Banco Latinoamericano de Comercio Exterior, S. A. Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 28, 2025

There are 9 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to Bladex Fourth Quarter twenty twenty four Earnings Conference Call. A slide presentation is accompanying today's webcast and is also available on the Investors section of the company's website, www.bladex.com. There will be an opportunity for you to ask question at the end of today's presentation. Please note today's conference call is being recorded. As a reminder, all participants will be in a listen only mode.

Operator

I would now like to turn the call over to Mr. Jorge Salas, chief executive officer. Sir, please go ahead.

Speaker 1

Good morning, everyone, and thank you for joining us today to discuss Blackx's fourth quarter and full year results for 2024. I'm here today with a few members of my executive team, including Annette Van Jorde, who will soon assume a CFO position starting this April. I will begin with an overview of what has been another record breaking year for Bladex. Following that, I will update you on the progress of our strategic plan. Then Annie, our CFO, will provide a detailed analysis of our financial results for both the quarter and the year.

Speaker 1

Finally, I will discuss today's macroeconomic and trade environment and share our guidance for 2025 before we open the call for questions. In 2024, Gladex reached a historic milestone with an exceptional performance across all key metrics, surpassing the ambitious goals we have set for the year. Building on a record year in 2023, we continue to push boundaries and achieve new heights. Throughout 2024, our commercial portfolio grew by 18% reaching a record of $10,000,000,000 This growth was particularly strong in Brazil, The Dominican Republic and Guatemala reflecting our robust expansion, profitability and diversification. Additionally, the health of our portfolio remained excellent with non performing loans close to zero once again, highlighting our disciplined risk management practices.

Speaker 1

Similarly, deposits experienced significant increase of 23% for year end closing balances and a 33% in average balances for the year, surpassing our guidance of 30% growth for average balances. Due to seasonal factors, deposit levels as of the December were slightly lower compared to those at the end of the third quarter. However, average balances continue to rise during this period. Furthermore, for the first weeks of twenty twenty five, deposits have resumed their growth, increasing their share in the bank's total funding sources. Additionally, our capital ratio remains strong with a tier one capital ratio of 15.5%, which is well within our defined target.

Speaker 1

In terms of profitability, net interest income has maintained an upward trend supported by increased volumes and effective funding cost management, resulting in a stable net interest margin of 2.47% for the year. In 2024, fee income also reached unprecedented levels, growing by 37 compared to the previous year. Ani will share more details about fees later on in the presentation. Importantly, our efficiency ratio stood below 27% despite the investments in transformation and in line with the guidance we provided. All that combined resulted in an all time high annual net income of $2.00 $6,000,000 marking a 24% increase from the previous year and a return on equity of 16.2%, which is 153% basis points higher than in 2023.

Speaker 1

Moving on to Slide two, we are now three years into our five year strategic plan, which we started executing in 2022. Clearly, results have exceeded expectations. During this period, we have achieved several critical milestones. As we have mentioned in the past, the idea of the plan has always been to take advantage of Blak's structural comparative advantages, making our bank significantly more profitable, more efficient, and increasing its product offering, by changing neither the profile of our customers, large banks and corporations, nor the nature of our commercial portfolio, which remains and will remain very short term and widely diversified throughout the region. This enables us to swiftly adjust credit exposures in order to ensure that we concentrate on transactions and relationships where the risk return balance is optimum.

Speaker 1

The first phase of the plan, now successfully concluded focused on efficiency. Today, we have a much more efficient deployment of our balance sheet in terms of use of capital in the region and overall capital levels. We have also optimized key processes of the bank, allowing us to reduce client onboarding times by 52%, expand our client base by 70% and increase our deposit base by 78. We are currently in phase two of our plan that centers in the expansion of our product offering. To that end, we are deploying the technological platforms necessary to scale our initiatives.

Speaker 1

One of these is our trade finance platform. That project is 56% complete and is scheduled to be launched in the second half of the year. This new platform will substantially transform our letters of credit unit by providing a state of the art digital client interface and enhancing transaction processing capabilities for working capital solutions. Additionally, our new treasury platform implementation is in its initial stage. We are finalizing adjustments with our provider to ensure a seamless rollout and expect to complete its first phase of deployment by mid-twenty twenty six.

