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August 1, 2009updated 12 Apr 2017 4:34pm

Growth in a decline

Despite the recession, HSBC Equipment Finance has ambitious plans for growth The new boss at HSBC Equipment Finance (HEF), Richard Carter, who took up the post in April, has some ambitious plans up his sleeves.

By Brendan Malkin

Despite the recession, HSBC
Equipment Finance has ambitious plans for growth. This includes
making inroads into the booming public sector.

The new boss at HSBC Equipment Finance (HEF),
Richard Carter, who took up the post in April, has some ambitious
plans up his sleeves.

Not entirely surprisingly for someone who
spent three years at HEF’s operations department before he was
promoted to his current post, one of Carter’s priorities right now
is overseeing the installation of a new IT system.

“Right now,” he remarks, “the big strategic
issue is how we want the business to look in six months’ time, when
the new IT system is in place.”

But he also has other, even more ambitious
goals, as he goes on to explain. He wants to work out “how to grow
[the business] in the medium to long term”.

Carter adds: “After all, the point of the
investment we are making is to make the process slicker from the
customer’s point of view and, ultimately, to allow the business to
grow a lot bigger.”

Here he is referring to HEF’s intention to
grow its HP and leasing business significantly over the next three
years – an aim which, in his opinion, needs to focus on the concept
of proposition.

“Essentially, this means that when an HSBC
relationship manager is talking to a customer about structuring
finance or an HP deal rather than an overdraft or term loan, they
have an idea of exactly how a customer can benefit on an
operational level, as well as in terms of cost benefits,” he
explains.

Having spent three years overseeing HEF’s back
office operation, Carter is keen to see the business’ new IT system
– currently being developed with SunGard and Northern Arch –
provide and demonstrate as many operational benefits as possible to
customers.

As the system is rolled out this winter and
subsequently built up over time, Carter’s vision is that it will
enable customers to access information on asset values, experiment
online with different deal structure possibilities, explore
termination options and monitor HP deals throughout their
terms.

On the bank’s end, the system could provide a
means to email system-generated quotes, a faster payments system,
storage of scanned documents and correspondence, and more efficient
automated document generation.

Ongoing operational
change

Another ongoing operational change in the
business has been the alignment of the previously separate credit
and risk teams under the direction of HEF’s head of credit.

Carter explains this has “provided the
transparency required to ensure HEF reacts to changes in the
market, while protecting HSBC’s exposure in the credit environment
at large”.

A major element of HEF’s growth strategy will
continue to be the structured finance team led by Bill Cuff, which
mostly arranges deals between £5 million (€5.8 million) and £50
million, almost exclusively to large corporate clients of the
bank.

Although the team’s work is not primarily tax
based, its main strength, in Carter’s opinion, is its technical
experience of intricate transactions involving unique or complex
assets.

While structured finance does little work with
public sector clients, due in part to the extra resources required
by the tendering process, it has gained knowledge of that market
through working with suppliers to government-run entities, and may
consider an entry into this sector in the coming years.

Currently, some 75 percent of HEF’s business
has been with HSBC customers, but it is understood that expansion
into a wider market, although executed cautiously, will be
spearheaded by the second major component of HEF’s business, its
general equipment finance division. This is divided into a central
team and several field-based teams.

Carter is pleased with the co-ordination of
these teams over the last 18 months, but is keen to see what
progress can be made in Scotland and Northern Ireland. He believes
a focus on proposition is doing a lot to build strong new
relationships for HEF.

In support of this aim, he quotes a recent
customer satisfaction survey carried out by an external source,
which found HEF to have received the highest scores across all HSBC
products and customer segments in the UK.

The survey found 95 percent of HEF’s customers
were satisfied with their product, 75 percent very satisfied and 88
percent were willing to recommend HEF to other businesses.

In addition to the structured finance and
general teams, HEF holds a number of specialist businesses focused
on knowledge of particular asset sectors.

Whereas Carter notes that the structure of the
business as a whole will inevitably change as it works more closely
with its parent, asset specialisms will certainly be retained.

“The strategy of segmenting HEF’s delivery
channels and having specialist divisions has enabled the business
to deliver added value to customers,” he says.

“Simply put, the more we know about the assets
in a particular market, the more we can match our proposition to
customers’ needs.”

Particularly well known in its sector is HEF’s
print division, led by Simon France, who PrintWeek recently named
as the 37th most important person in the print industry.

‘Great relationships’

“It is a hugely tough market, and it certainly
was one of the first into recession, but the print division has
done well in finding stable customers, and has some great
relationships with the main manufacturers,” says Carter.

Next up is HEF’s commercial vehicle business
led by Chris Bowden, built up over the last four years by a small
team of business development managers and specialising in HGVs and
larger vans.

Another small division is the marine finance
business. led by Mark Astbury, which has a different strategy to
other UK bank-owned MF outfits. Rather than pushing for business in
the marine market at large – a particularly uncertain place at
present – it concentrates on offering marine products to HSBC
banking customers, an MO which Carter says has done a lot to
strengthen those relationships.

HEF’s materials handling division is headed by
Adrian Shepherd-Roberts, another industry specialist, and deals
with a number of vendor partnerships as well as processing business
from HSBC customers.

Carter says HEF as a whole has a few less
vendor partnerships than it used to (although it has never been
huge in this area), and admits that manufacturers are facing an
extremely tough economic outlook at present.

Nevertheless, he says, the current roster of
relationships provides both good margins to HEF, as well as a
useful sales aid for partners, and will likely remain in the long
term. Furthermore, one of the reasons for implementation of the new
IT infrastructure will be to provide scope for building up new
vendor programmes.

A different type of partnership held by HEF is
with 3 Step IT, a Finnish company specialising in lifecycle
management for IT assets. This relationship has now been in place
for a full year, and the results are encouraging.

“Prior to working with 3 Step, we had been
virtually out of the IT market for some time” says Carter. “I like
what IT finance offers us, and the customer feedback has been very
good. Business is picking up well, and we will continue to invest
and develop that partnership.”

Certainly no one at HEF is denying the
difficulties of a recession that shows no signs of ending in the
next six months at least, but there seems to be little reticence in
the business about the possibilities for growth.

“Historically, we have never been as big as
some in HP and leasing, but the bank sees it as a solid capital
return, and there are definitely opportunities,” says Carter.

“Growing HEF works well with how the group
wants to develop its market, and growth is realistic if pursued
quickly and carefully. We have good momentum after 18 months of
hard work, and we are well capitalised, but capital expenditure in
the UK is still dropping.

“Sooner or later though, companies will no
longer be able to defer new investments, and I am confident we will
be in a good position to pick up that demand.”

Judging from the outlook of the business at
present, it would not be surprising if HSBC Equipment Finance found
itself significantly advanced in the ranks of British lessors in
five years’ time.

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