Authored by Alessandro Iacono, Invigors Italy
Italy is the third largest country in Europe in terms of leasing volumes generating 38.8bn Euro of new business in 2008, somewhat less than the UK and Germany but slightly ahead of France.
Following four years of continuous growth, the leasing industry in Italy experienced its first real reversal in 2008 with a fall in new business volumes of 20.8% compared to the previous year. All asset categories were affected but to a differing degree, worst hit was the real estate sector which contracted by 32.4% in that year. This has always been the largest segment of the leasing industry in Italy, unlike Germany and the UK accounting for 15bn Euro of new business in 2008.
The large drop in the leasing market outpaced the much smaller fall of 3.0% in gross fixed investments which occurred in 2008 which resulted in an overall decline in the lease penetration rate to 11.8%, back down to 2001 levels. The reason for this decline is clear, a combination of reduced capital investment and the credit crunch in financial services.
These changes also brought about some structural changes to the industry. The leasing sector in Italy has always been very polarised, with the major funders accounting for over half of new business volumes and a large number of much smaller players accounting for the remainder. In 2008 the top ten largest funders increased their share of new lending to 68% of the total market, up from 63% in 2007. It was clear that the larger, better capitalised funders, typically with their origins in banking, were much better placed to ride out the crisis than their small-medium competitors, many of which have experienced significant difficulty causing some to virtually cease new lending activities.
So, the Italian asset finance market was declining in 2008 even before the storm hit other European countries. What's happened in 2009? The downturn in lending accelerated dramatically in the fourth quarter of 2008 and continued in the first two quarters of 2009. However there were some weak signs of recovery in Q3/2009 and anecdotal evidence suggests that this has continued into Q4. Perhaps we can tentatively conclude that the most acute phase of the downturn has now passed, especially as recent estimates of new orders, inventories and also industrial production levels are showing weak but significant signs of recovery.
Moreover, general availability of credit appears to be improving although it remains tight. Recent surveys show that the number of companies unable to obtain funding from various credit institutions has remained stable and is no longer worsening. As we have seen previously, with the level of new leasing business closely correlated to fixed capital investment, as the latter improves in 2010 then we can expect an ongoing, though difficult, recovery in the leasing market.
If you're interested in exploring opportunities in the Italian leasing market, contact Alessandro Iacono on +39 (06) 955 57 317 or e-mail: alessandro.iacono@invigors.com.
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