Speaker 1

This initiative will enhance our ability to offer FX and derivative products, facilitate lending in local currencies, as well as to allow to expand our range of investment products. The remarkable results we have achieved throughout 2024 are essentially the result of a successful execution of the first phase of our strategic plan and also to a lesser extent of the favorable interest rate environment that we have experienced during the year. As we advance into phase two, we expect to see additional benefits, especially from non interest income generation as these capabilities are rolled out in the upcoming quarters. Let me now hand it over to Annie, our CFO, for a detailed financial analysis. Annie, please go ahead.

Speaker 2

Thank you, Jorge, and good morning to everyone. Let's now move to slide four. Jorge just highlighted our record breaking results for the year with net income reaching $2.00 $6,000,000 and a return on equity of 16.2%, up from 14.7% last year. This strong performance was driven by sustained business growth, higher revenues, improved efficiency and well contained credit costs. I will now provide further details on each of these components.

Speaker 2

Quarterly profits in 2024 consistently exceeded the $50,000,000 mark, extending the positive trend of prior years. In the fourth quarter, our profitability continued to be supported by strong top line performance, with net income reaching $51,500,000 an 11% increase year over year. Compared to the previous quarter, net income was down 3%, primarily due to higher expenses related to our ongoing strategic initiatives, which I will discuss shortly. Let's now take a closer look at our balance sheet growth and other key drivers of profitability starting with the credit portfolio on slide five. First, I want to clarify our approach to portfolio management.

Speaker 2

Our credit portfolio comprises both the commercial portfolio managed by our commercial team and the investment securities portfolio managed by Treasury. The commercial portfolio, which represents the bank's core business activity in Latin America, includes loans and off balance sheet instruments such as letters of credit. At year end, our total credit portfolio stood at close to 11,200,000,000 reflecting an 18% increase from the prior year, mainly driven by loan growth of $1,200,000,000 or 16% year over year. The consistent quarterly expansion throughout the year underscores the strength of our client relationships and market demand. As shown in the bottom right chart, our commercial portfolio remains well diversified and primarily short term in nature, with 73% scheduled to mature within the next year and an average remaining tenor of approximately twelve months.

Speaker 2

This short tenor structure enables us to maintain an agile business model, allowing us to swiftly adjust exposures and optimize risk adjusted returns. The composition of our investment securities portfolio illustrated in the top right chart reflects a focus on investment grade non LatAm issuers primarily in The U. S, thereby further diversifying our overall country risk exposure. Additionally, this portfolio serves as a liquidity buffer as most of these securities are booked in our New York agency and are eligible collateral at the Fed's discount window. The portfolio has an average remaining duration of about two years.

Speaker 2

Our funding structure presented in slide six highlights the expansion of our deposit base, which closed at $5,400,000,000 at year end, representing 54% of total financial liabilities. As part of our strategic initiatives, Bladex has significantly increased deposits from corporate clients over recent quarters, enhancing our funding stability while strengthening client relationships. Our Yankee CD program, which operates out of our New York agency, remains a key component of this growth, representing 22% of total deposits and providing dispersion to our deposit base. Meanwhile, our longer tenure funding stood at $2,700,000,000 at year end, accounting for 27% of total financial liabilities. Earlier in the year 2024, we executed our largest syndicated loan to date, a $400,000,000 facility with participation from long standing lenders across Asia, Europe, and The US.

Speaker 2

Additionally, we remain active in the debt capital markets, particularly in Mexico, where we further solidified our role as a key foreign issuer. In February, we issued 3,000,000,000 Mexican pesos in the local market followed by a second issuance of 4,000,000,000 pesos in November. Notably, all non US dollar funding is fully hedged, aligned with our risk appetite of not running FX risk in our balance sheet. These transactions highlight Black's strong access to global liquidity, reinforcing our funding profile and investor based diversification. Turning to our capital position on slide seven, Blagg's equity base continues to be strengthened by robust earnings generation.

