eu flag

Since our last report on the Nordic and Baltic region, 2016 has so far proved to be a year of exceptional events, with surprises and shocks bringing political and economic repercussions. These have affected business confidence and investment plans across Europe, which has been reflected in the asset finance markets, although the Nordics and Baltics markets have shown resilience.

The unexpected vote by the UK to leave the EU, terrorist attacks, the various reactions to the refugee crisis, and the failed military coup in Turkey are indicators of heightened political uncertainty in Europe; the aggression of the US presidential election campaign has revealed further protectionist sentiment; meanwhile, global growth continues to be constrained, especially in China.

These factors have led to forecasts of economic growth in Europe being tightened, at least for 2016 and 2017. However, set against this is the fact that a number of underlying factors have stayed resilient. Inflation generally remains low and interest rates show no signs of rising, unemployment overall has come down while employment levels have improved in some sectors. Oil prices have been relatively stable, meaning that manufacturers and private consumers continue to benefit from favourable energy costs.

The positive factors are summed up in the August 2016 Autumn Outlook from SEB, which states: “Despite various sources of concern, the eurozone economy will continue to grow at a pace of between 1.5–2%, which is above trend and implies that unemployment will continue to fall. Domestic drivers are relatively strong, with a household sector benefiting from low inflation, job growth and an improved wealth position due to rising home prices.”

It continues: “Capacity utilisation has now also reached levels where capital spending usually takes off,” although it adds the important proviso, “But continued banking sector problems are holding down the pace of lending and hampering the effectiveness of ECB stimulus measures.”

Ahlander christina

In the asset finance markets in the Nordic countries, equipment leasing and long-term rental new business volumes (NBV) have continued to show the fluctuating fortunes seen in recent years.

The only national market to suffer a decline in NBV in 2015 was Norway, mainly as a result of the downward pressure on oil prices caused by the global decrease in demand for commodities and energy having an adverse effect on investment.

However, elsewhere volumes grew, particularly strongly in Denmark and encouragingly in Finland, which experienced a second year of growth following a series of declines.

Nordic countries – equipment leasing NBV, ex-real estate (€ million)

nordic equipment leasing

Source: National Associations, Leaseurope

It should be noted that the national associations in Finland and Sweden are estimated to represent around 80% of their respective leasing markets, as compared with some 90% for the equivalent bodies in Denmark and Norway, so total business volumes can be expected to be proportionately somewhat larger in the former markets – although growth rates and trends should be assumed to be unchanged.

Individual rates of growth have varied considerably over recent years, with only Denmark avoiding a year-on-year decline in growth since 2010; however, the combined annual growth rate (CAGR) evens out exceptional annual figures and provides a view of the longer-term trends. Over the five-year period from 2010 to 2015, Denmark stands out with a CAGR of just under 10%, followed by Sweden on 7%, with Norway and Finland managing to keep in positive territory.

Nordic leasing markets, NBV growth ex-real estate (year-on-year)

nordic ex estate

Source: National Associations, Leaseurope, Asset Finance International

At the time of writing, the only national figures available for asset finance NBV in 2016 are for Denmark and Norway, and both sets are positive.

In Denmark, NBV in the first quarter totalled close to €1.9 billion, a rise of over 12% over the same period a year earlier, and indicating the growth trend there is continuing.

Further good news comes from Norway, where the Association of Norwegian Finance Houses (FINFO) reported a return to growth. Commenting on total market performance, Christina Åhlander, managing director FINFO (pictured above), told Asset Finance International: “In H1 2016 the market for new leasing business in Norway grew by 15% compared to a 2% drop in the market in 2015. There was particularly strong growth in H1 2016 in equipment leasing, which grew by 11%, and auto leasing grew by 21% due to high sales of passenger cars and increased market share for finance companies in the passenger car market.”

Regarding the near-term prospects in Norway, Ms Åhlander said: “The fall in oil prices still affects the economy, but the expansionary fiscal policy, low interest rates and a weaker exchange rate is helping to underpin activity in other sectors. There is still much uncertainty regarding the development of the Norwegian economy but positive signs are that the fall in oil investment is now easing, while export industries and domestic tourism are benefiting from a weak krone.”

