New funders are entering
the market gaps left by the departure of existing operators,
including in the motor finance sector, writes Antonio
Fabrizio.
Go deeper with GlobalData
The dramatic
bailout of the Irish banking system reflects a tough year in the
country’s leasing market. Sources claim Irish lessors wrote
virtually no new business in 2010, and banks are declining the vast
majority of requests for finance, especially when it comes to
SMEs.
Vision Asset Finance Ireland
sales consultant Eamon Renniesaid: “The Irish leasing market is
very tight. None of the banks, as far as we and other brokers we
speak to can tell, are lending. It’s just as simple as
that.”
Bank of Ireland (BoI), which
with Allied Irish Bank (AIB) received part of an €85bn bailout in
November, experienced a tough year in asset finance.
BoI, now 36% owned by the
Irish government, funds assets in business and agriculture, and has
relationships with car manufacturers including Toyota, Lexus, Ford,
Volvo and Mercedes Benz.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataA BoI spokeswoman said:
“Asset finance was challenging in 2010. We have been recovering
from the previous few years where the car market in particular took
a downward spiral.
“We see 2011 as likely to be
a challenging year, linked to the continuing economic uncertainty
and customers unsure about continued capital
expenditure.”
She added: “We are very much
open for business and we are working with our customers who have
encountered difficulty to ensure we can help them through these
difficult times.”
Lack of
lenders
However, such claims ring
hollow to Rennie.
“There is a façade within the
banks saying that they are open for business and they will lend,
but when it comes to reality they are just not lending,” he
said.
The bailout package, agreed
with the European Commission, the European Central Bank and the
International Monetary Fund at the end of November last year,
requires Ireland’s banks to undertake massive restructuring
programmes, and coincides with what has been described as the
harshest government budget in the history of the Irish
Republic.
The closure of
fully-nationalised Anglo Irish Bank, largely blamed for fuelling
the property bubble in Ireland, is to be accelerated. AIB and BoI
are under review to define their future size and structure; it is
expected that both will downsize, will focus on local business, and
may attempt to sell non-Irish operations.
In principle, the bailout
should provide the funds required to enable Irish banks to start
lending again.
“Whether they do that or not
is a completely different story. For the last couple of years, the
Irish government has thrown a huge pile of money at them, but they
haven’t passed that money onto SMEs,” Rennie said.
The lack of local lenders has
led to questions about whether overseas funders will enter the
market to compensate for Irish banks’ deficiencies.
Central Bank of Ireland
governor Patrick Honohan has publicly advocated such a sale, and
said: “As far as I’m concerned, they are for sale.
“I have been an advocate for
many years of the value for small countries to have foreign owners
for their banks, because the
risk is carried by the foreign owners.”
European or American banks
are thought most likely to be new market entrants, especially
considering the large American corporate base in
Ireland.
German company Grenkeleasing
operates in IT leasing in the sub-€50,000 range.
CFO Dr Uwe Hack said: “We not
only continue to do normal business in Ireland, we see the retreat
of competitors as an opportunity to grow the business very
substantially and establish Grenke as the market leader in
small-ticket IT leasing.”
Filling the
gaps
The bailout package could
potentially help large banks and smaller leasing companies, but
Grenke is independent of bank financing.
“Well capitalised banks are a
source of funding for smaller leasing companies and therefore might
help the leasing industry indirectly,” Hack said.
BMW Financial Services last
month opened a local branch and will now directly provide leasing
and insurance to Irish consumers and businesses.
The captive’s country MD,
Philip Kerry, said: “One of the key drivers in the Irish car market
is the availability of credit. With the decreased availability of
consumer credit and the disappearance of many former motor finance
companies, this is the right time for us to be making this
investment.”
Deutsche Leasing, a
relatively small company in Ireland, is also said to be actively
engaged in leasing, possibly outperforming a number of larger
companies.
For Rennie, any new player is
likely to find fertile ground in Ireland, as SMEs “are crying out
for someone to come into the marketplace or for some of the
existing banks to open up doors and to start lending”.
Rennie said: “I believe the Irish economy will recover.
When cash is injected into SMEs the economy will very quickly turn
around.”
