“Always check that you have heart, smart, guts and luck” – CEO Q&A with Fergal McGrath of Dilosk/ICS Mortgages 

By Business & Finance
21 July 2021
Pictured: Fergal McGrath, co-founding Director and CEO of Dilosk/ICS Mortgages

Fergal McGrath is a co-founding Director and CEO of Dilosk. He is a Senior Global Banker and Portfolio Manager operating within the international capital markets for over 20 years.

What are your main priorities and goals in your role?

Dilosk, which trades as ICS Mortgages, is a modern and alternative specialist mortgage lender in Ireland.  We entered the mortgage market after securing the ICS Mortgages platform from Bank of Ireland in 2014, and today we are the only fully Irish-owned non-bank lender in the market. We have achieved several successes to date, but our main priority is to keep focused on our clear strategy – to grow Dilosk/ICS Mortgages into one of the best customer-focused mortgage lenders in Ireland.  It is important that we do not get distracted and stray from this goal.  

What are your biggest challenges as a CEO?

A CEO must deal with many obstacles, challenges and distractions which often emerge in business and there are many demands, sometimes conflicting, from the many stakeholders involved in our business. I see my job as clearing the path and removing all obstacles to satisfy all stakeholders, while growing the business.  A problem today can also be an opportunity tomorrow, so I believe it is important to remain measured and calm. Mar a deirtear as gaeilge, ‘Ní neart go cur le chéile’. 

How do you keep your team/staff motivated?

Open communication and an open-door policy is paramount, and this must be done with integrity. Each person brings to the table unique skills and backgrounds, and it is the responsibly of a good leader to create an environment where these individuals can thrive, for their benefit and the benefit of the company. 

I encourage team members to embrace innovation, continuous development, and openness to change. I like to stress if there is a problem/mistake to remember that a problem shared is a problem halved.  We encourage a flat structure at Dilosk and it is extremely rewarding working alongside some incredibly talented team members. We spend considerable parts of our lives at work, so it is important that we enjoy it as much as possible!   

What are the challenges facing your industry going forward?

There are many challenges in the modern banking industry. In fact, it is because of these challenges we founded Dilosk, as we saw an opportunity to do things differently.  The impending departure of Ulster Bank and KBC from the Irish market is testament to these challenges.  The level of regulation is considerable and always evolving, which leads to higher operating costs. However, this must be embraced, understood and if applied correctly it creates a better organisation. As Dilosk is a young company celebrating its 8th birthday this summer, we run without adverse legacy issues. We were in a fortunate position to analyse past mistakes made by the industry globally, which contributed to the global financial crisis, and to develop a talented team and platform using IT systems and fintech partnerships to help create a long-term business.     

What new trends are emerging in your industry?

Until recent times technology developments in banking was primarily focused on the payments sector, and the mortgage sector was relative slow to adapt. Thankfully this is no longer the case, and the mortgage sector is now getting the attention it deserves and there are many innovative IT solutions available to aid the customer journey.  

The growth of retail credit firms (commonly known as specialist lenders or non-banks) in Ireland sitting alongside the pillar banks is interesting and we have seen some interesting product innovation from such retail credit firms recently.  It is worth remembering that building societies were commonplace in the 1980’s, and as the main providers of mortgage finance played a vital role in the housing market.   As most of these building societies are gone now, I see the role of retail credit firms taking the place of the building societies.   

Are there any major changes you would like to see in your sector?

Technology is transforming the sector and this process will only accelerate, which is good news for customers and good news for lenders willing to adapt. 

I would also like to see greater capital markets support from the European Central Banks and the Central Banks towards the retail credit firms which supply consumer and business lending to the housing sector and other areas which serve the overall economy.  A lower cost of wholesale funding translates into lower mortgage rates for customers.          

As an employer are you finding any skills gaps in the market?

We have made some great hires during the pandemic as we look for progressive team members who enjoy being part of banking outside traditional banking.  With a number of significant changes – whether departures or restructures – in the Irish banking sector announced over the past 15 months, there is a large amount of highly skilled talent available, particularly for those operators who are experiencing significant growth.  

