VOL 11 I NO 122 I 2018
FOR THE UK EQUIPMENT LEASING AND ASSET FINANCE PROFESSIONAL
Who wants to be a banker? PCF Bank is continuing to innovate
www.leasingworld.co.uk n PROFILE PCF Bank continuing to innovate PAGE 10 n FEATURE The toughest job in asset finance? PAGE 14 n FEATURE Investec leading by example PAGE 20 n FEATURE 2017: a case of living in interesting times? PAGE 22 CONTENTS
IN THIS ISSUE VOL 11 I NO 122 I 2018
FOR THE UK EQUIPMENT LEASING AND ASSET FINANCE PROFESSIONAL
Who wants to be a banker? PCF Bank is continuing to innovate
www.leasingworld.co.uk I PROFILE PCF Bank continuing to innovate PAGE 10 I FEATURE The toughest job in asset fi nance? PAGE 14 I FEATURE Investec leading by example PAGE 20 I FEATURE 2017: a case of living in interesting times? PAGE 22 20 Paul Cunningham, Investec
PUBLISHER
LeasingWorld Ltd Oakhill House Uphampton Droitwich Spa Worcs. WR9 OJR, UK T: +44 (0)1905 621444 E: [email protected] www.leasingworld.co.uk 16 Identity Fraud 06 Simply Asset Finance Published by LeasingWorld Ltd Company No: 5387699. ISSN 1749-3501 Printed in England by Pensord, Tram Road, Pontllanfraith, NEWS FEATURES Blackwood NP12 2YA UK NEWS 10 PROFILE: Who wants to be a banker No part of this publication may be 4 FLA completes 25th year How PCF Bank is continuing to innovate resold, reproduced or transmitted in in the leasing industry any form or by any means, electrical, 5 Investec beefs up block mechanical, photocopying, recording 6 Simply Asset Finance wins £60m 14 The toughest job in asset finance? or otherwise without the prior written 7 Apollo gets Haydock majority Credit underwriting: the hardest job in the asset finance permission of the publisher. 8 D&D Leasing Gala raises £7,500 LeasingWorld Ltd, Oakhill House, business? Uphampton, Droitwich Spa, Worcs WR9 0JR. 9 Looking at the UK through the Chancellor’s eyes CITY NEWS 19 Consumer-led slowdown, and not economy contraction SUBSCRIPTIONS Philip Shaw, Chief Economist at Investec Bank plc, 17 1PM PLC: Issue of equity / Director/PDMR dealings speaking at the Investec Annual Conference gave the LeasingWorld Annual subscriptions 17 Strong trading at PCF Bank delegates his take on the UK economy and its prospects • 12 hard copy UK Leasing World magazines sent by surface mail – £360 20 Investec leading by example Digital Upgrade • 12 hard copy UK Leasing World magazines REGULARS Robin Skuse, Associate Editor at Leasing World, reports sent by surface mail • PLUS Digital edition – £425 ROUND THE ASSOCIATIONS 21 In praise of experience DIGITAL Edition 12 All the latest news and events Philip Knight of Asset Advantage The Digital version is a Flickread powered ASPECTS OF FRAUD “page-turner”copy of the hardcopy 16 Identity fraud – Directors beware, Allan Foad reports 22 Unfortunately, we are living in interesting times publication, and the url link is sent out by Chris Boobyer reflects on 2017 email the day before surface mailing. The LEGAL Digital version has “live” links to advertisers’ websites, surveys, and report downloads. 17 Front of mind by Joanne Davis 24 A look at Paragon Bank’s Business Finance activities Paragon Bank’s latest Annual Report gives detailed TO SUBSCRIBE DATABANK insight into how they have integrated their recent asset 26 UK new business finance October 2017 ONLINE at www.leasingworld.co.uk/ finance acquisitions freepages/subscribe.php OR CITY CHATTER Telephone or email the publisher, on +44(0)1905 621444 or 28 The Welsh Dragon [email protected] 28 Old Moore BACK IN THE OFFICE 29 No, it’s not going away! MOVES 30 A roundup of who has moved where EVENTS LeasingWorld 31 Leasing Events Calendar 2018
2 VOL 11 I NO 122 2018 www.leasingworld.co.uk EDITOR’S COMMENT LeasingWorld
’ve just been reading the Business section of the Straits Times, Singapore’s respected daily broadsheet. The article that caught my eye was about I Singapore’s SMEs and the problems they face in 2018. These include late payment from customers, finding staff, real barriers to doing business abroad, and the economic and political uncertainties affecting investment decisions. Funny enough, those sound like the same problems that UK SMEs face, but we also have additional challenges like grappling with GDPR, auto-enrolment pensions for all staff, and meeting Financial Services Supplier Qualification System requirements. Are UK SMEs witnessing the end of everything that used to be simple? EDITORIAL The end of everything that used to be simple?
I’ll leave that to be pondered, in the meantime the UK asset finance industry Jan Szmigin continues in good health and lessors appear to be moving into 2018 with the Publisher heart saying Keep hoovering up the business, and the head saying, “But we T: +44 (0)1905 621444 E: [email protected] should be careful.” Developing on the theme of caution, Chris Boobyer of international consultancy Invigors EMEA LLP, in his analysis on Page 22, writes about Chinese curses and the issues that constantly came up in 2017, such as Digitalisation. He complains that after sitting through countless conferences on the subject, most delegates say they are none the wiser about it. But he does fear that our industry is under far greater threat of change, risk of disintermediation and irrelevance than at any time, and counsels that lessors should be much more on their guard. Also in this edition, we profile PCF Bank, a wonderful example of “from little acorns . . .” and many were aware of its modest beginnings as Private Robin Skuse Associate Editor and Commercial Finance Group on the AIM market, with its small portfolio, T: +44 (0) 7721 727554 mainly cars. Its progress has been featured on Leasing World’s City Pages for E: [email protected] many years, and now it’s a fully paid up bank with sharply priced funds from deposit-taking, and eyeing the opportunities in the market for asset and deal size diversification. Talking of little acorns, some time ago we started a Charity Totals table for the asset finance industry on our website www.leasingworld.co.uk, which has steadily gained traction, and now we can report that we recorded £193,377 raised by our industry for charity in 2017. But we suspect the true total is nearer half a million, so for 2018 we would encourage you to either email us with your charity donations so we can update the tables, or have a go at Allan Foad entering them yourselves, as the online table is fully interactive. Let’s see if it Contributing Editor really does reach half a million by the end of the year! n E: [email protected]
JAN SZMIGIN [email protected]
City Slicker City Chatter column E: [email protected]
www.leasingworld.co.uk VOL 11 I NO 122 2018 3 UK NEWS
> IN BRIEF FLA completes 25th year t the end of year festive celebrations over the Summer to correct press CHARITY TOTALS FOR 2017 Aat Haberdashers’ Hall in the heart of misunderstandings about the work of Leasing World’s fledgling listing of charity the City of London, Stephen Sklaroff, the regulators in FLA markets, resulting donations by our industry (see http://www. director general of the Finance & Leasing in coverage of the FLA’s position in more leasingworld.co.uk/charity.php) recorded Association (“FLA”) gave his signature than 100 national newspaper articles a substantial figure of £193, 377 that was address to an enthusiastic gathering. and in numerous broadcast interviews raised for charity in 2017. We know, however, “Although this Hall has a distinctly 7. And we’ve seen a series of more helpful that this is just the tip of the iceberg, and modern feel, the Haberdashers Company’s comments recently from both the FCA in 2018 we will be striving to record every history stretches back to 1371 – almost 650 and the Bank of England. charity donation by any company connected years. Which means that the FLA is nearly 4 8. These include that the Bank has with the asset finance industry – it is our percent as old as the Haberdashers, because found no evidence that the growth in guess that our industry raises nearer to half we reached the ripe old age of 25 this year! As consumer credit in recent years has many of you know, we celebrated our 25th been primarily driven by a material a million pounds for charity each year, and by Anniversary back in July, with a gathering of lowering of credit policies or scoring, or the end of 2018 we’d like to have some hard members from all three Divisions including of the sort of issues they saw before the numbers to prove it. no less than 12 former Chairmen. financial crisis. It was a great evening and my conclusion 9. That the Bank is relatively sanguine ALDERMORE ALMOST THERE is that we must have these 25-year about motor finance, and that the effect Aldermore Group PLC confirmed that anniversaries more often! of the recent stress-tests (going far shareholders (over 99pct) have approved the Before I say a few words about the past beyond anything seen historically) was merger between it and FirstRand International 12 months, I should quickly mention our pretty negligible. Ltd in the Court and General Meeting. The latest market statistics, which remain very 10. That motor finance anyway only offer to acquire Aldermore was 313p per encouraging. Asset finance new business represents 1.2 percent of household share, valuing the company at £1.08 billion. was up 7 percent in October, compared to income when the optional balloon The offer is still conditional on the court the same month last year, and consumer payment is excluded. sanction of the scheme, and approval from the finance new business up by 10 percent. 11. And that the FCA understands that Prudential Regulation Authority, the Financial Point of sale consumer car finance new PCP lending recognises the nature Conduct Authority, and from the South African business volumes grew by 2 percent, of the car as an asset, and reflects a with a 9 percent rise in used car finance shift in consumer appetite away from Registrar of Banks. offsetting the expected 7 percent fall in ownership. the new car market. 12. The Bank confirmed last week that BUSINESS AS USUAL? In the ten months to October, each of the all the major banks had passed the Aldermore has more than doubled its main FLA markets – asset finance, consumer latest stress tests – demonstrating the maximum property development loan finance and motor finance – reported new resilience of the UK banking system. size from £10 million to £25 million with business up 6 percent by value compared 13. With strong support from FLA immediate effect. The move comes on the with same period in 2016. members, we also persuaded the British back of increased demand from developers Well, it is customary at the Christmas Business Bank to extend the Enterprise who are looking to borrow through tailored Drinks for me to give a quick summary Finance Guarantee scheme to cover financing facilities, as well as the Bank’s of the year’s events. 2017 was so busy it’s asset finance, and the Chancellor to strategy to further increase its support for difficult to know where to start. Just to take pump some new money into the scheme UK housebuilders in 2018. just a few examples: in his recent Budget. 1. We dealt with more than 40 major 14. We successfully lobbied the Government Since 2012, Aldermore’s Property regulatory consultations. to ensure that its recently-published Development division has enabled SME 2. We briefed candidates for the second Industrial Strategy included funding developers to build over 5,000 homes, General Election in two years, and then for the local Growth Hubs and an as well as offering a personalised the members of the new front-bench expansion of the role of the Hubs in underwriting service ensuring all cases teams and Parliamentary committees. providing good information to local are individually assessed. 3. We explained the industry’s concerns and businesses about their finance options. hopes about Brexit to all the relevant 15. We launched two new guides on how Government departments. lenders should deal with vulnerable 4. We worked intensively – and I’m happy customers, based on extensive research to say productively – with the Financial in the industry. Conduct Authority and the Bank of 16. We pointed out to the FCA that its England as they continued their work proposed new rules on affordability on consumer credit, including the motor would exclude many people – finance market. including non-working mothers – 5. In April, the FCA announced – as part of from the credit markets.” its Business Plan – a long-expected piece of “exploratory work” in the motor His final words were, “The list goes on . . .” finance sector. But thankfully, by this time the audience 6. We conducted a briefing programme were happy to take Stephen’s word for it!
