ELFA Economic Activity Survey shows yearly decline for December.
Share:
Press Release Summary:
ELFA's Monthly Leasing and Finance Index (MLFI-25), reporting economic activity for equipment finance sector, showed overall new business volume for December declined by 22% compared to 2008. Month-to-month new business volume increased from November, but was down compared to last year. Showing improved portfolio quality, receivables decreased from November but increased on year-over-year basis. Similaraly, charge-offs decreased from prior month, but rose compared to December 2008.
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 22 Percent in December
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 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 www.leasefoundation.org/IndRsrcs/MCI/
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 9:00 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 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
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 $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
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
