leading Italian lessor to have grown last year. This is partly due
to changes in its credit arm. Antonio Fabrizio finds out more from
its head, Gaetano Trovato.
MPS Leasing e Factoring, ranked number six in Italian leasing with
a 5 percent share of the market, last year recorded an increase of
18 percent in new business
volumes.
business in Italy declined by 21 percent last year, and the fact
that every other top 10 Italian leasing company saw drops in new
business.
MPS’ success is due to a range of
factors, including the fact it recently secured several key real
estate leasing deals. However, changes in its credit department
have also helped.
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The company recently underwent a
root and branch reorganisation of its network structure. This
largely focused on credit policy (this is split in two, one for
leasing and one for factoring) – particularly around ways of
establishing a customers’ creditworthiness, according to Gaetano
Trovato, who heads the Italian lessor’s credit division.
The Siena-based company found three
ways of doing this, Trovato explained: “First of all, we determined
this by the past cash flow data of the firm, and a scrupulous
analysis of its credit history. This has to be combined with a
prospective evaluation, because it is with future, not past cash
flows, that they will repay us.”
Client’s business plans are taken
into account, as is the capability of the potential investment to
generate cash flow.
A third element MPS considers is
its customers’ risk of loss given default – the fraction of the
lessor’s exposure which will not be recovered following a default.
Trovato said this varies according to the type of product.
“If the leasing transaction is for
an office building located in the centre of a city like Milan, the
chances of a loss for us in case of default are definitely
different, compared to the financing of a specific line of assets,
say some specific furnishings for a specialised shop,” he said.
Also, like most lessors, it has
responded to the recession by being flexible about what assets it
invests in. Trovato said he keeps “an eye on good companies in bad
markets”. These include those in the pharmaceutical and chemical
industries.
He added: “The construction and car
industries are feeling the pain more than other sectors, but we
don’t rule out companies which could represent good investments for
us, even in a distressed sector.”
Trovato also says that MPS will say
a “firm no” to just any “purely financial transactions”. For
instance, it avoids sale and leaseback agreements, as they are not
exclusively aimed at financing new investments.
Another factor which has saved MPS
during the downturn has been its historically conservative approach
to lending. Around 80 percent of operations are sourced by local
bank branches, while the remaining transactions come from
brokers.
It also focuses mainly on the SMEs,
a market which the company’s MD, Gianfranco Antognoli, once defined
as the “backbone of Italy’s economy”.
Around 45 percent of its clients
are businesses with transactions up to €2.5 million, and another 45
percent are smaller companies. The remaining 10 percent is split
between a few big companies and a number of private customers,
mainly for yacht leasing.
MPS’ location has also reaped
rewards for the lessor. Its links with Central Italy’s firms –
Monte dei Paschi, its parent, is the biggest bank in the wealthy
region of Tuscany – has made it one of the key lessors in an
economically strong area, where businesses in agricultural,
industry and tourism have flourished over recent years. MPS also
benefits from the fact that while it was formed in 2002, Monte dei
Paschi has been operating since 1472.
Notwithstanding all this, Trovato
admits that the recovery will take a while to come, and that his
company has seen a decrease in equipment leasing.
“But when firms resume their
investments in equipment, that will be the sign that they are
getting ready to meet new production requirements,” he added.
However, for all MPS’ conservatism,
and commitment to staying afloat during the bad times, the lessor
remains very much open to business, even as funding generally dries
up.
“We are still doing very much our
job, which ultimately is to support the country’s economic system,”
remarked Trovato.
Let’s hope this translates into
growth for the second year running.
