While in Poland bad debt and defaults appear to be under control, in Romania an already bad situation looks set to get even worse in 2010. Antonio Fabrizio reports.
Prospects for Eastern European lessors might generally be bleaker than for their Western European counterparts, but reports often fail to take into account the significant differences existing between individual countries.
Take Poland and Romania, for example. Their respective leasing markets have gone through completely different experiences in 2009, and repercussions are likely to be seen well into 2010.
In Poland, GDP growth never went below zero, and therefore the country officially never entered recession in 2009.
Andrzej Krzeminski, CEO of Poland’s largest lessor EFL, said: “We have observed a dropdown in new business, a low quality of payments, but we didn’t go thorough a major shake-up.”
His company, a Crédit Agricole subsidiary, saw new business production drop down to €50 million a month in early 2009, half the figure of the most successful months in 2007. Similarly, defaults increased and risk problems only slowed down in the second quarter of 2009.
But Krzeminski added: “Now it’s all under control because we took a lot of actions to mitigate risk. We made sure that we protected ourselves from the problems that might come in 2010 from accepting bad risk in 2009.”
He expects that at the end of 2010, the amount of bad debt in EFL’s portfolio will have dropped from 1.8 percent in the worst months of the downturn, to less than 1 percent.
Romanian lessors, on the other hand, face a much bleaker 2010.
New leasing business in the country shrank from €5 billion to €1.2 billion, a spectacular 80 percent drop.
Bas Hoekstra, vice-president of Romania’s leasing association ALB, forecast no growth in 2010, but a flat market, as everyone will be “licking their wounds” rather than focusing on new business.
‘This is disastrous’
He said: “This is disastrous. There are many players currently exiting the market, and international players are putting their businesses up for sale, or they are integrating their leasing activities with their parents if they are bank-owned.”
Although he does not expect a worsening of bad debt, he also highlighted that there were some lessors that “haven’t come clean yet”.
“They are rescheduling a lot of deals in order to keep those deals out of the bad debt area, but you can’t continue to do that forever; at some point in time they will have to close their books and come clean,” he said.
It might well be, then, that Romania and a number of other Eastern European countries, even though they have hit the bottom, will continue to suffer for a while.
But at least Poland’s market – although dependent on developments in Germany, which is its major commercial partner – should see a better 2010 than many of its neighbours.