Exchange rate fluctuations can also affect periodic comparisons. For example, as cited above the market in Norway dropped 2% year-on-year in 2015 in Norwegian krone, but in euros it fell 9% as shown in the chart. Both Norway’s and Sweden’s currencies have weakened in recent years, making the performance of the asset finance markets in Norway and Sweden appear weaker when seen in euros – but the general trend patterns remain, regardless of currency.

Nordic economies – strengths and weaknesses

Projections for GDP growth have been gradually adjusted down as 2016 has progressed, but of the Nordic countries Sweden remains the leading economy, but rates are predicted to converge.

In Sweden, domestic demand has bolstered recent growth rates, but this is expected to fall back. Renewed energy sector investment should help Norway’s economy, which has suffered from low global oil prices. Growth in employment will stimulate demand and investment in Denmark, although the effects of Brexit may be most keenly felt here. Unfortunately for Finland the prospects remain for only subdued growth and a further fall in competitiveness with its neighbours.

Nordic countries – real GDP growth

nordic real growth

Source: Nordea Markets, September 2016

As already mentioned, unemployment levels are generally stable or improving, especially in comparison with the EU average which remains stuck in double digits.

In Denmark unemployment has been very stable throughout the year, at a little over 4%. Norway’s figures have been low but have just started to creep up to 5%. Levels have been somewhat higher in Sweden, but have returned to below 7%. And the best news has come from Finland, where unemployment has dropped from over 10% to just over 7% in August 2016.

Looking at inflation, the long-term target of 2% remains a distant prospect for most EU economies. This includes the Nordic countries apart from Norway, where inflation has been above 2% for over a year and peaked at 4.4% in July 2016. However, here the reduction in the base rate seems to be having an effect, with inflation now returning towards 3%. Elsewhere, figures for recent months show little change, even falling back to zero in Denmark. The EU average has at least showed signs of moving away from negative inflation, with small incremental increases for five consecutive months to September 2016.

baltic map

Despite their relatively small size, NBV in all three Baltic States leasing markets improved in 2015, following a period of relative stagnation. This progress is particularly encouraging given the headwinds faced by these economies, sandwiched as they are between the EU, where growth is fragile, and Russia, which remains economically weak.

It should be noted that the data in the charts is for equipment and vehicle leasing, but excluding real estate. Real estate leasing does not account for much volume normally, but 2014 was highly anomalous in Lithuania, with a volume of €227 million compared to the annual average of nearer €10-20 million. Removing real estate NBV from the total means Lithuania suffered a slight decline year-on-year in 2014; however, in 2015 NBV rocketed by more than 50%.

Volume growth was more modest in Latvia, although still an impressive 29%, while in Estonia NBV grew by 8% taking it back to nearly the same level as 2012.

Baltic States - equipment leasing NBV ex-real estate, 2011–H1 2016 (€ million)

baltic equipment leasing

Source: National Associations, Leaseurope

In terms of the total leasing portfolio, however, Estonia’s market has the greater total value – at the end of 2015 this stood at €2.1 billion, compared with €1.7 billion in Lithuania and €1.2 billion in Latvia.

NBV figures are available for the first half of 2016 for all three Baltic States and for Q3 for Estonia and Lithuania, so providing a good idea of whether recent growth trends are being maintained.

At the half-way point in 2016 NBVs for Estonia and Latvia were around the equivalent for the same period the year before. The third quarter figures for Estonia confirm that the full-year total should slightly exceed that of 2015, as is likely for Latvia.

Once again, though, leasing in Lithuania is powering ahead. Total NBV for the first three quarters of 2016 was not far short of €1 billion, and if Q4 follows the same trend the total for the full year will likely show year-on-year growth of more than 20%.

Such a figure will serve to further increase the difference in the combined annual growth rate between Lithuania and the other two markets.

