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August 31, 2011updated 12 Apr 2017 4:12pm

Leasing Q2 profit drops slightly across Europe

The European leasing industry has seen a more modest second quarter in 2011 following the significant growth in 2010 and the first quarter of this year. The second Leaseurope Index, a quarterly survey of European lessors by the industry body, showed pre-tax profit was down 5.7% from the first quarter to 740m.

By Grant Collinson

The European leasing industry has seen a more modest second quarter in 2011 following the significant growth in 2010 and the first quarter of this year.

The second Leaseurope Index, a quarterly survey of European lessors by the industry body, showed pre-tax profit was down 5.7% from the first quarter to €740m.

The figure, an aggregate of data voluntarily provided by 17 Leaseurope members, still showed growth of 28.1% from the same period in 2010.

New business volumes provided some positivity, increasing by 14.7% to €20.7bn for the period 1 April to 30 June 2011 marginally increasing portfolio worth.

Profitability ratio is down slightly from the first quarter at 34.4% although still substantially higher than in 2009 and 2010.

Commenting on the Index findings, Jean-Marc Mignerey, chief executive officer of Société Générale Equipment Finance, said: “Despite a more difficult economic environment in Q2, it is positive that the profitability ratio is substantially higher than in recent periods.

He added, while profitability was lower than the start of the year, he is confident the leasing industry can continue to grow earnings.

What is of more concern to Mignerey is the increase by 10 basis points in the second quarter of the cost of risk ratio.

He said: “It is of the upmost importance for the industry to watch this indicator closely, given broader slowdown in European economic growth and ongoing uncertainty about the impact of sovereign debt sustainability on financial stability.”

Mignerey also expressed concern that operating expenses increased from the first quarter faster than income, although the cost-to-income ratio still remains healthy compared to previous years.

He said: “It is not easy for lessors to further streamline operations which span many countries, different markets and asset classes.

“Nevertheless, rigorous cost control and continuous innovation remain vital for the industry to achieve consistent returns in an environment of scarce capital and tight liquidity.”

Mignerey added constant performance improvement across the leasing industry is of vital importance.

“This is particularly relevant at a time when banks are under unprecedented regulatory pressure to strengthen their capital base and de-leverage which will inevitably lead to a reduction in their risk weighted assets over the coming months and years,” he said.

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