4 VOL 11 I NO 122 2018 www.leasingworld.co.uk UK NEWS
Investec beefs up block nvestec Asset Finance plc (“Investec”) other SME lending channels. We look Ihas acquired Lombard North Central forward to working with each of the plc’s (“Lombard”) block discounting underlying block counterparties and to portfolio for an undisclosed amount. growing our presence in this key market The acquisition will broaden Investec’s for Investec.” footprint within the wider block Louise Ikonomides, Managing discounting market, and is in line with its Director, VLS, the incumbent portfolio strategy to extend Investec’s lending both manager for Lombard, said, “VLS has organically and through acquisitions. worked closely with Lombard for over Ian Isaac, Managing Director of a decade as administration partner for Lombard within the RBS Commercial & its Block Discounting business. We Private Banking Division said, “This is are pleased to continue managing the part of our continued efforts to become portfolio and associated periodic Audit, a more focused and sustainable bank for maintaining continuity for the borrowers the future. We continue to work with and demonstrating VLS’s unique Investec to ensure a smooth transition delivery qualities in an extended servicer for customers.” relationship with Investec Asset Finance.” But it wasn’t that long ago that we were Richard Adler will be leaving VLS to join printing a Lombard press release about the Investec block discounting team later in their new head of block discounting, Osian Rees, Head of Block Discounting January. He explained, “ I shall be joining who was stating, “My appointment the wholesale funding team at Investec to demonstrates that Lombard is serious Wholesale Funding at Investec was clearly work with Osian Rees as Investec expands about our intention to broaden our pleased with the opportunity, saying, “We its block discounting coverage . . . . I customer base in this sector.” Ah well, as are delighted to acquire this portfolio enjoyed the past three years concentrating Robert Burns wrote, “The best laid plans from Lombard. It demonstrates Investec’s on the service side of our industry, but of mice and men often go awry.” commitment to financing SMEs through it’s time now to return to my first area of Nevertheless, Osian Rees, Head of block discounting and complements our experience, in front-line lending.”
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www.leasingworld.co.uk VOL 11 I NO 122 2018 5 UK NEWS
> IN BRIEF Simply Asset Finance wins £60m
CMF CAPITAL GEARS UP CMF Capital has bolstered its senior management team with former ABN AMRO Lease industry expert, Paul Meijer. Meijer will bring over forty years’ experience and relationships to CMF Capital, and will be working closely with Managing Director John Mulheron to open new funding lines both in the UK but, also crucially across Europe and other overseas territories. His appointment comes at a time when UK businesses are still concerned that a trade deal or customs arrangements with the EU can be reached, Meijer’s experience in Europe provides CMF with an even stronger ability to deliver crucial investment funding regardless of future Brexit negotiations. Meijer, who will be based between Amsterdam and London, L-R Stefan Wolvaardt (CFO); Mike Randall (CEO); Brian Dhenin (Commercial Director); boasts an enviable record in the asset based Ylva Oertengren (COO); John Wiles (Sales Director) lending industry and has a reputation for structuring high value funding agreements in he British Business Bank has British Business Bank – is simple: we want to sectors such as marine, aviation, renewable Tannounced that it is providing a facility help organisations unlock the best funding energy and intermodal transportation. to Simply Asset Finance that will increase solution for their businesses and generate its funding to SMEs by £60 million for more working capital. We are delighted The arrival of the former ABN AMRO financier critical requirements like hire purchases, to agree this facility and look forward to follows CMF’s earlier announcement of a finance leases, and refinancing. The working with the Bank long term.” 19.28pct increase in funding levels, and transaction is the sixth made under the Keith Morgan, CEO of the British closing a third more deals in 2016-17. Bank’s ENABLE Funding programme, Business Bank, said, “Our ENABLE The increase has seen a total of over 140 which aims to increase the supply of Funding programme helps support smaller projects financed at record levels across the leasing and asset finance to UK SMEs. finance providers like Simply Asset Finance UK last year. These figures were despite of Since the first transaction in September who share our goal of increasing the supply the uncertainty of Brexit headwinds, and the 2015, the Bank’s ENABLE Funding of finance to small and medium sized continued subsidies the Bank of England programme has supported lending to businesses. Leasing and asset finance is provides the major UK banks. over 10,000 businesses. a vital form of funding for many smaller CMF Managing Director John Mulheron Simply Asset Finance is the new non- businesses looking to scale up. It allows said, “We have known Paul for a number bank lender which was setup in April them to buy or replace the equipment that of years whilst with ABN AMRO, and have 2017. It is led by Mike Randall, backed they need to take their business to the next worked on a number of high profile deals by the investor Cabot Square Capital, and level and realise their growth potential. together. He brings considerable experience provides funding to small and medium “The Bank is committed to increasing sized businesses to help them purchase the volume of funding available to smaller to the team, is a strategic thinker and has equipment, free up working capital and businesses. We’re also committed to network of contacts and relationships that invest in growth.In the short time since increasing the diversity of finance provision, only come with four decades in the finance it was established, the firm has already allowing exciting and innovative non-bank industry. He also shares our philosophy of arranged more than £35 million of entrants like Simply Asset Finance to help putting clients’ needs first. CMF Capital has financing across a variety of sectors – provide even more funding options to grown over the last thirteen years because including manufacturing, construction, smaller businesses around the UK.” of the way it does business and by building transport and recycling. Richard McDougall, Partner at Cabot long lasting relationships.” Mike Randall, CEO of Simply Asset Square Capital, said, “We are very pleased Finance, said, “The funding from the British with the excellent progress that Simply Business Bank will allow us to further Asset Finance has made in a short period of support those businesses that are looking time, and it is great that the British Business to invest in the future, and consequently Bank is supporting Simply Asset Finance drive the country’s growth. We’ve long alongside us. recognised the need to provide customers “Mike and his team provide an with a better, simpler, transparent and more invaluable service to businesses across the agile financial experience. country – by lending Cabot’s institutional “Many of our clients just do not want capital and the Government’s funds back to deal with large corporate lenders and into the real economy in a responsible and banks. Our ethos – which echoes that of the modern way.”
6 VOL 11 I NO 122 2018 www.leasingworld.co.uk UK NEWS
Apollo gets Haydock majority aydock Finance Limited (“Haydock”), a leading global alternative investment Hthe Blackburn-based asset finance manager and I believe working together provider, has announced that certain with them offers huge potential for investment funds managed by affiliates our existing and future introducers of Apollo Global Management, LLC and business customers. Already a (“Apollo”) have signed an agreement long established name in asset finance, to acquire a majority shareholding in Haydock has exciting plans to grow Haydock, investing alongside Haydock’s market share in the UK and to diversify founder and Executive Chairman, Jon our competitive offering.” Wilkinson. The agreement is subject to Haydock’s advisers on the transaction customary conditions and is expected to were EY (Financial) and Squire Patton close in Q1 2018. Boggs (Legal). Established in 1980, Haydock is Apollo Global Management, LLC is one of the largest independent finance a publicly listed (NYSE: APO) leading companies in the UK, offering Hire global alternative investment manager Purchase and Finance Lease funding with offices in New York, Los Angeles, to business customers nationwide. The Houston, Chicago, St. Louis, Bethesda, existing management team, led by Jon, Toronto, London, Frankfurt, Madrid, Steve Worrall (Managing Director) and Luxembourg, Mumbai, Delhi, Singapore, Ian Barr (Credit & Risk Director), will Steve Worral, Haydock’s MD Hong Kong and Shanghai. Apollo continue to run the business. Backed by had total assets under management strong investment support from Apollo, Jon Wilkinson, Executive Chairman of approximately $242 billion as of the team has identified opportunities to of Haydock, commented, “This is a September 30, 2017 in private equity, grow market share within the current tremendously exciting development credit and real asset funds invested segment focus and to develop the for Haydock, a company that has been across a core group of nine industries business offering into larger and more successfully built over a 37 year period where Apollo has considerable competitively priced markets. from its base in Blackburn. Apollo is knowledge and resources.
