ELFA releases survey of economic activity.
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Press Release Summary:
According to ELFA's Monthly Leasing and Finance Index, MLFI-25, new business volume for October declined by 32.8% when compared to same period in 2008. For 2009, MLFI-25 reported month-to-month new business volume down 8.5% from September to October, from $4.7 billion to $4.3 billion. Receivables over 30 days decreased to 4.2% as compared to 5.6% in September, while charge-offs decreased sharply to 1.7% from 3.0% in prior month and rose by 25% compared to October 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 32.8 Percent
Washington, DC, Nov 24, 2009- 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 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
Media/Press Contact: Diane Johnson, 703-391-2056, diane@fourleafpr.com
