all leases signed by Bulgarian leasing companies stood at €2.5
billion, an increase of 83 percent from June 2007’s figure of €1.3
billion.
Today, that €2.5 billion
makes up 7.5 percent of Bulgarian GDP – an astonishing figure when
compared with the equivalent figure for the UK of 0.8 percent,
according to a recent assessment from the FLA.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
This occurs in the context of a rapidly growing credit economy
where, out of €16.3 billion wealth ascribed to Bulgarian households
in mid-2008, some €5.1 billion comprised debts to banks or leasing
companies.
Leasing is therefore big business in Bulgaria, which joined the
EU in 2007. In recent years it has gone from strength to strength,
with net receivables for leasing nationwide rising exponentially
from €41.4 million in 2001 to €1.9 billion at the end of 2007.
This rapid growth has unquestionably been fuelled by the
flourishing auto finance industry that forms 62 percent of the
entire leasing market.
In Bulgaria, nine out of 10 cars are purchased through finance,
and registration levels are continuing to rise, with the market
having grown 21 percent between year-end 2006 and year-end
2007.
Such a potential asset finance gold mine has seen the Bulgarian
leasing landscape bombarded with buyouts from international
interests, and has recently prompted what may be a reawakening of
the international securitisation trade.
Understanding the way that this situation has arisen may be key
to understanding other developing markets in southeastern Europe,
since the process looks set to repeat itself elsewhere in the
region.
ISI Emerging Markets’ DealWatch information service reported an
8 percent increase year-on-year in the value of M&A activity in
southeastern Europe for H1 2008.
Although Bulgaria’s M&A activity was down 13.6 percent to
€1.8 billion, nearby Romania has seen a tripling of activity up to
€5.2 billion.
This suggests that the flurry of buyouts that shaped the current
landscape of the Bulgarian leasing market may be poised to begin in
neighbouring countries.
Trends in leasing
Cars and commercial vehicles dominate the Bulgarian market in
terms of assets, and continue to grow their segments. From June
2007 to June 2008, car lease volume increased by 94.9 percent to
€0.8 billion, and grew in market share from 32.4 percent to 34.4
percent.
Similarly, commercial vehicle lease volume rose 99.5 percent to
€0.7 billion, and grew its market share from 25.3 percent to 27.4
percent. Some 55,000 brand new commercial vehicle sales were
registered in Bulgaria in 2007.
Machinery and industrial equipment leasing saw a decrease in
market share from 30.8 percent to 27.1 percent year-on-year, but in
terms of new business still rose by 62 percent to €0.7 billion.
In terms of lessees the balance has shifted towards
non-financial corporations, which signed 90 percent of leases
active at the end of June 2008, compared to 87.9 percent the
previous year. Households signed 9.2 percent of leasing contracts,
compared to 11.4 percent in June 2007.
There has also been a move towards longer lease terms. Although
the proportion of contracts with a maturity structure beyond five
years was still only 13.7 percent at the end of the first half of
2008, this is an increase on June 2007’s figure of 11.9
percent.
The big players
Currently around 100 companies are active in the Bulgarian
leasing market, of which 22 enjoy between them a 90 percent market
share.
Leasing companies are regulated by the Bulgarian National Bank,
which will soon introduce new legislation to tighten the standards
which a company must attain to lend money legitimately (see
Leasing Life August 2008 and September 2008).
Largest among these companies on the field of leasing is
Interlease EAD, a subsidiary of the Greek National Bank which has
18.1 percent of the all-important car and commercial vehicle lease
market. Interlease, whose CEO Teodor Marinov also acts as chairman
of the Bulgarian Leasing Association, wrote €313 million of new
business in 2007.
Seven of the top eight leasing companies in Bulgaria – like
Interlease – are subsidiaries of international interests. The only
exception is Bulgarian-owned Eurohold, which has made use of
international money in a different way by selling receivables to
Deutsche Bank (see shaded box below).
Between them, the new business volumes at the top eight
companies make up 63 percent of the movables leasing industry. In
many cases, these larger players have been created by the merger of
two smaller companies.
Interlease’s nearest competitor is the Bulgarian subsidiary of
UniCredit, the European number one lessor which wrote nearly €15
billion of new business across the continent last year, according
to figures from Leaseurope.
UniCredit formed its Bulgarian arm in 2007, as part of the
integration of the Bulgarian banks it had acquired – Bulbank, HVB
Bank Biochim and Hebros Bank.Last month UniCredit announced the
borrowing of €80 million from the European Investment Bank (EIB) to
expand its leasing portfolio in areas including infrastructure and
energy.
Bulgaria’s third largest lessor, EFG Leasing, is another company
owned by Greek bank EFG Eurobank. EFG was formed by the merger of
two Bulgarian units, DZI Bank and Postbank. The company is still
known as Postbank in Bulgaria. Number four on the list is
Raiffeisen Leasing, the Bulgarian division of the Austrian
financial services behemoth.
Raiffeisen Leasing Bulgaria and its car leasing arm, Raiffeisen
Auto Leasing Bulgaria, were set up in 2004. Its combined leasing
portfolio at the end of the first half of 2008 showed an increase
of 69 percent year-on-year to €237.7 million.
Bulgaria’s Eurohold is growing so quickly it has been
looking for extra sources of funding
The Eurohold group was
set up in 2000 as insurance company Euroins. Since then, various
financial services and manufacturing divisions have been added to
the company’s original line of business.
In 2004 the leasing division of the group, EuroLease Auto, was
introduced. It now ranks as the group’s second largest arm, topped
only by insurance operations.
EuroLease is active in wheeled-asset leasing only, with its
portfolio split evenly between cars and commercial vehicles – by
far the most significant asset types on the Bulgarian market.
Eurohold has grown rapidly since its inception, and now operates in
Romania, Macedonia and Russia, with further regional expansion
planned, starting with Serbia.
The business model for this expansion is to pioneer insurance in
a geographical area, before adding auto leasing, car dealerships
and then other financial services elements.
This ‘clustering’ of services takes advantage of the “one-stop
shop” principle, and allows Eurohold a plethora of aftersales
opportunities on new registrations. This growth has historically
been financed by borrowing from Bulgarian banks, but according to
Eurohold CEO, Asen Assenov, the company has now outgrown such
resources.
“As our portfolio grew, we reached the financial limits of local
banks, and decided to attract international attention,” says
Assenov. The result of this decision was the unprecedented recent
purchase of €200 million-worth of auto lease receivables by
Deutsche Bank.
Based on consideration of the strength of automotive assets in
southeast Europe, the deal was rated BBB+ by Standard and Poor’s –
matching the sovereign ceiling for Bulgarian transactions.
Eurohold will use the money – which Deutsche Bank has stipulated
must be used within 24 months – to reinforce its dealerships and
insurance facilities in Bulgaria, as well as to beef up its leasing
operations in Romania and Macedonia, to match existing insurance
facilities.
More immediately, Assenov hopes that the Deutsche Bank money
will boost EuroLease Auto from fifth position to third in
Bulgaria’s leasing company rankings. Such a move would virtually
double the company’s market share, and allow it to compete with the
likes of international leviathans UniCredit, Raiffeisen and EFG.
After this, according to Assenov, it is very likely that the group
will seek further securities sales – and would be “happy” to do
business with Deutsche Bank again, he adds.
Fred Crawley