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www.leasingworld.co.uk VOL 11 I NO 122 2018 7 UK NEWS
> IN BRIEF D&D Leasing Gala raises £7,500 t was a tremendous night, perhaps best I wanted to thank you all so kindly for just PROMOTIONS AND MOVES Idemonstrated in these photo collages, with getting the word out about Karma Nirvana • Lisa Anderson starts a new position as Fleet host Bill Dost saying, “Everyone was having and how great a charity they really are – Administrator at AAH Pharmaceuticals fun and enjoying their time at our Annual https://www.karmanirvana.org.uk/donate/ . (previously Shire Leasing) Christmas Gala, this year held at the In and Another year of incredible support raising • Shereen Walia returns as Manager at Alfa Out Club in St James, London. Most of all funds and awareness for this great cause. Systems (previously NetSol Technologies) • Andrew Woodhouse starts a new position as Head of Credit Risk at Hampshire Trust Bank (previously Hitachi Capital Business Finance) • David Angus starts as Sales Director at Braemar Finance (previously ABN AMRO Lease) • Jane Pennington starts as Head of Sales at Kingsley Asset Finance (previously Admiral Leasing) • Carl Daufer has started as Head of Customer Service Desk at Santander Asset Finance (previously Bibby Leasing) • Jon Davies starts at J Davies Associates Ltd (previously 3 Step IT)
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8 VOL 11 I NO 122 2018 www.leasingworld.co.uk UK NEWS
Looking at the UK through the Chancellor’s eyes standard. Similarly the company car benefit in kind supplement will be increased from 3pct to 4pct for diesel cars, although this supplement will be removed entirely for cars whose NOx emissions are certified as meeting the RDE2 standard. Whilst these measures will influence the purchase of new diesel cars, they do nothing to remove older, more polluting vehicles, off the roads. The Budget documents also confirm that car VED and company car benefits in kind will continue to be assessed by reference to the New European Driving Cycle (“NEDC”) figures until April 2020, before moving to Worldwide harmonised Light vehicles Test Procedure(“WLTP”). Fuel duty is also frozen, for the eighth year in a row. Meanwhile HGV VED and levy rates will be frozen for 2018- 19, with the call for evidence on updating the HGV road-user levy, originally announced in March, now rescheduled to Autumn 2017. The Budget included a raft of proposals to draw more tax from overseas investors into the UK and those selling here but cross- border. These include two measures which appear designed to raise money through reducing tax differentials between digital and traditional businesses, through extending the VAT liability he contents of any Budget reflect the political and economic regime for on-line markets and imposing a withholding tax on situation at the time. Currently, the UK is moving towards royalties paid by UK businesses, which would particularly affect Tleaving the EU in March 2019, with various degrees of companies paying royalties to low tax jurisdictions. uncertainty around the economy both up to and beyond that date. We are also only a few months on from a general election which saw significant gains for a Labour party campaigning for > The consultations on the tax treatment an end to austerity. of leasing is due, alongside proposed GDP growth and business investment forecasts have been downgraded from those of March 2017, whilst inflation has legislation for the 2018 Finance Act increased to 3pct, but is forecast to fall back down to the target 2pct rate over the next year. Borrowing for 2017-18 is expected to be lower than previously forecast, primarily due to increased Other consultations include off-payroll working (IR35 etc) for tax receipts. Given the background, a generally balanced budget the private sector, possibly to bring this into line with the changes could be expected. However, supporting papers show that fiscal from April 2017 in the public sector, and single-use plastics policy has been loosened, with the Budget deficit now to decline waste. It is likely that there will be future tax rises as a result more slowly and no plan to balance the books until the mid of the various consultations, which would offset some of the 2020s; George Osborne’s original 2015 target now looks as if it extra expenditure announced this time. The NIC Bill due to go was a number he plucked from the air. Despite this, borrowing as before Parliament in 2018 may well also boost the Government’s a percentage of GDP will peak this year, before declining as GDP coffers, particularly if it uses the conclusions of the Taylor report grows (albeit more slowly). to support changes to self-employed NIC, picking up those The Chancellor had a number of measures that could boost dropped after the March Budget. business investment, for example new technology and related Some additional business rates reliefs were announced, infrastructure, such as 5G, fibre broadband, electric car recharging particularly for small businesses, although, again, not as much and driverless vehicles, will benefit from extra funding. as business organisations had demanded. Perhaps the hoped for headlines were around the plans for On VAT, the registration threshold is maintained at £85k for new housing, which should fuel the construction industry and the next 2 years. However, there is a commitment to look at the increase equipment needs. The main aspects of these were to “cliff edge” issue for businesses crossing that threshold. build a target 300,000 new homes per year (net) and provide The Budget also reaffirmed the Government’s commitment stamp duty cuts for first time house buyers, with other measures to the reduction in corporation tax to 17pct in 2020 and to to increase the availability of housing. the revised Making Tax Digital timetable. That will require all The consultations on the tax treatment of leasing is due, alongside businesses above the VAT registration threshold to have digital proposed legislation for the 2018 Finance Act. One will cover the records from which the information required in the current VAT legislative changes required to ensure “tax rules for leased plant returns can be sent to HMRC’s systems through their interface and machinery continue to work as they do currently,” following from April 2019; equivalent information for corporation and the introduction of IFRS 16 in 2019. The second consultation income tax will not be required until at least 2020. will “evaluate options for the corporation tax treatment of lease Overall this was a steady Budget, with no major policy payments under the new corporate interest restriction rules.” announcements affecting asset finance. However, the changes for Unsurprisingly diesel featured in the Budget. The first year diesel cars will need careful study by those involved with car finance. Vehicle Excise Duty (“VED”) rate for new diesel cars will GEORGE TONKS, INVIGORS EMEA LLP be increased by one band from 1 April 2018, except for cars [email protected] certified as meeting the Real Driving Emissions Step 2 (“RDE2”)
www.leasingworld.co.uk VOL 11 I NO 122 2018 9 PROFILE Who wants to be a banker ? How PCF Bank is continuing to innovate in the leasing industry
hy set up a new bank in the UK? think rigorously about the structure and The incumbents are huge, the robustness of their business model. Wregulatory burden is high, and the While the financial crisis had presented popularity of bankers amongst the public its challenges to PCF Bank, the leadership is somewhat low. remained confident of future health and Perhaps beginning to take retail deposits looking for new approaches to delivering makes the most sense for a company that excellent service to customers and value already has an established history of for shareholders. profitably extending loans. Building upon At the same time, financial services a strong existing position in the finance regulators at the Financial Conduct market is a far less daunting prospect than Authority and the Bank of England were starting a new business from scratch. Still, considering a huge range of potential it is not an undertaking without its risks. polices. Ensuring the long-term health of PCF Bank, previously known to many the finance industry and the economy as in the motor and asset finance market as a whole, as well as continuing to protect Private & Commercial Finance Group, everyday consumers, is a sizeable task recently gained full authorisation as a and requires a framework of overlapping specialist bank. Here we look at how the and interdependent measures. move will allow PCF Bank to expand its One idea that gained ground both lending into new prime areas of its markets, amongst regulators and in the financial the reasons behind the decision, and what services industry was to increase the plans the bank has for the future. number of banks offering products and Only a very small proportion of Scott Maybury, Chief Executive services to consumers. A number of independent finance providers are banks, banks and building societies had had and allowed to take deposits from the to merge or close during the crisis and public at large in order to extend loans decision to embark on gaining a banking it was thought that new participants to other customers. The majority of licence in 2014. could improve competition in the sector, finance providers are reliant on wholesale What then prompted the decision to benefitting consumers. funding, that is, on long-term borrowing adapt a longstanding business model and However, the number of new banks from large existing banks. become a bank itself? authorised in the UK between 1900 and That is not to say that this is a problem. It 2010 was zero. Clearly the process of is after all the fundamental basis of finance. From the crisis – opportunity gaining permission came with significant Borrow at a lower interest rate and at lend The financial crisis and its aftermath hurdles that would require flexibility and a higher one – keep the administration provoked a lot of new thinking in the hard work from both the regulators and costs and impairments below the value of finance sector amongst market participants, any aspiring bank itself. the margin and you are in profit. regulators, and customers alike. For many Nevertheless, PCF Bank Chief Armed with a detailed knowledge of people and businesses, longstanding Executive Scott Maybury, Managing their markets, and strong relationships arrangements no longer seemed like the Director Robert Murray, and their senior with a network of brokers, PCF Bank had facts of life that they had been. team, recognised that life as a specialist been using wholesale funding to offer asset So, in common with many other financial bank had a number of attractions and so backed lending to SME and vehicle buyers services businesses, the last ten years have they began to explore the possibility of for over twenty years before making the required the leadership of PCF Bank to life as a bank.
10 VOL 11 I NO 122 2018 www.leasingworld.co.uk PROFILE
Pros and cons – to be a bank or not to be a bank For PCF Bank the central attraction of gaining a banking licence was a diversified treasury model and the opportunity to build up a retail deposit base. One problem PCF Bank had faced during and to a certain extent after the financial crisis was that the wholesale funding that had been the mainstay of its model had proved more difficult to secure. A combination of more demanding rules on capital adequacy and risk management practices, political pressure, and straightforward caution had seen banks withdraw credit lines from businesses across the economy. Replacing some of PCF Bank’s wholesale funding with retail deposits would allow for a more stable source of funds, less reliant on other financial Robert Murray, Managing Director institutions. The board could see too that the shift would provide other additional demanding of senior time. Dealing directly So, how best to marry this experience benefits with significant potential upsides with retail customers was not something with taking retail deposits? Individual for the business. PCF Bank had a great deal of experience loans extended by PCF Bank tend to be The interest payable by PCF Bank on with. Few businesses relish the prospect of offered over a number of years whereas retail deposits is lower than the rate that undergoing a substantial IT development current accounts can in theory be wholesale funding is available from other and becoming a bank would require new emptied on demand, so do not necessarily banks. This means in turn that with retail governance and significant changes. And complement the tenor of PCF Bank’s deposits PCF Bank would be able to even once the process was complete, life existing lending. offer new products with lower rates and as a bank comes with significantly higher Offering term deposits was the natural so expand the bank’s offering in more public and regulatory scrutiny. fit. Banks offer better interest rates to prime areas of their markets, and further Fortunately the board of PCF Bank depositors willing to commit their money underpin the quality of the portfolio. are in the business of balancing risks for a given period, usually a certain Set against these exciting possibilities and have long practice in making the number of years. By offering three and five PCF Bank’s board had to set the risks right decisions. The benefits outweighed year fixed rates to depositors, PCF could inherent in applying for a banking licence. the potential costs and so the process of achieve the lower cost of funds that would The process would at a minimum be applying for a banking licence was begun. allow offering better rates to attract new rather lengthy, quite complicated, and very prime customers and at the same time bed- Challenger too? in the process of taking retail deposits. 2014 saw 29 other companies apply for banking licences. As you might expect A specialist relationship the range of services that each applicant With ambitious targets for portfolio intended to offer varied significantly. growth over the next five years, gaining Some other aspiring banks were looking the banking licence has proved to be more at offering current accounts and retail of a staging post than a destination for mortgages – aiming to become smaller PCF Bank. versions of the established high street Deposit taking is proceeding extremely names – whereas others were looking well with market leading rates on number into smaller market niches such as Islamic of products attracting significant inflows. finance or impaired credit lending. As a specialist bank PCF Bank is now The board of PCF Bank were quick to busy enhancing and expanding its existing recognise that competing for high street lending offerings and considering options current account and mortgages as a so in adjacent markets and complementary called Challenger bank was not a route products. Future asset diversification will that they wanted to go down. PCF Bank’s provide the engine for strong growth over core competencies were, and are, in lending a longer horizon. to SMEs and individuals with the security There are always new challenges to face of hard assets, and focusing on vehicles. in financial services and having completed The lender’s existing relationships with the most recent stage in its development brokers were well established and sector PCF Bank looks in prime condition to face David Bull, Finance Director knowledge gained over decades. whatever is next. n
www.leasingworld.co.uk VOL 11 I NO 122 2018 11 ASSOCIATIONS
ROUND THE ASSOCIATIONS
n On target for New Business record previously carried out by the Asset Based Finance Association, New figures from the FLA show that asset finance new business the British Bankers’ Association, the Council of Mortgage (primarily leasing and hire purchase) grew by 7pct in October, Lenders, Financial Fraud Action UK, Payments UK and the UK compared with the same month last year. Cards Association. They have now relocated to a new office and The plant and machinery finance and business equipment this is how you can get in touch with them. finance sectors reported new business up in October by 6pct UK Finance and 13pct respectively, compared with the same month in 2016, 5th Floor while new finance for IT equipment was up by 22pct over the 1 Angel Court same period. London, EC2R 7HJ Commenting on the figures, Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said, “Growth in the n New Brokers’ association asset finance market was broad-based in October, with most of The Financial Intermediary & Broker Association (“FIBA”) the main asset sectors reporting increases in new business. The has announced itself as the replacement for the Association of industry is on course to report a record level of annual new Bridging Professionals (“AOBP”). It will not confine its remit business in 2017 of around £32 billion.” to bridging. Instead, the new body will look to the whole of the Simon Goldie, Head of Asset Finance at the FLA, told us, “The market, although its lineup of lenders shows it retains a strong if FLA warmly welcomes the British Business Bank’s announcement not exclusive focus on property finance. that asset finance (leasing and hire purchase) contracts will now There had long been rumours that AOBP was considering a be eligible for the Enterprise Finance Guarantee. Having worked certain level of reinvention, but it was not necessarily expected very closely with the bank to help develop this facility, we look to commit to intermediaries and lenders across the finance sector. forward to seeing the availability of much-needed SME funding FIBA says it welcomes all brokers, intermediaries and finance boosted in this way.” professionals to attend its inaugural annual conference, which N.B. The British Business Bank application process for new takes place next month (17th January 2018). lenders – including asset finance providers – under its Enterprise The conference is free to attend and features a Keynote Finance Guarantee programme remains open. Please see the speaker from the Bank of England’s MPC, a panel discussion on British Business Bank website for further details. Competition in the Bridging Industry, chaired by Adam Tyler, and featuring Masthaven, Octopus Property, West One Loans, n More Training available Together and Market Financial Solutions. The conference ends In keeping with the industry’s identified need for greater training, with a panel discussion before lunch, entitled What is in store the FLA has really beefed up its programme of training courses for the UK Lending Market 2018, chaired by David Golder, to help with the task of shaping an industry fit for the second and featuring Ortus Secured Finance, Assetz Capital, OakNorth decade of the 21st century. In just the first 10 weeks of 2018, Bank, and CG & Co. The venue is at BAFTA in Piccadilly. it is presenting courses such as Foundation to Asset Finance, FIBA says, “The existing AOBP membership of IFAs, residential Intermediate Asset Finance, Essential Credit Underwriting Skills, mortgage and commercial finance brokers and a wide range Understanding Credit Scoring, GDPR, TCF, Asset Registration, of lenders forms a strong base of support and the intention is Understanding Fraud, Building Sustainable Repayment Plans for to reach out and attract brokers, lenders and tertiary service Defaulters, and The FCA Credit Rulebook (“CONC”). providers involved in the specialist lending sector, who have Thankfully, for all those who feel they deserve a reward after seen the benefits of this Association in the past but now want all that brainwork, the major event of the year, the FLA Annual more support.” Dinner at the Grosvenor House, falls on February 27th, when FIBA describes itself as “modern, inclusive [and] supportive,” the fears of falling behind in “The Knowledge” can be put aside suggesting that its recent formation is an asset. It says, “We will for the evening, to enjoy the more fun aspects of the business. support our Members by providing relevant training, guidance and assistance, as well as ensuring that they have access to a n UK Finance relocates comprehensive network of lenders, detailed product knowledge, UK Finance is a new trade association which was formed industry expert advice and dedicated compliance resources.” on 1 July 2017 to represent the finance and banking industry It won’t have escaped Leasing World readers that FIBA’s claims operating in the UK. It represents around 300 firms in the UK are fairly similar to those made by the National Association of providing credit, banking, markets and payment-related services. Commercial and Finance Brokers (“NACFB”), which boasts a The new organisation brings together most of the activities list of 140 active lenders (thought to pay an annual fee of c.
