After a year of astonishing growth in 2007, the Czech leasing
industry appears to have stopped dead in its tracks.
Value of assets financed across the members of the Czech Leasing
and Financial Association (CLFA) has dropped by a significant 10.8
percent year on year, and levels of equipment financing remain
virtually unchanged from figures for H1 2007.
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Hope, however, can be found in the upsurge of operating
leases among major lessors and a corresponding shift in preference
towards the leasing of heavier transport rather than consumer
vehicles. Additionally, many leasing firms have made big increases
in provision of consumer credit, commercial credit and factoring to
reflect the continued development of the Czech consumer
economy.
In the first half of 2008, CLFA members financed machinery,
equipment and means of transport worth CZK50.7 billion (€2.1
billion), demonstrating a 10.8 percent decrease compared with the
same period in 2007. This inter-annual deterioration has deepened
with the progression of the year after standing at 8 percent
following Q1 reporting.
This descent becomes more apparent when compared with 2007’s
first-half reporting, for which a year-on-year increase of 8.5
percent was reported for the same figure.
The sudden U-turn in growth is showcased by the performance of
CSOB Leasing, the largest of the Czech leasing firms, which
reported less than one tenth of a percentile point increase in
value of equipment financed during H1 2008 compared with H1
2007.
The Czech arm of Italian conglomerate UniCredit Leasing,
runner-up to CSOB, reported a 4.9 percent decrease in value of
equipment financed.
Meanwhile, former number three VB Leasing also announced a 4.5
percent shrinkage in this figure, falling to fifth place in the
rankings behind Cetelem CR and GE Money Multiservis.
Within the top 20 companies of the CLFA, only five reported
growth in value of equipment financed. Chief among them was SG
Equipment Finance, which managed a 28.4 percent increase.
Overall, the top 20 leasing companies generated a mean
year-on-year growth figure in this area of just 5.2 percent.
Taxation regime change
A report published by the CLFA after H1 reporting had been
published across the association put the “decrease of demand for
financial leasing” down to changes in the taxation regime imposed
on 1 January 2008.
The act (number 261/2007) was aimed at stabilising public
finances, and may have been responsible for some of 2007’s leasing
growth as companies rushed to sign leases before less favourable
tax conditions came into effect.
Act number 261/2007 did not have an entirely inhibitory effect
on the leasing industry, however.
As a result of changes to the taxation framework of financial
leasing, operating leases have become a much more attractive
proposition to lessors. As a result, penetration of operating
leases within leasing as a whole increased from 12.5 percent in the
first half of 2007 to 16.3 percent in the first half of 2008.
The rise has been particularly prevalent in the car and light
utility-vehicle sectors, in which operating leases made up 25.2
percent of all contracts written during the first six months of
2008.
This shift in priority towards operating leasing is highly
visible in the performance of the top 20 Czech lessors. CSOB,
despite stagnation in equipment finance, saw a 77.7 percent surge
in value of operating leases, bumping it up the ranks of operating
lessors from fifth to third.
SG Equipment Finance, Fortis Lease and Scania Finance also moved
up the ranks of operating lessors during H1, powered by
year-on-year increases of more than 100 percent. The charge was led
by SG Equipment Finance, which reported 134 percent growth in value
of operating leases compared to the same period in 2007.
The table was topped by operating lease specialists Leaseplan,
which reported the same rate of year-on-year growth (23.1) in both
value of equipment financed and value of operating leases.
Leasing of movable assets in the first half of 2008 continued to
reflect the dominance of transport and especially road vehicles,
with cars, light vehicles and heavy transport vehicles taking
nearly half of the market between them.
Proportions of asset types within that dominant block did,
however, show an emerging trend towards the heavier end of the
transport market.
The share of car leasing decreased from 25.2 percent in 2007’s
first half to 23.7 percent in 2008’s and the share of light utility
vehicles decreased from 19.5 percent to just 19 percent, while the
share of trucks and trailers fell from 26.2 percent to just 24
percent.
On the other hand, buses and other heavy commercial vehicles,
plus rolling stock, ships and aircraft took their combined market
share from 1.8 percent to 5.7 percent. The market share occupied by
machinery and equipment also rose, reaching 24.8 percent against 24
percent in the first half of 2007.
As in previous years, the majority of equipment leases were
signed in the private sector of services, while one third were
signed in the areas of industry and construction.
Formidable slowdown
Despite the formidable slowdown in leasing activity, CLFA
members showed a near-universal increase in their non-leasing
financing operations.
In H1 2008, the volume of finance granted by non-bank companies
via consumer credits increased to reflect what the CLFA H1 report
noted as an increase in demand for finance-able household
expenditure corresponding with rising Czech GDP.
The top 15 companies ranked by amount financed by consumer
credit in 2008 reported a mean increase in provision year-on-year
of 19.6 percent. This mean encompassed figures as high as 105.1
percent – the increase reported by CSOB, which goes further to
highlight its shift in focus away from traditional finance leasing
over the course of the past year.
CLFA members granted consumer credit in the form of personal
loans (31.4 percent of overall volume), revolving credit (33.2
percent) and as point of sale finance (35.4 percent).
As well as consumer credit, CLFA member companies provided
non-leasing finance for entrepreneurs to the tune of €0.4 billion,
an increase of 44.9 percent compared to the first half of 2007.
Factoring, too, saw a marked rise in incidence, with receivables
to the value of €2.9 billion assigned to the members of the
Association of Factoring Companies of the Czech Republic, an
increase of 17 percent on H1 2007.
The enthusiasm with which CLFA members are embracing operating
leases and non-leasing financial models suggests the sudden
drop-off in traditional leasing growth may not be indicative of any
general economic halt in the Czech Republic.
