Transcript Slide 1
LEASEUROPE
Shaping the future of the European leasing industry
Alain Vervaet Chairman of LEASEUROPE CEO of ING Lease Holding
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An unprecedented enlargement or a partnership for European development
Alain Vervaet Chairman of LEASEUROPE CEO of ING Lease Holding
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Historic event in Europe’s history May 1
st
, 2004 Unprecedented enlargement
EU = 25 Member States Moving Eastwards 8 Central and Eastern European countries 2 Mediterranean countries 3
New challenges
• Smooth transition from 15 to 25 Member States • Rapid economic integration in the 1990s: - Privatization programmes - Investment liberalization - Business oriented economy • EU-25 closer to Ukraine and Commonwealth of Independent States (CIS) 4
GDP and Population in 2004
• EU-25 GDP = Euro 10.040 billion • Just higher than U.S.A GDP • More than 2.5 times higher than Japan GDP • EU-25 total population = 455 million people 5
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The leasing industry in the US
• Largest single leasing market in the world • New business in 2003 = US$ 224 billion (30% of total business investment in equipment) • Over 5 years: 3 to 5 million more jobs - Between $100 billion to $300 billion more real GDP 7
The leasing industry in Japan
• Total leasing volume in 2003 = US$ 68.8 billion • Leasing volumes constant • Lease penetration in Japan = 8 % 8
The leasing industry in Europe LEASEUROPE, the European Federation of Leasing Company Associations
26 national associations • 1350 leasing companies – 193 billion € new investments in 2003 (217 billion € incl. hire purchase for Finl. & UK) – Estimate for 2004 = 234 billion € (incl. Hire purchase for Finl. & UK) – 470 billion € outstandings (497 billion € incl. hire purchase for Finl. & UK) – Estimate for 2004 = 546 billion € (incl. Hire purchase for Finl. & UK) – 48,000 jobs – Financing around 15% of the gross fixed capital formation in Europe • Members represent 90% of the leasing industry in Europe 9
• Decisions of the Federation are taken by:
– Board = representatives of 8 clusters – General Assembly – Committees and Working Groups • Accounting & Taxation Affairs Committee • Working Group Basel II • Legal Affairs Committee • Statistics and Marketing Committee • CEE Countries Working Group • European Auto Forum 10
Discussion partners of LEASEUROPE – The EU Commission – The European Parliament – IASB – The Basel Committee – The other Federations of the bank and finance industry located in Brussels (e.g. Eurofinas) – Sister Federations at international level • ELA (USA) • CFLA (Canada) • AELA (Australia) 11
Leaseurope is member of official consultative bodies of the European Commission, namely EU Banking Experts Group FORUM WORKING GROUPS Leaseurope DIALOGUE EBIC – European Banking Industry Committee
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LEASEUROPE’s mission is to:
– represent the interests of the leasing industry in Europe – promote and lobby for acceptance and general use of leasing – provide information for • members • partners • public at large – conduct research and economic studies The Board decides about priorities, which are reflected in the work of Committees and Working Groups.
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Europe = almost 45% of the global leasing market 44.3 % 36.7 % 15.5
% 1.2
% 0.8
% 1.5
%
Source: London Financial Group Global Leasing Report 2003 + Leaseurope data 14
Geographic distribution of European leasing activities (Leaseurope in 2003)
8% 7% 5% 11% 13% 17% 22% 17% Germany UK Italy France Austria & CEE Mediterranean Benelux Scandinavia
European leasing market dominated by 4 big countries Germany + UK + France + Italy = 69% of the market
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European leasing market - a sound market (Leaseurope in 2003) +10% average annual growth in the last 10 years (1990 to 2003-HP)
2003 New investments: 193 b € Outstandings: 478 b € 2003 (incl. hire purchase in Finland and the UK) New investments: Outstandings: 217 b € 497 b € 2004 (estimates + H-P) New investments: 234 b € (+ 7.6%) Outstandings: 546 b € (+ 9.7%) 250 200
Graph 1a: New Leased Assets 24 Bio € HP
150 100 50
95 94 89 80 86 95 107 119 137 160 174 193 199 193 234
0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 16
Equipment leases – Analysis by type of asset per cluster (Leaseurope in 2003) In billion euros
40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 D UK I F A& C EE Me Be di ne t.
