The IMF observes that after a slowdown in 2012 and 2013, the Austrian economy is growing again. GDP was projected to grow 1.5% in 2014 and 1.7% this year and inflation has more than halved since late 2011.
Its latest report on Austria states that the restructuring of fully or partly nationalised banks has made progress, but that challenges remain. The restructuring law for Hypo Alpe Adria included a bail-in of 890m in subordinated debt guaranteed by the state of Carinthia and an effective wipe-out of the underlying guarantee.
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Banks
The internationally active Austrian banks have been shifting to a new model, in which credit of their CESEE subsidiaries is, to a much larger extent, funded by local deposits rather than by parents. These large banks have strengthened their capital position, but capital gaps with peers remain. Neither the non-financial corporate sector nor the household sector is overleveraged, but the IMF has warned that housing prices warrant monitoring.
The organisation has also encouraged the authorities to continue to strengthen banks’ capital buffers and to accelerate the implementation of the EU banking union framework, while highlighting the need for further refinement of the macroprudential framework.
According to Wolfgang Steinmann, secretary general of the Association of Austrian Leasing Companies (VÖL), leasing has become an increasingly attractive concept in Austria over the past 30 years and is seen as an alternative and more flexible source of financing.
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By GlobalData"Although Austria is a very highly developed leasing market, the rate of growth in the leasing sector has far surpassed that of the general economy for several years in a row," Steinmann says. "Thus, despite difficult economic conditions both nationally and globally during 2013 and the first half of 2014, the leasing sector saw a sizeable increase of 13.8% to 5.7bn in new business volume in 2013."
This upward trend was continued in the first half of 2014 with a 3.8% increase and 2.7bn in new business.
"The Association of Austrian Leasing Companies is very satisfied with the successful results of 2013 and sees potential to grow further during 2014 in the moveable assets sector," Steinmann says.
He explains that more than three-quarters (31 out of 42) of the association’s members – who collectively account for approximately 95% of the domestic market – are bank-owned lessors, with the remainder being either manufacturer-owned or independent. This balance hasn’t changed significantly in recent years.
He says the Government did not take any direct or indirect action to support the lease finance industry during 2014, but is confident that it will take some steps in this regard during 2015.
When asked whether some sectors of the lease market are performing better than others, the secretary general of VÖL refers to the movable asset leasing sector (machines, computers) maintaining its high level in 2013 of 1.15bn new business volume, accompanied by a considerable increase in the number of new contracts (17.7%).
After a decline in 2012, new business in the aviation and railway sector recorded a disproportionately high increase of 153% in 2013. Computer and office equipment saw a rise of 10.4%, although medical equipment (-78.3%) as well as machinery (-6.3%) decreased in 2013.
Vehicle leasing
Despite the decrease in new registrations, the vehicles leasing segment managed to maintain volumes in 2013 compared to the previous year, with 3.47bn of new business volume.
Steinmann says: "This division proved to be the front-runner of domestic business, accounting for 60.8% of all new business. In comparison to the decrease in new registrations (-3.5%), the number of contracts fell slightly by 2.5% to 151,139 (2012: 154,819). The vehicle leasing rate – the number of new registrations financed by leasing – remained stable at 33.3%, which means that one-third of all vehicles registered were leased."
The Association of Austrian Leasing Companies has presented to the Government a list of suggestions regarding investment incentives and necessary improvements for the leasing industry, he adds.
Nigel Storny, managing director of LeasePlan Austria also refers to growth in leasing business last year. "We had a growth of 1.7% in the amount of contracts compared to 2013," he says. "Considering declining motor vehicle registrations in Austria (down by 4.9%), the growth of the leasing market is acceptable. Considering the circumstances, we’re satisfied with the growth over 2014 and do expect a slight growth in 2015 as well. The most significant change in the market is the attitude of clients regarding comfort and cost savings."
Fleet management
LeasePlan Austria considers itself to be the market leader in the fleet management space in Austria. "When looking at total leasing contracts, which also include private individuals (a segment we don’t serve) the market is led by a manufacturer-owned leasing company followed by local banks," Storny continues.
In December, Bank Austria revealed it had purchased a majority interest in UniCredit Leasing Austria from UniCredit Leasing following the realignment of leasing business across the UniCredit Group.
UniCredit Leasing Austria describes itself as the only universal provider of leasing services in Austria, with a 16% market share in 2013. In the first nine months of 2014, new business amounted to 462m, an increase of 18% over the previous year. Equipment leasing accounted for 247m, followed by motor vehicle leasing (133m).
