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Developing opportunities for factoring in Spain

Developing opportunities for factoring in Spain. BCR European Factoring Conference Madrid, 16-17 March 2006 Josep Sellés. Spain economical key figures. Population:44.000.000 (1-1-2005) GDP: 2005 2004 Euro zone 3.4 3.1 1.3 (2005) Unemployment in 2005:

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Developing opportunities for factoring in Spain

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  1. Developing opportunities for factoring in Spain BCR European Factoring Conference Madrid, 16-17 March 2006 Josep Sellés

  2. Spain economical key figures Population:44.000.000 (1-1-2005) GDP: 20052004Euro zone 3.4 3.1 1.3 (2005) Unemployment in 2005: 8.4% (8.3% EU) Inflation 2005: 3.7% (2.1%EU) Public Surplus in 2005 1.1% of GDP.

  3. Expert opinions on Spanish economical future (positive) Euler Hermes and Coface have considered: -Spain, as one of the 13 countries with the least risk either to invest or for commercial exchanges. -Forecast a reduction in the number of bankruptcies and insolvencies. (Last year 800 in total) A.T. Kearney Consultingconsider Spain the 17th most attractive country in the world in which to invest.

  4. Expert opinion on Spanish economical future (negative) -Decrease of competitiveness in exports -Low productivity ratio -Negative inflation gap with EU -Risk of Industrial transfer to emerging countries.

  5. Factoring growth in most important countries in Europe 1986-2004 397% 1.364% 1.356% 6.355% 926% 384% Million €

  6. Factoring Volumes in Europe(Million €) U.K. Italy France Spain and Germany Holland

  7. Historical growth of total factoring in Spain (million €) 474%

  8. Internationalfactoring by countries (million €) Germany Italy Holland France U.K. Spain

  9. International 2.162 m € 3,9% Domestic 96,1% 53.353 m € Domestic and International shares on total factoring Year2005

  10. Non Recourse 40% 53% 21.021 m € 28.399 m € With recourse 7% m € 3.932 Shares of domestic factoring products Factoring to suppliers Year 2005

  11. Factoring share by activity sectors Year 2005

  12. Ratio between total factoring and G.D.P.

  13. Ratio Total Factoring/G.D.P. by countries U.K. Italy Spain France Holland Germany

  14. Success keys of factoring in Spain -Marketed by banks. (thousands of branches) -Interest of banks to compensate the decrease of receivable discount facility. (priority product) -Increase in knowledge of the product by companies. -Increase of companies wishing to improve balance sheet ratios. -Increase of companies interested in getting financing facilities using debtor’s risk. -Public sector payment system is not improving. -Continuous growth of factoring to suppliers.

  15. Spain is really different in factoring?

  16. Spain is really different also in factoring? As a result of marketing by banks, factoring operations are analysed from a banks’ risk viewpoint: -Financing 100% -More weight on seller’s risk rather than operational or debtor’s risk -Contracts with one or few debtors are very common. -Factorising work in process, including construction. -Little weight on documental support of the business. -Many non-notified businesses -Debtor’s exclusivity is not required if business is to be supported on promissory notes, very common in Spain. -Spot contracts.

  17. To summarize in one question: Should I grant a credit line or a discount of receivables line (financed always 100%) to this customer? If the answer is yes, then we can go ahead with factoring because I’ll have an extra guarantee that it’s the assignment of credit, that will allow me to go against debtors if needed. If the answer is no, then we will analyze debtors and assignment documents guarantee.

  18. -Large growth of the sector -Good profitability of business -Banks maintain the amount of the discount of receivables with the aggregate of factoring volumes -Low ratio oflatepayment And, of course, -Loss of the factoring principles Consequences of this policy

  19. Menaces - Application and, more than this, interpretation of the NIC rules, that may complicate the window dressing effect on the balance sheet of customers. AS Large volume of business and growth comes from big companies looking for this effect.

  20. What about International Factoring? -Considered expensive by clients. -As domestic is profitable, factoring companies do not devote many structures for international factoring - considered also expensive for banks in terms ofstructure needed. -Clients prefer Credit Insurance - sector involved in a tough pricing competition in Spain. -Most of Spanish exports go to Europe - so clients themselves organize the collection service. -Poor quality of businesses, frequently with few debtors and sectors not very much wished by correspondents.

  21. So, Spain is different, Sometimes, very much different!

  22. Developing opportunities for factoring in Spain BCR European Factoring Conference Madrid, 16-17 March 2006 Josep Sellés

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