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December 19, 2011updated 12 Apr 2017 4:10pm

Benelux countries laid low

The leasing market in Belgium, the Netherlands and Luxembourg continues, like most of Europe, to suffer, at least to a certain extent, under the pall of the eurozone crisis Investment has fallen, volatility reigns, and although some leasing companies may be yet to feel the full effects of the continuing maelstrom, it has undoubtedly cast a long shadow over the industry.

By Claire Hack

Photo of a businessman with his head in his hands

 

The leasing market in Belgium, the Netherlands and Luxembourg continues, like most of Europe, to suffer, at least to a certain extent, under the pall of the eurozone crisis. Claire Hack reports.

 

Bar chart shwoing The Netherlands leasing industry – total production Investment has fallen, volatility reigns, and although some leasing companies may be yet to feel the full effects of the continuing maelstrom, it has undoubtedly cast a long shadow over the industry.

“There has been no growth in the market. No new participants have entered the market in 2011,” says Robert Engel, manager of communications at ABN Amro Lease.

“[Some companies] have decreased considerably in market share and volume over the last year.”

The lack of certainty over the future of the euro and over the potential for economic growth in Europe, and within the region specifically, has also taken its toll.

Some smaller companies have left the market, according to the Dutch Leasing Association (NVL), and bank-owned lessors are also starting to pull back.

Georgios Kolovos, pan-European leasing marketing leader at GE Capital, says: “Some bank-owned competitors have less appetite or are more cautious in terms of leasing, with greater focus on the credit quality of the customer, and not so much on the asset.

“In addition, they are becoming more selective in terms of partners and pulling out of certain small vendor relationships.”

Thus far, these shifting attitudes have not affected the cost of funding, Kolovos says, but in the short term, some increase in pricing should be expected.

Bar chart showing total production of members of the Belgian Leasing Association, 2005-2010 There are, however, still some reasons to be cheerful for market participants in Benelux, as the limited availability of capital from mainstream sources has meant more businesses are turning to leasing as an alternative.

“[There has been no] effect on the results of ABN Amro Lease for 2011,” Engel says.

“We have gained considerably in market share and volume in 2011, compared to 2010.”

Engel declines to give specific figures for profits or revenues, but said the company is performing well, and within its budget for the year. It has also seen a solid performance in the machinery and transportation equipment segments, he adds.

“ABN Amro Lease is currently active in Belgium, Germany and the UK,” Engel says.

“Our company is also looking to further its international presence abroad, with the intention to service the international customers of ABN Amro better.”

Engel was also bullish on the company’s future, despite the potential for further economic turmoil in Europe and the possibility, at the time of writing, of the break-up of the eurozone.

“ABN Amro Lease expects that the results for the last quarter will be very good. This expectation is backed by our pipeline, which is filled up for the rest of the year,” he says.

“We further expect to grow our business for the following year. This means that we aim to increase our portfolio and market share.”

Table showing members of the Luxembourg Association of Vehicle RentalABN Amro has also been dining out on the success of its e-learning modules, developed as part of a bid to propagate in-depth knowledge of leasing for every Dutch-speaking stakeholder in the company.

The company has also developed digital services for its clients, Engel says, in an ongoing project to offer customers quicker and more efficient services.

Other players in the region could be justified in having a similarly confident attitude to ABN Amro, furthermore, as businesses are forced to assess the need for new equipment.

“There is strong demand for leasing solutions in Benelux. Companies haven’t invested a lot in new equipment and, despite the fear of recession, they cannot delay the renewal of the equipment further,” Kolovos says.

“For smaller-ticket transactions, the main alternative to leasing is cash purchase, but the larger the deal becomes, the more often customers choose leasing.”

Ahead of the last major financial crisis in 2008, companies would look to take on leasing contracts at a minimum value of €50,000, according to Kolovos.

Now, however, the threshold is much lower; companies will turn to leasing for €15,000-€20,000, especially in the technology and office equipment segment, as well as for telecoms deals.

Kolovos adds that financing for medical equipment has been a particularly important segment for the leasing industry across the Benelux region.

“Political challenges in Belgium have significantly delayed new investment, while in the Netherlands, these are positive trends,” he says.

The challenges in Belgium include a high budget deficit, reportedly now predicted to be 4.2%, above the original 3.6% target, as well as costs incurred following the bailout of Dexia.

