Leasing in Latin America: On the leading edge of innovation and leadership

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1 THE ALTA 100 FOR YEAR-END 2012 REPORT SUMMARY Leasing in Latin America: On the leading edge of innovation and leadership Changes in leadership in the industry show that the real drivers of a healthy business are not demographics or macroeconomics but innovation and leadership The Alta Group, the leading global consulting firm focused in the equipment leasing and financing industry, in October 2013 released its annual report that ranks the 100 largest equipment leasing companies in Latin America. The report, issued since 2004, is the region s main and most reliable source of information about the equipment leasing industry. This article highlights important observations about the performance of the equipment leasing and financing industry in Latin America. In general terms, leasing portfolios in the region at the end of 2012 totaled an estimated US$ 67.5 billion, representing a reduction of 12.1% compared with the end of (US$ 76.8 billion). However, in fairness to the region, the industry grew an average of 9.77% between year-end and year-end 2012, if one excludes the weight of Brazil in the performance of the leasing industry. Total estimated new business in Latin America in 2012 was valued at US$ 47.6 billion. 1

2 Country Performances Table 1 shows the general performance of the leasing industry per country: Country Portfolio (US$000) 2012 Portfolio (US$000) Growth 2012 Estimated Volume 2012(US$000) Argentina $ 1,774, $ 1,736, % $ 872, Bolivia $ 51, $ 36, % $ 45, Brazil $ 20,840, $ 34,294, % $ 4,021, Chile $ 10,899, $ 9,605, % $ 2,227, Colombia $ 14,250, $ 11,003, % $ 3,750, Costa Rica $ - $ 307, $ Dominican Republic $ 27, $ 24, % $ 8, Ecuador $ 156, $ 165, % $ 62, El Salvador $ - $ 17, $ - Guatemala $ - $ 32, % $ - Honduras $ 38, $ 33, % $ 12, Mexico $ 8,264, $ 7,139, % $ 5,082, Nicaragua $ 16, $ 19, % $ 16, Panama $ 357, $ 23, % $ 2,014, Peru $ 8,936, $ 7,879, % $ 1,303, Puerto Rico $ 1,406, $ 1,687, % $ 804, Venezuela $ 484, $ 298, % $ 175, Other not classified elsewhere $ 2,500, Total $ 67,505, $ 76,804, % $ 20,397, Total excluding Brazil $46,664, $ 42,509, % $ 16,375, Table 1: Leasing Portfolio per country in thousands of United States Dollars. Sources: Central Banks, published financial statements and reports from companies Brazil is the outlier of the Latin American leasing industry. Lessors in Brazil are victims of their own success. For more than forty years, the leasing industry has enjoyed a favorable legal and tax environment. As a result, leasing became a tool to provide motor vehicle financing, mainly to consumers. The leasing industry was not motivated to innovate or differentiate their offerings. The dominant players ended up being the banks. Lessors (such 2

3 as the companies affiliated with Itau, the largest Brazilian bank) consolidated their market presence by acquiring the former financing captives of Fiat, Ford and other automakers. But their offerings were no different than massive full payout leases, which are commodities. As a result of this commoditization, motor vehicle financing is being moved from the leasing units of the banking groups into their credit arms. The banks are not losing the business. Lessors are the losers. The industry association, ABEL, focused its attention in defending certain regulatory challenges such as the threat of the municipal tax on services or ISS, but the industry refused to soul search about its capabilities to foster investment in capital goods in Brazil. As a result, the Brazilian leasing industry is a languishing, dying force. Brazilian lessors have in front of them today the great challenge to innovate and rescue their lost leadership. Fortunately for the rest of Latin America, there are still dynamic economies that use leasing as a tool to generate more capital investment and not simply as a tool for financing consumption. These are mainly the leasing industries in Mexico, Chile, Peru and Colombia. It is interesting and satisfying to mention that countries such as Bolivia and Costa Rica are also joining that team, at a lower scale but moving in the right direction. The leasing industry in Argentina has grown steadily. Many challenges are facing the independent companies there. With a few exceptions, Bank affiliates are not very aggressive in developing leasing to foster capital formation. Some bank affiliates are proud to focus their portfolio growth on using leasing for consumer financing. Wrong call. The case of Venezuela is interesting. There is one important player, Banesco, showing important growth. This is one of the key drivers of impressive leasing growth in the country. Central America and the Caribbean are still reluctant to provide meaningful statistics about the size, volume and performance of their leasing industries. Again, there are a few exceptions, and such exceptions are becoming leaders in the sub-region. Figure 1 shows the calculation of new originations (under the column of Volume ). These calculations are based upon experienced observation of equipment leasing companies portfolios, and in some limited cases, by direct reports from the companies. Therefore, as an estimate, it must be taken as an approximation but not as a representation of total accuracy. 3

