Leaseurope Index Q1 2021
The Leaseurope Index is a unique survey that tracks key performance indicators of a sample of 23 European lessors on a quarterly basis. This Q1 2021 is the forty-first edition of the survey.
The results of the Q1 2021 Index show a significant recovery for the European leasing business, with all KPIs improving on the back of Covid-19 restrictions easing and vaccination programs progressing across Europe. As a result, all weighted average ratios and median ratios have improved in Q1 2021 compared to Q1 2020. The trend in the median ratios (i.e., for the ‘typical’ company in the sample) also reflected a positive picture for the ‘typical’ company in the sample.
New business volumes increased slightly in Q1 2021 compared to the same period a year ago, with a rise of 1.0%. The portfolio of outstanding contracts expanded marginally by 0.6% in Q1 2021, while risk-weighted assets dropped by -1.5%.
Aggregate pre-tax profit surged by 57.0% in relation to Q1 2020 as a result of releasing provisions. Therefore, weighted average profitability also improved, reaching 40.8% compared to 32.0% in Q1 2020. The median profitability ratio (less susceptible to outlier values and more indicative of the ‘typical’ company) also showed an improvement in Q1 2021 at a higher level of 46.5%.
Operating income rose by 10.3% in the first quarter of 2021 compared to the same period a year ago. Despite the simultaneous increase of 2.8% in operating expenses, the weighted average cost/income ratio improved to 48.6% at the beginning of 2021, which was 2.2 percentage points lower than Q1 2020 while similar to the level of the full year 2019. The median cost/income ratio is more positive when excluding outlier effects, with an improvement of 3.2 percentage points to reach 44.9% in Q1 this year
Loan loss provisions fell substantially in Q1 2021, down by -53.8% year-over-year from loan loss provisions in Q1 2020. As a result, the weighted average cost of risk halved compared to the level of Q1 2020, at 0.3% versus 0.6%. In terms of the median ratio, cost of risk reached 0.2% in Q1 2021.
The levels of both RoA and RoE were higher in Q1 2021 compared to Q1 2020. Weighted average RoA stood at 1.8% in Q1 2021, with the median ratio at 1.6% for the ‘typical’ leasing company.
Peter Hupfeld, CEO of Nordea Finance, commented that
“The first quarter of this year shows a positive performance with financial indicators improving, particularly income and profitability. Despite the uncertain environment remaining, an economic optimism has been reflected in the releasing of loan loss provisions. As uncertainties regarding the further evolution of the pandemic and EU-UK trade relations diminish, the European Commission has forecast that business investment will pick up more strongly in the second half of this year. Thus, after the difficulties of last year, it is a good moment for lessors to expand support for European businesses, especially SMEs, as they recover from the crisis.”