Speaker 2

In light of our strong financial results and sustained performance, our Board of Directors approved an increase in our quarterly dividend from $0.5 per share to $0.625 per share, representing a 45% payout on fourth quarter earnings. This decision reflects our confidence in Blax's earnings trajectory and our commitment to delivering value to shareholders, while maintaining a strong capitalization aligned with our target at current levels, ensuring financial flexibility to support strategic growth initiatives and sustain our investment grade ratings. Let's now discuss our P and L performance starting on slide eight with the evolution of net interest income and margins. Since the launch of our strategic plan in 2022, net interest income or NII has nearly tripled driven by asset growth, improved lending spreads and higher US dollar interest rate environment during this period, which benefits our short term balance sheet repricing structure. Throughout 2024, quarterly NII consistently outperformed 2023 levels, closing the fourth quarter at $67,000,000 up 2% year over year and stable compared to the preceding quarter.

Speaker 2

Full year NII reached $259,000,000 an 11% increase from the prior year. This revenue growth during 2024 was largely driven by higher average loan balances, which increased by 11% annually. Net interest margin for the year stood at 2.47% in line with our guidance and relatively stable year over year. Let's now review fee income performance on slide nine. Fee based revenue remains strong, reaching nearly $12,000,000 in the fourth quarter and totaling $44,000,000 for the year, marking an impressive 37% annual growth.

Speaker 2

Letters of credit fees remain a key driver, reaching $7,000,000 in the fourth quarter and totaling 26,500,000 for the year, up 24% year over year. Growth in this segment reflects continued success in cross selling, process efficiencies, and new client acquisitions. Loan structuring fees also had a standout quarter with four transactions generating $3,700,000 in fees. For the full year, we executed 12 transactions totaling $2,500,000,000 generating a record $10,200,000 in fees, up 38% from 2023. With continued strength in credit commitments and other fees, Bladex's transaction based business continues to expand, supported by enhancements in our syndications and project finance teams.

Speaker 2

This momentum is already evident in 2025 with a strong start in the first couple of months. Our loan structuring and syndications team has already closed four transactions across The Dominican Republic, Mexico, Costa Rica and Brazil, totaling $468,000,000 and generating approximately $2,000,000 in fees. Looking ahead, we see continued strength in our pipeline, supported by solid sponsors across multiple countries in the region, including those in a promising path to economic recovery such as Argentina. Moving on to asset quality as shown on slide 10, Bladex's disciplined risk management framework continues to deliver outstanding credit performance. At year end, nonperforming loans remain minimal at just 0.2% of total exposure amounting to $17,000,000 with a robust reserve coverage of nearly five times.

Speaker 2

Low risk credits, or stage one, comprised 96.4 of our credit portfolio, while stage two credits accounted for 3.5%, all of which remained performing. Total credit provisions for the year amounted to $17,300,000 primarily driven by portfolio growth, with a portion allocated to select stage three exposures. Importantly, we recorded no write offs during the year and recovered $1,400,000 from previously written off credits. Finally, let me provide an update on expense evolution and efficiency as shown on slide 11. Total expenses for 2024 reached $80,500,000 reflecting an 11% annual increase.

Speaker 2

This was primarily driven by higher salary expenses due to increased headcount, aligning with our strategy to strengthen execution capabilities. Additionally, ongoing investments in technology and business initiatives as outlined in our strategic plan contributed to the increase. These strategic investments have supported higher business volumes, expanded product offerings and client growth over the past few years, leading to revenue growth that continues to outpace expense increases. As a result, our efficiency ratio improved to 26.5% in 2024 compared to 27.2% in 2023. In the fourth quarter of twenty twenty four, expenses totaled close to $23,000,000 representing a 7% year over year increase and a 9% rise quarter on quarter.

Speaker 2

This increase reflects the continued execution of our strategy along with the seasonal impact of higher year end expenses. With that, I'd like to turn the call back to Jorge. Thank you very much.

Speaker 1

Great, Annie. Thank you. Before wrapping it up, I want to briefly refer to the macroeconomic context and in particular to the implications for Latin America of President Trump's America First policy. There is no doubt that US foreign policy will remain crucial influencing the region's economic trajectory. There are two relevant dimensions here.

