Banco Latinoamericano de ercio Exterior(BLX) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2025, the company achieved record net income of $227 million, up 10% year-over-year, with an adjusted return on equity (ROE) of 15.8% [8][9] - Net interest income reached another record, increasing by 5% year-over-year, with a net interest margin (NIM) of 2.36%, slightly above guidance [4][25] - Non-interest income grew 54% year-over-year, now representing 20% of total revenues, up from 13% four years ago [5][26] Business Line Data and Key Metrics Changes - The commercial portfolio grew 11.5% year-over-year, driven by a solid expansion in the loan book and a contingent portfolio increase of over 20% [3][11] - Loan growth was led by Guatemala, Colombia, Mexico, the Dominican Republic, and Argentina, reflecting selective origination in attractive risk-adjusted opportunities [3][12] - Non-interest income from letters of credit increased by 20% year-over-year, while syndication fees rose more than 70% [5][27] Market Data and Key Metrics Changes - The investment portfolio totaled $1.4 billion, representing a 19% increase year-over-year, with approximately 91% investment-grade exposure [15] - Total liquidity closed the quarter at $1.9 billion, representing about 15% of total assets, with 91% placed with the Federal Reserve [15][19] Company Strategy and Development Direction - The company aims to transition into a more transactional trade banking platform for Latin America, focusing on scalability and capturing trade flows [34][35] - The 2026 guidance reflects a disciplined approach to profitable growth, with expectations for commercial portfolio growth between 13% and 15% [36] Management's Comments on Operating Environment and Future Outlook - The macro environment remains uncertain, with expectations of gradual easing and potential rate cuts in 2026 [32][33] - Latin America is expected to experience growth supported by easing cycles and recovery in consumption and investment, despite potential volatility from elections [33] Other Important Information - The efficiency ratio closed at 26.7%, reflecting ongoing cost discipline while investing in strategic initiatives [30] - The board approved an increase in quarterly cash dividends to $0.6875 per share, representing a 46% payout of fourth-quarter earnings [23] Q&A Session Summary Question: Clarification on ROE guidance - The guidance is for adjusted ROE, excluding the impact of additional Tier 1 capital issued [39] Question: Expectations for non-interest income in 2026 - Guidance for 2026 in terms of fee income will be around what was seen in 2025, targeting between 18% and 20% growth [40] Question: Impact of portfolio duration on NIM - The record NIM in 2025 was influenced by medium-term transactions and efficient liquidity management, with expectations for stability in 2026 [41][43] Question: Contribution of market growth vs. market share gains to portfolio growth - The growth in 2025 was well-balanced, with specific countries like Guatemala showing higher demand, but overall market share is not a primary focus [46][49] Question: Countries driving loan growth and those with high competitive pressures - Growth is expected to be balanced across regions, with concerns in Colombia and Brazil due to fiscal situations and potential defaults [61][62]