The summer
holidays are in full swing and Leasing Life is out just in
time to make it into our suitcases and onto the beach.
This issue’s contents are only a part
of what’s been on industry minds in the lead up to the break.
Considering everything else, it might be better to switch off from
leasing now and return refreshed and ready for what lies ahead.
Go deeper with GlobalData
Key among industry concerns is
regulation and how this is impacting bank-owned lessors’
willingness to lend. The cost of capital is increasing and it has
become more difficult for leasing arms to meet these costs through
earnings. The situation becomes more difficult since the cost of
money to the leasing company is double the cost of that money to
the parent bank.
It has been noted that some bank-owned
lessors are passing leasing deals onto their parent banks. This is
because the parent bank’s cost of capital is lower and they are
able to write off the risk more easily than a bank-owned
lessor.
However, the question of risk becomes
easier for a bank as they can cherry pick which credits to lend to.
If the customer is of a certain size, has a strong balance sheet
and a good turnover, it can become a “business” customer of the
bank. This is happening in many cases, which begs the question, how
do those customers now start to look at leasing?
Does leasing retain its independence
as an all singing and dancing entity that provides loans,
remarketing and asset management and maintenance, among other
things, or has the value of leasing diminished to merely an asset
servicing function in the light of regulatory pressures on
banks?
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By GlobalDataThe question becomes more pertinent
for many customers who cannot get bank loans as they have been
perceived as being of a certain size or risk profile. What are
their options then?
The head of one finance firm in the UK
recently had experience of a client who could not get financing
from a bank. The bank did not want to continue to lend to the
client and hired a team of accountants, at the client’s expense, to
dissect the company’s balance sheet and conclude that it was in
distress and and posed a risk to the bank.
The finance company posed several
different financing solutions for each of the company’s business
requirements, as opposed to placing all of the financing with one
high street lender who felt the risk did not meet its lending
criteria.
New forms of financing are becoming
available to these customers, who realise that banks need not be
their only option for leasing. The question is what impact will
this have on the future of the bank-owned lessor.
I would welcome any further thoughts
on how customers are looking at leasing.
On a lighter note, we have announced
the shortlist (see page 12) for the Leasing Life
Awards 2011, exclusively sponsored by CHP Consulting.
This year’s awards acknowledge
companies, which have consistently demonstrated their commitment to
the sector in light of increasing regulatory pressures and the
impact on banks’ ability to lend.
We are also announcing a new editorial
advisory board, comprising key figures who will help ensure
Leasing Life continues to meet the needs of the
industry.
Janet Du Chenne
janet.duchenne@vrlfinancialnews.com
