The total net investment in leasing for the UK’s largest firms has recorded annual growth of nearly £3 billion, the 2017 Asset Finance 50 has revealed.
The AF50, the UK’s most influential annual survey of business and equipment lessors, shows market growth of 6% as total net investment has grown £2.8 billion from £46.3 billion recorded in the 2016 report to £49.1 billion in this year’s study.
The AF50, sponsored by Alfa, is published by Asset Finance International and prepared by Asset Finance Policy’s director Julian Rose, the author of the A to Z of Asset Finance and Leasing.
The listing shows the UK’s 50 largest equipment and fleet lessors based on the latest accounts filed at Companies House, with businesses ranked by net investment in business equipment leasing.
It includes all asset finance agreements where the asset is owned by the lessor during the life of the agreement.
A full methodology is provided in the report.
This year’s AF50 shows that the market is becoming more diverse.
The market share of the major banks has fallen from 55% to 50%, while the listing of the 10 largest lessors (banking groups version) has shown substantial annual changes.
While Royal Bank of Scotland remains at the top, HSBC Bank has moved from third to second, replacing Barclays, which falls to fourth. Lloyds Bank, formerly fourth, moves up one place to third.
Joining the top 10 is European Rail Finance, at ninth, nudging Hitachi Capital down to 10th.
The largest player, RBS, accounts for 19% of the market, down from 20% last year, while the dominance of the top 10 has been slightly eroded, down from 73% in last year’s report to 71%.
This reflects the banks running down their UK structured finance books, while other big ticket firms grow, such as rolling stock companies.
The annual AF50 also includes a bank subsidiaries listing, which this year shows Lombard retaining its position at the top, while Close Brothers is moved from second to third by Lex Autolease.
The top 10 firms account for 56% of the market, up from 54% last year, with Lombard taking 13% of the market, down slightly from 14% in the 2016 report.
The report also identifies the top five fleet operators, which this year sees a change at the top as Lex Autolease replaces LeasePlan, which falls to second place.
The switch at the top reflects a reorganisation within Lloyds Banking Group, with various automotive subsidiaries being moved to Lex.
Fleet operators are ranked according to the value of lease receivables, which includes vans as well as cars.
Elsewhere in the listing, ALD and Arval (fourth and fifth respectively in last year’s report) swap places in this year’s listing.
Among the top five manufacturer lessors, VFS retains first place, while Xerox Finance is replaced by Caterpillar in fifth. Captive motor companies are excluded from the listing as separate accounts for business and consumer finance are not available.
Key themes in the report that are reviewed by an expert panel include the strategies of the major banks.
Ian Isaac, managing director of Lombard, said big banks were focused on a core product offering that allowed bank asset finance business to “increase wallet share of customers’ requirements for funding products, often at better returns than vanilla loans”.
However, according to some commentators, there seems to be a lack of clarity in the market.
George Ashworth, managing director of Santander Asset Finance, said: “Bank-owned asset finance businesses may have clear strategies. However, they must be a well-kept secret.”
He warned that market feedback suggested the sector was reaching a “pre-liquidity crisis point” amid a focus on chasing volume that encouraged a “race to the bottom” in terms of margins.
The report also reveals that the proportion of the total UK leasing book that is owned by firms outside the UK has increased to more than one-third, due in part to acquisitions by companies based in China, the US and Australia.
Experts suggest that the shadow of the Brexit vote will deter future investment in the short-term.
Mark Picken, managing director of Shire Leasing, said: “Whilst foreign investors will be eyeing the UK because of the weak pound, I doubt any major acquisition would complete until Brexit negotiations are clearer in likely outcome.”
Other areas of analysis include the strategies of new AF50 entrants, the challenges facing captive finance houses and the role of indirect channels.
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The following notes are clarifications and amendments to this year's addition.
- The previous year comparison for Asset Advantage should read £48 million.
- Metro Bank should be included in the tables with a 2015/6 value of £68 million.
- Haydock Finance is an addition to the list of 'Up and coming' firms on page 30.
- The 'Who's in and Who's out' on page 8 should note the AF50 excludes firms whose main business is renting vehicles or equipment for less than a year.