2005 study “update on leasing in europe” october 2005 “update on leasing in europe”...

2005 STUDY “UPDATE ON LEASING IN EUROPE”2005 STUDY “UPDATE ON LEASING IN EUROPE”

OCTOBER 2005OCTOBER 2005

“UPDATE ON LEASING IN EUROPE”

LEASEUROPE ANNUAL CONFERENCE 2005

PRESENTED BYDEREK SOPER

THE ALTA GROUP



LEASEUROPE SURVEY

Over 360 members of the Industry notified of Survey

Speedy response from CEE Countries, excellent co-operation from Italy and Germany.

Some Associations controlled the process. 28% Response – Greater than expected. Sample size should be statistically sound.



ALTA’S FIRST REACTIONS

Some marked differences to the 2003 Survey. Some countries and companies still believe their

business is “unique”. Activities and subjects of concern are common across

all countries. Generally companies are optimistic about themselves

but not about their economies. Very few feel regulation is bad – we wonder if

companies feel safe from competition if everyone is “regulated”.



TODAYS PRESENTATION

An overview of the results

The critical areas of interest

Some comment from Alta



RESULTS

Ownership of European Lessors

Mainly Bank owned. Some Captives and Independents, but demonstrating very

different “attitudes”. Many references to “Parent Bank” and “Servicing the Bank

customers”, “the Bank want us to do this”, etc. Giving the impression that the Bank parents are very much in control.



Results

Big Ticket…………………………………….37% Medium Ticket……………………………….94% Small Ticket………………………………….73% Direct Business……………………………..74% Vendor Leasing……………………………..82% Consumer Credit……………………………32% Floor plan / Stocking……………………….7%



RESULTS

Spread of Countries for Subsidiaries

CEE / Austria – 5/6 countries quite usual. Very few have International Coverage. More with European Coverage, but limited. Mainly domestic only. Not much overseas expansion planned.



RESULTS

Regulation / Supervision

Many believe ‘Regulation’ or ‘Supervision’ is an advantage for their business. The only concern expressed was cost.

A strong feeling came from the comments that companies like the protection “Supervision” gives them from the outside world.



RESULTS

Basle II Almost universal support. See asset quality increasing. Some concerns about cost. A few comments about “small ticket” leasing

becoming closer to Consumer business.



RESULTS

Growth or Decline in the Market

Overwhelming number said the Market would grow over the next three years.

A small number said growth this year and then decline.

No company said decline for the next three years.



RESULTS

Where will Growth come from?

Domestic 87%

Europe 67%

Outside Europe 19%

Change in Direction 13%

Other new services 21%

Acquisitions 24%



RESULTS

Margins. Most see a reduction in the short to medium term –

only a very small number expect an improvement. Over two thirds feel that leasing produces an

unsatisfactory return on capital. One third see longer term margins improving.

Interesting that none were advocating better margins from increased services – or perhaps this is secret!!



RESULTS

Do You favour Centralisation or Decentralisation?

Centralisation…………………………………..27%

Decentralisation………………………………..73%

Do you do leasing for Central or local Government?

71% said yes they do.

Do you enter into Joint Ventures with Vendors?

52% said yes they do.



RESULTS

Human Resources.

Many expect a shortage of quality staff for the next three years, but a small number of companies say they will be OK but the rest of the industry will have a problem.

A very strong trend to decrease the back office and increase the sales and customer facing support staff.

A significant number said they were moving staff from the Bank into the Leasing Company.



RESULTS

TrainingUse in-house training Team…………………………….84%

Use External Trainers…………………………………….72%

Public Seminars / Conferences…………………………53%

Web based training……………………………………….None

Management Development (INSEAD, IMD, etc)………7%



RESULTS

Training - continued

Top three subjects for training :-

Basic Leasing Skills – New Staff Selling and Marketing / Training the Vendor Asset Management.



RESULTS

The three most Concerning Issues. ( What keeps you awake at nights)

Profitability / volumes and ROC

How to increase turnover – the hunt for business

Maintaining good quality Staff.



RESULTS

IAS17 - accounting for leases.

Overwhelmingly little or no concern. A very strong feeling that many did not know what

effect it would have on their business. Recognition that customers would still want Off

Balance Sheet products. No evidence of much “new product” activity.



RESULTS

Is good quality credit information available in your domestic market?

Most thought the information available was good quality and received it from:-

1. Parent Bank Data.2. Central Bank Data.3. Rating agencies.



RESULTS

Are you experiencing any changes in credit quality in your existing portfolio?

The majority said – mainly stable, very little change expected and not expecting to change strategy on lending criteria.

One indicated a very steep decline – lets wish him Goodbye – he may not be here next year.!



RESULTS

Are your systems E Commerce enabled and do you plan to use E Commerce delivery of product.?

Very few indicated they could deliver at this point in time 25% said they were planning to do so. A significant number said they had no intention of using this

method of delivery.



RESULTS

Is Software Support a major area for Investment?

The vast majority indicated that Software spend was a significantly increased number in their budgets.

Many very negative comments – “no good suppliers” – “mostly about Basle II” – “Takes too much management time” etc, etc.



RESULTS

Residual Value Insurance.

Virtually none use it.

Involvement in Project Financing

35% said yes, in some form.

Involvement in Waste disposal or Renewable energy financing

42% said Yes.



RESULTS

MARKETS. – Vehicles

An overwhelming sector of the market – particularly in the CEE countries, where it is 60 / 80% of the business in many cases

Most in operating leases of cars and commercials, but very few in trailers.



Vehicles - continued

The Car Market……………………………………………….81%

The Full Service car market……………………………..…74%

Commercial Vehicles……………………………………..…67%

Commercial Vehicle Operating Leases…………… ….…54%

Trailer Leasing………………………………………… …….26%

Trailer Operating Leasing……………………………….....19%

Leasing of Vehicles to Private Individuals or Just Business?

80% was to Business only.



RESULTS

MARKETS. – Operating Leasing

A great many who do operating leasing do not employ asset management specialists.

Very few residual positions are covered by RV Insurance. Residual positions taken are mainly for one or two types of

equipment only. Many only do Operating leases where the residual position is

covered by the supplier.



RESULTS

MARKETS. – Real Estate Leasing

About 50% of the respondents do Real Estate Leasing

Most take residual positions. Most will only lease to the end user. Overwhelmingly Office or Industrial Buildings only. Most see it as a growth sector.



CRITICAL CONCERNS

Where is growth coming from. Profitability. IT Strategy. Compliance. Evidence of Leasing being more integrated into the

Banks.



SOME THOUGHTS FROM ALTA

European company earnings depressed. Pressure on short term margins All GDP forecasts for Europe are pessimistic

And yet almost everyone expects growth year on year for the next three years !



SO WHERE WILL THE LEASING GROWTH COME FROM?

New products and services? Can leasing take an increased share of the market? Investment in more technology? Mergers and Acquisitions? Banks exiting the business? International Growth?



Thank you to Leaseurope for allowing us to conduct the survey and present

the findings to this Meeting

www.thealtagroup.com

[email protected]

2005 study “update on leasing in europe” october 2005 “update on leasing in europe”...

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