BMW 2004 Annual Report Download - page 17

Group Management Report 8
A review of the Financial Year 8
Outlook 29
Financial Analysis 30
--Earnings performance 30
--Financial position 33
--Net assets position 34
--Events after the
Balance Sheet date 37
--Value added statement 37
--Key performance figures 39
--Comments on the financial
statements of BMW AG 40
Risk Management 44
BMW Stock in 2004 48
16
General economic conditions relating to
financial services business
Financial services business in 2004 benefited from
the improvement in the global economy and the
resulting tighter monetary policies imposed by some
central banks. The US Federal Reserve Bank in-
creased key lending rates in moderate steps from
1% to 2.25%; interest rates were also increased,
for example, in the United Kingdom and Switzerland.
By contrast, the European Central Bank and the
Japanese Reserve Bank did not change key interest
rates in 2004. Interest yield curves (in particular the
US dollar yield curve), which were steep at the be-
ginning of the year, became much flatter by the year-
end, extremely so in the case of the United Kingdom.
With money market interest rates increasing in the
USA, albeit at a much slower pace, five-year capital
market interest rates rose, whereas those for ten and
thirty year periods remained virtually at the levels of
one year earlier.
The financial services sector reacted to the re-
sulting pressure on margins by further measures to
optimise processes and improve efficiency. The
availability of funds on the money and capital mar-
kets further exacerbated the intensely competitive
situation.
Continuing growth for the Financial Services
segment
The Financial Services segment was again able to
expand business successfully for another year in suc-
cession. The business volume of the segment in
balance sheet terms rose by 13.6% to euro 32,556
million.The proportion of new cars of the BMW Group
leased or financed by the Financial Services segment
increased by 3.7 percentage points to 42.0%.
At the year-end, a total of 1,843,399 credit or
lease contracts were in place with dealers or retail
customers, 13.5% more than one year earlier.
Regional expansion continued
The Financial Services segment pushed ahead with
its regional expansion. In the course of the year, for
example, eight new ventures, based on cooperation
agreements, started their operations in Europe,
Asia and America. The Financial Services segment
now sells its products through 24 group entities
and 24 cooperation arrangements, and is therefore
represented in 48 countries.
Sharp increase in retail customer business
In total, 817,597 new contracts were signed with
retail customers in 2004, 15.1% more than in 2003.
The number of new contracts significantly surpassed
the previous year’s figure, both in the area of lease
contracts (+29.6%) and credit contracts (+8.5%).
As a result of the faster growth of lease business,
mainly relating to the higher number of contracts for
new vehicles manufactured by the BMW Group, lease
business now accounts for 35.4% of all customer
retail business. The Financial Services segment also
registered a 15.8% increase in the financing of used
cars, with the majority of new contracts relating to
used BMW brand cars.
Contract portfolio of BMW Financial Services
in 1,000 units
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
00 01
1,317 1,298
02
1,443
03
1,623
04
1,843