Despite Economic and Geopolitical Headwinds, the Latin American Leasing Industry Shows Resiliency

Transcription

1 THE ALTA LAR 100 FOR YEAR-END 2014 REPORT SUMMARY Despite Economic and Geopolitical Headwinds, the Latin American Leasing Industry Shows Resiliency Leasing companies managed to grow by introducing innovation and adapting to new regulatory and business environments. The Alta Group, the leading global consulting firm focused in the equipment leasing and financing industry, in October 2015 released its annual report that ranks the 100 largest equipment leasing companies in Latin America. The report, issued since 2004, is the region s main and most reliable source of information about the equipment leasing industry. This article highlights important observations about the performance of the equipment leasing and financing industry in Latin America. In general terms, leasing portfolios in the region at the end of 2014 totaled an estimated US$ 64.9 billion. Year to year, after adjusting the data as of year-end 2013, Latin America s leasing portfolios in 2014 grew 18.7% in United States dollars and 38% expressed in local currencies, while the regional average inflation remained around 11.55% (except for major outlier Venezuela with an annual inflation rate of 62.2%). Latin American economies experienced headwinds driven by the overall decline in the price of commodities, in particular those related to oil, coal and other mining. This decline was partially attributed to the reduction in China s demand for commodities, an excessive oversupply of oil, and, allegedly, the geopolitical crisis between Russia and Western Europe/the United States. It affected almost all Latin American economies with currencies that are somehow dependent on the export of commodities. Countries such as Brazil, 1

2 Mexico, Venezuela, Argentina, Ecuador, Colombia and Peru, all oil exporters, suffered setbacks in their foreign exchange earnings driven by the decline in the price of commodities. The sharp devaluation of the Latin American currencies came unexpectedly. Therefore, the Latin American leasing industry s calculated growth of 18.7% in US dollars in 2014 must be contrasted with the growth rate expressed in local currencies (approx. 38%) to obtain an accurate view. The leasing industry's growth rate in real terms, i.e. purchasing power parity, was 26% -- more than six times the average GDP growth of the Latin American economies. The Alta LAR 100 report also ranked the top equipment leasing companies in the region. In 2014, increasing numbers of operating lessors and renting companies joined the rankings, indicating that leasing companies are becoming more innovative. They are adjusting their business models to manage equipment risks, improve residual positions, and respond to an environment where customers are demanding solutions that bundle equipment with services. Total estimated new business in Latin America in 2014 was valued at US$ 18.1 billion. Country Performances Table 1 shows the general performance of the leasing industry per country: Table 1: Leasing Portfolio per country in thousands of United States Dollars. Sources: central banks, published financial statements and reports from companies. The Brazilian leasing industry continued declining in Once a dynamic and strong industry in the 1980s and 90s, equipment leasing has been falling continuously in the last decade. Banks became dominant in the industry, leaving little to no space for independent and captive lessors in Brazil. This was due, among other developments, to the highly regulated nature of the leasing industry in Brazil. Then, taxes associated with the service of leasing became a deterrent to growth, led by a number of risk-averse banks that decided to stop originations until a debate about the municipal services tax could be addressed by the 2

