Banco Latinoamericano de ercio Exterior(BLX) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Profit for Q1 2021 was $12.8 million, down 19% sequentially and 30% year-on-year, primarily due to lower net interest income [19][20] - Net interest income (NII) for the quarter was $18.9 million, down $6.9 million or 27% year-on-year, influenced by a sharp decrease in LIBOR-based rates [23][24] - Expenses were down 10% sequentially and 13% year-on-year, mainly due to lower personnel expenses [22] Business Line Data and Key Metrics Changes - The commercial portfolio grew 3% quarter-on-quarter, with disbursements up 5% [12] - Most growth was concentrated in Brazil, Chile, and Uruguay, while exposure in Argentina was decreased [13] - Commodity-related growth was significant, with oil and gas up 49% and metal manufacturing up 37% [14][15] Market Data and Key Metrics Changes - The IMF revised its 2021 growth estimate for Latin America from 3% to 4.6%, with trade growth estimates revised from 8.2% to 16.2% [9][10] - Demand from commodity clients increased by at least 30% on average, indicating a positive trend in the region [16] Company Strategy and Development Direction - The company plans to utilize a $60 million stock repurchase program to return value to shareholders, reflecting confidence in the market [10][34] - The management aims to explore new growth opportunities, particularly in structured trade finance products and solutions [37][38] - The company maintains a focus on high-quality credit exposure, with 95% of its $5.8 billion credit portfolio classified as low-risk [29][30] Management's Comments on Operating Environment and Future Outlook - The management expressed confidence in the bank's ability to navigate 2021 despite ongoing pandemic challenges, citing a clean balance sheet and strong capital base [32] - The management noted that the region is showing positive signs, particularly in trade finance segments, and expects to reach pre-COVID portfolio levels [35][56] Other Important Information - The bank recorded no credit provisions during the quarter, as it focused on high-quality countries and sectors [22][31] - The average rate of new disbursements was LIBOR plus 141 basis points, down 46 basis points from the maturing portfolio [12] Q&A Session Summary Question: Insight into the Board's decision for share repurchase and growth opportunities - The management believes the stock is undervalued at 55% of book value and views the share buyback as a tactical way to return value to shareholders [34] - The management sees opportunities in structured trade finance products and plans to grow without relaxing underwriting standards [37][38] Question: Increased exposures in Brazil and commodities - The management feels comfortable with exposures in Brazil, primarily in financial institutions, despite the pandemic's impact [41] - Commodity exposure is treated as short-term trade-related, with price volatility hedged by tenor [43] Question: Managing net interest margin amidst low rates - The management is focusing on increasing loan volume and fee-generating products to counteract the impact of low LIBOR rates [46] Question: Evolution of spreads and cash utilization - The management expects spreads to tighten in 2021 but plans to grow the investment portfolio using excess cash [51][52] Question: Loan growth opportunities - The management is optimistic about reaching pre-COVID levels due to increased demand from financial institutions and commodity-related companies [56][57] Question: Current situation in Central America - The management acknowledges the diverse realities in Central America, with potential for growth depending on the country [60][61]