US-owned leasing business may run off European book. Liz
Bury writes.
Go deeper with GlobalData
Key Equipment Finance has begun
consultations with staff in offices across Europe in a proposed
restructuring.
The move is throught to relate to
the introduction of a new IT system, and to capital constraints at
the US parent bank. A complete withdrawal from leasing in Europe
was not out of the question, sources claimed.
A new Oracle lease management
system was introduced to European offices over the New Year period.
It enables centralised management of leases and could help to
smooth any run-off of the portfolio, estimated to span
three-and-a-half to four years.
A source said: “Having the new
system would allow the run-off. Previously it has used local
systems that needed a fair number of staff.”
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By GlobalDataThe new IT system went live over
the New Year period in the southern region covering France, Italy
and Spain, and in the Nordics, covering Denmark, Norway and
Sweden.
It was already used in Benelux,
Germany, the UK and Ireland. The finance function for the Nordic
region had been partially moved to the UK, and the local office may
now be closed.
“The Nordic book, for example,
could now be administered from the UK. Programmes going well in the
rest of Europe haven’t always had the same traction in the Nordic
region. It’s a different market, particularly in technology,” the
source added.
A spokesman for Key Equipment
Finance (KEF) declined to comment about the specifics, but said in
a statement: “Like most businesses, KEF continually analyses and
updates the strategic direction of the company to best align with
changing market dynamics.”
“As such, we are currently
evaluating several options that will enable us to best meet client
needs and to ensure the continued delivery of strong business
results to our parent company, KeyCorp, and its shareholders.”
KEF is not alone as a bank leasing
subsidiary redefining its relationship to its parent bank. KBC Bank
is also believed to be stabilising its capital base and putting
less into leasing.
One senior leasing industry
observer said: “KeyCorp is short of capital, and it’s not a good
time to go to the capital markets. A finance director of a bank
might be happy to get out of leasing, but not at a loss. The
question is how to get out? The answer is with great
difficulty.”
If proposed new lease accounting
standards are introduced then they, combined with lack of funds,
could make leasing subsidiaries significantly less attractive to
their bank parent companies.
“The rationale for paying for
equipment could go. Leasing has always been good at inventing
stuff, and one of the ways to go is doing more business that wraps
in services,” the observer said.
“Not many banks are keen on rentals
relating to services they have no control over. Some of these
transactions may escape the accounting rules, but it changes the
nature of what banks do.”
KEF could find that operating as
separate entity from the main bank has become a disadvantage in the
context of post-crisis
banking.
“You could ring fence leasing to
maintain the capital base. That’s a discussion to be had with the
central banks and regulators,” added the observer.
“Bankers will turn to the things
they know: asset management, foreign exchange. Leasing will suffer
from being an unknown quantity.”