Baltic States leasing markets, NBV growth ex-real estate (year-on-year)

baltic leasing markets

Source: National Associations, Leaseurope, Asset Finance International

Baltic States economies – strengths and weaknesses

The key themes in the economic performance of the Baltic States are consumer spending on the one hand, and slower state investment on the other.

Government investment has been constrained by the transition between EU structural funding periods, affecting investment in infrastructure and construction in particular. EU funding is crucial to all three Baltic States – for example, in Estonia some 70% of public investment is funded by the EU.

Another negative factor has been the continuing economic stagnation in Russia, which has affected the Baltic States’ export markets. However, this influence is waning and there are signs of growth finally returning in Russia in the coming year.

Currently, these headwinds have a counterbalance in the Baltics in the form of consumption-led growth.

In Estonia, GDP growth is predicted to continue to rise although the rate of growth is expected to slow. In Latvia, declining investment is forecast to lead to GDP growth flatlining. And in Lithuania, consumer confidence has had a much greater influence on GDP growth than business confidence (highlighted by a 25% increase year on year in passenger car registrations in H1 2016), although again the rate of growth is expected to slow.

In Estonia and Latvia, the rate of inflation has been rising away from negative values in the first half of 2016. Inflation is currently between 0.5% and 1% in all three Baltic States, higher than the EU average rate, and forecast to rise.

Inflation may be lifted in Lithuania by wages rising as unemployment levels fall. Here, unemployment has come down to 7-8%, while in Estonia the level is fairly stable at around 6-7%; in Latvia, however, unemployment remains relatively high at 9-10%.

Baltic States – real GDP growth

baltic gdp growth

Source: Nordea Markets, September 2016


Nordic Investment Bank (NIB) and Deutsche Leasing Sverige AB have launched a €20 million facility to finance equipment leasing for small and medium-sized enterprises (SMEs) and small mid-caps in NIB’s member countries.

NIB is an international financial institution owned by eight member countries: Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden. The bank cooperates with intermediary financial services providers in the region.

The facility has a maturity of five years and, according to NIB, is expected to alleviate credit constraints and facilitate productivity growth. Improved access to financing for projects that raise productivity can increase competitive pressure and efficiency in the markets.

Deutsche Leasing Sverige, a member of the Deutsche Leasing Group, provides leasing services in Sweden as well as in Denmark, Finland and Norway. SMEs account for 80% of the company’s customers and mid-caps for 20%.

Dahlqvist per

Per Dahlqvist, Business Development & Marketing Manager at credit software specialist company Emric, provides an introduction to an important technological innovation

There is a growing consensus that blockchain technology will fundamentally change the way we think about asset financing and how banks and financial institutions operate. Blockchain is a type of distributed ledger (i.e. a list of transactions that are replicated across numerous computers rather than being stored on a central server). Three features of blockchain with significant potential to impact the asset finance sphere are:

  • Smart contracts – Self-executing contracts on the blockchain. These contracts are fully automated such that no one can manipulate the process, hence everyone can trust the outcome.
  • Hashes – Mathematical functions which turn data into unique identifiers. If you make a change to the data, the hash changes. Hashes are the basis of blockchain immutability, which makes the technology so secure.
  • Security – Transactions on the blockchain are immutable due to the decentralized nature of the distributed ledger.
    It is the combination of these three blockchain features that will be fundamental drivers for asset finance companies adopting blockchain technology. So where are the opportunities?

Cross border – In trade financing there are multiple stages in the exchange of goods between interested parties (e.g. letters of credit, bills of lading, and import/export authorization). Imagine if all these interactions could be done on the blockchain.

For example, we can divide the interested parties into: Ledger Participants (e.g. exporter, importer, shipping company) and Authentication Nodes (e.g. transaction banks, export and import port authorities). If all parties interacted on the blockchain via smart contracts they would each have a shared and secure view of each step of the transaction process from initial order to shipping, settlement and final delivery. Consequently, blockchain technology can help optimize settlement times, add greater transparency to disputes, improve capital efficiency and lower transaction costs.

