ASSET FINANCE 50 March 2016

Sponsored by Published by CHP CONSULTING CHP Consulting has been delivering systems and user interface, easy deployment and transactional consultancy services to the global asset finance industry transparency. currently serving since 1990. We know that no one project is like another. Gaining a 5 of the top 10 Our best practice methodologies and specialised knowledge competitive advantage in the modern marketplace demands of asset finance mean that we deliver the largest system fresh innovation every time. We work to understand in the AF50 implementations and most complex business change your business completely, then align our implementation projects. With an excellent delivery history over our 26 years methodology with your business practices. We work with you in the industry, CHP’s track record is unrivalled. to shape the solution that fills all the gaps. ALFA Systems, our class-leading software solution, is Our people are only the most talented graduates and used by many of the world’s top equipment finance and professionals. All our consultants operate in all areas of the automotive finance companies for full-lifecycle management business, from preliminary client contact and requirements of portfolios, ranging from the most complex structured definition right through to manning the support desk. This loans to high-volume flow transactions. ALFA is a fully ensures all our staff develop and maintain excellent all-round scalable, enterprise-wide solution that provides end-to-end expertise. integration and workflow automation. Setting the standard With over 40 clients in 18 countries, CHP has offices in for operational excellence, ALFA makes next-generation London, Paris, Detroit, and Sydney. For more information, technologies available today; with an intuitive, web-based visit chpconsulting.com.

ACKNOWLEDGEMENTS Data and table compilation: Julian Rose, founder, Asset Finance Policy Viewpoint contributors: George Ashworth, Director of SME, Virgin Money; John Bennett, independent leasing consultant; Carl D’Ammassa, Group Managing Director – Business Finance at Aldermore; Mike Randall, Chief Executive Officer, Close Brothers Asset Finance; Lindsay Town, Chief Executive, IAA-Advisory; Gavin Wraith-Carter, General Manager, Hitachi Capital Business Finance.

ASSET FINANCE INTERNATIONAL The Definitive Platform for Asset Finance Publisher: Edward Peck 39 Manor Way, Editor: Brian Rogerson London SE3 9XG ALFA Systems from CHP Consulting Author: Nigel Carn UNITED KINGDOM Asset Finance International Ltd. Telephone: +44 (0) 207 617 7830 http://www.assetfinanceinternational.com ALFA Systems is the software platform of choice for © Asset Finance International, 2016, All rights reserved No part of this publication may be reproduced or used in any form leading asset finance providers worldwide. or by any means – graphic; electronic; or mechanical, including photocopying, recording, taping or information storage and retrieval systems – without the written permission from the publishers. ALFA is 100% web-based, features full end-to-end support, and is able to handle the most demanding of operations.

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Contents Foreword

Foreword 5 Welcome to Asset Finance 50. It’s my great pleasure to sponsor this important piece of research from Asset Finance International Introduction 7 and Asset Finance Policy, which not only fills a key informational gap but also represents an opportunity to celebrate the Who’s in and who’s out 8 importance of our industry to the UK economy. How we measure firm size 8 Alongside the all-important rankings, we are given some insight Limitations 9 and context by a number of the leading lights of the industry – such as Gavin Wraith-Carter, Lindsay Town and John Bennett – Asset Finance 50 (Banking groups version) 10 as well as some revealing analysis from the publishers. Key results (Banking groups version) 12 We are all keen to promote asset finance, both within our own organisations and to external investors, while those outside the Top 10Competitive lessors (Bankingasset finance groups operators version) are 12 Competitive asset finance operators are constantly innovating, delivering more value industry want to better understand the market and its importance. constantly innovating, delivering more value Viewpointto customers The andcontinuing using fewer dominance resources. of the major banks 13 By setting out who the key players are, Asset Finance 50 helps to customers and using fewer resources. everyone to do just that. Achieve More ‘Non-legacy’CHP’s ALFA leasing Systems enables forward-thinking 15 Achieve More CHP’s ALFA Systems enables forward-thinking businesses to meet and exceed the most businesses to meet and exceed the most with ALFA Systems. Assetdemanding Finance of challenges. 50 (Bank subsidiaries version) 16 with ALFA Systems. demanding of challenges.

Key results (Bank subsidiaries version) 18 THE RIGHT FIRST TIME SERIES THE RIGHT FIRST TIME SERIES How to Transform an Asset Finance Company ThroughTop Systems 10 lessors Implementation (Bank subsidiaries version) 18 How to Transform an Asset Finance Company Through Systems Implementation Download the series today from chpconsulting.com/rft Download the series today from chpconsulting.com/rft VIEWPOINT Growth sectors and individual success stories 19

Fleet lessors 20 Top five fleet operators 21 Manufacturer lessors 21

Top five manufacturer lessors 21 ANDREW DENTON Chief Operating Officer VIEWPOINT Changing industry dynamics 22 CHP Consulting

Breakdown of the market by type of lender 24 AF50 Banks vs Non-Banks 24 Ten at the top 24 ‘Up and coming’ firms likely to be in the table next year 24

Viewpoint Market evolution and the future composition of the AF50 25

Your input 26

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Competitive asset finance operators are constantly innovating, delivering more value Introduction to customers and using fewer resources.

Achieve More CHP’s ALFA Systems enables forward-thinking businesses to meet and exceed the most Welcome to the first edition of the Asset Finance 50 (AF50) with ALFA Systems. demanding of challenges. rankings survey published by Asset Finance Policy and Asset Finance International. THE RIGHT FIRST TIME SERIES The AF50 is intended to become the UK’s primary annual survey How to Transform an Asset Finance Company Through Systems Implementation of business equipment and fleet lessors. Download the series today from chpconsulting.com/rft The survey is based on audited and publicly available accounts to ensure it is compliant with competition law and regulations. We have used the latest information filed online as at February 2016. As far as we know this is the first reliable asset finance industry ranking survey since the 1997 publication, Equipment Leasing in the UK. It is important to use the data with care. There are inevitably limitations to the survey and we list all those we are aware of. We will update the tables online if any errors or omissions are pointed out to us.