Speaker 1

The first one is related to the government's immigration policy, and the second is, of course, trade policy. Regarding immigration policy, we think that the mass deportations of illegal immigrants from Latin American countries may end up having a negative effect on the flow of remittances for the region to the extent that the number of people in The US who send money home is reduced. Remittances, which were $160,000,000,000 for 2024, are no doubt an economic pillar for several countries in the region, particularly in Central America. Having said that, we see the economic impact more in the medium term if mass deportations continue to exceed what they have been in previous administrations. In any case, it is something that we are permanently monitoring.

Speaker 1

Regarding, foreign trade policy and the impact of tariffs and potential tariffs, we will the impact will depend on how long they stay in place and the potential offset from dollar appreciation. It is hard to predict at this point what is going to end up happening. In the case of Mexico, The U. S. Biggest trade partner, we believe that the endgame of the Trump administration is a renegotiation of the USMCA agreement.

Speaker 1

This review is scheduled for 2026, and it is likely that The US will use this opportunity to extract concessions. We anticipate that discussions surrounding tariffs on Canada and Mexico will persist until the eventual renegotiation of the USMCA. It is possible that such review is brought forward. This would be positive in terms of reducing economic uncertainty as in such scenario, tariffs will not be in place long enough to have a material negative effect on the economy. But if on the contrary, they are here to stay, supply chain disruptions will occur and this in turn will raise inflation and lower economic activity.

Speaker 1

It is worth mentioning that our portfolio in Mexico is predominantly short term, as much as 80% short term lending, comprised of low leverage, very solid and well positioned corporations who are resilient and have demonstrated the ability to withstand stress scenarios in the past. In any case, the reality is that given the short term nature of the bulk of our credit portfolio and the presence of blacks across different sectors and countries in the region, we are confident that we will demonstrate once again that we have the ability to very quickly and profitably relocate our exposures to those companies that will be better positioned to take advantage of the new trade dynamics in the region. Moving on to the last slide, Slide 13. In line with that, our projections for 2025 anticipate a commercial portfolio growth of 10% to 12%. Average deposits are expected to increase 15% to 17% with a net interest margin in the 2.3% area.

Speaker 1

Despite continued investments in IT platforms, we aim to maintain our efficiency ratio at around 27% and achieve a return on equity between 1516% while keeping our Basel III capital ratio between the range of 15% to 16%. And this, of course, assume that the dividend that we just declared is maintained throughout the quarters during the year. As I said, we are confident in our ability to adapt to the changes of the new trade reality, maintain operational efficiency, and size profitable opportunities as they arise, and they will arise. Finally, I want to express my gratitude to our clients, our shareholders, the employees and their trust and support during 2024. Together, we have built a strong foundation for continued success.

Speaker 1

I'm going to leave it here and ask the operator to please open the call for questions. Thank you very much. Operator, you may now open the call.

Operator

Thank you very much for the presentation. We will now begin the Q and A section for investors and analysts. If you wish to ask a question, please click on raise hand. If your question has already been answered, you can leave the queue by clicking on put hand down. There's also the possibility to ask your question through the q and a icon at the bottom of the screen.

Operator

You may select the icon and type your question with your name and company. Written questions that are not addressed during the earnings call will be returned by the investor relations team. Our first question comes from Ricardo Buschpiegel with BTG.

Speaker 3

Hi, everyone, and thank you for the opportunity of making questions. I have two here on my side. So first, can you please comment, what is implying your NIM contraction X estimate for 2025 in terms of fat fund rate reduction? And it seems that it's pricing out a little bit more than just the reduction in the reference rate. So I want to have your color on, what could be eventually driving more this, this, this, the name, name contraction.

Speaker 3

And secondly, you mentioned that alone, a structuring and syndication business has been performing very well in the start of the year. Right? And see if you could comment a little bit, what could be potential drivers for, for, for this dynamic and also taking into account a more potentially more active, deal flow in, in this segment and also the launch of the new trade finance platform this year, how should we expect, Finkham to perform against, 2024? Right? Should we have a, a deceleration, more towards like a growth of 30% or be more close to the 40% or what we see or more towards the 20%.

Speaker 3

Any any color will be very helpful. Thank you.