12 VOL 11 I NO 122 2018 www.leasingworld.co.uk ASSOCIATIONS
£5,000 each for the title of Patron), and has been in the business this is concerning news, particularly when considering that for some 25 years. previous drops in the Index have been aligned with a reduction Are there too many associations crowding into too tight a in GDP growth. One of the factors influencing the Index is the space? That is a difficult one, on the one hand, how many is drop in business confidence and uncertainty caused by a lack too many? On the other hand we have just printed above, of clarity in Brexit negotiations, as well as the potential for details of the associations conglomerate, UK Finance, which further increases in interest rates. Reduced business confidence consists of a number of smaller associations pressured by is also reflected in the UK’s growth forecast, with the OBR now the banks to merge into one association, in order to save on saying that GDP will not grow by more than 2pct a year for the lenders’ costs of paying for membership of too many often foreseeable future. In addition, there is still growth in business overlapping associations. start-ups, but this is slowing, causing a drop in the net business creation indicator. n NACFB – SMEs in failing health? CYGB points out that small and medium businesses are This month we reached for the NACFB Newsletter to seek the essential to the productivity and prosperity of the UK economy, NACFB’s message to our readers, and although the newsletter and sustained poor performance by SMEs could have a significant consists of advertorial contributions from Patrons, an atypical and long-term negative impact on the economy. Given the recent report caught our eye from CYBG – owners of Clydesdale drop in the Index, CYBG is calling on the government to make and Yorkshire Banks – predicting a tough outlook for SMEs changes sooner rather than later, and do more to help businesses in 2018, written by Graeme Sands, head of CYBG’s business manage their costs and restore confidence. lending division. Earlier this year, CYBG committed to making a minimum of Their Q3 SME Health Check Index, compiled in association £6 billion of lending available from 2017 to 2019 to help fuel the with leading economics consultancy Cebr, has recorded its lowest growth of SME businesses in the UK, underscoring the critical score since January 2014, with the indicators for employment, role that the banking sector plays in supporting new enterprises revenue, confidence and net business creation (*) all down and cultivating established businesses. compared with Q2. Businesses in the North and the Midlands were worst hit – areas of the country that have been prioritised * The SME Health Check Index measures business performance by the government, and where there already exists a substantial and the macroeconomic operating environment affecting SMEs, gap in growth compared with London and the South East. including net business creation, business costs, capacity, confidence, Given the importance of SMEs to the health of the UK economy, employment, gross domestic product, lending, and revenue.
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www.leasingworld.co.uk VOL 11 I NO 122 2018 13 FEATURE The toughest job in asset finance? Credit underwriting: the hardest job in the asset finance business?
or most credit underwriters, the question mark at the end it through the various levels of approval of a bank. Borderline of the previous sentence is superfluous, as they feel it is cases that should have been rejected swiftly, unfortunately could Funquestionably the hardest part of the business. It certainly end up bouncing back and forth between the bank’s demands requires more all round training, including a mastery of for guarantees and extra security, and the customer’s inability finance and accounting, risk and financial ratio analysis skills, to provide them. The Altman Z-score was the new invention on and understanding the success and failure factors of different the block, a conglomerated ratio or “Z-score” that was made industries, from abattoirs to zircon-platers. Then there are up of many different ratios, that could then be benchmarked the years of grounding in the art of spotting artful dodgers, against scores from successful companies, and those that had mastering legal security and documentation, and fighting off gone bust. Once Z-score became trusted, it was a short step aggrieved salesmen in the coffee room over why their wonderful to computerising the scoring concept and letting the Quants customer (and that month’s bonus) had got the thumbs down. loose on developing it as far as it could go and into what is now Last but not least, there’s clearing up the mess after a deal known as credit scoring, a fast way of arriving at a credible unexpectedly goes belly-up (just look at Carillion), and deals measure that can be rationally justified as useful. can still go wrong despite all the due diligence. In the world of asset finance, credit response became a key So how do you do safe credit underwriting, other than by taking competitive advantage over banks, it had to be quicker, or if directors’ children hostage? There’s an old joke in banking, from it was a difficult credit it was necessary to delve deeper and this author’s time as a credit analyst, that described the ways come up with a way to say Yes. One sensible way developed for in which the three types of UK banks at the time – High Street dealing with the latter was so called “Refinance” which simply clearers, the newly arrived American banks, and the traditional, relies on the customer fully owning enough other fixed assets public school staffed merchant banks – did their credit analysis. for a sale and leaseback to be performed on them, generating The clearing banker looked at the assets on the balance sheet, the cash necessary to buy the new equipment. But come what because its main protection was the fixed and floating charge may, the customer had to be visited and his situation fully over assets; with no unencumbered assets left to encumber, the understood before a positive decision could be made, and this US banker did a cash flow analysis, on a flat-growth scenario, to became known as decisioning on the basis of the “credit story.” see how the loan was going to be repaid; finally, the merchant There were other, non-sensible ways that became fashionable banker looked at the list of board directors, to see if they knew at the time, thankfully now discarded, one which was falling any of them from their Eton schooldays. back on the “portfolio effect” which was kind of saying that the Things have moved on! But the ongoing problem with lessor had enough profits from other deals to absorb a loss on traditional credit analysis was that it was slow, it took time to this deal, if it should happen, totally mad but was often heard collect the figures, do the analysis, write a credit case, and get at credit meetings around the land, especially where a volume
14 VOL 11 I NO 122 2018 www.leasingworld.co.uk FEATURE
target was more important than a profit target. Then there was reporting year-end. Not only that, SME accounts are frequently always the “underlying asset value” argument, that the actual in abbreviated form which can be practically impenetrable, and loss was substantially mitigated by the resale value of the asset, unaudited. And he then warns of the Garbage In / Garbage Out ignoring completely that there would be no asset cover if the principle of data processing. same asset had been fraudulently sold to more than one lessor Gordon McKechnie of Equifax, a proponent of credit (the commonest of asset finance fraud), that decommissioning, scoring, tries to dispel some of the misconceptions about credit transporting and storing heavy equipment cost money, as did scoring, pointing out that it does not reflect a borrower’s ability possible cleaning up, refurb and remarketing, and finally the to repay. It is a three digit number, the result of an evaluation of significant cost of management time wasted in dealing with payment history, balances owed, credit history, and accounts, defaults. Having a remarketing capability makes sense because and hangs its hat on the principle that past performance is there will always be deals that fail, but underwriting riskier indicative of future performance. He admits that models vary credits because you have a remarketing capability, that’s between lenders, some using standard products, others heavily another discussion. customising models to their own risk appetites. Models have A recent Leasing World conference pitted a “credit-score” to be constantly re-tuned according to their performance, fan against a “credit story” fan, as we were intrigued by a but are considered cost effective when very large numbers of theory doing the rounds that if you ran all the credit story deals transactions have to be handled, and in particular operate at through a credit scoring system, most would be rejected! How great speed while removing subjectivity from decision making, could that be, we wondered? Philip Knight, Credit and Risk although some might question removing personal responsibility Director at Asset Advantage and a proponent of the credit story from decision making. approach, tries to meet all his prospects face to face and believes What becomes clear from the arguments for and against, is that credit story benefits from access to the financial data, but that for high volumes of credit applications the credit story also his own investigations such as site visits, sector knowledge, approach is simply too human intensive to be a practical way interest in the business, and also supporting the sales process, of decision making, there would just not be enough staff to deal and using the personal approach to build a relationship, which with the volumes. So, its horses for courses and room for both, results in him collecting much more data about a firm than the high volumes of transactions invite credit scoring, low volumes computerised credit scoring approach. open the door for credit story and relationship building. He notes that Credit scoring relies on numerical data, Gordon McKechnie also signalled a future of Big Data, when mainly financial, from accounts lodged at Companies House. the availability of massive data archives allows a wide range Of course, these accounts relate to past performance, and of useful assessments to be made, to give new insights, and sometimes quite a long way back if a company’s extended its showed a slide to illustrate what he meant. n
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www.leasingworld.co.uk VOL 11 I NO 122 2018 15 FRAUD
aspects of fraud Identity fraud – Directors beware
