CAT Financial Q3 Profit Up 45%, New Business Volume Up 4%
OCT 24, 2018 - 7:00 am
Cat Financial reported Q3/18 revenues of $735 million, an increase of $62 million, or 9%, compared with Q3/17. Third-quarter 2018 profit was $125 million, a $39 million, or 45%, increase from the third quarter of 2017.
The increase in revenues was due to a $33 million favorable impact from higher average financing rates, a $27 million favorable impact from higher average earning assets and a $13 million favorable impact from returned or repossessed equipment. These favorable impacts were partially offset by a $14 million unfavorable impact from lower lending activity with Caterpillar.
Profit before income taxes was $163 million for Q3/18, compared with $126 million for Q3/17. The increase was primarily due to a $13 million favorable impact from returned or repossessed equipment, a $12 million favorable impact from higher average earning assets and an $11 million increase in net yield on average earning assets primarily due to changes in portfolio mix.
The provision for income taxes reflects an estimated annual tax rate of 24 percent in the third quarter of 2018, compared with 30 percent in the third quarter of 2017. The decrease in the estimated annual tax rate is primarily due to the reduction in the U.S. corporate tax rate beginning January 1, 2018, along with changes in the geographic mix of profits. In addition, a one-time only tax benefit of $7 million was recorded in the third quarter of 2018 for the write-down of net deferred tax liabilities resulting from the 2017 tax year return to provision adjustments. The write-down reflects the reduction in the U.S. corporate tax rate from 35 percent to 21 percent beginning January 1, 2018.
During Q3/18, retail new business volume was $2.88 billion, an increase of $101 million, or 4%, from the third quarter of 2017. The increase was primarily driven by higher volume in Europe, partially offset by a decrease in Mining.
At the end of the third quarter of 2018, past dues were 3.47%, compared with 2.73% at the end of the third quarter of 2017. The increase in past dues was primarily driven by the Caterpillar Power Finance portfolio.
Write-offs, net of recoveries, were $40 million for the third quarter of 2018, compared with $47 million for the third quarter of 2017.
As of September 30, 2018, the allowance for credit losses totaled $416 million, or 1.49% of finance receivables, compared with $416 million, or 1.48% of finance receivables at June 30, 2018. The allowance for credit losses at year-end 2017 was $365 million, or 1.33% of finance receivables.
“We were pleased with the solid results delivered by Cat Financial in the third quarter,” said Dave Walton, president of Cat Financial and vice president with responsibility for the Financial Products Division of Caterpillar. “We saw improvement quarter over quarter for most key business drivers, and Cat Financial remains well-positioned to serve Caterpillar customers and dealers worldwide through financial services solutions.”
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