The leasing market in 2008: free fall (2009)

Free fall: limited borrowing funds at the capital market together with reduced spending power cut the leasing market by about 25%. Amount of new deals in 2008 declined by 27.8% comparing to 2007. Total monetary value of the deals neared 720 bln rubles against 997 bln rubles in 2007. The market is mostly impacted by general uncertainty in economy and vague expectations in relation to the financial market restoration.

Reverse trend: in 2008 incremental growth of leasing payments for the first time in three years exceeded growth of financing. Moreover, the financing declined by 17.7% compared to 2007. It really means that the majority of leasing companies have to serve their current portfolio without increasing volumes of their activities.

Expensive purchases are out of fashion: the second half of 2008 witnessed dramatic plunge in demand for new and expensive property. Out-flowing investments and reduced credit resources make potential clients "live on short rations". Demand for corporate transport and even special machinery notably decreased. Companies tend to direct untied finances to operation activities, disposing of their currency liabilities in the first place. At the same time redemption leasing shows signs of popularity.

Empty pockets: according to lessors, at the end of 2008 most banks almost completely stopped financing leasing activity. In some cases even partly paid equipment deals were suspended. The cost of new ruble credits in banks visibly went up. At the beginning of 2009 volume of credits for leasing (and real sector) companies was restricted by devaluation expectations - banks preferred to direct their funds to the hard currency market.

Pseudo-unprofitable leasing: current Russian accounting standards (currency liabilities are revalued, assets are not) and significant ruble devaluation would bring about losses in the books of leasing companies with sizeable currency liabilities. But such losses would be mostly technical - as a rule, client's liabilities to lessors are also recorded in hard currency, therefore currency risks shift from a lessor to a lessee.

Staying afloat: in 2009 leasing companies would mostly be fighting for survival - aspirations to grow and be competitive would be left for the future. The current year would check the quality of your deal portfolio, risk management, technology of deals, fighting with non-payments. Growth, if any, would take place due to merger and acquisition operations by bigger companies.