2017-07-26 06:12:53
2017 Survey of Equipment Finance Activity finds new business volume grew 2.5% in 2016
SEVEN CONSECUTIVE YEARS OF GROWTH would tempt fate in any economy. But fears of a U.S. recession subsided in 2016 amid guarded optimism on Wall Street—made stronger by the presidential election—and slow but continued recovery in the wake of the Recession of 2008-2009.
According to ELFA’s 2017 Survey of Equipment Finance Activity (SEFA), equipment finance companies generally mirrored those conditions with an overall increase in new business volume (NBV) of 2.5% in 2016. While the rate contrasts sharply with the 12.4% growth reported for 2015, the industry nonetheless outperformed the national economy, which grew just 1.6% for the year, according to the U.S. Department of Commerce.
The SEFA report covers key statistical, financial and operations information for the $1 trillion equipment finance industry, based on a survey of 115 ELFA member companies. The 300-page report, which is produced by PricewaterhouseCoopers, is the most important and comprehensive source of statistical information available on the equipment finance sector. Key findings for 2016 as reported in the 2017 SEFA include:
BANKS: As in 2015, banks drove the industry’s 2016 growth, still bolstered by absorption of portfolios formerly owned by GE Capital and the fact that banks’ surging market share increasingly has led banks to compete mostly with other banks. NBV for the sector rose 5% in 2016. Market share also inched upward, from 67% in 2015 to 69% in 2016. In 2008, by comparison, banks held a 45% share.
CAPTIVES: Troubled by slumps in agriculture and transportation as well as fundamental shift s in information technology, captives experienced a sharp decline of more than 6% in NBV for 2016. Th is was the third year of struggle for the sector, but the first in which new business volume fell instead of rising somewhat. Not all captives in the survey had difficulties. But of the 10 largest participating in this survey, five saw large-scale declines or sea changes in the core businesses of their parent companies, and declining equipment sales translate to less financing.
INDEPENDENTS: NBV for independent companies climbed 12% from 2015 to 2016, the largest percentage increase of the industry’s three sectors. The growth wasn’t surprising, given banks’ continued regulatory restrictions and captives’ focus on financing the products of their parent companies. But with more than $114 billion in new industry volume overall, independents continued to hold less than 8% of total market share, even though that share rose roughly 0.5% last year.
TICKET SIZE: By ticket size, industry performance varied, with large-ticket showing a nearly 2% drop in new business volume for 2016, likely related to declines in corporate aircraft , railroad and trucks and trailers. Meanwhile the middle-ticket market experienced the largest growth in NBV at 5.2% over 2015 figures. Middle- ticket claims the largest share of the equipment finance industry and covers a wide range of equipment types and end-user industries. The small-ticket market grew slightly by 0.8%.
INDUSTRY SECTORS: End-user industries charting the most growth in NBV were utilities, industrial and air transportation. End-user industries marking the largest declines in NBV included truck transportation, which suffered a freight slump that is abating in 2017. Also experiencing declines were mining, oil and gas extraction, still hurting from the oil glut, and agriculture, forestry and fishing.
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Participation in the SEFA is a benefit of membership in ELFA. Member-respondents receive a complimentary copy of the Survey Report, as well as confidential Individual Company Data Sheets.
Learn more at www.elfaonline.org/SEFA.
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