Richard R. Fleischer President, Banc of America LeasingBy all accounts 2008 was a trying year for large financial services companies. As the credit crisis intensified, banking giants were forced to write-down billions of dollars, accept billions more from the American taxpayer and, finally in the first quarter of this year, bare their books to the scrutiny of federal regulators.
When the U.S. Treasury completed its bank stress tests at the end of April, it found the nation’s 19 largest banks were undercapitalized by roughly $74 billion; and one bank in particular — Charlotte-based Bank of America — accounted for almost half of that amount, needing to raise some $34 billion, the government said.
Since then BofA has been working aggressively to close the gap. The bank recently raised $13.47 billion in a stock sale just days after selling nearly 6% of its stake in China Construction Bank (CCB) for $7.3 billion. As of May 27, Bank of America said it has raised almost $33 billion in its capital plan since the stress test results were announced.
But despite all the turmoil (in the fourth quarter, BofA posted its first loss since 1991), the bank’s leasing arm — Banc of America Leasing — has maintained its strong standing as the largest U.S. bank-owned leasing company, and this year managed to jump a full position on the Monitor 100.
At #3 in the rankings, Banc of America Leasing continues its long tenure as a member of the Monitor 100 “top five.” The company’s portfolio grew by 6% last year — not stellar when compared to better times, but quite a feat when you consider it’s nearly double the gain of anyone else in the top five. And, Banc of America Leasing managed to book more than $10 billion in new business volume last year, at the peak of the economic crisis — the bulk of it through direct origination and vendor channels. At the end of the year, Banc of America Leasing held $34 billion in managed assets.
Closely monitoring the growth was chief operating officer Rick Fleischer. At the end of 2008, Fleischer took over as president of the entire leasing division of Bank of America from his predecessor Doug Bowers, who had held the position for the prior six years.
The 46-year-old Iowa native began his career as a Certified Public Accountant at KPMG following his graduation from Iowa State University in 1985. After five years, he moved into financial consulting and turnaround management.
Fleischer joined Bank of America in 1997; and the majority of his 12 years with the company have been with Banc of America Leasing, first as president of the Vendor Finance business and, for the last six years, in the COO role.
Fleischer says that the turmoil in the global economy has led to a shifting dynamic in the leasing space and opened new channels for Banc of America Leasing. “We’re in unprecedented times in the economy and in the credit markets and what we have seen is, overall, our clients are turning toward the leasing product as an alternative source of capital,” he says. “Where in the past they might have used other capital raising activities, leasing has been a product they’ve turned to over the past 12 months or so. In the past they may have paid cash or used some other debt vehicle, this year they have more of a tendency to look at leasing.”
Simultaneously, parent Bank of America closed several high-profile acquisitions, which Banc of America Leasing has leveraged into new opportunities. Since 2007, the bank has completed three buyouts — scooping up Chicago’s LaSalle Bank, and with it LaSalle National Leasing; mortgage servicer Countrywide Financial; and most recently, Wall Street powerhouse Merrill Lynch.
The Merrill deal, valued at $33 billion, was completed on New Year’s Day and ended more than 94 years of independence for Wall Street’s largest investment bank. It also made Bank of America the largest U.S. bank by asset size with about $2.7 trillion, surpassing both JP Morgan Chase and Citigroup.
Banc of America Leasing has over 800 associates, with offices across the U.S. and internationally in Toronto, London, Dublin, Frankfurt, Hong Kong, Beijing and Tokyo, and offers its services in just about any country it feels its products are viable. Given the size and scope of Banc of America Leasing, it’s little surprise that Fleischer spends most of his time on the road.
“I’ll be out almost all the time; certainly every week, three or four days on average. I very much want to be out with clients and with the teams delivering the product,” he says.
Over the years the company has absorbed a number of leasing companies into its fold, notably: Security Pacific Leasing in 1992; LDI Corporation in 1996; and BancBoston Leasing and Fleet Capital in 2004. Fleischer says that logistically, the company is largely a reflection of that growth by acquisition.
“Our leasing business is nationwide and largely mirrors acquisitions over time,” he says, “so if you look at the leasing associate base, where they are, it’s largely in places where predecessor leasing companies were as well as in cities where we can align with our bankers and clients.”
As a result, today there’s hardly a sector that Banc of America Leasing is not active in. The company provides leasing solutions to small businesses, and middle-market and large corporations. It also offers expertise in tax-exempt financing and wholesale vendor financing, as well as tailored programs specific to industry segments.
Under its Business Leasing & Small Business product line, BofA provides lease financing solutions to companies with annual sales up to $25 million. It is also active in corporate air, energy services and healthcare finance. Banc of America Leasing is also a major participant in syndicated deals, making up roughly half the total syndicated volume of the 27 Monitor 100 companies that reported activity in this area.
On the global front, in 2007, Banc of America Leasing took advantage of new freedom for foreign investment in China under that country’s reformed leasing laws, forging a $615 million joint leasing venture with China Construction Bank. The partnership culminated in the December 2007 launch of CCB Financial Leasing, of which Bank of America owns 25%.
Beyond the Chinese partnership, Fleischer says BofA’s buyout of Merrill Lynch has dramatically changed the bank’s footprint globally. “Internationally we’re very excited about the clients that Merrill brings to the bank,” he says. “We have a much more robust international platform today than we did prior to the Merrill acquisition. With that it allows us to execute on our core strategy of delivering the leasing product to our clients wherever they may be.”
Bank of America embraced the green revolution two years ago by announcing a $20 billion, ten-year investment in environmentally sound technologies, which includes everything from making the bank’s own buildings more energy efficient to investment in renewable energy assets.
“The leasing company contributes from a renewable energy and an energy efficiency standpoint in that space so we’ve organized a team around green initiatives within the leasing company,” Fleischer explains.
Looking ahead to the rest of 2009, Fleischer says the worst may be over for the leasing industry, but he remains cautiously optimistic. “We see encouraging signs that things are starting to pick up a bit for client demand for CAPEX,” he says. “Leasing activity has picked up some and we would hope that as the second half hits that will continue; and then in 2010 we will see some modest growth. I don’t think it’s going to be robust growth like we’ve seen in the past but we’ll see clients re-entering the market, acquiring equipment and using leasing to finance.”
Christopher Moraff is an associate editor of the Monitor.
