On the State of Development of Leasing

Report on the state of development of leasing, non-bank credit and factoring markets in the Czech Republic in the 1st – 3rd quarter of 2014 Report on the state of development of leasing, non-bank credit and factoring markets in the Czech Republic in the 1 st – 3 rd quarter of 2014

Macro-economic Framework (Growing demand for non-bank financial products) In the 1st - 3rd quarter of 2014, financial products were being offered in conditions of economic recovery started at the end of last year. Investments grew, although not in a vehement way, in most branches of the economy. Household expenditures grew too. Under these circumstances, the volume of non-bank financing on the year-on-year basis increased in the 1st - 3rd quarter of 2014. Data on the development of the CR economy relevant for non-bank funding: . GDP grew on the year-on-year basis (in the 1st quarter of 2014 by 2.7 %, in the 1st half of 2014 by 2.9 %). . Industrial production grew on the year-on-year basis (in July by 6.2, in August by 2.8 %). . Growth of investments. . Retail sales grew on the year-on-year basis (in July by 6.2 %, in August by 2.7 %). . Inflation rate in the 1st - 3rd quarter of 2014 decreased (from 1.4 % at the end of 2013 to 0.7 % in September 2014). . Rate of unemployment reached 7.3 % in September. A considerable part of the demand for funding investment and/or consumer projects was accompanied by considerable risks and could not be accepted after applying prudent criteria of the evaluation of the customer and of the funded commodity. There was a continued growth in the share of credit products in the offer of leasing companies and a growing share of credit financing in their business.

Contribution of non-bank financial products to economic development (A significant share in funding enterprises and households) In the 1st - 3rd quarter of 2014, the CLFA member companies provided the following through leasing, factoring and/or loans to consumers and entrepreneurs: . The total funded sum of CZK 98.68 billion (by CZK 9.76 billion more than in the same period of 2013) - of which: CZK 71.69 billion for funding investments and operation of business entities, and CZK 26.99 billion for funding goods and services for households. . Funding of road vehicles (mostly new) by CZK 45.31 billion (46 % of the whole amount funded) - of which: 26.69 billion for the acquisition of passenger cars including 19.73 billion for the acquisition of 56,705 new passenger cars (the CLFA member companies have financed 40 % of the number of new passenger cars first registered in the CR in the 1st – 3rd quarter of 2014). . They also provided CZK 15 billion for financing machinery and equipment. . They concluded 749,287 new leasing and credit transactions. . At the end of the 3rd quarter of 2014, they managed 2,110,946 active lease and loan agreements. . Claims from running lease and credit transactions reached CZK 224.89 billion at the end of the 3rd quarter of 2014.

Development of Financing of Entrepreneurial Entities in 1 st – 3 rd quarter of 2014

1. Leasing of movable investment (machinery, equipment and vehicles) (A double-digit year-on-year increase of leasing) . A sum of purchase prices (excluding VAT) – CZK 28.75 billion (year-on-year increase in the top fifteen companies by 17.3 %). . Estimate of the whole market – CZK 29.64 billion. . Total amount financed (initial debt) – CZK 27.02 billion. . Decline of the share of operating lease in the total lease of movable investments – it reached 45.8 % (in the same period of 2013 – 46 %). . A commodity focus of the leasing for entrepreneurs – leasing of road vehicles continued to dominate: - share of the leasing of passenger cars – 32.5 % (31.5 % in the 1st - 3rd quarter of 2013); - share of new cars in the total leasing of passenger cars – 91.5 %; - share of the leasing of lorries – 35.4% (30.6 % in the 1st - 3rd quarter of 2013); - share of the leasing of machinery and equipment – 21 % (24.8 % in the 1st - 3rd quarter of 2013). . 31,796 new contracts for leasing of machinery, equipment and vehicles for entrepreneurs were entered into, - of which there were 12,007 financial lease contracts, 4,598 operating lease contracts, 14,657 contracts on full-service leasing and 534 contracts on short-term rental. . The number of new lease contracts to finance business investments increased by 9.9 % on the year-on-year basis. . 1,489 vehicles were received in the fleet management provided by CLFA members. . At the end of the 3rd quarter of 2014, leasing of machinery, equipment and vehicles for entrepreneurs was taking place on the basis of active 160.972 lease contracts, concluded by CLFA member companies, - of which there were 77,921 financial lease contracts, 19,451 operating lease contracts, 63,110 contracts on full-service leasing and 490 contracts on short-term rental. . At the end of the 3rd quarter of 2014, 6,351 vehicles could be found in the fleet management. . Receivables from the contracts concluded for the leasing of movable assets for entrepreneurs reached CZK 89.51 billion at the end of the 3rd quarter of 2014.

