Leasing in Latin America

Transcription

1 Leasing in Latin America Getting Ready to a New Normal WLY 2018 Page 1

2 2017 in perspective The leasing industry grew 5 times more than the Economy As a maturing industry, Leasing in Latin America has managed to keep growing over the whole Latin American economy. While the industry prepares to a disruptive change fueled, among other things, by the new Lease Accounting Standards, namely IFRS-16 and ASC-842 (for companies subjected to US GAAP), most of the current players exhibit resiliency, in particular independent Lessors. Table 1:Evolution of Leasing Portfolios in Latin America COUNTRY/PAIS 2017 USD$000 USD$000 USD$000 USD$000 MARKET GROWTH 17/16 GROWTH 16/15 GROWTH 15/14 PORTFOLIO 2014 PORTFOLIO 2015 PORTFOLIO 2016 PORTFOLIO 2017 SHARE Mexico $13,837, $13,474, $15,024, $21,381, % 42.31% 11.50% -2.60% Colombia $13,147, $12,963, $13,598, $15,818, % 16.33% 4.90% -1.40% Chile $10,135, $8,945, $10,470, $12,651, % 20.83% 17.00% % Brazil $9,765, $8,204, $7,324, $8,250, % 12.65% % % Peru $8,463, $6,656, $6,102, $6,031, % -1.16% -8.30% % Argentina $1,551, $1,242, $1,136, $903, % % -8.50% % Puerto Rico $599, $609, $730, $730, % -0.11% 19.90% 1.70% Costa Rica $698, $538, $584, $484, % % 8.60% % Guatemala $109, $128, $132, $86, % % 2.70% 17.80% Venezuela $329, $386, $286, $ % % % 17.30% Ecuador $112, $89, $92, $ % % 4.10% % Bolivia $69, $64, $80, $ % % 23.40% -7.20% Honduras $ $ $22, $ % % TOTAL $58,820, $53,303, $55,585, $66,339, % 19.35% 4.28% -9.38% Of course that not all countries have managed the same level of activity. Clearly, leasing industries across the countries surveyed by The Alta Group, can be differentiated: Honduras, Mexico and Colombia are certainly the stars. In other countries, such as Chile and Peru, the industry is growing less but this is due to the necessary shift from markets dominated by finance leases to emerging players in WLY 2018 Page 2

3 operating leases. Brazil already made that transition and for that reason, it is showing growth again. The transition in Brazil has shown the virtual abandonment of finance and operating leasing banks, while commercial, operating lessors ( Locadoras ) are gaining importance and growing in the marketplace. Indeed, the leasing industry in general grew much faster than the national economies measured by their corresponding Gross Domestic Product. Figure 2 illustrates that in each country. Argentina is an interesting case of an emerging player. Its industry is growing trying to catch up in terms of its penetration of leases over GDP. The industry counts with first class leadership, but it is facing great macroeconomic headwinds. However, its trend line is good. Figure 2: Who grows better: The Economies or Leasing within them? 2017 Leasing Portfolio Growth vs. GDP Growth Regional Puerto Rico Peru Mexico Figure 1: What grows better: The Economy or Leasing within? Honduras Guatemala Ecuador Costa Rica Colombia Chile Brazil Bolivia Argentina PORT.GROWTH GDP GROWTH -15.6% 0.0% 15.6% 31.3% 46.9% 62.5% WLY 2018 Page 3

4 The Three Musketeers: Banks, Captives and Independent Figure 2: Banks still dominate but losing ground Banks kept losing ground on their former dominance amongst the players in the leasing industry. While banks used to represent between 70% to 75%, their market share is declining to 65%. Many factors explain this. First, strict regulations that impose heavier capital requirements upon risk weighted assets, have led to a risk adverse culture in the banks, where tangible assets and residual position taken are virtually excluded from the bank s business model. Second, capital is flowing to independents because they are showing above average returns on equity, and finally, because certain equipment manufacturers still need strong support from their captives. The aforementioned notwithstanding, captives are mainly present in the four largest economies, namely, Mexico, Brazil, Argentina and Colombia. This has to do with critical mass considerations. If the market size doesn t justify establishing presence in a given country, captives would not dare to open a subsidiary in such country, rather outsource financing with existing domestic players, either banks or WLY 2018 Page 4

