Cat Financial Announces Third-Quarter 2020 Results

October 27, 2020

Cat Financial reported third-quarter 2020 revenues of $598 million, a decrease of $150 million, or 20%, compared with the third quarter of 2019. Third-quarter 2020 profit was $48 million, an $81 million, or 63%, decrease from the third quarter of 2019.

The decrease in revenues was primarily due to a $76 million unfavorable impact from lower average financing rates and a $40 million unfavorable impact from lower average earning assets. 

Third-quarter 2020 profit before income taxes was $96 million, an $88 million, or 48%, decrease from the third quarter of 2019. The decrease was primarily due to a $50 million increase in provision for credit losses, a $29 million decrease in net yield on average earning assets and an $18 million unfavorable impact from lower average earning assets. These unfavorable impacts were partially offset by a $20 million decrease in general, operating and administrative expenses primarily due to lower short-term incentive compensation and employee benefit expenses.

The provision for income taxes reflected an estimated annual tax rate of 33% in the third quarter of 2020 compared with 28% in the third quarter of 2019. The increase in the estimated annual tax rate was primarily due to changes in the geographic mix of profits. 

During the third quarter of 2020, retail new business volume was $2.60 billion, a decrease of $329 million, or 11%, from the third quarter of 2019. The decrease was driven by lower volume across all segments with the exception of a slight increase in Asia/Pacific.

At the end of the third quarter of 2020, past dues were 3.81%, compared with 3.19% at the end of the third quarter of 2019. Past dues increased primarily due to the impact of the COVID-19 pandemic, offset by decreases in the Caterpillar Power Finance and Latin American portfolios. Write-offs, net of recoveries, were $125 million for the third quarter of 2020, compared with $103 million for the third quarter of 2019. As of September 30, 2020, the allowance for credit losses totaled $460 million, or 1.74% of finance receivables, compared with $515 million, or 1.92% of finance receivables at June 30, 2020. The decrease in the allowance for credit losses was primarily driven by write-offs of previously reserved accounts in the Caterpillar Power Finance portfolio. The allowance for credit losses at year-end 2019 was $424 million, or 1.50% of finance receivables.

"The Cat Financial team delivered solid results in the third quarter while managing customer challenges from COVID-19 and the remaining Caterpillar Power Finance portfolio," said Dave Walton, president of Cat Financial and vice president with responsibility for the Financial Products Division of Caterpillar Inc. "We saw modest improvement versus second quarter 2020 for most key business drivers, and Cat Financial remains well-positioned to serve Caterpillar customers and dealers worldwide through financial services solutions."

For over 35 years, Cat Financial, a wholly owned subsidiary of Caterpillar, has provided financial service excellence to customers. The company offers a wide range of financing solutions to customers and Cat® dealers for machines, engines, Solar® gas turbines, marine vessels and various operational needs. Cat Financial has offices and subsidiaries located throughout North and South America, Asia, Australia, Europe, Africa and the Middle East, with its headquarters in Nashville, Tennessee.