2. Development of Credit and Instalment Sales for Entrepreneurs (The use of these non-bank products continues to grow) . They were provided by 26 CLFA member companies. . Total loans – CZK 28 billion. . Year-on-year increase in the volume of loans to entrepreneurs by 17.3 % in the leading fifteen companies. . Commodity focus: - loans for passenger cars – 40.1 %; - loans for lorries – 11.4 %; - loans for machines and equipment – 33.3 %. . The total of 48,656 loans was granted, of them 95 loans for the acquisition of property. . The number of loans granted declined by 0.67 % on the year-on-year basis. . An average loan granted – CZK 576,249. . The number of active loans at the end of the 3rd quarter of 2014 – 185,530. . Receivables from loans at the end of the 3rd quarter of 2014 – CZK 66.43 billion.

3. Factoring (Another interannual rise in use of factoring) . In the 1st - 3rd quarter of 2014, total receivables for CZK 121.5 billion were assigned to the members of the Association of Factoring Companies of the CR (AFS CR) (of which the amount CZK 115.1 billion is attributable to factoring companies which are also members of the CLFA). . As to AFS CR member companies, the above represents the year-on-year growth by 16.8 %. . Product focus: - recourse factoring – 62.1 % (year-on-year reduction of share by 3.9 %); - non-recourse factoring – 37.9 %. . Direction of factoring: - domestic factoring – 70.3 % (year-on-year increase of share by 1.7 %); - export factoring – 26.4 % (year-on-year reduction of share by 1.6 %); - import factoring – 3.3 % (year-on-year reduction of share by 0.1 %). . Amount of funds provided by AFS CR members to clients reached CZK 18.1 billion as at 30th September 2014 (increase in comparison with the situation at the end of September 2013 by CZK 1.9 billion), of which CZK 16.6 billion was attributable to the members of the CLFA.

Development of Non-bank Consumer Financing in the 1 st – 3 rd quarter of 2014

1. Consumer Credit (Year-on-year growth in the volume of loans granted) . They were provided by 18 members companies of the CLFA (including a number of leasing companies that offer them in addition to leasing products). . Total loans provided for the personal use amounted to CZK 25.56 billion, which represents a year-on-year increase of 1.4 %. . Volume and share of products: - personal loans – CZK 8.26 billion – 32.3 %; - revolving loans – CZK 9.26 billion – 36.2 %; - point of sale funding – CZK 8.04 billion – 31.5 %. year-on-year decline in the share of personal loans (by 0.4 %) and the share of point of sale funding (by 0.3%), year-on-year increase in the share of revolving loans (by 0.7 %). . Volume of credit to finance cars year-on-year increased by 0.8 % to CZK 5.95 billion; their number decreased by 1.1 % to 38,398 loans on the year-on-year basis. . A total of 662,153 contracts on consumer loans were concluded (year-on-year decrease by 0.5%): - 236,639 personal loans (of which there were 46 personal loans for the purchase of property); - 136,087 revolving loans; - 289,427 credit and instalment contracts within the point of sale funding. . Number of active loan contracts at the end of the 3rd quarter of 2014 – 1,743,595. . Volume of receivables from active loan contracts at the end of the 3rd quarter of 2014 – CZK 58.21 billion.

2. Consumer leasing (Another interannual rise both of the volume and the number of new contracts) . Sum of purchase prices of movable assets (excluding VAT) put to consumer leasing in the 1st - 3rd quarter of 2014 – CZK 1.43 billion. . The volume of consumer leasing increased by 27.9 % on the year-on-year basis. . Total amount financed (initial debt) – CZK 1.42 billion. . The share of financial leasing in the overall consumer leasing of movable assets – 4,2 %. . The share of operating leases – 75 %, the share of full-service leasing – 0.2 %, the share on short-term rental – 20.6 %. . Commodity focus – still completely dominated by leasing of road vehicles: - share of the consumer leasing and short-term rental of passenger cars and – 99.9 %; - share of new cars in total consumer leasing and short-term rental of passenger cars – 99 %. . 5.192 new consumer lease and short-term rental contracts were concluded, - of which there were 142 financial lease contracts, 3,682 operating lease contracts, 7 contracts on full-service leasing, and 1,361 contracts on short-term rental. . At the end of the 3rd quarter of 2014, consumer leases were taking place on the basis of active 11,339 lease contracts concluded by CLFA member companies, - of which there were 5,476 financial lease contracts, 4,400 operating lease contracts, 74 contracts on full-service leasing, and 1,389 contracts on short-term rental. . Receivables from lease contracts concluded with consumers reached CZK 1.32 billion at the end of the 3rd quarter of 2014.