5 independents. Such is the case in countries such as Chile, where no captives are detected. What the data and observed behavior of the market suggest is that as long as the Latin American economies suffer transformation, the global drivers (technologies and regulations) lead to forced changes in the business models of all Lessors. Demand for capital goods is changing, among other things because the sole definitions of capital goods is also changing. At the same time when imports of computers is declining in all countries, the demand for smart phones is skyrocketing. These are not classified as capital goods, but they are. However, no single lessor is currently Financing them. While the Fourth Industrial Revolution is emerging, we do not see yet any of these transformations in the composition of the portfolio of Latin American Lessors. No drones, not too many electric vehicles, seldom use of the Internet of Things, no 3-D printers financed, no smart cities, but instead, a large switch into real estate leasing. A material component of the growth of the leasing industries in Chile, Peru and Colombia come out of their originations in real estate leases. Another interesting observation has to do with the profitability of the surveyed Latin American Lessors. While the average return on equity of the whole universe of Lessors reviewed was 10.8% in 2017, the 100 largest Lessors delivered an average 12.7% return on equity in The 20 most profitable LAR Lessors Company Type Country Ford Credit Captive Mexico 38.9% RENTING COLOMBIA S.A. Bank Colombia 36.76% WLY 2018 Page 5

6 The 20 most profitable LAR Lessors Company Type Country Banco de la Provincia de Buenos Aires (incl, Provincia Leasing) HP FINANCIAL SERVICES COLOMBIA LLC Bank Argentina 36.46% Captive Colombia 32.47% Banco Patagonia S,A, Bank Argentina 31.87% John Deere Credit Captive Mexico 26.3% Arrendadora Banregio Bank Mexico 25.9% Comercial Administardora Independent Guatemala 23.95% Unifin Financiera Independent Mexico 23.3% Banco COMAFI (incl, The Capita Corp) Bank Argentina 22.26% Banco Credito del Peru Bank Peru 19.69% Localiza Independent Brazil 19.44% Banco de Galicia y Buenos Aires Bank Argentina 19.30% Interbank Bank Peru 18.96% Hewlett Packard Financial Services Captive Mexico 18.9% Banco de Chile Bank Chile 18.55% Banco Santander Chile Bank Chile 18.17% BBVA -Banco Continental Bank Peru 18.11% WLY 2018 Page 6

7 The 20 most profitable LAR Lessors Company Type Country Volkswagen Leasing Captive Mexico 17.6% Caterpillar Crédito Captive Mexico 16.8% Flyers and Divers: Who grew faster and who declined faster There were interesting moves in the industry, we had some newcomers in the list, these were the flyers: WLY 2018 Page 7

8 Table 2: Flyers: Companies who grew faster than their peers Jump Company TYPE COUNTRY Estimated Portfolio Volume USD(000 US$ ) 2017 (000) MAREAUTO COLOMBIA S A S Independent Colombia 82,805 $ 56, Banco de Lage Landen Brasil S/A Bank Brazil 76,484 $ 49, BV LEASING AM S A Bank Brazil 74,604 $ 47, CSILATINA A.M. S.A. Independent Brazil 69,371 $ 42, Value Arrendadora Independent Mexico 200,186 $ 121, Volkswagen Leasing Captive Mexico 1,932,240 $ 830, Locamerica Independent Brazil 483,423 $ 297, HP FINANCIAL SERVICES COLOMBIA Captive Colombia 98,653 $ 59, Banco COMAFI (incl, The Capita CorpBank Argentina 148,762 $ 113, HP Financial Services Captive Argentina 77,454 $ 47, Banco de la Provincia de Buenos AireBank Argentina 68,858 $ 64, Localiza Independent Brazil 2,273,658 $ 1,035, Arrendadora Inbursa Bank Mexico 2,308,925 $ 1,139, Daycoval Leasing - Banco Múltiplo S.Bank Brazil 159,861 $ 73, Banco Supervielle Bank Argentina 133,291 $ 113, Unidas Independent Brazil 636,622 $ 331, Operadora Mega Independent Mexico 177,754 $ 65, Mercader Financial Captive Mexico 377,256 $ 191, Financiera Bajio Bank Mexico 206,925 $ 100, AB&C Leasing Independent Mexico 98,006 $ 46, Popular Auto Bank Puerto Rico 730,125 $ 319, Banco Bice Bank Chile 681,676 $ 241, Paccar Arrendadora Captive Mexico 591,055 $ 254, John Deere Credit Captive Mexico 147,621 $ 60, CSI Leasing México Independent Mexico 118,660 $ 54, Arrendadora Afirme Bank Mexico 107,035 $ 45, Banco de Galicia y Buenos Aires Bank Argentina 99,079 $ 51, Servicios Financieros Progreso Independent Chile 63,008 $ 26, Banco Santander Chile Bank Chile 2,326,387 $ 736, BBVA COLOMBIA Bank Colombia 1,257,071 $ 496, Banco del Estado Bank Chile 1,226,055 $ 476, Movida Independent Brazil 850,536 $ 404, Banco Bilbao Vizcaya Argentaria Bank Chile 781,133 $ 310, Navistar Financial Captive Mexico 648,576 $ 273, Arrendadora Banregio Bank Mexico 648,020 $ 280, De Lage Landen Bank Mexico 150,630 $ 56, Arrendadora y Soluciones de NegocioIndependent Mexico 92,081 $ 41,512 while the divers were mostly banks that placed their leasing strategies in the back burner, sometimes due to the fear to assume asset management risks, and sometimes because they found alternative structures to perfect collateral, such as security interests in the countries that have followed the UNCITRAL Model Law WLY 2018 Page 8

