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Leasing could grow by 10% in
the country during 2011. Antonio Fabrizio reports.
German leasing has
emerged from the crisis as one of the strongest markets in Europe,
reporting growth of 4% for 2010. The German leasing association BDL
recorded growth every month during the year.
But even in this strongest of
economies, leasing has taken its knocks. In equipment leasing, new
business fell 4% in the first six months of 2010, rebounding during
the second half to bring growth for the whole year to 2.5%. And
although new business grew by 4% overall, this came against a
backdrop of business investment in hard assets of 6.4%.
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By GlobalDataPenetration of leasing therefore
fell by 3 basis points to 14.3% for 2010, down from 14.6% in 2009.
However, leasing accounted for 21% of investment in equipment, a
much higher rate compared to real estate, for which other financing
structures are favoured.
“An important factor for the
falling penetration rate was the good constitution of companies at
the end of the economic crisis. They had stockpiled liquidity,
enough to carry out many investment projects by themselves,” says
BDL managing director Horst Fittler.
It is mostly SMEs which use leasing
in Germany. While large firms only use external financing for 10%
of their investments, half of smaller companies’ financing needs
are met by external sources.
“On average, 60% of small companies
use leasing, and a large part of their equipment is leased,” says
Arno Städtler, senior economist at the Ifo Institute for Economic
Research. “In the future, this should continue to grow, because
SMEs will need capital from external sources to expand.”
Total new leasing business was
€43.6bn in 2010, compared to €41.9bn in 2009. Equipment and vehicle
leasing represented the vast majority of this, at more than €41bn.
Of the total volume, vehicles accounted for 64%, equipment leasing
for 30%, and real estate for 6%. New business of vehicles grew by
2.6%, equipment by 2.3% and real estate by 35.6%.
Growth is continuing this year, and
experts are signalling further improvements due to a mass
replacement cycle.
Michael Vander, associate at lease
consultancy The Alta Group, says: “Investment indicators show
dynamism in plant and equipment investments. Western German
manufacturers are replacing their assets, and this whole
replacement idea has now caught on.”
Ifo’s latest business climate
survey confirms this view, and Städtler said that lessors’ optimism
about the next six months had returned to levels last seen in
2006.
“Most people expected a downswing
in the first quarter of 2011, but this hasn’t happened. This is
inevitably influencing full-year forecasts, and indicators show
that the growth could reach 10%.”
Innovation will play a big part in
the anticipated growth. For Vander, renewables are an asset to
watch, with suppliers already focusing on new technical
developments to replace existing technology.
For Städtler, the industry is in a
similar situation to when leasing was launched in Germany, almost
50 years ago. At that time, companies like IBM and Xerox realised
that the cost of equipment was too high and started offering
leasing.
“Today, the same could happen to
electric vehicles. It starts slowly, but when there is a mass
demand and knowledge of second hand market, lessors and banks will
enter this market en-masse.”
Despite the new business
opportunities, risk control remains high on the agenda of most
German lessors, after the blow suffered during recession.
SGEF Germany’s managing director
Jochen Jehmlich says: “The peak of the crisis was in late 2009,
when a hike in bad debt hit our industry. Since then, cost of risk
has gone down quarter after quarter, but we still can see that the
balance sheets of some automotive suppliers and transportation
firms are affected. It will take another two years for these
companies to fully recover, but luckily the German economy
rebounded quickly.”
UniCredit Leasing Germany has
benefitted from reduced loan loss provisions.
Chief executive Frederik Linthout
says: “In January we reported loan loss provisioning below 2010
levels, and also below budget. From that prospective, the outlook
is very positive.”
UniCredit Leasing reduced its
transportation business during the crisis. As the segment improves
again and companies’ balance sheets get healthier, the lessor is
moving back to transportation, but with a clear risk focus.
“We cannot do leasing without
transportation, but want to avoid the losses that some companies
focusing on truck and trailers had. We pick only those clients
where we feel confident in terms of rating and credit history.”
Deutsche Leasing established a risk
model which has also proved effective during the crisis, limiting
overall losses.
Chief executive Kai Ostermann
maintains a cautious approach: “The current economic situation is
still insecure. Therefore, we decided to grow only moderately in
2010 and to maintain a conservative risk policy. Despite this
unsure economic situation and an increasing pressure on margins, we
want to achieve a result similar to last year’s.”
However if lessors continue with
their strict, risk-averse strategies, they could be storing up a
new problem. Vander says: “They could lose opportunities and their
market share could drop. It is inevitable for a lessor to take some
form of controlled risk. For that reason, knowledge of asset
management and second-hand markets will be increasingly key in the
future.”
Spotting an opportunity in the used
market, vehicle remarketing specialist Manheim has just opened its
second auction centre in Germany, near Regensburg, complementing an
existing site in Düren.
Manheim Continental Europe managing
director David Mercer says: “We see the German auction market as a
key part of the European growth opportunity.”
The auctioneer sees leasing
companies as a target for future expansion.
Mercer says: “Development of our
physical auction capacity is critical to providing service offers
that attract national level leasing customers.”
Commercial vehicles will be an important part of the growth
plans, and the new centre will sell light and medium commercial
vehicles every two weeks as part of its auction programme.
See also: Smaller operators under
pressure
See also: Expectations high for vendor
market
See also: Up close with German lessors
