Last month HBOS and Lloyds TSB announced
plans to merge, as did Alliance & Leicester and Santander. This
followed a flurry of tie-ups in Italy, France, and, of course, the
multi-bank acquisition of ABN AMRO. Fred Crawley
and Antonio Fabrizio examine what all this means
for European leasing.

Even before the latest round of banking mergers in the UK, 2008
was gearing up to be a year for large-scale tie-ups. However, with
the unions of HBOS and Lloyds TSB, and of Alliance & Leicester
and Santander, it looks as if large-scale marriages of convenience
during a crisis have become something of a British present day
obsession.

Elsewhere Italian banks and French lessors have been tying the
knot, all of which leaves the question: what exactly does this mean
for the future of the European leasing industry?

Quite a lot, it seems. For sheer size the new HBOS/Lloyds
leasing entity will be sufficiently vast for some to question
whether competition authorities will let it trade without some
parts of it being sold off.

HBOS-owned Lex is the UK’s largest vehicle leasing company with
a fleet of over 250,000 cars and vans, including 37,000 units in
the commercial vehicle market. It also owns Hill Hire, UK’s largest
truck and trailer rental specialist, which has a fleet of over
21,000 vehicles. Lloyds, on the other hand, owns Lloyds Autolease,
which has 140,000 units.

On top of this HBOS has small, medium and large ticket leasing
businesses. The former was recently folded into HBOS’ commercial
banking team, which means small ticket asset finance will be sold
alongside other products such as credit cards and overdrafts rather
than as a standalone product.

This move, which occurred in recent weeks, is likely to give
rise to job losses, although UK leasing recruiters last month did
not expect a wave of lessor job losses to arise from the
HBOS/Lloyds tie-up.

“Of course, one would expect that many people are left without a
job after a takeover, but this could be less probable in the case
of HBOS and Lloyds,” said one recruitment agency last month.

“The two companies have different expertise, including in their
leasing business, and therefore they are not massively doubling
their respective staff, and therefore we do not expect many
redundancies.”

‘Sit and wait’

Another financial recruitment agency said that some 600
employees at HBOS across asset finance and other sectors had
already been made redundant before the merger, but current
employees would more likely “sit and wait” to see how things
develop before looking for a new job.

But there is an aura of negativity among many in the leasing
industry about what the future holds for the asset financiers at
HBOS and Lloyds.

Long before the merger happened HBOS reportedly stopped much of
its asset finance lending to the public sector, and at last month’s
Southampton boat show its marine finance unit was allegedly
declining business to new customers.

Furthermore, while Lex has reputedly a first class single
technology system, Lloyds Autolease’s legacy systems need some
repair work done on them, sources alleged. Also, not all customers
of Bank of Scotland Dealer Finance – the former Capital Bank – will
necessarily be overjoyed at having to deal with Black Horse, if
such an eventuality ever arises.

Meanwhile, the takeover of ABN AMRO by Royal Bank of Scotland,
Fortis and Santander will heavily affect the leasing businesses
involved. At the time of printing, news broke that Fortis is to
sell most of its ABN AMRO stake after an €11.2 billion bailout.
Before this turmoil, however, October 2 had been set for the
transfer of equity from ABN AMRO’s Netherlands business unit –
comprising its Dutch and Belgian businesses – to Fortis’ Benelux
arm.

Shares in ABN subsidiary Amstel Lease’s Benelux businesses were
due to be transferred to Fortis Lease on this date should Fortis
choose to retain this element of ABN AMRO. In any case, Martin
Levering – the current CEO of Amstel Lease – will have a lot on his
plate.

Either way, the future of Amstel’s remaining business is
unclear, although Santander may obtain its Italian and Brazilian
business as part of the acquisition of ABN operations in these
countries.

Meanwhile, at time of going to press neither A&L nor
Santander were willing to comment directly on the future of their
leasing operations. However, a spokesperson for the former did say
that the merger will allow an increase in the small and medium
enterprise market of the two banks.

He said: “A combination of Abbey with A&L will lead to
significant increases in Abbey’s number of active business
customers and accelerates Banco Santander’s aim, through Abbey, to
expand its SME operations and increasingly compete with the ‘big
four’ incumbent banks for the UK’s mid-corporate banking
business.”

“The planned expansion in the SME market also enables Banco
Santander to make further progress in transforming Abbey into a
full service commercial UK bank,” he added.

The sectors that could be affected include A&L’s operations
in the traditional leasing sector – including its hire purchase,
finance lease, and operating lease products – as well as
‘alternative’ products, such as its ‘dynamic lease’ scheme.

A&L currently provides £6.5 billion of commercial lending
across the UK in several areas. It finances, for example, one in
four of all coaches in the UK, while its subsidiary, Hansar,
provides a service to smaller operators.

