Despite an upturn in the Czech leasing market, according to
just-released year-end-2007 figures,a decline in the market is
expected
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So far the Czech leasing market has escaped unscathed from the
global credit crisis. Instead, it experienced unparalleled levels
of growth during 2007. Overall leasing volumes, which includes
movables and real estate, climbed 14.5 per cent in the year, to a
portfolio size of CZK246bn (�9.65bn), while new-leasing volumes
reached CZK134.6bn (�5.26bn).
�For leasing, 2007 was a special and highly profitable
year,� Jiri Pulz, head of the Czech Leasing & Factoring
Association, says. �But 2008 will not see the same level of
growth.�
The year-on-year growth is largely the result of new taxation
laws that came into force on January 1 2008, which extended the
minimum periods for leases, particularly in the real-estate sector,
for which the period was extended from eight years to 30 years.
This inspired a surge in leasing contracts in late 2007 as
�companies aimed to finalise their agreements before the 2008
changes�, Pulz says.
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By GlobalData �It saw the volume of leasing contracts climb by two to
three per cent, so we expect a decline in volumes of the same rate
for 2008. It was merely an artificial rise in contracts in 2007
because of those taxation changes,� he adds.
For the eighth year in succession, CSOB Leasing, part of Belgium
bank KBC, has come out on top of the league table of leasing
companies in the Czech Republic. It financed CZK20.1bn (�789m) of
assets during 2007, while UniCredit Leasing CZ, ranked second,
financed assets totalling CZK13.3bn (�522m). Cetelem CR, a Czech
company formed 11 years ago, came third with CZK11.3bn (�443m) of
assets financed last year.
Favourable conditions
The Czech Republic�s vibrant macroeconomic framework in 2007,
which had an inter-annual GDP growth rate of 6.6 per cent, created
favourable conditions for leasing, particularly in the equipment
sector.
New equipment leasing production increased by 15.4 per cent to
comprise 24 per cent market share. Also, in response to growth in
household investments and expenses, coupled with relatively low
interest rates, the penetration of equipment leasing in fixed
capital investments rose to 30 per cent for 2007.
In terms of machinery, equipment and transport leasing, the book
value reached almost CZK200bn (�7.5bn) and receivables from
signed contracts reached a total of almost CZK158bn (�6.2bn) at
the end of 2007.
Dramatic increases
Meanwhile, real-estate leasing grew year on year by 6.4 per cent
and its book totalled CZK45.9bn (�1.8bn) after depreciations.
The volume of consumer credit loans also increased by 30 per
cent to CZK48bn (�1.88bn) for 2007. Companies, including
Santander and GE Money, have started specialising in the sector and
the more generalised leasing companies have also added the product
to their menu, Pulz says.Analysts anticipate further growth
potential for consumer credits in 2008 and 2009.
However, Pulz predicts the market will stagnate because the
Czech economy has ridden the wave of economic growth for the third
consecutive year and, as the recession of Western economies will
have a sobering affect on the Czech economy.
�GDP will only increase by 4 per cent for 2008, which
will have a significant impact on investments and consumer
spending. The demand for leasing will be lower than last year,�
Pulz says.
Decline in car leasing
Passenger-car leasing decreased its market share from 29 per
cent in 2006 to 24.5 per cent in 2007 and the share of LUVs and
heavy road vehicles saw minimal growth for 2007.
This decline will continue with new taxation laws that extended
the minimum period for a vehicle lease to a challenging five
years.This will rouse an overall reduction in financial leasing and
slow uptake in the alternate operating lease.
For example, in 2007 the growth of the share of operating
leasing in total leasing of movable assets remained stagnant. In
2007, it amounted to 12.5 per cent, while in 2006 it was 14 per
cent.
�It will take time for everyone to understand the advantages
of operating leasing, but, in the meantime, the decline in
financial leasing will see a decline in vehicle leasing; even the
period of buying a new car will be prolonged,� Pulz says.
Operating leasing
However, given the dominating presence of Western leasing
companies and banks, the uptake of operating leasing may be quicker
than anticipated, but it may also bring with it wider market
problems.
Consolidation by big corporates is a key characteristic of the
Czech leasing and banking market, very much like its Eastern and
Central European neighbours.The topfive leasing companies comprise
27 per cent of the market and entered the Czech market via
acquisition, but Pulz says there is still enough room for
independent companies to make their mark.
Pulz adds that, despite the heavy influence of western players,
the Czech economy has been able to avoid the credit crisis up until
now because it is still very domestically reliant. But it seems
inevitable, given its international trading, an increased
globalised financial infrastructure and the fact it is now
�stretching beyond real capacity�, that a slowing down has to
come.
