PU\ING\ING L – GMM\Z20091009_SS

10/10/2009 22:58

State of play CEE countries

Leasing in Central Eastern Europe
ING Lease, Krzysztof Bielecki
5th of October 2009
High growth figures for CEE in the past PU\ING\ING L – GMM\Z20091009_SS
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New lease production growth 2005 - 2006

HU 8,46%

CZ 11,28%
SI 16,52%
SK 31,08%
EE 31,20%
BA 34,23%

PL 64,95%
BG 68,85%
RU 103,62%
0% 20% 40% 60% 80% 100% 120%

Based on members reporting in Leaseurope’s 2006 Annual Survey 1

Development of new lease production growth in PU\ING\ING L – GMM\Z20091009_SS
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the CEE
60%

50%

40%

30%

20%

10% 12,20%

0%
2000 2001 2002 2003 2004 2005 2006 2007 2008

2
New lease production for CEE showed an average PU\ING\ING L – GMM\Z20091009_SS
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growth of 12,2% in 2008

GDP growth is still high in CEE as well

Growth new leasing

production 2007 - 2008
> 10%
0 - 10% -22% -18%
-42%
-10 – 0%
< -10%
9%
41%
GDP growth 2007 - 2008 -2%
15%

> 5-10% -2% 23%

19%

0% – 5% 59%

-35%
-5% – 0%

< -5%

Data from Leaseurope and Eurostat 3

The 2009 outlook for CEE is very different PU\ING\ING L – GMM\Z20091009_SS
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Growth new leasing

production 1st half 2009
> 10% -65%

0 - 10% -75%

-10 – 0%
< -10%
-38%
-76%
2009 GDP growth -50%
-42%

> 5-10% -70%

-74%

0% – 5% -2%

-74%
-5% – 0%

< -5%

Data from country estimates, national leasing associations and Eurostat 4

Developments for some specific CEE countries
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Poland

1st quarter 2009 new lease production -39%

A collapse in road freight brought transport finance down by 46%

Czech Republic

1st half 2009 new lease production -50%

Light commercial vehicles and trucks dropped while machinery leasing business gained

Hungary

1st half 2009 new lease production -70%

Commercial vehicles fell by 66%

Upward trend in down payments (+17%)

Romania

1st quarter 2009 new lease production -74%

Industrial equipment and vehicles recorded the highest drop while real estate leasing increased

Major trend is increased financing of second-hand assets, particularly vehicles, at the expense of new ones

Russia

New lease production -18% in 2008

Rail car equipment was hit most in 2008 and dropped by 45%

Forecast 2009 new lease production -65%

In general we see specialised players/captives increase market share. Occasionally RE improves as well (mostly sale and
lease back).

Data from own country estimates, national leasing associations and Leasing Life 5
 PU\ING\ING L – GMM\Z20091009_SS

2007 penetration rate high in most CEE countries 10/10/2009 22:58

Penetration rate shows

the amount of investment
financed by leasing

> 25%

20% - 25%
15% - 20%

0% - 15%

Data from Leaseurope, country estimates, national leasing associations and Eurostat 6
In 2008 the penetration rate drops in most CEE PU\ING\ING L – GMM\Z20091009_SS
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countries

Penetration rate shows

the amount of investment
financed by leasing

> 25%

20% - 25%
15% - 20%

0% - 15%

Data from Leaseurope, country estimates, national leasing associations and Eurostat 7
Risk costs are rising in the CEE PU\ING\ING L – GMM\Z20091009_SS
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2008 - 2009 1st half

600

500

400

300

200

100

0
2008Q3 2008Q4 2009Q1 2009Q2
Index of Risk Costs (Q3 2008 = 100)

Data from own country estimates 8

 PU\ING\ING L – GMM\Z20091009_SS

Evolution of global market spreads 2007 - 2009 1st half 10/10/2009 22:58

In basis points

950

850 Bond spread

750
650

550 Development credit

spreads syndication
450

350
250 Average CDS BB+
150
50
20 1

20 2

20 3

20 4

20 1

20 2

20 3

20 4

20 1

2
Q

Q
07

07

07

07

08

08

08

08

09

09
20

Evolution of lease margins not available but upward

margin development from mid 2008 onwards

Data from various sources 9

The structure of the CEE market changed over time PU\ING\ING L – GMM\Z20091009_SS
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CEE new lease production per asset category (2006 - 2008)

Amounts in € x billions
2007
2006
12; 26%
10; 30% 10; 30%

38% 19; 41%

52% 48%
62%
3; 8%
12; 26%
10; 32% 3; 7%
2008

13; 26%

21; 41%
49%
51%
Non auto equip
Real estate
Cars
13; 25% CV
4; 8%

Data from Leaseurope 10

Mitigating vulnerability in the CEE
Geographic scope?
• CEE region is not homogeneous;
there are markets performing better average
then others
Focus on different asset types?
• Cars & LCV more cyclical
• In SME segment, assets are less
important
• RE seems to be more immune for
the crisis
PU\ING\ING L – GMM\Z20091009_SS
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Enlarge target customer segments?
• Corporate clients perform better than
• Public sector
• Product proposition for different client
segments
Specialise in specific industries?
• Lessors focused on transportation
industry suffer higher losses
• Leasing is natural choice for financing
cyclical industries
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Summarising

• CEE leasing markets are very volatile due to their size and immaturity

• SME customer segment dominates the portfolios of CEE Lessors therefore the
industry is exposed in the early phase of the crisis

• There is a substantial asset concentration on cars and transportation assets as the

consequence of focusing on the client segment

• Diversification could mitigate the risk but only for European players

• Liquidity crisis might be a good moment for Lessors to review their strategies and
portfolios

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Thank you for your attention

Questions?

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