Время роста — деловой оптимизм лизинговых компаний в первом полугодии 2024 года

MAIN CONCLUSIONS

In 2023, the Russian leasing sector overcame the slowdown in growth related to the unstable operating environment of the year before. The number of new lease contracts grew by 1.5x in 2023 compared to the previous year, to 488,000. Most of the sector’s leading companies demonstrated growth of net investments in leasing (NIL) of more than 25%.
The main driver of growth was the recovery of economic activity in Russia last year. The sector’s growth in 2023–2024 is also aided by a gradual overcoming of the deficit of leased property and state support for individual segments of the economy, mainly for small and medium-sized enterprises (SMEs).
The Agency conducted a survey among companies that have ACRA credit ratings in order to obtain information about how Russian leasing companies view the sector’s prospects for growth¹. A third of participants expect NIL to exceed 25% over the next 12 months, while an absolute majority forecast it to grow by more than 10%. Participants continue to have optimistic expectations regarding revenue and net profit growth rates.
Participants of the survey named demand for leasing companies’ services the main factor that drives business growth. A characteristic feature of the development of the industry in 2023 was a significant increase in the number of lessees.
The main factor constraining the growth of leasing companies’ business is the level of interest rates. At the same time, representatives of the sector do not expect the situation to change for the better over the next 12 months.
The level of competition in the sector is not a factor that has a pronounced negative impact on the business development of leasing companies. In most segments, leasing demand remains strong enough for even small lessors to demonstrate rapid growth. This contributes to the emergence of new players and an influx of investment in their capital.
The quality of the lease portfolio does not concern the sector’s companies. In general, this is consistent with the information available to ACRA regarding the credit quality of corporate borrowers using debt financing in one form or another. At the same time, according to the Bank of Russia, the number of terminated lease contracts is increasing.

¹ Assessment of business optimism

NEW ACCELERATION

In 2023, the Russian leasing sector was able to overcome the slowdown in growth rates of 2022 related to a deterioration of the operating environment. According to Fedresurs, the total number of lease contracts at the end of 2023 reached a record 488,000 vs. 316,000 a year earlier. According to information disclosed by some industry leaders, most representatives of the sector demonstrated active business development in 2023 (NIL growth exceeding 20–30% was a fairly regular occurrence).

The first quarter of this year confirms the stability of the existing growth trend in the leasing sector. The number of new contracts exceeded the indicator for the same period last year and most major players are also continuing to grow their business.

The key factor in the successful development of leasing in 2023–2024, of course, remains the resilience that the Russian economy demonstrated to the shocks of 2022. The relatively restrained decline in 2022 and transition to growth in 2023 contributed not only to the realization of pent-up demand, but also to the positive impact of business optimism from both existing and potential lessees on the industry.

Figure 1. The number of new contracts hit a record in 2023, thousand contracts

Source: Fedresurs, materials for the 13^th Annual Congress of the Russian Leasing Industry

In certain segments, growth of the sector was stimulated by the partial solution of problems surrounding supplying imported equipment to the domestic market. In particular, namely thanks to this, auto leasing grew by 86% (according to VTB Leasing JSC), while a simultaneous 86% decline in transactions involving secondhand vehicles was recorded².

Another significant factor in the fast growth of leasing business is the growth of SME lending, which amounted to 28.6% in 2023 and 5.2% in Q1 2024. Representatives of this segment are active consumers of leased property (various types of automotive equipment, commercial equipment, etc.). The inflow of financial resources, mainly supported by government programs, has facilitated both the overall high business activity of SMEs, as well as their active use of the services of leasing companies. The total number of lessees who entered into lease contracts in 2023 amounted to 179,000, compared to 134,000 a year earlier largely due to this.

²Materials for the 13^th Annual Congress of the Russian Leasing Industry

In addition, this tendency enabled the share of leasing in the total volume of financing of SMEs to be increased from 10.6% to 15.5% (according to OKB JSC).

According to ACRA, the prospects for growth of leasing in Russia in 2024 remain rather favorable. This is supported by both anticipated sustained GDP growth rates, as well as other factors that are characteristic of the sector, for example, the relatively low level of penetration of leasing services in individual segments of the economy compared to a number of other countries, the readiness of credit institutions, as well as other financial institutions, to provide funds to leasing companies (which, in particular, was expressed in the significant growth of the volume of placements of leasing companies’ bonds in 2023).

When noting the presence of certain external factors capable of supporting the sector’s growth, ACRA also takes into account the fact that ultimately, the sector’s performance depends on how leasing companies themselves assess the favorableness of these factors for operating activities, as well as how they view the main obstacles to development. In the Agency’s opinion, it is precisely this assessment (the assessment of business optimism) that is key for making management decisions.

