Banco Latinoamericano de ercio Exterior(BLX) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income of $37.1 million for the second quarter, maintaining a return on equity (ROE) of 13.4%, consistent with previous quarters and aligned with 2023 guidance [3][60] - Total assets reached over $10 billion, marking a 14% annual increase, driven by higher loan and investment portfolio balances [4] - Net interest income (NII) for the quarter was $54 million, a 67% increase year-on-year, with a net interest margin of 2.42%, up 88 basis points from the previous year [44][41] Business Line Data and Key Metrics Changes - Fee income increased by 35% quarter-on-quarter and 38% year-to-date, primarily from letters of credit, which surpassed $1 billion for the first time [3] - The commercial portfolio reached a record $8.1 billion, up 7% year-on-year and 4% from the previous quarter [4] - The bank's lending business is supported by a diversified investment securities portfolio of over $8 billion, with 75% invested in investment-grade issuers [23] Market Data and Key Metrics Changes - Deposits exceeded $4 billion for the first time, representing a 30% growth year-to-date and accounting for 49% of total funding [38][61] - The bank's asset quality remains strong, with 98% of the total credit portfolio classified as low risk under IFRS9 [7] Company Strategy and Development Direction - The company is focused on optimizing its client country mix and onboarding new clients, which aligns with its strategic plan to enhance execution capabilities [21][45] - The strategic plan aims to capitalize on growth opportunities in Latin America, despite projected GDP growth slowing to 1.6% in 2023 [50] - The bank is committed to maintaining a sound capital position, with capital ratios targeted between 15% and 16% [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a challenging economic environment, citing potential growth from foreign direct investments and resilient remittance flows [50][27] - The company anticipates a modest currency weakening in late 2023 and 2024, supported by easing inflation and potential rate cuts [27] Other Important Information - The bank's cost-to-income ratio remained stable at around 27%, reflecting solid revenue growth and cost control [26] - The board declared a dividend of $0.25 per share, unchanged from previous quarters [24] Q&A Session Summary Question: What could drive potential pressure on NIM in the second half of the year? - Management indicated that the pressure on NIM could be influenced by the Fed's actions regarding interest rates, with a current estimate of a 12 basis point impact for every 100 basis points change in rates [32][68] Question: Can you provide details on the Stage 3 exposure written off in the quarter? - The company wrote off a $25 million exposure related to a non-bank financial institution, with no optimistic recovery prospects [56] Question: Will the company consider increasing dividends in the near to medium term? - Management stated that dividend decisions are made quarterly by the board, with ongoing discussions about capital management alternatives [15]