Q4 2019 Earnings Call

Hello, everyone and welcome to Biotics fourth quarter 2019 conference call on this for Tuesday February 2020. This call is being recorded and is for investors and analysts only if you are a member of the media you are invited to listen only bought access prepared a powerpoint presentation to accompany their discussion is available to their web.

Cash and on the banks corporate website at Www Dot Biotics dot com joining us today are Mr., Gabriel Chatzky, Chief Executive Officer, and Mitch and aggressive Mendez Chief Financial officer their comments will be based on the earnings release, which was issued earlier today and is available on the corporate website following state.

It's made pursuant to the safe Harbor for forward looking statements described in the private Security Litigation Reform Act of 1995 in these communications, we may make certain statements that are forward looking such as statements regarding <unk> future results plans and anticipated trends in the markets affecting his results and financial condition.

These forward looking statements our bodies expectation on the date of the initial broadcast of this conference call and bought it does not undertake to update these expectations based on subsequent events or knowledge various risks uncertainties and assumptions are detailed in the banks press release and filings with the Securities and Exchange Commission chip.

One or more of these risks or uncertainties materialize or should any of our underlying assumptions prove incorrect actual results may differ significantly from results expressed or implied in these communications and with that I am pleased to turn the call over to Mr. told <unk> for his presentation.

Thanks, Travis good morning, everyone. Thank you for joining us today.

Before I know that I feel like dealt into key aspects of our earnings results for the fourth quarter and for full year 2019, I'd like to discuss some important developments that took place that fear and their impact on our perception of risk and financial results I will address the global macroeconomic context economic them, that's not something.

Arm into Latin America.

Specific developments affecting our portfolio.

After I know that's your let's review I will also addressed my successor as CEO reasons for my departure details of the transition and to what you at shareholders should expect some color. It's out of this administration about it.

During our last five quarter conference calls, we mentioned that the credit quality of our portfolio cost structure and allowances for expected credit losses that base for earnings generation capacity, our fourth quarter and all of 2019 vessels are another step in that direction.

2019, the global economy experience its weakest year of girls since the financial crisis weighed down by tensions that have significantly slowed international trade.

According to the I imagine global growth was only 2.9% significantly below potential, which we estimate that 3.8%.

The main driver for the lackluster performance of the World economy, where the trade war between the U.S. and China negative trade flows that disruptive supply chain, an idiosyncratic risks in countries that just Italy, and Turkey that along with Brexit affected European growth and in particular.

In particular, Germany.

The U.S. economy grew by 2.3% in 2019.

Which did contribute to world growth, but had a limited impact.

That's because its competition.

Sure, Hey, sorry, and sector and that service sector.

Great and investment, which have possible positive ripple effects throughout the world economy, but.

Nevertheless, the U.S., what the Beacon applied in an otherwise Graeme world economic economy picture.

Despite its doors Lee low unemployment then so let's go now.

The <unk> lowered interest rates to come to rock economic weakness elsewhere with inflation under 2% and inflation expectations under control the fed lowered its benchmark federal funds rate three time during two times during the year to a level of 1.75%.

Under normal circumstances defense action would have been a headwind for the U.S. dollar, but in an overall low growth environment with geopolitical flare ups around the world.

<unk> dollar strengthened always the negative development for commodity prices and for foreign direct investment into emerging markets.

Although forecast by the I.M.S.C. World trade flows expanding by just 3% in 2020 and global economic growth of 3.3%. We believed that the modest estimate like in 2019, maybe you revised downwards I'm going playing out trade dispute.

Social disturbances in key countries and climate change what key factors identified as risk to their forecast.

Furthermore growth expectations are anchored on diminishing trade tensions between the U.S. in China.

And our assumption or grow in trade flows.

We question these expectations, particularly in light of the Corona by this outbreak and the impact that may have on both Chinese and global Commerce.

To summarize the global context, we see that potential for more noise from that trade front. Despite the signing of the first stays up the Chinese U.S. agreement.

