While the real estate market has been hit by new tax rules,
public sector and energy leasing may offer new hope in a heavily
penetrated market
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
Ioannis Klokidis, managing director Aspis Leasing SA and Aspis
Credit SA, and also president of the Greek Leasing Association,
recalls how 25 years ago, when he began his leasing career, Greece
was awash with foreign-owned leasing companies. “Now they are
nearly all gone,” he remarks. Today there are just three foreign
bank-owned leasing companies: Commercial Leasing, owned by Credit
Agricole, General Leasing, part of Société Générale, and BNP
Paribas Leasing.
Now, however, it is the turn of the Greek banks and their
leasing subsidiaries to turn their attention to new markets.
Piraeus Leasing, EFG-Eurobank-Ergasias Leasing, and National
Leasing, which is owned by the National Bank of Greece, have been
the most active in setting up operations in new markets. Others,
however, are showing increasing interest in foreign markets. Aspis
Leasing, part of Aspis Bank, for instance, has plans to set up a
subsidiary soon in Bulgaria, a country where 41 per cent of leasing
business is sourced from the three Greek leasing companies named
above.
Pastures new
The move to fresh pastures, a trend which started in 2000 and
which over the last four years has been occurring at a faster rate,
is an important part of Greek lessors’ strategy. This has partly
been caused by the declining number of opportunities available to
Greek lessors in their home market. “Expanding to new countries is
a large opportunity for Greek lessors as the Greek domestic market
is mature, and it is becoming harder to grow there,” says Klokidis.
New production in Greek leasing last year totalled €3bn, while
credit advances increased year-on-year by €1bn.Total outstandings
reached just under €8bn last year, 16 per cent up on year end
2006.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataSome attribute the slowdown in Greek leasing to a decline in
real estate leasing, which has been caused by tax changes.
According to Pelly Papakyriaki, managing director of
EFG-Eurobank-Ergasias Leasing, a recent rule change has meant VAT
is not deductible on purchases of commercial real estate made by
Greek leasing companies. This only applies where the asset being
bought is owned by a real estate or manufacturing company. This
rule is applicable to lessors, but not to other providers of
loans.
This has made real estate leasing far less attractive to
customers, although there still exists zero tax on sale and
leaseback deals in this sector, says Papakyriaki. She adds: “If we
don’t find alternative things to do then the rule change will
reduce new production for real estate leasing by 5 to 10 per
cent.”
Not all Greek lessors agree that the real estate leasing market
is on the decline. Either way, any collapse of real estate leasing
could potentially have a disastrous effect on the whole asset
finance sector. The percentage of local lessors’ investment in this
sector has grown sharply since a recent law change enabled
commercial premises to be financed through lease products, and
today real estate leasing represents 58 per cent of all leasing in
Greece.
Leasing limits
Leasing in Greece has natural limits. A law enacted in 1986 bars
ships from being financed by way of leases, rather only by other
types of loans, although some yachts and smaller craft are leased.
Considering Greek ship owners control the world’s largest fleet,
amounting to 28 per cent of global tonnage, and with some 40m
tonnes of new capacity in the pipeline, any rule change in favour
of ship financing by way of leasing will have a dramatic effect on
Greek lessors.
Also, vendor finance business in Greece remains small compared
to Western Europe, although international truck dealerships,
including MAN, Scania and DAF, offer customers a range of deals
provided by a panel of lessors, rather than through the captive
finance arrangements common elsewhere in Europe. Only Mercedes-Benz
has a captive finance company in Greece, although it has a limited
market share.
IT finance
In the IT sector international players such as Dell and
Microsoft provide captive finance, although EFG-Eurobank is in
talks with Cisco Capital to provide all of its customer financing
arrangements in Greece. However, IT financing represents a
miniscule proportion of leasing in Greece – around 3 per – and
local lessors are not optimistic about future growth. Software
leasing has more potential, however. BNP Paribas Leasing, for
instance, provides finance to SAP in Greece.
Also, despite continued investment in infrastructure in Greece,
combined with a provision of €22bn in EU state aid covering the
period 2006 to 2013, the leasing of machinery, which represents 16
per cent of total leasing, declined last year. Ioannis Mavrellos,
managing director of Piraeus Leasing, says, however, that in fact
machinery leasing is growing but, because of the sharp rise in real
estate leasing, then proportionate to the overall leasing market it
appears to be contracting. “In absolute terms it has risen,” says
Mavrellos.
