Leaseurope Index Q4 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 Q4 2019 survey is the thirty-sixth edition.
All of the weighted average ratios for Q4 2019 weakened compared to the same period in 2018, except for cost/income improving. However, the trend in the median ratios, which excludes some large outlier values, revealed a mixed picture for the ‘typical’ company in the sample with cost/income and RoE performing well, while profitability and cost of risk deteriorated. On an annual basis, all median ratios worsened in 2019 with the exception of RoE, which saw an improvement.
Total new leasing volumes reported in Q4 2019 by the sample of firms grew by 5.5% in comparison to the same quarter of the previous year, reaching around €30.5 billion. The whole of 2019 experienced growth of 4.0%, seeing almost €113 billion in new business conducted. The portfolio of outstanding contracts in the sample grew by 5.3% in 2019, while risk-weighted assets increased by the lower level of 4.1%.
Aggregate pre-tax profit decreased in 2019 compared to 2018, contracting by -6.5%. This was largely a result of poor performance in Q2, and particularly Q4, in which growth fell by -28.5%. As a result, weighted average profitability for 2019 declined from 42.0% in 2018 to 38.0% in 2019.
Aggregate operating income saw growth in Q4 2019 of 4.1% compared to 2018’s same period. Although operating expenses escalated by a higher degree during this period, rising by 6.7%, the weighted average cost/income ratio dropped to 49% from 52.1% year-on-year. The trend for the whole of 2019 was similar, with cost escalation of 3.8% slightly exceeding income growth of 3.5%. When it comes to the weighted average cost/income ratio, things remained fairly stable reaching 48.4% in 2019.
Loan loss provisions in the fourth quarter are generally quite volatile as firms adjust their provisions for the end of year accounts. This resulted in the average annualised cost of risk for Q4 2019 rising nearly twice as high as the previous year (0.81% versus 0.43%). Median cost of risk for the whole of 2019 shows a more measured result, increasing to 0.4% from 0.3% in 2018.
Both weighted average RoA and RoE in Q4 2019 declined compared to Q4 2018. A similar trend was observed in the overall full year of 2019, with RoA of 1.4%. In terms of median ratios, RoE showed an improvement in overall 2019 performance.
Enrico Duranti, CEO at Iccrea BancaImpresa, commented that “Despite relatively strong performance in the third quarter, 2019 has been a challenging year. Macroeconomic uncertainty, trade tensions and the adaptation to changing regulatory requirements have resulted in increasing costs for the European leasing business. Regardless of these headwinds, European lessors have managed to expand their income and portfolio. Clearly this year will present large and unprecedented challenges for firms across Europe as economies contract, uncertainties remain and governments make large scale adaptations. Therefore, it will be essential for European lessors to maximise our internal strengths, minimize the impact of external challenges, and continue to support European businesses, especially SMEs, during difficult times with the repercussions of Covid19.”