24.03.2021

Leaseurope Index Q4 2020

Due to the impact of Covid-19 on the entire global economy, the year 2020 was a challenging one for the leasing sector, with all annual financial ratios weakening significantly.

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 2020 survey is the fortieth edition.

Due to the impact of Covid-19 on the entire global economy, the year 2020 was a challenging one for the leasing sector, with all annual financial ratios weakening significantly. All of the weighted average ratios worsened for Q4 2020 compared to the same period in 2019. Although the trend in the median ratios, which excludes some large outlier values, revealed a similar picture for the ‘typical’ company in the sample, median cost/ income performed better in the fourth quarter of 2020.

Total new leasing volumes reported in Q4 2020 by the sample of firms dropped by -4.2% in comparison to the same quarter of the previous year. The whole of 2020 experienced a decline of -12.1%, seeing almost €100 billion in new business conducted. The portfolio of outstanding contracts in the sample shrank by -1.8% in 2020, while risk-weighted assets decreasing by a similar level of -1.9%.

Aggregate pre-tax profit decreased in 2020 compared to 2019, falling by -28.4%. This was largely a result of poor performance in the first half of 2020, particularly Q2 which experienced a -50.3% loss. As a result, weighted average profitability declined from 37.7% to 25.9% between 2019 and 2020, with median values seeing similar drops. Despite some minor income decline, this trend was mostly driven by large loan loss provisions.

Aggregate operating income remained fairly stable in Q4 2020, growing by 0.6% compared to Q4 2019, but operating expenses elevated by a higher 7.6%. This resulted in the weighted average cost/income ratio rising to 52.0% in Q4 2020. When looking at the whole of 2020, operating expenses remained relatively unchanged at -0.7%, while operating income experienced a decrease of -2.9%. This led to a rise in the average cost/income ratio, reaching 50.1% for 2020.

Loan loss provisions in the fourth quarter escalated by 17.6%. This resulted in the average annualised cost of risk for Q4 2020 increasing to 0.9%. Over the full year 2020, both median and weighted average cost of risk roughly doubled compared to 2019, reaching the same level of 0.8% each.

Weighted average RoA and RoE in Q4 2020 contracted compared to Q4 2019. Similarly, both indicators experienced declines in the whole year of 2020, with RoA reaching 1.0%.

View from the industry

Tim Albertsen, Group CEO at ALD Automotive commented,

While 2020 presented significant challenges for businesses across Europe, the leasing industry showed remarkable resilience in funding assets essential to support the European economy. Particularly, European lessors have managed to stabilise operating expenses, with their income and portfolio experiencing only single-digit declines. Despite accommodative policies and recovery packages, the brighter economic outlook for 2021 remains highly uncertain, driven by the evolution of the pandemic and the success of mass vaccinations. Although business investment is expected to recover at a slower pace, we will continue leveraging our strengths to provide European firms of all sizes with the support needed to speed up their recovery.