John Deere Financial portfolio jumps 22%

John Deere Financial tallied portfolio growth in the second quarter of fiscal 2023 amid increased sales and strong credit performance as allowance for credit losses inched down.  

Finance receivables jumped 22% year over year to $51.7 billion, according to a May 19 8-K filing with the Securities and Exchange Commission. The portfolio reflected “outstanding” credit quality, John Deere & Co. Chief Financial Officer Josh Jepsen said Friday on the company’s earnings call.  

“We’re closely monitoring all the challenges in the banking sector as the market has contended with rising rates over the last year,” Jepsen said. “Fortunately, … there’s been no change in our ability to fund the portfolio, and the credit quality has been outstanding.”  

In addition, lease returns have been “near zero,” Jepsen said.  

Write-offs landed at about 0.1% as a percentage of the average portfolio, according to the earnings presentation. Allowance for credit losses on the global portfolio, excluding Russia, meanwhile, inched down 2 basis points YoY to 0.4%.  

“Our customers have had three very strong years financially,” Jepsen said. “Our forecasts this year imply past dues, nonperforming loans and write-offs are stable and remain below long-term averages.”  

Financial services revenue clocked in at $1.1 billion, up 28% YoY, according to the 8-K filing.  

Sales by the numbers:  

Sales revenues jumped as demand remained robust:  

• Small ag and turf net sales revenue increased 16% YoY to $4.1 billion;  
• Production and precision ag net sales jumped 53% YoY to $7.8 billion; and  
• Construction and forestry net sales rose 23% YoY to $4.1 billion.  

“As we look ahead to the rest of 2023, we see robust demand with our order books providing excellent visibility through the end of the year,” John Deere Director of Investor Relations Brent Norwood said on the earnings call.  

“Furthermore, we expect the ending inventories in 2023 to be below target levels,” he said.  

Notably, dealer inventory remained below historical averages while demand for compact tractors declined YoY, pushing inventory levels in that segment back to pre-pandemic levels, Manager of Investor Communications Rachel Bach said on the call.