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Who’s in and who’s out Limitations We aim to include the top 50 UK business equipment and fleet Considerable effort has been made to ensure the accuracy of the lessors, based on their accounts that are filed at Companies rankings, but some problems are inevitable, particularly in the first House. Some firms are missing: edition. Possible issues include: llNew entrants may not yet have filed any accounts (see ‘Up and llDifferent lessors have different accounting year-ends and coming’ box). some may be late in filing data at Companies House. For most lessors, this edition is based on the year to December 2014. llSome automotive lessors (for example Ford Credit, Volkswagen Financial Services) show combined figures for consumer and However, the year-ends used actually range from December business finance, so we’ve been unable to include them as we 2013 (in one case only) to March 2015. have no basis for making a simple estimate. llLessors reporting under international accounting standards show the discounted value of their finance lease receivables. llSome lessors (for example HP and Dell) don’t publish separate UK accounts for their financial services arms. Those reporting under UK rules show the undiscounted value. We have not attempted to adjust for this or for other differences llWe may also have completely missed lessors unintentionally between IFRS and UK GAAP. andCompetitive we’d beasset happy finance tooperators hear are from such firms and add them to Competitive asset finance operators are theconstantly tables. innovating, delivering more value llSome lessors might have securitised parts of their leasing constantly innovating, delivering more value to customers and using fewer resources. books, possibly resulting in the receivables no longer to customers and using fewer resources. appearing on their balance sheet (although we are not aware Achieve More CHP’s ALFA Systems enables forward-thinking Achieve More CHP’s ALFA Systems enables forward-thinking Where there is no operating lease Howbusinesses we measure to meet and exceed firm the most size of any specific examples). businesses to meet and exceed the most demanding of challenges. demanding of challenges. with ALFA Systems. llLessors may report some non-UK business in their accounts. with ALFA Systems. disclosure, we show The rankings are based on the lessor’s net investment in business We have looked out for this and have sought to use data only equipment leasing. It includes all asset finance agreements where THE RIGHT FIRST TIME SERIES for the UK market. THE RIGHT FIRST TIME SERIES the asset is owned by the lessor during the life of the agreement. 50%How to Transform an Asset Finance Company Through Systems Implementation How to Transform an Asset Finance Company Through Systems Implementation Download the series today from chpconsulting.com/rft llSome lessors, particularly international banks, may operate Download the series today from chpconsulting.com/rft of the balance sheet carrying For finance leases and hire purchase, we show the present branches in the UK but write the business in other countries. value of total receivables less unearned (deferred) income and amount of assets used for The table will, therefore, understand their importance in the UK impairments. operating leases as a proxy for market. the minimum contracted future For operating leases, we show the undiscounted minimum A major part of our research effort has been the identification lease payments contracted future lease payments. Where there is no operating of the appropriate reporting entity. Some leasing firms are lease disclosure, we show 50% of the balance sheet carrying parts of groups with many entities and a mixture of ownership amount of assets used for operating leases as a proxy for the arrangements. We have carefully reviewed group structures minimum contracted future lease payments (the notes to the to identify the most appropriate sets of accounts to use. There rankings show where this method has been used). could still be instances where the figures shown do not include Several banks have leasing business in multiple parts of their all parts of the lessor’s UK businesses, for example where owned groups, including wholly or part-owned specialist leasing businesses are not consolidated at the UK parent company level. subsidiaries or divisions. In our main table we show the total leasing business of the banking group. We then break the group figures down in the further analysis.

Asset Finance 50 (Banking groups version)

