The average profit as a percentage of total operating income in equipment finance fell from 26.7% in 2012 to just 18.1% in 2013, according the weighted average ratio in Leaseurope’s 2013 Index survey.
While the average cost of companies operating expense as a percent of operating income fell slightly, from 48% to 47%, the cost of risk increased from 0.9% to 1.3%. In this same period, return on assets fell from 0.8% to 0.5%.
The European picture for commercial vehicles was a bit bleaker, as profitability fell from 35.6% in 2012 to 19.3% in 2013. Cost to income ratio increased from 43.7% to 46.8%, return on assets fell from 1% to 0.7% while cost of risk also increased from 0.6% to 0.9%.
The Index involved 17 companies, including ABN Amro, BNP Paribas and ING Lease, and Leaseurope said the use of weighted average ratios allowed the size of companies to be taken into account.
However it also warned this system is prone to being influenced by extreme values, and so provided a median ratio which lessens the effects of any such outliers, but doesn’t take into account the size of the companies.
Using the median ratio, profitability in equipment finance rose from 31.1% in 2012 to 32.6% in 2013 and cost of risk fell from 0.8% to 0.7%.
Operating expenses were 47% of operating income, up from 43.2%, in this format, while return on assets still fell – from 1% to 0.9%.
Although the picture did not change quite as dramatically for commercial vehicles, the fall in profitability was a lot less marked than in weighted averages. Using a median ratio, it fell from 31.9% in 2012 to 27.6%.
Return on assets fell from 1.1% to 0.9% in the period, while cost of risk was flat, at 0.4%. Median operating expense as a percent of operating income still rose, however, from 44% to 52.5%.