Banco Latinoamericano de ercio Exterior(BLX) - 2024 Q4 - Annual Report

PART I Item 3. Key Information The Bank faces significant business risks from market conditions, liquidity, credit, and regional economic volatility Risk Factors The Bank's performance is subject to market conditions, business-specific risks, and regional economic volatility - The Bank's business is significantly impacted by market and macroeconomic conditions, including geopolitical events which can cause market volatility and supply chain disruptions[34][35][39] - Bladex is exposed to significant liquidity risk, with a high concentration of deposits from central banks (38%) and other institutions[46][49][50] - The Bank's credit activities are heavily concentrated in Latin America and the Caribbean, with 52% of the Credit Portfolio in five countries as of December 31, 2024[135][136][138] - A significant portion of the loan portfolio is exposed to the oil/gas (11%) and agribusiness (5%) sectors, which carry unique risks related to commodity price volatility[150] - Panama's inclusion on international financial monitoring lists poses a reputational and regulatory risk that could adversely affect the Bank's operations[91][92][93] Item 4. Information on the Company The company's history, business segments, strategic plans, credit portfolio, and regulatory environment are detailed History and Development of the Company Bladex was established by regional central banks to promote foreign trade and is headquartered in Panama - Bladex was established as a specialized multinational bank by central banks in the region to promote foreign trade and economic integration[155][156] - The Bank is headquartered in Panama, chosen for its status as a regional banking center and its U.S. dollar-based economy[156] - Bladex operates through its head office in Panama, a New York Agency, a subsidiary in Brazil, and representative offices in Argentina, Mexico, and Colombia[157] Business Overview The Bank's operations are divided into Commercial and Treasury segments, with a focus on strategic growth and regulatory compliance - The Bank operates through two main segments: the Commercial Business Segment for core intermediation and the Treasury Business Segment for investment and liability management[164][165][166] - The Bank's 2022-2026 Strategic Plan focuses on strengthening the business model, expanding the customer base, and optimizing credit origination[207][210][214] Commercial Portfolio by Product (as of Dec 31) | | 2024 | % | 2023 | % | 2022 | % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | (in $ millions, except percentages) | | | | | | | | Loans at amortized cost - principal balance | $8,375.2 | 83.5 | $7,195.6 | 84.4 | $6,763.0 | 87.8 | | Loan commitments and financial guarantee contracts | 1,414.3 | 14.1 | 1,063.7 | 12.5 | 779.4 | 10.1 | | Customers' liabilities under acceptances | 245.1 | 2.4 | 261.4 | 3.1 | 163.3 | 2.1 | | Total | $10,034.6 | 100.0 | $8,520.7 | 100.0 | $7,705.7 | 100.0 | - The total Credit Portfolio increased by 18% to $11.2 billion in 2024 from $9.5 billion in 2023, driven by higher lending origination[227] - Credit-impaired loans increased to $17 million (0.20% of Loan Portfolio) in 2024 from $10 million (0.14%) in 2023[233] - The Bank is regulated by the Superintendency of Banks of Panama and is subject to U.S. laws, with key regulations including a Capital Adequacy Ratio and a Liquidity Coverage Ratio (LCR)[265][269][280] Item 5. Operating and Financial Review and Prospects The Bank's financial performance analysis shows increased profit in 2024, driven by higher net interest income and fees Operating Results Profit for 2024 grew 24% to $205.9 million, driven by higher net interest income and improved return on average equity Summary of Profit for the Year | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | (in $ thousands, except per share amounts) | | | | | Net interest income | 259,211 | 233,183 | 148,011 | | Total other income, net | 44,425 | 32,936 | 18,661 | | Total revenues | 303,636 | 266,119 | 166,672 | | Provision for credit losses | (17,299) | (27,463) | (19,521) | | Total operating expenses | (80,464) | (72,498) | (55,111) | | Profit for the year | $205,873 | $166,158 | $92,040 | | Basic earnings per share (in US dollars) | $5.60 | $4.55 | $2.54 | | Return on average total equity | 16.20% | 14.68% | 8.95% | - The 24% increase