eminently visible in that their details are readily available at Companies House. A search of the register will reveal full name, address, and date of birth which are gold dust to the identity thief. But more public information is available. Armed with the residential address the fraudster can make a local authority search to ascertain what council tax band the director’s property is in. Anything between D and H is indicative of somebody with above average means and G and H are very attractive bands. Only 4pct of houses in the country sit in band G but 10pct of the victims of identity fraud live in these properties. Public information therefore gifts the fraudster the outline of a profile of someone who is likely to be wealthy. He completes the picture by searching the social media and databases that may or may not be legal. Once he has assembled his profile the fraudster will act quickly because he has to exploit it as much as possible before his impersonation is exposed. Conventionally, the identity thief will open bank accounts and apply for credit cards but he tends to act differently when he is pretending to be a company director. In this case he is more likely to take advantage of on-line loans and credit facilities with major stores, and there is also evidence that he will seek to buy prestige motor cars using asset finance. or those who achieve the accolade of Company Director Whatever the means the amount of the theft is likely to be it is often the pinnacle of their careers and they should considerably higher than the average for identity fraud. Fbe rightly proud of their achievement, but evidence is At the end of the day it is likely that finance companies will emerging to show that in reaching this height they are exposing take the financial hit for these crimes but the company director themselves to a greater risk of having their identities stolen. will go through a lot of grief before they are resolved and the This evidence has come to light in a research study undertaken evidence shows that when a director’s identity is stolen once jointly by CIFAS and LexisNexis Risk Solutions which was it is likely to be stolen again. So what can be done to protect published earlier this year. CIFAS is the mutually owned body these victims and the finance companies who suffer the losses? that has been set up to combat corporate fraud and LexisNexis The first advice is to protect personal data as much as provides risk management advice and software tools. CIFAS possible. This involves being very careful about what is posted has contributed 3½ years of data on nearly 300,000 actual on the social media and protecting all devices with access to the cases of identity fraud and LexisNexis has injected its expertise internet with strong passwords. It is also sensible to check credit in developing solutions to combat fraud. profiles regularly and investigate any irregular occurrences. The starkest finding of the study is that company directors are The second advice is to finance providers. So many Twice as likely as the average to have their identities stolen. Why applications these days are dealt with on-line without human should this be? intervention. Conventionally, an application from someone The first explanation is that company directors are judged in a senior position with a high income will find a ready to be wealthy and are therefore more attractive “marks” for approval. In the light of this research it is recommended that fraudsters than Mr Average. Fraudsters like rich pickings and such applications should be scrutinised in more detail. A therefore company directors make prime targets. Fraudsters also quick phone call to verify the authenticity of the applicant like easy pickings and when they approach credit providers with could save a lot of grief later and maybe kick off a worthwhile the profile of senior executives their applications are seldom relationship. declined and can be for higher amounts than the norm. They Alternatively, software can be used to identify suspicious are further assisted by the fact that although company directors characteristics, which of course is a solution offered by are diligent in managing their business’s affairs they are often LexisNexis, but it is nonetheless a valid idea. neglectful of their own. Identity theft works for as long as it goes Identity thieves are both resourceful and well organised, and undetected and it seems that frauds against wealthy people take they take a lot of beating. The best that we can do is make life longer to spot than the average. difficult for them and we should do whatever is necessary to hold The problem is exacerbated because company directors are them at bay. n
16 VOL 11 I NO 122 2018 www.leasingworld.co.uk FRONT OF MIND
Front of mind Joanne Davis Partner, Head of Asset & Consumer Finance, Locke Lord LLP
Clarification on Consumer Credit Income Fee reporting
he FCA has recently clarified the consumer credit reporting requirements. The annual charge the FCA levies Ton consumer credit firms is based on data submitted in the CCR002 or CCR007. The ‘Total Annual Income’ reported by firms is used to calculate the regulatory fees and levies for the following year. The FCA has recently clarified what firms need to report, so they are charged correctly.
What to report In their annual consumer credit returns, Firms will be asked for ‘Total annual income’ as defined in FEES 4, Annex 11BR for the purposes of FCA Fees reporting. This is question 12 of the CCR002, or question 6 of the CCR007. The FCA use this figure to calculate Firms’ regulatory fees & levies for the following year. The note below outlines what firms need to report to ensure firms are charged correctly. It covers common scenarios, but it Rules for Lending (Credit) is not comprehensive, and Firms should refer to the Handbook Firms need to include the interest, fees, and other related rules in FEES 4 Annex 11B before submitting their return. income, that relate to entering into, or exercising rights under, regulated credit agreements. Rules for Credit broking For example, you charge a customer £200 interest and £30 Firms need to include the commissions, fees and other related fees on a loan agreement in the period. You should report £230. income (such as administration charges and volume bonuses) If you sell goods or services on an interest-free arrangement, relating to regulated credit broking. This includes situations and you charge no fees or equivalent, you should report using where the customer ultimately enters into an exempt agreement, the ‘proxy’ measure of income. This is calculated as: such as a business use or high net worth exempt agreement. (5pct + Bank of England base rate) Whether the agreement is exempt or not is irrelevant to the x (amounts received under agreements) question of whether a broker is engaging in regulated activity, For example, you allow a customer to pay in 24 monthly therefore income derived from introducing individuals and instalments for services you provide. You receive 12 payments small partnerships (of three partners or less) should usually be of £100 in the period. The Bank of England base rate at included in the calculation. your reporting date is 0.25pct. You should report (£1,200 x For example, if you sell an item for £1,200, where the 5.25pct) = £63. customer pays a deposit of £200 and chooses to pay the rest Interest-free lending in 12 or fewer monthly instalments is of the balance on credit. You receive £1,000 from the credit often exempt from regulation, so should not be included – see provider plus £50 commission for making the introduction. instalment credit agreements. You should report £50. Consumer hire as owner No commission income Firms should report any income that relates to or results Where Firms receive no commission income, or where Firms from the consumer hire agreement, even if these costs are not pay a subsidy to the credit provider, firms should report using specified within the hire contract (e.g. delivery and charges the ‘proxy’ measure of income. This is calculated as: for damages). (5pct + Bank of England base rate) For example, a firm hires out tractors and charges are broken x (value of credit agreement) down as follows: For example, you sell an item for £1,200. The customer • Hire of tractor – payable each month. pays a deposit of £200, and the remainder is paid via interest- • Any losses/damage to the tractor sustained whilst on hire. free credit. The credit agreement is for £1000. You pay a • Annual servicing of the tractor whilst on hire. subsidy to the finance provider, so you only receive £900. The • Delivery and pick up of tractor. Bank of England base rate at your reporting date is 0.25pct. All these payments are income generated by the regulated Firms should report (£1,000 x 5.25pct) = £52.50. consumer hire agreement. The firm’s business might for Where firms receive no commission or equivalent income, example include servicing tractors which are not on hire – but firms should use the value of the goods hired as the basis for this particular tractor is serviced during the contract period the proxy measure. because it is on hire. www.leasingworld.co.uk VOL 11 I NO 122 2018 17 FRONT OF MIND
Submit a 12 month period If Firms have made a decision not to charge If firms are required to submit a CCR002 twice a year, a firm Where Firms have made a business decision to waive or should provide the actual 12-month figure in year-end return discount charges, Firms should report the ‘fair value’ for item 12. In your first six-month return a firm can submit nil of the amount Firms otherwise would have received. under item 12 (as this figure is not used). For all the other items Firms should only use the ‘proxy’ measure if its main on the CCR002, you should refer to the reporting period. business is to provide goods or services. If a firms main Where firms reporting period covers more or less than 12 business is to carry out a credit-related regulated activity, months, for instance because a firm is newly authorised or have Firms should use the ‘fair value’ method if it receive no changed its year end, the figure must be annualised to represent income on a deal. a 12 month period. Firms should multiply the actual figure up or down as appropriate, and submit the annualised figure. When Firms can report nil Do not include: Normally firms should only report nil if it has not carried out • The firms entire turnover, or its income from sales of any credit-related regulated activities during the period. ordinary goods or services. If a firm has carried out activities for which it received no • Income where the activity is unregulated because the income, a firm should report using either the ‘proxy’ or ‘fair borrower or hirer is not a “consumer”. For instance, firms value’ methods described above. should exclude income where the borrower or hirer is a One exception is where a credit broker merely displays limited company or partnership of more than three partners. posters or provides leaflets about publicly available credit • Income from broking regulated mortgage contracts, products, and has no way of knowing if a customer took whether first or second charge. This should be reported out a credit agreement because of this. Although the proxy in fee block A18. measure does apply in this instance, the calculation would • Income from broking residential buy-to-let mortgages. not be possible. For any credit broking that occurred in this • General insurance commissions, which should be reported manner, a firm would record £0. under fee block A19. But Firms should include any Not-for-profit debt advice bodies can record £0 as they commission element that relates to setting up a regulated are not charged any annual fees. n credit agreement. • Exempt instalment agreements. • VAT or Pence. YOU CAN CONTACT JOANNE DAVIS AT [email protected]
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18 VOL 11 I NO 122 2018 www.leasingworld.co.uk FEATURE Consumer-led slowdown, and not economy contraction Philip Shaw, Chief Economist at Investec Bank plc, speaking at the Investec Annual Conference gave the delegates his take on the UK economy and its prospects
et’s take a glance at the economy first off. Where are In the customs union, if you export to the EU, you don’t have to we? Okay, let me show you a chart – it’s fairly simple. get your goods customs checked. L It’s just quarter-on-quarter GDP growth, together with “Last, what we need to get sorted out is our new trading “contributions. In the year before the Brexit referendum in the relationships. We already have a trade deal with about 55 other middle of last year, you can see it’s probably averaging something countries because we’re part of the EU. When we leave, then like half of one percent per quarter, the equivalent per quarter of those deals will fall away. So there’s an awful lot to do in a very around 2pct per annum. We didn’t see a sharp slowdown in the short window. Just a few points to bear in mind. economy immediately afterwards. “A quick word on today’s increase of a quarter of one percent in the Bank rate, to 0.5pct. The Bank of England is genuinely afraid that inflation is an issue with rates at previous low levels. We’ve got a tight labour market, unemployment is at a 42-year low at 4.3pct, and the Bank of England’s view is that this is going to generate more pay growth, threatening the inflation target. Remember, we’re already at 3pct inflation, some way ahead of the 2pct target at the moment. The BoE’s projections suggest that at today’s level of rates inflation will come down, but not sufficiently to meet the target in three years’ time. “Also perhaps at the back of their minds is what the Fed has been doing. We’ve had four interest rate increases in the Fed, and central banks everywhere are pretty uncomfortable with a level of interest rates close to zero for an indefinite period.
