The decision by ING Lease last year to cease writing new business led to a welcome boost to Investec’s established strategy for growth, which includes recruiting ING’s former employees, reports Grant Collinson
When ING Lease announced it was to stop signing business in the UK, Investec Asset Finance was one of a few firms the industry looked to expectantly to pick up the slack in leasing business.
Investec was established as a serious funder in the UK’s broker-introduced market before the news broke in October 2012 and was viewed as a natural fit for much of ING’s small- and mid-ticket business.
And inevitably Investec has enjoyed business growth as well as personnel expansion in the four months since ING Lease ceased to write new business.
Nonetheless, the company considers the ING exit a timely boon which accelerated the growth plans it already had in place in 2012, rather than a market-shifting shock which has forced the firm to rewrite its strategy.
Speaking to Leasing Life at Investec’s Reading office, Martin Harries, head of intermediary sales, describes the company’s post-ING strategy as "an extension of the growth strategy already in place in 2012."
In the first few months of 2013 that extension has seen Investec add 17 new personnel, several of whom came from ING Lease, although for some the recruitment process had begun before the Dutch bank made its announcement.
Wesley Harfield, head of sales at Investec, says: "ING Lease was a great business and its employees reflect that. They are very professional."
Harfield tells Leasing Life his firm visited the ING Lease Redhill offices late last year and talked with staff during "informal surgeries".
Following these meetings, Investec has recruited across sales, credit, broker support and new business and for its small-, mid- and big-ticket teams.
The new faces will work in the company’s expanded Reading premises as well as in its central London offices.
Despite the considerable staff intake, Mike Francis, Investec’s head of asset finance, says "recruitment drive" is the wrong phrase. In future, as in recent months, when Investec needs new more people it will get them, he says.
This expansion of personnel has come on the back of business growth, up 39% year-on-year in 2012, which Francis admits has accelerated in the wake of ING Lease going into run-off.
Nonetheless, Francis says he prefers not to focus on growth targets and instead is focused on "the right growth"."No one here has volume targets," he says, "If we write zero in a month but turned away only bad deals, that’s no problem."
That said, the firm has set a target for a £1bn-plus lease portfolio by 2014, which, when Investec first publicised the aim in November2012, meant nearly doubling its portfolio from £540m.
However long it takes
Francis says he is not worried about setting a strict time frame for portfolio growth. He says it "will take however long it takes" and adds profitability is the key driver rather than volume growth for its own sake.
Francis has a similar view when it comes to expanding the firm’s broker partnerships. He says the company had between 80 and 85 existing relationships pre-ING’s announcement and he expects the firm will double its partnerships to around 160 to 170.
Nonetheless, Francis says the company is not being rash when it comes forging relationships with brokers looking to place business after ING Lease and says "if the right intermediaries are out there then we will work with them" but adds, above all, he looks for "professionalism" in potential business partners.
Much of the growth Investec has seen so far this year and in the last few months of 2012 has came from its existing broker relationships, Harfield adds.
Harfield also tells Leasing Life Investec’s expansion into block discounting is about developing these existing relationships.
The company wrote a small number of blocking facilities in early 2012 and was planning to expand its business when ING Lease, which had a strong block discounting unit, ceased writing business.
Like elsewhere in the business, Investec’s growth ambitions in block discounting have been given a boost by the Dutch bank lessor’s demise, but its plans remain unaltered. The firm is aiming for a portfolio of around £80m – which Harfield says is roughly in line with ING Lease’s business – but, as with other areas of growth, there is no pressure to grow the business and new facilities will depend on individual circumstances.
Harfield adds block discounting, which will be available to brokers with their own books, is a natural extension of what Investec already offers to its brokers and is another method through which the firm can further liquidity for UK SMEs.
Providing liquidity and finance for SMEs which would otherwise lack access to funding is what Francis describes as the raison d’être of Investec’s asset finance business and adds, for the vast majority of the time, funding is for businesses which fit the ‘S’ in SME.
Francis says "We are lending into a sector we believe in."
Furthermore, he says, asset finance is "instilled" in Investec Bank and has been since it was founded as a leasing business in South Africa in the 1970s.
The bank, which has a dual listing on the London and Johannesburg stock exchanges, has a presence in South Africa, the UK and Australia where it also has leasing operations. The bank recently began doing business in Ireland and Canada too and when asked by Leasing Life about geographical expansion for Investec Asset Finance, Francis says "we will go where the bank goes".
The bank’s board is still very supportive of the asset finance operation, which sits within Investec’s specialist banking unit, Francis adds its directors don’t see asset finance as a "second stream" business, but rather as part of the bank’s culture.
"The Investec culture is very clearly identifiable," Francis says, "and the bank is still small enough that we can sit down with the CEO to talk through a big deal. Everyone is very accessible."
Support from the board has added to the positive outlook Francis has for the business and the wider leasing industry.
Francis is reasonably confident of how Investec will cope with the impending capital restraints of Basel III and says: "The bank always took a conservative view on our capital with regards to Basel II, so Basel III won’t make things worse – it might even make things better."
He adds the group’s blended liquidity profile gives his business the "manoeuvrability" to cope with change.
He describes the current economic landscape for leasing as "benign" although he limits the effects of that benevolence to "no dramatic growth or slump".
Francis also takes a positive stance on the subject of change in the wider leasing market and says, while rumours abound about the next big bank-owned lessor to exit the UK, he will be "less surprised to see new entrant in the market than an exit."
Francis and Harfield both suggest private equity and pension funds have been looking very carefully at the industry and the time might now be ripe for investment.
Narrowing in on changes in the Investec business, Harfield says the company is looking at new product ideas, in asset finance and wider commercial finance, which will help the company further fund the SME sector and, in turn, grow its business.
BROKER LINKAs part of Investec Asset Finance’s planned business development, its updated broker portal Brokerlink went live in August 2012 and, according to Martin Harries, 56% of deals come through the online system.
Harries says the firm plans to increase that percentage and focus on the small-ticket sales aid space.
The system was developed with NetSol Technologies and includes a document upload system which facilitates automated underwriting.
Including the deals hitting its Brokerlink system, Harries says staff at Investec’s Reading office are dealing with around 200 asset finance lending requests a day with typical deal sizes around £10,000 to £15,000. These figures do not include the numbers for middle ticket deals of £500,000 and above which are referred into a specialist team in London.
NEW APPOINTMENTSFour senior appointments among the recent intake of 17 recruits at Investec Asset Finance joined from ING Lease after the firm went into run-off in November 2012.
Lee Rhodes joined Investec’s mid-ticket department to help grow the lessor’s book in that sector after 10 years with ING Lease working on mid- and large-ticket deals.
Rhodes will be joined in the mid-ticket department by Clare Hagon who joins as a credit analyst. Hagon also comes from ING Lease where she worked for seven years in various roles across departments including, financial products, small-ticket and block discounting.
Investec bolstered its own block discounting team with the appointments of Osian Rees, who will head the department, and Eddie Pharo, both of whom move from ING Lease.
The other 13 appointments are spread across Investec’s sales, pay-out, credit, broker support and new business departments at both the London and Reading offices.