The UK’s largest leasing
business is banking on its parent’s branch network. Liz Bury
reports.
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Lombard has been
working hard on strategy. The UK’s largest leasing company has put
in place new managers, identified its target asset classes, and
taken a long hard look at risk.
It has also been careful to align
its aims with the policy of its 84% owner, the UK government. No
surprise, then, that lending to small business to promote economic
recovery is high on its agenda.
Managing director Alex Baldock
says: “We have to lend more and need to do so responsibly. We see a
market opportunity out there. Sale and leaseback can unlock cash
tied up on the balance sheet – asset finance has qualities that
lend to emerging from a downturn.”
Lombard’s parent, Royal Bank of
Scotland, signed a commitment in November 2009, as part of the
price of the bailout, to provide £16bn of business lending during
the year to end February 2011; and a similar amount is committed
for 2012.
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By GlobalDataRBS has also signed up to a
customer charter for small and medium enterprises, obliging it to
meet all reasonable applications for finance from viable
businesses.
At a time when most other lenders
have found it prudent to focus on margin over volume, aren’t
Lombard’s commercial aims pulling against the government’s
agenda?
Lombard North Central accounts for
2009 show the business lent less, at a higher volume, than during
the previous year (see box).
Baldock says: “The conflict is not
as acute as you suggest, we take a balanced view of profit versus
volume. We are happy to play our part to fulfil government aims,
but we are not only driven by that, we are not a charitable
institution. We see a sound commercial opportunity to profitably
fund SMEs.
“Our role within society is to
de-rust Britain and to make sure it has the kit to be
competitive.”
Unforseen
events
Baldock, 39, started
out at global business consultancy Bain & Co, having studied
modern European history at Worcester College, Oxford.
On leaving Barclays in January
2008, to begin six months gardening leave before joining Lombard,
he had no idea that things would turn out as they did.
Since the bailout in autumn 2008
Lombard Ireland has been designated as non-core and Lombard Vehicle
Management put up for sale. Employee numbers across the business
dropped significantly during 2009, partly reflecting a swathe of
jobs losses at Lombard Ireland.
The senior management has changed:
several high-profile departures included Mike Oxby to Santander,
and Richard Priestman. A combination of external hires and internal
promotions forms the new team.
“We have invested heavily in hiring
talent,” Baldock says.
Another significant change was to
pull back from the broker network, paving the way for further bank
integration.
“That was a hard decision. We
weren’t making any money because we had been hit by bad debts and
fraud.”
Lombard has become smarter at
identifying and understanding its risk profile, and is now managing
it more proactively than in the past.
Branching out
Integration with parent bank RBS’s
branch network has made Lombard’s solutions available to banking
customers through 1,930 outlets (excluding 318 branches to be sold
to Santander).
It is a different business model
from that built by Chris Sullivan, now RBS chief executive of UK
Corporate, 10 years ago.
“We have hundreds of relationship
managers, the largest number of any lessor by a country mile,”
Baldock says.
“General asset financiers are
co-located with their bank colleagues nationwide, and work
cheek-by-jowl with them. We work together on portfolios. We go
prospecting for new business together.”
Baldock is determined that Lombard
should maintain direct relationships with leasing customers even as
it utilises the branch distribution network. The head of each
leasing division (see opposite page) has been installed on
their banking counterpart’s board.
“Our job within the group is to be
a capital efficient lender,” Baldock says.
“Asset finance is a capital
efficient way to lend money. The core of what we do is not about
tax treatments, but is to do with understanding the value of assets
to our customers. This core competence is our reason for being in
the group and in the market.”
Behind the front-of-house staff,
providing a deeper level of customer support, are Lombard’s product
and asset specialists.
“You could call us an asset
specialist business with strong coverage,” Baldock says.
Aviation, marine, and plant and
machinery have been identified as target asset classes.
“Historically we have not been as
strong on plant and machinery as we are on wheeled assets, but we
want to do more,” he says.
Lombard claims to speak for 20% of
the UK leasing market, twice that of its nearest competitor. After
a period of such rapid change and instability, it now anticipates a
healthy double digit growth curve.
Baldock says: “The last thing I
want to do is sound pompous, but growth is important. If business
doesn’t recover it hurts the economy.
“In Lombard we are prime providers, equipped to back business,
and we want to.”
See also: Lombard’s six group operating divisions at a
glance
