Used car demand, low hedging costs boost Volkswagen Financial Services expectations

BERLIN (Reuters) - Volkswagen Financial Services expects record annual revenue boosted by a strong fourth quarter, it said on Wednesday, amid high used car demand, comparatively low risk provisions for car loans, and cheap refinancing opportunities.

Annual operating profits this year will be far above a previous projection of 4 billion euros ($4.51 billion), CFO Frank Fiedler said to Reuters, after fourth quarter results outstripped all other quarters this year.

Volkswagen Financial Services, which includes the Volkswagen Bank and Porsche Financial Services, reported operating profits of 2.8 billion euros in 2020.

The company, which said in March it expected revenue this year to match last year's levels, had expected more dealerships to fail in the second year of the pandemic but very few did, Fiedler said.

"We managed to get our full dealership branch through," Fiedler said. "And they are looking good."

The carmaker's finance division is undergoing a restructure, moving from a country-based system to organising itself by sales channel, divided into dealerships, direct digital sales and fleet customers, it said.

Retail and fleet customers were protected by state aid schemes in some countries, and the carmaker's finance division thought they would see more collapses as these schemes ran out, Fiedler said: "We planned for this, but it did not take place."

($1 = 0.8862 euros)

(Reporting by Jan Schwartz, Victoria Waldersee; Editing by Miranda Murray)