Although growth below potential geopolitical risk coming from the Middle East Asia, and Latin America, and what we call idiosyncratic risks from countries, such as Argentina, Italy, Turkey.

2019 wants a difficulty or for Latin America economic growth came in at 0.1% significantly below one the 1% growth 2018 and significantly below beginning with your expectations of 2.1%.

After <unk> other than 2016, when Brazil experienced its sharpest recession in the last 70 years 2019 was the slowest growth year for Latin America in a decade.

Oh, the largest three economies of Latin America, which represent about 75% of the GDP of the region, Brazil was the only one that showed any signs of life growing tepidly at 1.2%.

We don't have zero growth a remarkable decoupling from a strong U.S. economy, and Argentina's GDP shrunk by 3.3%.

Great flows were Latin America overall declined 2.1%.

And our only expected to recover by 1.6% in 2020.

We see a similar picture with respect to 2020 economic growth expectations. After a difficult 2019 estimates are just for one of the Hopper syndrome.

Despite these modest expectations. We believe there are risks to downward revisions.

With regard, Brazil as the main potential driver for economic growth in the region that said Colombian through should also performed well.

But with commodity prices depressed because of trade uncertainties and strong and a strong U.S. dollar Mexico stock in the low growth, although no growth mode. You do need the fiscal restraint type monetary policy to keep portfolio money flowing and fundamental lock up investment.

Potential for social unrest in Chile, and then smaller countries like Costa Rica, which its mirrored in the fiscal Red ink.

Or Ecuador struggling to comply with the IMF program, we simply do not see other countries a significant contributors to regional growth.

Brazil is about 36% of the GDP of Latin America.

So while we are cautiously optimistic about its capacity to implement an aggressive productization program pension labor reform along with other free market friendly measures, we're always watch won't or political what precautions and the consequences our current expectations for economic growth our two points.

Well per cent for Brazil, we are looking to increase exposure there to the extent that we can identify growth in credit demand and can profitably lend to companies that meet our credit underwriting parameters.

As mentioned in our last call. We continue to see medium term risks in Mexico because of the prospect of political interference and they don't entities that for the last 20 years, we run independently on professionally.

Although the current administration has shown a willingness to keep Mexico and the good side up the rating agencies.

Maintaining a small primary fiscal surplus continued support for Pemex in restoring production and the good relationship with the U.S. challenges remain even after the signing off the U.S.M.C.J.R. Bates scenario remains that Mexico will not be downgraded to below investment grade until two.

When you one.

As such we maintain a short term profile 10 month, because I live in our Mexico portfolio.

A portion of the Undercar categories stands out with everyone Columbia activity good growth prospects, although lower commodity prices will temper growth expectations improved micro still at the under a regeneration of consumer demand.

Sure power the Peruvian Colombian economy forward to the tune of 3.2, and 3% respectively. Fourq 2020, we are increasing exposure to these countries not portfolio.

And she led we expect very subdued growth of 1.3% in 2020. After the economy claim to a halt late 2019, because social disruptions that goal for a new constitution and a more equitable pension system.

The Chilean economy is sound and should be able to withstand ongoing flare ups of social disturbances, while maintaining a solid credit profile. We will use these periods of uncertainty to maintain or increase our exposure at profitable levels.

Most of Central America, and the Caribbean continued to have solid economic growth prospects.

By lower commodity prices for their exports and subdued demand from the developed world.

We are playing close attention to developments in Costa Rica as fiscal reform seem to have to be having little impact in improving the fiscal deficit.

It may be too early to judge the effectiveness of their reforms, but we wanted to see by now some improvement in FICC physical accounts from the higher and broad or be a ti and what we got was merely a 7% deficit in 2019.

Therefore, we keep our exposure in Costa Rica, too short terms with companies that have a significant presence in other countries in Latin America, what we goal will be Latina.

We continue to pay close attention to Ecuador, its implementation or lack all of the IMF program and its capacity to raise the $9 billion it needs for 2020.

