Banco Latinoamericano de ercio Exterior(US:BLX)2023-04-27 16:00PART I Item 3. Key Information This section outlines the principal financial, operational, and regional risks affecting the Bank's business and financial condition Risk Factors The Bank's performance is materially affected by business-specific risks like market volatility and operational threats, alongside regional economic and political instability - The Bank's business is significantly impacted by market and macroeconomic conditions, including geopolitical events, pandemics, inflation, and changes in monetary policy, which can destabilize global markets and affect financial results96126129 - The Bank faces significant liquidity risk due to its highly concentrated deposit base, with 45% of total deposits from central banks as of December 31, 2022104133135 - The transition from LIBOR to Alternative Reference Rates (ARRs) like SOFR presents substantial risks, including potential market dislocation and operational complexities in transitioning contracts114115148 - The Bank is exposed to significant compliance risks related to complex anti-money laundering (AML), anti-corruption, and sanctions laws, with failures potentially leading to severe penalties47483 - Credit activities are highly concentrated in the Latin America and Caribbean Region, with 50% of the Credit Portfolio in five countries as of year-end 2022, increasing susceptibility to localized economic downturns218220 Item 4. Information on the Company This section provides an overview of the Bank's history, business structure, strategic direction, and regulatory environment History and Development of the Company Established in 1977, Bladex is a multinational bank headquartered in Panama City to promote foreign trade in Latin America and the Caribbean - Bladex was organized in 1977 and began operations in 1979 as a specialized multinational bank to promote foreign trade and economic integration in the Latin America and Caribbean Region230261 - The Bank is headquartered in Panama, chosen for its role as a regional banking center, its U.S. dollar-based economy, and its tax-exempt status granted by a contract-law261 - Bladex operates through its head office in Panama, an agency in New York, a subsidiary in Brazil, and representative offices in Argentina, Mexico, and Colombia286 Business Overview The Bank operates through Commercial and Treasury segments, with a strategic focus on expanding its customer base and optimizing its credit portfolio - The Bank operates through two business segments: the Commercial Business Segment for core financial intermediation and the Treasury Business Segment for investment and asset/liability management265233292 - The Bank's five-year strategic plan (2022-2026) focuses on strengthening the business model, expanding the customer base, and optimizing commercial effectiveness and credit origination310311312 - The Bank is subject to extensive regulation by the Superintendency of Banks in Panama and by U.S. authorities for its New York Agency, covering capital, liquidity, and AML/CFT compliance434435488 Credit Portfolio Growth (in millions USD) | Portfolio | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | :--- | | Credit Portfolio | $8,726 | $7,365 | $5,946 | | Commercial Portfolio | $7,706 | $6,540 | $5,551 | | Investment Portfolio | $1,020 | $825 | $395 | Operating and Financial Review and Prospects This section analyzes the Bank's financial performance, liquidity position, capital resources, and critical accounting estimates Operating Results The Bank's profit increased 47% in 2022, driven by a significant rise in net interest income from higher rates and loan growth - The 71% increase in net interest income in 2022 was driven by both higher volumes ($13.5M impact) and higher interest rates ($47.8M impact)555514 - Provision for credit losses increased significantly to $19.5 million in 2022, up from $2.3 million in 2021, due to Credit Portfolio growth and provisions on impaired instruments7611240 - Operating expenses rose 38% to $55.1 million in 2022, attributed to strategic initiatives, new hires, and a new performance-based variable compensation policy1175537 Profit for the Year and Key Metrics | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Profit for the year | $92.0 M | $62.7 M | $63.6 M | | Basic earnings per share | $2.54 | $1.62 | $1.60 | | Net interest income | $148.0 M | $86.8 M | $92.4 M | | Return on average total equity | 8.95% | 6.10% | 6.19% | Liquidity and Capital Resources The Bank maintains a strong liquidity and capital position, with diversified funding sources and capital ratios well above regulatory minimums - The Bank's funding is diversified between deposits (40.3%) and borrowings/debt (59.7%), with deposits from central and state-owned banks constituting 45% of total deposits13411342 - Off-balance sheet arrangements, primarily documentary and stand-by letters of credit, increased to $656 million as of December 31, 2022, from $482 million in the prior year916917 Financial Position Summary (in millions USD) | Metric | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $9,284 | $8,038 | | Loans, net | $6,760 | $5,713 | | Total Liabilities | $8,215 | $7,046 | | Deposits | $3,205 | $3,037 | | Borrowings and debt, net | $4,417 | $3,304 | | Total Equity | $1,069 | $992 | Capital Adequacy Ratios | Ratio | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Tier 1 Capital Ratio (Basel III) | 15.3% | 19.1% | | Regulatory Capital Adequacy Ratio | 13.2% | 15.6% | Critical Accounting Estimates The Bank's financial statements rely on material estimates, particularly for credit loss allowances, securities impairment, and fair value of financial instruments - Management identifies the determination of allowances for expected credit losses, impairment of securities, and the fair value of financial instruments as critical accounting estimates695 - These estimates require significant judgment, especially in assessing future cash flows for impaired loans and assumptions