9 and the suggestions of the International Finance Corporation, that albeit provide priorities, still lack the strength of creditors rights that a lessor enjoys under applicable law. Nonetheless, in practical terms is easier to perfect a secured transaction and it represents less hassle in the front end. In Brazil, that still lacks a secured transactions law, the guarantee trust ( alienação fiduciaria ) has displaced leasing as the preferred form of asset based financing. For that reason the largest diver is Banco Itaucard, one of the largest banks in Brazil. The following list shows interesting lessons about going up and down: WLY 2018 Page 9

10 Jump Company TYPE COUNTRY Portfolio USD(000) 2017 Estimated Volume US$ Banco Itaucard S/A Bank Brazil 255,942 $ (96,964) Banco Patagonia S,A, Bank Argentina 72,184 $ 36, CHG Meridian Mexico Independent Mexico 129,548 $ 14, Banco Financiero Bank Peru 126,448 $ 23, FINANDINA Bank Colombia 101,601 $ 23, CARVAJAL PROPIEDADES E INVERSIONES -9 S.A. Independent Colombia 148,819 $ 44, Banco Ibm S/A Arrendamento Mercantil Captive Brazil 443,442 $ 77, Tanner Independent Chile 170,370 $ 43, LEASING CORFICOLOMBIANA Bank Colombia 135,188 $ 38, BBVA Banco Frances Bank Argentina 120,305 $ 78, Banco Consorcio Bank Chile 62,856 $ 21, Santander Brasil Arrendamento Mercantil, -7 Merging Santander Leasing Bank Brazil 573,716 $ 149, Safra Leasing S/A Arrendamento Mercantil Bank Brazil 275,820 $ 52, Bradesco Leasing S/A Arrendamento -6 Mercantil Bank Brazil 664,794 $ 115, RENTING COLOMBIA S.A. Bank Colombia 347,308 $ 100, BBVA Leasing Bank Mexico 900,276 $ 172, SG Equipment Finance S.A. Arrendamento -5 Mercantil Bank Brazil 274,534 $ 80, Cia. de Arrendamento Mercantil RCI Brasil Captive Brazil 215,364 $ 55, EQUIRENT S.A. Captive Colombia 116,728 $ 40, Alfa Arrendamento Mercantil S/A Bank Brazil 88,691 $ 33, Unifin Financiera Independent Mexico 1,911,647 $ 701, BANCO DE OCCIDENTE Bank Colombia 1,727,413 $ 599, ITAU Bank Colombia 1,171,481 $ 381, OuroVerde Independent Brazil 391,335 $ 96, Hp Financial Services Arrendamento Merc. -4 S/A Captive Brazil 329,834 $ 122, LEASING BANCOLDEX S.A. Bank Colombia 145,845 $ 53, Banco de la Nacion Argentina (incl, Nacion -4 Leasing) Bank Argentina 109,924 $ 59, BANCO POPULAR Bank Colombia 97,621 $ 38, HSBC Bank Argentina S,A, Bank Argentina 74,074 $ 71, Corporacion Cafsa Captive Costa Rica 68,228 $ 30, Banco Itau Chile Bank Chile 1,960,986 $ 510, Financiera Desyfin Independent Costa Rica 234,174 $ 79, Arrendadora Actinver Bank Mexico 224,800 $ 64, Grupo BNS Bank Costa Rica 182,517 $ 71, Tattersal Independent Chile 132,267 $ 40, Comercial Administradora Independent Guatemala 86,601 $ 33, Banco Credito del Peru Bank Peru 2,285,676 $ 576, BBVA -Banco Continental Bank Peru 1,427,330 $ 346, Caterpillar Crédito Captive Mexico 1,235,613 $ 371, Interbank Bank Peru 527,063 $ 164, Banco Internacional Bank Chile 205,775 $ 79, Banco de Chile Bank Chile 2,227,140 $ 780, Banco Interamericano de Finanzas Bank Peru 424,620 $ 134, COLPATRIA RED MULTIBANCA Bank Colombia 349,397 $ 156, Arrendadora Ve Por Mas Bank Mexico 155,212 $ 53, LEASEPLAN AM S.A. Independent Brazil 112,610 $ 49, Corporación Financera Atlas Independent Mexico 92,354 $ 37,190 WLY 2018 Page 10