2013/14 2014/15 Rank Name Year-end 2013/14 2014/15 Change Notes Rank Name Year-end (£ 000) (£ 000) Change Notes (£ 000) (£ 000) 1 Royal Bank of Scotland 31/12/2014 11,401,000 9,473,000 -17% 26 MAN 31/12/2014 304,000 315,000 4% 2 Barclays Bank 31/12/2014 5,827,000 5,485,000 -6% 27 Deutsche Leasing 30/09/2015 280,000 282,000 1% 3 HSBC Bank 31/12/2014 4,883,000 5,475,000 12% 28 CIT 31/12/2014 230,000 252,000 10% 4 Lloyds Bank 31/12/2014 7,009,000 5,284,000 -25% 29 Zenith Leasedrive 31/03/2015 210,000 242,000 15% OL 5 Close Brothers 31/07/2015 1,718,000 1,869,000 9% 30 Arnold Clark 31/12/2014 215,000 232,000 8% OL 6 LeasePlan UK 31/12/2014 1,598,000 1,709,000 7% 31 Ryder 31/12/2014 228,000 226,000 -1% OL 7 Hitachi Capital 31/03/2015 855,500 1,098,000 28% 32 Dawson 31/12/2014 210,000 219,000 4% OL 8 Aldermore Bank 31/12/2014 720,000 1,046,100 45% 33 Scania 31/12/2014 224,000 213,000 -5% OL 9 BNP Paribas 31/12/2014 988,000 1,003,000 2% Excludes Arval 34 Caterpillar 31/12/2014 212,000 212,000 0% OL Bank of London and 10 Porterbrook 31/12/2014 747,000Competitive asset855,000 finance operators14% are 35 31/12/2014 207,000 187,000 -10% Competitive asset finance operators are constantly innovating, delivering more value The Middle East constantly innovating, delivering more value 11 De Lage Landen 31/12/2014 750,000to customers and852,000 using fewer resources.14% Assumed 5% stock finance 36 Shawbrook 31/12/2014 148,000 179,200 21% to customers and using fewer resources. 12 Alphabet 31/12/2014 738,000 817,000 11% Achieve More CHP’s ALFA Systems enables forward-thinking 37 IBM 31/12/2014 237,000 171,000 -28% Achieve More CHP’s ALFA Systems enables forward-thinking 13 Siemens 30/09/2014 730,000businesses to meet799,000 and exceed the most9% 38 Five Arrows 31/03/2014 142,000 156,220 10% businesses to meet and exceed the most demanding of challenges. demanding of challenges. with14 ALFA Systems. with ALFA Systems. Santander 31/12/2014 733,000 787,000 7% 39 Grenke 31/12/2014 102,000 122,000 20% 15 Angel Trains 31/12/2014 680,000 780,000 15% 40 NIIB 31/12/2014 98,000 108,000 10% Assumed 50% business lending THE RIGHT FIRST TIME SERIES THE RIGHT FIRST TIME SERIES 16 ING Lease 31/12/2014 1,510,000 708,000 -53% How to Transform an Asset Finance Company Through Systems Implementation 41 AIB 31/12/2014 60,000 98,000 63% How to Transform an Asset Finance Company Through Systems Implementation 17Download the series today from chpconsulting.com/rft Download the series today from chpconsulting.com/rft Investec 31/03/2015 576,000 666,000 16% 42 Ricoh 31/03/2015 91,000 92,000 1% 8 Arval 31/12/2014 528,000 658,000 25% OL 43 CHG-Meridian 31/12/2014 80,000 90,000 13% 19 Société Générale 31/12/2014 541,000 627,000 16% 44 Liberty 31/12/2014 53,000 72,000 36% 20 ALD 31/12/2014 539,000 604,000 12% 45 Iveco 31/12/2014 73,000 63,000 -14% 21 European Rail Finance 31/12/2014 163,000 583,000 258% 2014 includes Eversholt 46 MAN 31/03/2015 44,000 56,000 27% 22 PACCAR 31/12/2014 477,000 464,000 -3% OL 47 Arkle 31/12/2014 52,000 55,000 6% 23 SMBC 31/03/2015 279,000 374,000 34% Includes Mithras Leasing 48 Pitney Bowes 31/12/2014 59,000 53,000 -10% 24 GE Capital 31/12/2014 295,500 347,000 17% OL 49 Canon 31/12/2014 44,000 39,000 -11% 25 BAL Global Finance 31/12/2014 319,000 323,000 1% Assumed 66% lease investments in UK 50 Private & Commercial 31/03/2015 26,000 28,000 8% OL: No operating lease disclosure found. Assumed operating lease receivables equal to 50% of net book value of assets on operating lease.

ALFA Systems is the software platform of choice currently serving for leading asset finance providers worldwide. ALFA is 100% web-based, features full end-to-end support, and is able to handle the most demanding of operations. 5 of the top 10 Whatever type of equipment you finance, ALFA will take your business to the next level.

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The big four UK banks dominate Key results (Banking groups version) VIEWPOINT The continuing dominance of the major banks the top of the table, with around The total net investment in leasing for the top 50 firms is £46.3 billion, down from £47.9 billion in the previous year, as the large Asset Finance International asked a select group of asset finance industry professionals for their views banks continue to run-off their legacy big-ticket leasing books. The 56% of certain trends highlighted by the AF50 research. The first topic was why the banks have managed to largest player, RBS, accounts for 21% of the market, and the top retain such a large presence in the overall market. of the total volume of the AF50 10 account for 72% of the market. in 2014/15 Several factors enable the banks today. Although the effective transactional tools On a nominal (undiscounted) basis, total net investment in leasing major banks to maintain their position of the banks is being at breaking into competitor is likely to be around £55 billion. This is based on an average dominance, according to the challenged, they will retain a banked relationships and discount rate of 5% and constant annual cashflows for the experts. The first is liquidity, as strong presence in the market banks do not wish to dissipate industry portfolio. The equivalent figure reported by the Finance & independent leasing consultant for the foreseeable future.” their ownership/control of Leasing Association is approximately £57 billion. John Bennett suggests: “The distribution. If they do, they know The big four UK banks dominate the top of the table, with around AF50 survey shows that seven “In today’s environment they will not get it back.” 56% of the total volume of the AF50 in 2014/15. This is down from of the top 10 lessors are bank where capital is not as readily Lindsay Town, Chief Executive 61% of the total in 2013/14. It reflects the banks running down owned. Leaseurope’s latest available as it was pre-2008, of IAA-Advisory agrees and, their UKCompetitive structured asset finance finance operators books are including high value assets constantly innovating, delivering more value ranking survey (2014) also banks continue to enjoy much although observing the major such as ships and aircraft. to customers and using fewer resources. records seven of the top 10 greater access to capital than banks’ dominance is waning, lessors in Europe as bank CHP’s ALFA Systems enables forward-thinking independent or captive lessors. also sees distribution as Achieve More Top 10 lessors (Banking groups version) owned. businesses to meet and exceed the most I expect bank-owned lessors important: “The core reasons with ALFA Systems. demanding of challenges. “In today’s environment are in my view to do with the Rank 2013/14 2014/15 will continue to dominate the where capital is not as readily history of the UK industry. industry for many years.” THE RIGHT FIRST TIME SERIES 1 Royal Bank of Scotland Royal Bank of Scotland available as it was pre-2008, There was minimal incentive How to Transform an Asset Finance Company Through Systems Implementation banks continue to enjoy much He stresses the role of or encouragement to distribute Download the series today from chpconsulting.com/rft 2 Lloyds Bank PLC Barclays Bank greater access to capital than distribution for banks: transactions so the industry 3 Barclays Bank PLC HSBC Bank independent or captive lessors. “Nowadays, with capital had a strong ‘take and hold’ I expect bank-owned lessors efficiency at the forefront of mentality, reinforced by the 4 HSBC Bank PLC Lloyds Bank will continue to dominate the the minds of banks, asset- early period tax structures that 5 LeasePlan UK Limited Close Brothers industry for many years.” based lending in the form of made distribution, whether George Ashworth, Director of HP and leasing has become by sale, securitisation or risk 6 Close Brothers Group PLC LeasePlan UK SME at Virgin Money, provides an increasingly important part participation, especially difficult. of a bank’s overall lending Whilst the tax aspects have 7 ING Lease (UK) Ltd Hitachi Capital some background: “Historically, the banks acquired their asset proposition. However, although faded considerably, the take and 8 BNP Paribas Leasing Solutions Ltd Aldermore Bank finance interests as a result of the capital efficiency is important, hold mentality persisted. there are some authorised 9 Hitachi Capital (UK) PLC BNP Paribas secondary banking crisis in the I doubt that this will continue in early 1970s. The banks provided institutions that would, but perpetuity and we have seen 10 De Lage Landen Leasing Ltd Porterbrook much needed liquidity which in for distribution, not remain signs of the ‘no distribution’ turn fuelled the growth of the UK in the industry. Regardless approach shifting, led by the leasing industry throughout the of whether a bank enjoys a aircraft and car lessors and some There were several moves in the top 10 in the last year. Lloyds 70s and 80s. Dominant market standardised or approved IRB forward thinking ‘general’ lessors.” dropped two places to become the smallest of the four large positions were built during this [internal rating based] approach, banks. Broker channel funders Close, Hitachi and Aldermore all These changes are noted by time and it is these historical distribution is the key driver. climbed, while vendor-channel specialists BNP Paribas and De Mike Randall, CEO of Close positions that account largely for Asset finance products have Lage Landen dropped. ING, in run-off, dropped out of the top 10. Brothers Asset Finance, the dominance of the commercial proven themselves to be very