“But 2017 has been quite a different story. We’ve actually seen, first of all, a slowdown in the pace of growth. We’re not contracting – we’re still growing – but it’s at a slower pace. Why has that happened? Well, if you look at the royal blue bars on the graph, that’s the contribution of consumer spending to the economy. Consumer spending is about two-thirds of it, which is why it’s always going to have quite an influence. And that was holding up pretty well through the latter half of 2015 and the first half of 2016. Then it began to slow down a little bit after the referendum, but since then it’s pretty clear that we’ve seen a sharp slowdown over the first half of 2017. “And that is because we’ve seen a rise in inflation. Inflation is currently 3pct and pay growth is averaging about 2pct. So, as we know, household budgets are being squeezed. Consumer spending growth has slowed down in real terms. Overall economic growth Inflation should come down over the next year or so, probably by is about 1.5pct per annum this year. So what has resulted is a more than the BoE is forecasting. And we do think we’ll see, a little consumer-led slowdown, but not contraction in the economy. We bit of upward movement in pay. And so that should, together, begin are predicting a similar pace of growth for next year. to mitigate some of the squeeze on households that we’ve seen. “Brexit, of course, is going to be a major determinant. If there’s no But at the same time, there is a risk of an adverse reaction to the trade deal, what happens is that we face World Trade Organisation interest rate rise, particularly in the household sector. Also, Brexit (“WTO”) tariffs exporting to the EU. On average, they’re not too uncertainty could lead to an investment falloff, which poses a risk. high – overall they’re 3-4pct of export prices, but from category Where do we go from here on rates? Well, I’ve managed to catch to category they can vary a lot. For example, if you’re trading on a little bit of the Bank of England’s material that was published WTO, and you’re a dairy exporter, you face an average tariff of earlier and on the Bank of England’s forecasts there’s more scope about 45pct. For a car exporter it’s 20pct. It’s those sorts of numbers. for Mark Carney to force through further rate increases. The “We also have to settle a number of things in addition to point here is that the Monetary Policy Committee really believes trade. There’s access to services, the issue of financial services, that there is an inflation problem. So clearly the plan is that the and we need to talk about the rules of non-tariff boundaries, Bank of England wants to raise rates again, gently, over the next then there is the very important subject customs arrangements. couple of years. n
www.leasingworld.co.uk VOL 11 I NO 122 2018 19 FEATURE Investec leading by example Robin Skuse, Associate Editor at Leasing World, reports
nvestec’s 2017 Asset Finance Broker Conference sported an inspiring guest Ispeaker list (one which included Joe Simpson, author, mountaineer, and survivor of a fall into a crevasse where he was left for dead, Nicky Moffat the highest ranked female British Army Officer, and the larger than life MP for Sutton Coldfield, Andrew Mitchell (politics from an insider), all to do justice to a topic which has huge contemporary importance: “Shaping the Future.” The day’s theme focused on the challenge of getting the right staff, training and career development, so that there will be someone in the future capable of taking over today’s business finance brokerages. The current perception is that there is a wide generational divide in the industry, older commercial finance brokers, often coming into broking after a career in a bank, have grown up in a highly structured world of regular training and the truth is that the proven formula that education. If you were working at a bank > Perhaps in a perfect works is a cycle of training course, then thirty years ago, you would have had putting it into practise by working under no option but to complete strict, regular world there would be an experienced guiding hand, then when training courses. You might not have that has been mastered, going on a more found it much fun at the time, but the one single standardised advanced training course, then putting benefits will have stayed with you. qualification that into practise under guidance until In contrast, the younger broker has that has been mastered, and so on. The probably fallen into the business by question may come up, “Where are the accident, and got ahead by sheer force by doing is a great way to master the yo- more experienced guiding hands in the of personality and drive. Through their yo, where the consequences of getting it broker industry, and have they had any start up years, they’re handing out other wrong are not career-ending, (neither are training?” so there is a moral responsibility people’s money, passing finance deals to they career-starting, come to that), but here for those in the industry that are “the the professionals at the funding banks, for brokers, we’d always recommend a full package” to start putting themselves and may or may not wonder where banks proper training course. into a position of “giving back” for the get their money from, what they have to Perhaps in a perfect world there would future of the industry. consider before they can grant credit, and be one single standardised qualification, Investec’s suggestion was to think why the finance agreements carry quite so so that no one has to decide what might about “talent management, courage and many scary sounding clauses. They may be best for them. In the meantime, diversity,” in other words, having the look around and see multiple training we have some larger funders’ broker right people around you, people you options and qualifications, all subtly training days which tend to focus on the trust and who know what they need different and none of them mandatory. credit underwriting aspects, the Leasing to know. For all that a CV can tell you You can’t take all of them, you don’t Foundation’s MA at Falmouth University about a person’s potential, there is no actually have to take any of them to keep with its heavy emphasis on Leadership better way to identify future talent than your salary coming in, and you’re already aspects, the FLA designed Diploma in to work alongside it for eight weeks. busy with the day job…so it is tempting to Asset Finance (DipAF) from the London Then, if you are doing leadership right, file Training in the Maybe Later tray. Institute of Banking and Finance, NACFB the graduate you just trained won’t have As a result of this attitude, to misquote Compliance Services – many which we much incentive to take that knowledge Donald Rumsfeld, there are things that have written about recently in Broker to some other broker’s office. Wes brokers don’t know that they don’t World magazine – and Investec’s own Harfield summed it up nicely, saying, know. We haven’t really seen the FCA solution to the problem to be launched in “It’s all about seeing a career path.” If as start to bite yet and a fine from them 2018 that will focus on a more rounded a new recruit you want to be sat at your could wipe most brokers out, then there’s picture of talent management, courage, boss’s desk in five years, and understand HMRC, and reputational risks from being diversity, and visible career path. how you can make that happen, why associated with the wrong deals. Learning It’s not just training courses though, not stick around and see if, by knuckling
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down, you can get there in four? and heed the caveat “past performance Paul Cunningham from Quantum is no guarantee of future results”. Both Finance grabbed everyone’s attention of these problems could be tackled by by including the phrase “The Lazy a really focused training programme. Broker” into a Powerpoint presentation The benefits would be felt up and down (and if you’ve ever been to these events, the financial food chain; lenders would you’ll know how hard it can be to get feel more comfortable giving fast and anyone to sit up and take notice during a consistent underwriting decisions, brokers Powerpoint presentation). could expand with greater confidence, and By speaking about the Lazy Broker, who borrowers would have an independent neither asks enough questions nor gives confirmation of the quality of the broker enough answers, Paul highlighted the issue they were dealing with. of “what’s in it for us.” Why is Investec, The good news is that there is a and other lenders like it, so keen to run strong element of standardisation here training courses? It’s because they can spot already. Investec’s training plan is not trends in the quality of deals and how they so far removed from those we have seen have been packaged. Quantum believes elsewhere, and with good reason; there the quality of the average application Paul Cunningham – MD Quantum Finance are simply rights and wrongs, rulings and has declined, and puts that down to an legal requirements that are not up for oversupply of funds – meaning the broker from outside or promoting from within. debate. What appears to who wants to do the bare minimum can We talked to one broker firm that was the There is variation in the peripheral now do even less – because they are sure model of long-game sustainability; the man parts of training, the abstract parts that to find someone who will say Yes. To at the top was set to reduce his working go beyond KYC and deal-packaging. We the extent that Paul’s advice could be hours in 2018, his second-in-command could even be seeing the birth of different condensed into a pithy acronym, it would would take on more of the decisions, and training families – Investec’s and others be this: “KYC” and then tell the funder all the Next Generation would move up a step. – each with the same essential skills and that you know about that customer. But we also listened to a broker firm in the knowledge, but shaped by other factors. Meanwhile, this was also a networking process of doubling its office floor space From what we have seen, lenders like event. Practically all the brokers we spoke – they were in a very different position, Investec who have grasped the initiative to wanted to talk about their plans for because recruitment can be an uncertain are doing a terrific job, and we are sure it 2018 – expansion, succession, hiring business. Pluck a graduate from university, will pay off. n In praise of experience Philip Knight of Asset Advantage writes:
recently heard Michael Bloomberg The reports cover not just the bare Reviewing bad debt with the credit team say on Radio 4’s Today Programme, facts about who attend and where, but isn’t about pointing the finger at mistakes, Iin the context of potentially being too snippets of intelligence gleaned about the but is about learning from the experience old to run for US President, that, “Age company such as who their competitors of the bad debt. Why did the borrower go is a euphemism for experience, and are and what is the customer’s view of bust? Should we take a different approach experience is the most valuable thing a the economy. As a team we therefore to that industry sector? With the benefit person possesses.” benefit from industry related information of hindsight is there data which we could Well, as an over fifty myself all I can say building our group knowledge and have collected, and should now perhaps to that is “Hear, hear!” But experience experience, which can then be applied collect? Are there any operational isn’t just something that benefits to future proposals in that sector. The elements of the deal which we should individuals, it’s also a critical component corporate memory benefits from this large consider changing to reduce future losses? of the business process. database of reports on various industries The downside to all this activity is of course So, how does a company acquire that we now hold. more work, a team approach to the job, experience and how does it benefit from In addition, we use a Wikipedia and an all-consuming appetite for business. that experience? To begin with it needs style intranet product to maintain our As that other famous US businessman, investment in systems and resources and stance on various issues. Using an Warren Buffet once said, “Read 500 pages commitment from the team members, and easy to maintain database like this we every day. That’s how knowledge works. that starts with a culture in the business can rapidly respond to changes in the It builds up like compound interest.” And of wanting to acquire knowledge. credit environment, disseminate the didn’t Einstein call Compound Interest the For example, at Asset Advantage, all information across the teams, and build “Eighth Wonder of the World, those who of our credit customer visits are followed the corporate experience bank. understand it, earn it. Those who don’t up by comprehensive contact reports and We use our experiences in collections understand it, pay it!” those reports are shared within the team and recoveries to improve and update our So, experience equals compound using the Slack social media platform. credit process through positive feedback. interest? “Hear, hear!” to that, too! n
www.leasingworld.co.uk VOL 11 I NO 122 2018 21 FEATURE Unfortunately, we are living in interesting times As I started to reflect on 2017 my thoughts turned to the old Chinese curse – May you live in interesting times. Well, we are certainly doing that and on the surface at least our industry seems to be in the most part surviving, and in many areas flourishing despite the great uncertainties that we face. Politics, economics and international trade seem to have dominated the news space for most of the year – but that was only when global nuclear annihilation took a back seat for a few days! By Chris Boobyer
et, those working in the industry, as those before them, have put these massive issues to one side and carried on doing Ywhat we do best – providing vanilla and structured finance to equip industry, provide transport and essential mobility to the local, national and international organisations that depend on leasing and asset finance to drive the economy. In our role as consultants, Invigors are privileged to look under the bonnet of many of the industry’s leading and sometimes emerging companies, and the following is a compendium of the issues we have addressed during the year and they will, no doubt be occupying a lot of our time in 2018 and beyond. Starting with the changes to the tax and accounting frameworks, many acres of fact sheets and reviews have all added up to what we all really anticipated from the start, the most radical proposals were watered down and we now have to deal with a compromise. Meanwhile, regulatory oversight has developed and expanded. However, the question remains that, given the size of the problems, are the remedies proportionate? Answers on a postcard to the various bodies concerned may help relieve some of the frustration! And irrespective of views, there are issues for commercial and marketing teams to deal with, rather than just leaving in the back office. As a firm we have concentrated on influencing the various proposals as they were developing and ensuring our clients were able to take a balanced view of requirements. As proposals became finalised that position has changed to supporting client implementation plans. Given the excellent internal teams enjoyed by many of our larger clients we have been more focussed with them on the necessary process or organisational changes required to manage the current changes and prepare for those happening in 2018 – GDPR in particular and the later stages of addressing the opportunities presented by IFRS 16. On the subject of process and organisational change, one of the related challenges has been the increasing demand for the industry’s services – self serve, faster response times, more and better customer information and improved data handling. Set are aware of much interest in our industry but simply having the this against the backdrop of fairly limited innovation and new money is just not enough. In truth this hasn’t been the case for products from many of the service providers and it’s clear why that some time, but many funders are resting very comfortably on their in this vacuum the buzz word of the year has been ‘digitalisation’. laurels and we are very concerned that they are misguided. Unfortunately, for many its meaning is far from clear and we Many fellow conference delegates complain that topics on have sat in many conferences and workshops debating how best digitalisation are ‘more of the same old stuff’ and to be fair to achieve it – or something/anything that will assist. Our view that has been the case in many instances. To hear something is that the industry is under far greater threat of change and at different and actually gain some strategic and competitive risk of disintermediation and irrelevance than at any time. We value, you should come to a programme we are presenting with
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the FLA on May 3rd, 2018. This will address the issue from which is the only forum of its type where CEOs can speak four separate directions and provide plenty of time for debate, openly and in complete confidence about many of the strategic challenge and discussion with those that really do know what issues facing them and their concerns for the industry. During they are talking about! the sessions we also discuss a series of ‘hot topics’ and as a One of the most revealing things we do for our clients is to group debate potential actions to address the issues raised. individually benchmark products, processes (and sometimes After each meeting Leaseurope publishes a synopsis of the even opinions on an informal basis) to check their corporate event amongst its membership and the industry’s pulse from time to time. This is valuable Stemming from the inaugural CEO Business Council in 2013 for the commissioning client and also for the participants was one of our most rewarding things we do during the year, who all receive confidential feedback on where they stand in which is time spent working with the Leaseurope Future Group. the overall market. These are often undertaken pre or post Invigors is passionate about securing the future of the industry and market or channel entry and particularly at the start of the in particular about establishing the most favourable environment planning process which adds some real and objective data to to attract, retain and stimulate the millennial generation to apply the strategic conversation. their collective intellectual capabilities and energy to the European Our more public work involves published benchmarking asset and motor finance industry. surveys on system providers. We are about to launch our 2018 2017 marks the fifth anniversary of the Leaseurope Future review which will update the work last done in 2012. There have Group and during this time it has created an alumni of 75 leasing been some major developments amongst the players and some well professionals across many different disciplines, member firms, publicised entries and exits from the scene plus plenty of promises and countries. The group has generated over 60 innovative of revamped products and answers to all known problems. Watch ideas and the ‘Class of 2017’ was tasked to devise and create out for this in early 2018. practical solutions to address the most challenging strategic Client demand for systems and process design consultancy and tactical issues to the industry as described by the 2017 has increased in Europe and has dominated our work with Alta CEO Business Council. These ranged from the low adoption colleagues in the US more than ever this year. We have been of new technologies; to thinking how non-financial institutions engaged on a number of large and high profile RFP’s where we may gain a competitive edge if they enter the asset finance have utilised our knowledge and experience of the major service market, through to devising social media strategies to attract providers guide to assist clients through the selection process and different customer segments to the industry. provide objective ‘compare and contrast’ evaluations for clients to There is no doubt that the Christmas holiday was a welcome base their decisions. relief to all of those dealing with the stresses and strains of the Those of you who attend the Leaseurope Annual Convention past year. There is also no doubt that there is much more of will have seen some of the Invigors work in action, either on that to come in the New Year so, as we tidy up the loose ends stage or in the preparation of some of the speaker content and of 2017, all of the Invigors European team wish you a happy, messaging in some of the sessions. Invigors are great advocates of profitable, and a not quite so interesting New Year!n Leaseurope as it provides a true pan-European perspective on the industry and allows us to gain and construct a very broad view of CHRIS BOOBYER, SENIOR PARTNER industry issues both for ourselves and also for our clients. INVIGORS EMEA For example, we facilitate the annual CEO Business Council [email protected]
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www.leasingworld.co.uk VOL 11 I NO 122 2018 23 FEATURE A look at Paragon Bank’s Business Finance activities The following is taken from Paragon Bank’s latest Annual Report which gives detailed insight into how Paragon Bank has integrated its relatively recent asset finance acquisitions such as Five Arrows Leasing, and Premier Asset Finance:
he principal activity of the Group’s Commercial Lending and the valuation of any security, together with expertise in division is asset finance, where strong progress has been collections and security realisation. In common with the rest of Tmade following the acquisitions made in the previous year. the Group, the division’s focus is on the maintenance of strong The Group’s asset finance activities are transforming to service a credit standards and it does not pursue business volumes at the broader mid-market range of SME customers, as opposed to the expense of margins. The division relies heavily on specialist teams more limited niches originally serviced. This strategy has resulted to address the separate business lines, either sourced externally or in higher new business volumes (up 52.5pct on the eleven month internally developed. performance in 2016 to £220.0 million in 2017). Customer credit The asset finance business has seen a 39.8pct annualised profiles are generally stronger in this larger sector, but with yields growth in new advances in the first full year of the Group’s necessarily lower. ownership, as changes made following the acquisition came The Group’s motor finance business also saw strong growth into effect. Premier, acquired in 30 September 2016, has in 2017. Operating in the hire and lease purchase segments of proved valuable as a source of new business, particularly in the the market (with no exposure to personal contract purchase business finance area. This has taken place against a backdrop products), new business origination grew by 50.4pct to £120.0 of aggressive competition in the market and general economic million during the year (2016: £79.8 million). nervousness in UK industry, leading to some reluctance by SMEs The final established sector is the division’s development to take on new finance commitments. finance operation, providing funding to smaller property The asset finance business also made a significant investment developers, where new drawings totalled £48.9 million in the in assets for hire under operating leases, both term and spot, first full operating year of the business (2016: £9.1 million). acquiring £12.9 million of assets to generate future income The Group has also established a team to provide structured (2016: £8.7 million). lending solutions to non-bank financial institutions, with the The motor finance business continues its development phase first lending scheduled for the second quarter of the Group’s with a 50.4pct increase in new lending as its distribution 2018 financial year. network expands. This rate of growth is expected to moderate Building on the asset finance operation acquired in 2015, the as the business becomes more mature. Group’s Commercial Lending division brings together a number The development finance business, which provides funding for of streams of mostly asset backed lending to, or through, small scale property developments, was launched at the end of commercial organisations. The principal customer focus of the previous year. It has seen significant growth as it moves from the division is on lending to SME and mid-sized corporate its pilot phase to a wider scale launch, expanding from its initial customers, which is an important differentiator from the rest of focus on London and the South East. the Group’s business. While asset and motor finance form the largest parts of the division’s operations, and finance leasing is PERFORMANCE its principal product, offerings are tailored to respond to specific The new lending activity in the segment during the year is set out below: needs identified in the marketplace. 2017 £m 2016 £m The Group recognises that whilst the asset finance market Asset finance 220.0 144.3* is wide and deep, covering some £75.1 billion of outstanding balances at 30 September 2017 (2016: £70.7 billion) and £31.6 Motor finance 120.0 79.8 billion of advances in the year then ended, most of this funding is Development finance 48.9 9.1 provided by commodity lenders. The Group targets niches within Total 388.9 233.2 this market where its particular skill sets can be best applied. Examples of such niches are the financing of waste collection The outstanding loan balances in the segment are set out vehicles for local authorities, construction equipment, and below, analysed by business line. complex veterinary equipment. Outside the leasing market the division also has niche offerings including invoice factoring, 30 September 2017 £m 30 September 2016 £m development finance, and specialist lending. Asset finance 325.0 250.4 Access to customers is generally though specialist brokers, Motor finance 163.0 95.3 including the Group’s in-house brokerage, Premier Asset Finance (“Premier”), or equipment suppliers, and the markets in which The motor finance and development finance businesses the division operates tend to be fragmentary, with different continued to mature in the year, with their distribution networks brokers focused on different asset types. expanding and internal systems developments supporting their The common themes of these diverse business lines are a growth. The development finance business saw its first projects reliance on understanding and engaging with the customer successfully completed and paid down in the year and has seen