11 Other divers, who fell slightly less, were affected by the reduction in capital investment that affected Latin American countries driven by election years and the uncertainty generated by notorious corruption scandals such as the Lava Jato scandal in Brazil that created collateral effects in other countries of Latin America and led to the paralysis of large infrastructure projects that were driving investments in countries such as Peru, Colombia, and even Mexico. Who really own the Alta LAR 100 companies and from where: Another interesting feature observed has to do with the ownership of the largest lessors. Certainly, the United States of America has given up its control. This country is no longer relevant for the leasing industry in Latin America. The space left by the United States has been taken over by Japan, Spain, France, Germany and Canada. Certainly, the United States is not great in Latin America, it is becoming less and less influential in the equipment leasing and financing industry in Latin America. WLY 2018 Page 11

12 and the winners are: The complete list of The Alta LAR 100 year-end 2017 is the following: Company TYPE COUNTRY Portfolio USD(000) 2017 Estimated Volume US$ (000) BANCOLOMBIA Bank Colombia 5,524,933 $ 2,134, NFR Finance de Mexico Captive Mexico 4,642,345 $ 2,042, DAVIVIENDA Bank Colombia 3,233,981 $ 1,445, Banco Santander Chile Bank Chile 2,326,387 $ 736, Arrendadora Inbursa Bank Mexico 2,308,925 $ 1,139, Banco Credito del Peru Bank Peru 2,285,676 $ 576, Localiza Independent Brazil 2,273,658 $ 1,035, Banco de Chile Bank Chile 2,227,140 $ 780, Banco Itau Chile Bank Chile 1,960,986 $ 510, Volkswagen Leasing Captive Mexico 1,932,240 $ 830, BCI - Credito e Inversiones Bank Chile 1,918,146 $ 771, Unifin Financiera Independent Mexico 1,911,647 $ 701, BANCO DE OCCIDENTE Bank Colombia 1,727,413 $ 599, BBVA -Banco Continental Bank Peru 1,427,330 $ 346, BBVA COLOMBIA Bank Colombia 1,257,071 $ 496, Caterpillar Crédito Captive Mexico 1,235,613 $ 371, Ford Credit Captive Mexico 1,229,583 $ 451, Banco del Estado Bank Chile 1,226,055 $ 476, ITAU Bank Colombia 1,171,481 $ 381, Scotiabank Bank Peru 1,011,675 $ 321,175 #N/A 21 Engenium Capital Independent Mexico 981,428 $ 380, BANCO DE BOGOTA Bank Colombia 981,367 $ 427, BBVA Leasing Bank Mexico 900,276 $ 172, Arrendadora Banorte Bank Mexico 856,135 $ 347, Movida Independent Brazil 850,536 $ 404,372 WLY 2018 Page 12

13 Company TYPE COUNTRY Portfolio USD(000) 2017 Estimated Volume US$ (000) Banco Bilbao Vizcaya Argentaria Bank Chile 781,133 $ 310, Popular Auto Bank Puerto Rico 730,125 $ 319, Banco Bice Bank Chile 681,676 $ 241, Bradesco Leasing S/A Arrendamento Mercantil Bank Brazil 664,794 $ 115, Hewlett Packard Financial Services Captive Mexico 657,589 $ 657, Navistar Financial Captive Mexico 648,576 $ 273, Arrendadora Banregio Bank Mexico 648,020 $ 280, Unidas Independent Brazil 636,622 $ 331, Paccar Arrendadora Captive Mexico 591,055 $ 254, Santander Brasil Arrendamento Mercantil, Merging Santander Leasing Bank Brazil 573,716 $ 149, Interbank Bank Peru 527,063 $ 164, Banco Security Bank Chile 497,056 $ 166, Locamerica Independent Brazil 483,423 $ 297, Banco Ibm S/A Arrendamento Mercantil Captive Brazil 443,442 $ 77, Banco Interamericano de Finanzas Bank Peru 424,620 $ 134, Scotiabank Sudamericano Bank Chile 398,573 $ 136, OuroVerde Independent Brazil 391,335 $ 96,026 #N/A 43 TIP De Mexico Independent Mexico 386,489 $ 142, Mercader Financial Captive Mexico 377,256 $ 191, COLPATRIA RED MULTIBANCA Bank Colombia 349,397 $ 156, RENTING COLOMBIA S.A. Bank Colombia 347,308 $ 100, Hp Financial Services Arrendamento Merc. S/A Captive Brazil 329,834 $ 122, ATC SITIOS DE COLOMBIA S.A.S Independent Colombia 298,574 $ 134, Safra Leasing S/A Arrendamento Mercantil Bank Brazil 275,820 $ 52, SG Equipment Finance S.A. Arrendamento Mercantil Bank Brazil 274,534 $ 80, Banco Itaucard S/A Bank Brazil 255,942 $ (96,964) Financiera Desyfin Independent Costa Rica 234,174 $ 79, Santander Peru Bank Peru 228,924 $ 92, Arrendadora Actinver Bank Mexico 224,800 $ 64, Cia. de Arrendamento Mercantil RCI Brasil Captive Brazil 215,364 $ 55, Financiera Bajio Bank Mexico 206,925 $ 100,730 WLY 2018 Page 13