3 Brazilian Supreme Court. When the ruling came through, it was too late for the financial leasing industry; most banks had already changed their business models, providing assetbased lending instead of financial leases. Additionally, once finance leases started to become treated as commodities in Brazil, they became less attractive to corporate lessees in spite of the tax advantages. The sluggish state of the Brazilian economy also did not help the country s leasing industry in However, not everything is bad news for Brazil. Good renting companies are emerging as key players in a new era of leasing. These companies include Localiza, Locamerica, Unidas, JSL and Ouro Verde. While they have not yet been incorporated into the Alta LAR 100 list, because their key data are not yet fully comparable with finance lessors, they certainly will be incorporated in the future because they are the innovators that are actually growing the business in Brazil. In the financial leasing domain in Brazil, the dominant players are still the banks. Lessors (such as the companies affiliated with Itau, the largest Brazilian bank) consolidated their market presence by acquiring the former auto financing captives of Fiat, Ford, and other companies. But their offerings were no different than massive full payout leases, which are commodities. As a result of this commoditization, motor vehicle financing is being moved from the leasing units of banking groups into their credit arms. The banks are not losing the business. Lessors keep paying the tab. The size of Brazil explains why the country still hosts the region s largest leasing industry. However, a decline in more than 15% in local currency is indicative of the continuous downward spiral. In the current Alta LAR 100 report, Colombia ranks high in the list as the country hosting the second largest leasing industry in Latin America. What is the main reason for this? Colombia was the only country that had complete information available, which enabled Alta to assemble data for all 273 companies involved in leasing, most of them in the business of operating leases. Despite this methodological warning, the clear conclusion is that the leasing industry in Colombia has emerged as a very innovative and growing market. In fact, the largest leasing company in Latin America is, again, a Colombian lessor, namely Leasing Bancolombia. The growth of the country s leasing portfolio, which was 66% in local currency, 37% in US dollars, and 63.1% in real terms, i.e. with the same purchasing parity index, is still an expression of a healthy industry. Mexico, with 75 reporting companies, is still experiencing interesting changes. While recently enacted financial and tax reforms slowed down the leasing industry, the country showed an 8% year-to-year growth in local currency, 1.5% in US dollars and real growth (net of an annual inflation rate of 4%) of 4% reflective of weaker investment in capital goods in the country. The year 2014 and part of 2015 experienced market exits of a number of players that could not cope with the new regulatory requirements and changes in tax rules. However, Alta suggests watching the independents in Mexico, which are growing after the regulatory adjustments and are driving innovation. 3

4 Chile reported the second largest portfolio growth in local currency - 46%, which is equivalent to 33.8% in US dollars and 41.6% in real terms, with the same purchasing power parity. However, the industry in Chile faces several headwinds: For one, the decline in Chinese demand for copper (the main exporting commodity in Chile) is affecting Chilean economic growth. In addition, the socialist government is implementing investment adverse changes that might impact the pace of growth of the leasing industry in coming years. Chile can be reported as a still growing leasing industry, but with a negative prognosis. Argentina experienced, for the second consecutive year, an impressive growth (45% in local currency, or 13.01% in US dollars). The industry has demonstrated a great determination to keep growing in spite of the headwinds created by the Argentine economic and political systems. Venezuela s leasing industry also grew notwithstanding its very distressed economy. Leasing portfolio values in Peru, Puerto Rico, and Ecuador decreased. Peru s decline was again this year led by the reduction of mining sector output and investments, and a generalized slow down of the economy. Ecuador seems unconcerned about innovation in the leasing business since finance leases lost their tax advantage. Here, the absent elements that are needed for growth are innovation and leadership. Puerto Rico has experienced one of the worst financial and economic crises in its recent history. Bolivia, with only three leasing companies, keeps sustaining growth. This is a good indication of the quality of Bolivian leaders in the leasing industry. Companies in Central America and the Caribbean are still reluctant to provide meaningful statistics about their size, volume, and performance. Again, there are a few exceptions, notably in Costa Rica, and these exceptions are becoming leaders in the sub region. Figure 1 shows the calculation of new originations (under the column of Volume ). These calculations are based upon experienced observation of equipment leasing companies portfolios, and in some limited cases, by direct reports from the companies. Therefore, as an estimate, it must be taken as an approximation but not as a representation of total accuracy. 4

5 V e n ezu el a Pu e rto Ri co Arge n ti n a Bo l i v i a E c ua do r Mexi co Pe ru Brazi l Co l o mb ia C h i l e Figure 1: Where new volume originated in the region Multinational Groups active in the leasing industry in Latin America Table 2 shows the main multinational groups active in Latin America. Economic Group Leasing Portfolio USDl(000)3 Itau $5,611, Bancolombia $5,006, BBVA $4,697, Nissan Renault $4,060, Credicorp Peru $3,091, GrupoAval $2,983, Grupo Bolivar $2,261, Bradesco $2,017, Volkswagen $1,993, Scotiabank $1,878,