Transaction efficiency throughout the supply chain – If all interested parties in a physical supply chain have a shared view of an asset and document all interactions with the asset on the blockchain, there are substantial savings to be made in middle- and back-office processes and services.

Blockchain has unparalleled potential to improve the efficiency and governance of the financial industry. We at Emric are thrilled to be participating in the proliferation of this disruptive technology.

electric car 

According to Denmark-based energy and ICT solutions provider Insero, sales of electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) across the Nordic countries totalled 15,771 in the third quarter of 2016. As a result, the total stock has increased by 45% in the first nine months of 2016. This increase is primarily fuelled by new record sales in Norway, Sweden and Finland, with a return to growth in Denmark. (Source: Insero Quarterly, Q3 2016).

It should be remembered that Norway accounted for 72% of total new sales, and Sweden for 22%.

Nordic electric vehicle sales, Q3 2016

nordic electric sales

Source: Insero Quarterly

The markets in Denmark and Sweden were expected to be affected by anticipated reductions in government incentives in 2016, which had led to relatively strong sales in the final quarter of 2015. Information from electric vehicle sales database (which includes data for plug-in light commercial vehicles as well as passenger cars) shows that sales in Denmark, particularly of PHEVs, did indeed collapse at the start of 2016, although the market in Sweden was virtually unaffected. In Finland, sales volumes in the first half of 2016 were double that of the same period a year earlier, though this was from a very low base.

Meanwhile, sales in Norway continue to impress. It remains the leading country in Europe for plug-in cars and LCVs by a large margin, with a staggering 25% market share compared to the rest of Europe where the overall share is just over 1%. Sweden has now overtaken the Netherlands in second place, but here the share is still only 4%.

Incentives to go electric

Tax and financial incentives on alternatively fuelled vehicles vary between the Nordic countries and unsurprisingly, given the relative sales volume, a greater range of incentives is available in Norway. Here, for example, there is full exemption from VAT, registration tax and road tax, and reduced company car tax. VAT exemption also applies to leased vehicles. The Norwegian government has announced that these incentives will remain until at least 2018.

In Denmark, however, the reduction in registration tax will be less as of January 2017 when it drops from 80% to 60%. The Danish government is debating the introduction of a financial subsidy for early private purchasers of EVs, which would be funded by the government and car importers.

Sweden already operates a green car rebate incentive, and there are plans to introduce new reductions in tax for low-emission cars, to be balanced by increased taxes on high-emission cars.

In Finland battery EV purchasers now pay just 2.5% registration tax, down from 5% in 2015, and pay the minimum rate of ownership tax which is based on CO2 emissions.

Maynar luis

One important recent development in the Nordics and Baltics has been the acquisition of asset finance software provider Emric by Tieto. Asset Finance International asked Luis Maynar, Head of Business Development Banking & Finance at Tieto for comment on how the leasing markets can benefit from innovation in technology.

Asset Finance International: As a leading supplier of software and service solutions in the Nordic region, what are your views on the adoption of technology for asset finance? What steps should leasing companies be taking now to benefit from technological innovation?

Luis Maynar: In our view asset finance solutions are moving in the following direction:

  • Process automation and consolidation – through end-to-end systems: from origination, fulfilment and servicing that are highly configurable and that embed business rules and workflow engines;
  • Extension of the value chain to provide end-to-end processing, including collections management;
  • Single view of the customer in terms of relationships, credit limit, exposures and risk;
  • Rapid response to regulatory changes – through rules-driven accounting, for example; and
  • Native support for multi-languages and multi-currency.

In response to these challenges companies are:

  • Replacing silo-based systems with more modern parametrical solutions that allow end-to-end processing; and
  • Lowering operations cost via business process outsourcing.

AFI: Is leasing technology being updated fast enough in the post-recession environment in Europe? Are lessors being held back by out-of-date technology?

LM: We believe that lessors could gain competitive advantage through utilizing the latest technology. This could be from advanced scoring systems to implementation of new emerging technologies, e.g. blockchain technology for trade financing. It’s clear that there’s money to be saved and customers to be acquired through technical competiveness.

