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December 12, 2009updated 12 Apr 2017 4:29pm

German Supplement: Banking channel growing in strength

While the vendor finance channel formed the largest proportion of German lessors business and saw the largest rise last year, business acquired through banks has also been on the rise for some time now. But what impact will refinancing issues have on German lessors in 2010?

By Jason T

While the vendor finance channel formed the largest proportion of German lessors’ business and saw the largest rise last year, business acquired through banks has also been on the rise for some time now. But what impact will refinancing issues have on German lessors in 2010?

The banking channel grew by 9 percent in volume last year, accounting for 13 percent of all equipment-leasing business transacted.

The BDL, Germany’s leasing association, termed this segment’s growth as “remarkable”, adding that the rise in leasing business acquired through banks is in “response to increasing customer-side demand”, which has led to more banks offering leasing as a financial product.

With 63 percent of non bank-owned leasing companies saying they could not do adequate new business due to a lack of refinancing, it is no surprise that customers are turning to cash-rich banks for their leasing needs. Although to some extent the outlook for refinancing looks better in 2010 than it did in 2009, it is likely that banks will continue to hold the upper hand for some time.

For the banks, because leasing offers a ‘safer’ income model to traditional lending – thanks to the inherent asset behind every deal – it is also an appealing product for them. But the banking channel is still far off from catching up with the vendor finance and reseller channels, which made up just over half – 54 percent – of new business last year.

This segment, which also includes captive lessors, saw an above-average increase of 11 percent last year, testament to the popularity of vendor partnerships. This 11 percent rise could be attributed to manufacturers looking for ‘safer’ conduits for selling their products, especially pertinent in a recession.

The broker channel – which has traditionally been weak in Germany – only formed 6 percent of new business last year, and this is not expected to change as long as demand for finance outstrips supply.

Perhaps unsurprisingly, direct business was the only channel which saw a net decrease in business last year. Indeed, the direct business channel – defined as new business acquired through leasing companies’ own sales teams – saw business fall by three percent last year to 26 percent of total new business, perhaps also because of lessors encountering difficulties when refinancing.

“Refinancing will remain difficult in 2010,” said Friedhelm Westebbe, managing director of the BDL.

Although he expects existing market trends – especially with regard to vendor leasing – to continue, non bank-owned companies will continue to suffer.

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