The Deutsche Leasing Group is focusing on growth in the US and financing the green transformation. The company, which is owned by Sparkassen, accompanies German firms, mostly medium-sized enterprises, in 22 countries with its financing solutions. „We see good opportunities in North America,“ says CEO Kai Ostermann.

In the fiscal year 2022/23, new business in North America amounted to 215 million euros. Double-digit percentage growth rates are expected in the coming years. The company has already expanded its business in the US and Canada in previous years. „We are a small player in the market,“ states Ostermann. „But in our sub-market of supporting German investments, we are developing well.“ He sees „continuous growth opportunities.“

For now, the group, which is headquartered in Bad Homburg, does not plan to enter additional markets. Deutsche Leasing is already present in the essential markets of their clients, predominantly European countries, but also China, Brazil, the US, and Canada. „Before entering another country, we would try to further exploit already established markets such as North America.“ Acquisitions are also not currently under consideration.

Ostermann also rejects an acquisition of S-Kreditpartner, which is mainly active in auto financing. Currently, the company operates as a joint venture between Deutsche Leasing and Landesbank Berlin, the owner of Berliner Sparkasse. Berlin has been trying to divest its two-thirds stake in S-Kreditpartner for some time. Deutsche Leasing holds the remaining one-third. „Although we are very satisfied with the development of S-Kreditpartner, we do not aim for a majority stake in the company.“

Due to the Russian invasion of Ukraine, the Deutsche Leasing has now completely withdrawn from Russia. The Deutsche Leasing Vostok, with offices in Moscow and St. Petersburg, has been sold in a management buyout involving a strategic investor, according to Ostermann. The value of the transaction has been kept confidential. Ostermann estimates the former business volume in the country at around 150 million euros.

The withdrawal incurred „minor losses,“ which Ostermann does not quantify. However, considering the challenges of transferring money out of the country, which was highly complex and involved months of preparation, he is satisfied. „Overall, we came out of it quite well.“

Transformation financing played an increasingly significant role in the past fiscal year, which ended September 30, 2023. „We aim to strengthen our position in this field", says Ostermann. The corresponding new business amounted to over 900 million euros and continues to grow in the current fiscal year. „In the first five months, we have again achieved significant double-digit growth compared to the previous year, and we expect this trend to continue in the second half of the year.“

The product range of Deutsche Leasing is coherent, notes Ostermann. It includes leasing contracts for small equipment starting from 20,000 euros to large rail projects ranging from 300 million to 400 million euros. The company positions itself as a „full-range supplier.“

Deutsche Leasing also aims to drive the green transformation as an arranger of green energy. „In the second half of the year, our own green energy project will go online", announces Ostermann. „We not only finance but also co-invest in our own photovoltaic plant.“ The company will provide electricity not only to itself but also to other companies within the Sparkassen financial group. It utilizes Financial Power Purchase Agreements (PPA) to offer price security. The capacity of the plant is expected to be around 53 megawatt-peak.

Overall, Deutsche Leasing achieved new business of 10.1 billion euros in the fiscal year 2022/23, slightly below the previous year's value of 10.4 billion euros. While the volume remained stable for movable investment goods, the company could not match the previous fiscal year's performance in the real estate sector, mainly due to a large real estate deal with a retail chain in the fiscal year 2021/22. According to Ostermann, the company estimates its market share in the 86 billion euros leasing market in Germany to be around a quarter.

The economic result slightly exceeded the previous year's value of 177 million euros, reaching 180 million euros. „We are satisfied with our figures", summarizes Ostermann. The proposed distribution to the shareholders, the Sparkassen, remains at 40 million euros, as in previous years. On the risk side, the past fiscal year also went very well. „As for defaults, things are looking decent so far this year,“ Ostermann says.

Nevertheless, Ostermann expects more corporate insolvencies. If demand weakens, the geopolitical situation becomes more difficult, and interest and energy prices remain high, some companies may struggle.

Even though the number of corporate insolvencies is expected to increase, there is no need for drama. After historically low insolvency rates, driven by government COVID-19 aid measures, the CEO notices a return to pre-pandemic levels. „We don't foresee a wave of insolvencies, rather a normalization on the risk side.“

Ostermann is quite optimistic about the current fiscal year 2023/24 so far. „In the first five months, we are slightly above the previous year's volume and operating result, which had already been good.“

However, he emphasizes that the positive trend may not continue. The outcome of the second half of the year will depend significantly on the return of investment incentives. „Our business represents a large part of the Mittelstand in Germany. And our clientele already shows a certain degree of uncertainty, which is always burdensome for investments.“

The cyberattack, which affected parts of the group in June of last year and hindered operations for several weeks, resulted in costs totalling approximately „a mid-single-digit million-euro amount,“ as stated by Ostermann, which were related to managing the situation. „These include consulting costs, IT costs, and the like. But the most significant factor was the dedication of our colleagues, who worked many night shifts and weekends to manage it", says Ostermann.

Loss of earnings due to the cyberattack could not be clearly quantified, as the economy was also weakening at that time. „In the second half of the year, we probably lost a small three-digit million-euro amount in new business.“ Companies had already postponed investments due to high energy prices and an economic downturn, and Deutsche Leasing had focused more on the profitability of its new business.

It was a classic ransomware attack, in which the perpetrators encrypt data after infiltrating an IT system and demand ransom for decryption. If not paid, they threaten to release the data. According to Ostermann, no ransom was paid. Indeed, approximately three months after the cyberattack, documents containing some customer data surfaced on the darknet. Consequently, Ostermann asserts that the company is not being confronted with any claims for compensation.

Parts of the group and its IT systems were completely unaffected by the attack, including DAL Deutsche Anlagen-Leasing and the Deutsche Factoring Bank. At the time of the attack, Deutsche Leasing was in the process of relocating its IT data centre, resulting in only approximately one-third of the IT systems being impacted. The remaining two-thirds had already been transferred or restructured into other setups. Additionally, Ostermann notes that the perpetrators only remained in the systems for a relatively short period, preventing them from extensively infiltrating undetected.

The recovery efforts lasted for weeks, and applications were gradually restored based on priorities. At times, employees had to resort to makeshift solutions, occasionally reverting to pen and paper. „It took us two to three months to fully return to unrestricted normal operations", Ostermann recalls. „We've successfully navigated through this live stress test, so to speak.“

„This is an experience one wouldn't want to go through. However, it has also demonstrated that with considerable effort and adequate support, such a phase can be overcome.“