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 December declined by 22 percent when compared to the same period in 2008. For 2009, the MLFI-25 reported month-to-month new business volume increased by 77.5 percent from November to December, from $4.0 billion to $7.1 billion, reflecting typical end of year activity. When comparing full year totals for 2009 vs. 2008, new business volume was down almost a third. This percentage correlates with the drop in business fixed investment and the unadjusted new orders for durable goods.
Portfolio quality improved. The MLFI-25 reported receivables over 30 days decreased to 4.3 percent as compared to 4.5 percent in November. However, on a year-over-year basis, receivables over 30 days increased by 13.6 percent. Charge-offs decreased to 2.08 percent from 2.42 percent in the prior month, but rose by 31.7 percent compared to December 2008. Sixty-four percent of participant companies reported that fewer transactions were submitted for approval during the month, due to tightening underwriting standards and lower demand, according to supplemental data.
Credit approvals increased slightly to 68 percent when compared to the previous month; compared to the same period in the previous year, credit approvals ratios have improved from 65.5 percent in December 2008. This is the first time this year that credit approval ratios were higher than the previous year. Total headcount for equipment finance companies remained virtually the same in the November-December period. Once again, the construction and trucking transportation industries led the underperforming sectors.
"For the most part, the positive news in 30-plus-day receivables is a result of improved liquidity, as well as a more disciplined approach during these challenging times that has allowed companies to meet their payment obligations," said Aylin N. Cankardes, President, Rockwell Financial Group, located in Centennial, CO. "Lenders spent the last year rebalancing their portfolios, and are now focused on getting back to the core function of supporting their target markets, which always generates a positive trend toward credit approvals."
ELFA Interim President Ralph Petta said, "The good news/bad news is that while credit losses showed some improvement, the industry still has a long way to go to return to the kind of positive growth we saw in the pre-recession economy."
A related index, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI), for January was at 58.7, virtually the same as December 2009's index of 58.8. December 2009's 2010 MCI-EFI number is the highest since the index was inaugurated in May 2009.
MCI-EFI survey respondent Harry Kaplun, President, Frost Bank, located in San Antonio, TX, said, "I feel mildly positive about the industry. Pent up demand in several equipment categories would trigger more capex financing in 2010."
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/
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