Banks reassess risk in the leasing industry

Banks are reassessing their relationships with the vehicle leasing industry against a backdrop of relative economic uncertainty and an aversion to high-risk investments.

Banking giants have always had a major role to play, but in recent years it has been a case of the major funders looking for the nearest exit, rather than digging deep.

Fingers were burnt by falling residuals and the need to deleverage quickly in the wake of the banking crisis. Collapses, mergers and acquisitions followed as the leasing landscape changed.

But the British Vehicle Rental and Leasing Association (BVRLA) believes the dust is finally starting to settle. Chief executive John Lewis told Fleet News: “Things are looking more positive than at any stage since the credit crunch.”

However, it seems hard to believe when a currency crisis remains a very real danger and has already cost banks dear.

At least the flames have been doused for now, after Greece cleared its latest hurdle to stave off bankruptcy. It struck a deal last week to write off millions of pounds of debt it had with funders after Europe’s banks had already agreed to forfeit billions more.

BNP Paribas, which owns Arval, and the owners of ALD Automotive, Societe Generale, was among those hardest hit, with each having to take a 75% haircut on the amount of money owed to it by Greece.

BNP Paribas said it had written down its holdings of Greek debt by a total of 3.45 billion euros in 2011, while Societe Generale wrote off 662 million euros. Both reported a sharp drop in profits in 2011.

However, when Arval announced it was selling its fuelcard operation for £194m in December 2011, its owners told Fleet News that its leasing business wouldn’t be next.

Leasing finance expert Gerard Moon, a director at Zero Finance, said there has been “no indication it is intending to “exit the market”. “Indeed, ALD is experiencing double digit growth and its white label scheme has proved very attractive to a number of the manufacturers,” he said.

But four years on from the banking crisis of 2008, its shockwaves still reverberate throughout the leasing industry.

Lombard Vehicle Management’s owner, the Royal Bank of Scotland (RBS), is still battling to turn its fortunes around. It identified non-core assets to offload at an early stage after the crash and LVM became one of those assets looking for a new suitor in 2009.

Elsewhere, ING sold its contract hire division ING Car Lease to BMW-owned Alphabet in September 2011 for 637m euros.

Masterlease, which was owned by Ally Financial, was bought by Investec and Leasdrive was handed the management of the fleet.

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