lu x &C H Sc a nd in a vi a Others Big tickets Motorcars Road transport vehicles Computers and Business machines Machinery and Equipment 17
Equipment leases Analysis by type of customer (Leaseurope in 2003)
90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Agriculture, forestry, fishing Manufacturing, industry, construction Services private sector Services public sector Consumer Others 1997 1998 1999 2000 2001 2002 2003 Leasing is increasingly used by all categories of customers.
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Real estate leases – Analysis by type of building & primary contract term (Leaseurope in 2003)
40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 2002 2003 Others Public services Hotel and leisure Office buildings Retail outlets Industrial buildings 100% 80% 60% 40% 20% 0% 2002 2003 > 20 years 16-20 years 8-16 years <= 8 years 19
Leased assets in 2003(Leaseurope)
Scandinavia Benelux&CH Medit.
Austria & CEE France Italy UK Germany 0% 20% 40% 60% 80% 100% Real estate Equipment 20
Penetration rate of leasing in 2003 – National & international levels (Leaseurope) Austria 12.4% Belgium Switzerland Czech Republic Germany Denmark Spain Estonia France Finland Hungary Italy Netherlands Norway Portugal Poland Sweden Slovenia Slovakia Turkey UK Weighted Average 9.8% 9.7% 19.1% 17.2% 7.0% 6.7% 29.6% 19.2% 4.0% 18.8% 12.9% 6.6% 7.0% 11.5% 19.9% 9.3% 16.6% 14.0% 6.8% 12.8% 14.1%
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Penetration rate of leasing at national and European levels (Leaseurope)
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2003: 14.1 % of European assets financed by leasing
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Leasing exceeds 40% of external financing of capital goods
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Summary: European leasing market (Leaseurope)
– – –
Solid growth over the last 10 years (+ 10%) Car leasing dominates 4 major countries = 69% of the market
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Leasing
– – – –
Market share Accessible source of financing Important employer (48,000 persons) Major player in SME’s development and growth
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Source: ELA, October 4, 2004
WHY LEASE?
Need for Efficient Capital Convenience / Service Conserve Cash Rent a Balance Sheet Manage Tax Liability Avoid Technological Obsolescence Solutions Structuring Knowledge Asset Management
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ELB - The European Leasing Barometer
• Indicator of the confidence level of European leasing companies in the economic activity and expectations for the coming months • Some 101 leasing companies (Leaseurope) in 24 countries • Survey three times a year 25
European Leasing Barometer (ELB)
Jan/Feb 2005
http://www.leaseurope.org/elb/EuropeanLeasingBarometer.html
Global ELB & EU 25 ELB - Comparison with EU Commission's Services Confidence Indicator
70 60 50 40 35 30 20 10 0 33 26 15 26 46 37 60 59 58 58 58 54 47 45 Jan 02 Feb 02 M ar 02 Apr 02 M ay 02 Jun 02 Jul 02 Aug 02 Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Feb 03 M ar 03 Apr 03 M ay 03 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Jan 04 Feb 04 M ar 04 Apr 04 M ay 04 Jun 04 Jul 04 Aug 04 Sep 04 Oct 04 Nov 04 Dec 04 Jan 05 15 10 5 0 -5 -10 Global ELB EU 25 ELB EU Confidence Indicator Construction
European leasing companies less optimistic in the economy and its evolution for the next three months
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Leasing companies and their economic environment European leasing companies more optimistic about their own activities than the macroeconomic environment or their domestic leasing market
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Geographical analysis
Cluster Comparison Over Last Two Editions
80 70 60 20 10 0 50 40 30 50 44 29 18 61 62 49 44 49 66 58 60 72 62 66 51 Germany UK+Ireland France Italy Mediteranean Benelux+CH Austria+ EE Scandanavia Sep-04 Jan-05
UK & Scandinavia most pessimistic (-38% & -23% respectively) while France, Benelux, Switzerland and Mediterranean countries have a more favorable outlook.