So far the country may be able to count with only 4 billion from multilateral organizations, while the capital markets may not be for forthcoming given its an ability to instrument a great report.

I'm traction area elements of the IMF prescriptions, such that the elimination of fuel subsidies have encountered strong opposition from political boots.

Argentina, then suspended animation.

The new government refuses to submit an economic Glenn and fill it has clarity on debt negotiations.

Needless to say foreign debt holders are reluctant to agreed to a debt restructuring without any economic program that underpins the sustainability of future debt obligations.

It is unclear what comes next in the meantime yards and on treasuries, having trouble selling local debt having declare the last two options deserted raising the prospect of before the closing of the economy to prevent vessels that nobody seems to be willing to hold from being converted into dollars and leaving the country.

Sure.

As you'll hear from I'm not going to see I know, we have reduced our exposure to Argentina significantly and I'm very comfortable with what remains concentrated and strategic industries and U.S. dollar generators.

We continue to believe that the current macroeconomic context offers no room for complacency. Furthermore, the combination of low growth and risk aversion is exacerbating liquidity for the top top names in the region compressing as our margin nodal whats compensating for the risk of these credits represent.

Against this backdrop, we continue to finalize the risk reward function of the country level adjusting our portfolio accordingly, and maintaining a vigilant credit underwriting posture.

73% of our commercial portfolio has less than one your remaining lives lie there isn't a privileged position to dynamically adjust net exposure.

Our book of business is solid we are adding new clients and identifying new prospects were increasing share of wallet with our existing client base and restructuring value added transactions, our focus on high quality borrowers and persistent U.S. dollar liquidity in key markets put some pressure or whatever.

Cherish and margin that fed blather, that's been able to maintain a real relatively stable margin level.

In 2019, our syndicated structured transactions tied to Latin American integration have had solid performance.

With a strong finish in the fourth quarter, increasing our fee income.

Deposits, particularly from our class a shareholders represent 52% of our funding sources. We appreciate the trust and commitment of the region Central Bank and the impact that these deposits have in improving our cost of funds that said, we continue to diversify our funding sources we started.

The new Yankee CB program that will complement our short term funding structure.

On the cost side and expenses for the quarter continued to be under control and have been mostly impacted by the seasonal effects of the fourth quarter as you'll hear from I know that I see it up our credit impaired loans experienced a slight degrees from last quarter as well as a reduction in our watch list the category.

Reserve coverage and tier one capital ratios remained strong.

Book value remains solid above $25 a share that is why our board of directors approved to maintain a 38 and a half sent to share dividend.

Against this backdrop the management apply there as well as its board of directors, it's cautiously optimistic for 2020 and look for a continuation of the profitability path, we embarked on in the last five quarters.

With these initial comments I will now turn the call over to our CFO. Another I see a lot to provide you with more detail about our 2019 before.

Good morning, everyone. Thank you Debbie.

Then if I say that it has been an honor having a company you even drive into back to the Trump securities today.

Under your stewardship bank has reinforced its business fundamentals on which to continue building and creating value.

I will now go through there would be sold for the fourth quarter and full year 2019 into more detail, making reference to the presentation uploaded on our website.

First on page four let me highlight the banks 2019th annual performance.

Quoting a profit of $86 million or $2.17 per share.

On five consecutive quarters of sustained profitability.

These results compared to an 11 million dollar profit in 2018, when the bank recorded impairment losses on financial instrument and nothing Nigel assets.

Totaling 67, and a half million dollars.

Mostly related to eat right right.

2019 weeks old well based on Beatty top line revenue year on year.

As the bank was able to maintain nearly stable net lending marquee with average commercial portfolio volumes slightly up while shifting its credit underwriting toward lower with concrete.

This is particularly quite an achievement in context of virtually no economic growth and decreased trade activity across the Latin American region, coupled with a declining interest rate environment during the second half the year.

Doing 2019 back improved its efficiency, reaching eight cost income ratio of 32%.

The account of at 17% reduction in operating expenses.

