In July 2012, BBVA Compass, one of the world’s top global banks announced its intention to form an equipment finance group in the U.S. Since that initial announcement, little if any news had been disseminated regarding this new bank leasing company until an August press release was issued announcing that Cleveland-based BBVA Compass Equipment Finance is open for business and offering equipment leasing and financing nationwide to companies acquiring everything from new aircraft to rail cars and medical equipment.

This new entrant to the domestic U.S. market is led by leasing veteran Mark Marinik, who had previously served as president of ICX Corp., the leasing affiliate of Charter One.

Equipment Finance Advisor met with Marinik to learn more about BBVA Compass’ market focus, strategic initiatives, and goals in the U.S. equipment leasing and finance industry. During our time with Mark, he shared a great deal about his team’s vision, their mission and perhaps as importantly, the high-level of commitment BBVA Compass Bank has already made to his team and the significant investments the bank has made to ensure the group’s long-term success.

Equipment Finance Advisor: Mark, to begin and to establish a clear timeline for our readers, can you tell us when BBVA Compass Equipment Finance was actually launched and the rationale for the bank’s timing of this decision to actively pursue the equipment finance sector in the U.S.?

Mark Marinik: Both J.T. Lovins and I started with the bank in August 2012 with the intention of immediately getting the operation in place. During the past year we have been hiring staff, building our infrastructure, implementing our IT solution, and creating our policies and procedures. With this work completed, we are now able to go live with production. We officially launched the business in the beginning of July 2013.

As for the timing, I can tell you that BBVA Compass was very deliberate in its timing of this group’s launch. Prior to coming on board, the bank had hired consultants to evaluate and size the U.S. equipment finance market opportunity. After the decision was made to actually engage in the U.S., various teams were interviewed to build out the group, and we were selected as the team to lead the company. So the timing was well-planned and the bank is very committed to building a truly world-class equipment finance operation.

EF Advisor: What attracted you personally to this opportunity with BBVA versus other bank and non-bank opportunities?

Marinik: What was initially most enticing to me was the fact that this is the largest U.S. bank without an equipment finance group. My excitement grew as I learned more about the bank’s deep commitment to the business and the support that would be provided by the parent. This commitment and tremendous growth opportunity was very attractive to me and my entire team.
 
EF Advisor: According to the August 2013 press release, your team has operated out of Cleveland for many years. This leads me to ask – is this entry into the equipment finance industry by BBVA in essence a “lift out” of sorts of your former ICX (part of Charter One) team?

Marinik: Yes, that is correct. My team had done this previously when we grew ICX from scratch to a portfolio of about $2.5 billion in net assets. We certainly expect to do the same here at BBVA Compass. Virtually everyone hired to date are people that were on our previous management staff. This team worked together successfully for a long time and our abilities have always complemented each other…and we like each other as well, which is very important.

EF Advisor: Please tell us a bit about your team in Cleveland – for example: number of business development professionals, do you have a dedicated credit, operations, portfolio management and asset management team (separate from the banking group)?

Marinik: We utilize the bank’s credit functions and industry veteran Brick Moore was recently hired as our dedicated chief credit risk officer for the equipment finance group. We do have a dedicated operations group headed by J.T. Lovins … J.T. and I have worked together for over 30 years. Portfolio management is headed by one of our former ICX senior executives as well – Joan Hinkle – vice president of portfolio management. And for asset management, which is clearly separate from the banking group, we brought on a very seasoned industry professional – Jim Noyes. Jim will be heading up our asset management group.
 
As for business development, we are building our sales team slowly. At this time we have four marketing officers – one in Dallas, one in Chicago and two in Cleveland, who are servicing our previous relationships. We expect to add three additional business development officers per year for the next few years going forward. In addition to the equipment finance sales team, we have hundreds of bank commercial lending officers pitching the leasing product as well. We are spending a lot of time educating the lenders on what the equipment finance group can do, and they are already bringing us in to select customers and prospects.

So this really fills a strategic gap in the bank’s offerings. We’ve been on road shows with the bank lending officers and the equipment finance product has been very well received as they have been clamoring for it for quite some time. Our existing equipment finance team (the former ICX team) also has many direct customers that are prospects of the bank, and we have been bringing bankers in to meet with these equipment finance customers as appropriate. So it’s going well in both directions and we are off to developing a very healthy relationship.

EF Advisor: Will the equipment finance group conduct business with non-bank customers and what is your geographic footprint?

Marinik: Yes, we will be doing business with non-bank customers and our efforts will be on a national scale. Our marketing officers are currently calling on previous relationships from our earlier days in the industry and while many of those relationships tend to be out of footprint, they certainly present major opportunities for BBVA Compass Bank as well. The bank’s footprint is generally in the Sunbelt states and these are tremendous markets, but we are already helping to bring the banking side to some of the national accounts we have serviced over the years. So we have both an in-footprint and out-of-footprint effort.

EF Advisor: Can you tell our readers a bit about your group’s targeted industry sectors, anticipated ticket sizes, transaction types, and credit profiles?

Marinik: We are generalists, but because of our bank’s headquarters location and footprint, we certainly expect a heavy emphasis on energy equipment. We will also be pursuing transportation equipment including over-the-road, rail and corporate aircraft. I expect our transportation portfolio to constitute roughly half of the business we will be doing going forward. Medical is also a sector in which we have found success and have developed some strong relationships, so we expect to do a fair amount of that as well.  And of course we will be pursuing manufacturing.

From a credit profile perspective, we are generally targeting stronger credits perhaps best defined as BB and above credits and the deals will generally be $1 million and above, but we will go lower to service an existing bank customer. I would expect our “sweet spot” to be a $10 million transaction and we are capable of going significantly larger on rail and marine vessel transactions. We expect to be competitive and active in those larger deals because of the bank’s corporate footprint and the fact that the corporate lending group is headquartered in Houston, which provides access to a lot of these types of opportunities.

Overall our team is very relationship oriented and we expect to book multiple equipment schedules with our account base. So we will be searching for companies with significant annual leasing needs while providing a full slate of leasing products including FMV leases.

EF Advisor: Will the team pursue indirect business via a buy desk? And conversely, will the team be syndicating transactions?

Marinik: Yes, we have hired a senior executive, John O’Donnell, who heads up our capital markets group and he is responsible for buying indirect business and also syndicating on the sell side. But most of our business will be generated by the direct origination group. We will always be an active indirect buyer, but our preference is to have the direct relationship with the customer.

EF Advisor: Earlier in our conversation you mentioned pursuing the energy sector, does this include renewable/clean energy technology such as wind and solar?

Marinik: We haven’t been pursuing the renewable energy sector, although we would certainly do clean energy deals for stronger credits. From the energy side we expect to be tied to the oil industry in terms of transportation equipment such as marine supply vessels in the Gulf of Mexico.

EF Advisor: What do you think will ultimately define your success in the U.S. equipment finance industry?

Marinik: We expect to offer very competitively priced and structured products coupled with outstanding customer service. This level of customer service will also be tied to the significant investments the bank has made in the technological platforms we have implemented. Additionally, we expect to leverage our past customer relationships and indirect sources to quickly build our business. But as I mentioned earlier, our past model has always been based upon direct origination, and this will be our strong preference here as well because we value and treasure the direct customer relationship – this will be a key to our success.

At the end of the day, the leasing business is still an old-fashioned business in some ways. Meaning, if you preserve and value your relationships, benefits are typically found on both sides of the transaction.