A newly formed commercial finance company has named a chief executive officer to help it stand out in equipment leasing crowd.
IBJ Schroder Business Credit Corp. has hired Edward J. Fanning, 55, as its president and CEO. Mr. Fanning joined from Heller Business Credit, where he was senior vice president, managing asset-based finance business on the East Coast.
The group is the equipment finance and asset-based finance business of IBJ Schroder Bank and Trust Co., New York, a wholesale bank primarily engaged in middle-market lending.
The $700 million-asset group was formed in January "to bring together all secured lending activities on one side of the bank," said Dennis Buchert, president and chief executive officer of the bank. "The structure allows us to focus our energies on commercial finance, to generate business that we might not as a bank division, and to differentiate commercial finance from other lending areas of the bank," Mr. Buchert added.
IBJ Schroder provides senior debt to transactions that are "already well along in their structure," where equity sponsors, buyout firms, or other banks have already provided equity or advisory work.
It will aim at companies with $20 million to $150 million in sales; this is the "power alley" of middle market banking, Mr. Buchert said.
Mr. Fanning said that the bank's syndication capabilities will complement the commercial finance business, a sector which some bankers call one of the fastest growing in commercial banking today.
"Banks are so interested in the leasing business because it has historically offered higher growth rates and overall rates of return," said James Fishell of Key Corporate Capital Inc. "In many cases, we're able to get higher returns compared to conventional lending products."
KeyCorp recently announced plans to buy 80% of Leasetec Corp., a computer and telecommunications equipment leasing company in Colorado.
The spreads in equipment leasing have not deteriorated as those on large end commercial lending have, so banks have maintained disciplined rates, underwriting standards, and spreads, Mr. Buchert said.
"The risk-reward balance is maintained better than at the large end of the market," he added.
Indeed, portfolios of bank-affiliated leasing companies swelled in 1995 by 19%, or $5.9 billion, according to The Monitor, a bimonthly publication of Molloy Associates, an Ardmore, Pa., firm that recruits for the equipment leasing and financing industries.
So IBJ Schroder may have trouble penetrating the market, as it is already well-populated with banks.
Nationsbanc Leasing Corp., a $4.4 billion-asset subsidiary of NationsBank Corp., is the biggest among bank-affiliated leasing companies.
Citicorp Global Finance, follows closely behind with $4.1 billion of assets. Bank America Leasing & Capital Group, KeyCorp Leasing Ltd., and First Union Leasing are also major players. IBJ Schroder ranked 28th.
"There's no lack of competition in this market," Mr. Fishell said. "Banks have traditionally been good players, and now they're intrigued by the business and piling in.
"There's a lot of liquidity chasing a finite amount of equipment," another banker added. "This is not just a spread business, and rates are better than commercial loans."