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Latin Leasing: Explosive Growth

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Itau remains Latin America's top leasing company, but Banco Saenz grew most. Brazil is the top market and one of the fastest-growing ones.

BY CHRONICLE STAFF

Latin America's leasing industry reached $33.8 billion in assets, an increase of 46.5 percent from the previous year. That follows 55.6 percent growth in 2005. And Brazil and Argentina are leading the way in growth, according to a new report by U.S.-based consultancy The Alta Group.

Brazil-based Cia. Itauleasing de Arrendamento Mercantil is again the top leasing company in Latin America thanks to reporting $4.1 billion in assets, an increase of 17.1 percent. Banco Itaucard S/A Arrendamento Mercantil squeezed out Safra Leasing from the second place thank to assets of $2.4 billion. Safra ended up third with $2.0 billion in assets, which was an 11.1 percent increase from 2005. The top five was rounded out by Popular Auto (Puerto Rico) and Banco Santander Chile.

However, Argentina-based Banco Saenz was by far the winner in growth, going from a mere $20 million in leasing assets in 2005 to $683 million last year. That's a whopping 3,351 percent increase. Other growth winners include Argentina-based Banco de San Juan (1,930 percent) and Nuevo Banco de Entre Rios (1,609 percent).

SANTANDER AND SCOTIABANK

Among foreign companies, Spain-based Santander is the largest leasing company, with $1.7 billion in assets last year, an increase of 36 percent from 2005.  Another Spanish bank, BBVA, is the second-largest thanks to leasing assets of $1.3 billion, an increase of 65 percent from 2005. Rounding out the top five foreign leasers are Citibank, ABN Amro and IBM.

But the fastest-growing foreign leasing company is Scotiabank, which saw a 508 percent increase last year to $52.9 million. Scotiabank's leasing business has grown thanks to acquiring Banco Interfin in Central America, Banco Wiese and Sudameris in Peru.

Other foreign growth champions include CSI Latina (137 percent), GMAC (109 percent) and HSBC (83 percent). HSBC acquired Banistmo, a Panamanian bank, and through it, its corresponding banks in Central America and Colombia.

Large multinational banks appear to follow different strategies. While banks like Scotiabank, HSBC, and GE Money have boosted their leasing business in Latin America, other banks have reduced or sold off their businesses.

Citibank sold its leasing assets in Argentina, Colombia, Peru and Central America, while boosting them in Brazil and keeping them flat in Mexico. However, with the acquisition of Cuscatlan in El Salvador (announced in December), it will again boost its leasing assets in Central America, The Alta Group points out.

France-based Société Generale sold its leasing assets in Brazil, while Bank of America finished leasing operations in Latin America after selling its assets in Brazil, Chile and Uruguay to Banco Itau, its Mexico assets to CSI Latina and its Argentina assets to Standard Bank of South Africa.

Meanwhile, also vendors are increasing their leasing business, The Alta group points out. "While information technology and telecommunications investment is booming in Latin America, vendors such as IBM, HP, Dell, Positivo, Lenovo…, Cisco and others are very active in Latin America, building customer financing solutions with the support of well-established leasing companies," the company said in its report.

TOP MARKETS

Brazil is by far the largest leasing market in Latin America, with leasing assets of $15.9 billion, an increase of 57 percent from 2005. The strong increase is impressive when considered the high base volume from 2005 - $10.1 billion - and the fact that Brazil's economy overall only grew by 3.7 percent last year (one of Latin America's lowest GDP growth rates).

The reason for the strong growth? Regulation. "Brazilian leasing laws and regulations are among the best in emerging markets," Rafael Castillo-Triana, an Alta principal, said in a statement. 

Chile is the second-largest leasing market. Last year its leasing market reached $4.2 billion, an increase of 13 percent from 2005. However, the size of the Chilean leasing industry may be deceiving, the report warns. "Most of the leased assets in Chile correspond to real estate leases, rather than equipment leasing," The Alta Group says. "This is a tendency that seizes more punctual opportunities rather than sustainable investment in capital to the economy."

Colombia is ranked third, with leasing assets of $2.7 billion, or 38 percent more than in 2005. "Despite the fact that the industry is still threatened by potential bank consolidation, lessors have shown solid leadership and have propelled the industry forward," the report points out.

Mexico is the fourth-largest leasing market, according to the reported figures. However, The Alta Group believes the market is larger. "Several players that are not affiliated with the industry association, AMSOFAC, may not be reporting their numbers and are therefore left out--yielding a lower figure for Mexico than the true total," the report acknowledges.

Other key markets include Peru, Argentina, Ecuador, Costa Rica and HondurasArgentina, the seventh-largest lease market, grew more than any other market - 64 percent - to $737.8 million last year. "Argentina is gaining in ranking, and Alta anticipates that it will soon rank third," it says. "Despite growing inflation, Argentina has a strong business, legal and regulatory environment."

Surprisingly enough, economic size does not correspond to the size of the leasing market. In addition to Mexico (Latin America's second-largest economy) ranking lower than it should, Venezuela (Latin America's fourth-largest economy) ranks behind smaller economies like Chile, Colombia, Peru and Ecuador.  

Although the Latin American leasing market will likely continue growing at healthy rates, there are some clouds on the horizon. Delinquency rates, which were low last year, are likely to grow this year as a result of the sub-prime crisis in the United States, The Alta Group warns.  

 

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