Dilosk did not exist pre-crisis and was born because of the crisis.

How did your strategy develop in the context of the banking crisis and economic crisis?

Dilosk did not exist pre-crisis and was born because of the crisis. It was clear to us that there was a gap in the Irish mortgage market for a specialist mortgage lender providing customers with a more modern and alternative approach focusing on customer service, product innovation and competitive rates. Our first strategic acquisition, the ICS Mortgages platform and mortgage portfolio from Bank of Ireland in 2014, provided a solid foundation for us and this was eased by the European Commission’s desire to promote further competition in the market.  We were able to reinvent the existing ICS Mortgages brand with a dynamic new team, new ownership and a new culture – but one which is clearly aligned with ICS Mortgages legacy of helping people buy homes in Ireland since 1864.   

How has Brexit affected you?

To date, we have not seen any major effects. Certainly, on bond funding (securitisation) roadshows across Europe over the past few years, many investors had questions and concerns about Brexit and the impact on Ireland Inc, but overall investors became comfortable with this risk, and we got there in the end with a healthy level of interest on our bond issuances. I do believe, however, that the wider Irish financial services sector will see a net benefit in the long term from Brexit, as more UK companies set up a presence in Ireland.

I do believe, however, that the wider Irish financial services sector will see a net benefit in the long term from Brexit, as more UK companies set up a presence in Ireland.

How has COVID-19 crisis affected your business/sector?

On the operational side, we had challenges with remote working and implementing the industry-wide pandemic mortgage payments breaks for borrowers who were adversely impacted financially. Overall, however, we overcame the challenges quite quickly.              

We were initially overly concerned on the business side as new mortgage business declined by 60% for the first few months.  The market swiftly recovered, and we did not need to impose any redundancies or salary reductions.  Overall, 2020 was a challenging year which affected the bottom line however we managed to have a profitable year.      

How do you define success and what drives you to succeed?

I would define Dilosk as a success as we created value out of nothing which has been extremely rewarding. We started with a blank page, and we have a remarkable and scalable business today.  However, as we achieve our goals it is imperative, we establish new ones.    

What drives me to succeed is a realisation that life is relatively short, and you have a limited window to succeed. I am extremely passionate about this business and that is the best driver.        

What’s the best advice you’ve been given, or would give, in business?  

I have always been fascinated with behavioural economics and the importance of RQ (rational quotient) in business, that is the importance of making sound investment decisions.  Warren Buffet describes it more eloquently as IQ is the horsepower of an engine, but RQ is the actual output. 

The advice that I would give would be to always check that you have, what I believe, are the four main ingredients – heart, smart, guts and luck – if so, business will be an easier journey. 

What have been your highlights in business over the past year?

We had a remarkably busy and challenging year in 2020 and despite the pandemic we grew our mortgage loan book, and much credit is due to the dedicated team we have.  

We had a phenomenally successful bond issuance in February 2021 as we raised €319 million at record levels.  The European roadshow was conducted remotely via web conferencing, which was a first for us, however, the investor demand was particularly strong.  In fact, the bond issuance was significantly oversubscribed with over €850 million of investor demand for €319 million of bonds.

Over the past year we also put in place a strong and talented ‘C’ suite executive team incorporating the CFO (financial), COO (operations), CRO (risk) and CCO (commercial) across all business lines which has been a tremendous addition to the business.  

What’s next for your company?

Our initial mission statement was to be the No1 Buy to Let lender in the market by 2020 and we achieved this ahead of schedule. As we expanded beyond the buy to let market into the family home market in late 2019, we set a goal to secure a 5% market share and once this is achieved, we will reset our goals to accommodate future growth.  

Where do you want your business/brand to be this time next year?

As the only majority Irish-owned specialist mortgage lender in the market, ICS Mortgages is committed to the Irish market and to providing long-term value to home-buyers. We intend to continue the development of ICS Mortgages as a more recognised and trusted brand and to develop greater scale and grow market share.

We also expect to raise more capital by issuing our fifth public bond transaction under the Dilosk RMBS platform and explore other funding options.