Banco Latinoamericano de ercio Exterior(BLX) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's profits grew by 12% quarter-on-quarter and 2% year-on-year, reaching nearly $16 million, driven by a 5% increase in top-line revenues quarter-on-quarter and a 7% increase year-on-year [21][9] - Net interest income (NII) showed a quarterly growth trend supported by higher credit portfolio balances and higher lending spreads, with a slight annual decrease of 2% due to lower LIBOR rates [22][25] - The Basel III Tier 1 capitalization ratio remained solid at 21%, with risk-weighted assets increasing by 9% quarter-on-quarter and 22% year-on-year [29] Business Line Data and Key Metrics Changes - The bank's loan disbursements reached approximately $3.6 billion, up 8% from the previous quarter, with a net portfolio growth of 3% quarter-on-quarter [11][12] - The investment portfolio increased by $252 million during the quarter, totaling $573 million, with 43% of it in investment-grade companies [17] - Fee income from syndications increased by 11% quarter-on-quarter and 82% year-on-year, reflecting a resurgence in transaction-based structuring and syndications [23] Market Data and Key Metrics Changes - Latin American trade flows are expected to grow by 26% in 2021 and nearly 10% in 2022, supported by high commodity prices and pent-up demand [16][7] - The economic recovery in Latin America is mixed, with Brazil and Mexico projected to grow at 5.2% and 6.2% respectively this year [6][7] - The bank's exposure to financial institutions decreased by 7%, primarily in Brazil and Colombia, while investment-grade countries now account for 46% of total exposure [14][16] Company Strategy and Development Direction - The company remains cautiously optimistic about growth opportunities in Latin America, leveraging its agile business model and robust balance sheet [8][32] - The bank is focusing on increasing exposure in countries like the Dominican Republic, Guatemala, and Panama, while reducing exposure in riskier countries such as Argentina and El Salvador [42][43] Management's Comments on Operating Environment and Future Outlook - Management highlighted the impact of inflationary pressures and tighter monetary policies across Latin America, which could increase demand for hard currency financing [35] - The company is well-positioned to navigate challenges such as supply chain disruptions and rising freight rates, with clients looking to build inventory to mitigate risks [36][38] Other Important Information - The board declared a quarterly dividend of $0.25 per share, maintaining a 64% payout ratio relative to quarterly earnings [31] - The company executed a share buyback program, repurchasing 1.8 million Class E shares for nearly $29 million since its launch [30] Q&A Session Summary Question: Impact of inflation on Bladex - Management acknowledged rising inflation due to commodity prices and supply chain disruptions, noting that central banks in Latin America are responding with tighter monetary policies, which could favor Bladex [34][35] Question: Increase in operating expenses - The CFO explained that the increase in operating expenses is attributed to the resumption of variable compensation and general expenses after cost-saving measures during the pandemic [40][41] Question: Countries for exposure reduction and increase - Management identified Argentina and El Salvador as countries for exposure reduction due to economic challenges, while expressing confidence in countries like the Dominican Republic and Panama for increased exposure [42][43]