To ascertain the level of business optimism among the participants of the leasing market, in May ACRA held a survey among leasing companies that hold credit ratings from the Agency. Participants of the survey had to answer a number of questions concerning conditions for doing business, their view of how conditions will change over the next 12 months, as well as other factors which ACRA believes to be the most significant for the operations of leasing companies.

A total of 18 companies participated in the survey. They represent different segments of the leasing industry and have different ownership forms (companies with state participation, subsidiaries of credit institutions, as well as independent leasing companies). ACRA plans to publish this sort of research on an annual basis in the future.

INTEREST RATE VS. SUSTAINABLE DEMAND

The main questions that the participants of the survey answered concerned how conditions for doing business have changed over the past 12 months and what changes they expect over the next 12 months. In ACRA’s opinion, a significant factor reflecting the level of business optimism is that none of the survey participants expect business conditions to worsen over the next 12 months. Half of the survey participants expects conditions to improve, while the other half expects no change.

ACRA notes that changes to conditions for doing business over the past 12 months were only positively assessed by five respondents, while four stated they had deteriorated.

The survey showed that the nature of development of the leasing sector in 2023–2024 is generally determined by three factors — demand of lessees, interest rates, and competition between lessors. These were the factors most often cited as driving or constraining development in 2024.

Table 1. Importance of individual factors for the development of leasing companies
(survey participants were asked to rate importance on a five-point scale, where 5 is critical importance, 1 is no importance; table shows the average score)

	12 months ago	Now
Interest rates	3.94	4.50
Demand for your company’s services	3.89	4.00
Level of competition	3.67	3.72
Credit quality of lessees	3.22	3.72
Availability of leased items	3.72	3.33
Banking conditions	3.22	3.28
Dynamics of operating expenses	2.78	2.94

Source: ACRA’s survey

Survey participants consider the growth of demand for their services to be the most favorable factor for conducting business (15 out of 18 surveyed companies believe demand is currently contributing to business development). At the same time, an increase in the activity of lessees over the past 12 months was noted by 12 respondents. More than half of the companies also expect demand to continue to grow over the next 12 months.

However, according to the leasing companies that took part in the survey, the main thing that may prevent the potential of high demand being realized is the current high interest rates (all respondents specified that this factor constrains development). In ACRA’s opinion, this factor will have a greater impact on the ability of leasing companies to finance an increase in business volume. However, demand may remain at a fairly high level.

According to an April survey of business activity among small and medium-sized enterprises (Opora RSBI) released by Promsvyazbank and National Public Organization of Small and Medium-sized Enterprises OPORA RUSSIA, although on average SMEs consider high rates to be an obstacle to borrowing, the share of companies willing to use debt financing remains fairly stable and is weakly dependent on tightening monetary policy.

As noted above, the activity of SMEs is one of the key factors in the growth of leasing business in 2023–2024. Taking into account the fact that the influence of changing monetary policy on the business activity of this segment remains rather moderate, we expect lessees to continue to form stable demand for the sector’s services.

Given current expectations regarding the nature of monetary policy, the probability of a lowering of the key rate and, as a result, a reduction in the cost of monetary resources is low. In these conditions, leasing companies may be faced to choose between declining profitability and slower business growth.

In ACRA’s opinion, a rather interesting aspect is the assessment of the impact of competition on the dynamics of leasing development in 2023–2024. Six survey participants indicated that the level of competition between lessors constrains business development. At the same time, half of the respondents answered that competition is favorable for business development.

The Agency notes that the presence of leaders by business volume in certain segments of the industry does not prevent small companies from achieving rapid growth. For example, leasing companies with ACRA ratings and NILs of lower than RUB 5 bln were able to increase their NILs by 1.5 to 2 times in 2023. In the Agency’s opinion, this situation is contrary to the one in the banking sector, where the domination of major banks considerably constrains the growth of lending activity of SMEs, even in conditions of rapid growth of the industry’s corporate portfolio.

The leasing industry continues to have a relatively low entry threshold, which stimulates the inflow of private investors and the appearance of new companies. The number of companies acting as lessors even increased in 2022, from 626 to 635. In 2023, their number increased to 697.

HAS THE LEASING ITEM SHORTAGE NOT BEEN FULLY RESOLVED?

One of the factors that constrained the sector’s development in 2022 was a shortage of leased property, which was due to both instability of shipments from abroad, as well as the termination of production by certain foreign companies inside Russia.

As mentioned previously, industry-wide, the problem of property shortages has been partially resolved, but half of the survey participants noted it as one of the factors constraining business development. Assessments of how the situation has changed over the past 12 months (growth/decline in availability/no change) were equally distributed.

Respondents generally do not expect the situation to improve in this area over the 12-month horizon, however, only two companies see the risk of a further decline in the availability of property, which may indicate a stabilization of the situation.