Speaker 1

Ricardo, three three great questions. The one on the net interest margin, compression, you're right. It's it's not only, funds rate compressing. I'm gonna let Annie speak about that. And then on on syndications, we do have we do have a very strong pipeline going forward.

Speaker 1

I'm gonna let Samuel, our chief commercial officer, tackle that one. And then I'll talk a little bit about fees at the end. So, Rani, why don't you tackle the net interest margin?

Speaker 2

Sure, Jorge. Good morning, Ricardo. Yes. As you well mentioned, we did see some tighter lending spreads toward the end of the year. We saw more competitive market environment with Latin American issuers more active in the capital markets and much wider availability to US dollar financing.

Speaker 2

In fact, for the guidance that we put in this year, we're assuming that the lending spreads remain at those levels. Probably, we could also see some more pressure, but in our estimation, we hope to keep it away. And then like you mentioned, the second aspect would be the 100 basis point reduction that the Fed already lowered towards the end of last year. And that started to impact our overall asset yields and then reducing the benefit of the equity invested in those assets. But, of course, our liabilities also started to reprice also very quickly.

Speaker 2

Remember that we do have a very short term repricing structure in our balance sheet. So both assets and liabilities adjust, I would say mostly within a ten or one year or less than a year. So that's what we have been seeing.

Speaker 4

On the syndication side, well, syndication fees are obviously dependent on market conditions and particularly on investment in M and A activity across the region. With that said, when you look at the historical figures of that business, you can see that annual income have been around the $5,000,000 mark. In the last couple of years, we've seen an important increase versus the the historical five meter mark, very much in line with the strategic changes that are being made. We have created businesses that bring higher fees like project finance infrastructure, as well as we've been bringing professionals with more experience in structuring and distributing more complex transactions, which tend to bring higher fees as well. That is to say that we believe that the current growth on average should be sustainable and trending upwards all things equal, of course.

Speaker 4

Of course, with with regards to to other fee generating business such as the the layers of credit business, like mentioned before, we we continue to strength the basis, or the base, and not only in terms of tech development, which was already mentioned, but also very much, focus on onboarding new, letters of credit clients as well as a strong focus on cross selling to existing clients. And and I think we we have made great strides on that and continue, to see good momentum.

Speaker 1

Thank you, Sam. That was helpful and perfect leeway for the fee fee question. So fees increased more than 30% this year. I mean, meaning 2024. We are expecting around 10% increase for 2025 after that 30%.

Speaker 1

It will really depend on on syndications in the pipeline than than Sam mentioned. We do, foresee that the letters of credit fees will continue their upward trend as we, as clients on start onboarding our our new platform. And it it will take some time, but we're confident that we can do at least 10% more, for 2025.

Speaker 3

Very clear answers, guys. Thank you very much.

Speaker 1

Thank you, Ricardo.

Operator

Our next question comes from Ricardo Valadino. He says, hello, Anna and Jorge. Congratulations on executing your strategic plan successfully up to this point. I have two questions. First, how do you see the current Trump administration tariffs affecting Vladek's outlook?

Operator

Second, you have guided for around 2.30% NIM. How do you see NIS as a part of this 2025 guidance?

Speaker 1

Okay. Thank you, Ricardo. I'm gonna tackle the first one on on, Mexico and the Mexico exposure. And then I believe that the second one, was already mentioned on well, some of it was mentioned in in the previous question by by the PTG analyst. But regarding Mexico is our our second biggest exposure, countrywide.

Speaker 1

It's 12% of our portfolio. Now, as I mentioned, 78% of that exposure is short term, and only 10% of that exposure is placed with companies that export to The US. So, I mean, these are these are very solid companies. We have made different stress tests, shocking. There are EBITDA with different levels of tariffs, and if we feel comfortable about the resilience.

Speaker 1

I mean, we are, talking about net debt to EBITDA ratio at around 3.5 times even in the stress scenario. So these are, in general, as I said, low leverage corporations that have demonstrated resilience, in past periods of uncertainty. So, we're confident about our Mexico portfolio. Anne, you wanna

Speaker 2

Yeah. Just to comment on on our projection for the NIM of 02/30. Like I said, we anticipate to continue having some pressure in our lending spreads. And we also are projecting for two additional Fed rate cuts, 25 basis points each for the second half of the year. That's embedded in that projection.

