The Equipment Leasing and Finance Association (ELFA) which represents the $650 billion equipment finance sector today releases its 2009 Survey of Equipment Finance Activity (SEFA), which shows that new business volume among a sample of the ELFA member companies declined 2.2 percent in 2008. This compares to a two percent increase in 2007 originations among the respondents to the 2008 survey. Banks’ share of new business volume grew slightly by 0.9 percent, while Captives and Independents’ volume decreased by 1.8 percent and 8.1 percent, respectively.
“The Survey of Equipment Finance Activity is the broadest compendium of industry data, comprising a representative cross-section of equipment lease and loan origination by product, structure and origination,” said ELFA president Kenneth E. Bentsen Jr. “The survey is unique to the ELFA and provides a baseline and benchmark for companies operating in the equipment finance space.”
The SEFA (formerly known as the Survey of Industry Activity or SIA) provides quantitative information about the status of the $650 billion equipment finance industry: statistical, financial and operations information for equipment finance organizations for the purposes of data comparison year over year through a voluntary survey of member companies. In the 2009 SEFA project, 122 reporting entities participated in the survey as compared to 154 the prior year.
Once again, PricewaterhouseCoopers LLP managed the survey for the ELFA, ensuring confidentiality, integrity and quality of the submitted data and results. A feature of this survey prepared for all participants is an Individual Company Data Sheet, which matches key data points for each company with the overall survey sample as well as its peer group in the following categories: organization type, market segment, organization size and business model. These metrics cover both financial and operational metrics. A new feature would make it possible for non-SEFA participants to also obtain a customized benchmark to see how their business stacks up.
From an asset perspective, agriculture, energy, healthcare, materials handling and office products enjoyed modest growth. By end-user industry, the top performance categories are agriculture, forestry, and fishing; finance, insurance, and real estate; health services; and utilities. Industrial and manufacturing sectors’ new business volume remained constant. By market segment, the micro-ticket market showed the greatest new business volume decrease with 19.1 percent.
Industry member respondents report that profitability is constrained as seen by a weighted average return on equity (ROE) of 11 percent, a decline from 12 percent in 2007. Return on assets (ROA) also suffered, falling to 1.2 percent from 1.9 percent during the year-earlier period.
Other key findings:
· Portfolio Performance. Equipment finance organizations report average charge-offs of 0.7 percent of the average net lease receivables balance, a slight improvement from 0.8 percent in 2007. Receivables over 90 days jumped to 1.0 percent from 0.6 percent the prior year.
· Margins. Average pre-tax yield decreased to 7.29 percent from 8.19 percent in 2007. Average cost of funds were lower at 4.21 percent, down from 5.25 percent in 2007. Pre-tax spreads increased 15 basis points to an average of 3.08 percent in 2008.
· Lease Applications Processed. Total number of applications submitted (1.78 million) is down slightly from 2007 (1.79 million), with the number of applications approved (71.6 percent) also declining when compared to the previous year (74.4 percent).
· Workforce. Total number of full-time equivalent employees (FTE) declined 4.2 percent from 2007 total headcount. The largest FTE decline (29.9 percent) is in the portfolio management staff. Independent/financial services organizations were the only company type that, on average, added to headcount in 2008 (0.7 percent). Captives led the way in FTE reduction, cutting 8.5 percent of its staff in 2008.
For more information about this survey or ELFA Industry Research, call Bill Choi at 202-238-3413 or go to http://www.elfaonline.org/ind/Research/.
About the 2009 Survey of Equipment Finance Activity
ELFA’s 2009 Survey of Equipment Finance Activity results were compiled from surveys sent to 386 eligible ELFA members, of which 114 companies representing 122 entities submitted 2008
· Equipment types financed, as explored in the survey, include: Agriculture, aircraft, construction, computers, telecommunications, rolling stock, printing, medical, industrial, trucks and trailers and others 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.
About the ELFA
The Equipment Leasing and Finance Association is the trade association that represents companies in the $650 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