4 Puerto Rico Estimated Volume 2012(US$000) Venezuela Argentina Bolivia Panama Nicaragua Peru Brazil Chile Mexico Colombia Dominican Republic Honduras Ecuador Figure 1: How new volume was originated in the region Multinational Groups active in the leasing industry in Latin America Table 2 shows the main multinational groups active in Latin America. Controlling Entity Total Assets Itau $ 8,223, Bancolombia $ 5,271, Santander $ 4,951, GrupoAval $ 4,026, Bradesco $ 3,932, BBVA $ 3,881, Citibank $ 2,586, Scotiabank $ 2,264, Corpbanca $ 2,193,

5 Grupo Bolivar $ 1,773, Caterpillar $ 1,310, Hewlett Packard $ 1,229, IBM $ 760, Safra $ 546, Volkswagen $ 345, CIT Group $ 217, CSI $ 197, Table 2: Leasing Portfolio by Group Some of these groups are underestimated due to the fact that their data was not available in full. GE Capital, IBM Global Financing and Caterpillar Financial are the most remarkable examples of this. The aforementioned notwithstanding, it is clear that the multilatinas are still leading the industry, which means that the most active multinational groups are from within the region, namely Itau, Bancolombia, and GrupoAval. The European groups show a mixed performance: while Santander and HSBC declined in the region, BBVA is growing. A new and growing player is the Canadian Scotiabank, which is showing consistent progress. The presence of U.S.-headquartered multinationals has declined dramatically. Perhaps the most outstanding example is the exit of CIT Group from the markets of Colombia, Chile and Argentina, while its growth has been anemic in Mexico and Brazil. CSI did not supply data for many of the countries where it operates. Another interesting feature is that 4 of the Alta 100 are government owned. These are: Banco del Estado (Chile), Leasing Bancoldex (Colombia), Banco Nacion (Argentina) and Banco GMAC do Brasil (subsidiary of the Ally Bank, controlled 78% by the United States Treasury). Table 3 lists the Alta 100 corresponding to the year-end of It is interesting to note certain moves. For instance, Leasing Bancolombia moved up from 8 th place in 2010 to the first place in This was the combination of growth in Colombia, a reduction in activity by the top Brazilian leasing companies, and Leasing Bancolombia s innovation and leadership, which is a benchmark for Latin American lessors. A large number of operating leasing and renting companies are new to the list, evidence of the Latin American market s move from the pure full payout business model to an asset based financing business model. Some other observations are highlighted in the full report that will be available for sale at 5

6 The Alta 100 list corresponding to the closing of 2012 Table 3 lists the company rankings. POS IN POS IN 2012 Company COUNTRY 2012 US$ (000) US$ (000) 2 1 Leasing Bancolombia CFC Colombia 5,011, $ 3,726, Banco Itauleasing Brazil 4,681, $ 6,688, Banco Credito del Peru Peru 3,468, $ 2,870, Bradesco Leasing S/A Arrendamento Mercantil Brazil 3,077, $ 3,733, Banco Santander Chile Chile 2,677, $ 2,394, Leasing de Occidente S.A. merged into Banco Occidente Colombia 2,609, $ 1,979, Banco de Chile Chile 2,326, $ 1,864, Santander Brasil Arrendamento Mercantil, merging Santander Brazil 2,017, $ 3,560, Leasing 12 9 BBVA -Banco Continental Peru 1,795, $ 1,756, Helm Leasing S.A. merged into Helm Bank Colombia 1,478, $ 1,202, BCI - Credito e Inversiones Chile 1,468, $ 1,176, Scotiabank Peru 1,454, $ 1,287, Davivienda (Leasing Portfolio) Colombia 1,410, $ 976, Caterpillar Mexico 1,310, $ 1,196, Dibens Leasing S/A Arrendamento Mercantil Brazil 1,288, $ 1,026, Banco Itaucard S/A Arrendamento Mercantil Brazil 1,281, $ 2,606, Popular Auto Puerto 1,257, $ 1,169, Rico BV Leasing Arrendamento Mercantil S/A Brazil 897, $ 1,863, Interbank Peru 835, $ 724, BBVA Chile Chile 820, $ 561, Cia. de Arrendamento Mercantil RCI, f.k.a. Renault do BRAZIL Brazil 763, $ 674, Banco IBM S/A Arrendamento Mercantil Brazil 760, $ 834, Leasing Bogota S.A C.F.C. merged into Banco de Bogota Colombia 743, $ 500, Corpbanca Chile 715, $ 568, Banco del Estado Chile 689, $ 588, Banorte Mexico 667, $ 488, HSBC Bank BRAZIL S/A Arrendamento Mercantil Brazil 659, $ 1,165, BBVA Leasing CFC merged into BBVA Bank Colombia Colombia 650, $ 427, Hewlett Packard Mexico 625, $ 570, HP Financial Services Arrendamento Merc. S/A Brazil 604, $ 576, Ford Credit Mexico 563, $ 687, Navistar Mexico 546, $ 484, Banco Bradesco Financiamentos (f.k.a. Finasa S/A) - Carteira Brazil 503, $ 1,230, Arrendamento Mer ITAUBBA Leasing S/A Brazil 499, $ 955, Banco Security Chile 478, $ 439, Inbursa Mexico 474, $ 313, Banco Itau Chile Chile 472, $ 336, Banco Bice Chile 463, $ 352, ScotiabankSudamericano Chile 433, $ 376, Paccar Arrendadora Mexico 414, $ Banco Interamericano de Finanzas Peru 403, $ 347, Banregio Mexico 397, $ 378,

