Equipment Finance Sector continues to strengthen,.
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Press Release Summary:
Monthly Leasing and Finance Index (MLFI-25), reporting economic activity for equipment finance sector, shows overall new business volume increasing for July compared to same period in 2009 as well as prior month. Credit quality is mixed, with receivables over 30 days increasing marginally to 3.5% and charge-offs falling to 1.5%. Also, credit approvals stabilized at 70% in July, and total headcount for equipment finance companies remained relatively flat during June-July period.
Original Press Release:
Survey of Economic Activity: Monthly Leasing and Finance Index
Equipment Leasing and Finance Association's Survey of Economic Activity: Monthly Leasing and Finance Index
Equipment Finance Sector Continues to Strengthen
Washington, DC- 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 July increased 17 percent when compared to the same period in 2009. When compared to the prior month, the MLFI-25 reported new business volume increased slightly, from $5.5 billion to $5.6 billion. After 20 consecutive months of declines, business volume continues to show positive year-over-year growth in each of the last four months. The July increase in originations was the strongest in two years.
Credit quality is mixed. Receivables over 30 days increased marginally to 3.5 percent, up from 3.3 percent in the prior month, but improved when compared to the year-earlier period (3.9%). Charge-offs fell to 1.5 percent when compared to the previous month (1.8%) and the same period in the previous year (1.7%).
The number of credit approvals stabilized at 70 percent in July compared to the previous month, and improved compared to the same period the prior year (66%). Thirty-six percent of participating organizations reported submitting more transactions for approval during the month. Finally, total headcount for equipment finance companies remained relatively flat during the June-July period. Supplemental data shows that small business and construction lead the underperforming sectors.
"Financing demand appears to be picking up," notes ELFA president William G. Sutton. "Our data mirrors recently reported government statistics showing the annual rate of overall business investment in equipment and software up nearly 22 percent in the second quarter. It appears we're heading in the right direction and our members remain cautiously optimistic that this trend will continue."
To underscore this point, a related survey, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI), for August was at 58.2, an increase from the July 2010 index of 57.6.
There have been some positive signs in the industry," said Crit DeMent, Chairman, CEO, LEAF Financial Corporation. "In addition to the recent encouraging trends in origination growth and portfolio performance, the asset back securitization market seems to be strengthening for equipment leasing. Several lessors have completed transactions in 2010, and investors have been very receptive to our asset class because of its relatively good performance. The latter half of the year promises to be even stronger as issuers and rating agencies become more comfortable operating under some of the new government regulations. The return of this critical source of capital is a vital component to the long-term success of many in our industry, especially among independents and captives."
About the ELFA's MLFI-25
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 released globally at 9 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 MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.
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.
ELFA MLFI-25 Participants
ADP Credit Corporation
Bancorp South Equipment Finance
Bank of America
Bank of the West
Canon Financial Services
Caterpillar Financial Services Corporation
CIT
De Lage Landen Financial Services
Dell Financial Services
EverBank Commercial Finance
Fifth Third Bank
First American Equipment Finance
GreatAmerica
Hitachi Credit America
HP Financial Services
John Deere Credit Corporation
Key Equipment Finance
M&I Equipment Finance
Marlin Leasing Corporation
National City Commercial Corp.
RBS Asset Finance
Regions Equipment Finance
Siemens Financial Services
Stearns Bank
Susquehanna Commercial Finance, Inc.
US Bancorp
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 $518 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. Follow ELFA on Twitter @ELFAonline.
ELFA is the premier source for statistics and analyses concerning the equipment finance sector. Please visit www.elfaonline.org/ind/research/ for additional information.
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