Competition is driving banks to explore new frontiers through car leasing, drawing on their ready-made distribution network. While this diversification has already been underway for some time, the phenomenon has been gathering pace in recent years.
Crédit Agricole launches into long-term car leasing
In 2020, the bank announced the creation of its new entity, CA Rent, to cover the long-term leasing segment in the automotive sector. Operational since summer 2021, the company plans to enter into around ten banking partnerships internationally. With this move, Crédit Agricole aims to support "the changing world of mobility" and respond to the economic consequences of the health crisis, as confinement has weighed on production.
In the first nine months of 2020, CACF, Crédit Agricole's consumer credit subsidiary, recorded revenues of 1.49 billion euros, down 8% year-on-year. The group, which was unable to reach its target of 108 billion euros in outstanding credit, is counting on its new car financing business to turn things around. The bank recently strengthened its leasing business with the acquisition of Olinn, a specialist in car and IT equipment leasing. The company generates annual sales of around 175 million euros and serves some 5,300 business customers in Europe. This announcement clearly demonstrates the green bank's new ambitions in this sector.
Crédit Agricole is thus aligning itself with its two main competitors, Société Générale and BNP Paribas, already active in this lucrative niche.
ALD and Arval: profits on the rise
ALD Automotive, a subsidiary of the Société Générale Group, seems to have found the winning formula. This summer, it announced a 70% increase in half-year net profit to 352 million euros, on 1.76 million rental contracts signed. But that's not enough for the bank, which, in order to overtake its rivals, has begun discussions with a view to bringing together its subsidiary, ALD, and the Dutch company Lease Plan. This operation would enable Société Générale to shift its center of gravity even further towards the fast-growing car leasing market.
Arval, a subsidiary of BNP Paribas, posted a 59% increase in net income to 334.6 million euros, with 1.42 million vehicles leased. These figures confirm the resilience of the operational leasing business model.
In this way, banks are able to compete with the major leasing players by leveraging their distribution network, which reaches millions of private individuals and businesses. This extension of their business, capitalizing on the boom in the used car market, remains a form of consumer credit, but with less regulation, fewer capital requirements and a higher level of profitability.