Leasing veteran Lindsay
Town explains why leasing as an industry is worth fighting
for,
and offers a few pointers to the leaders of the future on how to
keep leasing unique.
Go deeper with GlobalData
As happens quite often it seems, the leasing and asset
finance industry faces another moment of challenge. We see the
outfall of the liquidity crisis and ensuing recession together with
yet another set of convoluted accounting standards to cope with.
One wonders why we are still around, or whether we will still be
around as an industry in the years to come. I look back at the
benefits of our industry as we set them out years ago and I wonder
– what makes us unique today?
The relevance of my wondering is
not intended to be a sentimental retrospective, albeit my comments
are intended to provoke debate. Unless we offer a unique
proposition to our target markets and to our stakeholders, we face
some simple possible outcomes: being merged into being no more than
a product name; losing the skill and craft that we have built up
over decades; and failing to attract or develop any new talent to
take us through the next generation of our industry’s
development.
It is in my view a redundant
exercise looking to renew the pre-credit crunch business model. The
winners for the next decade or so will have new business and
operating models that will set them on course. Those that manage to
get their positioning right will attract the talent that is vital
and will develop the skills, capabilities and profitability for the
future business.
Being aligned to key stakeholders
is a vital part of our future. In times long past, the industry
stood aside as far as it could from its stakeholders and was
allowed in the main to do so. The returns were superior, the credit
experience well above average and as long as the business was fed
capital, well priced liquidity and taxable profits (in the UK) it
was a very happy arrangement. It is not like that anymore.
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By GlobalDataSo, where does that leave us in
terms of being unique? Do we have a compelling economic rationale
to exist? How would you encourage a new graduate or junior manager
to join the industry as a serious career choice? If we can’t answer
those questions, then we don’t truly deserve to be called an
industry.
I admit my bias having been in this
industry for 35 years. What motivated me at the start is what keeps
me passionate about the industry today. I see our industry as
combining several unique features, whether in the micro ticket, car
rental or high value cross border market.
These features may be boiled down
to three essential statements. First, we help to make things. Not
by general corporate finance but by hard direct ownership or highly
specific finance. Second, we help to sell things. We work with
manufacturers and vendors to be the financial oil to lubricate the
sales process. Third, we help to manage the risk and cost of using
assets. Whether for a Boeing 777, a container ship, a train, car,
or a piece of IT, we provide operating lease or contract hire or
rental that manages the risk of ownership and use of an asset.
Those three points are vital. If we
lose sight of them then we might as well lend on overdraft or
sponsor bond issuance. No other part of corporate lending is as
focused on the underlying asset and its use as our industry.
Through that asset focus, people in our industry get real and
valuable experience of huge areas of the corporate world and the
process of manufacturing, selling and trading assets, including at
times international trade, export and import finance as well as the
delicacies of funding transactions. They learn how to form
strategic partnerships and tactical alliances with trading
companies that few bankers or financiers would ever see. We are at
the forefront of the movement and use of capital goods, and that in
my mind is an exciting and unique place to be.
But, we do face some incredibly
large challenges. Our stakeholders want to make sure they support
the right parts of their business; some have retrenched and on top
of it all we have faced some serious challenges in terms of our
operating approach and at times credit risks.
We have at times chased volume and
not return, let our operating models become outmoded and sometimes
lost sight of the changing strategic drivers that confront us. All
of these can be addressed. If we do face up to those challenges and
are clear on what value we are adding, then bringing new talent,
and probably new capital, are not insurmountable obstacles.
I have never had a difficulty
praising this industry as a place to work. The times when it
frustrates me are far outweighed by the times it has sent me home
smiling, and I would not choose a different part of the financial
world in which to work. We need to convince others of the benefits
in a clear and ringing tone to set the scene for our next stage
that lets people outside the industry see what we are truly
about.
For those at the start of their leadership of this industry, a
determined approach is needed, clearly stating to the wider world
why we are unique and, critically, why that is important to the
wider economic process.
See also:
Best practice: investing in young
talent
