A not so odd, odds-on winner

Horseracing and banking are closer than you think. RONNIE STEEDMAN, executive director of Weatherbys Bank, explains how the 200-year old institution is boldly expanding from holding stakes to advising the wealthy.

When James Weatherby, a Northumberland solicitor, agreed to hold the stakes for a horse race in 1770, few could have predicted that this would form the foundation of a business that, seven generations on, provides the central administration for British horseracing and runs its own private bank.

Today, Wellingborough-based Weatherbys still administers horseracing under contract from the British Horseracing Authority, including responsibility for all race entries, naming of horses, allocation of colours, registrations and even the printing of the cards for 55 of the 60 racecourses.

It’s a highly demanding and efficient family-run business employing over 350 people. As the official stakeholder, the business holds and distributes the prize money (£110m in 2009). And it’s this last activity that prompted the family-owned business to apply for a banking license in 1994.

People coming into racing must demonstrate they can meet their racing financial commitments. They have a choice: they can open a full service Weatherbys bank account or they can open an invoice account with the British Horseracing Authority (BHA).

The principal advantage of having a Weatherbys account is that the account-holder gains quicker access to prize money which is paid out 15 days after the day of the race, whilst BHA accounts pay out at the end of each month.

Over the years, Weatherbys account-holders, choosing not to cash in their winnings, allowed several tens of millions of pounds to accumulate. Although not formally a bank, the business had been operating along very similar lines for some time.

After extended discussions with the Bank of England, it was decided that the banking activity and the holding of clients’ deposits should be formalised. Weatherbys Bank was formed in 1994. It was not until 2001-02, however, that the board made the commitment to really expand the operation.

The aim was to extend the support we offer to our clients. Horseracing is a high expenditure pursuit – notwithstanding the capital costs of a racehorse, which can be a few thousand to several million pounds. Just to have a horse in training costs about £25,000 a year – and some of our clients have five, ten or even more horses in training, so it’s a substantial investment.

With a customer base in excess of 10,000, we’re invariably dealing with high net worth individuals in the UK and around the world. The logical next step was to say that we’re looking after our clients’ racing banking anyway, so why not use that as a conduit into offering wider banking facilities to help them generate and manage their wealth, whether that’s the family estate, farming operation or family business and so on.

Today, nearly ten years on, true to its heritage and ethos, Weatherbys Bank operates on sound banking principles based on a very conservative approach to banking. Strong capital and liquidity ratios are fundamental, particularly in today’s marketplace, and this is achieved by maintaining a very strong Tier 1 Capital Ratio, in excess of 15%, not borrowing from other banks, and lending to clients no more than 45 to 50 pence of every pound taken on deposit.

Having spent most of my career at Bank of Scotland, I was attracted to Weatherbys by the unique and exciting opportunity to influence the development of a new and respected financial institution. After nine years, I must say, I’m impressed with the progress.

RONNIE STEEDMAN is a Fellow of CIOBS

Investment team
“NO BAGGAGE. NO LEGACIES”
The early focus was very much on getting the cheque book and the cards right and making sure the systems were operating efficiently. Now we have further developed the private banking service which has recently expanded into investment management and wealth advice.

After recruiting a team of private bankers, a senior wealth adviser and an investment manager,Weatherbys has taken larger premises in Mayfair to maintain close customer contact. This is one of its core strengths. Chairman, Johnny Weatherby, and his brother and Chief Executive, Roger, personally know the vast majority of our clients.

We really started with a clean sheet – no banking baggage or legacies.We don’t have branches. That’s just not our way.We deal with our clients on a day-to-day basis from our offices inWellingborough or London. The client talks to the same person whenever they call and invariably they build up a close personal relationship.

Traditional values
“OPPORTUNITIES ARE HUGE”
Bucking the trend witnessed by other financial institutions, Weatherbys’ adherence to traditional sound banking principles insulated it from the financial crash. The bank recorded strong financial performance during the financial crisis: deposits of about £245m have risen by 40%since 2008, and their loans around £100m-£110m.

Rather than galloping headlong in pursuit of growth at all costs,Weatherbys strategy is to maintain its long-term stability. The bank’s enviable capital and liquidity position has found favour amongst customers keen to experience good old-fashioned banking.

We’ve come a long way, but in some respects we’ve really only scratched the surface – the opportunity remains huge. Our roots are in horseracing, but we are rapidly expanding beyond that sector. Once our clients tell their friends about us, then doors start to open all over the place.

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