The leasing market has been actively growing for the third year in a row. In January–September 2018, new business volume increased by 42% compared with the similar period of the previous year, exceeding 1 trillion rubles. In Russia, the new business volume to GDP ratio is still lower than in European countries; however, in the first 9 months of 2018 it reached the level of 1.4%, setting a record for the Russian market. Growth in new business volumes was recorded in half of the study participants, made up from 83% of the leasing market as a whole; a year earlier, positive dynamics were observed in two thirds of respondents, which were forming more than 90% of the market.
Total new lease transaction volume in January–September 2018 amounted to 1,650 billion rubles, against 1,140 billion rubles a year earlier. The volume of payments received in the first three quarters of 2018 increased insignificantly compared to the previous year, reaching 700 billion rubles. Lease portfolio size had grown 19% since the start of the year and had reached its record volume of 4.1 billion rubles as of October 1, 2018. However, said dynamics of the portfolio were largely caused by activities of major state-owned enterprises. For instance, the share of the State Transport Leasing Company (GTLK) in the lease portfolio increased to 22% as of October 2018, against 14% a year before; if the four major state-owned enterprises—namely GTLK, “Sberbank Leasing”, “VTB Leasing” and “VEB-Leasing”—were not taken into account, total portfolio growth would not have reached 5%. In addition, in order to evade sanctions by the regulators, banks with a weak margin according to prudential standards have been transferring problematic assets to the balance of leasing companies, thus distorting the lease portfolio volume. According to “Expert RA”, if problematic assets having been reassigned to leasing companies by banks are not taken into account, total lease portfolio has been stagnating.
In the first 9 months of 2018, GTLK was the market leader, its new business volume having more than doubled compared with the similar period of the previous year. It should be noted that approximately 54% of the leader’s business fell on large transactions involving railway equipment. The second position in the market was taken by “Sberbank Leasing” Group, leading in the segment of operational leasing thanks to aircraft transactions. The third position in new business volumes is still being held by “VTB Leasing”.
All in all, growth rates of major players have been significantly surpassing the market’s average rate, leading to the market becoming more concentrated: in the first three quarters of 2018, the top 3 companies accounted for approximately 46% of new business, against 37% in the previous year. The share of the top 10 companies, on the other hand, increased by 6 pp, to 73%. At the same time, growth rates of lessors outside the top 20 in 2018 were almost twice as slow as during the 9 months of the previous year.
It should be noted that increased concentration on major players in leasing business growth is largely due to transactions by state-owned enterprises involving railway equipment and aircrafts, as well as water transport and equipment for the oil and gas industry. As a result, the share of state-owned enterprises in new business volume for January–September 2018 equaled 60%, against 51% a year earlier.
Large transactions by market leaders caused a decline in the retail concentration index (from 48% to 40%), defined as the total share of retail segments—passenger cars and trucks, as well as construction and agricultural equipment—in new business volume. Said decline in the index also affected the structure of lessees in terms of the scale of their businesses. To illustrate, the share of large-scale business grew to 51% in January–September 2018, against 45% in the similar period of the previous year, whereas the share of transactions with small and medium-sized enterprises, on the contrary, dropped to 48% against 52%.
Nevertheless, new business volume in retail segments has been demonstrating positive dynamics: growth in the first 9 months of 2018 equaled 17% to the similar period of the previous year. Car leasing constitutes a major retail market, having amounted to 318 billion rubles in January–September 2018, occupying 31.3% of the market. It is followed by railway equipment with a small gap, its volume during the first 9 months of 2018 having reached 312 billion rubles (30.8%). The rail segment has been demonstrating record growth rates for the second year in a row as a result of the low base effect: the volume of new business in the segment rocketed 120% during the first 9 months of 2018 and 153% in the first 9 months of 2017, compared with the similar time period of the respective previous year. Growth rates among transport segments have been most modest in aviation, new business volume for which only increased by 4.7% in the first 9 months of 2018 compared with the similar period of the previous year.
In the first 9 months of 2018, positive dynamics were shown by 17 out of 18 major segments distinguished by “Expert RA” within the study. The segment of food processing equipment leasing has also been demonstrating positive dynamics. The volume of the segment increased by 70% in January–September 2018 compared with the similar period of the previous year, exceeding 6 billion rubles; its share in the leasing market, however, increased insignificantly, namely from 0.5% to 0.6%.
“Siemens Finance” is the leader of the segment in question, its new business volume in the first 3 quarters of 2018 having grown by 53% compared with the similar time period of the previous year. At the same time, due to intense growth of new business volumes at other enterprises, the share of “Siemens Finance” in the segment dropped by 4 pp, amounting to 37%. The second position is occupied by “UniCredit Leasing”, the company’s share having increased to 12%, against 4% a year earlier, through 5.5-fold growth in its volume of food equipment business. “Severnaya Venetsiya (Venice of the North)” ranks third, having increased its new business volume by a factor of 10 to the similar period of the previous year, when the company only placed 18th.
CONSOLIDATION TO BE CONTINUED
Market dynamics in 2019 will largely depend upon macroeconomic and foreign policy factors. The possible tightening of the sanction regime is capable of leading to a further decrease in the ruble exchange rate, which may cause the key rate to rise, thus negatively affecting leasing transaction funding.
During the past two years, more than 30% of new business volume fell on the fourth quarter due to major transactions traditionally made at the end of the year. Said scenario took place in the last quarter of 2018 as well, which allowed the leasing market to reach the volume of 1.4 trillion rubles. In 2019, the market will continue to grow, although growth rates are expected to slow down to 10–20%, as the low base effect of the previous years will be depleted and growth opportunities will be limited by weak growth rates of the economy.
Key trends of the leasing industry in the coming years will include increasing consolidation of the leasing business on largest players. In addition, specialists at “Expert RA” believe that new M&A deals are possible among the top 30 enterprises in 2019. At the same time, part of the small companies will leave the market due to stronger competition and tightened regulatory control of leasing companies’ activities.
Dynamics of car leasing will depend on decisions made by the government on subsidizing the automotive industry. According to forecasts by “Expert RA”, growth rate in the car segment may reach 15%, or 5–8% without taking state support into account. Positive dynamics of the aviation segment will still be due to the program for subsidized SSJ100 sales being implemented, as well as expansion of fleets by the major players in the Russian air freight market, which will ensure 15% growth in new business volume involving aircrafts this year. Increased export shipments will stimulate demand for rolling stock, which will allow the railway segment to demonstrate growth rates of 50% within the positive scenario. However, in 2019, the first signs of railroad car surplus may emerge, which would cause corrections in rental rates. As a result, growth in the rail segment in 2019 will not exceed 35%, the largest share of new business volume falling on the first half-year.