from The definitive platform for asset finance. CHP Consulting www.chpconsulting.com Powerful systems, latest technology, assured delivery. 14 ASSET FINANCE 50 MARCH 2016 ASSET FINANCE 50 MARCH 2016 15 although he also sees the resources: “We’ve seen a host of ‘Non-legacy’ leasing attraction of SME finance to new players come into the market the banks: “It is clear from in the last few years as banks and Given that most high value assets are now financed overseas it these results that SMEs are still non-banks look to benefit from seems useful to consider what the index would look like for only mainly dependent on traditional the unusually low interest rate ‘non-legacy’ bank business leasing (i.e. excluding the high value bank financing, rather than environment. Our industry rightly structured finance legacy books of the large banks). those of long-standing asset has to comply with a whole host To attempt this, we have reviewed the banks’ subsidiary operations finance companies. This is not of new regulations, which is GAVIN WRAITH-CARTER and shown these rather than the banking group figures in the Hitachi Capital Business Finance surprising, even following the leading to increased costs and banking subsidiaries version of the AF50. We have not, however, running down of the banks’ consolidation. Larger institutions excluded other big ticket leasing, such as the rolling stock UK structured finance books are better placed to invest in “This historic status quo companies, as these are not in any sense ‘legacy’. including high-value assets such technology and programmes is changing and is ably Subsidiaries included in this table include: as ships and aircraft. that help manage these new demonstrated in the AF50 “The financing strands of the obligations. That is a key factor in by the arrival of new names, Bank Subsidiaries why banks remain dominant in main banks have continued together with publicly cited Barclays Barclays Mercantile Business Finance to perceive the SME market to the market.” Competitive asset finance operators are debt market deals and private HSBC HSBC Equipment Finance constantly innovating, delivering more value be highly profitable, with the Finally, Gavin Wraith-Carter, equity/hedge fund activity.” to customers and using fewer resources. strengthening of the economy General Manager of Hitachi Lloyds Lex Autolease being one of the reasons behind Capital Business Finance, Lloyds Bank Commercial Finance Achieve More CHP’s ALFA Systems enables forward-thinking businesses to meet and exceed the most the banks starting to lend to the reminds us of the importance Royal Bank of Scotland Lombard North Central with ALFA Systems. demanding of challenges. SME community again.” of being the established source JCB Finance Lindsay Town adds: “The of finance: “I think that banks retain a large presence in the THE RIGHT FIRST TIME SERIES industry has also remained in A significant caveat over the banking subsidiaries version is that How to Transform an Asset Finance Company Through Systems Implementation the province of larger banking leasing industry as there’s the the large banks may have some active UK leasing activities within Download the series today from chpconsulting.com/rft groups as there has historically usual lethargy when it comes the core bank and not in their leasing subsidiaries. These may be been very little external interest to finance – it’s much easier ‘mainstream’ SME leasing activities, or continuing high value deals from investors of all flavours in the to go back to your bank than written in the UK. try to think of other sources of leasing world as a medium for An example of this issue is that following a change in policy, funding. They are a business’s investment. However, this historic Lloyds Bank now reports most of its business equipment leasing first port of call for a number of status quo is changing and is business through the core bank and not through its asset finance different financial transactions, ably demonstrated in the AF50 subsidiaries. by the arrival of new names, so they are naturally the initial together with publicly cited debt point for many questions market deals and private equity/ about asset acquisition. 7 out of the hedge fund activity.” The number of different products available and TOP 10 New entrants and the inevitable options mean that for post-2008 structural changes are a solid business, the highlighted by Carl D’Ammassa, answer will tend to be Group Managing Director – a yes, so there’s no Business Finance at Aldermore. requirement to shop lessors are However, he points out that the around.” banks still have an advantage bank owned when it comes to investment

