White Clarke Group: regulatory uncertainty biggest worldwide challenge for leasing industry
The biggest issues for the asset finance industry are navigating regulatory uncertainty, keeping controls of costs and innovations
This was according to technology firm White Clarke Group.
In its Global Asset & Auto Finance survey. May 2015, the company also found that in the US, the motor finance sector has seen significant growth. The report said that new vehicle retail sales in February 2015 were the highest they had been for the month since 2002, which has translated into greater demand for finance.
Brendan Gleeson, group executive vice president of White Clarke Group said: “The US auto loan market is driving ahead, with three quarters of the leasing activity in this sector concentrated on the prime or super-prime segment. While the trend towards longer lease terms and a lowering of credit requirements has prompted fears that the sub-prime sector of the market may be heading for trouble, so far delinquency and repossession rates have remained at historic lows.”
In Europe, Gleeson said motor finance out performed the general recovery in asset finance, which grew by 8.4% year-on-year. “Auto lending performed particularly well, with new leasing volumes up by 12.4% on 2013,” he said. “Improvements were driven by Europe’s four largest economies in northern Europe, while some of the leasing markets in southern Europe saw double digit growth, albeit from a low base.”
The report suggested Eastern Europe was an area with the potential for strong growth in 2015, noting the Polish Leasing Association reported market growth in 2014 of 21.3%.
In the Asia Pacific region, White Clarke Group noted that the rise of the middle class in China is set to substantially enlarge the motor finance industry for the next five years. According to PWC, China’s finance motor finance industry has a penetration of just 21%. The firm said the industry has the potential to grow at an annual rate of 25% for the next five years.
White Clarke Group noted: “Additionally, the Chinese government is encouraging a broader lending environment by promoting awareness of financial leasing options and moving to relax the regulatory requirements to obtain auto financing licenses through the China Banking Regulatory Commission.”
The Thai motor finance industry has been struggling with a slowdown in domestic sales since 2013. In addition, The White Clarke Group reported one motor finance company saw bad loans increase 20% year-on-year in 2014, while loan application rejections doubled in the period.
According to Gleeson, there are a number of broad challenges facing the industry in the years ahead:
– Significant political uncertainty in key markets about possible legislative and regulatory change
– Multinational companies are still anxiously awaiting the outcome of the long running attempt to create a global leasing standard
– A number of countries are dealing with regulatory change, including the new Financial Conduct Authority in the UK and the potential widening of powers for the Consumer Financial Protection Bureau in the US.
– A number of longer term challenges such as the potential Greek exit from the Euro, unrest in the Middle east and potential interest rate rises.
Gleeson said: “…on the face of it, there are some enticing prospects for asset and auto finance providers across the globe. However, I detect a continuing reluctance on the part of organizations around the world to make the sort of really significant investment decisions which would drive the industry to new highs.”