Pascal BOUILLON, Deputy CEO

1
How Banks work with Leasing Companies in
Europe Strategy of Banks entering the Leasing
Market

• Pascal BOUILLON, Deputy CEO
• Kiev, February 21, 2006

2
Leasing for Banks

• Initially, in most European countries, Leasing
  has been tailor made to suit the banks clients
  needs as an alternate solution to loans
• While some large, international banks have
  developed this activity as asset/equipment
  financing, a core activity through dedicated and
  specialized entities
• Many have exited this business during the last 20
  years
• While some independent leasing companies have
  been created, especially in countries where
  Leasing is not regulated

3
How Banks work in Leasing

• Today many retail banks are not involved at all
  in leasing
• Other are refinancing Leasing Companies
• Line of credit
• Assignment of receivables
• Assignment of contracts
• Others
• Or cooperate with Leasing companies
• Referral
• White labelling
• Joint venture,
• Few have set up a dedicated business entity
• Critical mass
• Expertise

4
Refinancing of leasing companies (1)

• Need to hedge
• assets and liabilities
• Interest rate, liquidity, exchange rate
• Access to capital market in mature countries
• Secured line of credit
• Requires a specific legal environment to achieve
  perfect lien on receivables or assets
• Unsecured line of credit most of the time
• Flexible solution
• Need to monitor the risk of mismatched funding
• Assignment of lease receivables, with recourse
  (without transfer of risk)
• Problem of exposure of the Leasing company
• Analysis of the origination of portfolio, quality
  of transactions
• Block discounting allows easier match funding

5
Refinancing of leasing companies (2)

• Assignment of lease receivables, without recourse
  (with transfer of risk)
• Assignment of the future lease instalments
• Depending on the local legal environment
• Requires specific risk analysis assessment of
  portfolio, how business is originated, credit
  policy, currency risk, Residual Value risk,
• Security are difficult to organise
• Title on equipment regulation are different from
  one country to another and are difficult to
  implement
• Assignment of contracts
• Requires minimal legal environment
• Lease syndication through a pool, allowing
  refinancing of small leasing companies by larger
  ones
• Disclosed or undisclosed
• With or without mandated billing and collection

6
Cooperation agreements

• Referral
• Simple cooperation with agreement on price, fees,
  
• White labelling
• Undisclosed or partially disclosed
• Joint Venture
• With minority shareholders
• Without external shareholders
• Servicing
• Bank subsidiary managed by leasing company

7
Asset and Equipment FinancingA specialised
business

• Industry expertise
• High Tech
• Industrial Equipment
• Transportation
• Based on equipment knowledge
• Collateral assessment (amortization, second-hand
  value, residual value)
• Better knowledge of client business

8
Industry Expertise
Transport
Industrial Equipment
High Tech

• IT
• hardware
• software
• peripheral

• transport
• trucks
• commercial vehicles
• busses

• machinery
• machine tool
• printing machine
• packing machine

• handling
• forklift trucks
• handling equipment

• construction machines
• loader
• dredger
• earth moving equipm.

• office equipment
• copier
• telecommunication
• IT (retail distribution)

• agricultural machinery
• tractors
• harvesters

• medical equipment
• medical equipment
• laboratory equipment

• real estate
• office building

• aviation and marine
• aircrafts
• ships

9
Significant growth in emerging countries

• Average penetration rate in Europe 15
• Czech Rep. average 18 since Y 2001
• Hungary 22 in Y 2004
• Slovakia 15
• Slovenia 20
• Poland, penetration doubled within 4 years
• Relevant market (excluding cars) has reached a
  significant size
• Poland 2.4b
• Czech Republic 2b
• Hungary 700M
• Slovakia 600M
• Slovenia 400M