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January 1, 2010updated 12 Apr 2017 4:28pm

Out with the old…

Jason T Hesse looks back at the main stories that shaped the European leasing industry in 2009 and discovers 2010 cannot come soon enough for many. Following the economic storm of 2008, the year started off with European lessors taking steps to control the damage. BNP Paribas Lease Group announced it was severing broker links throughout Europe, with the companys then UK MD, Mike Dix, attributing the policy to the significantly higher default levels on broker-introduced business.

By Jason T

Jason T Hesse looks back at the main stories that shaped the European leasing industry in 2009 and discovers 2010 cannot come soon enough for many.

January 2009

Leasing Life January 2010 CoverFollowing the economic storm of 2008, the year started off with European lessors taking steps to control the damage.

BNP Paribas Lease Group announced it was severing broker links throughout Europe, with the company’s then UK MD, Mike Dix, attributing the policy to the “significantly higher” default levels on broker-introduced business.

It also emerged that, in the UK, both GE Capital Solutions and Siemens Financial Services were restructuring their businesses, with Siemens closing down its motor contracts and funfair equipment leasing arms, and GE reorganising the business.

However, the new year also saw lessors feel the sting from the Global EPP fraud, where lessors had bought no less than 579 pieces of equipment for the plastics manufacturer, when only 71 of these machines actually existed. Despite lessors claiming £64 million (€71 million) from the administrators, only £1.5 million was raised at a sale of Global EPP’s assets.

February 2009

LL February 2009 coverBusinesses continued to restructure in February, with new management at the helm of Iveco Capital and UniCredit Leasing; and De Lage Landen cutting its global workforce by 3 percent.

Although members of the German leasing association reported a funding shortage, elsewhere there were signs that liquidity had not entirely disappeared from the market.

Indeed, Banca Italease completed an almost unprecedented €1.38 billion securitisation – the sign of healthy demand – while GFKL, the German financier, raised €150 million by selling the Spanish and UK arms of Universal Leasing, one of its subsidiaries.

Good news also arrived courtesy of Deutsche Leasing, which reported a 15 percent increase in new business for 2008; and Grenkeleasing, which reported an 18 percent increase in demand.

March 2009

LL March 2009 coverMarch was arguably one of the most difficult months of 2009 for British brokers, with lessors such as KBC, Lombard and Investec all seriously reassessing how they do business – if at all – with intermediaries.

While KBC cut broker links entirely, Investec took steps to tighten its broker policy, including setting maximum exposure limits of £25,000, creating broker commission ceilings, and pulling out of a wide range of sectors.

The merger between HBOS and Lloyds TSB was also on everyone’s lips, with the announcement that the banks’ combined leasing arms would be led by former Lloyds directors David Oldfield (for the leasing business) and Nigel Stead (for the fleet finance business), while Lindsay Town and Jon Walden would both step down and leave the business.

Sale-and-leaseback transactions started to generate significant interest in March, with UK lessors such as State Securities and Lloyds TSB Autolease reporting “significant demand” and Lombard Vehicle Management reporting a 50 percent rise in sale-and-leaseback volumes.

April 2009

LL April 2009 coverWith entrepreneur Pelham Olive appointing a “dream team” of lessors – including ex-Syscap’s Lord Mitchell and Sean Williams, ex-BPLG’s Mike Dix, and ex-Asset Advantage’s Jonathan Eddy – for a new energy project finance business, interest in the ‘green’ energy sector continued to grow.

Indeed, while Crédit Agricole Leasing was involved in the financing of a €200 million photovoltaic installation in France, Deutsche Bank completed a €70 million long-term financing deal for four photovoltaic power parks in Mallorca, Spain.

Leasing Life started to investigate GP-Ads and Global Telecoms & Technology, and how a significant number of companies were refusing to pay millions of pounds for equipment finance deals which included services promised to them in earlier agreements, which they had allegedly not received.

This was the start of a long series of investigations (see page 15).

May 2009

LL May 2009 coverLeasing Life’s second business confidence survey showed lessors were, for the first time, openly worried about the future, where only the most adaptable and well-funded would survive.

In the survey, lessors predicted a continued fall in business volumes, limited availability of capital, a squeeze on profits due to increases in bad debt, deeper and wider cost reductions, and staff cuts.

Although the survey results made for grim reading, not all lessors were negative about the future. Indeed, memos from GE Capital, leaked to Leasing Life, showed the lessor was targeting 10 percent growth in 2010, helped by a much leaner business which would focus on pan-European accounts and large profitable in-country customers.

June 2009

LL June 2009 coverThe general mood in June was perhaps more optimistic and forward-looking than the previous month’s survey had suggested.

An analysis of the leisure finance sector showed that there were still opportunities for lessors, for example the opportunity to finance the equipment used in U2’s world tour.

Sam Geneen, managing director of Five Arrows Leasing and chairman of Fineline, the group’s company for the media industry, sounded an optimistic note.