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ELB – the European leasing barometer
Conclusions: – Change in methodology resulting in more sensitive measure – After period of high expectations in 2004, confidence has fallen to reach levels similar to those in Sept 2003 – When ELB is broken down into its components, most pessimistic expectations are for the economic situation in the respondent’s home country – ELB and EC’s services confidence indicator follow similar trend (long term interpretation) – Next ELB survey: April/May 2005 29
Leaseurope’s Top 100 ranking
(next ranking June 2004)
• Since 2001 • Annual survey (on voluntary basis) • Groups and individual companies • Top 100 leasing companies in Europe • In 2003, overall production = € 122.3 billion • Top 20 companies = 65% of total value of new contracts 30
Leaseurope – 2005 onwards Main legal issues: CCD & AML
Consumer Credit Directive • First proposal in September 2002 • Ongoing work with the Legal Affairs Committee • Last available document = amended proposal including EU Commission endorsement of EP 1st Reading April 2004 - Art. 3-2-b : confirmed exclusion of “hiring agreements except where they provide for the title to pass to the hirer eventually” - Art.3-2 ba : exclusion of “leasing agreements which do not create any obligation to purchase the object of the agreement” 31
Main legal issues: CCD & AML
Consumer Credit Directive (con’d) • EBIC meets EU Commission: March 14, 2005 • Release of new official proposal by EU Commission: end of April • 1st EU Council Experts Group meeting: May 25, 2005 32
Main legal issues: CCD & AML
Consumer Credit Directive (con’d)
Scope
• If not included in the scope of the CCD left to EU states to regulate" (e.g. joint & several liability.) •
Are excluded
: leasing operations (sic); credits with amounts over Euro 100,000; mortgages or credits secured by mortgages (a.o.) 33
Main legal issues: CCD & AML Consumer Credit Directive (con’d) 3 regimes:
• Full harmonisation (for pre-contractual and contractual information, APRC) • Mutual recognition (for credit intermediaries, responsible lending and duty to advice, all provisions linked to contractual rules like right of withdrawal) • Transitory regime: 6 years towards mutual recognition (for early repayments and information on overrunnings) 34
Main legal issues: CCD & AML Anti-Money Laundering 1991
: 1st Anti-Money Laundering (AML) Directive (limited to drugs offences; applied only to financial sector)
2001
: 2rd AML
June 30 2004
: 3rd proposal for AML, extending scope of previous directives to terrorist financing (reflects recommendations of the OECD-based Financial Action Task Force against ML) 35
Main legal issues: CCD & AML Anti-Money Laundering February 14, 2005
: Leaseurope (EBIC) started lobby action
Position Paper
: • Definition of beneficial owner = entity having control of the customer (holding at least 25%, instead of 10 %, of shares • Definition of politically exposed persons = restricted to third countries (not EU) having prominent public functions • Request for "full harmonisation" of provisions (instead of minimal) for competition reasons 36
Main legal issues: CCD & AML Anti Money Laundering (con’d) At stake = Third parties (intermediaries) working with lease/finance companies (agency relationship) due to:
• large amount of work connected with typical "outsourcing" agreements; • if term "outsourcing" maintained = problem for credit/lease distribution at point of sale or via Internet; • third parties "synonymous" with institution concerning "customer due diligence"/ customer identification and verification requirements only must meet).
