The real impact of the credit crunch was driven home last month
with the closure of the UK asset finance divisions of two banks,
Bank of Ireland and Kaupthing Singer & Friedlander,while at
least one other large bank lessor is believed to have temporarily
last month closed to new business one of its asset based lending
arms.
The asset finance arms of CIT and the Co-operative Bank are also
under review as they face liquidity and margin pressure.
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The industry has not been so badly hit since the oil crisis in
the early 1970s, but more bad news is expected with continuation of
the crunch combined with tightening margins, as well as the
collapse of lessee Global EPP which might cost lessors up to £70m
in write downs (see Special Investigation).
The effects of the crunch were first felt last year when One
World Leasing collapsed, resulting in the sale of its assets to
Investec Bank, although with a tightening up of interbank, lending
worse may follow.
Kaupthing
Kaupthing’s leasing business, which is mainly comprised of pubic
sector deals, is up for sale, while the business finance division
of Bank of Ireland UK, which includes leasing and factoring, has
closed down and its corporate division has stopped offering big
ticket leasing due to changes in accounting rules.
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By GlobalDataOne source close to Bank of Ireland said that the bank was
shutting its doors to asset finance in the UK because of increased
regulatory pressures and tightening margins.
“They felt they weren’t getting enough return that is needed
from a subsidiary company,” the source said. “Particularly in a
mature market, lessors are finding it hard to get funding from
their banking parents because the obvious tax advantages that were
once there have now gone.”
Bank of Ireland’s press office said the closure of BOI’s
business finance division is because it “does not fit with the
Bank’s long-term growth strategy for the UK”.
“We will continue to administer and manage existing BIBF Finance
Agreement(s) and these customers will not be affected. Bank of
Ireland will continue to operate its other UKbased asset finance
business, Northridge Finance, which is part of NIIB,” it said in a
statement.
“Bank of Ireland Group has a focused growth strategy in the UK,
and committed to developing businesses with scope for significant
growth and superior shareholder return.”
CIT realigns
CIT’s portfolio is under review after the announcement last
month that it had drawn down completely on its bank facilities, and
its only possible fall-back may be to sell non-core assets in order
to generate up to $7bn (£3.5bn) in proceeds. The commercial and
consumer lender also sold its 30 per cent equity stake in US-based
DFS raising proceeds of $306m (£154m) for the group.
A CIT spokesperson told Leasing Life that the company
will become “smaller” and “more focused”.
“We are in the process of reviewing various alternatives and
will refine the mix of assets and businesses over time. This will
enable us to focus on our strategic core commercial finance
franchises.” However, the spokesperson did not comment on which
part of CIT’s portfolio is under review.
Nevertheless, CIT continues to hold an option to provide funding
to Dell Financial Services through to January 2010, while Microsoft
Financing, which receives funding lines from CIT, said it was
committed to its partnership and was not looking for new
funders.
Co-operative Bank review
The asset finance arm of the Cooperative Bank is also under
review, partly because of a hardening of margins caused by the
credit crunch.
Its small ticket leasing arm financing deals between £75,000 and
£250,000 is under inspection, its business development manager,
Chris Matthews, said.
“We are in the throes of reviewing business streams but we
are not pulling out of the market,” he added. “We announced last
year that we have a £400m pot to invest in the renewables sector,
and we have been putting more emphasis on that recently.” Leasing
deals involving biomass and hydroelectric energy assets are of
particular interest to the bank. Emphasis is also being placed on
larger deals, in excess of £250,000.
Lansbanki: ‘Business as usual’
Landsbanki’s commercial finance division, comprised of asset
based lending, structured finance, syndications and equipment
finance, continues “business as usual”, writing deals worth between
£5m and £300m, a spokesperson said. In recent weeks the company
closed a £65.5m deal with LPC Group, Britain’s largest independent
manufacturer of specialist paper products, and also a £23m invoice
discounting deal with Borders bookshop.
The company declined to comment on the impact the administration
of lessee Global EPP, from which Landsbanki is owed in excess of
£6m.
