Market rocked as lessor pulls
out. Fred Crawley and Girish Gupta report.
Go deeper with GlobalData
Fortis Lease is to exit the retail
motor finance market in the UK, in a move that could give new
funders the opportunity for a market entry by acquiring its
book.
It is understood that many of
Fortis’ smaller dealer finance links have already been wound down,
with larger relationships – including those with stocking
facilities attached – to be concluded by the end of the year.
The decision was made by BNP
Paribas Lease Group, which has managed Fortis’s leasing operations
in Europe since parent bank BNP Paribas took over the Belgian group
in October 2008.
A BNP Paribas Lease Group
spokeswoman said: “The decision has been made by BNP Paribas Lease
Group that the business conducted by Fortis Lease UK was not core
to the strategic objectives of BNP Paribas Lease Group. The
decision has been made to stop writing new business in Fortis Lease
UK therefore running off the business.”
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By GlobalDataAttempts to find a buyer for the
business have so far been unsuccessful.
“We looked at the possibility to
re-house the business within the wider BNP Paribas Group. This was
unsuccessful as there was no adequate strategic fit,” the
spokeswoman said.
“Attempts were then made to sell the
business to other financial institutions in addition to private
equity houses, but again this was unsuccessful due to prevailing
market conditions. We believe we have exhausted all possibilities
at the current time and therefore any future sale would be very
much on a reactive basis.”
By the end of 2008 the Fortis
retail motor book formed the majority of Fortis Lease’s UK
portfolio, which itself stood between £1.6bn and £2bn. In addition
to motor business, the Fortis Lease book contains a significant
quantity of plant and machinery leases, as well as a number of
marine finance agreements.
Fortis’ retail strategy was aimed
towards the higher-ticket end of the car market, with executive,
performance and prestige vehicles being targeted. As a result, the
Fortis book is thought to have a high average deal value.
For the last year, Fortis has
received virtually all its business through relationships with the
UK’s largest dealer groups, after it pulled out of
broker-introduced business in late 2009.
Fortis Lease had forged strong
links with brokers under the sales leadership of Hector Thompson
prior to 2008. All this changed subsequent to a restructuring of
Fortis Lease’s management after the BNP Paribas takeover.
During 2009 some introducers are
thought to have taken advantage of Fortis Lease, leading the
company into paying out high levels of commission. If this dented
returns making their way back to Europe, it could have contributed
to the strategic decision to concentrate on dealer sales.
Since severing broker links, the company is understood to have
taken on deals at the high end of the prime market. As such, its
portfolio is regarded to be strong, with a relatively low incidence
of bad debt, raising the possibility that a buyer may yet come
forward. Failing a sale, the business will be run down by letting
the agreements run their natural course.
