Traditional banking approach more valued than ever according to Paragon Bank's John Phillipou

Understanding businesses and building strong relationships have never been more important according to Paragon Bank’s John Phillipou

You can tell a lot about how well a business is run by the small details of its operations, according to John Phillipou, who has made a career of backing winners when it comes to lending.

John, who lives in Fleet in Hampshire, is the Managing Director of SME Lending at Paragon Bank, however the road to his current role began navigating rural farm roads in Hampshire and Dorset in the nineties long before the smartphone era.

His role then was for JCB Finance, selling lease agreements for tractors and other equipment to farmers.

"It's the tiny observational things that build up a picture of how businesses are set up,” he said.

"If a farmer's gate was held together with string, then you wouldn't lend money because if they couldn't take pride in their gate, then they are not going to take pride in their loan and their equipment.

"If I would arrive at a printing company, and it's a new company looking for their first investment loan, but the two directors have gone out, bought Porsches and they are sitting with their feet on the desk, then you know that it is going to go wrong."

John's first introduction to the South Coast came when he studied economics at the University of Portsmouth, where he met his now wife who was studying pharmacy.

The Cardiff native, who has two grown-up children, has spent much of his career in lending and leasing, having worked his way up from an administration role at the Bank of Scotland.

Leadership roles at JCB Finance, Citi Group, Deutsche Leasing (UK) and PEAC (a specialist lender) followed, before taking up his current position at Paragon Bank in 2019.

His big step up the ladder came when he visited an Irish customer in Cosham, Hampshire.

"This was a customer that would eat sales reps for breakfast and he was known for being a tough negotiator, he said.

“I went in there as this upstart 24-year-old, he was quite feisty but I stood my ground. He was buying ten JCBs and JCB finance had never lost a deal on a new JCB.

"They funded everyone who wanted a JCB, however this young upstart working for the Bank of Scotland branch in Portsmouth took a quarter of a million-pound deal off JCB Finance.

"Two weeks later they (JCB) recruited me."

John spends at least two days a week at Paragon Bank's office in Eastleigh, which overlooks Southampton Airport, and where its asset lending division is based.

The rest of the week is spent at the London office, travelling to meet customers and managing Paragon's subsidiary leasing companies which include Iceberg in Poole and Specialist Fleet Services in Northampton.

He said: "I tend to be out and about more than I was before the pandemic and I rarely work from home.”

"I'm very conscious that there is value in interaction with staff and they like to hear and see that their manager is involved in the business."

TRADITIONAL BANKING

John is very much a believer in the values of traditional banking - and its emphasis on relationships - with this people-centric approach instilled into him early on in this career.

He said: "One thing I learned very early on was that if you believed in a customer who was buying their first machine and you backed them then you would have them as a customer forever.

"They will remember that you were the one that helped to get started."

John says that this loyalty is even more valued by companies in today's economy, especially with the country officially entering recession.

He said: "It is quite challenging for businesses at the minute, and you have got to help companies through it.

"We are quite a traditional bank, we are not fair-weather friends and we get to know our customers.

"If people go looking, they can probably find a cheaper deal, but those banks might not be interested in them in a couple of years when things aren't going so well."

John says it is the variety of the role that has kept him in the industry for three decades, while he also holds the position of Chair at the Finance & Leasing Association.

He said: "What I love about my role is that you have to understand a lot of different industries.

"You have to be a bit of a chameleon. If I am talking to a construction customer, I am visualising myself in steel toe cap boots, then the next minute I could be speaking to a FTSE 250 financial director, and I then have to get into a different frame of mind.”

"You have to understand the dynamic of the business you are meeting and how they operate."

Understanding the businesses you are working with also allows you to spot opportunities and John points to a deal struck during the time he was financing cranes used to build Terminal 5 at Heathrow while working for Citi Group.

He said: "I had financed flat top cranes used in the development of airports for Heathrow.

"It was a very niche asset and no bank wanted to touch it. What would you do with them after the project finished?”

"I structured the deal and completed. However, I also joined the dots and realised that those same cranes could go to the next big airport project globally, which was in the Emirates and due to start three years after the Heathrow project.

"I had never done international business before, however, I contacted the Arab conglomerate behind the build to see if they wanted the cranes and they agreed to go ahead."

Paragon Bank growth

John has overseen significant growth in lending to SME customers since 2019, with the bank lending over £447.9m in its last financial year.

This increase, John says, is down to having the right people on board and focused on the right markets.

He said: "When I came in, there were lots and lots of different companies that had been bought and they needed to be pulled together.

"The reason for growth is that we have got the right people in the right place and the right roles.

"You have to focus on the right areas of the market because asset finance is a little bit counter-cyclical.

"There are a lot of headlines about low growth rates in the UK economy however in many of the markets we serve, we are just carrying on but with heads up awareness.

“There's a plethora of equipment that, regardless of the state of the economy, will wear out and need replacing."