Fleet News

Banking alliance points to better times ahead

A partnership with a banking group has opened the door to a major growth opportunity for one of Britain’s leading independent contract hire and leasing companies.

The new alliance between Santander and Zenith Provecta could also be signposting the start of better days for the beleaguered business car sector, believe financial experts.

“This development should show that the sector has weathered the storm – and the fact that Santander is involved is also evidence of a fresh level of confidence,” said Grant Thornton leasing and consumer finance associate director Gerard Moon.
“I think partnerships such as this should now be the way forward.”

Asked for his response to the deal, the former Zenith executive told Fleet News: “This is great news and is a fantastic opportunity for the company.

“The bank will have done its homework and I think it will have drawn a lot of comfort from the way things are being run at Zenith, which is private equity owned and has all the flexibility it needs to operate with a partner such as Santander.”

According to fleet expert Colin Tourick, the new arrangement adds up to a winning solution.

He said: “It’s hard to say if it represents a new trend because this market is constantly reinventing itself and trying out new ideas, but it is logical – banks are in the business of providing finance, fleet management is a specialist area and fleet finance requires vast amounts of funding.

“Santander likes this market but doesn’t want to build a fleet management capability and Zenith wants to build its fleet but doesn’t have access to near-unlimited funding.

Now Zenith gains access to Santander’s clients, so everybody wins.”

Back to the future

But he added: “This new deal is not really new.

“This is the way fleet management was done in the 1980s and 1990s.

"Before banks took over lots of contract hire companies, it was quite normal for them to provide the funding and specialist fleet management companies to provide the fleet management.

“Interestingly, Abbey – now part of Santander – was one of the banks that moved into this market big-time in the 1990s when it bought Elton vehicle Finance, renamed it First National, took over ACL (Standard Chartered) and Autolease and formed Lloyds TSB Autolease, one of the main constituents of Lex Autolease.

“All of which means the deal really reflects the fact that Santander likes this market but has decided to come back to into it via a partnership rather than doing it on its own.”

Grant Thornton director of leasing and consumer finance Tarun Mistry said: “My understanding of the deal is that Santander is allowing Zenith to market contract hire to all its clients and that it will fund any business that is the result.

“Funding is the issue in the market at the moment and this is a development that will ease the situation.

"Three years ago, there may have been 20 or so banks involved in funding the sector, but there are now half that number.

“For Santander clients who find themselves in the difficult position of not being able to get their vehicles funded, this is a positive move and for contract hire companies, the arrival of Santander means a new key player is coming to the market – and as a bank with liquidity, it will be beneficial for fleet operators.”

Relationship banking

According to Mistry, the Spanish group’s move is all about relationship banking and the provision of additional services.

“Santander wanted to get into vehicle financing and this is a way of servicing existing clients with another product and using a proven platform for contract hire and fleet management services to administer the agreements.”

The involvement of another bank could have another significant benefit, believes Mistry.
“Hopefully, it will bring margins and rates down for the industry.

“And it will be interesting to see if Santander starts funding some of the other contract hire companies on a direct basis – if this were to occur, that would certainly be a very positive development for the market.

“I think this partnership is a very good idea. Both parties will benefit from it and it looks set to be a successful venture.

"However, if Santander decided it wanted to fund other contract hire companies, there might be some conflict of interest,” he said.

British Vehicle Rental and Leasing Association chief executive John Lewis described the Santander-Zenith link-up as a “white label” relationship.


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