Download Special Reference: Turkish Leasing Sector

Leasing Sector,
Turkey
Bülent Tasar
Chairman – Turkish Leasing Assosciation (FIDER)
CEO - Siemens Finansal Kiralama A.S. - Turkey
April 2012
1
Changing dynamics of the emerging markets &
the potential for their leasing industries
Special Reference: Turkish Leasing Industry
April 2012
2
April 2012
3
Shifting Balances
Emerging Economies
Population
Land Mass
FX Reserves
Oil Demand
GDP
Exports
Advanced Economies
0
10
20
30
40
50
60
70
80
90
100
*Emerging Economies as % of total World, 2010; Source: IMF
April 2012
4
April 2012
Russia
Japan
Emerging
Czech Rep
Poland
60%
Germany
Korea
South Africa
France
UK
China
US
Thailand
Chile
Brazil
Argentina
Indonesia
Turkey
Mexico
Vietnam
India
Malaysia
100%
Egypt
Saudi Arabia
Pakistan
EM: Strong Human Capital
Projected Growth of Working Age Population (Ages 10-65), 2005-2030
80%
Advanced
40%
20%
0%
-20%
-40%
5
They are growing faster than the advanced economies
Contribution to Global Growth
Emerging Economies
Advanced Economies
Source: HSBC
GDP Growth
2010
Advanced Economies
Emerging Economies
2011
2012
3.0
2.4
2.6
7.3
6.5
7.0
Source: IMF
April 2012
6
By 2050…
E7 countries, which comprise
of Turkey, China, India,
Brazil, Russia, Indonesia and
Mexico are expected to
outperform the growth rates
in the US, EU, G7 and OECD
countries.
E7 countries are expected to
attract the highest levels of
capital inflow in addition to
the strong increase in their
trade volumes.
April 2012
120000
100000
80000
E7
G7
60000
40000
20000
0
2006
2050
Source: Goldman Sachs, PriceWaterHouseCoopers
7
They invest heavily in sectors where leasing industry
is the most active
Energy Infrastructure
Transportation
Telecommunications
Health
April 2012
8
Share of SMEs in
GDP & employment
is very high…
70
60
Developing
Advanced
50
40
30
20
10
0
…but their access to
financial services
remains severely
constrained
Share of Formal SMEs in Formal
Manufacturing Employment
Share of Formal SMEs
in GDP
Share of Informal SMEs in Labor Force & GDP
50
Developing
Advanced
40
30
20
10
0 Share of Informal SMEs in
Labor Force
April 2012
Share of Informal SMEs
in GDP
9
Key Take Away: Emerging Markes will provide
significant growth prospect for their leasing industries…
Larger and relatively stronger
Offering significant growth potential
Under-penetrated
Under-capitalized
Under-leveraged
Under-owned & under-valued
Providing compelling sector/company-specific stories
April 2012
10
…& significant value-added for global players
Margins are higher
Returns are stronger
Penetration levels are low
Presence of captive parents
Strong M&A activity and search for partnerships
Scope for know-how transfer and value add
April 2012
11
Special Reference: Turkish Leasing Sector
April 2012
12
What can Turkey offer different than other
Emerging Markets
Unique Geographical Location…
…enjoys a very special location at the crossroads between East & West, overlapping Europe & Asia
geographically
…occupies an area approximately equivalent to the quarter of the size of the EU
…strategically located on critical energy corridors
…is the leading investor in Caucasian and Central Asian Turkic Republics
April 2012
13
Fast
growing
economy
GDP
1970
US$ 13 bn
Consecutive High Growth Rates
US$bn
%
2000
US$ 200 bn
2011
US$ 776 bn
Source: TURKSTAT
April 2012
14
Declining Budget Deficit & Net Public Debt
Budget Balance / GDP %
0
-1.1 -0.6 -1.6 -1.8
-2
-4
-1.3
-3.6
-6
-5.2
-8
-10
-5.5
-8.8
-12
-14
-11.9 -11.5
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: TURKSTAT
Net Public Debt / GDP %
70
66.3
61.5
60
55.2
49.1
50
41.7
40
34.0
29.5 28.2 32.5 28.7
2006
2007
30
20
10
0
2001
April 2012
2002
Source: TURKSTAT
2003
2004
2005
2008
2009
2010
15
Increasing Trade Volumes
1970
US$ 1.5 bn
2000
US$ 81 bn
2011
US$ 382 bn
April 2012
16
Stronger FDI flows
over
US$20bn per year
in 2005-2008
compared to only
less than US$1bn historically
April 2012
17
Promising for Higher Growth Rates
due to Low Penetration Levels
Energy
Automotive
Per capita consumption (toe)
Car ownership per ‘000
Finance
Loans + Deposits / GDP, %
April 2012
18
Turkish Leasing Industry in a Nutshell
Financial Leasing can be applied in the form of domestic lease, cross - border lease. Currently No
operational leasing.
Main medium-long term equipment financing instrument, especially for SME’s.
31 companies of which 26 are member of the association.
First 15 players dominate the market (mainly bank subsidiaries).