7 POS IN POS IN 2012 Company COUNTRY 2012 US$ (000) US$ (000) Unifin Mexico 392, $ 315, Safra Leasing S/A Arrendamento Mercantil Brazil 382, $ 571, BB Leasing S/A Arrendamento Mercantil Brazil 368, $ 681, Leasing Bolivar S.A. Colombia 363, $ 292, Leasing Corficolombiana Colombia 336, $ 290, Bbva Bancomer Mexico 291, $ 326, RENTING COLOMBIA S.A. Colombia 260, $ 223, Santander Peru Peru 256, $ 215, Banco Bradesco S/A Arrendamento Mercantil Brazil 242, $ 808, Banco Internacional Chile 236, $ 207, Banco Volkswagen (f.k.a. Volkswagen Leasing S/A Brazil 236, $ 689, Arrendamento Mercantil SGEF S.A. A.M. Brazil 232, $ 153, BBVA Banco Frances Argentina 225, $ 210, Banco Comercial I Trust do BRAZIL S.A - Banco Mult. (antes CIT Brazil 217, $ 194, BRAZIL Arrendamento Mercantil) BNP Paribas Brazil 214, $ 200, Leasing Colpatria CFC merged into Red MultibancaColpatria Colombia 214, $ 124, CHG MERIDIAN MEXICO Mexico 198, CSI Mexico 197, $ 236, Banco De Lage Landen BRAZIL S/A Brazil 194, $ 156, Bepensa Mexico 193, $ 234, Finandina S.A. converted into Banco Finandina Colombia 191, $ 211, BIC Arrendamento Mercantil S/A Brazil 187, $ 246, Panamericano Arrendamento Mercantil S/A Brazil 186, $ 367, Leasing Popular merged into Banco Popular Colombia 184, $ 150, Banco Galicia Argentina 173, $ 139, VePor Mas Mexico 170, $ 162, Banco Safra S/A Carteira Arrendamento Mercantil Brazil 164, $ 259, Alfa Arrendamento Mercantil S/A Brazil 162, $ 258, Banco del Caribe Venezuela 161, $ 60, John Deere Credit Mexico 153, $ 124, Banco COMAFI Argentina 152, $ 156, Factoring Corporativo Mexico 152, Amerika Financiera (Fk America Leasing) Peru 150, $ 156, Banco de Bogota Panama Leasing Panama $ 150, Leasing Bancoldex S.A. Colombia 148, $ 140, Citibank Peru 147, $ 116, Pure Leasing Mexico 146, $ 106, Mercedes-Benz Leasing antes DaimlerChrysler Leasing Brazil 135, $ 182, Arrendamento Mer. S/A Water Capital Mexico 131, $ 100, Banesco Venezuela 131, $ 47, Banco Patagonia S.A. Argentina 129, $ 114, DE LAGE LANDEN Mexico 124, Banco Nacion Argentina 124, $ 125, Banco Supervielle Argentina 120, $ 107, Banco Aliado-Unidad de Leasing Panama $ 120, Banco Pichincha f.k.a. Inversora Pichincha S.A. Colombia 116, $ 125, Banco Credicoop Argentina 115, $ 131, Rabobank Chile Chile 114, $ 118, HSBC Bank Peru Peru 112, $ 104,

8 POS IN POS IN 2012 Company COUNTRY 2012 US$ (000) US$ (000) HSBC Bank Argentina S.A. Argentina 112, $ 119, ArrendadoraBanamex Mexico 112, $ 137, Operadora Mega S.A. de C.V. Mexico 112, $ 130, Banco Alvorada S/A Carteira de Arrendamento Mercantil Brazil 109, $ 387, Leaseplan Arrendamento Mercantil S/A Brazil 109, $ 113, Banco Guayaquil Ecuador 107, $ 104, Banco GMAC S/A Arrendamento Mercantil Brazil 99, $ 309, Banco Provincial (BBVA) Venezuela 97, $ 82, Banco Financiero Peru 96, $ 80, The Alta Group Latin American Region, LLC For More Information More information on the Latin American leasing industry is available in The Alta 100 database. To purchase additional information, or make other inquiries, contact: Katrin Förster-Csvany FAX kforster@thealtagroup.com 8