The story of Key Equipment Finance is an allegory for
today’s leasing industry: an ambitious US bank looks to Europe for
expansion during the boom years, opens offices across the
continent, deploys a sales force, signs a slew of vendor deals, and
builds up its book.
Between 2004 and 2006 KEF in Europe
was reported to have grown on average by 50% a year. At its height,
it was operating in 15 European countries.
Go deeper with GlobalData
News this month of potential
redundancies at the lessor’s European operations is less than
bullish. The company says the restructuring is part of ordinary and
ongoing strategic review, but that’s a story which is hard to
swallow whole.
Staff in the UK, and in offices across
Europe, from Paris to Stockholm, have received letters about a
consultation. Back in 2008, the company made some European sales
roles redundant.
This time around, the full extent of
the potential job losses is not yet known. But there must be a
serious a question mark over whether some offices will even
continue in existence. The US parent bank is thought, like many
large banks, to be short of cash. This could result in more than a
light-touch review of operations.
The liquidity squeeze is forcing all
banks to take a long, hard look at their operations. Leasing is
facing a tough sell internally. Having been separate from the main
banking culture for so long, hidden away in a subsidiary operation
– as in the case of KEF – the banking group’s managers often
understand very little about it. It may be profitable, but it’s
capital intensive too.
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By GlobalDataWith new capital requirements around
the corner, and the cost of funding high, it is easy to see why
banking boards may opt to pull out.
Proposed new lease accounting rules
are not helping much. Once leases go on the balance sheet, lessors
will need urgently to explore new ways to add value for
customers.
Service contracts are likely to play a
part in a future leasing offer, as the vision of Jean-Louis
Bouchard, CEO of the newly-formed Econocom group, demonstrates
(see p14-15). But banks are not service companies, and
they may not wish to diversify in such a direction.
Observers believe that a buyer for KEF
in Europe would be welcome, if not for the fact that banks are
unwilling to sell good business on the cheap. In the UK, even some
of the most established and largest operators might be tempted to
sell if the price was right.
But the appetite and capability to
make full-priced acquisitions is lacking. Therefore banks are
choosing to run-off the portfolio: pragmatism is the best
option.
Future leaders in
leasing
Leasing
Life’s Future Leaders supplement is designed
to provoke debate. The next generation of leasing professionals,
those who will lead the industry in years to come, will have a
different outlook and different sets of skills compared to the
bosses of today’s boardrooms.
The publication is designed to set us
thinking about what skills need nurturing in order to keep asset
finance relevant to business managers as they make investment
decisions; and how candidates can demonstrate they have what it
takes to be a future leader.
The debate continues on 10 March, at
the Future Leaders in Leasing webinar, where we are joined by
veteran lessor Lindsay Town; human resources expert David Hudson of
Close Asset Finance; and Investors in People employer Allan Ross,
from First Independent Finance. Registration is free to all on
www.leasinglife.com.
Liz Bury
