State of play Western Europe

The leasing and automotive rental industry in 2008

and beyond

Alain Vervaet
5th of October 2009

Eurofinas and Leaseurope Joint Annual Convention Madrid | 5-7 October 2008
World Markets in 2008

Leaseurope
330 bil€
of which
equipment &
US vehicles:
ELFA Japan
294 bil€
138 bil€ JLA

42 bil€
Brazil
ABEL

11 bil€

New equipment leasing volumes; ELFA figures do not include passenger car leasing
Source: Leaseurope 2008 Annual Survey, local leasing associations, Leaseurope estimates
1
 New Leasing Volumes in Europe
400,000 ‘94-’08:

350,000
CAGR: 7.0%
300,000
Millions of €

250,000

200,000 CAGR: 10.3%

150,000

100,000

50,000

0
94

95

96

97

98

99

00

01

02

03

04

05

06

07

08
19

19

19

19

19

19

20

20

20

20

20

20

20

20

20
Equipment and vehicles Real Estate New Volumes
294 bil€ 36 bil€ 2008

New volumes reported by members taking part in respective Leaseurope Annual Statistical Surveys
2
 Development of European New Lease
Volumes
New volumes – Yoy %
2008:
25%

15%

-2.4%
5%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-5.0%
-5%

-15%
-21.6%
-25%

Total volumes Real Estate Equipment (incl vehicles)

Not adjusted for currency fluctuations

Annual growth rates calculated based on a homogenous sample of members reporting in the previous
year of Leaseurope’s Annual Survey
3
 New Business Growth Per Asset Type
(2008)
New volumes – Yoy %
Machinery ICT CVs Cars Big/other
5%

0%
+5%
Total Real estate Movables* -5% -2% -2%
5% 5%
-10%
0% 0% -11% -11%
-15%
-5% -5% -2%
-20%
-5%
-10% -10%
-25%
-15% -15%

-20% -20%

-25% -25% -22%

* Decline of -1% if big/other excluded

Annual growth rates calculated based on a homogenous sample of members reporting in the previous
year
4
 New Business Volumes (2008): Customer
Type
• 3.4% of total vols
Other • -4.6% decrease in ‘08
• spread relatively
Public sector homogeneously:
– lowest: 0.11%
– highest: 8.23%
% equipment
leasing volumes • 14% of total vols
• -7.5% decrease
overall yet leasing to
Consumers consumers rose by
79% 4.5%
• diverse penetration:
– some report 0
Businesses – lowest: 0.06%
– highest: 55%
Includes hire purchase when reported
5
 European Leasing Penetration
Leaseurope penetration rate evolution (1999-2008)
2008*
25%

23.65%
20%

16.02%
15%

10%

5% 4.61%
* Total 2008
0%
penetration for
the 30 members
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 in 23 countries
for which data
was available
Total volumes Real Estate Equipment (incl vehicles)
Leaseurope penetration (total new leasing volumes/investment) based on figures for the19 members
reporting in all Annual Enquiries from 1999 to 2008. Source: Leaseurope, Eurostat
6
 New Business Volumes in Mature
Markets (2008)
25%
New volumes – 2008; Yoy %

15%

5%

Leaseurope
-5%
AT BE NL DK* FI NO* SE* ES PT DE FR IT UK*
-15%

-25%

-35%
Increase in lease penetration
Decrease in lease penetration
* % change not adjusted for currency fluctuations
Annual growth rates calculated based on a homogenous sample of members reporting in the previous year
7
 Leasing Volumes as a Share of GDP in
Mature Markets
4.5%
4.0%
3.5%
3.0% Leaseurope
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
AT BE NL DK FI NO SE ES PT DE FR IT UK

Total new volumes per country divided by nominal GDP. Source: Leaseurope, Eurostat
8
Structure of Leaseurope’s Western
Markets Evolves Over Time
New volumes per asset category
17% Real estate 15%
34% 33%
Cars
50%
CVs 49%
50% 51%
Non auto equip

12% 16% 36%

15% 34%
37% 49% 2007
49% 2006
auto
auto
47%
5%
BVRLA RE falls
joins
35%
53%
auto 2008
16%
9
Focus on Vehicles
Launch of the European Car Leasing & Rental Report
This Afternoon
Leaseurope’s Weight in Cars (2008)

Cars financed/purchased
Leasing ST Rental Total
# (mil) 6.04 0.98 7.02
€ (bil) 116.94 20.14 137.08
Portfolio/fleet
Leasing ST Rental Total
# (mil) 16.05 0.78 16.83
€ (bil) 239.30 NA NA

Based on figures reported in the 2008 Annual Survey & Leaseurope estimates; includes figures from short
term rental associations except for fleet value (€)
10
 The European leasing market in H1 2009
New volumes
% change H1’09/H1’08 -36%
Not adjusted for currency

€17 bn
UK


€20 bn
DE


€13 bn
IT

-39% -52%

€13 bn
FR
-23%
-57%

€4 bn
ES

-25%

€2 bn
PL
-41%

€0.8 bn
CZ
-57%
Leaseurope member association data
11
Funding and Margin Developments
Before the crisis:
• Cheap money
• Money abundantly available
• Extremely low risk costs
•Tough competition in financial sector
• Tough competition within the leasing industry
Focus on:

Volume

Market share

Penetration
12
Funding and Margin Developments
• Margins decline by an average of 20 bps per year
• Mid-2008, average margin on new production 75 bps lower than 2005

2,5

2,3 2004

2,1
2005
1,9
2006
1,7

1,5
2008 2007
1,3

1,1

0,9

0,7

0,5
AA+ A+ A- BBB+ BBB- BB+ BB BB- B+ B B- C <C

13
Funding and Margin Developments
Big issue: Money became scarce
• Independents
• Captives
• Banks/bank owned
• Retail capacity
• No retail capacity
Liquidity premiums
• Euribor/IRS no longer cost of funds
• Liquidity premiums entered into the market
Players completely
disappeared from the
marketplace
14
Risk Management
Credit risk
• Bad debts soared
• Credit losses from <20 bps to 50-75 bps
• Basel II (IRBA): LGD, PD
• Acceptance rate of new transactions
• Increasing risk premium: better remuneration of economic
capital in deals
Residual values
3rd party
• Automotive captive
• Other equipment
• Real estate
15
Risk Management
Risk Costs are Rising

600%

500%

400%

300%

200%

100%

0%
2008Q3 2008Q4 2009Q1 2009Q2

Risk Costs Estimate

16
State of play Western Europe
Leasing and Automotive rental industries in
Europe and beyond

Alain Vervaet
5th of October 2009

Eurofinas and Leaseurope Joint Annual Convention Madrid | 5-7 October 2008