Leaseurope Index Q3 2019
The Leaseurope Index is a unique survey that tracks key performance indicators of a sample of 23 European lessors on a quarterly basis. This Q3 2019 is the thirty-fifth edition of the survey.
All of the weighted average ratios for Q3 2019 improved compared to the same period of last year, except for cost/income. The trend in the median ratios on the other hand, showed a mixed picture, with profitability and RoE improving, while cost/income, cost of risk and RoA deteriorated.
Total new leasing volumes reported by the sample of firms increased by 7% in comparison to Q3 2018, reaching €28.1 billion. As the outstanding portfolio continued to rise at 4.7% growth in Q3 2019, total risk-weighted assets (RWAs) also increased, at a slower rate, by 2.4%.
Pre-tax profit grew by 11.2% in Q3 2019 compared to the same period of 2018 (see table 1). Consequently, the weighted average profitability ratio also increased from 39% in Q3 2018 to 40.9% in Q3 this year (see table 3a). The median profitability ratio exhibited a similar trend, with profitability improving from a previous level of 39.3% to 40.0% in Q3 2019 (see table 3b).
In Q3 2019, operating income increased by 3.9% compared to the same period in 2018, however operating expenses rose at a higher level of 7.9%. This resulted in escalation of the weighted average cost/income ratio, which expanded to 49.0% in the third quarter of 2019. Median cost/income ratio also showed an increase in Q3 2019 to 48.2%, which maintained a relatively similar level to that observed in the first quarter of this year.
Loan loss provisions in Q3 2019 decreased significantly compared to the same period a year ago, shrinking by 32%. As a result, the average annualised cost of risk dropped from 0.50% in Q3 last year to 0.34% in Q3 2019, the lowest level seen so far this year. However, when excluding the impact of large outlier values, the median cost of risk for the third quarter was less optimistic, with a moderately higher level of 0.38% in this year’s third quarter.
The weighted average RoA ratio and RoE index improved in Q3 2019 in comparison with Q3 2018 with RoA reaching the level of 1.5%. In terms of median indicators, however, RoA remained relatively stable during this quarter, averaging 1.3%, while RoE increased.
Patrick Beselaere, Global Head ING Lease, commented that, “Despite some economic headwinds during the first half of this year, the European leasing industry managed to perform relatively well in the third quarter. As the cost/income ratios continue to increase, going forward lessors should be cautious when it comes to rising operating expenses. Economic growth, together with investment, is expected to remain subdued for the rest of the year and going into 2020, setting the stage for potentially challenging market dynamics for the year ahead. Lessors will need to focus on our core strengths in order to continue outperforming the market.”