Evidencing effective cost control management, and overall enhance structural and operational efficiency.

Also doing 2019, the bank improve its risk profile not only by re shifting its portfolio the nation toward lower risk country, but also evident by did decrease in its watching these exposures and the fact that no you create it has been.

Lastly, fight as NPL seems that third quarter 2018.

And then we sold.

<unk> provision charges recorded asking Birdmen love and financial instrument decreased substantially year on year to $430000.

Fair to 857, and a half million dollar charge Eattwenty 18.

Now onto quarterly results.

Profit for the fourth quarter of 29, <unk> totaled $22 million well he centsper share.

We'd be centene eight quarter on quarter increased 8%.

On an annual increase of 7%.

On page five net interest income the banks main revenue pool accounting for about 86% of total revenue was stable year on year at $110 million 2019.

Net interest margin, which we'd be sense, the net yields productive assets that he net interest income average interest and yes. It was one point, 74% for 2019.

An increase three basis points year on year.

Positively impacted by the net effect of increasing naval base market rates doing Plenti 18, which remain high through the first half of 2019.

Net interest spread which we think the difference in average wage between assets and liabilities are indicative of the trends net lending sprint and remain nearly stable throughout the year at one point, 19% 2019 down two basis point year on year well averaged.

Lending volumes decreased slightly like 2% year on year.

For the fourth quarter 2019, net interest income of $27 million was up by 1% order in quarter and down 4% year on year.

The quarter on quarter increase related to a 6% growth average lending volume Oh fading at 12 basis points decreased net interest margin to one point, 65%.

Mostly related to lower lending spreads Oneq <unk>, we do nation top quality countries.

The year on year quarterly net interest income decline is mostly attributable to a decline in lending spreads together with the net negative effect of decreasing market rate.

And I mean, there that you you carry through into second half the year.

These were partially compensated by a decrease in low yielding average liquidity and it's important to total interest earning assets.

Now moving onto page six.

Fees and commissions totaled $15.6 million 2019 down 9% year on year.

Due to a 12% decline in fees from the letters of credit business, partially compensated by a 14% increase in loan syndication fees.

The bad successfully closed seek structured transactions during 2019.

During the fourth quarter of 2019 fees totaled $5.4 million up 90% quarter on quarter and stable year on year.

The quarterly increase is related to close confession in the structuring and syndication business in the fourth quarter.

Well see some letters of credit have experienced positive quarterly trend.

2019.

Some pages seven to nine we'd be spending evolution and completion, our commercial portfolio.

Which includes known and off balance sheet.

Oh sure.

Letters of credit and guaranteed.

Our commercial portfolio totaled $6.5 billion at year end 2019.

5% quarter on quarter and up 3% year on year as we experienced it becomes inquiry man and good risk reward opportunities during the fourth quarter.

Our commercial portfolio remain short term in nature.

73% maturing in the next 12 months and an average remaining tenor of about 12 month.

Well trained exposures constituted 53% of our short term origination.

Financial institutions continued to be the largest industry exposure, we've been spending 56% of the total.

The remaining exposure is well diversified amongst several industry sectors throughout the region, none of which exceeded 7% at year end.

So without 2019, the bank improve the country music profile of its portfolio being able to reduce its exposure to Argentina by $385 million down to 3% of the total portfolio at year end 2019 from 10% the you before after.

We are successfully collecting maturities acid plant.

At the same time, the bank increased exposure to top rated countries, such as Chile, representing 11% of the total portfolio compared to 3% the year before and to Colombia, <unk> 4.2, 15% of total portfolio at December 31st.

2019.

The bank also increased exposures to non let time tough rated countries in Europe and North America.

Which at year end 2019 accounted for 7% total portfolio.

These exposures I relate it to transaction carried out in Latin America, mostly with multi nationals operating in the region.

Oh their country exposure and variations.

<unk> reductions in Brazil, Panama in Mexico in Costa Rica relate to the banks continued focus on optimizing its risk reward equation.

