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February 25, 2014updated 12 Apr 2017 3:59pm

European leasing shows signs of strong recovery

The Leaseurope Quarterly Index shows a 'substantial improvement' in the profitability and new business of leasing companies in Europe, despite a reduction in portfolios and an increase in loan loss provision.

By Verdict Staff

The Leaseurope Quarterly Index shows a ‘substantial improvement’ in the profitability and new business of leasing companies in Europe, despite a reduction in portfolios and an increase in loan loss provision.

Operating income among the 17 companies surveyed rose by 5.2% to €7.57bn for the year, helped by impressive growth in the final quarter, which saw a 9.6% annualised increase and brought €1.98bn into the income of the companies.

On a weighted average basis, pre-tax profitability as a part of the companies’ income rose from 16.3% to 26.5%.

New business also rose in Q4 2013, up 13.7% to €19.6bn compared to Q4 2012. As Q3 2013 was only 1.8% higher than Q3 2012, the figures seem to indicate a significant recovery in the European leasing market.

The growth in the fourth quarter helped increase 2013 new business to increase 0.8% to €68.3bn compared to 2012, a year the index fell compared to 2011.

However, in 2013 portfolios decreased by nearly 5% to €214bn, from €225bn at the end of 2012, and operating expenses also began to rise again, compared to a fall in the previous year.

2013 loan loss provision also saw a 7.9% increase over the previous year, with €1.74bn put aside for losses.Cost of risk fell, however, to 0.7% from 0.9% in 2012, and the return on assets also marginally improved from 0.9% in 2012 to 1% in 2013.

Philippe Bismut, chief executive of Arval, said: "2013 saw a slow recovery beginning in the EU, with European GDP rising by 0.4% in Q4 2013 in comparison to Q4 2012.

"It’s even better news for the European leasing industry, which is experiencing an even greater recovery as evidenced by the strong KPI performance in Q4 2013. 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. Consolidated recovery will bring some long awaited breathing room and future opportunities for industry development."

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