(third parties should not be forced to comply with any requirement of directive that institution 37
Main legal issues: CCD & AML Anti Money Laundering (con’d)
• March 7, 2005: EBIC tabled amendments with EP LIBE Committee (MEP Nassauer = Rapporteur) • April 25-26: scheduled vote in EP LIBE Committee • May: vote in plenary • June 7: discussion in ECOFIN Council 38
Leaseurope – 2005 onwards Regulatory issues: A new world order
• Capital adequacy requirements or Basle II • IFRS Will leasing stay independent from Banking Supervision?
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Basel II: A Risk sensitive approach
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The new proposal will replace the 1988 accords A better evaluation of risks Capital allocation according to encountered risks Implications on return on equity
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Basel II: Leaseurope’s aim
Tools Objective Ensuring that leasing business receives sufficient attention when it comes to defining capital adequacy ratio
Extensive knowledge (business & academic level) Scientific studies
working group Privileged interlocutor with regulators
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Basel II: Leaseurope’s input
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Discussion forum within the industry
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List the challenges of the leasing industry with identified solutions
• • •
Identify best practices Supported with further research Bargaining power at the European level 1: Physical inspection related problems 2: Residual value
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Basel II: Leaseurope’s input
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Actively participates in the consultative process
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Maintains close contacts with regulators at the European Commission and Basel Committee
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Capital Requirements Under Basel II Will More Closely Reflect the True Level of Underlying Risk Capital Requirements Change in Europe – BIS II vs. BIS I* RWA as % of Assets
180% 160% 140% BIS I Standardised IRB Foundation IRB Advanced 120% 100% 80% 60% 40% 20% 0% Large Corp SME Project Finance Mortgage Other Retail Source: Mercer Oliver Wyman report (The New Rules of the Game), June 2003 Leasing Banks Sovereign Other 44
As a High Risk-Adjusted Return Business, General Leasing Is Set to Gain From the Realignment Of Capital RAROC
40% • Lower average loss rates than vanilla lending due to structured repayments 35% 30% • Less customer transparency and lack of ‘product’ standardisation allows for higher margins 25% 20%
Asset Finance
• Greater collateral control where funding linked to specific assets
Value Added Lending
15% 10% • On average RAROC in value-added lending and asset finance are amongst the highest available in wholesale banking where balance sheet leverage is involved 5%
Vanilla Lending
0% • Pressure on mid-market lending due to higher capital charges under Basel II 5 10 15 20 -5% Source: Mercer Oliver Wyman
Revenue
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EU-Regulation 2005 - IFRS
consolidated accounts publicly traded companies non publicly traded companies Obligation to apply IAS/IFRS from 2005 MS option* to apply IAS/IFRS annual accounts MS option* to apply IAS/IFRS MS option* to apply IAS/IFRS 46
Lease Accounting: Still a Debate …
• Dissatisfaction with economic ownership concept (on- or off-balance of assets and liabilites) • New Approach implies fundamental changes to accounting concepts
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• Information on Leaseurope’s Website
– Information on EU regulations – Studies and position papers – Statistics – The ELB – Top 100 leasing companies – Others 48
Some trends and questions in the industry
• M&A lead to a vast network controlled by some 15 leasing families having substantial market share in nearly every European country • Captives, main banks and US controlled companies taking the lead • Pan European actors increasing the importance of cross border leasing?
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Looking Eastwards
• Leasing has deep roots in Europe • Leaseurope has special links with Central and Eastern European countries • Special Working Group for Leasing Companies in Central and Eastern Europe • Seminar for leasing managers • Next Seminar, in Belgrade April 26-27, 2005 50
Your personal invitation
Leaseurope Annual Conference October 3-4, 2005 Cascaïs, Portugal You are most welcome to join us.
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LEASEUROPE
Shaping the future of the European leasing industry
Avenue de Tervuren, 267 B – 1150 Brussels Tel. +32 (0)2 778 05 60 fax +32 (0)2 778 05 79 e-mail: [email protected]
http://www.leaseurope.org
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LEASEUROPE
Shaping the future of the European leasing industry
Alain Vervaet Chairman of LEASEUROPE CEO of ING Lease Holding
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