Customer finance operations

Total new financing volume in 2011 amounted to SEK 44.8 billion (35.1). Adjusted for changes in exchange rates, new business volume increased by 35% compared to 2010 as a result of increased sales volumes of the Volvo Group products and stable penetration levels. In total, 49,757 new Volvo vehicles and machines (34,522) were financed during the year. In the markets where financing is offered, the average penetration rate was 25% (25).

As of December 31, 2011, the credit portfolio was SEK 95,544 M (84,550). During 2011 the credit portfolio increased by 13.8% (decrease: 4.4), adjusted for exchange-rate movements. The funding of the credit portfolio is matched in terms of maturity, interest rates and currencies in accordance with Volvo Group policy.  For further information see note 4.

The operating income for the year amounted to SEK 942 M compared to SEK 167 M in the previous year. Return on shareholders’ equity was 7.3% (0.4). The equity ratio at the end of the year was 9.1% (9.0). The improvement in profitability is driven mainly by lower credit provisions and higher earning assets. During the year, credit provision expenses amounted to SEK 682 M (1,438) while write-offs of SEK 804 M (1,460) were recorded. The write-off ratio for 2011 was 0.93% (1.65). At the end of December 31, 2011, credit reserves were 1.33% (1.69%) of the credit portfolio.

As a consequence of the strong volume growth in Brazil, VFS executed on its second large portfolio syndication in the second quarter of 2011. This transaction of approximately SEK 4 billion of the Brazilian credit portfolio served as an important risk mitigation measure and successfully freed up capital for reinvestment in the country. The transaction generated a positive impact on operating income of SEK 45 M.