As for GE Capital itself, its Minerva extranet platform – a tool that gives vendor finance partners, resellers and manufacturers a way to provide customised leasing solutions to clients – is drawing attention from potential customers, according to Kolovos.

“Despite the limited supply [of funding], customers are expecting quick responses,” he says.

“The introduction and investment in our Minerva extranet platform means we get a lot of tailwind to our business, with quick quotes and instant credit decisions.”

There has also been speculation over talks between the bodies representing the leasing industry and government officials, on implementing changes to legislation specifically designed to help the leasing industry. No details were available at the time of writing.

Chart showing Belgium leasing industry production by type of equipment, 2005-2010

 

The Belgian Leasing Association

The Belgian Leasing Association (ABL) is one of the founder members of Leaseurope, and currently has about 30 members.

This includes ABN Amro Lease, BNP Paribas Leasing Solutions, BMW Financial Services, and De Lage Landen.

According to the association’s annual report for 2010, leasing companies based in the country were at least somewhat better off than their European neighbours.

The country’s GDP saw an average growth in real terms of 2% throughout the year, after a fall of 2.7% during the previous year.

The 2010 report also showed that ABL members achieved total volumes of more than €4bn during the year, up 6.6% on the previous year.

The rate of penetration for 2010 also grew, climbing to 9.1%, from 8.6% in 2009, but was still much weaker than in the period between 2002 and 2008.

Now with a budget deficit of 4.2% predicted for 2011, instability is among the key factors affecting the leasing industry.

The market must also contend with the continuing disagreement about how to resolve the eurozone crisis, as well as potential investor reticence caused by the lack of a concrete solution, and also the recent bailout of Dexia.

This included the Belgian government stepping in to buy the bank’s Belgian arm for €4bn, according to reports at the time.

Table showing Dutch Leasing Association – figures for 2010

 

The Dutch Leasing Association

Investment from businesses remains very low in the Netherlands, says NVL secretary general Peter-Jan Bentein.

Companies are only now beginning to invest in new equipment as they can no longer put it off, which may be good news for leasing as they look to less mainstream means of funding, but as the European crisis rages on, there can be no guarantees.

Bentein told Leasing Life that business volumes in the third quarter of 2011 were up by 14.8% compared with the same quarter in 2010, but declined to give specific figures for either period.

He also declined to give any kind of outlook for the year ahead, but added that three companies are known to have left the Dutch market during 2011.

Even in 2010, signs were beginning to emerge of a weakening industry in the Netherlands.

“The fact that the Dutch leasing industry so strongly lags behind other European countries as yet has no good explanation,” NVL’s annual report said.

“The financial crisis in the relevant market segments for leasing is taking longer than expected, and it is still unclear how long this will last.”

In other words, the effects of the crisis could well be felt in 2012 and beyond, as politicians struggle to reach a consensus on how best to remedy the situation across Europe.

“As a result, the propensity to invest declined, with consequences for the Dutch leasing industry, resulting in a total production level of €3.77bn, compared with €4.5bn in 2009,” the statement added.

Figures broken down by industry segment are only available on a yearly basis, Bentein said, meaning there is no data available yet for the whole of 2011, but most signs point to a further decline in volumes.

The greatest challenge will be to achieve a turnaround in production volumes, according to Bentein, and bring them from reduction to growth, although he added that this has so far been successful.

 

Luxembourg Association of Vehicle Rental

Luxembourg, as one of the smallest nations in the world, has no association specifically dedicated to leasing.

The Grand Duchy does, however, have a vehicle rental association (FLLV), which is a member of Leaseurope.

The FLLV is also a member of the Confédération Luxembourgeoise du Commerce, and has more than 20 members of its own, including KBC Autolease Luxembourg, and GE Capital Fleet Services.

The total fleet, however, comes to just 31,000 vehicles, and in 2010, this represented about a quarter of domestic light vehicle registrations.

The association is also described as having considerable influence on the Luxembourg economy.

Because the industry in Luxembourg is so small compared with the rest of Europe it has not been the subject of as many headlines as its neighbours in Belgium and the Netherlands.

Very little data is available on the market, meaning it’s difficult to gauge how it has fared as a result of the most recent financial turbulence.

As a result of the decline in the vehicle segment, however, as well as nervousness over the future of the eurozone, indications suggest the leasing industry in Luxembourg will face all the same struggles as elsewhere.

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