I’ve been at GE for 10 years. I joined our leveraged lending business, where we mainly structured acquisition-led debt facilities for financial sponsors and was the commercial leader until 2010. Since then I have run our cross-border receivables financing team and led a business development team, identifying acquisitions and partnerships. Then I came into the broader role of chief commercial officer in 2012.
While I have now had 10 years’ experience at GE, I still feel like a relative newcomer. When I spend time with colleagues across the business it’s not uncommon to meet people who have been here for 20 or 30 years.
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What did you do before GE?
Before GE I was in investment banking. I had worked at Lehman Brothers, Bankers Trust and BNP Paribas. My focus was on the telecommunications, media and technology sector (TMT) and I focussed on advisory and capital raising for medium to large corporates. My first role at GE was within its TMT leveraged lending team.
How do you find asset finance compared to investment banking?
It’s quite different. The products we have in GE range from the more structured transactions with receivables finance and leveraged lending, which isn’t too dissimilar in some ways to the investment banking-style products to pure asset finance activities we have with leasing and fleet services. While the products are different, the underlying analysis you need to undertake is similar. Whatever you are looking at, you need to understand credit analysis, deploy structuring skills and measure returns on capital.
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By GlobalDataAnything from GE you are particularly proud of?
Following the financial crisis we have had to refocus GE Capital, adapt to a different regulatory environment and get the business back into growth mode. I am proud of being able to get our commercial lending and leasing businesses back into growth and in the process create new roles for our people. When looking at our different business units it has been very satisfying to see the business I joined, leveraged finance, grow from what was a very early-stage business into a mature player in its market with a significant position in terms of mid-market leverage buyouts, which was a process I started back in 2006.
Another example of which I am very proud relates to our receivables finance business, which has evolved to doing much larger structure cross-border deals alongside the traditional SME financing activity.
At an overall GE Capital level, coming through the financial crisis, we took the decision that we were going to focus on businesses where we felt we had a competitive advantage. We’re growing ahead of GDP growth in all markets we’re operating in, and on the whole we’re achieving our targets in these markets.
Can you give me an overview of leasing in Europe?
We’re focused on growing our equipment finance business in four European countries – France, Germany, the UK and Italy. With our fleet activity we’re also present and active in Sweden, Switzerland, Benelux, Spain and Portugal. In both cases we serve both large multinational customers and local businesses.
With equipment finance we’re focussed on the office equipment/IT, health care and industrial segments. Our largest businesses are in France and Japan which are succeeding in the area of supporting vendor and reseller customers that use our products to drive sales. We’re seeking to innovate in this space into software and software as a service which is a priority for us in the second half of this year. We’re signing up new accounts in the industrial and medical sectors from OEMs keen to work with us across our global coverage network.
Geographically we see different trends at work across our markets.
In Europe there remains a divide between north and south with strength in demand for capital goods in Germany and the UK as these economies recover from the global financial crisis. Southern Europe remains slower with confidence holding back investment.
Sector-wise we’ve seen a stronger recovery in IT-led expenditure, and in Asia we’ve seen mining and construction somewhat subdued given the cyclical nature of those markets.
Has your mid-market report impacted your policies or behaviour?
If you look at the analysis of mid-market investment intentions in the mid-market report, you can see some of these trends I discussed play out. So in office equipment you have more firms that are maintaining investment and increasing investment over the coming 12 months, and on the IT side we see the balance increasing rather than the same level of investment.
Mid-market companies account for a third of private sector GDP, so GE Capital has, over the past two years, grown exposure to the mid-market by around 24%, and now around two-thirds of our lending and leasing is directed to mid-market firms.
Our Access GE programme is targeted squarely at the mid-market as we try to partner with our customers and deliver more than just money. We open up the broader functional and industrial expertise across the whole of GE in areas such as finance, HR, procurement and commercial activation. This allows us to address the issues that our customers tell us restrain growth, such as recruitment and capacity building across their organisation.
An example came from our mid-market research which told us that exporting into Eastern Europe is a huge area of interest for Italian mid-market firms as they seek to diversify from overdependence on their local markets. We hosted a group of our mid-market customers in Prague with representation from GE businesses in Poland, the Czech Republic and Hungary to help them talk about how to grow their franchise in those countries.