Onto page 10 credit impaired loans or NPL.

Total $62 million at December 31st plenty 19.

Stable quarter on quarter and down $3 million from the previous year.

Daniel reduction is related to the sales and exposure backing to third quarter 2019, which resulted in a half a million dollar collection and 82 and a half million dollar righto against existing individually allocated reserves.

As mentioned before.

No loans have been classified as NPL or credit impaired under the <unk> first nine stage three could take or he sees September 2018.

And feels represented 1% of total loans with every service coverage of 1.7 times.

And accounted for a single client exposure in Brazil.

And I have for its nine stage three individually allocated allowance of 88%.

Reflecting a book value of around $8 million.

I as far as nine phase two exposure experienced net decrease of over $130 million doing 2019.

Mostly due to repayment of scheduled maturity.

It's been taghreed incorporate exposures that have undergone some credit deterioration there will be nation.

Some of which I relate it to internal countries downgrade or do they are incorporation in our watching it.

All of the exposure in these get tanker eat remains parent.

Oh, you nature in the United States, one portfolio, which relates to the well for me portfolio with credit conditions on change since origination increased by close to $350 million doing 2019.

And accounted for 95% Tilton exposure at year end 2019.

Stage, one collective quit mr. decreased by $2 million doing 2019, reflecting improved country risk profile.

Onto page 11.

Operating expenses for the year 2019, bequeath by 17% to $41 million.

Which led to an improved efficiency level of 32%.

Compared to 38% in previous years.

The annual expense reduction was mostly related to a 14% decrease in personnel related expenses, mainly associated with restructuring backing 2018.

Reduction or any other expenses, partly relate to the adoption of new accounting standard I afraid 16, Eattwenty 19, whereby the banks office space lease expenses are now accounted for as depreciation and interest expense.

Well there expenses will also reduce on the absence of onetime charges recorded Eattwenty 18, as when it's all their cost savings across the organization, which reflect the banks continued effort and focus on expense control and process improvement.

Fourth quarter, 2019 expenses amounted to $11 million down, 9% year on year and up 26% quarter on quarter.

The latter mostly related to higher employee related expenses and other seasonally higher expenses.

Yes, we made it to you in <unk>.

Finally on page 12, we'd be send the positive trends in our OE, reaching 8.7% for the fourth quarter and 8.6% for the year 2019.

<unk> pain, so, let cathy capitalization of 19.8% at year end 2019.

Well done shareholder return above 7% was supported by 38, and a half quarterly dividend payment announced today, we'd be sensing a 69% payout ratio over quarter hearing.

I would now like to turn the call back to double again. Thank you.

Thank you I mean [noise].

It's been a true pleasure and privilege to will have worked with you and the rest of the team.

After five years before can look like.

From a consultant to chief operating officer, and finally for the last two years as CEO I will be leaving the balance so I can be closer to my family in New York.

This was a consensual decision with the board of directors that gave us ample time to find a lifetime today for this to your position and to ensure a smooth transition.

When I took the chief operating officer job almost three years ago, My wife, and I were becoming empty nesters.

Youngest child was leaving for college the plan was that both of US would move to Panama, but unfortunately and for family reasons that couldn't happen and we didn't have had to live apart for the last three years.

Third we becoming lags is feel would be a job that was left a lifetime I have loved everyday working at the helm.

When I took over two years ago, there were significant challenges that I needed to take on.

I had with me and eight plus team.

And together, we accomplished so much.

In the last two years, we took that bands from one of the most difficult credit cycles in Latin America to solid and sustainable earnings tightened our credit underwriting standards to withstand challenging macro economic and industry environment.

Designed and implemented an active portfolio management structure to optimize our exposure along being efficient frontier worked with their stake holders with transparency and clarity as to what we were doing and why we weren't doing it solidified our governance structure everything from.

Board and management committees to key management roles data and compliance strengthen our operating model reviewed our processes and procedures and consumer <unk> control structure, Rodolfo obsolete operational and technology assets and instilled a culture of risk management.