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significant investment in systems and specialist personnel. Across million (2016: £0.8 million), representing both the quality of all business lines growth has been carefully controlled with credit the lending and the Group’s success in realising security on quality and margins prioritised over expansion. defaulted cases. Average yields on the major product lines are set out below. Outlook Average Yield Average Balance The division seeks to develop its businesses, by increasing 2017 2016 2017 £m 2016 £m the reach of its existing offerings and adding further lines or Asset finance 9.35% 11.78% 311.1 247.6 specialisms, either organically or through M&A activity. It seeks Motor finance 5.13% 4.85% 125.7 71.9 to be responsive and flexible in addressing the market, but its UK focus means that it is exposed to a downturn in investment Yields in the segment have remained strong. While the amongst UK businesses, particularly one affecting its core figures for motor and development finance are affected by construction and broadcast sectors. their growth trajectories, the decline in the yield in asset The coming year will see development of new product finance reflects its strategic repositioning under the Group’s lines, including two already launched, aviation finance and ownership, to address the larger, higher quality but lower structured lending. yielding mid-range segment of the market. The structured lending team was established to provide senior Arrears on the segment’s business remain low with arrears debt to the UK non-bank lending market. The business will in the asset finance business at 0.97pct and motor finance at deploy loans of up to £25.0 million to help support “best-in- 0.56pct (2016: 0.82pct and 0.09pct respectively), comparable class” businesses working across consumer and commercial to those in the wider sector, with the FLA reporting average lending. The Group will work alongside clients to help fund arrears for asset finance at 0.60pct and car finance at 1.70pct their growth. Each transaction will be secured on underlying at 30 September 2017 (2016: 0.60pct and 1.50pct). assets and structured using established robust methodologies. It Development finance accounts are monitored on a case-by- is anticipated that each facility will generate attractive returns case basis by the Credit Risk function. At 30 September 2017, for shareholders, and present a low risk way of accessing familiar no accounts were in default and no defaults had been suffered and new markets. in the year. The average loan to gross development value Overall the division has a good platform on which to build and for the portfolio at the year end, a measure of security cover, increasing scale will enable a better return to be generated from was 60.6pct. its resources, control framework and investments in systems and Overall the charge for impairment in the segment was £0.1 aggregate new advances of over £0.5 billion expected in 2018. n
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www.leasingworld.co.uk VOL 11 I NO 122 2018 25 21261 HIT Leasing World Magazine Ad 180X125 JULY 16.indd 1 06/07/2016 14:11 DATA
UK NEW BUSINESS FINANCE OCTOBER 2017
Current month compared 12 months to
Month Yearly October 2017 October 2016 October 2017 October 2016 change % change %
Total comprising …. 2,672 2,489 7 31,771 30,228 5
By asset
Cars 911 841 8 9,833 9,265 6
Other asset finance 1,753 1,608 9 20,939 19,566 7
High value 7 40 -83 999 1,396 -28
By channel
Direct finance 1,395 1,316 6 15,585 14,937 4
Broker finance 505 443 14 5,785 5,097 13
Sales finance 765 690 11 9,403 8,797 7
High value 7 40 -83 999 1,396 -28
By product
Finance leasing 328 311 5 4,005 4,123 -3
Operating leasing 553 559 -1 7,057 6,689 6
Hire purchase 1,519 1,333 14 16,765 15,246 10
Note 1: Cumulative totals are subject to rounding differences. Source: The Finance & Leasing Association
UK NEW BUSINESS FINANCE (13 MONTHS)
New Business Finance Total Sales Finance Cars Broker Introductions
3500
3000
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2000
£’m
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0 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 July 17 Aug 17 Sep 17 Oct 17
26 VOL 11 I NO 122 2018 FLA New Business Finance Total Finance Leasing Operating Leasing www.leasingworld.co.uk Hire Purchase
3500 500 DATA
0 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 July 17 Aug 17 Sep 17 Oct 17
UK NEW BUSINESS FINANCE (13 MONTHS) BY PRODUCT
FLA New Business Finance Total Finance Leasing Operating Leasing Hire Purchase
3500
3000
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2000
£’m
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0 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 July 17 Aug 17 Sep 17 Oct 17
UK NEW BUSINESS FINANCE QUARTERLY COMPARISONS
New Business Finance Total Sales Finance Cars Other Asset Finance
Broker Introductions Finance Leasing Operating Leasing Hire Purchase Q1: JAN-MAR Q2: APR-JUN
8000 9000
7000 8000 7000 6000 6000 5000 5000 4000 4000 3000 3000 2000 2000 1000 1000
0 0 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2014 Q2 2015 Q2 2016 Q2 2017 Q2 Q3: JUL-SEP Q4: OCT-DEC
9000 8000
8000 7000 7000 6000 6000 5000 5000 4000 4000 3000 3000 2000 2000 1000 1000
0 0 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2013 Q4 2014 Q4 2015 Q4 2016 Q4
www.leasingworld.co.uk VOL 11 I NO 122 2018 27 CITY CHATTER
CITYCHATTER
coming through. Talking to other banks and leasing companies, The Welsh Dragon they all seem to be enjoying good levels of business. I also attended This City Chatter comes from the City of Cardiff. I was on our own Awards dinner at the Hilton Bankside and certainly all business in Bristol for a couple of days and stayed just across the participants were waxing lyrical about the current state of the Welsh border at the Marriott Hotel at Chepstow St Pierre. I our industry. Will the trend continue as the warning signs about had played golf there some years ago but as I had left my clubs our economy increase? behind I decided to spend the afternoon in Cardiff. Thinking of the past, I recently found an old article naming Although Cardiff was granted its Charter of Incorporation by the leasing (or related) companies that had listed on the London James I in 1616, it remained a small town until the early 19th Stock Exchange – it brought back memories of the “good old century. Its prominence as a major port for the transport of coal days” and makes interesting reading: Baltic Leasing, Broadcastle, following the arrival of industry in the region contributed to its Cattles, Combined Lease Finance, Sturla Holdings, Britannia, rise as a major city. IAF, Close Brothers, Singer & Friedlander, SHF, General Capital, “Cardiff” means “the fort on the river Taff.” The fort in Hitachi Capital, and (still listed) Private and Commercial. question was built by the Romans in AD 75 at the place where Of course Shawbrook has just recently delisted and I read Cardiff Castle now stands. that Aldermore are being bought for a billion pounds by South Since the 1980s, Cardiff has seen significant development. A African bank, FirstRand. new waterfront area at Cardiff Bay contains the Senedd building, home to the Welsh Assembly, and the Wales Millennium Centre arts complex. Current projects include the continuing Old Moore redevelopment of the Cardiff Bay and city centre areas, with new Moore sounded quite excited with a surprising invitation to lunch. initiatives such as the Cardiff International Sports Village, a BBC “I have found a new Wine Bar close to your office!” he exclaimed. drama village, and a new business district in the city centre. I had moved from my Cheapside office (close to Bow Wine Those of us from a different era will remember Hodge Finance, Vaults) just over a year ago and Moore was totally unimpressed which was founded in Cardiff by Sir Julian Hodge. It was a major by my attempts to drag him to a new venue. Literally 2 minutes hire purchase and leasing player in the 1970s and both Chartered walk from my office, we came to a bar named “James Cochran Trust and Bank of Wales were founded under his dynasty. EC3” located at 19 Bevis Marks. Moore was immediately greeted by Pierre, the manager, with a hug and the best seats in the Things about Cardiff you may not know house. I was then introduced to the owner Will Bryant. Opened Henry Morgan, better known as the Captain Morgan, who had in November 2016, it’s their second London venue, and both are his name attributed to rum, was born in Cardiff in the 1600s. named after a chef who cut his teeth at the renowned Michelin He went on to raid Spanish settlements two-star Ledbury restaurant in Notting Hill [one of and sail around the Caribbean. Next our editor’s favourites, apparently]. The time you have a spirit and mixer, restaurant boasts a superb range of think of him. Tapas dishes, and a busy lunchtime Cardiff isn’t known as the City of crowd. The food was delicious and Arcades for nothing. It has the highest Moore was given almost celebrity concentration of Victorian, Edwardian style attention. and contemporary indoor shopping After a number of dishes and several arcades out of all the British cities. bottles of Spanish Rioja, Moore called There are secret underground for “La Cuenta.” I was feeling very tunnels spanning the city centre. happy until Moore handed the bill Some say they connect military routes to me and said, “You have no idea from the city to other counties, others how much research I did to find suggest they connect old pubs while you this excellent establishment some probably run under the arcades. near to your office – the least you can do is pick up the bill!” Back in my London office things have been I have been a regular visitor since, hectic. At last, some of the capital expenditure and would truly recommend a visit. programmes that were deferred following Brexit are now Tell them Old Moore sent you!
28 VOL 11 I NO 122 2018 www.leasingworld.co.uk BACK IN THE OFFICE
>meanwhilebackintheoffice
No, it’s not going away!
Following on from our highlighting the Women in Finance process is based entirely on merit. The ‘best’ person gets the Charter, we present a picture of the current state of women job. Given the disproportionate number of men to women in on boards of FT250 companies, as presented in the Hampton- senior roles, business should question the soundness of their Alexander Review (November 2017) entitled FTSE Women meritocracies. I am pleased so many business leaders are asking Leaders – Improving Gender Balance in FTSE Leadership, and this question and taking action to improve.” sponsored by KPMG. Sir Philip Hampton, who chaired the We encourage the companies in our industry to take an action of review, writes in his Foreword: promoting at least one woman to their board in 2018, or if they do “There should be an expectation in business that the selection not have that authority, to lobby those in their companies that do.
FTSE 250 Executive Committee Number of responses: 2026
PERCENTAGE OF NEW APPOINTMENTS TO JUNE 2017 GOING TO MEN AND WOMEN AVERAGE SIZE OF EXECUTIVE COMMITTEE 9 79.5% % 240 TOTAL 16.6 NUMBER OF POSITIONS 1914 20.5% 62 TOTAL PERCENTAGE NUMBER OF WOMEN 318 OF WOMEN NUMBER OF NEW APPOINTMENTS TO JUNE 2017 GOING TO MEN AND WOMEN
FTSE 250 Direct Reports Number of responses: 2026
PERCENTAGE OF NEW APPOINTMENTS TO AVERAGE JUNE 2017 GOING TO MEN AND WOMEN SIZE OF DIRECT 52 REPORTS % 71.1% TOTAL 25.4 1518 NUMBER OF 10500 POSITIONS 28.9% 616 TOTAL PERCENTAGE NUMBER OF WOMEN 2666 OF WOMEN NUMBER OF NEW APPOINTMENTS TO JUNE 2017 GOING TO MEN AND WOMEN
www.leasingworld.co.ukFTSE 250 Combined Executive VOL 11 I NO 122 2018 29 Committee & Direct Reports Number of responses: 2026 MOVES
ON THE MOVE
n Arkle Finance has appointed Daniel years of experience in the asset finance Bailey (right) as managing director as it sector, having built up a wealth of consolidates a period of rapid growth. expertise during stints at D&D Leasing, His appointment comes as the funder GE Capital and Barclays. reports having lent more than £50 million Daniel Bailey commented, “Brian is in 2017, 90pct provided to SMEs. joining us at an exciting time. Arkle has Daniel is well known in the industry, enjoyed a year of record growth in which and has worked his way up through the our reputation for strong, client-centric ranks at Arkle, having previously served service has proved decisive. as a director and as an associate director “Brian has an unmatched pedigree in during a 12-year career at the company. the asset finance sector and an enviable He succeeds Stephen Bassett in the top contacts book, and he will play a crucial job, who left in December after piloting role in the next stage of our growth story. Arkle through a sustained growth phase “Arkle has made significant investment since 2009. into its systems and people in 2017, Since it launched two decades ago, giving us a platform for further progress Arkle has become one of Britain’s leading that will ensure we maintain our high providers of business equipment and service levels as we handle higher volumes consumer finance. Notable specialisms of business in 2018. include renewable energy asset finance, “Our goal now is to consolidate our marine finance and finance for educational One of Mr Bailey’s first actions as MD success in lending to businesses and institutions. It works with more than 150 has been to appoint Brian Jerome as an consumers, by leveraging our market- finance brokers across the UK. and has Associate Director with key responsibility leading expertise in marine, aviation lent to more than 5,500 customers. for sales. Brian Jerome has more than 30 and education sector finance too.”
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30 VOL 11 I NO 122 2018 www.leasingworld.co.uk EVENTS
LEASING EVENTS CALENDAR 2017 / 2018
Date Event Address Contact
Dec 5 FLA Christmas Drinks Haberdasher’s Hall [email protected]
Dec 6 AF-PA Christmas Drinks The Marylebone Sports Bar [email protected]
Dec 7 Blockers Lunch (SOLD OUT) Hispanias [email protected]
D&D Leasing Christmas Charity Reception Dec 14 The In and Out Club, Piccadilly Bill Dost [email protected] (By Invitation)
Dec 15 AF-PA Leasing Charity Lunch (SOLD OUT) IOD Pall Mall [email protected]
2018
Feb 27 FLA Annual Dinner Grosvenor House, Park Lane [email protected]
May 15 2018 FLA Spring Drinks Reception The Kings Fund, London [email protected]
Leasing Industry Great British Pub Quiz 2018 May 17 The Counting House, Cornhill [email protected] (By Invitation)
June 20 NACFB’s Commercial Finance Expo The NEC, Birmingham http://www.commercialfinanceexpo.co.uk
Oct 30 Leasing World Awards Dinner London Hilton Bankside [email protected]
Dec 4 2018 FLA Christmas Drinks Reception Royal College of Physicians [email protected]
www.leasingworld.co.uk VOL 11 I NO 122 2018 31 Asset finance with a bright perspective
Assets we finance include: prestige and classic cars • light & heavy commercial vehicles • bus & coach • trailers • municipal vehicles construction equipment • agricultural equipment • waste recycling equipment • CNC machinery • injection moulding machines
Call us today 020 7190 5555 www.utbank.co.uk we understand specialist banking