The growth rate of the leasing market in the fourth quarter of 2023 may slow down noticeably

The growth rate of the leasing market in the fourth quarter may slow down noticeably. The main factors will be the growth of the key rate and the acceleration of inflation, which increases the cost of funding for lessors and the cost of contracts for lessees. Companies in such conditions will postpone investment projects. The driver of growth will remain retail segments, for which it is easier to attract financing.

The growth of the key rate and inflation dynamics are the main factors that will have a negative impact on the leasing market in the fourth quarter of 2023 and beyond, leasing companies surveyed by Kommersant agree. The influence of these factors will vary depending on the leasing segment, but one way or another, the rate of market growth may slow down in the coming months, despite the intensification of the business season, market participants are confident.

The third quarter has not yet reflected changes in market conditions in its results, and most companies do not record a slowdown. However, the growth rate in the second half of 2023 in annual terms will be 30–40%, industry participants expect. In the first half of the year, according to Expert RA, the volume of new business in the leasing market reached a historical maximum of 1.49 trillion rubles. This was twice the figure for the same period in 2022 and three times the figure for 2019–2020 (see Kommersant on September 12). “In the first half of the year, rates were at an affordable level. In addition, there was a strong economic recovery, stimulated not only by interest rates, but also by budget expenditures,” says Mikhail Gonopolsky, managing director of the Insight investment group. Now, due to increased rates, “the demand for leased items will no longer move up as seriously as it did in previous months,” he believes. However, we can only talk about a slowdown in growth rates, and not about a market decline, admits Mr. Gonopolsky.

Since July of this year, the Bank of Russia has raised its key rate in several stages from 7.5% to 13%, which resulted in an increase in rates on the debt market. On average, the leasing agreement rate is calculated as the key rate plus 3 percentage points. The cost of funding has also increased proportionally for industry players. The process of attracting investor funds is also becoming more complicated for leasing companies that have limited access to bank financing. For greater comfort for investors when placing bonds, a transition to a monthly coupon and arranging an amortization schedule for the issue is being considered in order to reduce duration and reduce risks in conditions of increased uncertainty, Interleasing notes.

According to investment programs until the end of 2023 and for 2024, some companies are already planning to revise the volumes and dynamics of investments downwards, confirms the CEO of Region Leasing Rustem Mukhamedov. “And inflationary dynamics, which lead to an increase in the cost of leased items in the short term, gives a surge in the volume of the leasing market, and in the long term has a braking effect on market dynamics,” he warns.

However, the companies surveyed by Kommersant do not yet see any risks to the payment discipline of their clients. In addition, in the event of a rapid reduction in the rate, based on the experience of past similar shocks, retail leasing will quickly return to growth, says Suren Asaturov, deputy director of the ACRA group of financial institution ratings. Other market segments have their own specific characteristics, among which the key rate is not in first place in terms of impact on business, he notes.

As for transport, construction equipment, and cars, the impact of the rate in these segments is not so strong. As Mikhail Gonopolsky explains, “it is easier for clients to refinance the transaction and obtain financing for the same leased items at lower rates in the future, when the Central Bank’s policy changes” (see Kommersant on August 8). In addition, the factor that has increased the demand for leasing passenger vehicles is the additional financing of the Ministry of Industry and Trade’s subsidy to support the domestic automobile industry by 7.8 billion rubles, adds Maxim Kalinkin, General Director of Gazprombank Leasing.

Polina Trifonova