Meanwhile, however, the foreign leasing arms of Greek banks are
thriving. These foreign subsidiaries provide some 9.2 per cent of
total new business for Greek leasing companies, and 9 per cent of
total outstandings.
The three Greek leasing companies in Bulgaria, EFG Eurobank
Leasing, Piraeus Leasing, and Interlease, the local name for Greek
company National Leasing, have captured 41 per cent of the local
market, and last year transacted a combined total of €625m of new
business. These three lessors are also the only Greek lessors in
Serbia where they represent 5 per cent of the total market and last
year transacted deals worth a total of €32.2m.
Turkish delight
In Turkey, National Leasing has become one of the largest local
players, signing a total of €653m of new business in 2007. Combined
with EFG Eurobank they represent 8 per cent of the Turkish market.
EFG Eurobank, which is planning to follow its parent bank into
Russia and then Ukraine, is planning to invest more heavily in
Turkey and believes it is a market with lots of potential,
particularly as the country’s real estate market leasing is
undeveloped, and because it is seeing an upturn in the operating
leasing of cars and boats.
Despite Romania being a relatively large market, Greek lessors
National Leasing, EFG Eurobank, Piraeus Leasing, Alpha Leasing,
Marfin Leasing and Cyprus Leasing represent 28 per cent of the
total local market, and last year they transacted around €650m of
new business.
Greek lessors are also making their mark elsewhere in Europe
with some having opened up recently in Egypt (Piraeus Leasing),
Poland (EFG Eurobank Leasing), Albania (Piraeus Leasing and EFG
Eurobank Leasing), and earlier this year Cyprus Leasing launched a
subsidiary in Russia. It is early days for all of these, but they
are keen to scale-up and continue their march to new
territories.
Home soil
It is not just, however, foreign opportunities available to
Greek lessors. Changes are afoot at home, too. Some lessors report
that leasing to local authorities is strong, particularly for car
and waste related assets. Others say they are leasing heavily to
health providers, although these figures do not appear separately
in Greek Leasing Association statistics. Not all Greek lessors
lease to the public sector, however, so it appears to be early days
in the development of this market. Also, it is not possible to
lease to central government, although, according to Mavrellos, this
rule is currently under review.
Another is that some Greek lessors’ plan to invest in new asset
types, particularly in the energy sector. If they do so then the
average deal size will grow with it as many energy transactions are
between €10m and €15m in value. Mavrellos referred to corporate jet
leasing, a tiny market at present, as also having good
potential.
Also, government plans to make operating leasing more widely
available could transform the marketplace which, at present, except
for cars and a small number of broadly undeveloped sectors, such as
film finance, is dominated by finance leasing. The Central Bank of
Greece has investigated the possibility of opening up operating
leasing to new assets and, according to Klokidis, it will define
the “extent the scope of the finance leasing companies to offer as
well operating leasing under separate accounts”.
Lessees might have good reason to sign operating leases as such
deals can be off-balance sheet. Also, the 250 or so Greek companies
that have signed international accounting standards can apply these
rules in respect of their leases. It is believed that it will be
most widely used in the leasing of medical and construction
equipment. However, there are “huge obstacles” to the application
of operating leasing in real estate, says Klokidis.
Trucks look set to continue to be funded through finance lease
as to get an operating lease license costs an operator hefty sums,
ranging from €86,000 for a truck,€70,000 for coaches, and €300,000
for petrol transporting trucks. There are proposals to reverse
this, although it is expected they will take anywhere between three
and seven years to come into force.
It is important now for Greek lessors to look for new business
in Greece. Opportunities abound, but in the longer term the real
growth potential can probably best be achieved by expanding into
new territories.
KEY FACTS ON EFG EUROBANK LEASING
Ranking: Number one in Greece for new business
and volumes for the last seven years
Staff number: Greece: 69 Foreign subsidiaries:
150
Market share: 20%
Outstanding balances (year end 2007):
€1.5bn
Asset breakdown: Real estate (70%), vehicles
(12%), machinery and equipment (18%)
Number of customers: 5,500
New business volume (2007): €539m
Countries of operation: Bulgaria, Romania,
Serbia, Turkey and Poland
Plans for 2008: Enhancing business relations
with vendors, creation of additional subsidiaries so it is based in
the same countries as its parent, development of new facilities for
customers
