1 International Forum Leasing in CEE Prague, 2 - 3 February 2012 Country Focus - Czech Republic Mrs. Jirina TAPSIKOVA, CLFA Overview of the Czech leasing

1International Forum Leasing in CEE Prague, 2 - 3 February 2012

Country Focus - Czech Republic Mrs. Jirina TAPSIKOVA, CLFA

Overview of the Czech leasing market:

1. State of development

2. Particularities

3. Macroeconomic role

4. Perspective



1. State of development

phases of development volumes customers commodities consolidation role of CLFA



Phases of development of leasing market

1. Start – up purpose of leasing – full financing of lesse’s investment full-payout leases depreciation tax benefits transfer of asset risks absence of basic regulation of leasing

Czech leasing market early nineties

2. Growing competition differentiation in lease products elaboration of service aspects of leasing reducing cost of the lease gradual introduction of leasing regulation

Czech leasing market at the turn of the century



3. Operating phase stark contrast to medium-term loans non full-payout leases lessors assume a significant amount of residual asset risks transfer of tax benefits to lessee operating leases leasing regulation elaboratedCzech leasing market at present

4. Elaborated lease patterns tailoring leases to specific needs of lessees frequently large value contracts inclusion of leasing in overall project financing packages innovative arrangements for cheaper funding, security and equity stake in

leasing Future of the Czech leasing market



6,5 16 17 28 3246

63 63,575 84,5

96 97 99,3 96,6 100,5 106,4122,7

95,5

44,2 47

0,7 0,4 0,6 0,7 0,3 0,4 1,2 4,4 5,6 4,4 5,8 9,1 9,4 11,8 12,6 11,2 11,9 11,6 3,2 2,10

20

40

60

80

100

120

140

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Development of leasing volumes of members of the Czech Leasing and Finance Association (bln. CZK)

Real Estate Equipment* 2008 – change in taxation regime of leasing (longer terms of

leasing, elimination of shorter depreciation in leasing)

*



Equipment leased by members of the Czech Leasing and Finance Association in 2010

according to sector of lessee´s activity

3,0%

37,5%

2,5%

51,8%

5,2%

consumers agriculture industry, constructionservice private sector service public sector



Equipment leased by members of the Czech Leasing and Finance Association in 2010

analysis by type of asset

25,5%

1,6%

1,2%

0,1%4,2%1,4%

5,0%2,8%

21,4% 18,5%

18,3%

cars - 25,5 % trucks - 18,5 %motorcycles - 0,1 % light commercial vehicles - 4,2 %buses - 1,4 % other heavy commercial vehicles - 1,6 %ships, aircraft - 5,0 % computers, office equipment - 2,8 % machinery, industrial equipment - 21,4 % fotovoltaic equipment - 18,3 %others - 1,2 %



Consolidation

Share of leaders on the market:

top three top fifteen

2000 44 % 87 %

2005 41 % 80 %

2010 29 % 83 %

a really concentrated leasing market



Consolidation 90 % of the volume of all assets on lease in books of 15 companies 8 leaders (of top 15) – bank subsidiaries 4 leaders (of top 15) – captives mostly subsidiaries of pan-European banks/lessors



Czech Leasing and Finance Association established 1991 59 members, out of it – 40 providers of leasing (2010) aims:

efforts towards creation of economic and legal conditions conductive for leasing coordination and promotion of common interests of members

activities: dialogue with state authorities (lobbying) cooperation with non-governmental interest groupings dissemination of information on leasing gathering and processing information for members (a fortnight bulletin, WEB) analyses of selected problems of leasing (expert committees) prevention of crime in leasing ethical code of conduct arbitration in leasing leasing statistics contacts with other leasing markets and/or associations (LEASEUROPE) etc.



2. ParticularitiesNo state (banking) supervision liberal and flexible approach of state authorities toward leasing non-deposit taking entities no direct medium for implementing fiscal and monetary policy of the

state (Central Bank) hitherto no major problem in the leasing industry with

macroeconomic consequences conditions for establishing and operating a leasing company the

same as for other ordinary commercial legal entities (entrepreneurial licence)

role of the market respected self-regulation supported elements of indirect regulation



2. ParticularitiesLevel of regulation

no “leasing law” civil law

no exact definition of financial leasing (innominate contract) role of general contract terms role of jurisprudence

public law no exact definition of “financial institution” or “leasing company” consolidated supervision of leasing subsidiaries within banking groups elements of reporting to the Central Bank money laundering fair market competition consumer protection environmental protection etc.



2. Particularities

Rising role of operating leases on equipment leasing

2000 3,5 %

2005 12 %

2010 25,8 %

Diminishing role of property leases

2000 4,9 %

2005 11,2 %

2010 4,2 %



93,4% 93,3% 91,6%88,3%

82,6%

77,3% 76,1%

63,9%

46,1% 47,5%

36,0%37,0%

20,4%

13,0%

10,1%6,0%

2,2% 2,5% 4,0% 4,0%

16,5%16,9%

15,7%10,9%

12,6%11,4%7,7%

4,4%4,2%4,4%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Financial Leasing

Credits

Operating Leasing

2. Particularities Rising share of credits in portfolio of leasing companies



3. Macroeconomic role Contribution to forming and developing market economy

start-ups SMES restructuring of economy innovations support of sales employment



3. Macroeconomic role since 1990 - sum of assets leased – 1,6 bl. CZK contribution to GDP

2000 3,8 %

2007 3,7 %

2010 1,4 % financing of one fourth of all investments in equipment financing of new cars through leasing (14,6 % in 2010)



4. Perspective

a) Rating of the Czech Republic

Moodys A 1

Standard & Poor´s A

Fitch – IBCA A +



b) Economic data crutial for demand GDP 2010 + 2,3 % (3.521 mld. CZK) I/2011 + 2,8 %

II/2011 + 2,2 %III/2011 + 1,2 %

Investments in equipment2008 + 5,5 %2009 - 16,3 %2010 - 3,2 % (377 mld. CZK)

Industrial production11/2011 + 5,4 %

Construction11/2011 - 2,3 %

Retail sales11/2011 +0,5 %



Other economic data crutial for demand

Unemployment

12/2011 8,6 %

Inflation

12/2011 2,4 %



c) Data reflecting quality of outstandings in leasing credits in default11/2011 - non-financial enterprises 8,1 %

- households 5,1 %insolvencies 2011 - entrepreneurial entities 2.413 (+ 49 %)

- households 10.620 (+ 82 %)

d) Economic data crutial for fundingRepo rate by Central Bank0,75 % (since 7th May 2010)



4. Perspective

Major challenges for leasing major changes in direct taxation (2014) new international accounting standard (2013 ?) new Civil Code (2014) Basel III (2012)



4. Perspective a stable sector of financial market a consolidated market no major re-financial problems elaborated level of risk management rising role of sofisticated leasing products rising role of credits in non-banking financial services widening regulation an ordinary European leasing market rising volumes in future months


Thank you for attention

Documents

1 International Forum Leasing in CEE Prague, 2 - 3 February 2012 Country Focus - Czech Republic Mrs. Jirina TAPSIKOVA, CLFA Overview of the Czech leasing