ELFA Index shows decline in new business volume in August.
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Press Release Summary:
ELFA Monthly Leasing and Finance Index shows overall new business volume for August declined by 35.1%, compared to August 2008, and fell 22.9% from July. Reflecting volume of commercial equipment financed in U.S., it also indicates 2.5% increase in charge-offs from prior month, which rose by 115.5% compared to August 2008. Monthly Confidence Index for September dropped slightly to 53.8, but majority of participants believe business conditions will stabilize over next 4 months.
Original Press Release:
Equipment Leasing and Finance Association's Survey of Economic Activity: Monthly Leasing and Finance Index
Year-Over-Year New Business Volume Declines 35.1 Percent; Charge-Offs Increase
Washington, DC, Sept 24, 2009 - The Equipment Leasing and Finance Association's (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $650 billion equipment finance sector, showed overall new business volume for August declined by 35.1 percent when compared to the same period in 2008. For 2009, the MLFI reported month-to-month new business volume decreased 22.9 percent from July to August, from $4.8 billion to $3.7 billion.
The MLFI-25 is the only index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is a financial indicator that complements other relevant economic indices, including the monthly durable goods report prepared by the U.S. Department of Commerce, which reflects new orders for manufactured durable goods, and the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete picture of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.
The MLFI-25 reported receivables over 30 days increased to 5.0 percent as compared to 3.9 percent in July. On a year-over-year basis, receivables over 30 days increased by 47.1 percent. Charge-offs increased sharply to 2.5 percent from 1.67 percent in the prior month and rose by 115.5 percent compared to August 2008. Credit approvals improved to 67.6 percent when compared to the previous month, however, they declined from 72.6 percent in August 2008. Total headcount for equipment finance companies decreased slightly in the July-August period.
Seventy-five percent of participant companies reported that fewer transactions were submitted for approval during the month, due to tightening underwriting standards and lower demand.
"The MLFI-25 data illustrate a pattern of stagnant growth in new business volume and at the same time, some deterioration in credit quality," said ELFA President Ralph Petta. "It should come as no surprise to those following the equipment finance sector that it will take some time for troubled portfolios to work their way through the system," Petta said.
The Federal Reserve Board released its charge-offs and delinquency statistics for the second quarter 2009 for financial institutions. Comparing all products offered by financial institutions, lease financing receivables performed well with a 1.52 percent charge off ratio compared to 2.64 percent for all financial products. Delinquencies for lease financing receivables (defined as over 30 days) dropped to 2.13 percent. Lease finance receivables were one of the best performing financial product categories compared to an overall average of 6.15 percent for financial products.
The Equipment Leasing & Finance Foundation's Monthly Confidence Index for September dropped slightly to 53.8 compared to 54.9 in August. The majority of survey respondents believe business conditions will continue to stabilize over the next four months. For more detailed information on the Monthly Confidence Index visit www.LeaseFoundation.org
About the ELFA's MLFI-25
The MLFI index is released globally at 9:00 a.m. Eastern time from Washington, D.C. each month, on the day before the U.S. Department of Commerce releases the durable goods report. The latest Monthly Leasing and Finance Index, including methodology and participants is available below and also at www.elfaonline.org/ind/research/MLFI/
MLFI-25 Methodology
The ELFA produces the MLFI-25 survey to help member organizations achieve competitive advantage by providing them with leading-edge research and benchmarking information to support strategic business decision making.
The MLFI-25 is a barometer of the trends in U.S. capital equipment investment. Five components are included in the survey: new business volume (originations), aging of receivables, charge-offs, credit approval ratios, (approved vs. submitted) and headcount for the equipment finance business.
The MLFI-25 measures monthly commercial equipment lease and loan activity as reported by participating ELFA member equipment finance companies representing a cross section of the equipment finance sector, including small ticket, middle-market, large ticket, bank, captive and independent leasing and finance companies. Based on hard survey data, the responses mirror the economic activity of the broader equipment finance sector and current business conditions nationally.
The results of each MLFI-25 are posted on the ELFA website. ELFA is the premier source for statistics and analyses concerning the equipment finance sector. Please visit www.elfaonline.org/ind/research/ for additional information.
ELFA MLFI-25 Participants
ADP Credit Corporation
Bank of America
Bank of the West
Canon Financial Services
Caterpillar Financial Services Corporation
CIT
De Lage Landen Financial Services
Dell Financial Services
Fifth Third Bank
First American Equipment Finance
GreatAmerica
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
About the ELFA
The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $650 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA members are the driving force behind the growth in the commercial equipment finance market and contribute to capital formation in the U.S. and abroad. Its over 600 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers and investment banks, as well as manufacturers and service providers. For more information, please visit www.elfaonline.org
The Equipment Leasing & Finance Foundation is the non-profit affiliate to the Equipment Leasing and Finance Association, providing future-focused research to the equipment finance industry. For more information please visit the website at www.leasefoundation.org
