Peter-Jan Bentein CEO ING Lease Netherlands

04/20/23 18:49[Enter reference here]

Challenges for lease companies in the current economic

environment-

a fight with the economic cycle

Peter-Jan Bentein

CEO ING Lease Netherlands

ALB Conference – Bucharest – 18/11/2010

Date


2

Contents

The impact of the economic crisis

Lease market in Europe & ING Lease

Economic sectors affected through the cycle

Leasing market in The Netherlands

Consequences of the economic crisis

New issues to deal with

Non-performing customers

Remarketing

How to recover from the crisis?

Escape from the fatal spiral

Demand side

New perspectives and market segmentation

Sector outlook & famous last words

Date


3

“the economy has fallen off a cliff” (*)

(*) Mark Cliffe, Chief Economist ING

Date


4

0

100

200

300

400

2008 2009

New production volume

Market developments in Europe (up to 2009)

0

50

100

150

2008 2009

New production Top 20 Leasing companies

30%

40%

50%

2008 2009

Market share Top 20 Leasing companies

0

100

200

300

400

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

New production volume

-37%

-22% +9%

Source : Leaseurope

Date


5

Impact on ING Lease

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2008 2009 2010

Risk Costs

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2008 2009 2010

New Production

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2008 2009 2010

Margin new production

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2008 2009 2010

Result before tax

Date


6

Economic sectors affected through the cycle

Source: ING Economic Bureau

Machinery

Chemistry

Transport sector

Food

Grafimedia

Rubber and plastics

Building materials

Packaging

Metal industry

Date


7

Accidents may happen…

Source : Trompenaars&Hampden

Date


8

2

2,5

3

3,5

4

4,5

5

5,5

6

6,5

2006 2007 2008 2009 2010 (est.)

New production

Leasing volumes in the Netherlands (new production)

Source : NVL

-29%

-22%

After years of tremendous growth, the market volume fell to 50%

Date


9

Leasing market in The Netherlands

75% of the market covered by 4 players - 25% by 30 other Lease Companies

75% of the sourcing realised by bank branches - 25% sourced by Vendors

Ontwikkeling marktaandeel over de jaren

0%

10%

20%

30%

40%

50%

60%

2006 2007 2008 2009 2010

Amstel Lease De Lage Landen

Fortis Lease ING Lease

Date


10

Consequences of the crisis

2005 2006 2007 2008 2009 2010(est.)

risk costs

Worsening client ratings

Leading to additional provisions

Worsening asset values

Leading to additional provisions

More assets to repossess

Leading to lower remarketing values

Leading to book losses

High increase of arrears

Leading to additional costs to manage

And eventually book losses

Date


11

New issues to deal with

Strategic issues

Keep up overcapacity or cut it off? (e.g. grafimedia, cranes)

Remarketing channels to develop, fastRepossession issues: where are my assets? Who is

to buy them ?Repossess now, or stretch the tenor? (hope and

pray)Restructuring issues (grace period, abandon

instalments,…)

Date


12

New issues to deal with (II)

Staff

Sales oriented people vs. Management of ArrearsStaff dedicated to bad debts dept. needed to be

increased rapidlyWatch list managementPortfolio management Fraud detection (false invoices, assets removed,…)

Date


13

Non-Performing Customers

Arrears management needs daily follow up by a dedicated team

In house or outsourcing of arrears management/collections?

Getting paid before other creditorsSeize the asset before others do

Restructuring and stretching if there is a chance for recovery

Repossess and sell-off the asset when all hope has gone

Date


14

Remarketing Channels

Transparancy is keySale to end-users or traders?Sale outside the country? (overcapacity issue)Trusted partnership with selected tradersCut losses vs. waiting for recovery

Date


15

My future outlook for risk costs…

Provisions for risk costs: too high?

Customers recover well from the crisisAsset values recover well

We learned a lot of risk management in economic crises

Due to IFRS risk provisions are to be released in the years to come

Effective book losses will remain relatively limited

Date


16

How to recover from the crisis??


Volume challenges: demand needs to pick up

Hope for the future

Market vs. Product Segmentation

Date


17


Downgrading customers

Lower asset values

Higher risk costsRigid risk

assessment

No new business

Economic downturn

Lower Investment

grade

Lower demand for

leases

Date


18

Demand side remains low (NL figures)

Fixed Investments by Companies (NL) vs Portfolio development GLNLQuarter on Quarter

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2006 2007 2008 2009 2010 2011 2012

Q on Q

Investments NL

Portfolio GLNL

Forecast (GLNL)

Investments Forecasted by ING Economic Department

Date


19

Hope for the future : Look at it from a different angle

New investments will need finance anyway

Penetration rate of lease vs lending remains low

Lease is well positionedasset basedless use of economic capitalrelatively low book losses

Lease offers better solutions for our customers

Date


20

Leasing proposition is favourable

Asset based finance still to be preferredBasel III consistent with principles of Basel II

Less equity needed than lendingagainst on average better margins than lendingbetter return on Equity

Market approachfrom reactive to pro-active attitude

Date


21

Corporates

Large Midcorporates

Medium Midcorporates

SME

Tailor made solutions

In depth asset and sector knowledge

Standard Products

Small tickets, mass processing

Consultative Sales

Sales

Market vs. Product Segmentation

Date


22

OutlookAsset Group Asset Group Outlook

Expectations per asset & industry

Date


23

THE ‘key succes factor’

Anti Cyclical Thinking

Date


24

Thank you for your attention!

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Peter-Jan Bentein CEO ING Lease Netherlands

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