Survey: US Capital-Equipment Financing Strengthened In August

Equipment Leasing and Finance Association survey shows rising loan and leasing activity for capital equipment

--Choppy month-to-month activity attributed to concerns about U.S. economy

--Delinquent loans and leases down from a year ago

  

Financing volume for business equipment grew 33% in August from a year earlier, easing concerns, at least temporarily, that spending on capital equipment is weakening.

Respondents to the Equipment Leasing and Finance Association's monthly survey said they financed $5.7 billion of new equipment last month, compared with $4.3 billion in the year-earlier period. August's volume was flat with July. From January through August, survey respondents provided financing for $43.9 billion of equipment purchases, up 25% from the same period in 2010.

The recovery in the $521-billion-a-year commercial leasing and financing industry from its 2009 doldrums appeared to regain some momentum last month after activity plunged in July following a spike in June. The finance association attributed the recent choppiness to increasing uncertainty about the performance of the U.S. economy.

"It is clear from less-quantitative reporting that equipment-finance executives still believe the storm clouds hovering over our economy have not yet dissipated," said William Sutton, president of the Washington-based association. "Current and future business performance will continue to ebb and flow."

Nevertheless, credit-quality metrics measured in the survey showed across-the-board improvement last month. Credit standards eased in August as the approval rate for loans and leases rose to 77.6% in August from 76.3% in July. Of the companies participating in the survey, more than 60% reported that they submitted more transactions for approval during August, up from 59% in July.

Loans and leases past due by more than 30 days amounted to 2.5% of survey respondents' net receivables in August, down from 4.3% a year earlier and down from 2.7% in July. Loan charge-offs amounted to 0.6% of respondents' net receivables last month, down from 1.3% in August 2010 and down from 0.7% in July.

Survey respondents continued to cite construction, trucking and printing as the industry sectors within their loan portfolios that are underperforming.

The 25 respondents to the Washington association's survey included banks Wells Fargo & Co. (WFC), Bank of America Corp. (BAC) and Fifth Third Bancorp (FITB); independent financing companies including CIT Group Inc. (CIT); and finance units for manufacturers Caterpillar Inc. (CAT), Deere & Co. (DE), Volvo Group, and Dell Inc. (DELL)