The financial leasing market: evaluation of 2013 and expectation for 2014

Considering that the financed volume of the financial leasing market decreased in 2013 compared to 2012, it might appear that the market is losing its rhythm. Nevertheless, a closer analysis reveals encouraging prospects.

Losing the rhythm?

The Romanian financial leasing market registered a new financed volume amounting to EUR 1.243 mn as of December 2013, according to ALB (the Romanian Leasing Association). This represents a 9% decrease compared to the same period in 2012. After seeing modest recovery attempts of the market in 2011 and 2012, we unfortunately had to witness a downward trend in 2013, which took the yearly business volume of the sector below the performance rate registered in 2009 (Figure 1).


In other words, the overall financial leasing activity on the market in 2013 (1.243 mn EUR) was inferior to the one in 2009 (1.299 mn EUR). What is the reason of this decrease? Could it be said that the financial leasing market is losing its rhythm? Could this affect the confidence of the leasing companies and is there enough rationale to be pessimistic about 2014?



In order to understand the reasons behind the decrease, it would be useful to look closer to the figures of the market and to the structure of the portfolio. The Romanian financial leasing sector has been historically focused on auto leasing. As of December 2013, 71 % of the entire business was dominated by the auto business. The breakdown of the entire leasing  market is composed of 71% auto, 25% equipment and 4% real estate, (Figure 2). Taking into consideration that auto sales in  Romania drastically lowered in 2013, this naturally affected the leasing business and less financing resulted in this segment. Additionally, the increasing trend of the operational leasing of auto, as being deemed an alternative solution, further  contributed to a decrease in the financial leasing volume.



We have been witnessing an increasing trend in equipment financing in the past five years and the share of this segment reached 25% in 2013, compared to 21% in 2008. Some of the leasing companies have chosen to increase their activity in this field during the last couple of years. This strategic move helped some leasing companies keep their positions on the market, and even contributed to an increase in their market shares. Furthermore, the growth of the agricultural production encouraged many leasing companies to enter this segment in 2013. On the other hand, this trend helped more Romanian companies access the funding that they needed for their investments.


Real estate financing maintained its trend in 2013 as a restricted area for most of the leasing companies. In 2009, this segment had a 17% market share, but in 2013, it reached only 4% of the total financial leasing volume of the market. This  result is mainly determined by the low activity level in the construction sector. On the other hand, the appetite of leasing companies for real estate finance is still poor.

Consequently, it is too harsh to conclude that the decrease in the total volume of financial leasing is a sign of losing the rhythm of the market. Supported by the increase in the auto and equipment markets in the short term and the relief of the real estate market in the mid-term, the financial leasing business will maintain the smooth growing trend in the coming years.

Major players

Bank owned leasing companies are keeping their dominant position on the market and they represent 65% of the total volume. Captive leasing companies of car producers have 20% and independent leasing companies have 15% market share (Figure 3).


If we analyse the trend since 2005, we can see an increasing dominance of the bank owned leasing companies against the captives in the last 9 years. In 2005, the bank owned leasing companies had 55%, the captives had 30% and the independent companies had 15% market share of the total leasing business. So, since 2005, the captive leasing companies have lost 10% market share to bank owned ones, whereas independent leasing companies remained constant with 15% market share in the last 9 years. Please see the figure for the top 15 financial leasing companies in 2013, based on the new business  volume per year (Figure 4).

Trends for 2014 and beyond 

We expect the auto segment to grow in 2014, based on the optimistic sales figures declared by the auto producers. This trend may help captive leasing companies increase their volumes and even market shares, compared to 2013. Additionally, the financing volumes of light and heavy commercials may increase, as well.

On the other hand, the agricultural segment may lose its attractiveness, given the fact that a drier season is expected and we are already seeing signs of low precipitation.

Most probably, real estate financing is expected to keep its linear trend without significant increase or decrease. Equipment financing will still be an important segment, based on two factors. Firstly, the suppliers of auto producers already have some investment plans for new capacities. Secondly, the Romanian state is expected to allocate more resources for highways. Various players on the market estimate an increase of 10% to 15% in the business volume for 2014, compared to 2013. This means that the total volume can reach over EUR 1.4 bn.

In the light of these expectations, we foresee higher levels of  competition amongst leasing companies for more market share. At the same time, another challenge will be maintaining the quality of the portfolio. These influences will have as a result lower provisions and higher profit levels.


Due to the depressing fall of the overall financial markets in 2008, the Romanian financial leasing market also lost significant business volumes, but it has been gradually recovering ever since. Nevertheless, the recovery process will not be so quick.  As an anonymous quote points out: “The elevator to success is out of order. You will have to use the stairs… One step at a  time.”