This also may be evidenced by the fact that a shortage of equipment is not felt in the SME segment, which largely forms the client base of leasing companies. According to the abovementioned overview of SME business activity, almost 90% of companies that since 2022 have had to substitute imported goods and components, have handled this situation by now (in the manufacturing sector, 60% of companies felt this need). Consequently, the ability of leasing companies to supply the market with equipment appears to be generally consistent with market needs.

Figure 2. How SMEs have replaced foreign goods and components

Source: Opora RSBI

CREDIT QUALITY OF THE LEASE PORTFOLIO IS NOT A CONCERN

Six of the 18 participants of the survey noted a decline in the credit quality of lessees over the past 12 months (the others believe that the quality of the portfolio has remained stable). According to the Bank of Russia, leasing companies prefer to avoid accumulating non-performing claims on their balance sheets, and the main way to resolve such situations is to terminate contracts. The regulator also notes that the total volume of assets to be sold under terminated agreements increased in 2023 and since the start of 2024.

According to the participants of the survey, the credit quality of the portfolio will generally remain unchanged over the next 12 months. At the same time, almost half of the companies announced that the current credit quality of lessees limits their risk appetite and thereby hinders development.

The stable quality of the lease portfolio is combined with a consistently low share of non-performing loans provided by banks to non-financial organizations. The share of overdue loans among corporate borrowers is steadily decreasing (less than 4% as of May 1, 2024), while overdue debt on SME loans during the year accounts for about 5% of the portfolio.

Figure 3. Share of overdue debt in the loan portfolios of Russian banks

Sources: Bank of Russia, ACRA

MARKET PARTICIPANTS EXPECT FURTHER BUSINESS GROWTH

Based on the results of the study, ACRA came to the conclusion that the current conditions for the leasing business are favorable for its further active expansion in 2024 and 2025. Almost 90% of survey participants (16 companies out of 18) believe that over the next 12 months, the total volume of the lease portfolio will grow by more than 10%, and 33% expect its growth to exceed 25%.

In the opinion of the leasing companies, these sorts of portfolio dynamics will be accompanied by improved financial results. According to the expectations of half of the respondents, revenues will increase by more than 25% year-on-year in 2024, while almost a third expect net profit to grow by the same extent. A further six companies think net profit will increase by 10–25%.

In ACRA’s opinion, these expectations are entirely justified, however, for them to materialize, the following conditions must be met in addition to maintaining a sustainable pace of economic development of the country.

Maintaining interest rates at no higher than the current levels: further tightening of monetary policy may not only lead to a reduction in leasing companies’ possibilities to attract financial resources, but also affect the solvency of lessees, primarily those who obtain debt financing at a floating rate (the problem of increasing interest costs on previously raised loans may also be relevant to lessors).
Maintaining state support measures for individual segments of the economy (mainly for SMEs): this will ensure an inflow of financial resources to companies that receive support and promote their active development, as a result of which stable demand for the services of lessors is formed.
Further increase in the availability of property for leasing: although the problem of shortage of leased items has been largely resolved over the period since the beginning of 2022, one of the side effects of this has been an increase in prices in a number of segments; in ACRA’s opinion, continued growth of supplies of various types of property to the domestic market may contribute to the reverse process and somewhat offset the negative impact of increased interest rates.

ACRA positively assesses the mood of market participants for active business growth in 2024 and 2025, but notes certain risks and threats that may be relevant in the current market conditions in the coming years. In addition to systemic risks associated with changes in the operating environment, such specific risks may result from the developments described below.

The higher availability of leased items at the moment is due, among other things, to the fact that over the past two years the market has been saturated with Russian and Chinese-made equipment, demand for which has increased due to an absence of previously in-demand European and Japanese brands. The portfolios of equipment seized from insolvent clients, on the contrary, are represented mostly by European and Japanese brands, which have become scarce and remain high quality. This allows market participants to relatively quickly transfer seized property to new recipients. Consequently, in a year or two, the structure of seized portfolios will change and be represented by affordable equipment, which may lead to an increase in losses even while maintaining the credit quality of lessees.
Stronger competition, including the expansion of the geographic and niche presence of companies (including major federal ones), leads to the fact that small regional players have to adjust the terms of lease contracts taking into account market trends, including reducing the level of advances and extending the terms of contracts. This practice over a short horizon, as noted above, leads to lower profitability, and over a longer horizon it leads to a decrease in the margin of safety and an increase in losses when terminating contracts with unscrupulous counterparties. Now the trend is somewhat smoothing out due to the speed of operation of small companies and their knowledge of regional markets and their business segments, but these opportunities are objectively limited.
Although the balance of supply and demand in the leasing services market currently leaves a chance for rapid growth for both large and small companies, the trend of increasing industry concentration, which is now characteristic of credit institutions, is gradually spreading to leasing. If the strengthening of the positions of industry leaders leads to the squeezing out of small players from the market, this may become a factor in worsening conditions for lessees.