6 GrupoYarur $1,317, Caterpillar $1,251, Santander $1,100, IBM $896, Chilean Government $885, GrupoLebois $877, Grupo Slim $784, Ford Motor $732, Banorte $718, Interbank $717, Table 2: Leasing Portfolio by Group Some of these groups are underestimated due to the fact that their data was not available in full. IBM Global Financing and Caterpillar Financial are the most remarkable examples of this. The aforementioned notwithstanding, it is clear that the multilatinas are still leading the industry, which means that the most active multinational groups are from within the region, namely Itau, Bancolombia, and GrupoAval. Itau is close to losing its leadership to Bancolombia. The European groups show a mixed performance: Santander grew as well as BBVA but HSBC declined in the region. Canadian Scotiabank is showing consistent progress. The presence of multinationals with US headquarters has continued to decline dramatically. Following the exit of CIT Group Inc. no other US based company has shown active interest in coming into the Latin American market. It is clear that Latin America is not currently a strategic priority of US lessors and investors. The jury is out about whether this predominant strategy of US lessors is a wise or wrong approach. Another interesting feature is that four of the Alta LAR 100 are government owned. These are: Banco del Estado (Chile), Leasing Bancoldex (Colombia), Banco Nacion (Argentina), and Banco Provincia (Buenos Aires Province). An additional development to note is the increased investment by Chinese companies through the acquisition of two banks that are part of the Alta LAR 100 ranking. These banks are the Industrial and Commercial Bank of China of Argentina (f.k.a. Standard Bank), ranked No.87, and the China Construction Bank, which acquired the Brazilian banking group BicBanco, whereby the leasing company is ranked as No.80. 6

