crunch hits home
After the unexpected dynamic growth of 52 per cent in new
Romanian leasing business for 2007, this year the market upturn is
likely to be less energetic in comparison. For several years
Romania has been one of the fastest growing leasing markets in
Europe. This accelerated with its ascension to the EU on January 1
2007 and the proliferation of foreign investment. Although growth
will continue, the Romanian market, like all other European
markets, will be affected by the global credit crisis.
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Last year the Romanian leasing market recorded €5bn in the value
of new signed leasing contracts – which was record growth, and
corresponded to Romania’s six per cent macroeconomic growth. In
2007, leasing represented four per cent of GDP.
“We estimated an increase of between 32 and 35 per cent for
2007, but the outcome far exceeded that,”Adriana Ahciarliu,
secretary general at ALB, said. In reality it grew by over 50 per
cent.
Comparatively, in the first quarter of 2008, the value of new
signed leasing contracts was €1.5bn, an increase of 37 per cent on
the first quarter in 2007.“We have more realistic expectations for
growth this year,”Ahciarliu said. “Because, like other markets,we
are facing an increase in refinancing costs.”
The Central Bank raised interest rates from seven to 9.5 per
cent early in 2008, and ratings agencies Moody’s, Fitch and
Standard & Poor’s has downgraded Romania’s foreign investment
security. Debt and company costs have increased, which also
contributed to a downfall in the leasing market.
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By GlobalDataAhciarliu added that the real estate market, which enjoyed
strong growth and was a huge driver in the leasing market last
year, is now on a standby situation as many of the companies have
stopped real estate financing.
In 2007 nine per cent (€406m) of the market’s new business
volume was generated through real estate leasing.The remainder of
the leasing financings were created by industrial equipment (21 per
cent,€974m) and transportation (70 per cent,€3.27bn).
In the transportation sector, cars had a market share of 52 per
cent, heavy commercial vehicles 30 per cent and light vehicles 16
per cent.
“Also, due to the new taxation law on vehicles in Romania, the
volume of passenger cars decreased during the end of last year and
so far this year,”Ahciarliu said.
Meanwhile, in the equipment sector, 37 per cent of the volume
was generated in the construction field, eight per cent in IT and
software, eight per cent in the metallurgic industry, seven per
cent in the car service, six per cent in the food industry, six per
cent medical equipment, five per cent printing, five per cent
printing and four per cent in the wood treatment industry.
Romania has about 200 leasing companies, 97 per cent of which
are members of the two different Romanian leasing associations.
Romania’s primary leasing association,ALB, increased its market
share from 71 per cent in June 2007 to 85 per cent in Q1 2008, as
some of the major leasing companies joined its ranks.
The other leasing association,ASLR, represents the smaller
independent leasing companies in Romania, comprising 12 per cent of
the market. In 2007, the combination of ALB and ASLR member
companies totaled €4.7bn and the number of their combined leasing
contracts reached €161,077.
Company types are made up of 18 per cent of vehicle captives, 59
per cent subsidiaries of commercial banks and 23 per cent
independent leasing companies. In 2007, corporate clients attracted
the majority of financings (73 per cent), followed by retail (23
per cent), and the public sector (four per cent).
Financial leasing continues to represent the majority of the
leasing contracts (98 per cent), and the remaining two per cent is
through operating leasing. Meanwhile crossborder leasing is a
diminishing trend, and is now less than one per cent.
Katherine Gregory