in 2024 profit was driven by a $26.0 million rise in net interest income and a $10.2 million decrease in credit loss provisions[326] - Net interest income grew 11% in 2024 due to improved lending spreads and increased average credit balances[326][336] - Fees and commissions increased by 37% to $44.4 million in 2024, driven by growth in letters of credit and syndication activities[340] - The Commercial Business Segment's profit rose 27% to $194.5 million, while the Treasury Business Segment's profit declined 10% to $11.4 million[354][356][360] Liquidity and Capital Resources The Bank maintains a strong liquidity and capital position, with significant growth in assets and deposits in 2024 - Total assets increased by 10% to $11.9 billion as of Dec 31, 2024, driven by a 16% growth in the Loan Portfolio[363][366] - Total deposits increased 23% to $5.4 billion in 2024, with deposits from central banks constituting 38% of the total[367] - The Bank maintained a strong liquidity position with $1.9 billion in liquid assets and a Liquidity Coverage Ratio (LCR) of 264.6%[399][950] Key Credit Ratios (as of Dec 31) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | (in $ millions, except percentages) | | | | | Total allowance for credit losses to impaired credits | 498% | 654% | 190% | | Impaired credits to Credit Portfolio | 0.15% | 0.11% | 0.40% | | Total allowance for loan losses to Loan Portfolio | 0.93% | 0.83% | 0.82% | | Credit-impaired loans to Loan Portfolio | 0.20% | 0.14% | 0.45% | - Total equity grew 11% to $1.34 billion in 2024, with a Tier 1 capital ratio of 15.5%, well above required minimums[454][459][460] Trend Information Management identifies key trends including global economic slowdown, regional inflation, and political uncertainty as material risks - Key downside risks for the region include a sharper-than-projected global slowdown, financing stress, and geopolitical disruptions[468] - Persistent inflation and interest rate increases in advanced economies could lead to a severe external financing shock for the region[468] - Political uncertainty from upcoming elections in several Latin American countries creates an unpredictable economic policy trajectory[474] 2024 vs. 2023 Performance Highlights | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Profit for the year | $205.9M | $166.2M | | Earnings Per Share (EPS) | $5.60 | $4.55 | | Net Interest Income | $259.2M | $233.2M | | Fees and Commissions | $44.4M | $32.5M | | Return on Average Equity (ROAE) | 16.2% | 14.7% | | Efficiency Ratio | 26.5% | 27.2% | Item 6. Directors, Executive Officers and Employees This section details the Bank's leadership composition, compensation structure, board practices, and employee demographics Directors and Executive Officers The Bank's leadership includes a ten-member Board of Directors and an experienced executive team led by CEO Jorge Salas - The Board of Directors is composed of ten members elected by different classes of common stock, ensuring representation from various shareholder groups[488][490] - The executive leadership team is headed by Chief Executive Officer Jorge Salas, who has been in the role since March 2020[503] Compensation Executive compensation combines fixed salaries with variable cash and equity awards based on performance - For fiscal year 2024, the aggregate variable cash compensation paid to current executive officers was $1,543,004[519] - On February 20, 2024, executive officers were granted an aggregate of 143,976 restricted stock units corresponding to 2023 performance[521] 2024 CEO Compensation | Component | Amount | | :--- | :--- | | Annual Base Salary | $500,000 | | Performance-based Variable Cash | $415,285 | | Restricted Stock Units (Value) | $1,038,462 | | Perquisites & Other Benefits | $9,795 | - Non-employee Directors receive an annual cash retainer of $85,000 ($135,000 for the Chairman) and an annual equity grant of restricted shares[530][532] Board Practices The Board maintains independent oversight through separate CEO and Chairman roles and five standing committees - The Bank maintains separate positions for the Chief Executive Officer and the Chairman of the Board to ensure independent oversight[547] - The Board has five standing committees: Audit, Risk Policy and Assessment, Finance and Business, Anti-Money Laundering, and Nomination, Compensation and Operations[551] - The Audit Committee