And control.

I'm pleased to say.

Today that blouses balance sheet is pristine.

The bank has been able to return to our always between eight and a half a 9% despite the very challenging environment.

Over the past two years macroeconomic risks slow regional economic growth tepid trade flows an idiosyncratic country an industry risks have been the norm and all those risks work coupled with overwhelming liquidity chasing the same creditworthy client.

If bladex can deliver eight on Uh huh, 8.6%, our OE with these headwinds we should be very well positioned to deliver more sizable returns in more benign environment that will surely calm.

We're keenly aware of the risks in the region and the industries, we finance and with confidence I can say that our team knows how to spot opportunities and deliver results.

I've been working on transitioning to hold because how that's for a few weeks and strong. We believe that lilacs is fortunate to have him. He is a highly qualified professionals who has been working in the financial sector for over 20 years in different countries enlist diverse mandates including see.

For the past 10 years quotes that recognizes that he's getting a well functioning bank with a strong presence and reputation in a region and he's cognizant. All these blocks this need for glasses need for continuity.

I look forward to following Bladex under his leadership.

Finally, I want to thank our board of directors on our shareholders for the Trust me instilled in me these fears.

And I'm very grateful to the team and employees of biologics.

I now open the call for the Q and they session.

If you would like to ask a question. Please press the star key followed by the one key.

Your Touchtone phone now <unk> questions be taken in ordering <unk> received if any time you elect to remove yourself.

First start to get Basket question. Please press star one though.

My first question comes from Yuri Fernandes JP Morgan.

[noise] teachers, you'll know a first of all fluctuates best looks to two good and those 200 as follows Mike.

Although best look.

Most of my first question I guess is more times than a ceiling.

Yes, its quality was really good this quarter.

Well she can provide more color on the Brazilian exposure to the sugar.

Just really relates to you believe these me she only stage, we or didn't the goal how do you just a these loans are moving given it's a it's a big exposure.

And I have a a second the will to two guys a regarding.

Well like whats your expectations for girls works doesn't <unk>.

It seems like Houston is optimistic because he was doing better.

But we also has China now and I don't know like you can provide any color on.

Loan growth sports doesn't do anything like what is blogs expectation for disease. Thank you.

Thank you Uri Ah. Thanks for your question Yeah first on the on the NPL exposure in Brazil.

<unk> that exposure hasn't changed seems we Ah recorded it then feeling even backing up on September 2018, and back then we also allocated a large amount of individually a allocated mr. a to that particular exposure, which now accounts for 88%.

So even though a now or you know and in terms of nominal values. The at Oaktree $62 million and yes, it's related to the shoe who are exposure.

You know our book value when you take into account be allocated reserves, it's a it's close to $8 million.

So you know that that that particular exposure. It's it's a undergone a long period of restructuring which is still in process.

And you know we do expect that doing these year 2020.

The restructuring process should finalized and then we would be able to you know a record in order books or the end result of that's restructuring.

But I would like to stress that the the book value of the exposure is about $8 million and we definitely think it it's adequate or at this point in time and under their restructuring that we are undergoing.

It's hard to do.

So we're going to just a follow just to follow.

I guess telephones.

Do so you shouldn't get a reversal at this point like some are likely to get results or maybe you more provisions here.

Or hard to say no.

We or you know accounting wise, there's very strict methodology and what we record you know our books is precisely the value that we see in terms of recovery of that credit and if that changes Oh, we will pay at the necessary provisions or reversal as they may happen, but as of today that is there.

Oh, you have the recovery that we are forcing.

Thank you.

Well first of all you worry. Thank you for your well wishes and and question. Let me just add a tiny bit to what I know that I feel that was saying a at this point in time beyond the the exposure that I'm not going to see a lot with men.

It's really a we don't have any sugar exposure to Brazil. The remaining sugar exposure that we have which totals about 150 million is in countries with or let's say very little or no exposure to international markets that.