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Asset Finance 50 (Bank subsidiaries version)

2013/14 2014/15 Rank Name Year-end 2013/14 2014/15 Change Notes Rank Name Year-end (£ 000) (£ 000) Change Notes (£ 000) (£ 000) 1 Lombard 31/12/2014 3,996,000 4,209,000 5% 26 MAN 31/12/2014 304,000 315,000 4% 2 Close Brothers 30/07/2015 1,718,000 1,869,000 9% 27 Deutsche Leasing 30/09/2015 280,000 282,000 1% 3 LeasePlan UK 31/12/2014 1,598,000 1,709,000 7% 28 CIT 31/12/2014 230,000 252,000 10% 4 HSBC 31/12/2014 1,550,000 1,611,000 4% 29 Zenith Leasedrive 31/03/2015 210,000 242,000 15% OL 5 Barclays 31/12/2014 1,267,000 1,215,000 -4% 30 Arnold Clark 31/12/2014 215,000 232,000 8% OL 6 Hitachi Capital 31/03/2015 855,500 1,098,000 28% 31 Ryder 31/12/2014 228,000 226,000 -1% OL 7 Aldermore Bank 31/12/2014 720,000 1,046,100 45% 32 Dawson 31/12/2014 210,000 219,000 4% OL 8 BNP Paribas 31/12/2014 988,000 1,003,000 2% Excludes Arval 33 Scania 31/12/2014 224,000 213,000 -5% OL 9 Porterbrook 31/12/2014 747,000 855,000 14% 34 Caterpillar 31/12/2014 212,000 212,000 0% OL Bank of London and 10 De Lage Landen 31/12/2014 750,000Competitive asset852,000 finance operators14% are Assumed 5% stock finance 35 31/12/2014 207,000 187,000 -10% Competitive asset finance operators are constantly innovating, delivering more value The Middle East constantly innovating, delivering more value 11 Lex 31/12/2014 744,690to customers and847,240 using fewer resources.14% 36 JCB Finance 30/09/2014 154,000 183,000 19% to customers and using fewer resources. 12 Alphabet 31/12/2014 738,000 817,000 11% Achieve More CHP’s ALFA Systems enables forward-thinking 37 Shawbrook 31/12/2014 148,000 179,200 21% Achieve More CHP’s ALFA Systems enables forward-thinking 13 Siemens 30/09/2014 730,000businesses to meet799,000 and exceed the most9% 38 IBM 31/12/2014 237,000 171,000 -28% businesses to meet and exceed the most demanding of challenges. demanding of challenges. with14 ALFA Systems. with ALFA Systems. Santander 31/12/2014 733,000 787,000 7% 39 Five Arrows 31/03/2014 142,000 156,220 10% 15 Angel Trains 31/12/2014 680,000 780,000 15% 40 Lloyds Bank 31/12/2014 255,000 126,000 -51% THE RIGHT FIRST TIME SERIES THE RIGHT FIRST TIME SERIES 16 ING Lease 31/12/2014 1,510,000 708,000 -53% How to Transform an Asset Finance Company Through Systems Implementation 41 Grenke 31/12/2014 102,000 122,000 20% How to Transform an Asset Finance Company Through Systems Implementation 17Download the series today from chpconsulting.com/rft Download the series today from chpconsulting.com/rft Investec 31/03/2015 576,000 666,000 16% 42 NIIB 31/12/2014 98,000 108,000 10% Assumed 50% business lending 8 Arval 31/12/2014 528,000 658,000 25% OL 43 AIB 31/12/2014 60,000 98,000 63% 19 Société Générale 31/12/2014 541,000 627,000 16% 44 Ricoh 31/03/2015 91,000 92,000 1% 20 ALD 31/12/2014 539,000 604,000 12% 45 CHG-Meridian 31/12/2014 80,000 90,000 13% 21 European Rail Finance 31/12/2014 163,000 583,000 258% 2014 includes Eversholt 46 Liberty 31/12/2014 53,000 72,000 36% 22 PACCAR 31/12/2014 477,000 464,000 -3% OL 47 Iveco 31/12/2014 73,000 63,000 -14% 23 SMBC 31/03/2015 279,000 374,000 34% Includes Mithras Leasing 48 MAN 31/03/2015 44,000 56,000 27% 24 GE Capital 31/12/2014 295,000 347,000 18% OL 49 Arkle 31/12/2014 52,000 55,000 6% 25 BAL Global Finance 31/12/2014 319,000 323,000 1% Assumed 66% lease investments in UK 50 Pitney Bowes 31/12/2014 59,000 53,000 -10% OL: No operating lease disclosure found. Assumed operating lease receivables equal to 50% of net book value of assets on operating lease.

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currently serving 5 of thein the top AF50 10