14 Company TYPE COUNTRY Portfolio USD(000) 2017 Estimated Volume US$ (000) Banco Internacional Bank Chile 205,775 $ 79, Value Arrendadora Independent Mexico 200,186 $ 121, Grupo BNS Bank Costa Rica 182,517 $ 71, Operadora Mega Independent Mexico 177,754 $ 65, Docuformas Independent Mexico 173,488 $ 76, Tanner Independent Chile 170,370 $ 43, Daycoval Leasing - Banco Múltiplo S.A Bank Brazil 159,861 $ 73, Arrendadora Ve Por Mas Bank Mexico 155,212 $ 53, De Lage Landen Bank Mexico 150,630 $ 56, CARVAJAL PROPIEDADES E INVERSIONES S.A. Independent Colombia 148,819 $ 44, Banco COMAFI (incl, The Capita Corp) Bank Argentina 148,762 $ 113, John Deere Credit Captive Mexico 147,621 $ 60, LEASING BANCOLDEX S.A. Bank Colombia 145,845 $ 53, LEASING CORFICOLOMBIANA Bank Colombia 135,188 $ 38, Banco Supervielle Bank Argentina 133,291 $ 113, Tattersal Independent Chile 132,267 $ 40, CHG Meridian Mexico Independent Mexico 129,548 $ 14, Banco Financiero Bank Peru 126,448 $ 23, BBVA Banco Frances Bank Argentina 120,305 $ 78, CSI Leasing México Independent Mexico 118,660 $ 54, EQUIRENT S.A. Captive Colombia 116,728 $ 40, LEASEPLAN AM S.A. Independent Brazil 112,610 $ 49, Banco de la Nacion Argentina (incl, Nacion Leasing) Bank Argentina 109,924 $ 59, Arrendadora Afirme Bank Mexico 107,035 $ 45, FINANDINA Bank Colombia 101,601 $ 23, Banco de Galicia y Buenos Aires Bank Argentina 99,079 $ 51, HP FINANCIAL SERVICES COLOMBIA LLC Captive Colombia 98,653 $ 59,804 WLY 2018 Page 14

15 Company TYPE COUNTRY Portfolio USD(000) 2017 Estimated Volume US$ (000) AB&C Leasing Independent Mexico 98,006 $ 46, BANCO POPULAR Bank Colombia 97,621 $ 38, Corporación Financera Atlas Independent Mexico 92,354 $ 37, Arrendadora y Soluciones de Negocio Independent Mexico 92,081 $ 41, Alfa Arrendamento Mercantil S/A Bank Brazil 88,691 $ 33, Comercial Administradora Independent Guatemala 86,601 $ 33, MAREAUTO COLOMBIA S A S Independent Colombia 82,805 $ 56, HP Financial Services Captive Argentina 77,454 $ 47, Banco de Lage Landen Brasil S/A Bank Brazil 76,484 $ 49, BV LEASING AM S A Bank Brazil 74,604 $ 47, HSBC Bank Argentina S,A, Bank Argentina 74,074 $ 71, Banco Patagonia S,A, Bank Argentina 72,184 $ 36, CSILATINA A.M. S.A. Independent Brazil 69,371 $ 42, Banco de la Provincia de Buenos Aires (incl, Provincia Leasing) Bank Argentina 68,858 $ 64, Corporacion Cafsa Captive Costa Rica 68,228 $ 30, Servicios Financieros Progreso Independent Chile 63,008 $ 26, Banco Consorcio Bank Chile 62,856 $ 21,299 WLY 2018 Page 15