“Not everything is doom and gloom,” Geneen told Leasing Life. “Today, more than ever, people need the services of the leisure and entertainment industry to take their mind off ‘recession stress’.”

The month also saw private equity firms reveal how they have earmarked tens of millions of pounds for investment in asset finance, should the right opportunities present themselves. Surely a welcome source of capital for cash-strapped lessors?

July 2009

LL July 2009 coverAlthough July’s Leasing Life covered the topic of fraud in depth, lease accounting was also high on the agenda, with the International Accounting Standards Board’s (IASB) deadline for comments approaching fast.

Although the actual impact of the IASB’s accounting proposals remained unclear, any attempts to bring leased assets onto lessees’ balance sheets were met with scepticism, sparking widespread concern the changes could harm the leasing industry.

Separately, an in-depth analysis of the Austrian and Swiss markets concluded that, although both economies had been hit hard by the financial crisis, they could be interesting markets for lessors to move into once the recession ends.

August 2009

LL August 2009 coverA survey of European leasing in August also revealed there was hope for the future.

Despite volumes declining rapidly across Europe in 2009, not all lessors had suffered equally. Bank-owned lessors in particular were found to be ‘reasonably positive’ about their future prospects, and were confident they could grow during the recession.

Lessors were not asking whether there was enough business, but whether demand would outstrip supply, the survey concluded.

August also looked at the state of the block discounting market in the UK, where some funding lines were being reduced. With some mid-tier lessors having their block lines cut, Leasing Life found block discounting would continue to be a key funding line for UK lessors – even though it may only be available to an elite few.

September 2009

LL September 2009 coverAs CIT’s financial problems deepened, Leasing Life looked at what was happening to the American lessor’s vendor relationships. The market was awash with speculation over who might take over Dell and Microsoft’s vendor finance agreements, while Toshiba and Avaya confirmed they were sticking to the troubled lessor for the time being.

Meanwhile, German lessors continued to suffer as refinancing dried up. The pullout by HSH Nordbank and other regional banks from the lease refinancing market certainly had a lasting impact on Germany’s medium-sized lessors, while the German leasing association, BDL, found itself repeatedly stalled in its efforts to open up state aid to independents.

September’s issue also looked at the trend for leasing subsidiaries to adopt cross-selling strategies to grow their businesses.

The past 12 months marked a trend for many financial services groups to integrate asset finance sales into a broader strategy aimed at selling ‘solutions’ rather than just products, with parents such as Close, HSBC and Barclays all integrating their financial services businesses.

October 2009

LL october 2009 coverOctober marked a turning point in the year, with leasing industry recruiters reporting a definite increase in business – potentially the sign finance companies were starting to think about measured growth again?

One recruiter warned not to expect any abrupt changes in the market, however, and said: “The staffing market will see much more of a gradual and steady climb, as opposed to any sudden rocketing in needs.”

Leasing Life’s October issue also analysed the EU’s European Investment Bank (EIB) lending policy for lessors. Although UK lessors had, thus far, not shown much interest in loans to SMEs through the EIB, their large continental counterparts were doing so in droves.

Over the last year, the EIB has lent hundreds of millions of euros to the likes of UniCredit Leasing, SG Equipment Finance, Dexia Lease and MPS Leasing e Factoring – particularly in southern and eastern Europe – to pass on to SME customers.

October also marked the final withdrawal of Lombard and Hitachi Capital from the intermediary market, much to the dismay of British brokers.

November 2009

LL November 2009 coverDespite October’s buoyancy, during November, evidence emerged that the percentage of fixed capital investment financed by leasing had fallen over the past year across many of Europe’s largest leasing markets. In other words, the popularity of leasing was waning.

However, the upside was that lessors were already responding to this by refocusing part of their energies on new equipment finance products, investigating ways of offering a wider range of products.

The last quarter of 2009 marked a definite improvement in liquidity, with securitisations starting to make a comeback. Greek lessor Piraeus Leasing and captive lessor Volkswagen Financial Services both completed transactions during November, of €540 million and €546.5 million respectively, a sign the market was opening up again.

December 2009

LL December 2009 coverIn its end-of-year business confidence survey, Leasing Life and Invigors research found European lessors were more positive about the future than they were six months earlier.

The survey found two thirds of asset finance professionals anticipating new business volumes to increase over the next six months, up from 45 percent in April. Of those predicting growth in 2010, most expected a healthy increase of between 5 and 20 percent.

The end of the year also continued to mark the trend of lessors integrating factoring and invoice discounting, with lessors such as GE Capital, Close Asset Finance, Crédit Agricole Leasing, and Lloyds TSB Commercial Finance doing so.

Moreover, 55 percent of attendees at Leaseurope’s annual convention confirmed the trend, accepting they would need to broaden the scope of their business in order to satisfy customers.

Many in the industry expect the trend to continue in 2010.

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