AFI: How can these leasing companies best exploit the increasing interconnectedness of their markets?

LM: Increased interconnectedness will help leasing companies to improve their models of asset valuation from how much a machine is used to how and where a car is driven. It is also a way to understand their customer preferences and behaviours to develop their services and offers in a fast-paced changing environment. The interconnectedness can also prevent un-predicted maintenance and help the service provider to improve their service offering.

AFI: Finally, from your company’s perspective, what is the outlook for business across the Nordic and Baltic region?

LM: In the Nordic market we see a great demand for digitalisation programs that aim at streamlining the customer experience across any customer touchpoint. Different strategies are taken. Some banks favour a ‘wrap-around’ strategy, whereby the more substantial changes are done on the front-end while re-plumbing processes to their existing legacy infrastructure.

Other banks favour a more vertical transformation approach, replacing both front- and back-end solutions by newly architected packaged solutions. In general, the key challenges reside in formulating a transformation strategy and business case and, more importantly, in the execution of the transformation programmes.

ranvik espen

Norway-based GSGroup is a leading European provider of services and solutions for mobile data collection, including for fleet management. CEO Espen Virik Ranvik(pictured above) gives his company’s view of the current state of the market in the Nordic and Baltic region.

The goal for GSGroup is to make our customers more effective by offering them solutions within asset management and field services. Over the past year GSGroup has experienced increased demand for our solutions. Our growth is strongest in the Nordic countries, but the trends are also recognizable in the Baltic region. We have seen a growing interest for field services and asset management solutions for several years, and the growth is increasing, especially this year.

Even though this growth is perceptible in all products, the market is ripe for acquisition. We have to deliver cost-effective and feature-rich products, and consolidation is therefore required. The acquisition of PPCT (a Finnish provider of telematics for fleet management solutions) was a strategic step to achieve our business vision – GSGroup shall be a preferred solution provider in Europe within field services and asset management.

We see that customers are focusing on environmental accounting and efficient utilization of assets and human resources. In our experience, customers lower their costs by 10-20% at the time they start to use our products, and that’s even before we start to optimize the utilization rate.

Key elements in our solution are:

  • Fleet management and utilization;
  • Travel log (according to government regulations);
  • Environmental accounting and driving behaviour;
  • Field services; order planning, order dispatch and documentation;
  • Secure valuables (anti-theft);
  • Car sharing and driver identification;
  • Asset management; and
  • Integration of solutions (3rd party).

We also see that customers are looking for scalable SaaS/cloud-solutions. A monthly licence fee is preferred to large investments costs, and this gives a transparent cost structure for assets and employees. We also see this applying to the financing of vehicles and equipment. A recent market survey tells us that about three-quarters of our customers have leased assets, and less than 25% have only self-funded assets. We think the trends are becoming more apparent; customers prefer a scalable, transparent cost structure, reduced deployment risks, and hosted solutions to achieve a strong desire to focus on their core business.

GSGroup thinks this trend will continue over the next years. As long as the customer is focusing on effectiveness and environmental accounting, there will be big opportunities for products such as ours. GSGroup will be measured by the ability to create innovative and cost-effective solutions.

Adoption of new technology is crucial, and the challenge is to find the proper product for the market, where we have to balance features versus costs. As a provider, we have to be able to answer our customers’ questions so that they can operate more efficiently. This is why GSGroup is delivering products and services within field services and asset management; reduced costs, and improved environmental footprint and effectiveness are best achieved when you optimize both assets and human resources.

2015 was another year of fluctuating fortunes for the asset finance markets in the Nordic countries and Baltic States.

Concerns over economic factors, national and global, will always have a dampening effect on companies’ capital investment intentions, and this is most obvious in the decline in equipment leasing and long-term rental new business volume (NBV) in Norway where the downward pressure on oil prices caused by the global decrease in demand for commodities and energy has been particularly acutely felt.

In Sweden leasing NBV was static in 2015, although this may at least mark the end of a recent downward trend and Sweden remains by some distance the region’s largest market. However, there was impressive new business growth in Denmark and, more surprisingly, the signs are looking positive in Finland.

