ELFA: New Business Volume Grew 16.5% in 2011
Published July 19, 2012
Categories: Association News
New business volume grew 16.5% in the equipment finance industry in 2011, according to the 2012 Survey of Equipment Finance Activity (SEFA) released by the Equipment Leasing and Finance Association. The growth in volume surpassed the 3.9% increase reported for 2010, marking the second year of growth following a 30.3% decline in 2009 and a 2.2% decline in 2008. The SEFA, which is based on responses from 109 ELFA member companies, covers key statistical, financial and operations information for the $628 billion equipment finance industry.
“The equipment finance industry helps a wide range of commercial businesses to acquire the equipment they need to conduct their business operations,” said William G. Sutton, ELFA president and CEO. “The 2012 SEFA data show the equipment finance sector continued to gain momentum as the economy improved in 2011. More recent data collected in 2012 indicate that steady growth is continuing, even amid a slow economic recovery.”
Key findings for 2011 as reported in the 2012 SEFA include:
· Overall new business volume grew 16.5%, a significant increase over 2010 growth of 3.9%.
o By market segment: All market segments showed growth in volume, except for the smallest segment. New business volume fell 4.8% for the micro-ticket segment but grew 15.2% for the small-ticket segment, 21.8% for the middle-ticket segment and 10.2% for the large-ticket segment.
o By organization type: Independent equipment finance organizations saw the strongest increase in new business volume (19.7%, up from 5.2% in 2010), with banks close behind at 19.3% (up from a 0.9% decrease in 2010). Captives saw their volume grow by 10.5% (down from 11.3% in 2010).
· From an asset perspective, the equipment types that saw increases in new business volume included agriculture; computer equipment; construction; furniture, fixtures and equipment; industrial/manufacturing; materials handling; printing and transportation. The equipment types that saw new business volume decline included medical; mining, oil and gas extraction; office machines; telecommunications and amusements.
· Delinquencies and full-year losses (charge-offs) continued to decline. Delinquencies in the overall portfolio were just 1.4% past due 31 days or more in 2011, the lowest in at least five years. Delinquencies remained an issue for certain industries, especially construction and printing. Charge-offs fell from 1.0% in 2010 to 0.4% in 2011.
· Employment levels remained stable, although as portfolios improved, positions in collections declined and positions in bookings increased.
· Given the current financial markets, cost of funds declined significantly. Competitive pressure did drive pre-tax spreads lower in 2011, but still they remained higher than they were in 2008 and 2007.
· Credit approvals increased, as did the percentage of those approved applications being booked and funded. Over 70% of overall credit applications were approved and just under 50% of submitted applications were booked.
· Net income increased overall in both dollar terms and as a percentage of total revenues. Return on average equity remained healthy at 15.5%. Return on average assets increased to 2.0%, returning to levels seen earlier in the decade.
The SEFA is the broadest compendium of industry data, comprising a representative cross-section of equipment lease and loan origination by product, structure and origination. It provides a baseline and benchmark for companies operating in the equipment finance space through a voluntary survey of ELFA member companies.
PricewaterhouseCoopers LLP administered the 2012 SEFA. The results were compiled from surveys sent to 327 eligible ELFA member companies in the first quarter of 2012. A total of 114 respondents representing 109 companies submitted 2011 U.S. domestic lease and loan data. The respondents include eight ELFA members in the 2011 Monitor Top 10 list of the largest U.S. equipment finance organizations and 35 ELFA members in the 2011 Monitor Top 50.
The data are presented by organization type (bank, captive, independent); market segment (micro-ticket, small-ticket, middle-ticket, large-ticket); organization size (under $50 million, $50-$250 million, $250 million-$1 billion, over $1 billion); and origination business model (direct, vendor, third-party, mixed). For most categories, data is reported for the past two fiscal years, 2011 and 2010.
Equipment types financed, as explored in the survey, include agriculture, aircraft, construction, computers, office machines, telecommunications, rolling stock, printing, medical, industrial, trucks and trailers and other equipment types. Types of financing offered by the equipment finance companies include tax-oriented finance leasing, short-term operating leases, leveraged leases, conditional sales agreements, off-balance sheet loans and tax-exempt leasing.