As uncertainty continues to reign over the success of
economic stimulus packages worldwide, Claire Hack talks to
Sebastiano Musso, deputy general manager and head of the Italian
market at UniCredit Leasing, about the impact of the macroeconomic
situation on the leasing market in the country.
financial maelstrom to emerge from the US and Europe has caused
major strife within the Italian economy. The country’s debts are
spiralling and its sovereign credit score was cut to A+ by ratings
The gap between Italy and other
European countries in terms of debt has therefore widened, and the
cost of mid- to long-term funding has doubled over the course of
the last six months, according to UniCredit Leasing’s deputy
general manager Sebastiano Musso.
“This has further depressed already
weak demand. I would also draw attention to the narrowing between
medium and long-term spreads, now heading for a single-digit
level,” Musso adds.
“Such a situation is impacting
leasing companies, which strongly rely on the inter-bank and debt
markets for financing.”
Captive and bank-owned lessors are
therefore at an advantage, Musso says, as they have access to a
wider variety of funding sources, and also have the strength of
their parent companies to back them up.
This includes UniCredit Leasing
itself – among the largest leasing companies in Europe, and part of
Italian banking giant UniCredit.
Other companies, however, lack this
support, and especially in certain sectors, Musso adds.
am perceiving decreasing competition in bidding for renewable and
real estate related tickets – businesses strongly linked to
long-term funding availability,” he says.
“Being part of an international
banking group like UniCredit, that can access a wide range of
funding sources, provides us with an advantage versus most of our
competitors in the Italian market, both in terms of availability
and amount of funding, and consequently, of financing
The Italian leasing market as a
whole was sluggish in the first half of 2011, as it was closely
linked to the dynamics of financial instability.
“The leasing business is tightly
correlated with the [behaviour] of the real economy, and this
connection is well reflected in the patterns of the different
segments,” Musso says.
“The Italian market data issued for
[the first half of 2011] by Assilea [the Italian leasing
association] confirm a stagnation of the market – in spite of an
increase in the number of contracts, there was a decrease in total
values, with relevant trend differences in specific product
The total number of contracts for
the period ended 30 June, was up 5% compared with the corresponding
period in 2010, Musso says, while the total value of contracts fell
The renewable energy segment
performed particularly well – perhaps surprising given its
connection to expensive, longer-term funding – as volumes across
the industry increased 65% throughout the six month period, and
soared 147% at UniCredit.
“The acceleration in volumes was
driven by the deadlines set by the fourth edition of State
incentive schemes, becoming less attractive since the end of
August,” Musso says.
A major reduction in subsidies for
renewable energy projects in Italy was announced earlier in the
year, meeting fierce opposition from policy makers in Europe.
Explicit expense budgets were set
up for large photovoltaic (PV) plants for three intervals between
June and December 2012 under the new regulations.
These are to be enforced via a
ranking system, limiting large PV plants’ access to incentives, and
will apply to plants that began operating on or after 1
In September, it also emerged that
the Italian government would offer additional incentives of 10% for
plants whose construction cost, excluding labour, included
components at least 60% of which were manufactured in the European
The plan met with criticism, as it
appeared to favour Spain and Germany, where many of these
components are made, rather than Italy itself.
Meanwhile, equipment financing –
including smaller items on shorter-term contracts – suffered a
major drop in volumes, falling 22.5% during the first half of 2011,
compared with the first half of 2010.
“This was driven down by the
weakness in the investment cycle,” Musso says.
“There were strong uncertainties
about the business in the coming quarters, which capped demand for
funding for non-financial investments. This demand remained weak
And while official figures for
volumes in the third quarter of 2011 are not yet available, Musso
was able to make a number of predictions for the coming weeks and
“Looking at the Italian leasing
market from UniCredit’s privileged position – in July, we enjoyed a
19.2% market share – I envisage that the scenario will remain
unsound, with volumes both in real estate and equipment segments
lagging behind first half results,” he says.
“Given the different trends in the
diverse segments, I expect that companies with higher penetration
in fast growing segments such as the photovoltaic industry will
increase their market share during the third quarter.”
Captive funders, and especially
those in the vehicle leasing sector, are expected to strengthen
their positions, Musso says, while mid-sized companies may weaken,
owing to the continuing lack of availability of bank funding.
Leasing itself, Musso adds, acts as
a barometer for economic trends, as increased investment in
equipment tends to be an indicator of growth in industrial output,
while a reduction in these investments suggests a recession could
be on the cards.
“Macro-economic stagnation and the
resulting drop in investments are certainly among the drivers of
current slow recovery of new business volumes,” he says.
“A second element that increases
volatility in the Italian [leasing] market is the uncertainty of
the regulatory and fiscal framework, in the renewable sector for
Internal analysis conducted by
UniCredit Leasing suggests 2012 will see only “feeble growth” in
the market, Musso says, although some improvement may be observed
in the medium term.
“The strategic variable for the
entire market remains the possibility of funding in the medium
term,” Musso says.