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The results suggest that the Key results (Bank subsidiaries version) VIEWPOINT Growth sectors and individual success stories market for ‘non-legacy’ leasing In our second version of the table, which might better represent in the UK is considerably less the ‘non-legacy’ business leasing market, the total investment in The discussion group of of innovation going on in the concentrated than that for leasing for the top 50 firms is £28.3 billion, up 6% from £26.6 industry experts considered the unsecured lending space which the total market including the billion in the previous year. indications in the AF50 research traditional lenders need to learn banks’ legacy books The largest player, Lombard, accounts for 15% of the market, and of which asset finance sectors from and compete with. the top 10 account for 54% of the market. are thriving, and how this is “The government has also been Even with the significant constraints on this analysis, the results reflected in individual company giving the construction industry suggest that the market for ‘non-legacy’ leasing in the UK is rankings. a lot of attention and has considerably less concentrated than that for the total market The consensus is that the JOHN BENNETT committed to extensive house- including the banks’ legacy books. market has been performing building projects and supporting well and looks in good health first-time buyers. This looks set A comparison of the top 10 firms for this version shows more “Finance for technology and clearly the rise of broker specialists Close Brothers, Aldermore and across most sectors. There to continue, so I expect to see IT firms has been outpacing Hitachi in the last year. are, as always, exceptions, as demand from the construction Competitive asset finance operators are independent consultant John other areas and these tech- sector remain strong.” constantly innovating, delivering more value to customers and using fewer resources. Bennett points out: “FLA data savvy companies don’t expect Nonetheless, despite the recent Top 10 lessors (Bank subsidiaries version) shows that IT has been the top to interact with lenders in a benign conditions allowing most Achieve More CHP’s ALFA Systems enables forward-thinking asset growth sector, up 38% for businesses to meet and exceed the most traditional way. ” sectors to perform well, as Virgin Rank 2013/14 2014/15 the year to October 2015. This with ALFA Systems. demanding of challenges. Money’s George Ashworth 1 makes IBM's 28% drop in net Lombard Lombard record of 1.4m vehicles. This states, “The table shows the investment in the survey rather large commercial banks that THE RIGHT FIRST TIME SERIES 2 LeasePlan UK Close Brothers surprising!” will be reflected in AF50’s net How to Transform an Asset Finance Company Through Systems Implementation investment figures both for generally deploy a direct Download the series today from chpconsulting.com/rft 3 HSBC LeasePlan UK He also notes: “According to larger vehicle lessors such as distribution model sitting at the 4 Close Brothers HSBC FLA new business data, the only LeasePlan, and also for those top. This reflects the historical asset category that has declined position that the large UK 5 ING Lease Barclays funders that are supporting the recently is business equipment, sector by providing wholesale commercial banks have enjoyed. 6 Barclays Hitachi Capital down 2% for the year to October back-to-back facilities to fleet The negative growth of balance 2015. This is clearly reflected in sheet assets on balance in this 7 BNP Paribas Aldermore Bank lessors. The positive impact the negative or minimal growth will be widespread across the sector reflects a relationship-led 8 Hitachi Capital BNP Paribas trends for all three business Top 50.” strategy and I suspect some 9 De Lage Landen Porterbrook equipment captives in the top degree of substitution effect 50 − Canon, Pitney Bowes and Technology and construction between asset-based lending 10 Porterbrook De Lage Landen Ricoh. BNP Paribas, as a vendor are stand-out sectors for and bank debt.” Aldermore’s Carl D’Ammassa: specialist in this sector, has Regarding other sectors and also probably suffered from the “Finance for technology and IT firms has been outpacing players, he adds: “Broker volume downturn in business models in the shape primarily of equipment financing.” other areas and these tech- savvy companies don’t expect Hitachi and Aldermore appear to However, Bennett finds better to interact with lenders in a have done relatively well in terms news in the fleet sector: “New traditional way. They want fast, of volume. The main vendor car registrations for fleet and efficient and convenient digital distribution models are also well business users were up 10% communications. There is a lot featured.” in 2015, reaching an all-time

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Representing one of the solutions being tailored to meet Top five fleet operators aforementioned, Hitachi individual business needs Capital’s Gavin Wraith-Carter across various sectors, it is fair to Rank 2013/14 2014/15 comments: “It’s no surprise that say the majority of asset finance the banks are at the top – they sectors continued to thrive in 1 LeasePlan LeasePlan have the most diverse mix of 2015. 2 Lex Lex industry sectors that they will “Close Brothers Asset Finance fund and their sheer scale and has grown steadily and is MIKE RANDALL 3 Alphabet Alphabet historic activity means that they Close Brothers Asset Finance lending more than ever to 4 ALD Arval will be difficult to shift. SMEs across the UK and “Yet, it’s not all doom and throughout key industries such “With a range of flexible finance 5 Arval ALD gloom. Our British Business as transport, print, construction, solutions being tailored to meet Barometer research has shown manufacturing and renewable individual business needs across that a consistent percentage of energy. As a result of this, we various sectors, it is fair to say Manufacturer lessors SMEs would like their financial continue to provide a lifeline to the majority of asset finance provider to have specialist sector many businessesCompetitive asset that finance simply operators are We show here the largest manufacturer-owned (so-called ‘captive’) Competitive asset finance operators are constantly innovating, delivering more valuesectors continued to thrive in constantly innovating, delivering more value knowledge so that they can offer couldn’t access other traditional lessors, based on the value of lease receivables. to customers and using fewer resources. 2015.” to customers and using fewer resources. them tailored financial solutions forms of finance.” The AF50 excludes the captive motor companies as they do not forAchieve their business, More over one in CHP’s ALFA Systems enables forward-thinking Achieve More CHP’s ALFA Systems enables forward-thinking For IAA-Advisory'sbusinesses to meet Lindsay and exceed the most split business and consumer finance. We are also missing Hewlett businesses to meet and exceed the most five (23%) in Q4 2015 and 24% become more prominent. The with ALFA Systems. Town, thedemanding challenger of challenges. banks Packard and Dell, both of which might be assumed to be of a with ALFA Systems. demanding of challenges. in Q4 2014. Those companies shift in the league tables will are making a mark: “In a model similar scale to IBM. PACCAR’s operating lease outstandings are following a similar theme of a that avoids the high operational be amplified by the drive of the diversificationTHE RIGHT FIRST of TIMEsectors SERIES are established clearing banks to estimated based on 50% of the balance sheet carrying amount of THE RIGHT FIRST TIME SERIES How to Transform an Asset Finance Company Throughburden Systems of running Implementation a full service How to Transform an Asset Finance Company Through Systems Implementation goingDownload to see the series their today positions from chpconsulting.com/rft clearing bank they seek focus on core strategies and assets used for operating leases. Download the series today from chpconsulting.com/rft remain stable, or rise, but it’s we are seeing that a strong profitable entry products to the Any comparison of manufacturer lessors is difficult as each firm those that are singularly focusing battleground of SMEs. Asset focus on asset finance is not on the more troubled areas such necessarily at the core of such has different policies on what it will handle (e.g. own equipment finance in the widest sense is a only, own equipment supplied together with other manufacturers’ as agriculture which could see relatively obvious single product strategy. I see potential for this equipment, or any equipment) and how it will finance it (e.g. all drops of a few positions.” and can lead to cross-sale trend to fall away, but the core There is a real advantage of potential, if managed correctly. banks will need to convince own-finance or mix of own-finance and third-party). Such factors asset finance specialists offering We have already witnessed the themselves of the real strategic can also change from year to year. targeted solutions, says Close rise of the likes of Aldermore fit of asset finance, along with Brothers’ Mike Randall: “With and Shawbrook; I would be many other products in their Top five manufacturer lessors a range of flexible finance surprised if we did not see them once sprawling armoury.” Rank 2013/14 2014/15 Fleet lessors 1 PACCAR PACCAR We show here the largest fleet lessors, based on the value of lease 2 MAN MAN receivables where this is shown in notes to the accounts. For Arval, we show 50% of the balance sheet carrying amount of assets used 3 IBM Scania for operating leases as a proxy for the minimum contracted future 4 Scania Caterpillar lease payments. Note that the AF50 includes all leased assets of these operators, including commercial vehicles as well as cars. 5 Caterpillar IBM