Its other leasing operations include ships, rail assets such as
freight wagons, container boxes, commercial aviation aircraft and
helicopters, and waste recycling, in which A&L has taken the
lead as it is a founding member of the government WRAP (waste and
resources action programme) equip scheme, which provides asset
finance in the recycling sector.

It also plays a role in niche shipping areas, such as offshore
oil drilling support vessels. In the environmental sector, the bank
funds assets in a number of renewable sectors, particularly in the
wind energy generation market, where it offers funding facilities
to wind farm developers.

In advance of the restructuring of A&L post merger, there
have already been job losses at the UK bank. James Comrie last
month stepped down from his post as head of Wholesale Fleet at
A&L Commercial bank after nine years in the post. In November
he will join Dawson Finance as its new head of specialist leasing
where he will be involved in funding fleet and waste, as well as
other specialist asset funding.

The other Santander-owned British bank, Abbey, has interests in
the leasing sector through Porterbrook, which specialises in the
leasing of railway rolling stock and associated equipment and has
leases with 17 train companies. Its investment to date in the UK
rail market totals about £1.5 billion (€1.88 billion) in new trains
and over £200 million in existing fleet refurbishment.

Abbey sold its asset finance and leasing businesses – which
provided specialist finance to the small and medium enterprise
sector – back in 2004, a few months before it was acquired by
Santander.

For advise on their future integrations, however, they could
only look south to some of the considerable leasing mergers which
have been taking place in both Italy and France in recent
months.

In July this year, UBI Leasing was formed from the union of BPU
Esaleasing, a part of former Italian bank, BPU, and SBS Leasing,
part of SBS.

The two businesses in many respects complement each other – and
it appears the merger process has occurred efficiently and
relatively quickly.

Specifically focused

UBI Leasing has almost 2,000 retail branches and 400 corporate
points. Traditionally focused in Northern Italy, Lazio, Campania
and Puglia, the company said it aims at exploiting the
‘complementarities’ between the two former businesses, with BPU
Esaleasing specifically focused in cars and equipment, and SBS
Leasing specialising in real estate and maritime fleet.

Bruno Degrandi, the former president of SBS Leasing, has become
UBI Leasing’s new president, and Maurizio Lazzaroni, managing
director of BPU Esaleasing, and a member of the Italian leasing
association, Assilea, is its new managing director. Faustino Lechi
di Bagnolo, from SBS Leasing, is the director general of UBI, and
Tazio Morbio from BPU Esaleasing is its deputy director
general.

Judging by the growth of the two businesses prior to the merger,
UBI has considerable potential. The lease businesses of SBS and BPU
totalled €1.6 billion at the end of the second quarter this year,
up 16 percent compared to the same period in 2007. Net profits
totalled €30 million.

Managing director Maurizio Lazzaroni said: “Since July UBI
Leasing has been fully functioning following the phase of
information system migration, which proceeded smoothly and within
the time frame that we had anticipated in our industrial plan.”

He added: “On a commercial point of view, the first performance
on the markets has been very positive. We will now focus on the
maximisation of the complementarities between the competencies of
SBS Leasing and BPU Esaleasing in the interests of all our
stockholders.”

Also, this year, Intesa Leasing and San Paolo Leasint merged to
form a new entity called Leasint. At the end of the second quarter
this year Leasint announced that new business for the year had
reached €3.3 billion, an increase of 4.7 percent compared to the
figure last year when the lessors were separated. Net profit was
also up 22.7 percent to €46.8 million compared to last year.

Two major players

According to Leasint managing director Edoardo Bacis, who was
also the former MD of Intesa, the integration occurred in order to
directly fuse “two major players in the Italian leasing sector,
with common values, combining their force to maximise growth”.

Also, earlier this year LeasePlan France, the French branch of
global fleet and vehicle management business LeasePlan, completed
the acquisition from Mercedes-Benz Financial Services of its
subsidiary Daimler Chrysler Fleet Management, also known as DCS
Fleet. The merger has given LeasePlan a French business which has
100,000 units.

Last month LeasePlan told Leasing Life that the main
challenges in France in the first months following the acquisition
concerned the coordination of sales forces, the structuring of the
integration process in the frame of a common programme using best
practices and expertise from both companies, and the accounting and
reporting consolidation of DCS Fleet with LeasePlan France.

DCS’s management was integrated into LeasePlan France’s
governance, and the managing director of DCS Fleet became a member
of LeasePlan France management team after the acquisition.

The DCS Fleet’s staff is still located in a separate building,
but the company said that at the beginning of 2009 a move is
planned to regroup LeasePlan France and DCS Fleet staff.

Meanwhile, sources say that the merger of the asset and motor
finance arms of HBOS and Lloyds will take years to complete. In a
leasing market already saturated with up-for-sale portfolios,
selling off the crown jewels might well be the way forward.
However, as these Italian and French mergers have shown, large
lessors tie-ups can occur, and relatively comfortably so, too.