Helmut Bernkopf, Bank Austria management board member with responsibility for business with retail and corporate customers, said its leasing strategy would be in line with Bank Austria’s business model with a clear differentiation between SmartLeasing (offering improved online and self-service) and SelectLeasing, with a high level of advisory competence.
"We accompanied our customers through the last crisis-ridden and turbulent period as a reliable partner, while constantly expanding our range of services," says Karin Schmidt-Mitscher, CEO UniCredit Leasing Austria. "In our activities we rely on co-operation with Bank Austria and we draw on our experience in Austria which spans more than 50 years. On this basis we can provide personal advice and products tailored to meet specific needs."
She adds that the company is keen to extend the range of services it offers its customers in future. "Our retail customers can take advantage of motor vehicle insurance on attractive terms and conditions as a product complementing motor vehicle leasing," Schmidt-Mitscher says. "Online information on various types of leasing arrangements for company cars is available via Bank Austria business banking from the beginning of 2015."
Schmidt-Mitscher believes the strongest growth opportunities for the business are through its vehicle management product, which is available to customers starting with one vehicle and has been simplified and optimised to the extent that it is also offered at the point of sale in bank branches and at car dealers. UniCredit Leasing will also intensify and enhance cooperation and partnerships in the vehicle segment over the coming months.
"In 2015, UniCredit Leasing Austria is expecting to see selective opportunities for growth, especially in the areas of equipment/vendor and real estate leasing," Schmidt-Mitscher adds. "There’s pent-up demand above all for investment in machinery and equipment, segments where companies have in the last few years exercised restraint. The significance of replacement investments will increase in this area, partly also for environmental reasons."
Stable and healthy
When asked to describe the current health of the Austrian leasing market, Heinz Scheibenpflug, managing director of Deutsche Leasing Austria says it is stable and healthy. "Because of this fact we see no negative effects on the future of the market and therefore our estimates of the development of the business for 2015 are on the same stable level as 2014," Scheibenpflug says.
The most significant development in the market over the past 12 months was that the leasing of cars was still on a high level and seems to be set to grow further in 2015.
Scheibenpflug says: "The leasing market of movable assets was highly competitive and for sure will be tough in the current business year as well, especially concerning margin and risk taking. However, we’re satisfied with the slight market growth and considered this trend already in our figures for 2015."
On the subject of how market share breaks down between bank-owned, independent and manufacturer-owned lessors, Scheibenpflug observes that the market share of movable leasing assets is still dominated by bank-owned and independent
lessors.
"In comparison to the other leasing segments, the leasing business of cars – especially for private customers – is growing very strongly," he says. "The main reason for this is the fact that the captives of the car manufacturers are pushing their car sales over low ‘all-in-one’ leasing rates including finance, insurance and maintenance costs. Therefore this package is very interesting for low-income and young customers who normally only buy used cars."
So what is Deutsche Leasing Austria doing to encourage growth in leasing activity in Austria? "We have a focus on broadening and deepening our existing key vendor partnerships on an ongoing basis with the target of becoming a virtual captive and to be recognised in the Austrian market as an asset finance specialist in general," Scheibenpflug concludes.
"In regards to car and movable leasing, we observe that every third car in Austria is financed by leasing as it is still very attractive for private persons based on the low interest rates," says Andre Lohlein, CEO of S Leasing (a subsidiary of Erste Bank).
"The commercial sector has registered a tendency to purchase more expensive cars. Although the new cars registration rate was falling, the leasing market in this sector has been growing since the first half of last year."
He describes himself as satisfied with market growth over the past 12 months and expects the market to grow this year.
"We were satisfied with the market growth in the segment of car and movable leasing," explains Lohlein. "We think that the tendency will hold on and that the leasing market will also grow in 2015. The real estate leasing sector we see depending on public sector activity – if the public sector restarts its activities then the whole real estate leasing market will get restarted this year."
Lohlein – who agrees with the view that most Austrian leasing companies are bank-owned lessors and that the balance between independent and manufacturer-owned lessors has not changed significantly in recent years – is less overtly optimistic about state intervention in the lease sector during the course of the next 12 months than the secretary general of the Association of Austrian Leasing Companies.
"The government didn’t take any action to support the lease finance industry last year," says Lohlein. "We will see if any actions will come in 2015, but we don’t know yet. The movable leasing sector did develop better since 2013 than the car leasing sector, but overall it has to be said that the car leasing sector registered more stable growth over the last number of years than the movable leasing sector."
S Leasing wants to be more than a finance partner only, he concludes. "We offer our customers complete packages. In cooperation with different business partners such as Forstinger (a car component dealer), OMV (an oil and gas company) and Bosch Service (a car repair shop) we offer special sales discounts. We also cooperate with the Vienna Insurance Group to offer our clients special car insurance offers."
