Lessors well-placed to take on challenges of 2022 

Prudent financial management and targeted regulatory reform mean that the lessors of Croatia, Serbia, Bulgaria and Slovenia will be well placed to confront 2022 in better shape than they might have feared this time last year. Che Golden reports

Towards the end of summer last year, many Balkan states were concerned that the coronavirus pandemic would wreak havoc on lease volumes – particularly in key sectors such as tourism, a major source of revenue in the region.


Fast forward 12 months and the Croatian Financial Services Supervisory Agency (HANFA) noted that in the first half of 2021, the leasing sector reported total pre-tax profits of HRK 200 million, more than 170 per cent up on the same period last year. HANFA also said 13 leasing companies reported overall operating profits of HRK 205 million, while two leasing companies reported pre-tax losses totalling HRK 5 million.

The reported profit was greatly influenced by a 34.2 per cent reduction in reported costs of value adjustments compared to the first half of 2020, as well as an 8 per cent increase in profit from interest rates.

This is a remarkable bounce back when you consider that HANFA figures show that the effect of the pandemic during 2020 led to 25,028 (or 38 per cent) fewer leasing contracts being concluded compared to 2019. The fall in contracts came almost exclusively from the tourism and transport sectors.

With the pandemic ebbing, Croatia has been able to reverse the negative trends of 2020. In the first half of 2021, 9,588 (54 per cent) more leasing contracts were concluded than in the first half of 2020, while the value of newly concluded contracts increased by more than HRK 1 billion. The greatest increase, both in terms of number and value, was recorded by passenger cars and commercial vehicles.

HANFA believes leasing companies in Croatia weathered the Covid storm thanks to a high level of liquidity. Its figures show leasing companies maintained a consistently high level of own funds (more than HRK 2.2 billion as of 30 June 2021) which guarantees business stability in the coming periods.

The amounts of own funds range from HRK 3.8 million for the smallest leasing companies to as much as HRK 473.9 million.

The Croatian leasing industry is hoping for a successful tourist season this year to fill the coffers. Activities most affected by the pandemic were, not surprisingly, transport, charter and car rental. Companies in this sector have been propped up by active moratoriums, but these are due to expire this year so Croatia needs tourists to come back as well as people spending within the local economy.

The future of aviation is strictly tied to several factors


Serbia, on the other hand, managed to get through Covid without posting any negative results for the leasing sector. According to the National Bank of Serbia, balance sheet assets amounted to RSD 115.3 billion at the end of 2020, which is 12 per cent more than at the end of 2019.

Net profit amounted to RSD 371 million at the end of 2020, with the largest number of the financial leasing companies – nine - having a positive net result. Total revenues and profits amounted to RSD 4.3 billion, which is 4.8 per cent more than the previous year, and total expenses and losses amounted to RSD 3.7 billion. The total capital of all financial leasing companies at the end of 2020 stood at RSD 9.3 billion.

At the end of 2020, the financing of freight vehicles, minibuses and buses continued to account for the largest share (40 per cent) of the market, followed by passenger vehicles (38 per cent). Other lease assets accounted for less than 10 per cent.

In Q4 of 2020, the most significant share of total financial lease investment was accounted for by transport, warehousing, information and communications. Trade also accounted for a significant share, followed by manufacturing, mining, and water, electricity, gas and steam supply, and construction.

Several policies were put into place to help businesses weather the pandemic. Payment of payroll taxes and contributions in the private sector were deferred with subsequent repayment of liabilities in instalments (starting from 2021 at the earliest).

Payment on taxes and contributions on salaries for one month were also deferred for a month and there was provision made for payment of three minimum wages to entrepreneurs that are subject to the flat-rate tax and pay tax on actual income, and to micro, small and medium-sized enterprises in the private sector.

In the corporate sector, a moratorium was established on dividend payments - except for public companies - while targeted support was offered to sectors that suffered the most, primarily the tourist industry.

The National Bank of Serbia also took steps to shake up the regulatory framework for payment systems, payment services and electronic money issuance, under EU legislation.

The government has also been drafting the Law on Digital Assets, which was adopted by the National Assembly in December 2020. This will introduce a legal framework for digital tokens, virtual currencies and other digital assets.

The Serbian economy, in general, bounced back to pre-crisis level by Q1 2021. According to the Serbian Statistical Office, GDP growth reached 1.2 per cent in Q1, while at the quarterly level it amounted to 2.5 per cent. This was better than predicted and the growth of the economy was underpinned by increased construction activity.

Based on faster-than-expected recovery in Q1, higher planned government capital investment and the adopted third package of fiscal measures, the Serbian government estimates GDP growth to reach 6 per cent this year.


In Bulgaria, the total amount of leasing companies’ claims under financial and operational leases was BGN 4.491 billion or 3.5 per cent of GDP at the end of June 2021 compared to BGN 4.274 billion (3.6 per cent) at the end of June 2020.