used in fair value models104410451046 Item 6. Directors, Executive Officers and Employees This section details the composition of the Board and executive team, their compensation structure, and board committee functions - The Board of Directors consists of ten members, with a separation between the roles of Chairman and CEO to ensure independent oversight972836 - Executive compensation is performance-based, combining variable cash bonuses with long-term equity awards to align with corporate objectives772773 - Non-employee directors receive an annual cash retainer ($85,000 for directors, $135,000 for the Chairman) and an annual equity award of restricted shares782784 - As of December 31, 2022, the Bank's workforce comprised 238 permanent employees, an increase from 184 in 2021907912 Item 7. Major Shareholders and Related Party Transactions This section details the Bank's ownership structure and transactions conducted with shareholders and related parties in the ordinary course of business - As of December 31, 2022, Brandes Investment Partners, L.P. was the largest shareholder of Class E stock, holding 17.1% of the class and 13.1% of total common stock915 - Major Class A shareholders include Banco de la Nación Argentina (16.5% of class) and Banco do Brasil (15.4% of class)915 - The Bank conducts credit and deposit transactions with its Class A and B stockholders, with 12% of the Loan Portfolio placed with these related parties as of December 31, 2022923 Item 8. Financial Information This section references the included financial statements and outlines the Bank's dividend policy and legal proceedings status - The Bank's policy is to declare and distribute quarterly cash dividends, with the total dividend declared for 2022 at $1.00 per common share, unchanged from 2021 and 2020954 - No legal or arbitration proceedings that could have a significant effect on the Bank's financial position or profitability are pending or contemplated926 Item 10. Additional Information This section provides details on the Bank's corporate structure, share classes, and tax implications for shareholders - The Bank's common stock is divided into four classes (A, B, E, F) with different rights, and the affirmative vote of 75% of Class A shares is required for major corporate actions919974 - Under a special contract law, the Bank is exempt from income tax in Panama, and dividends paid are exempt from Panamanian dividend tax or withholding10291049 - For U.S. Holders, distributions are generally taxable as ordinary dividend income, and the Bank does not believe it will be classified as a Passive Foreign Investment Company (PFIC)10111018 Item 11. Quantitative and Qualitative Disclosure About Market Risk The Bank actively manages market risk, which primarily consists of interest rate, foreign exchange, and price risk - The Bank's primary market risk is interest rate risk, which is managed by monitoring repricing mismatches and is considered relatively low due to the short-term nature of its portfolio10551416 - Foreign exchange risk is not significant as the majority of assets and liabilities are denominated in U.S. dollars, with most non-USD exposures hedged with derivatives10671232 - Price risk is associated with the Bank's Investment Portfolio, which had a carrying amount of $1.02 billion and a fair value of $0.97 billion as of December 31, 202210681069 PART II Item 15. Controls and Procedures This section affirms the effectiveness of the Bank's disclosure controls, procedures, and internal control over financial reporting - The CEO and CFO concluded that the Bank's disclosure controls and procedures were effective as of December 31, 20221074 - Based on the COSO framework (2013), management concluded that the Bank's internal control over financial reporting was effective as of December 31, 202210761079 - The independent registered public accounting firm, KPMG, issued an unqualified opinion on the effectiveness of the Bank's internal control over financial reporting1106801 Item 16. Corporate Governance This section covers corporate governance matters, including the audit committee financial expert, Code of Ethics, and accountant fees - The Board has determined that Mr. Fausto de Andrade Ribeiro is an "audit committee financial expert" and is independent1112 - The Bank has adopted a Code of Ethics that applies to its principal executive, financial, and accounting officers11131114 - The Bank's corporate governance practices differ from NYSE standards for domestic companies regarding the absence of a separate corporate governance committee and the process for approving equity compensation plans11221123 Principal Accountant Fees (in USD) | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit fees | $677,892 | $656,124 | | Audit-related fees | $181,900 | $103,790 | | Total | $859,792 | $759,914 | PART III Item 18. Financial Statements This section contains the Bank's audited consolidated financial statements for the three-year period ended December 31, 2022, prepared in accordance with IFRS - The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB7271254 - The independent auditor, KPMG, issued an unqualified opinion, stating that the financial statements present fairly the financial position and results of operations of the Bank727 Consolidated Statement of Financial Position (in thousands USD) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $9,283,910 | $8,038,111 | | Loans, net | $6,760,434 | $5,713,022 | | Securities, net | $1,023,632 | $831,913 | | Total Liabilities | $8,214,563 | $7,046,321 | | Deposits | $3,190,716 | $3,036,228 | | Borrowings and debt, net | $4,416,511 | $3,304,178 | | Total Equity | $1,069,347 | $991,790 | Consolidated Statement of Profit or Loss (in thousands USD) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net interest income | $148,011 | $86,782 | $92,450 | | Total revenues | $166,672 | $104,206 | $99,157 | | (Provision for) credit losses | ($19,521) | ($2,328) | $1,464 | | Profit for the year | $92,040 | $62,697 | $63,593 |