Volvo Financial Services
Strong growth and solid profitability
The financial services of VFS are offered with the sales of Volvo Group vehicles and equipment and are available with service agreements and aftermarket services through seamless integration at the point-of-sale with Volvo Group dealers. This approach delivers a convenient one stop-shopping experience for the customer.
In 2013, VFS provided financial services in 40 markets around the globe. The global diversification of the VFS portfolio proved to be a significant strength as assets under management reached all-time highs. This profitable growth along with stable portfolio performance, increased operational efficiency and good funding levels yielded solid profitability for VFS in 2013.
Operational consolidation, process standardization and systems harmonization were key activities during 2013. These activities allowed VFS to capitalize on profitable growth opportunities with scalable business platforms and high service levels.
Overall economic conditions continued to improve during 2013 and demand for VFS products remained strong even though some markets struggled for growth.
In the Americas, record managed assets and retail volumes were achieved and the portfolio performed extremely well in terms of delinquencies and write-offs.
EMEA (Europe, Middle East and Africa) achieved a stable portfolio performance but new volumes were impacted by the relatively slow demand in truck and construction equipment markets.
In APAC (Asia Pacific), profitability remained good despite delinquencies in China remaining on elevated levels.
In all VFS markets, and particularly in developing markets, downturn preparedness is a key objective regardless of the current business cycle.
Customer finance operations
Total new financing volume in 2013 amounted to SEK 47.0 billion (46.6). Adjusted for changes in exchange rates, new business volume increased by 5.9% compared to 2012. In total, 51,466 new Volvo Group vehicles and machines (50,994) were financed during the year. In the markets where financing is offered, the average penetration rate was 27% (27).
As of December 31, 2013, the net credit portfolio amounted to SEK 103,873 M (99,690). 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 to the Consolidated financial statements.
The operating income for the year amounted to SEK 1,522 M compared to SEK 1,496 M in the previous year. Return on shareholders’ equity was 12.1% (12.5). The equity ratio at the end of the year was 8.1% (8.1). Improvements in gross income and operating expenses were partially offset by higher credit provisions.
During the year, credit provision expenses amounted to SEK 923 M (639) while write-offs of SEK 719 M (577) were recorded. Third quarter provisions and write-offs were higher than normal due to deterioration of collateral positions and values related to non-performing loans and leases in Spain stemming from the global financial crisis in 2009 and 2010 caused by the continuing recession and protracted legal processes in that country. The write-off ratio for 2013 was 0.71% (0.58). At the end of December 31, 2013, credit reserves were 1.31% (1.23) of the credit portfolio.