This indicates that Bulgaria has experienced very little change, even though new business volumes decreased by 16.62 per cent compared to the previous year.

While the Bulgarian leasing market is stable, Borislav Todorov, CEO of Kuehn & Partner Bulgaria, says the country is facing fresh challenges as Covid becomes an unpleasant memory.

“We are facing a larger administrative and legal burden, like the increase in last year’s regulation in the anti-money laundering and anti-terrorism legislation,” he says. “We also have to get to grips with new IFRS 17 Leasing, especially in field of operative leasing accounting. In the last few months every sector has been hit with increased inflation, which is causing a drag on the economy in general. Add to this the new EU ‘Green deal’ and the carbon emissions regulation and you can see the leasing industry is dealing with a lot more bureaucracy.”

Financial lease claims amounted to BGN 4.272 billion at the end of the second quarter of 2021. They increased annually by 5.1 per cent (BGN 206.4 million) and by 3.1 per cent (BGN 126.9 million) in comparison with the end of the first quarter of 2021. Their share of the total volume of claims under lease agreements at the end of June 2021 was 95.1 per cent and remained unchanged in comparison with the end of the same month of 2020.

New financial lease agreements concluded during the second quarter of 2021 amounted to BGN 580 million. Compared to the second quarter of 2020 their volume increased by 69.8 per cent (BGN 238.4 million) and by 19.4 per cent (BGN 94.2 million) compared to the first quarter of 2021.

Claims under agreements for financial leases of cars amounted to BGN 1.733 billion, an increase of 7 per cent compared to the same period in 2020 and 4 per cent higher than in the first three months of this year. Their relative share in the total amount of financial lease claims was 41% at the end of June 2021 compared to 39.8% at the end of the same month of 2020.

At the end of the second quarter of 2021, claims under agreements for financial leases of commercial and light commercial motor vehicles amounted to BGN 1.306 billion, which represents a small decline from the same period in 2020 and an increase of just over 1 per cent from the end of March 2021.

Claims under agreements for financial leases of machinery and industrial equipment were BGN 1.004 billion, up by 14 per cent compared to the end of June 2020 and almost 5 per cent from the end of March.

Todorov is confident that 2022 is going to be a good growth year for the country. “There are a number of factors driving demand for leasing in leasing in Bulgaria such as the VAT advantage in some types of leasing,” he says.

“There is also a demand for investments in the economy, still based on the old socialist country legacy, which is going to create a lot of opportunities. Of course, we will see a bump in growth as life gets back to normal after Covid, but things like increased inflation can be an opportunity for some sectors for better profit, with more companies turning to leasing to save costs.”

Bulgarian leasing companies have had an additional helping hand in the form of a new risk-sharing scheme, Leasing 2021, launched by the National Guarantee Fund (NGF). It is specifically targeted at leasing companies and is the first risk-sharing instrument exclusively for leasing companies in Bulgaria.

The programme aims to facilitate access of micro, small and medium-sized enterprises to leasing services by issuing guarantees to complement collateral required for lease transactions.

The scheme targets both existing and start-ups and provide for leasing transactions for the purchase of long term tangible assets, means of transport and real estate.

The minimum portfolio that the NGF can form to a leasing company is approximately BGN 10 million and the maximum is BGN 70 million. The guarantee limit to final lessees and related parties is up to BGN 750,000.


The economic outlook for Slovenia has improved and GDP growth of 6.1 per cent is expected this year, according to the recent report of the Slovenian Institute of Macroeconomic Analysis and Development (IMAD).

After a sharp decline in economic activity last year (4.2 per cent), investment in equipment and machinery, in particular, is increasing.

The Slovenian property market has been flourishing, with new investment and construction cycles. Due to sales of a larger number of shopping centres in 2019, the share of retail real estate turnover (offices, commercial, service, restaurants, bars, and other tourist facilities) was unusually high, but this decreased significantly (by more than 10 per cent) in 2020.

As a result of the change of ownership in lease agreement relationships, commercial real estate rental has increased.

Construction is one of the few industries that has proved to be relatively Covid-proof, with only a slight decline. There are several large real estate projects in progress for residential and commercial buildings, especially in the capital city Ljubljana. According to IMAD, construction activity at the beginning of 2021 strengthened enormously and there has also been an increase in the number of hotel construction projects, with the number of hotel rooms anticipated to increase by as much as 45% in the next three years.

Having extended and adjusted the macroprudential measure restricting profit distributions by banks and savings banks, Banka Slovenije extended the recommendation providing similar guidance to leasing companies until the end of September.

Banka Slovenije’s purpose in extending the recommendation was to ensure that, like banks and savings banks, leasing companies also retain the highest possible level of capitalisation. Retained earnings represent the most important resource for increasing their regulatory capital.