During the quarter, the customer finance business experienced further improvements in profitability mainly attributable to lower credit losses. Portfolio quality and performance remained strong in North America, Latin America and Asia-Pacific and parts of Western Europe, particularly Germany, demonstrated solid recovery during the period. Eastern Europe portfolio performance, while stable, continued to lag the recovery. The tragic events in Japan did not have a significant impact on first quarter results.
New financing volume remained strong during the quarter and the customer finance portfolio grew in all regions when adjusted for exchange-rate movements. In addition, Volvo Financial Services established a footprint in India with the signing of a private label alliance with the Indian finance company SREI. The alliance is expected to commence local financing activities in the second quarter.
New financing volume in the first quarter of 2011 amounted to SEK 9.4 billion (6.8). New financing volume increased by 50% compared to the first quarter of 2010, when adjusted for changes in exchange rates, due to increased Volvo Group unit deliveries and stable market penetration. In total, 10,664 new Volvo Group units (6,196) were financed during the quarter. In the markets where financing is offered, the average penetration rate in the first quarter was 23% (23).
At March 31, 2011 total assets amounted to SEK 87 billion (94). Compared to the first quarter of 2010, the credit portfolio was down 8% due to the strengthening of the Swedish krona. During the quarter, the credit portfolio increased by 2.0% when adjusted for exchange-rate movements. Gross income is down only slightly from prior year as the reduction in portfolio size was offset by lower level of non-earning assets and more efficient funding.
During the quarter, credit provisions amounted to SEK 178 M (374) while write-offs of SEK 168 M (353) were recorded. Together with the growing credit portfolio, this resulted in a slight decrease in credit reserves from 1.69% to 1.67% of the credit portfolio at December 31, 2010 and March 31, 2011, respectively. The annualized write-off ratio through March 31, 2011 was 0.80% (1.51).
Operating income in the first quarter amounted to SEK 179 M compared to SEK 14 M in the previous year. The improvement compared to the previous year is driven mainly by lower credit provisions.