7 The Alta LAR 100 list corresponding to the closing of 2014 Table 3 lists the Alta LAR 100 ranking of the largest leasing companies in Latin America, corresponding to the year-end of A large number of operating leasing and renting companies are now populating the list, evidence of the move of the Latin American market away from the pure full-payout business model to an asset-based financing business model. Some other observations are highlighted in the full report that will be available for sale at Table 3: Alta LAR 100 Ranking of Largest Leasing Companies in Latin America 2013 RANK 2014 RANK Company COUNTRY 2013 Leasing USDl( Leasing USDl( ROE Chg % in Local Currency 14/13 Estimated Volume US$ (000) ROE Portfolio Chge in USD$ 14/ Leasing Bancolombia Cfc Colombia 5,011, ,187, % 16.0% $ 2,060, % -6.6% 2 NR Finance de Mexico Mexico 2,919, ,619, % 13.7% 0.6% 5 3 Banco Credito del Peru Peru 3,468, ,073, % 7.2% 0.6% 9 4 Leasing De Occidente S.A. Merged Into Banco Occidente Colombia 2,609, ,499, % -1.7% 627, % -20.8% 37 5 Corpbanca Chile 715,006 2,130, % 6.4% 494, % -7.6% 13 6 Davivienda (Leasing Portfolio) Colombia 1,410, ,930, % 25.1% 877, % 0.7% 7 Volkswagen de Mexico Mexico 1,247, ,622, % 33.9% 419, % 18.4% 6 8 Banco Itaucard S/A Arrendamento Mercantil Brazil 1,281, ,611, % -42.3% 341, % -48.7% 3 9 Bradesco Leasing S/A Arrendamento Mercantil Brazil 3,077, ,229, % -20.7% 288, % -29.5% BBVA -Banco Continental Peru 1,795, ,499, % 3.4% 239, % -3.0% BBVA - Bancomer Mexico 291, ,176, % 26.9% 138, % 12.3% BCI - Credito e Inversiones Chile 1,468,495 1,385, % 9.5% 146, % -4.9% CORBANCA Antes Helm Leasing S.A. Merged Into Helm Bank Colombia 1,478, ,350, % 19.5% 54, % -3.8% Scotiabank Peru 1,454, ,418, % -4.6% 87, % -10.5% Caterpillar Mexico 1,323, ,283, % 10.2% 101, % -2.5% BBVA Leasing Cfc Merged Into BBVA Bank Colombia Colombia 650, , % 47.4% 70, % 18.7% Banco IBM S/A Arrendamento Mercantil Brazil 760, , % 4.8% 63, % -6.8% Banco del Estado Chile 689, , % 31.4% 49, % 14.1% Unifin Mexico 392, % 0.0% 50, % 0.0% 4 20 Santander Brasil Arrendamento Mercantil, merging Santander Leasing Brazil 2,017, ,177, % -18.0% 62, % -27.1% Inbursa Mexico 474, , % 43.0% 60, % 26.5% Leasing Bogota S.A C.F.C. Merged Into Banco De Bogota Colombia 743, , % 25.9% (7,523.43) 10.3% 1.4% Ford Credit Mexico 597, , % 24.9% 63, % 10.5% Banorte Mexico 667, , % 11.3% 31, % -1.5% Interbank Peru 835, , % -0.5% 14, % -6.6% BBVA Chile Chile 820, , % 8.0% 32, % -6.2% Navistar Mexico 546, , % 7.1% 32, % -5.2% Banco Bice Chile 463, , % 27.4% 23, % 10.6% Popular Auto Puerto Rico 477, , % 2.4% 51, % 2.4% Banco Security Chile 478, , % 10.3% 18, % -4.2% Banregio Mexico 397, , % -2.1% 19, % -13.4% Banco Itau Chile Chile 472,352 46, % 969.8% 15, % 829.1% Banco Interamericano de Finanzas Peru 403, , % 1.3% 20, % -4.9% Paccar Arrendadora Mexico 414, , % 1.9% 15, % -9.8% Cia. de Arrendamento Mercantil RCI, f.k.a. Renault do BRAZIL Brazil 763, , % -19.4% (924.88) 8.7% -28.4% HP Financial Services Arrendamento Merc. S/A Brazil 604, , % -5.9% 10, % -16.4% HSBC Bank BRAZIL S/A Arrendamento Mercantil Brazil 659, , % 4.9% 20, % -6.8% Scotiabank Sudamericano Chile 433, , % 4.0% 5, % -9.7% 39 RENTING COLOMBIA S.A. Colombia 315, , % 35.3% 14, % 9.0% BV Leasing Arrendamento Mercantil S/A Brazil 897, , % -11.1% 4, % -21.0% Leasing Bolivar S.A. Colombia 363, , % 17.6% 5, % -5.3% Safra Leasing S/A Arrendamento Mercantil Brazil 382, , % 5.2% 1, % -6.5% Red Multibanca Colpatria S.A. Colombia 214, , % 11.8% 6, % -9.9% BBVA Banco Frances Argentina 225, , % 16.6% 2, % -11.0% Santander Peru Peru 256, , % 8.2% 1, % 1.5% SGEF S.A. A.M. Brazil 232, , % 20.7% (396,847.55) 0.0% 7.2% Leasing Corficolombiana Colombia 336, , % 0.4% - 0.0% -19.1% 48 ATC SITIOS DE COLOMBIA S.A.S Colombia 95, , % 224.7% - 0.0% 161.5% BB Leasing S/A Arrendamento Mercantil Brazil 368, , % 2.9% - 0.0% -8.5% Banco Financiero Peru 96, , % 2.7% - 0.0% -3.6% 7

