Leasing’s top brass on the
challenges the industry is facing.
Go deeper with GlobalData
Cost of capital and a detachment
from customers are among a string of challenges to face post-crisis
leasing voiced by industry leaders at Leaseurope’s annual get
together.
The heads of four of Europe’s
largest leasing companies also pointed to the death of finance
leases and an unhealthy focus on volume over profit, as potential
threats for the future.
SG Equipment Finance chief
executive Jean-Marc Mignerey said: “Resources, liquidity and
funding will remain scarce. Regulation will make the cost of
business higher. We have to focus.
“Leasing died
in 2009. A third of the market disappeared in Europe, the sharpest
decrease in the history of leasing. Why? Internal finance, large
companies using bonds issues, limited access to government support
for leasing, these are part of it; and there are significant supply
side factors – capital preservation combined with a sudden
tightening of underwriting.
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By GlobalData“The cost of capital has risen.
Liquidity has a cost and we have to pass that on to customers.”
Lessons learned from the crisis
included the need “to think a generation down the road”, said
Massimiliano Moi, UniCredit Leasing chief executive.
“Risk always strikes back. In good
times we must build unnecessary reserves. That’s the lesson. We
must think not just short term. Think solar energy, ask ourselves
‘where is the mistake we are making right now?’ Money is
scarce.
“We must show a positive return on
every euro of new business. And we need new metrics by which to
rank: a ranking by profit not volume. Volume is a false
positive.”
Return on assets was put forward by
Moi as a better measure of success than new business volumes. De
Lage Landen chief executive Ronald Slaats agreed that volume is no
longer the primary performance indicator.
“In the Leaseurope 2009 ranking, we
are number one by profit, number eight by volume. I see people
going back to competing on price; I am not,” he said.
An
observation shared by the leaders was of finance leases losing
their appeal, in some cases in favour of rental agreements.
“The financial lease is a dinosaur
that will die,” Slaats said.
Philippe Bismut, BNP Paribas Lease
Group’s chief executive, put it even more strongly.
“The financial lease is dead,”
Bismut said.
Predictions for the future included
the expectation that leasing would continue as a smaller, more
focused industry.
“We need to invent capital-light
leasing,” Moi said.
“We can, even within banking, be spread innovators, customer
satisfaction boosters, response-time cutters, systems innovators
and champions of quality.”
See also: Cheap money and easy
credit, no more
