ELFA releases survey of economic activity.
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Press Release Summary:
According to ELFA's MLFI-25 Monthly Leasing and Financing Index, which reports economic activity for $650 billion equipment finance sector, overall new business volume for May increased 6.5% when compared to same period in 2007. Originations month-to-month remained flat, stabilizing at $7.2 billion, while receivables in less-than-30 day category were 97.0% in May, up slightly from prior month. Credit approval ratios increased 2.3% from 73.9% to 76.2% when compared to prior month.
Original Press Release:
Equipment Leasing and Finance Association's Survey of Economic Activity: Monthly Leasing and Finance Index
MLFI-25 Data Show Year-Over-Year Originations Increased in May
Washington, DC, June 24, 2008- 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 May increased 6.5 percent when compared to the same period 2007.
The MLFI-25 reflects levels of equipment financed and complements other relevant economic indices, including the monthly durable goods report produced 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. Along with the MLFI-25 these reports provide a complete picture that describes the use of productive assets in the U.S. economy: equipment produced, acquired and financed.
According to the May data, originations month-to-month remained flat, stabilizing at $7.2 billion. Respondents' portfolio performance improved: receivables in the less-than-30 day category were 97.0 percent in May, up slightly from the prior month. Charge-offs were almost flat when compared to the prior month, increasing one basis point to .78 percent.
Credit approval ratios (76.2 percent) increased 2.3 percent when compared to the prior month (73.9 percent). Total headcount has been relatively stable (showing only a slight decrease) since February 2008.
"Those expecting to see evidence of an overall slowdown in commercial equipment finance activity (or a significant decline in portfolio performance) as a result of the mortgage crisis, rising energy and food prices or a general economic slowdown may be surprised by this report," said William Verhelle, Chief Executive Officer, First American Equipment Finance, Fairport, NY. "Only in specific segments such as trucking, real estate and among some small businesses is there evidence of significant increased delinquencies and reduced new equipment financing activity. There does not yet appear to be an overall slowdown in the pace at which businesses are financing new capital equipment, nor is there a material deterioration in the portfolio performance of existing capital equipment receivables due to commercial lenders," said Verhelle.
"It's possible that businesses are financing more capital equipment acquisitions to preserve cash, thereby accounting for the continued strong level of equipment loan originations. But many expected a more significant increase in charge-offs and over 30 day receivables," Verhelle said. First American Equipment Finance is a participant in ELFA's MLFI-25.
"Demand in the equipment finance sector appears to be picking up after an initial decline in the first quarter and credit quality shows little deterioration; business volume and portfolio quality are holding their own," said Kenneth E. Bentsen, Jr., ELFA President. "So far, we seem to be weathering the storm," said Bentsen.
MLFI-25 Methodology
ELFA produces the MLFI-25 report to help member organizations achieve competitive advantage by providing them with leading-edge research and benchmarking information which supports strategic business decision making. The report is also a barometer of the trends in U.S. capital equipment investment.
Five components are included in the MLFI-25 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 provides metrics reflecting 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, which contributes to the representation of current business conditions nationally.
Results of each MLFI-25 are posted on the ELFA website and in ELT, the Magazine of Equipment Leasing and Finance. To access ELFA's comprehensive industry information, please visit www.elfaonline.org/ind/research/
ELFA MLFI-25 Participants
ADP Credit Corporation
Bank of America
Bank of the West
Canon Financial Services
Caterpillar Financial Services Corporation
CIT
Citicapital
De Lage Landen Financial Services
Fifth Third Bank
First American Equipment Finance
GreatAmerica
Hitachi Credit America
HP Financial Services
Irwin Financial
John Deere Credit Corporation
Key Equipment Finance
Marlin Leasing Corporation
National City Commercial Corp.
RBS Asset Finance
Regions Equipment Finance
Siemens Financial Services
US Bancorp
US Express Leasing
Verizon Capital Corp
Volvo Financial Services
Wells Fargo Equipment Finance
About the Equipment Leasing and Finance Association (ELFA)
The Equipment Leasing and Finance Association is the trade association that represents companies in the $650 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing the utilization and investment of and in 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 700 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 ELFA is also the premier source for statistics and analyses covering the equipment finance sector. To access ELFA's comprehensive industry information, please visit www.elfaonline.org/ind/research/
Contact:
Diane Helyne Zyats
Equipment Leasing and Finance Association
202-238-3438 - office
dzyats@elfaonline.org
