TALLINN – Last year was one of extensive growth for the leasing market and for the financial sector as a whole. It is typical for Estonia that most of the leasing companies are subsidiaries of banks.
Now that the inflow of cheap capital has decreased and turned everything upside down, the changes on the banking market are also being felt on the leasing market.
According to the Estonian Association of Leasing Companies, the consolidated portfolio of Estonian leasing companies increased three times in 1997 in comparison with the previous year and amounted to 5 billion kroons ($345 million) by the end of the year. The leasing of real estate increased the most – its volume grew more than five times during the year, amounting to nine percent of the total leasing portfolio. Automobiles and commercial vehicles remained the largest sector in the composition of the portfolios.
In 1997, 64 percent of the association's leasing portfolio was taken by capital lease (sale on leasing terms). The share of the commercial lease (the object of lease is returned to the leasing company or the trader at the end of the lease) had decreased by 4 percent compared to 1996 and the share of hire purchase had increased from 1.8 to 5.6 percent.
Now interest rates are increasing and salesmen predict a drop in car sales by one third. The development in car sales last year was supported by extremely low real interest rates, which dropped at times to below 10 percent. The rate of interest, which is about 18 per cent at present, is predicted to be around 20 percent at the end of the year.
The merger of leasing companies, which is part of a consolidation of Estonian banks,will form two market leaders on the Estonian leasing market.
Hansa Capital, the subsidiary of Hansabank Group, offering leasing-financing, is buying the companies belonging to Hoiupanga Liising (Savings Bank Leasing) and the subsidiary of Latvia's Zemes Banka which was controlled by Hoiupank. Hansa Capital is active in the Baltic States, Russia and the Ukraine. Its market share in the Baltic Sates is about 35 per cent and once the mergers are completed, its total assets will amount to seven billion kroons and its staff will number 220.
Uhisliisingu AS, the largest subsidiary of the Eesti Uhispank, has already taken over the operations of Tallinna Pank Leasing and its actual merger will be confirmed during the next two months. The subsidiaries of Uhisleasing and Tallinna Pank Leasing in Latvia will be united to form about 12 percent of the Latvian market. The Latvian and Lithuanian branches of Tallinna Pank Leasing will make the Uhisleasing dream of a pan-Baltic package of services come true.
Together the merging leasing companies Hansa Capital (37 percent market share) with Hoiu Leasing (27 percent) and Uhisleasing (22 percent) with Tallinna Pank Leasing (5 percent) form about 90 per cent of the Estonian leasing market according to the data of the first quarter of 1998. The rest including the subsidiaries of Forexpank, EVEA Pank, ERA Pank, Krediidipank and Merita Pank have to operate on a 10 percent share.