is composed entirely of independent directors, with Mr. Roland Holst serving as the designated "audit committee financial expert"[552][553] - The Risk Policy and Assessment Committee is responsible for overseeing the Bank's enterprise risk management[559] Employees The Bank's permanent employee count grew to 322 in 2024, with the majority based in Panama Number of Permanent Employees by Location | Location | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Bladex Head Office in Panama | 287 | 237 | 208 | | New York Agency | 8 | 7 | 6 | | Representative Office in Argentina | 4 | 3 | 3 | | Representative Office in Brazil | 10 | 8 | 9 | | Representative Office in Mexico | 8 | 8 | 7 | | Representative Office in Colombia | 5 | 5 | 5 | | Total | 322 | 268 | 238 | Item 7. Major Shareholders and Related Party Transactions This section identifies major shareholders and confirms that related party transactions are conducted on arm's-length terms Major Shareholders Major shareholders include Latin American central banks for Class A shares and institutional investors for Class E shares Major Shareholders (Beneficial Owners of 5% or more of a class) as of Dec 31, 2024 | Shareholder | Class | Number of Shares | % of Class | % of Total Common Stock | | :--- | :--- | :--- | :--- | :--- | | Banco de la Nación Argentina | A | 1,045,348 | 16.5% | 2.8% | | Banco do Brasil | A | 974,551 | 15.4% | 2.6% | | Banco de Comercio Exterior de Colombia | A | 488,547 | 7.7% | 1.3% | | Banco de la Nación (Perú) | A | 446,556 | 7.0% | 1.2% | | Banco Central del Paraguay | A | 434,658 | 6.9% | 1.2% | | Banco Central del Ecuador | A | 431,217 | 6.8% | 1.2% | | Banco del Estado de Chile | A | 323,413 | 5.1% | 0.9% | | Banco de la Provincia de Buenos Aires | B | 884,461 | 51.7% | 2.4% | | The Korea Exchange Bank | B | 147,173 | 8.6% | 0.4% | | Brandes Investment Partners, L.P. | E | 4,508,530 | 15.7% | 12.3% | | BlackRock, Inc. | E | 2,295,659 | 8.0% | 6.2% | - The Bank's common shares have different rights by class, with Class E shares being the only class listed on the NYSE[588][589] Related Party Transactions The Bank engages in ordinary course credit transactions with its shareholders on commercial, arm's-length terms - The Bank conducts credit transactions with its Class A and B stockholders, with 7% of the Loan Portfolio placed with these parties as of Dec 31, 2024[591] - All related party transactions are made on arm's-length terms, subject to prevailing market rates and corporate governance procedures[591][592] Item 8. Financial Information This section outlines the Bank's dividend policy, which includes quarterly cash dividends and a significant increase in 2024 Dividends Declared Per Common Share | Year Ended Dec 31 | Dividend per Share | | :--- | :--- | | 2024 | $2.125 | | 2023 | $1.250 | | 2022 | $1.000 | Item 9. The Offer and Listing The Bank's Class E shares are listed on the NYSE under the symbol "BLX", with other share classes not publicly traded - The Bank's Class E shares are the only publicly traded class, listed on the NYSE under the symbol "BLX"[601][604] Class E Share Price Range on NYSE (in $) | Period | High | Low | | :--- | :--- | :--- | | 2024 | 36.58 | 22.93 | | 2023 | 25.73 | 15.71 | | 2022 | 17.35 | 12.58 | Item 10. Additional Information This section covers corporate governance details, exchange controls, and taxation implications for shareholders Memorandum and Articles of Association The Bank's articles define its purpose to promote regional trade and outline the governance structure and share class rights - The Bank's purpose is to promote economic development and foreign trade in Latin American countries[610] - The Board consists of ten members: 3 elected by Class A shareholders, 5 by Class E shareholders, and 2 by all common shareholders combined[613] - A three-quarters affirmative vote of Class A shares is required for significant corporate actions like mergers or dissolution[616] Taxation The Bank is exempt from income tax in Panama, and dividends paid are not subject to withholding tax - The Bank is exempt from income tax in Panama under a special contract law, and dividends are exempt from Panamanian dividend tax[655][656] - For U.S. Holders, distributions on Class E shares are typically treated as ordinary dividend income, and gains from sales are treated as capital gains[633][637] - The Bank does not believe it will be classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes[639][641] Item 11. Quantitative and Qualitative Disclosure About Market Risk The Bank manages market risk through Board-approved policies, with minimal exposure to foreign exchange and interest rate risk - The Bank's market risk management policies are designed to identify and control credit and market risks through established limits and regular monitoring[663] - The Bank has no significant foreign exchange risk as most assets and liabilities are denominated in U.S. dollars[671][673] - Interest rate risk is managed by controlling repricing mismatches and is relatively low due to the short-term nature of its balance sheet[448][452] PART II Item 15. Controls and Procedures Management and independent auditors have concluded that the Bank's disclosure controls and internal controls are effective - The CEO and CFO concluded that the Bank's disclosure controls and procedures were effective as of December 31, 2024[681] - Based on the COSO 2013 framework, management concluded that the Bank's internal control over financial reporting was effective[682][686] - The independent auditor, KPMG, issued an unqualified opinion on the effectiveness of the Bank's internal control over financial reporting[688] Item 16. Other Information This section covers governance topics including the audit committee expert, code of ethics, accountant fees, and cybersecurity Audit Committee Financial Expert The Board has identified Mr. Roland Holst as an independent audit committee financial expert - The Board has determined that Mr. Roland Holst is an "audit committee financial expert" and is independent[694] Code of Ethics The Bank has adopted a Code of Ethics for its principal officers, which was amended in July 2024 - The Bank has adopted a Code of Ethics for its principal officers, which was amended in July 2024[695] Principal Accountant Fees and Services Total fees paid to the principal accountant, KPMG, were $875,426 in 2024 Principal Accountant Fees | Fee Type | 2024 | 2023 | | :--- | :--- | :--- | | Audit fees | $735,726 | $721,604 | | Audit-related fees | $139,700 | $180,000 | | Tax fees | $0 | $0 | | All other fees | $0 | $0 | | Total | $875,426 | $901,604 | Purchases of Equity Securities by the Issuer and Affiliated Purchasers A $50 million share repurchase program was authorized in 2024, but no shares were repurchased during the year - A share repurchase program of up to $50 million was authorized in February 2024[700] - No common stock was repurchased under the plan during the year ended December 31, 2024[701] Corporate Governance The Bank's governance practices differ from NYSE standards regarding committee structure and equity plan approval - Unlike NYSE standards, the Bank does not have a dedicated corporate governance committee; these responsibilities are handled by the full Board[703] - Equity compensation plans are approved by the Board, not directly by shareholders, which differs from NYSE rules but complies with Panamanian law[704] Cybersecurity The Board's Risk Committee oversees a comprehensive cybersecurity program, and no critical incidents occurred in 2024 - The Board's Risk Policy and Assessment Committee oversees cybersecurity and information security risk[711] - The Bank's cybersecurity program is built on five pillars and utilizes next-generation security platforms[714][715] - For the year ended December 31, 2024, Bladex was not a victim of any critical system failures, data loss, or cyber-attacks[716] PART III Item 18. Financial Statements This section contains the Bank's audited consolidated financial statements prepared in accordance with IFRS Accounting Standards Notes to the Consolidated Financial Statements The notes detail the Bank's accounting policies, including its IFRS-based preparation and three-stage ECL model - The consolidated financial statements are prepared in accordance with IFRS Accounting Standards as issued by the IASB[754] - The Bank classifies financial assets as measured at amortized cost, FVOCI, or FVTPL based on its business model and cash flow characteristics[780] - The allowance for expected credit losses (ECL) is measured using a three-stage approach based on changes in credit risk[828][832] - The Bank's comprehensive risk management framework addresses financial and non-financial risks, with oversight from the Board's Risk Committee[1019][1022]