The European
leasing industry is experiencing a sea change, the scale of which
it has never seen before.
One only has to look at our article
on page 5, which outlines the expansion plans of Europe’s largest
leasing companies, for evidence of this.
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But the far bigger change, and one
which will determine the size and shape of the European leasing
industry for years, even decades, to come is lessors’ ever
increasing focus on parent integration.
The list of bank-owned lessors
which have now embarked on this path is growing almost by the
month. Those which spring immediately to mind are Lombard, De Lage
Landen, Barclays, ING Lease, UniCredit and Santander, but there are
plenty more.
It is, after all, through the
parent that these companies hope to both avoid repeating those
problems that caused the recession in the first place – bad debt,
high risk, poor customer base, confused route to market – while at
the same time help them to grow their businesses.
Almost all leasing companies
committed to parent integration report recent increases in new
business volumes, largely as a result of much more cross-referral
business from their parents.
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By GlobalDataAlso, their deal sizes are growing
as they focus their attentions as much now on FTSE 100 companies as
they used to on the SME sector.
Lombard, for instance, which over
the last 18 months has focused on far greater cooperation with its
parent, the Royal Bank of Scotland, saw its “top line” grow last
year and now it “fully intends to grow its book” during 2010,
according to managing director, Alex Baldock.
The penetration of leasing might
well also grow as it shifts to the forefront of a bank’s armoury of
financial offerings.
The type of product offered by
lessors will also change. Already we have seen leasing sitting
alongside the likes of invoice discounting and factoring in more
structured-type deals, and this is likely to become more prevalent
in the future. Integration, it seems, aids innovation.
Another change is in the type of
people now being hired by leasing companies. Relationship managers,
capable of working as part of a team of general finance
specialists, are now much more in demand, and over the past year
have rapidly been filling the ranks of many bank-owned lessors.
Distribution models, also, are
changing. Lessors relationship with brokers are becoming more
opaque and uncertain. Some have cut all ties with brokers, and have
no plans in the immediate future of re-forging them.
Others, meanwhile, are both
managing to work closer with their parent while, at the same time,
keeping their broker relationships. A key example of this is
Investec Asset Finance in the UK.
ING Lease Group is both committed
to working more closely with its parent, while at the same time
seeing opportunities in keeping the broker model in the UK and
developing a new one in Germany.
Another positive to have come out
of this sea change is that, as leasing is now less of a silo at the
bottom of banks and is more trusted by its parents, bank-owned
lessors are likely to have access to ever greater amounts of
liquidity.
Given the urgency of some lessors
to innovate, and to tap relatively unexplored markets, not least
China and India, this could not have come at a better time.
Perhaps, indeed, leasing companies
are turning into something rich and strange.
Brendan Malkin
brendan.malkin@vrlfinancialnews.com