How do you operate in a captive-dominated market like IT?
Larger IT companies often operate their own captive finance organisations. In many cases they will partner with finance companies such as ourselves to complete their value proposition. This may take the form of segmentation by channel where a finance company will serve the smaller-ticket retail transactions or selling assets on a wholesale basis as captives seek to manage their exposure. Often we will work with captive finance companies to provide inventory finance solutions and, where we can, we combine that with our, or their, retail finance offering.
Some large and mid-sized OEMs will seek to outsource their sales finance activities through a white label partnership or even a joint venture style approach. What is important is to have a value proposition that enables our partners to generate incremental sales by providing attractive finance terms. So whether this takes the form of specialist asset management to drive competitive residual values, or systems and processes that facilitate auto decisioning on large numbers of small transactions, we need to be able to work with the OEMs and find ways to complement what the captive can provide.
I understand you also have a new international structure in place?
Previously our European and Asian business had been organised separately. They’ve now come together into a single HQ organisation called GE Capital International, which is present in 30 countries worldwide.
From an equipment finance perspective, the main markets we serve are Italy, Germany, France, the UK, Japan, Australia, New Zealand and India. We’re developing capabilities to serve our customers via exciting joint ventures in China and South Korea which gives us a really broad platform from which to serve our multinational customers. We work closely with our North American business on origination and account management so as to be able to deploy a consistent value proposition across the globe. We also collaborate closely with our distribution finance business which provides inventory or floorplan financing.
We have a number of customers in common between distribution finance and equipment finance, and we’re able to provide a solution that enables the manufacturer to provide funding through the supply chain from the moment the goods leave the factory until they are sold and financed through to the end-customer.
Are looking to expand into new countries?
Our priority is to gain scale in the countries we’re in at the moment. We’ve got quite a broad geographic footprint; it’s getting scale in those countries that’s important. But where we need to follow customers or we think there’s a compelling business case, we’ll always keep our options open.
How was it to enter the Chinese market?
We entered through a joint venture with State Grid Corporation of China in 2011. Our strategy was to enter with a partner that really knew the market and the landscape there.
The JV gave us instant scale and significant opportunities for distribution and funding to mid-market companies, at a low risk, while we brought our operational expertise to the plate. State Grid is a respected and established company in China, and is a partner with a truly global footprint, matching GE Capital’s international aspirations.
Any new products?
Our strategy is to digitise current business processes and deliver a consistent customer experience across the countries in which we operate. With respect to the front-end, we have our award-winning iManage customer-facing deal entry tool which we rolled out to the UK, France and Germany this year with the intention of launching in Italy in 2015.
We’ve developed an online vendor reporting tool that we’re currently beta testing and we will have a launch later this year, which will allow much better transparency to our vendor relationships, as to what is going on in the channels they sell through. For the end-customer we’re investing to make the customer experience easier with online tools available to access important documentation and manage interactions with our customer service teams digitally.
In technology we see opportunity to drive sales through an evolution of our products to serve software and services, as well as hardware. We see continued innovation in our end-markets ranging from 3D printers to continued mass adoption of tablets and mobile devices which will substitute the use of conventional office equipment, PCs and laptops.
Where do you see the industry developing over the next 12 months?
It varies from market to market. We’ve seen some traditional players in the market retrench from markets they consider to be non-core, and we’ve been able to pick up business off the back of that shift in focus.
In the short term, with interest rates low and established lenders under pressure to extend financing to the SME/mid-market, we believe that the traditional asset finance markets are well served with lenders providing competitive rates in a low interest rate environment. Non-bank finance companies will need to differentiate through service or industry expertise to be able to compete and drive up lease penetration in sub-segments of the market.
Don’t expect any dramatic change in the market. However I do think there are fewer truly global providers, which is an area we’re looking to exploit.
Over time we watch for innovation outside the traditional players. Some of the P2P platforms are offering asset finance, which is creating an online channel for customers to tap into that’s more transparent and, in some cases, quicker than established bank or leasing company providers. We’re watching these new entrants with interest and developing our own innovative processes and systems to compete in an increasingly digital environment. n
