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 October declined by 32.8 percent when compared to the same period in 2008. For 2009, the MLFI-25 reported month-to-month new business volume down 8.5 percent from September to October, from $4.7 billion to $4.3 billion.
The MLFI-25 reported receivables over 30 days decreased to 4.2 percent as compared to 5.6 percent in September. On a year-over-year basis, receivables over 30 days increased by 17 percent. Charge-offs decreased sharply to 1.7 percent from 3.0 percent in the prior month and rose by 25 percent compared to October 2008. Over two-thirds 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 declined slightly to 66.2 percent when compared to the previous month; however, they dropped sharply from 71.7 percent in October 2008. Total headcount for equipment finance companies increased very slightly at 0.2 percent in the September-October period.
Indicators show what may be the apex of the economic downturn. Third quarter GDP showed 3.5 percent annualized growth. According to the Federal Reserve, banks have loosened credit standards, and the National Federation of Independent Businesses (NFIB) small business optimism index has increased for the last three months (August-October). In October 2009, the National Association of Business Economics (NABE) reported in their industry survey that more respondents reported a rise in capital spending over the prior quarter. This was the first increase since October 2008.
"The industry continues to work hard on qualitative objectives, including portfolio delinquency, charge-offs and improving credit underwriting," said Steve Grosso, President and Chief Operating Officer, CoActiv Capital Partners, Inc. located in Horsham, PA. "With capex and new business volume continuing to lag, it is expense control and portfolio management that are driving bottom-line performance. There continue to be opportunities for those with capital to deploy it with better margins than seen in the last 25 years."
"October's data is mixed," said ELFA interim President Ralph Petta. "While we are pleased that credit quality shows improvement, underlying demand for the product is still relatively weak. Hopefully, we will see a strong pick up in traditional end-of-year new business volume."
A related index, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI), for November showed an increase to 57.2 compared with 54.3 in October.
MCI-EFI survey respondent Robert Stowers, President, Altec Capital Services, said, "[We are] Starting to see tangible signs of improving market conditions and customers' willingness to add new equipment. [It is] still a long way to go to get back to some form of normalcy."
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