Monthly Leasing and Finance Index January 2010
Participants in the ELFA MLFI-25:
- ADP Credit Corporation
- Bank of America
- Bank of the West
- Canon Financial Services
- Caterpillar Financial Services Corporation
- De Lage Landen Financial Services
- Dell Financial Services
- Fifth Third Bank
- First American Equipment Finance
- Hitachi Credit America
- HP Financial Services
- John Deere Credit Corporation
- Key Equipment Finance
- Marlin Leasing Corporation
- National City Commercial Corp.
- RBS Asset Finance
- Regions Equipment Finance
- Siemens Financial Services
- Susquehanna Commercial Finance, Inc.
- US Bancorp
- Tygris Vendor Finance
- Verizon Capital Corp
- Volvo Financial Services
- Wells Fargo Equipment Finance
The Equipment Leasing and Finance Association's (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $518 billion equipment finance sector, showed overall new business volume for January declined by 24 percent when compared to the same period in 2009. The MLFI-25 reported month-to-month new business volume decreased by 52.1 percent from December to January, from $7.1 billion to $3.4 billion, reflecting typical end-of- year activity in December. According to supplemental data, this downturn in new business volume is attributable, in large part, to a continued decline in customer demand for financing.
Portfolio quality stabilized. After reaching a high of 5.6 percent in September 2009, MLFI-25 reported receivables over 30 days remained flat at 4.3 percent. On a year-over-year basis, receivables over 30 days increased only slightly. Charge-offs decreased to 1.68 percent from 2.08 percent in the prior month, but rose by 19.2 percent (27 basis points) when compared to January 2009.
Credit approvals increased to 71 percent in January, up from 65.2 percent in the same period in the previous year. A majority of participant companies reported that fewer transactions were submitted for approval during the month. Total headcount for equipment finance companies decreased by almost two percent in the December-January period. And, once again, the construction and trucking transportation industries lead the underperforming sectors.
"The data present a somewhat cloudy picture, as originations continue to lag and portfolio quality shows some improvement," observed ELFA interim President Ralph Petta. "We are starting to see positive signs in the amount of equipment being financed as more and more companies begin thinking about replacing tired assets and expanding their businesses."
"Most companies remain reluctant to invest in new capital equipment, without further signs of a true economic recovery," said Jud Snyder, President, M+I Equipment Finance Company, located in Milwaukee, WI. "Replacement capital equipment spending should provide some lift to originations during the first half of 2010, but new investment still seems to be on hold. The bright spots in the MLFI-25 data show a stabilization of portfolio quality and a return to historical levels of credit approvals. It's early, but hopefully these are trends that point to the start of a new economic growth cycle."
A related index, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI), for February was 60.6, an increase from January's index of 58.7, and a new high for the index since it was inaugurated in May 2009.
The MCI-EFI is a monthly survey of equipment finance industry executive leadership that provides a qualitative assessment of both the prevailing business conditions and expectations for the future. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry's confidence. For more information, visit http://www.leasefoundation.org/IndRsrcs/MCI/