The long-awaited merger between BNP
Paribas Lease Group (BPLG) and Fortis Lease has finally begun to
take shape. Although still in its early days, the massive,
multi-country integration, which combines two of Europe’s largest
leasing companies, has launched into its implementation stage with
the phasing out of the Fortis Lease brand.

BNP Paribas’s shareholders approved the
strategy and the integration plan in December last year and, at the
same time, agreed the merger of the two banks and their leasing
arms should take place simultaneously.

BPLG CEO Philippe Bismut said: “Because one of
the main missions of BPLG is to support the relationship of the
retail bank with customers, we had to move at the same speed as the
bank and keep consistency during the integration process.”

Bismut recognised the work to do is vast,
because the two lessors have different business models and
approaches to the market.

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Indeed, BPLG’s main business has always come
from vendor programmes – mostly global partnerships with
manufacturers and software publishers – and from supporting the
retail bank’s customers.

Fortis Lease, on the other hand, has been very
much the leasing arm of Fortis Bank, but mostly within the middle
market segment, the one between retail customers and large
blue-chip organisations.

“The main challenge – but also a big
opportunity – is to take all that and make it work as a consistent
organisation, to realign all the operations in all countries into a
unified strategy,” Bismut said.

Business strategy

The business strategy of the two
lessors was also different. A major driver of Fortis – and one of
the reasons why it collapsed – was its focus on growth and volumes.
Instead, Bismut said the different BPLG model, focused on “quality
rather than quantity”, has proved quite resilient.

“Our profit has been
eroded by bad debt, but we have drawn lessons from that,” he
said.

For instance, rather than providing a “vanilla
funding service”, BPLG has opted for specialising in “vertical
business units”.

Bismut said: “We have reviewed the portfolio
and decided which markets we will focus on and which we will
exit.”

The lessor recently sold its Nordic IT
business to 3 Step IT, although in that case the sale had already
been decided by Fortis before the BPLG acquisition.

“But that is the kind of approach, we would
ideally run down the business that we deem is too risky,” Bismut
said.

“We do this on a case-by-case basis,” he
added.

European network

Following the merger, BPLG now a
presence in 20 countries, and has a different integration plan for
each territory it operates in.

Bismut said: “Depending on local situations,
projects have started already in a few countries. Other countries
will start when we will get all the green lights, and this could
happen later in the spring, depending on the complexity of the
integration.”

The deployment of a new strategy is proving
easy in countries like Luxembourg and Switzerland, where Fortis
Lease, but not BPLG, had a presence. With the integration, BPLG is
now in a position to provide new business for vendor partners that
wish to penetrate in those new markets.

Bismut expects the integration process to be
more complex work in those 14 countries where both companies had a
presence, particularly in France and the Netherlands.

In France, both Fortis Lease and BPLG were
operating on the same market segments. For instance, both of them
are major players in the real estate leasing market, so the new
entity has to combine two specialised teams.

In the Netherlands, following the
nationalisation of Fortis Bank, Fortis Lease Netherlands will not
work in tandem with the bank, and therefore needs to reposition
itself.

“For BPLG it is a good opportunity because,
although we already have a presence in the Netherlands, we are
still a small player, and see the integration with Fortis Lease as
a way to raise our profile,” he said.

The lessor plans to strengthen its position in
Central Europe. It will mainly focus on Poland, where Fortis Bank
has a large network; Ukraine, where despite a difficult market BPLG
has “long-term” ambitions; and Romania, where BPLG is trading with
large farming businesses who have international revenues, and are
not being hit by currency issues.

Elsewhere, BPLG will boost its presence in
Turkey, again because of the strong presence of Fortis Bank, the
country’s third-largest.

It will also focus on India – where BPLG has a
leading position in construction equipment, and has impressive
growth prospects because of the large infrastructure projects being
planned – and on China, where Fortis Lease legacy has provided a
modest presence, meaning that BPLG has got the infrastructure
already in place to start in that market.

Still headquartered in Paris, the new entity
will have a number of “excellence centres” across Europe, from the
real estate business in Paris, to a business jet centre based in
Switzerland, while the Netherlands will be an excellence centre for
a few other assets, such as flight simulators.

BPLG has already appointed a new
management team comprising senior staff from both companies (see
box, right). Work is still in-progress at the lower levels of the
organisation, although it is understood that there will be a number
of job cuts.

Last month, French newspaper L’Echo reported
that BPLG might cut as many as 380 jobs across Europe. A BPLG
spokesperson could not comment on that number, saying the matter is
“still being discussed”.

Bismut, however, pointed out that although a
number of jobs could be shed, new jobs will be created with the
development of “strategic niches” for the lessor.

He said: “Most of the job cuts are not the
result of the integration, but of the rundown of the portfolio. On
the one hand, we will phase down some business, but on the other we
will develop new business, so there will be jobs suppressed, but
also new jobs created thanks to the development of strategic niches
we intend to focus on.”

Technology

Bismut said bad debt charges
increased significantly during 2009, and volumes went down quite
sharply in the transport and materials handling sectors.

However, he added that margins were preserved,
the rate of delinquencies had started to slow down and that “the
business model has proved resilient”.

He said that the IT equipment business – a
sector in which BPLG did not have a presence until a couple of
years ago – had a “very good year”, with around 30 vendor
partnerships signed in 2000.

BPLG head of IT and telecoms Joseph Pulicano
added: “We have made a conscious decision to develop our position
in the IT and telecoms sector. We have the ambition to become the
European leader in software financing.”

BPLG is currently one of Oracle’s three
partners in Europe. It also works with SAP in the UK, Italy, Spain,
and Portugal, Autodesk, Sage, HR Access, and other major software
companies.

In addition to that, the lessor is
strengthening its IT hardware arm and its telecom business (with
the likes of Alcatel Lucent on an international basis, as well as
with Cisco in France).

The most recent win – and that most awaited
within the market – has been with Microsoft. The lessor will
provide financing to Microsoft’s SME customers in four European
countries, France, Italy, Switzerland and Germany.

Although Pulicano could not comment on whether
other major EU countries, including the UK, would be considered for
future agreements between the lessor and the software giant, it is
understood BPLG is having discussions about other territories,
too.

BNP Paribas Lease Group – new
management