New business volume grew 2.5% in the equipment finance industry in 2016, according to the 2017 Survey of Equipment Finance Activity (SEFA) released this month by the Equipment Leasing and Finance Association (ELFA). The rise in new business volume marked the seventh consecutive year that businesses increased their spending on capital equipment.
The 2.5% increase in new business volume contrasts sharply with the 12.4% growth reported for 2015, but the industry nonetheless outperformed the national economy, which grew just 1.6% for the year, according to the U.S. Department of Commerce.
"Seven consecutive years of growth would tempt fate in any economy," notes the survey's executive summary. "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."
The SEFA report covers key statistical, financial and operations information for the $1 trillion equipment finance industry, based on a comprehensive survey of 115 ELFA member companies, including Key Equipment Finance, representing the majority of the Monitor 100. The report is available at www.elfaonline.org/SEFA. ELFA will host a web seminar on the SEFA findings on Aug. 17 at noon EDT.
“The equipment finance industry continues a slow-growth trajectory, mirroring a fundamentally sound — if unspectacular — U.S. economy during the past several years," said ELFA President and CEO Ralph Petta. "Despite a slowly rising interest rate environment, leasing and finance companies are profitable entities, with generally healthy portfolios and sustainable levels of returns. Although the makeup of the SEFA respondent base varies widely in terms of size, markets served, financial results and business operations, they are all bound by one common characteristic: they make meaningful contributions to the health of our nation’s economy by enabling businesses, both large and small, to acquire the necessary equipment to run their business operations.”
Key findings for the banking sector, which includes KeyCorp, said:
- Bank credit approvals in dollar terms climbed 6.5% in 2016 to roughly 71% of applications submitted, although it was unclear whether this was due to improved customer situations, more focused marketing or both. Nonetheless, booked and funded applications as a percentage of approved applications fell slightly, indicating that although more customers were given the green light to receive funding, they went elsewhere to get it—or postponed the equipment acquisition.
- Bank delinquencies edged up to 1.0% from 0.8% in 2015. But the rate was the lowest in the three sectors (Banks, Captives and Independents) for 2016 and by industry standards, any rate below 2% is considered extremely low. Net full-year losses at banks doubled from 2015 — but at 0.24%, still barely made the charts and were the lowest for the three industry sectors. In all, banks enjoyed a successful year, skillfully managing their balance sheets and capital requirements to grow their net earning assets by a higher rate than needed to grow their equity, thus leveraging their growth.
Read the enter Executive Summary here: