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August 1, 2009updated 12 Apr 2017 4:34pm

Analysis: Bank-owned lessors

Lenders in the Republic of Ireland are cutting back on business to a huge extent, with Bank of Scotland Ireland expected to announce the closure of its asset finance business in tandem with a possible shutdown of its Halifax branch network AIB has announced its closure to broker business outside the motor sector this month, following Bank of Irelands refusal of introduced deals at the end of June

By Verdict Staff

Ireland

Lenders in the Republic of
Ireland are cutting back on business to a huge extent, with Bank of
Scotland Ireland expected to announce the closure of its asset
finance business in tandem with a possible shutdown of its Halifax
branch network.

AIB has announced its closure to
broker business outside the motor sector this month, following Bank
of Ireland’s refusal of introduced deals at the end of June.
Lombard Ireland, understood to be recently assigned as ‘non-core’
by parent RBS, closed its doors to broker business in late
April.

UK

Life is not getting any rosier in
the UK asset finance sector. In May new business declined
year-on-year by almost 38 percent, and this followed the
announcement that plant and machinery finance fell by 44 percent
during Q1 of this year.

As brokers struggle to survive, it
also emerged last month that Fortis Lease UK is pulling out if the
yacht and jet finance market.

Some bank lessors, meanwhile, are
urgently upping their efforts to integrate more with their
parents.

Important market news is that the
respected Andrew Bullard has parted ways from State Securities,
Five Arrows’ subprime specialist, of which he was its long-standing
sales director.

Germany

Preliminary figures for the second
quarter of 2009 show that new business volumes in Germany are
likely to be down year-on-year by 25 percent.

This follows a decline during the
first three months of this year of 17 percent compared to the same
period the year before. While on paper this looks bad, in reality
the periods on which these latest results are being compared to –
the first two quarters of 2008 – were “very strong”, according to
the German leasing association.

Therefore, the association estimates
that “the negative growth rate of the whole year 2009 will be
lower, perhaps between minus 15-20 percent”.

Austria

Austrian-based CEE leasing
networks such as Raiffeisen and VB have reduced volumes almost
universally in order to preserve portfolios hit by the regional
collapse of road transport and construction.

Meanwhile, resale outside of the
automotive sector has proved a brutal challenge. Relatively
established EU markets such as the Czech Republic, having been less
dependent on foreign investment than ‘overheated’ markets such as
Romania and Ukraine, have seen less drastic growth in arrears.

All lenders agreed that Q1 brought the
sharpest changes to the market, with the rest of the year
cautiously expected to remain flat for business.

Poland

International banks have seen
their Polish leasing arms universally hit by large new business
drops in Q1, with Crédit Agricole subsidiary EFL down 32 percent
year-on-year, Commerzbank-owned BRE down 50 percent, and Raiffeisen
Leasing International’s Polish business 70 percent short of Q108’s
business volume.

Raiffeisen has reported rescheduling
of several big ticket deals due to the impact of international
markets, and expects business decline until the end of the year,
while EFL has seen a glimmer of hope through a €210 million SME
lending facility from the European Investment Bank (EIB) and the
Council of Europe Development Bank (CEB).

Italy

Given the Europe-wide collapse of
real estate, it comes as little surprise that the Italian leasing
market – which is dominated by real estate finance – has had a
shocking 2009 so far.

Also, with expectations that new
business will total €30 billion by the end of this year, a whopping
€20 billion short of the equivalent figure for last year, then it
looks as if there are few signs of recovery.

UniCredit Leasing reported a 40
percent decline in new business during the first five months of
this year. The top Italian lessors reported a slowing down of
business during 2008 of 26 percent.

The Baltics

The economic crisis has hit the
Baltic region particularly hard, with new business down by 73
percent year-on-year in Estonia at the end of May 2009, and down 85
percent in Latvia in June 2009, according to industry association
figures.

Nordea Finance has seen its market
share grow to 36 percent in Estonia, and aims to become the number
one player in Latvia. But other companies have not been so
successful: Sampo Finance, part of Danske Bank, has become a recent
victim of the recession, essentially pulling out of the Estonian
leasing market entirely.

Romania

With a Romanian business
newspaper recently reporting an average fall in new business for
leasing companies of 75 percent, the industry is in dire
straits.

The Romanian Leasing Association,
which estimated the fall to be around 60 percent, attributed the
decline to the economic crisis and the rise of fraud. But steps are
being taken to fight back, and a register of assets is set to be
launched in the fall. In terms of declining business, all types of
assets have been affected, although vehicles have been hit the
hardest.

A swing towards operating leases was
also reported as companies look to maximise profits.

Turkey

The Turkish leasing industry is
facing a huge challenge as its total new business in 2009 is
expected to plummet to $2.5 billion (€1.8 billion), more than 50
percent below the already disappointing $5.3 billion recorded in
2008.

However, according to FIDER’s
chairman, Bülent Tasar, the crisis has partly been caused by the
VAT increases introduced last year which have discouraged lots of
firms from leasing.

Not everyone agrees with his view, but
there is a general consensus that if the Turkish parliament
approves legislation under discussion, volumes could increase
again.

Slovakia

Following years of consecutive growth
in the Slovak leasing market, and a 6.5 percent volume growth over
2008, new business fell by almost 43 percent during the first
quarter of 2009, with truck and trailer leasing down 70 percent
year-on-year.

CSOB Leasing, owned by Belgian banking group KBC, reported a
loss of €1.6 million for 2008, compared to a profit of €8.4 million
in 2007, while the local arm of Austrian VB Leasing ended its
financial year with €1.32 million in losses. Tatra-Leasing, owned
by Raiffeisen group, saw profits down 29.9 percent year-on-year at
€1.8 million.

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