Sotheby’s Finance portfolio grew 35% to $583 million in 2014

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Sotheby’s Finance’s revenues grew by $10.8 million – or 35 per cent – in 2014 to $42.1 million. The gross profit from Sotheby’s Finance increased by 10% (%3.1 million) to $33.1 million.

In January 2014 Sotheby’s started funding its finance division with a $550 million dedicated revolving credit facility rather than from the auction house’s own cash. On 31 December 2014 Sotheby’s Finance had a loan portfolio of $644 million, having borrowed $445 million.

Its average loan book was $583.3 million in 2014, 35 per cent up from its average 2013 loan book of $433.6 million.

Sotheby’s Finance had a 7.21 per cent return margin in both 2013 and 2014.

The auction house has reduced its targeted return on equity for Sotheby’s Finance from 20 per cent to 15 per cent. It says this will allow it to grow faster.

Sotheby’s total sales rose by $400 million to $6.7 billion in 2014, giving it revenues $853.7 million – which were up 10 per cent from 2013. Sotheby’s had adjusted earnings of $246.4 million up from $246.4 million in 2013. Sotheby’s Finance has eight employees compared to 1,341 involved in the auction and sales business.

Sotheby’s Finance offers two main types of loan: cosignor advances and term loans backed by art. Cosignor advances are used to finance works that will be sold with 12 months. While term loans are typically for two years, Sotheby’s will typically lend around half of the item’s value – a loan-to-value of 50 per cent. The portfolio had an average loan-to-value ratio of 48 per cent in 2014. Although, more than half of its portfolio was financed at LTVs of more than 50 per cent.

Term loans accounted for just $65.6 million in 2014 – up from $62.2 million in 2013. It also recieved term loan repayments of $38.1 million in 2014 and $76.4 million in 2012.

Sotheby’s will occasionally lend to dealers to help them buy art. In these cases Sotheby’s takes a partial ownership and shares in a profit or loss when the art is sold. In 2014 these loans accounted for just $2.8 million, down from $5.8 million in 2013.

Some $22,409,000 of loans are late, down $2 million from 2013 even though the portfolio has grown to $644 million.