Speaker 2

And with respect to the net interest spread or the NIS, we do foresee that that should remain around four quarter levels at 169, perhaps a couple of basis points lower than that.

Operator

Thank you. Our next question comes from Patrick Brown. Congratulations on the excellent results. We see that you we see that you are already at 16% ROE according to the slide three. However, your guidance is 15% for 2026.

Operator

Why are you expecting less profitability in the future?

Speaker 1

Thank you for that question. Good question. We've gotten that question before. The truth is that remember that the 2026 guidance you saw on slide three, that was given back in 2022 in an investor day presentation, when we launched, this plan for the first time. Now our our projections back then assume, normalized level of Fed fund rates at at 2.5%, which, of course, we all know has not happened.

Speaker 1

Now with the information we have today and and and considering everything else equal, we feel comfortable that the profitability will be in the higher end of that range for sure in 2026. And the reason is is very straightforward. I mean, so far, three years of execution. We have, and I'm gonna give round numbers here, almost double the size of a balance sheet, keeping, as we've seen, NPLs close to zero. We've doubled, almost doubled the income, with more more than tripled net income.

Speaker 1

And all of this has been done without even implementing the trade nor the treasury platforms. So remember, as as I said earlier, the purpose of of the tools and the whole plan is to basically, you know, enhance, the ability of this bank to to scale and to bring fee income to ultimately, make our results less dependent on on market rate fluctuations. So so quite honestly, it's it's it's hard not to be optimistic about the potential of this bank and this unique franchise going forward.

Operator

Thank you. Our next question comes from Daniel Mora with Credit Corp.

Speaker 5

Hi. Good morning, and thank you for the presentation. I have just two questions. The first one is regarding a contract of tariffs and the foreign trade outlook in Latin America. Just similar to the case of Mexico, I would like to understand what is the total exposure of the loan portfolio to trade with United States or if you feel there is any more exposure regarding clients between countries that are not exposed to United States, but it still could be impacted by that context.

Speaker 5

That will be my first question. And the second one is regarding the trade finance and treasury platform. I would like to know the status of each one. And also, if the deployment of those platforms will be in all the countries in which you operate, or or will you start only in in a few countries? Thank you, Spanish.

Speaker 1

Thank you. Then we had great questions. First one regarding exports to make I mean, to The US. It's it's it's mostly Mexico, and that's where we've we've done most of our our our stress test. So we're not, we're not worried about tariffs being imposed in other countries at this moment.

Speaker 1

Now if you think about it, if tariffs are imposed in in Mexico and China and and it's not for sure at this point, this will mean that these countries will likely lose, you know, market share in US imports. So that opens the opportunity for other countries in LatAm to export to The US. So for example, we believe Brazil could benefit in this in short term, as it could, you know, redirect exports of oil or agricultural products to to The US. Also, potentially Central America and the Caribbean countries have the, you know, the potential to increase their market share in The US market for food, or or or even light light manufacturing. What I'm what I'm trying to say is that blacks has the ability to position itself to be able to finance and and and and and take advantage of the new trade dynamics in the region because, again, of the short term nature of the portfolio.

Speaker 1

So we see from our end, given, you know, the the the short term nature, we see more opportunities here, without volatility than than anything else.

Speaker 4

Sam, you wanna add something What was the second question?

Speaker 1

Oh, yeah. Yeah. And to the second second question. Go ahead.

Speaker 4

Yeah. The the the platform that we're launching, with CGI, initially with the letters of credit, it it's it's country agnostic. It's it's US Dollars. It's hard currency. So we could do, it's offshore, so we could virtually do in any of the countries that we operate.

Speaker 4

What we will do is start piloting with the our closest relationships or the more meaningful in that business and then starts deploying to the rest of the clients. The idea is to have all of our clients operating through that platform. And and with time, we believe we can get there, but, of course, we'll take some time.

Speaker 1

I don't know, Daniel, if that answers your question.

Speaker 5

That's perfect. Thank you so much for that. Very clear.

Speaker 1

Okay. Thank you.

