ELFA’s report shows December new business volume down 7% year-over-year, up 62% month-to-month, and up 3% year-end.
WASHINGTON - The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $827 billion equipment finance sector, showed their overall new business volume for December was $10.7 billion, down 7% from new business volume in December 2012. In a typical end-of-year spike, their new business volume was up 62% from the previous month’s volume of $6.6 billion. Cumulative new business volume for 2013 rose 3% over 2012.
Receivables over 30 days were at 1.9% in December, up slightly from 1.8% in November. Delinquencies increased from 1.6% in the same period in 2012. Charge-offs were unchanged from the previous month at the all-time low of 0.3%.
Credit approvals totaled 78.3% in December, an increase from 76.5% the previous month. Fifty-seven percent of participating organizations reported submitting more transactions for approval during December, an increase from 47% November.
Finally, total headcount for equipment finance companies was up 2% year over year.
Separately, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI) for January is 64.9, the highest confidence level in two years, and an increase from the December index of 55.8. An improved general outlook for economic activity among industry leadership contributed to the increase.
ELFA President and CEO William G. Sutton, CAE, said: “December’s strong volume number is consistent with the typical growth pattern of a very busy end of year for many equipment finance organizations. Overall, 2013 was a very good year for many ELFA members: the cumulative growth data for the year bear this out. Offsetting this strong performance in new business activity, however, were reports of margin compression in virtually all sectors. Aggressive competition, low interest rates, and declining yields put pressure on overall profitability. Credit quality continues to be very manageable, despite the slight uptick in delinquencies.”
Miles Herman, president and COO, LEAF Commercial Capital, Inc., said, “I remain relatively optimistic about 2014, and believe that we are heading in the right direction. My optimism is tempered by the nominal shortfall indicated by the MLFI-25 between December of 2012 and December of 2013. Nevertheless, the report also shows that business volume is up overall, and that December was in fact 62% above November. Based on the most recent Monthly Confidence Index, it appears that my colleagues concur, at least to varying degrees. It is of course worth noting that this MCI is the strongest it has been for the prior 24 months. That kind of consistent optimism is, in and of itself, a good sign.
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 8 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 MLFI-25 is a time series that reflects two years of business activity for the 25 companies currently participating in the survey. The latest MLFI-25, including methodology and participants is available below and also at http://www.elfaonline.org/Research/MLFI/
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.
Source: Equipment Leasing and Finance Association