Seizing New Opportunities: SunTrust Realigns Equipment Finance Group
by Daniel Casciato Monitor 100 2015
Monitor contributor Daniel Casciato catches up with Paul Severn, who talks about creating a culture of change as SunTrust’s Equipment Finance Group transitioned from a standalone business to one of many financial products available to SunTrust customers.
Paul Severn, Managing Director/Head, Equipment Finance Group, SunTrust
For years, SunTrust Equipment Financing and Leasing operated as an independent affiliate, fairly disconnected from the banking clients of SunTrust, its parent company based in Atlanta. Currently, as the tenth largest bank-owned equipment finance company in the U.S. based on net assets, SunTrust wants to expand the scope of its focus toward delivering equipment financing solutions to wholesale banking clients.
As a result, the company shifted equipment financing under the umbrella of the Asset Finance Group within the corporate and investment bank division in 2013. The Asset Finance Group is now composed of five related products: asset based lending, asset securitization, structured real estate, program lending/SCF and equipment finance. This move also coincided with SunTrust’s corporate banking expansion in the cities of Dallas, San Francisco, Chicago, Boston, Los Angeles, New York and Houston. Now, the institution will be able to deliver a more comprehensive suite of banking solutions to middle market businesses and corporate clients in those regions as well.
“Equipment finance is a collateralized product and by moving it under the Asset Finance Group, we can take advantage of the synergies of running similar businesses,” explains Paul Severn, managing director and head of the Equipment Finance Group at SunTrust. “Equipment finance is no longer a standalone business; it is now a product alongside other diverse product specialties.”
Leading an Effective Transition
The Equipment Finance Group typically works on smaller essential-use equipment financing with clients ranging in all sizes within the transportation, industrial, healthcare, technology and energy sectors. But Severn plans to become more involved in driving larger structured and complex equipment financing transactions for wholesale banking clients.
“Those clients need this type of coverage,” he says. “This will not only be important for client activity but it can also help grow our business and help grow healthy income associated with our capital market activities.”
After spending the previous 17 years in various roles with SunTrust, most recently leading the Structured Real Estate Group, the company asked Severn to lead the Equipment Finance Group. SunTrust saw his diversified experience and collection of financing skills as a benefit to the equipment unit as it made its transition into the corporate and investment banking division.
Severn’s first job out of college was working in investment management with Traveler’s Insurance. That inspired him to return to business school to learn more about investment banking. Soon after, he followed his career path into private bond financing which ultimately led him to the Structured Real Estate Group at SunTrust, something he helped grow and eventually run.
One of Severn’s first tasks was to consolidate the asset management functions. Most of the asset management team moved to SunTrust’s headquarters in Atlanta. Several new executives were also hired, including Robert Mercogliano, a 28-year veteran in domestic and international leasing, as head of asset management; Lawrence Watts, who is head of originations and has over 30 years of experience in the financial services industry; and Steve Spivey as head of capital markets, who brings more than 25 years’ experience in the industry.
Developing a Culture of Change
Last year, as Severn and the rest of the team gained more solid footing in their new roles, they began to concentrate on creating a foundational change within the Equipment Finance Group, which included:
Organizing origination efforts based on how clients are covered across its wholesale bank;
Building capabilities within capital markets;
Rebuilding asset management to gain the expertise needed to continue moving forward;
Improving operational capabilities in closing transactions and optimizing workflow processes;
Working with the credit team to ensure they had the alignment necessary across coverage groups.
“We will continue to fine tune these elements to be as operationally efficient as possible,” Severn says, adding that they also plan on increasing client activity, improving client dialogue, and becoming more idea-driven.
Since equipment financing is a commodity-driven product in a highly competitive environment, Severn stresses the importance of being more proactive rather than reactive with potential and current clients.
“By bringing ideas to clients early and staying in front of them, we can help differentiate ourselves,” he says. “One way that we can do this is by upgrading the quality of our ideas and presentations. We do not want to sit around waiting for an RPF. Our primary objective is to create a culture to change the way we think, the way we go to market, and the way in which we focus on our clients.”
Severn adds that one of the great advantages of operating under the corporate and investment banking umbrella is its emphasis on being a stronger product partner with clients. The idea of being an independent business with independent clients is an old idea from SunTrust’s perspective, notes Severn. Suntrust’s desire is to have a broad relationship with all of its clients and to be able to deliver the entire bank and cross-sell different solutions to meet their needs — whether it’s syndicated corporate loans, public bonds, asset finance solutions or equity origination.
“If one of our equipment finance product specialists is in front of a client and they hear of a swap or debt raising opportunity, we want to make sure that the right team from SunTrust is involved so we can do the right thing for our client at the right time,” says Severn. “We are not independent silos operating in different client segments anymore. We are a team focused on meeting the needs of the clients and we want to do it in an unbiased, timely way.”
Looking ahead, Severn calls it an interesting time for the equipment financing and leasing industry. He foresees continued strong demand from clients in terms of equipment finance products and solid growth within the industry — both legacy institutions and new entrants. “Fierce competition at the investment-grade end of the market continues to put pressure on spreads and structure, making certain transactions very challenging from a risk/return perspective” he says.
Additionally, he expects more volatility through the end of the year in certain industry sectors such as oil and gas. “There are challenges but overall it will be a nice year for growth within the industry. As part of SunTrust’s client-centric product platform our focus is on serving a broad spectrum of clients and differentiating ourselves with a value-added, solutions-oriented approach.”
Vice President of Financial Services,
Corcentric Capital Equipment Solutions
With wild swings in financial markets, the political landscape changing worldwide, oil production through the roof and the U.S. Federal Reserve increasing interest rates, how should a company adjust its asset financing structures to contend with the uncertainty? Corcentric’s Pat Gaskins suggests using a dynamic financing model that can account for unexpected change over the asset life cycle.