Revenues and profitability uptick proclaim “future opportunities” for European lessors

The weighted average ratios of the Leaseurope Index for Q4 2013 show a substantial improvement compared to the same quarter of the previous year.

On an annual basis, all ratios improved in 2013 compared to 2012 (with the exception of cost of risk), largely as a result of strong performance in the last quarter of 2013.

The Leaseurope Index is a unique survey that tracks key performance indicators of a sample of 17 European lessors on a quarterly basis.

Total new leasing volumes reported by the sample of firms increased by 13.7% in comparison to the same quarter a year ago, reaching just under €20bn, while the whole of 2013 saw a marginal 0.8% increase in comparison to 2012.

The portfolio of outstanding contracts declined by -5% while risk-weighted assets decreased by a smaller amount (-3%).

Profit & profitability

Despite a few firms in the sample experiencing losses in the quarter, total pre-tax profit of all the companies increased by 10% for Q4 2013 in comparison to Q4 2012(see table 1).

Aggregate Data Q1 2013  – Q4 2013

	2013 Q4		2013 Q3		2013 Q2		2013 Q1
Aggregated data provided by companies (all figures in millions of euro for the relevant period)	Sum of values (€ m)	% change vs Q4 2012	Sum of values (€ m)	% change vs Q3 2012	Sum of values (€ ms)	% change vs Q2 2012	Sum of values (€ ms)	% change vs Q1 2012
1. Operating income	1,984	9.6	1,848	4.8	1,959	7.8	1,881	5.7
2. Operating expenses	999	3.9	887	-0.3	920	3.5	884	1.3
3. Loan loss provision	472	-7.1	395	6.8	491	9.8	411	33.0
4. Pre-Tax Profit	508	54.3	565	13.4	564	20.0	586	-2.0
5. RWA at end of period	163,661	-2.8	165,855	-1.0	168,623	0.0	170,408	-0.2
6. Portfolio at end of period	214,278	-4.8	218,366	-2.5	223,508	-0.7	224,065	-0.6
7. New business volumes	19,614	13.7	15,989	1.8	17,630	0.0	14,550	-9.5

Aggregate Data 2010 – 2013 Annual

	2013		2012		2011		2010
Aggregated data provided by companies (all figures in millions of euro for the relevant period)	Sum of values (€ m)	% change vs 2012	Sum of values (€ m)	% change vs  2011	Sum of values (€ ms)	% change vs  2010	Sum of values (€ ms)	% change vs  2009
1. Operating income	7,572	5.2	7,199	-4.8	7,564	2.1	7,405	3.1
2. Operating expenses	3,644	0.5	3,627	-2.5	3,721	5.6	3,523	6.7
3. Loan loss provision	1,745	7.9	1,617	7.0	1,511	-19.7	1,882	-9.2
4. Pre-Tax Profit	2,182	13.9	1,915	-18.3	2,345	19.0	1,970	64.6
5. RWA at end of period	163,661	-2.7	168,234	-6.5	179,925	3.9	173,191	n/a
6. Portfolio at end of period	214,278	-4.8	225,054	-4.1	234,563	1.6	230,978	0.4
7. New business volumes	67,285	0.8	66,771	-14.5	78,073	3.0	75,793	7.3

The average profitability ratio increased substantially, from 16.3% in Q4 2012 to 25.8% in Q4 2013, although it was slightly lower than the rest of 2013.

It is important to note that the quartile values of the profitability ratio are widely dispersed within the firm sample for the reporting period.

Growth Rates of Financial Indicators 2012 – Q4 2013

New Business Volumes Q1 2012 – Q4 2013

Income, expenses & cost/income

Operating income recovered well compared to the same period a year ago, growing by 9.6%, while operating expenses increased to a lesser degree (3.9%). This difference caused the cost/income ratio to fall from 53.5% in Q4 2012 to 49.0% in Q4 2013.

In fact, all quarters in 2013 saw a decline in the cost/income ratio, resulting in a lower total figure for 2013 of 47%.

Loan loss provision & cost of risk

Loan loss provisions decreased in Q4 2013 compared to Q4 2012 (-7.1%), the first decline seen in 2013.

The average annualised cost of risk remained at the same level as Q4 2012 at 0.9%.

The total cost of risk for 2013 was slightly lower at 0.8%.

RoA and RoE indicators

RoA and RoE 1 increased significantly in Q4 2013 compared to Q4 2012, reaching 0.9% and 115, respectively. These figures are less heavily influenced by outliers than in previous quarters. Overall, 2013 saw increases in these indicators, with an RoA of 1.0% and an RoE of 121.

Return on Assets Ratio 2012 – Q4 2013

 

Return on Equity Index 2012 – Q4 2013

Philippe Bismut, CEO of Arval, commented: “2013 saw a slow recovery beginning in the EU, with European GDP rising by 0.4% in Q4 2013 in comparison to Q4 20122.

“It’s even better news for the European leasing industry, which is experiencing an even greater recovery as evidenced by the strong key performance indicators (KPI) performance in Q4 2013.

“Revenues and profitability have been particularly impressive last quarter, on the back of the highest new business volumes seen since Q4 2011. The leasing industry proved itself able to weather one of the most difficult downturn periods of recent history and is now positioned to capitalise on market recoveries.”

Bismut added: “Consolidated recovery will bring some long-awaited breathing room and future opportunities for industry development.”