For Mike Randall, a key driver continue as newer banks like VIEWPOINT Changing industry dynamics will be the anticipated growth Aldermore which operate with in SME finance, and where the legacy-free systems continue to Asset Finance International broker community trying to SMEs choose to go for funding: build market share. asked its panel of experts secure wholesale funding “Our recent Business Barometer ”An emerging trend that may for their views on what in order to create their own data has shown that nearly 1.4m affect the market, George developments within the books and thereby present SMEs across the UK are looking Ashworth observes, is the likely industry are likely to influence themselves as a potential to expand this year. With this in CARL D’AMMASSA increase in money costs with the AF50 rankings. There is attractive acquisition. How these mind, we hope to see more and Aldermore Business Finance the US Federal Reserve making a view that certain market trends may influence the AF50 more SMEs looking towards the first move in increasing rates. dynamics are changing, LINDSAY TOWN is more in the broker space than asset finance companies “It will be those companies “The macro effect of this is likely although this may only be IAA-Advisory anything else. As a result, we are to support their expansion that put serious time and effort to be more impactful on those gradually reflected in the AF50. likely to have those businesses plans, which will increase their into their digital offering that businesses that are engaged that go to market via brokers positions within the tables.” One trend is that of new, non- “The relatively recent arrival of will rise up the tables over the in the financing of SMEs,” see the volumes of business authorised institutions entering external investors seeking their One changing dynamic is the next few years. Ashworth says. “We have now presented to them diminish; they ” the market. In the view of goal of yield has helped to re- adoption and application of new had several years of historically are also likely to see the quality Lindsay Town, “The relatively shape the UK industry, but ... systems, as Carl D’Ammassa Both Carl D’Ammassa and low money costs. As such, of the business presented to recent arrival of external stresses: “Digital distribution John Bennett point out that, there are a large number of this is far from the endgame.” them deteriorate at an even investors seeking their goal of and FinTech are really changing despite the strong performance businesses that are not used to faster pace as those brokers yield has helped to re-shape the market and the way SMEs at industry level, almost one in seeing increasing debt servicing acquired by private equity that do make such moves will the UK industry, but I strongly want to interact with their four lenders in the initial AF50 costs appear in their profit and investors start to grow their endeavour to retain the quality believe that this is far from the funding providers. Banks and table show negative growth over loss accounts. A proportion of ‘own book’ business, at the business for their own books endgame. The impact of new more traditional lenders need to the survey period, including these businesses will struggle to same time as new funders are and place the balance.” external sources will be to allow focus on how this is changing three of the big four banks. As cope with any dilution of margin. targeting the broker sector as the smaller lessor or more Consolidation through customers’ expectations D’Ammassa says, “Whilst the It may well be the case that a their primary business source. specialist lessor to grow their acquisition may affect the and ensure they adapt their big four UK banks still dominate proportion of these businesses The inevitable result will be market share. The risk capital structure of the market, as technology and methods of the table of biggest banking will not be able to withstand reduced margins in the short flows will seek superior yield well as strategic investment engagement to compete. It will lenders, their hold on the sector any increase in money costs. term, with increased credit risk but more importantly superior by lessors, according to Gavin be those companies that put is loosening as their share of Although this will not move in the medium term for funders sustainable risk-adjusted yield. Wraith-Carter: “The number serious time and effort into their total volume of the AF50 has the dial as far as the tables are as they seek to maintain and Through the selection process of acquisitions in the industry digital offering that will rise up the declined by 5% in the last year. concerned, it is something to grow new business volume.” we could see an increase in the has significantly increased tables over the next few years.” I expect to see this trend watch out for.” consolidation of the ‘broker with And George Ashworth notes: and although it will take time a book’ segment and that will “The trend of new non- for the results of these to feed start to shift the dynamics of the authorised institutions entering through to the AF50, they will league table.” the UK asset finance market has undoubtedly have an impact. Others concur that changes in continued apace. We have also Those lenders who can tap the broker space will continue. seen the pace of consolidation into the significant capital John Bennett comments: “For in the broker space tick up a expenditure by businesses funders, the broker market notch, as both existing firms (currently around £180 billion) will become more competitive and new entrants have moved will be those that have the better due to reduced demand, as to acquire distribution. These chance of influencing their brokerage firms that have been moves have given rise to the positions within the tables.” 24 ASSET FINANCE 50 MARCH 2016 ASSET FINANCE 50 MARCH 2016 25

