It's cool. It'll be it'll be interesting to see how it lands there because, you know, trying and winding back to the start of our conversation around, you know, being able to do things digitally on video and it really enables companies, and I've seen this firsthand, you know, they're able to hire from a much wider geographical scope. A lot of companies that would want people based in London or in a certain city, they're thinking now, why do they need to be? Yeah, that is very much the case. And, you know, with technology, inevitably, and I think a lot of firms will be seeing this, particularly in the sort of professional services arena, that we will behave a bit differently once we're through this. And, you know, I was probably a bit more skeptical about home working prior to coming into this, but actually productivity, the service to our clients has been extremely good over this period. So we'll end up with a, you know, a hybrid type of model going forward. But, you know, inevitably, that will have a bit of an impact on the commercial property market in places like London. Definitely. Just to end, what is your now, your experience working from home for nine months? What is your ideal working scenario once all this is is over? Yeah, no, interestingly, and I'm very fortunate because I only live a few minutes from the office right in central Edinburgh. So it is not a hardship for me to get into the office. So I think, you know, I'd probably I'll move back to probably 80 percent in the office and maybe a day a week so that you can really have that good quality time to think and, you know, maybe focus much more on strategic issues that you're not getting interrupted in the office. So I think for me, that would be ideal. Some of our people I think they'll move back to 100 percent in the office. But some actually could be the other way around in that four days a week they might be out of the office and maybe just a day a week in the office. So there'll be a bit of a balance there. Interesting. And you're now and you're now comfortable with your with your employees kind of almost choosing the best way for them to work in the week. Yes, we will. And, you know, that's something that we'll be looking at the operational model very carefully. You know, some people there's a huge benefit from being in the office. Others, you know, we want them to be out and about. Yeah. Yeah. Interesting. Well, Graham, thank you so much for joining me. Really appreciate it. And I look forward to seeing you face to face for a coffee very soon. Look forward to that, Lewis. Thanks a lot. See you. See you. Bye.