GIVE LEASE A CHANCE
The following is an excerpt from Give Lease a Chance: How an Overlooked, Unloved Asset Class Could Save Banking, a white paper by K2 Capital Group. The full white paper is free and can be read here.
If you were ever picked last for a team sport at recess, you have a good idea how the lease finance industry feels these days. Despite outperforming every major asset class for the last five years, leases account for less than 1% of total assets for an average U.S. bank. In the immortal words of Rodney Dangerfield, lease finance can't get no respect. Yet, despite significant demand for leasing by their commercial customers, many banks are reluctant to dedicate human resources or portfolio shelf space to it. The most recent data from the Federal Deposit Insurance Corp. (FDIC) shows that leased assets make up just 1.4% of an average bank's total loan portfolio, or a miniscule 0.73% of a bank's total assets.
Lease Concentration % |
Of Loan Portfolio |
Of Total Assets |
| 2012 | 1.37 | 0.73 |
| 2011 | 1.37 | 0.74 |
| 2010 | 1.41 | 0.79 |
| 2009 | 1.50 | 0.86 |
| 2008 | 1.62 | 0.97 |
| Source: FDIC |
While banks offer a number of reasons why they don't offer leasing, performance isn't one of them. According to FDIC data, since 2007 leases have outperformed every single asset class in a typical bank portfolio, including loans for residential, commercial real estate, construction, home equity, credit cards and commercial and industrial (a.k.a. C&I). The numbers aren't even close. Looking at two key performance measures (noncurrent and net charge offs), leased assets far outperform any of the other asset categories.
The white paper is free. Read the full version of Give Lease a Chance: How an Overlooked, Unloved Asset Class Could Save Banking.
