The Financial Companies Association – ALB Romania

Source/Sursa: ASOCIATIA SOCIETATILOR FINANCIARE – ALB ROMANIASource/Sursa: ASOCIATIA SOCIETATILOR FINANCIARE – ALB ROMANIA

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The Financial Companies Association – ALB Romania

Financial Leasing Market in Romania31.12.2012


OPIS

Romania’s Macroeconomic indicators Romanian leasing market:

Evolution during financial crisis Weight per segments Anti crisis policies Lessons to learn

Conclusions

Diplomat Consult SRL


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Ministry of Economy

Indicators 2011 2012 2013 (NPC forecast)

GDP (bl. Euro) 131.4 (556.7 bl. Lei) 132 (587.4 bl. Lei) 138.5 (623.3 bl. Lei)

Economic growth (%) 2.5% 0.7%1.6% (NPC), 1.5% (FMI), 1.4%

(BERD)

Budgetary deficit (% out of GDP, cash) 4.3% 2.5% 2.1%

Current account deficit (% out of GDP) 4.5% 3.8% 4.2%

Inflation rate 3.1% 5.0% 3.5%

Unemployment rate (according to the International Labour Office)

7.0% 5.6% 5.2%

Average net salary (Euro) 354 359 363

Exchange rate Leu / Euro (annual average)

4.23 4.45 4.5

Exports (bl. Euro) 45.5 (+20.5%) 45 (-0.5%) 46.7 (+3.8%)

Imports (bl. Euro) 54.7 (+16.7%) 54.6 (-0.6%) 57.5 (+5.1%)

Foreign direct investments (FDI) 2.69 bl. Euro 1.91 bl. Euro1.109 bl. Euro (9 months +

29%)

Romania – Economic and Social Macro Indicators

GDP/inhabitant – 49% out of the EU average in 2011 Public Debt – 35.6% out of GDP (Romanian accounting standards)


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Foreign trade in Romania

ExportsWhat does Romania export?

Heavy metal industry and transport equipment – 40% Chemical industry (fertilizer, petro chemistry) Textile industry Food industry Wood industry (furniture, paper) Electrical devices (home appliances, vehicles, components)

Where to? Top 5 destinations: 1) Germany, 2) Italy, 3) France, 4) Turkey, 5) Hungary

ImportsWhat does Romania import?

Medicines Vehicles, tires Electrical devices Vehicle accessories

Top 5 import partners: 1) Germany, 2) Italy, 3) Hungary, 4) France, 5) China

Ministry of Economy


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Investments in Romania

Top 5 foreign investors in Romania (in 2011) Netherlands – 27% Austria – 11% Germany – 9% Cyprus – 7% France – 7%

Total FDI in June 2012 = over 55 bl. Euro

FDI’s destination: metallurgical industry, chemical industry, extractive industry, electricity, heat, gas and water, financial services and insurance, construction and real estate, trade, information technology, communications.

Ministry of Economy


Leasing Market in Romania

Financial leasing = approx. 1.7% out of GDP Licensed and supervised companies by the

National Bank of Romania Two levels of supervision according to volumes and

total exposure A total of 198 financial leasing companies Huge concentration of market share by the

banking leasing subsidies (63%)



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Romanian Leasing Market by Type of Lessor 31.12.2012


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Financial Leasing Market Evolution (annual growth rates) 2007 - 2012

Mill €



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Romanian Financial Leasing Market - Weight per Asset Segment



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Romanian Financial Leasing Market Structure by Duration of Contract



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Romanian Financial Leasing Market - Vehicle Financing



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Romanian Leasing Market - Equipment Financing31.12.2011 vs 31.12.2012



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Romanian Financial Leasing Market Real - Estate Financing



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Romanian Leasing Market by Outstanding of Early Terminated and Not Repossessed Leased Assets (000 Euro)

-26%

-11%

-2%



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Romanian Leasing Market by No. of Repossessed Assets

-33%

+9%

-39%



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Romanian Leasing Market by No. of Remarketed Assets

-64%

-39%

+1%



Lessons to Learn

More Prudential Managerial Behavior in Financing New Leasing Contracts: Know your client better (market risk, solvency risk,

bankruptcy evolution) Apply forex stress test for the whole duration of the

leasing contract Finance in The Best Solution Currency for the client –

less forex risk for the client = less NPL risk for the lessor Evaluate & monitor the residual value risk on leased asset Evaluate & monitor the remarketing risk on the leased

asset Evaluate & monitor the repossession risk on the leased

asset



Lessons to Learn

More Prudential Managerial Behavior in Monitoring the Existing Contracts: Monitor on daily basis the lessee’s payment behavior/cross check with

credit bureaus and other reliable sources (utilities black list, insurance black list)

Archive the leased assets ID in the national electronic archive in order to protect the property title

Prevent and predict NPLs by keeping a strong communication with the lessee / offer restructuring solutions before applying the NPL recognition

Provision the delays in payments Keep your company at the proper level of capital adequacy rule! Accommodate the human resources according to “tomorrow” evolution

of the portfolio



Lessons to Learn

More Prudential Managerial Behavior in Monitoring the NPL Contracts: Monitor the leased assets via GPS systems or similar ones Apply antifraud policies in direct cooperation with national and

international authorities (Economic Police, Anti Money Laundry Office, National Leasing Association etc.)

Provision the NPLs Create repossession & remarketing divisions Develop and apply repossession & remarketing internal policies



Conclusion: FLEXIBILITY, PRUDENTIALITY, TRANSPARENCY, CONFIDENCE

Teach your client to be responsible when signing a leasing contract Be tough with customers and do your best to know them better than

they know themselves! Don’t hesitate to say NO when a client deserves this response! This

NO will come with a positive feed back tomorrow in terms of company’s image and financial results!

Be modest! Today’s profit in leasing may be tomorrow cost of provision and deficit!

Monitor your portfolio’s evolution constantly! Be transparent in recognizing the non performance! Keep your shareholder informed and build mutual confidence! Be flexible and adapt to new challenges of the market!


The Financial Companies Association – ALB Romania

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