Operator

Our next question comes from Valentina Marin with Banco Colombia. I have two questions. First, what countries do you expect to lead portfolio growth in 2025? Do you expect any particular focus? What would be the reason for such focus?

Operator

And second, do you expect to continue reducing provisions? What would be your target for COR in 2025, '20 '20 '6?

Speaker 1

Okay. I'm gonna let Sam tackle the first one on on portfolio growth. That's that's his area. And then I'll I'll talk a little bit about

Speaker 4

provisions for 2025. Okay. But overall, on average, we believe growth should continue to be balanced throughout the countries in which we operate. We're obviously monitoring very closely what opportunities this more volatile geopolitical context and potential escalation of trade work can bring to us. In times like these, some global investors tend to wait on the side, which could bring opportunities for us to move quick quick as always.

Speaker 4

Mexico could be one of such countries as it has great corporations would will survive no matter what happens. We also continue to see Central American conglomerates expanding outside the region, North and South. We're working hard to capture some of those opportunities to finance M and A particularly. Finally, like our CFO already mentioned, we're we we see a promising path of economic recovery in countries such as Argentina and El Salvador. We don't plan to move aggressively in those countries, but there could be good opportunities to grow from where we are today with the best credits in each of those countries.

Speaker 1

Great, Sam. Thank you. Regarding reserves, remember reserves are are model based. I believe reserves in 2023 were right below 30,000,000 I think it was $28,000,000 And and you have you have keep in mind, that the we had one non bankified, number forming loan there in Mexico, and that took most of the hit in in 2023. 2024, it was $17,000,000 So given that we are projecting a similar growth, and and similar country mix, we believe that reserves for 2025 should be around what they were for 2024.

Speaker 1

So in the $17,000,000 to $20,000,000

Speaker 6

Thank you very much and congratulations on the great result in 2024. I have three questions. The first question is, some of what has been said in today's presentation implies a concentrated portfolio. So I'd like to know what is the largest concentration you have and how you manage loan concentration? Second question, there was a great increase in credit commitment fees this year and I'd like to know if that implies any changes in the portfolio makeup for next year.

Speaker 6

And finally, third question, most of your investment portfolio is 92% of it is held to maturity securities. And in which country is most of this held to maturity portfolio held? And are there any changes contemplated? Thank you.

Speaker 1

Thank you very much. Very good questions. First one regarding loan loan concentration. First of all, keep keep in mind, this is a a wholesale bank, so we're naturally, concentrated, because of the nature of of of the business. We are, as you saw, very diversified in terms of countries and also in terms of sectors.

Speaker 1

We feel very comfortable that our top exposures in, are either, quasi sovereign companies, normally short term or have very, strong, collateral. So, concentration, is always something that we are monitoring at the credit committee level, at the risk level, and also at the board level. Regarding second question was about can you remember what the second question was? Sorry. Very good.

Speaker 1

Commitment. Yes. I'm I'm gonna let Sam talk about commitment fees. They have increased, and we expect good performance of the commitment fees to the extent that we're growing our, product finance business. But, Sam, you can give further more color on that.

Speaker 4

Sure. I think first is I think it's important to make clear that we're not, the typical wholesale banking that, are have a very active or or material book of contingency lines or or or backstop facilities, RCF, some funded RCF. We don't have much of those. We don't look for those. The the the nature of our, commitment, commitments, they come from yes.

Speaker 4

They're growing from the project finance parts that typically when a project when we fund a project, not, the needs of the projects are being, dispersed as construction builds up. So there is some delay, drawdown term loans as we call. And those are yes. Project finance is still very small on the in terms of the total book, but that business is growing. Also, what is growing with the growth of the the, letters of credit business, we're seeing also opportunities to, in some of the tenders around the countries that we operate, some of the traders ask for, our commitment right before the tender opens.

Speaker 4

So those are very short term commitments, and and and we like those. And also that guarantees that we're gonna be the bank of choice for the issuance of the letter of credit that we look for those. So I think that that's another source of where those are come coming. And and and third, less important than the others, but also we we continue to be on the lookout in the secondary market. And we have found over the last a few years some really good opportunities to buy committed facilities at discounts.

