are shaping up to be a formidable contributor to the earnings of
Hypo Alpe Adria Leasing.
According to Stefan Duller, Hypo’s managing director, who
oversees the group’s expansion strategy, South Eastern Europe (SEE)
made up close to 80 per cent of the €2.7bn in new business volume
for 2007. SEE leasing volumes are expected to sustain that share
for this year’s forecast new business volume of €3.3bn.
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Last fall, Hypo established a subsidiary in Ukraine, a
burgeoning market for vehicle and equipment leasing and one that
Hypo predicts by 2012 will become one of the largest operations
within the group.
“We are targeting Ukraine in moveable and car leasing and we
want to place €220m in deals this year,” Duller said, noting that
currently roughly one in 12 of Ukraine’s 48m population had
cars.
“There is a tremendous need for more cars but the car leasing
market is not developed. Most of the cars are first of all paid in
cash and a lot of cars are financed by bank loans, so the leasing
portion is very small,” he added.
Indeed, the car segment is an obvious place to begin with for
any new entrant into the Ukrainian market. Latest statistics by the
International Finance Corp, a unit of the World Bank, showed that
automobiles made up 16 per cent of its $3.7bn (€2.3bn) leasing
portfolio in 2007. Automobiles were second after rail transport (52
per cent) but double that of freight transport (8 per cent).
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By GlobalDataThere is also a developed secondary market for automobiles,
offering another reason why the leasing of cars has taken off much
quicker compared to other asset classes.
Two other fast-growing markets for Hypo are Bulgaria and Serbia,
Duller said. Bulgaria reported its first set of full-year results
for 2007 in which it achieved total volume of €240m, and is on
target to end 2008 with over €300m in new business through an
expected 6,000 new contracts. The deals in Bulgaria are structured
as finance leases, owing to the practical difficulties present in
an emerging market.
Among them, Duller explained, was the disadvantageous position
of not being a manufacturer-related finance house. Without proper
maintenance services at its disposal, coupled with the poor
conditions of Bulgarian road infrastructure, Duller said it would
be “very difficult to run a profitable” operating lease business as
it would not be able to command good residual values at the end of
a lease.
Meanwhile, Hypo’s Serbian unit reported a net profit of €19m on
the back of a 45 per cent growth in contracts. In 2007, Hypo
grabbed the lead in market share for leasing of almost 30 per
cent.
However, like other leasing companies in the former Yugoslavian
territory, Hypo is lobbying for change in its monetary policy,
which has the affect of limiting growth in leasing companies.
Companies that offer finance lease products in Serbia are subject
to the same regulatory oversight as banks. This means it has to
maintain a reserve ratio equivalent to 20 per cent of its finance
volume.
“We are very satisfied with the market and we also see huge
potential here, but it would be better, of course, not to have to
keep the reserve ratio,” he said diplomatically.
