Leaseurope reveals new business down 30% in Q2 2020

Operating income and expenses contracted by 9.3% and 11.2% respectively. Leaseurope claimed this was the first time that operating expenses had fallen so sharply since its index began (the latest is the 38th edition).

Loan loss provisions rose by 134.2%, causing the weighted average cost of risk to increase from 0.42% to 0.97%. The company claimed the cost of risk was “more positive when excluding outlier effects” but added that the median ratio “hit a record high” in the second of 0.7%, close to 2010 levels.

Return on assets of 0.7% and return on equity of 0.8% were at their lowest levels since 2010.

The portfolio of outstanding contracts increased by 1.1% and risk-weighted assets remained relatively stable, rising by 0.3%.

Jochen Jehmlich, chief executive officer at Société Générale Equipment Finance, explained: “The KPIs tracked by the Leaseurope Index show that the European leasing industry was not exempt from the general downturn experienced as a result of the Covid-19 pandemic in the second quarter.

“At present, portfolios continue to expand despite a large drop in new business, and lessors have responded rapidly to the crisis by lowering costs and taking very conservative positions on loan loss provisions to reflect the highly uncertain economic environment. For the rest of the year, the European Commission has forecast a slow rebound in business investment due to lingering uncertainty surrounding demand and the future of UK-EU trading relations.

“Although this environment certainly presents additional challenges, European lessors will continue leveraging their strengths to provide much needed asset financing to facilitate business recovery, particularly for SMEs.”