4 Participation islamic 11 Investment Banks
Contracts : Almost all full payout - mostly fixed interest rate
Average term: 3 years
Average growth rate: 35% in real terms.
2011 growth 55% in US$ terms.
April 2012
19
Legislative Framework
Leasing Law (No: 3226) governs only Financial Lease. (since June 1985).
 Uncancellable period is four years (two years in some exceptions such as cars, computers, photocopiers,
construction machineries, buses, trucks, medical equipments, aircraft and vessels).
 Lessor change is permitted.
 Sub Leasing is not allowed.
 Both movables and immovables can be leased (except industrial rights such as patent rights, software etc).
 Lease rentals can be fixed or floating and in TL and/or in FX.
 Lessor is the legal owner of the asset.
Leasing sector is governed by the Banking Regulation and Supervision Agency (BRSA).
 Contracts should be registered with notary public to secure the ownership rights of Lessor.
 Lessor is obliged to take out insurance, Lessee should pay the insurance premium.
 Total book value of the leased assets can not exceed 30 times of the shareholders’ equity.
 Minimum capital requirement is TL 5 million (appx. USD 2.7 million).
 Cross -border leasing contracts should be registered with the BRSA.
April 2012
20
Accounting & Taxation in Turkish Leasing Industry
April 2012
The leased equipent is shown
as symbolic price 1 YTL on
Lessor’s balance sheet
Leased equipment is booked
with its invoice amount at
fixed assests on B/S
Therefore no depreciation is
allocated
Depreciation is allocated over
leased equipment invoice
amount
Only interest portion of the
rental is booked as revenue
LESSEE
LESSOR
IFRS since 2007 for all enterprises.
Corporate tax: 20%
0.5% withholding tax on Cross-border rental payments.
No stamp duty or any tax on the lease contracts.
Investment incentives for special sectors and/or regions with 0% VAT allowances.
Only interest portion of the
rental invoices are booked as
expense
21
Strong Growth Rates of the Past are expected to Return
with New Legislation and Tax Reform
Sharp decline due to
tax changes coupled
with global
financial turmoil
Strong growth rates:
CAGR: 50.23%
Another growth
phase
6,712
19,373
24,250
1st Phase
June 1985 – June 2003
Tax base leasing.
All rentals are corporate tax deductable.
Investment Incentive (up to 100% tax allowance
may be reflected to lessee in pricing).
1% VAT against general VAT
(over years 11% - 15% - 18%).
April 2012
28,581
37,239
2nd Phase
July 2003 – Dec 2005
IFRS tax accounting.
No more tax base leasing.
Investment Incentive Certificate and
VAT advantageous continued.
42,963
51,519
3rd Phase
Jan 2006 – Dec 2007
Investment Incentive Certificate, corporate
tax allowances application ended gradually
(finished by end 2008)
VAT advantage of 1% against 8% or 18%
continued.
19,878
6,197
10,186
4th Phase
Dec 2007-Jan 2012
No any special tax incentive or advantageous in
leasing sector.
11,195
5th Phase
current
1% VAT
against
general
VAT (18%)
22
Draft Leasing Law
What will Change?
Operating Leasing
 Sale and Lease Back
 Sub Leasing
 Software Leasing
 Improvement in legal cases (i.e. Get equipment quicker, more
severe trade/civil law articles against fraud).
 No time restriction
 The voluntary-based Leasing Association will become
obligatory, covering all lessors and strengthening its status.
 Registration of lease contract with the Association will be less
bureaucratic compared to the ex Notary Public application
April 2012
Higher
volumes
New Products
Less
Bureaucracy
More
Efficiency
23
Future Prospects
 Penetration levels will increase in line with strong growth rates in Turkish GDP, increasing per
capita income and higher level of private investments.
New financial openings like operating leasing, sale and leaseback, sub leasing, software leasing will
also increase the growth rate and fuel higher levels of penetration.
Margins will improve via taking asset/RV risks (operation leasing, techfresh etc.)
 Asset management and risk management will be crucial (Basel II to be applied within 2 years).
 Technology investments will be used to create competitive advantages (IT, software, web base
applications etc.)
 Brokership will increase.
 Specialization/Value Creation/ Innovation will differentiate the lessors. Benchmarking will be key.
Learning organizations will be formed. (Dynamic and ongoing trainings).
April 2012
24
Future Prospects
Thank you for your kind attention.
Siemens Finansal Kiralama A.S.
BÜLENT TASAR
Managing Director/CEO
Meclisi Mebusan Cad. No:45
34427 Findikli / Istanbul
Tel
:
+90 (0 212) 251 02 07/08
Tel (Direct)
+90 (0 212) 252 92 09
Fax
:
+90 (0 212) 293 35 30
e-mail:
[email protected]
website :
www.siemensleasing.com.tr
April 2012
Finansal Kiralama Dernegi (FIDER)
BÜLENT TASAR
Chairman
Nisbetiye Cad. Ayyildiz Is Merkezi No. 2/2
34300 1.Levent / Istanbul
Tel
:
+90 (0 212) 284 53 10
Fax
:
website :
+90 (0 212) 281 66 47
www.fider.org.tr
25