8 CHG MERIDIAN MEXICO Mexico 198, , % -7.0% - 0.0% -17.7% Banco Internacional Chile 236, , % -1.8% - 0.0% -14.7% Banco de la Nacion Argentina (incl. Nacion Leasing) Argentina 124, , % 63.3% - 0.0% 24.6% Banco Comercial I Trust do BRAZIL S.A - Banco Mult. (antes CIT BRAZIL ArrendaBrazil 217, , % -6.1% - 0.0% -16.6% Value Mexico 75, , % 36.8% (4,964.53) 0.0% 21.0% Docuformas Mexico 84, , % 69.7% - 0.0% 50.1% 57 ACTINVER Mexico 152, % 19.2% - 0.0% 5.5% Operadora Mega S.A. de C.V. Mexico 112, , % 12.3% - 0.0% -0.6% Ve Por Mas Mexico 170, , % -1.9% - 0.0% -13.2% Tanner Chile 113, , % 19.8% - 0.0% 4.0% John Deere Credit Mexico 153, , % 1.2% - 0.0% -10.5% Banco de Galicia y Buenos Aires Argentina 173, , % 2.4% - 0.0% -21.8% HSBC Bank Argentina S.A. Argentina 112, , % 48.7% - 0.0% 13.5% Leasing Bancoldex S.A. Colombia 148, , % 12.0% - 0.0% -9.8% De Lage LANDEN Mexico 124, , % 25.6% - 0.0% 11.1% Financiera Bajio Mexico 78, , % 31.5% - 0.0% 16.4% Csi Mexico 197, , % -37.2% - 0.0% -44.4% Banco Patagonia S.A. Argentina 129, , % 11.1% - 0.0% -15.3% Banco Supervielle Argentina 120, , % 24.9% - 0.0% -4.7% 70 Tattersal Chile 113, % - 0.0% 1.0% Banco Guayaquil Ecuador 107, , % 2.3% - 0.0% 2.3% Banco COMAFI (incl. The Capita Corp) Argentina 152, , % 6.9% - 0.0% -18.5% Alfa Arrendamento Mercantil S/A Brazil 162, , % -7.2% (72,154.33) 0.0% -17.5% MERCADER FINANCIAL Mexico 33, , % 75.3% - 0.0% 55.1% Mercedes-Benz Leasing antes DaimlerChrysler Leasing Arrendamento Mer. S/ABrazil 135, , % 0.0% - 0.0% -11.1% Citibank Peru 147, , % -15.6% (180,598.34) 0.0% -20.9% Banco Popular Colombia 184, , % -12.2% (1,267.92) 0.0% -29.3% Finandina S.A. Converted Into Banco Finandina Colombia 191, , % -8.9% -26.7% 79 SKC Rental Chile % 0.0% 0.0% BIC Arrendamento Mercantil S/A Brazil 187, , % -25.7% -34.0% Corp.Fin.Atlas Mexico 92, , % 3.9% -8.1% Leasing Peru Peru 64, , % 11.8% 4.9% Leaseplan Arrendamento Mercantil S/A Brazil 109, , % 0.0% -11.1% Banco DeLage Landen BRAZIL S/A Brazil 194, % 0.0% 4,102, % Citibank Leasing S/A Arrendamento Mercantil Brazil 76, , % 35.0% $12, ##### 20.0% Arrendadora Banamex Mexico 112, , % -16.6% 14, % -26.2% Industrial and Commercial Bank of China (ICBC) Argentina 88, , % 18.4% $ 32, % -9.6% Bancolombia S.A. (Leasing Portfolio Booked In The Bank) Colombia 84, , % 27.9% $ 34, % 3.0% Banco Volkswagen (f.k.a. Volkswagen Leasing S/A Arrendamento Mercantil Brazil 236, , % -31.4% -$46, ##### -39.1% Banco Credicoop Argentina 115, , % -2.9% $ 22, % -25.9% Arr. Y Sol. De Negocio Mexico 38, , % 23.9% 32, % 9.6% 92 Servicios Financieros Progreso Chile 97,240 91, % -13.3% $ 15, % -24.7% Banco de la Provincia de Buenos Aires (incl. Provincia Leasing) Argentina 86, , % 19.4% $ 29, % -8.9% 2 94 Banco Itauleasing Brazil 4,681, , % -14.9% -$20, ##### -24.3% Banco Bradesco Financiamentos (f.k.a. Finasa S/A) - Carteira Arrendamento MeBrazil 503, , % -55.7% -$97, ##### -60.6% Rabobank Chile Chile 114,646 89, % -22.5% $ 8, % -32.7% Ab&C Leasing Mexico 30, , % 47.5% 32, % 30.5% Banco GNB (antes HSBC Bank Peru) Peru 112, , % -18.1% $ 10, % -23.2% Citibank NA Argentina 25, , % 30.4% $ 27, % -0.5% BCO BNP PARIBAS BRASIL S A Brazil 214, , % -50.3% -$67, ##### -55.8% The Alta Group Latin American Region, LLC 8

9 For More Information More information on the Latin American leasing industry is available in The Alta LAR100 database. To purchase additional information, or make other inquiries, contact: Katrin Förster FAX This report was written by Rafael Castillo-Triana, CEO, The Alta Group - Latin American Region (LAR), 1920 Lakeshore Drive, Fort Lauderdale, Florida 33326, US. Tel: , Fax: rcastillotriana@thealtagroup.com, Website: 9