Breakdown of the market by type of lender Viewpoint Market evolution and the future composition In 2014/15 banks accounted for 77% of the total market, down from 81% in 2013/14, showing the growing importance of of the AF50 independent lessors to the UK market. The final topic which Asset Mike Randall and Carl AF50 Banks vs Non-Banks Finance International asked the D’Ammassa both look forward panel of experts to consider is to changes in the broader asset UK Banks the likely look of the AF50 in finance market. Randall says: “As 2013/14 70% 11% 19% a year’s time and whether any we go through 2016, we hope International Banks particular type of lender might to see more asset finance-based be making a mark. companies enter the market and increase competition. Non-Banks 2014/15 67% 11% 22% There is agreement that the GEORGE ASHWORTH banks won’t be as dominant, Virgin Money Moreover, further entrants by but significant changes to the new asset finance firms would help support the awareness of Competitive asset finance operators are AF50 tables will take time. Gavin constantly innovating, delivering more value Wraith-Carter comments: “I think positions. Where I believe the these types of lenders in SMEs Ten toat customers the top and using fewer resources. that more non-bank funders are biggest changes shall occur is looking for funding options.”

Here we highlight the top firms of the AF50 in the broker space.” Achieve More CHP’s ALFA Systems enables forward-thinking making inroads into the market And D’Ammassa observes: “I’ve businesses to meet and exceed the most and these, along with those Regarding potential new been keeping a keen eye on the withTop banking ALFA group Systems. demanding ofRBS challenges. £9,473,000 funders that can offer a full range entrants, he adds: “Modesty unsecured lending space and Largest growth in banking group HSBC +12% of solutions will be more likely prevents me mentioning speaking to a lot of innovative to become key players in the Virgin Money but in respect of funding companies like TopTHE leasing RIGHT firm FIRST TIME SERIES Lombard £4,209,000 How to Transform an Asset Finance Company Through Systems Implementation market. Those utilising schemes companies to watch out for in crowdfunders. Considering the Download the series today from chpconsulting.com/rft Largest growth in leasing firm Aldermore +45% such as Enable from the British 2016, if I were a betting man, low base most of them started Top manufacturer-owned PACCAR £464,000 Business Bank are likely to see I would be keeping an eye on from, they are already doing a Largest growth in manufacturer-owned MAN +4% this impact on their position; Highbridge Securities. I think huge amount of business and however, the scale of the big Star Capital is another business whilst I don’t think they’ll ever Top fleet lessor LeasePlan £1,709,000 banks and lethargy/resistance to to watch out for in the current displace traditional lenders Largest growth in fleet lessor Arval +25% change of businesses mean that market conditions.” they are certainly disrupting the Top equipment independent (non-bank) Hitachi £1,098,000 there’s unlikely to be significant John Bennett comments: “I market.” change at the top.” Largest growth in equipment independent Hitachi +28% don’t believe that any one type Lindsay Town provides some George Ashworth also sees of lender will dominate new concluding thoughts: “As the 2016 as the year of the non- entrants in the AF50 in 2016. AF50 league table matures and Whatever the precise outcomes, ‘Up and coming’ firms likely to be in the table authorised institution, but says My tips for new entrants are we see increasing shifts in the it seems the industry is firmly next year of the make-up of the AF50: “I Macquarie and ABN AMRO, sources of capital and improved would expect to see the large also Victoria Asset Finance, a attitudes to distribution, I suspect on the road towards lower Firms that are virtually certain to join the AF50 next year include commercial banks still in situ. new entrant which acquired the that we will see that those concentration at the top and a Dutch bank ABN AMRO, Australian bank Macquarie, and Maxxia, The extension of the FLS will remaining ING portfolio. Kennet, that rise nearer to the top will the joint Australian and UK-backed firm. Other possibilities include greater diversification of types more or less guarantee that now owned by Star Capital, have certain unifying features. Kennet, LDF, Metro Bank, Virgin Money, and Raphaels Bank. of lenders status quo position. Barring and with access to European Customer service is a trite Whatever the precise outcomes, it seems the industry is firmly consolidation at OEM level, I Investment Fund capital, could phrase perhaps, but I think will on the road towards lower concentration at the top and a greater would also expect the captive make AF50 in 2016, but it may be a real differentiator. I also see diversification of types of lenders. finance companies to hold their take a year longer.” that the next great differentiator

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will be the provision of more financial yield, but some will “The next great differentiator than just finance. The use of become very comfortable. As will be the provision of more service contracts, true asset the new accounting standards than just finance. The use of management, operating move from debated theory to leasing and added relevant practical implications there service contracts, true asset services will provide a fertile will be a strong incentive to management, operating ground for growth, as we reassess products and this leasing and added relevant have seen in areas such as may leave some of the more services will provide a fertile contract hire. Here we may ‘finance only’ participants ground for growth” see some of the investment- losing ground to those that can type funds baulk slightly as the adapt their offering to the new model becomes more based world.” on asset management than

Competitive asset finance operators are constantly innovating, delivering more value to customers and using fewer resources. Your input Achieve More CHP’s ALFA Systems enables forward-thinking We lookbusinesses forward to meet toand your exceed viewsthe most and comments on the AF50. Your with ALFA Systems. demanding of challenges. input will be important in helping to ensure the rankings are as complete, reliable and useful as possible. Please contact Julian THE RIGHT FIRST TIME SERIES Rose at Asset Finance Policy ([email protected]). How to Transform an Asset Finance Company Through Systems Implementation Download the series today from chpconsulting.com/rftWhere appropriate, the tables will also be updated and published on the Asset Finance International website, so please check for the latest versions there.

JULIAN ROSE Asset Finance Policy

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