Nordic countries, leasing NBV (€ million)

nordic countries leasing

Source: National Associations, Leaseurope.  Note: * Finland total is estimated, based on H1 2015 total of €1,914m

It should be noted that the national associations in Finland and Sweden are estimated to represent around 80% of their respective leasing markets, as compared with some 90% for the equivalent bodies in Denmark and Norway, so total business volumes can be expected to be proportionately somewhat larger in the former markets – although growth rates and trends should be assumed to be unchanged.


Åhlander christina

Year-on-year changes in NBV have veered up and down quite dramatically for all four national markets, but a straight comparison between the NBV totals in 2015 over those of 2010 reveals a striking difference in overall volume growth: Denmark’s market grew over 65% over the period, whilst in Sweden it actually fell by 2.5%. Meanwhile, the market in Norway grew by nearly 30% and, contrary to perceptions of stagnation, the figure for Finland, albeit estimated, is very similar.

The combined annual growth rate (CAGR) evens out any unusual annual figures and gives the longer-term trends over the five-year period. Here the national markets keep the same order for performance, with Denmark heading the group with close to 11%. Interestingly, Sweden remains in marginal negative territory for CAGR, in contrast to its overall economic performance (see later section of this report).

Nordic leasing markets, NBV growth
nordic leasing markets

Source: Asset Finance International, National Associations. Note: * Finland figures include estimated NBV for 2015

Commenting on recent leasing market performance in Norway, Christina Åhlander, managing director of the Association of Norwegian Finance Houses (FINFO), stated: “In 2015 the market for new leasing business in Norway dropped 2% compared to 2014, due to a sharp fall in vehicle leasing of 10%. The drop was mainly in passenger car leasing to consumers,” she said, adding that this was due to “an increase in the minimum leasing period and a high increase in sales of electric cars where residual value has been more difficult to estimate, made consumers turn to car loans instead of leasing.”

However, she noted, “The market for equipment leasing increased 4% compared to 2014, although in Q3 the year-on-year increase was 6.1%, so we clearly see a slowdown in the economy.”

Regarding the near-term prospects in Norway, Ms Åhlander said: “Businesses are expecting only small growth over the next six months. The oil industry is cutting down on investments and this is also heavily affecting their suppliers, although other industries, for example the food industry, are doing well. There is still much uncertainty regarding the development of the Norwegian economy. There will be low growth in companies’ investment in the coming year.”

Leasing in the Baltic States defies economic headwinds

At first glance, the leasing NBV data for the Baltic States show the markets in Estonia and Latvia returning to growth in 2015 after two disappointing years, while growth in the Lithuanian market has stalled somewhat but is still on an overall upward trend.

However, although the figures are reasonably encouraging, it should be noted that the leasing markets are still small and part of three economies that are inevitably influenced by EU-Russia sanctions and the current woes of the Russian economy.

NBV in Lithuania was more than €1 billion for the second successive year in 2015, while in Estonia volume grew to €933 million, close to its 2012 record high. It should be noted that the full-year 2015 total for the smaller Latvian market is estimated, but it also looks set to return to near record levels of €600 million plus.

Although Lithuania has the largest market by NBV, Estonia has greater total leasing portfolio value. At end-2015 this stood at €2.1 billion, compared with €1.7 billion in Lithuania and an estimated €1.3 billion in Latvia. Since 2010, the leasing portfolio has risen 22% in Estonia, some 4% in Latvia, but declined by 5% in Lithuania.

Baltic States, leasing NBV (€ million)

baltic leasing nbv

Source: National Associations, Leaseurope

Year-on-year NBV growth rates have generally declined from the highs at the start of the decade, but over the five years from 2010 to 2015 volumes in all three markets have more than doubled and the CAGRs are remarkably similar at around 16–17%. These are impressive figures given the economic headwinds, but 2016 is likely to be another tough year.

Baltic States leasing markets, NBV growth

baltic leasing markets

Source: Asset Finance International, National Associations.  Note: * Latvia figures include estimated NBV for 2015