Speaker 4

And there there are some of the numbers or the growth that come from those, let's say, opportunistic purchases as well. So I think this is this is what a bit of the picture on the commitment business side.

Speaker 1

Thank you. The third question was regarding the the investment portfolio, that is, in fact, both of it, held to to maturity.

Speaker 4

It

Speaker 1

it's mostly in The US. I'm gonna let, our head of treasury capital markets, give a little bit more color on that. Eduardo, you wanna share some thoughts?

Speaker 7

Yes. Thank you, Jorge. Yes. As Jorge explained, I mean, most of the portfolio is held with issues outside of Latin America. It's a portfolio for a very short duration.

Speaker 7

Average duration is two years, and most of it is investment rate more than 80%. We see this portfolio as a source of diversification of credit exposures outside of the region. It must be remembered that by our bylaws, we can only lend in member countries, But this portfolio would be predominantly invested outside the region provides a source of diversification. And as Annie explained before, also because most of these, I mean, I would say all of these, bonds are global agencies and most of them are investment grade. They're also a vehicle, through which we can access the fact the Fed discount window in a situation of market disruption.

Speaker 7

So, in short, most of the exposures are US, minor exposures in European and Japanese issuers, and mostly more than 80 investment rate. Thank you.

Speaker 6

Thank you very much.

Speaker 2

Thank

Speaker 4

you.

Operator

Okay. Thank you very much. That's all the questions we have for today. I'll pass the line back to Jorge Salas for their concluding remarks.

Speaker 1

Thank you, Sofia. Before we conclude today's call, I want to take a moment to acknowledge someone very special to Blaise. As we announced, back in November, after an extraordinary thirty five year career in lines, Annie, our CFO, has decided to step down. While she remains with us until April, ensuring a small, smooth transition to our net, this has been her last earnings call. Annette has been an integral part of Glax's leadership, driving the bank's financial performance with excellence, integrity, and a true commitment to our strategic vision.

Speaker 1

Under her help, we have delivered record breaking results as you've seen and positioned the bank for continued success. On behalf of the entire management team and the board, I want to extend my deepest gratitude to Annie for her years of dedication and invaluable contributions. Annie, we will miss your leadership, but more than anything, we will miss you as a colleague and as a friend. At the same time, I want to take this opportunity to welcome Annette as she steps into her new role. Annette brings a wealth of experience and deep knowledge of our business, and I have no doubt that she will continue to build on the strong foundation that Annie has established.

Speaker 1

Annie, you wanna say a few words?

Speaker 2

Sure. Thank you, Jorge, and thank you all. It has been an incredible journey at Bladex. I am deeply grateful for the privilege of working with such a talented, committed team. These past years have been filled with challenges, milestones, and achievements that I am immensely proud of.

Speaker 2

I want to thank our investors, our board, my colleagues, and especially my team for their support, trust, and collaboration. Bladex is in an excellent position for the future. And I have no doubt that the bank will continue to thrive under Jorge's leadership and the outstanding team we have built. I am especially delighted to see my close colleague and dear friend, Annette, take on this role, confident that her expertise and vision will continue driving Bradex forward. Thank you for all.

Speaker 2

Annette, please.

Speaker 8

Hi, everyone. Thank you, Jorge, and thank you, Annie. While Annie leaves big shoes to fill, I am honored to step into this role and continue building upon the strong foundation she has helped establish. Over the past months, I have had the privilege of working closely with Annem and her guidance, knowledge and leadership have been invaluable. I look forward to continuing to execute our strategy and drive long term value to our shareholders, clients, and stakeholders.

Speaker 8

And on behalf of the Italian team, I wish you all the best in your next chapter, and thank you for everything you have done for Gladys.

Speaker 2

Great. Thank you.

Speaker 1

Thank you both. And, I think this concludes the call. Thank you, everyone, and I'll see you in the next call. Goodbye.

Speaker 2

Thank you. Good day.

Operator

Thank you. Gladys conference call is now closed. You may disconnect, and have a nice day.

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Earnings Conference Call
Banco Latinoamericano de Comercio Exterior, S. A. Q4 2024
00:00 / 00:00
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