Show Dili t 1 THE FINANCE INDUSTRY Reflecting Improved economic conditions and strengthened public confidence 1976 earnings for tor most major finance and personal loan companies should approach or exceed earlier records as their reports are arc released release the profit profit- bearing spread between income generated from lending and the cost cast of oC funds employed has widened significantly over the past two years Also delinquency rates have declined steadily from the levels of oC 1974 Overall the industry's profit prospects appear bright for the year ahead Unlike ike earnings however the industry's record of stock market performance was far farless farless farless less impressive in 1976 Uncertainly Uncertainty Un Un- certainty certainly over the industry's competitive outlook ranks high among the factors contributing to the sluggishness Essentially the groups group's ability to preserve its market share appears doubtful and hence recent company assessments have emphasized diversification into unrelated operations TilE TIE COMPETITION TREND From million mil in 1966 total installment credit Increased increased increased in In- creased at a compounded annual annual an an- nual rate of 81 percent to 1618 million in 1975 Although finance and personal loan companies participated in this growth credit held by the sector grew at a smaller compounded annual rate of 51 percent from million in 1966 to million in 1975 From percent in 1966 the industry's share of total credit declined to percent by yearend yearend yearend year- year end 1975 In addition preliminary figures for last year suggest a continuation of the unfavorable trend Understandably the constant decline in market share reflects the increased availability of installment credit at commercial commercial commercial com com- mercial banks and credit unions By the issuance of credit cards d department stores and other retail outlets have also captured a larger share of total credit To cope with this intensifying intensifying intensifying in in- competition many large finance companies have consolidated operations and diversified into unrelated areas such as insurance manufacturing and retailing UNIQUE I DISADVANTAGES S SUf Unlike ike banking institutions finance and personal loan companies conduct lending functions in the absence of a deposit base Consequently these firms must utilize large amounts of debt in order to raise funds on which interest can be earned Firms can influence influence in influence in- in fluence earnings somewhat by varying the proportion of long- long and term short-term debt but otherwise the cost of funds is beyond the companies companies' control On the revenue side the industry industry in in- is closely monitored by state and federal statutes which regulate regula te the size of loans as well weIl as their related rates and terms t I FINANCE CE CES VS S LOAN l CO COMPANIES PAN IES In addition to p personal lending lending lending len len- ding finance companies usually offer a broad range of commercial financing services Accounts rc receivable financing factoring and industrial leasing are arc among services typically offered Serving needs of business as well as those of consumers finance companies are more favorably pO positioned to pass higher costs on to customers Also because l' l the demand for commercial ser services services ser ser- er vices intensifies during periods of tight money profit margins are usually more stable than they are for personal loan companies IN INI INVESTMENT I ST NT OUTLOOK Despite ite uncertainty a III t Y surrounding ing the industry's s competitive situation the lIlar near m-dr- term profit p picture remains remal bright Continued expansion of the peak borrowing group Fr r 35 seems certain Also the overall demand for comma i i c 1 ial wl 11 services is still improving Investors o owning the common stocks of Beneficial Corp err IT Financial and household Finance are advises to maintain maintain main main- tain hold positions position For hur representation in the v v. v we recommend purchase ol uI W w. r E. E Heller International om- om mon mono For a free fn-e report on this thus company write to s Reports Inc Wellesley y Hills Mass l |