Cat Financial reported second-quarter 2020 revenues of $641 million, a decrease of $116 million, or 15%, compared with the second quarter of 2019. Second-quarter 2020 profit was $59 million, a $20 million, or 25%, decrease from the second quarter of 2019.
The decrease in revenues was primarily due to a $60 million unfavorable impact from lower average financing rates and a $48 million unfavorable impact from lower average earning assets.
Second-quarter 2020 profit before income taxes was $89 million, a $52 million, or 37%, decrease from the second quarter of 2019. The decrease was primarily due to a $25 million decrease in net yield on average earning assets, a $23 million unfavorable impact from lower average earning assets and a $15 million increase in provision for credit losses. These unfavorable impacts were partially offset by a $22 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 27% in the second quarter of 2020 compared with 29% in the second quarter of 2019, excluding a discrete item in the second quarter of 2019 of $13 million for a valuation allowance against the deferred tax assets of a non-U.S. subsidiary. The decrease in the estimated annual tax rate was primarily due to changes in the geographic mix of profits.
During the second quarter of 2020, retail new business volume was $2.74 billion, a decrease of $607 million, or 18%, from the second 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 second quarter of 2020, past dues were 3.74%, compared with 3.38% at the end of the second quarter of 2019. Past dues increased primarily due to the impact of the COVID-19 pandemic. Write-offs, net of recoveries, were $30 million for the second quarter of 2020, compared with $74 million for the second quarter of 2019. As of June 30, 2020, the allowance for credit losses totaled $515 million, or 1.92% of finance receivables, compared with $457 million, or 1.69% of finance receivables at March 31, 2020. The increase in allowance for credit losses was driven in part by expectations of a lingering impact from COVID-19. The allowance for credit losses at year-end 2019 was $424 million, or 1.50% of finance receivables.
Response to COVID-19 and Global Business Conditions
Cat Financial continues to respond to business conditions impacted by the COVID-19 pandemic. Cat Financial’s operations have been classified by many government entities as an essential activity for support of financial services. Our customers and dealers use our services, mainly, to obtain retail and wholesale financing for Caterpillar products. Cat Financial is taking many actions to manage through this pandemic:
Cat Financial continues to maintain our strong financial position and liquidity. Cat Financial ended the second quarter with $630 million of cash and available global credit facilities of $7.75 billion. In July, Cat Financial issued $1.5 billion of new three-year and 18-month medium-term notes to supplement its liquidity position. In addition, Cat Financial benefits from $8.0 billion of supplemental liquidity facilities that were arranged by Cat Financial and Caterpillar in April.
Cat Financial continues to implement safeguards in its facilities to protect team members, including increased frequency of cleaning and disinfecting, social distancing practices and other measures consistent with specific regulatory requirements and guidance from health authorities.
Cat Financial is monitoring the situation closely and continues to focus on portfolio health. Cat Financial is responding to government requirements globally to adjust the repayment terms for customers and is providing payment relief through Customer Care Programs launched globally, including account modifications to accommodate customer needs. We continue to provide qualified customers and dealers with new loans and leases to support their current and future business needs.
"Our business performed well during the quarter while managing the continued challenges from the COVID-19 global pandemic," said Dave Walton, president of Cat Financial and vice president with responsibility for the Financial Products Division of Caterpillar Inc. "Our team remains focused on executing the strategy to help Caterpillar customers and dealers succeed through financial services solutions while maintaining our strong financial position and liquidity."
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.
Caterpillar media contact: Kate Kenny, +1 309-361-9333 or Kenny_Kate@cat.com
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