“All of our peers are aware that we
are not going to reach the volumes recorded in 2006 and 2007,
[which totalled] €50bn on a national basis, and that in the short
term, the overall picture still remains even below 2008
The lack of a confirmed bailout
package within the eurozone, which relied upon a key vote in
Slovakia on 14 October, as well as the absence of a specific bill
within Italy aimed at boosting growth, will also drag figures down,
according to Musso.
“If the macroeconomic scenario
recovers, or specific bills are passed for a resumption of
investment, the leasing industry will be among the first to
benefit,” he adds.
Any return to investment in Italy
will mean outlay on new equipment, or other growth projects, and as
traditional bank funding is expected to remain tight, it is likely
this could, in turn, mean volumes at leasing companies will
increase, however feebly.
For now, Musso says, the Italian
market appears to be divided into three categories.
“Data for the first part of 2011
confirmed a progressive crystallisation of the market, based on the
strength of the commercial network and the access to medium and
long-term forms of funding,” he says.
The first of the three categories
is made up of the larger companies, linked to major banking groups,
providing continuity of funding, as well as the ability to cover
any length of contract.
“This allows them to be able to
cope with the entire leasing demand, from short term vehicle
business to long term deals in property and [the] photovoltaic
[sector],” Musso says.
The second group, Musso adds,
includes captive lessors, as well as bank-owned funders that
operate solely within certain sectors – primarily within vehicle
and other smaller equipment leasing – and prefer not to offer
The third, and final, group
includes the remaining leasing companies within Italy, which are
active in all market segments, but are generally are risk averse,
meaning they prefer to avoid bigger ticket deals.
“Each group uses a different
distribution channel mix – brokers, banking network, direct,
vendors – and different policies for network’s remuneration,” Musso
“To date, I haven’t noticed top or
middle league players retreating from the market, but [there has
been] a relevant repositioning or exit strategy from specific
He adds that a decrease in the
total number of companies active in the Italian market could be on
the cards in the coming months.
“For example, this could be mergers
of companies that have developed in former banking groups, or that
were created to achieve specific business or distribution
strategies,” Musso says.
As for UniCredit Leasing itself,
the company has not been without its challenges during the course
Musso says: “[This year] opened
with three clear challenges for UniCredit Leasing: customer
centricity; risk control and management; and synergies with the
UniCredit Group, both in terms of customer service and ALM [asset
“Recent tensions in national and
international financial markets have confirmed the foresight of
these three priorities, and that will remain unchanged for
Much will depend, furthermore, on
the future of the eurozone, as well as changes to internal fiscal
policy in Italy.
At the time of writing, Slovakia
had yet to approve fully an EU bailout scheme, aimed at expanding
loans to troubled Greece, as well as deepening spending cuts and
introducing new taxes.
UniCredit Group operates in Italy
and 18 other countries across Europe under the UniCredit Leasing
CEO Massimiliano Moi has stated
that the key initiatives of the company will all be aimed mainly at
improving the customer experience.
“[They] will be directed towards
the achievement of the best offer of products and services, the
improvement of our capacity of fulfilling the customers’ needs and
to the reduction of production costs,” Moi says, in a statement
published on the company’s website.
“In addition, particular attention
shall be dedicated to developing the multichannel approach and to
reinforcing the cooperation with the UniCredit bank network,” the
UniCredit leasing has more than
3,000 employees across its 19 countries of operation, and refers to
itself as “the leading company in Europe for asset based financing
Based on new business volumes in
2009, the company was among the top three funders of its kind in a
total of 13 countries.
As of 2010, its revenues totalled
€810m, and its net profit came to €102.4m. The value of its
contracts for the year was €9.7bn.
Assilea, or the Italian Leasing
Association, represents lessors across the country, and, at the
time of writing, had more than 60 members.
The association aims to help its
members to deal with the challenges they face in the current
economic climate, and makes representations at both national and
It carries out research and
studies, as well as setting out codes of conduct, and implementing
initiatives aimed at promoting and regulating leasing activity in
Assilea has been publishing an
annual report on leasing since 1995, containing information on
trends in leasing, both within Italy and overseas. Its current
president is Maurizio Lazzaroni.
It is also a member of Leaseurope,
the larger body governing leasing companies within Europe.
With the growing popularity of PV
energy in Italy, new legislation has been continually
The fourth instalment of Conto
Energia, the law governing Italian PV projects, introduced a number
of changes to the third instalment, which was released only nine
The previous instalment offered
major incentives to those involved in supplying solar energy, but
with the huge uptake in popularity, it became apparent that the
cost would not be sustainable.
Conto Energia Four was therefore
introduced to contain that cost, and incentives were significantly
The changes have attracted
criticism from sources both in Italy and elsewhere, as it is feared
they could discourage people from investing in renewable energy,
thereby damaging efforts to control climate change.
The distribution of subsidies among
PV plants has also been cited as being too complex, as it involves
an elaborate ranking system, designed to limit larger plants’
access to the funding.
Much of the funding for such projects has also been supplied by
leasing companies, including UniCredit, meaning the changes could
have an adverse effect on the industry, as engaging in solar
schemes becomes less attractive.