Volvo Financial Services originations up 18%

Commercial financier Volvo Financial Services’ new retail financing volume reached a record in the third quarter amid “fierce competition” from banks and leasing companies.

Volvo’s new retail financing volume clocked in at $2.7 billion in Q3, up 17.7% year over year, according to the earnings report. New business volume increased 13% YoY when adjusted for currency in Q3, Jan Ytterberg, Volvo Group’s acting chief financial officer, said during the Wednesday earnings call.

“The fierce competition from banks and leasing companies is putting pressure on the earnings,” he said, adding that the competition also negatively impacted the financing penetration rate. “Customers’ financials and payment performance are good, and that’s why we have low write-off levels and low credit expense levels.”

The company’s 12-month total financing penetration rate was 27%, flat quarter over quarter but down 2%, or 200 basis points, YoY, according to the earnings report.

A Volvo badge and parking-assist camera on the grille of an automobile at a Volvo Cars AB dealership in Stockholm, Sweden, on Thursday, Aug. 19, 2021. Volvo Cars said its considering an initial public offering months after calling off earlier plans to merge with Geely Automobile Holdings Ltd., the Chinese manufacturer owned by its parent. — *Photographer: Mikael Sjoberg/Bloomberg*

The company’s credit portfolio, which includes bus, construction equipment, engine and truck segments, totaled $23.3 billion, up 20.8% YoY, according to the report. Volvo Financial Services’ credit portfolio grew 20% when adjusted for currency.

Similar to the second quarter, “high deliveries and improved prices are impacting positively on the portfolio growth,” Ytterberg said. The third quarter will be his last as acting chief financial officer. Mats Backman takes over the position this month following his appointment June 29.

The lender’s third-quarter growth is the result of Volvo Group’s growing business portfolio and higher interest levels, Volvo Chief Executive Martin Lundstedt said during the call.

Volvo Financial Services’ 12-month rolling number of financed units totaled 67,734 in Q3, up 1.3% sequentially but down 3.3% YoY, according to the earnings report.

Shares of Volvo [OTC: VLVLY] were trading at $20.16 as of market close Thursday, down 2.47% or 51 cents from market open. Volvo has a market capitalization of $42.43 billion.