Its exposure of a different dynamics that the one in Brazil, which is completely exposed to price the sugar price fluctuation. So that's just to add a little bit more color on that particular exposure.

Beyond that.

I I <unk>. If you can repeat your question because your line was not very clear and I just want to make sure that I address it correctly.

No just how you were single rules how <unk>.

It wasn't gold and silver weeks from quarter over quarter or no.

We're seeing I'm going on like more a better dynamics first skills into any or China volumes, maybe be a headwind like home or seen youre your potential for growth for slim.

Well, Oh, we usually discussed objective parameters that kind of underpinned the growth so for our business and we don't give specific guidance I'm on a you know for.

Our performance, but we will say that we have been able to navigate a very challenging low growth environment now for the past two years and we believe that we have a again very good penetration.

With our existing client they have been able to a source new clients and and gain larger share of wallet with our existing client base. So we we are as I said cautiously optimistic the bank historically has grown.

Some multiple of overall trade.

Flows in the region being focused on trade finance, but I say said, we don't give specific guidance I'm asked to the growth in our balance sheet.

So super clear are destined to enter into the bill for for for the next three years last three years industrial.

<unk> partners.

[music].

Thank you Uri.

[noise] [noise]. Your next question comes from Jim from singular research.

Yes. Thank you.

For taking my question and first of all I, just want to wish I'd get real well. It sounds like you did a very fine job over the past few years and Ah I wish you a continue the health and happiness going forward.

My question is only guards. Thanks.

Yeah, you're welcome.

My question is in regards to basically the the interest environment and maybe a interest trend interesting, but patients going with 21. So I believe in the last conference call you mentioned.

I believe Dan I mentioned that the out.

Low interest environment actually negatively impacted results.

And it doesn't seem like interest rates are going to be going up by.

Going to continue to stay low in regards to.

Corona virus exposure and global trade.

However, I believe you mentioned that the results, we're gonna be reversed and I was just so we'll be comment on that if that expectation still exist and if there was a reversal.

When we when you would anticipate that reversal to hop.

Oh, Okay, I think that Kim thank you.

Yes.

You know.

[laughter] interest rate caps profile very short Andrew.

We both asset and liability.

Right.

He short tenure.

Having said that our liabilities because it wasn't base that 50% Labeed very very sure. There usually also me back a little quicker. So when the interest rates are going down depending on the vision that we happiness assets and liabilities, we may have shorts.

You are repricing that may be favorable or not indeed last a particular Kate <unk>.

<unk> as they interest rate decline was also accompanied with any better yield Claire.

That is it.

Ended up costing a negative impact a in the last couple of quarters.

But that is very temporary so if.

You should see now going forward and we have already started to see a reverse I mean that trend and and basically the repricing almost on between assets and liabilities and at the end of the debate that the net effect is pretty much neutral going forward.

On the other hand.

ER due to the fact that we have over a billion dollar in equity like that somehow provide financing for a interest earning assets or a portion up.

As as rates go down or our mean gets pressure also because of the lower yield in Indiana in general.

What we see going forward with stable rate, we also see that or now for time being the rates that seem to too.

To be a that aren't going to be remaining stable throughout 2020, and so you know business as usual for us in terms of maintaining not our net interest Brent spread more driven or on the credit spread that we are able to to get.

From lending in Indonesia and B.

In terms of net interest spread for 2020, Oh, we anticipating any Ah Ah stay the same or any uptick I believe in the last quarter was 1.8 in the quarter before that was 1.9.

We anticipate getting to see the same type of Ah.

Of spreads going forward for 20 Twond.

Like like France, Italy, we don't.

<unk> for estimates going forward, but you know you can see the trend having to do with our incredible shift in country rates profile and you know it or you know that speaks for itself we think we.

Well.

You know we are and you know in terms of loan portfolio. This place when down into fourth quarter 2018 from 197 to 192 in this past quarter. So.

And you know that the they change was not ER was not a dramatically high so.

We actually are seen pretty stable trend.

And perhaps to just as a follow up question. The profitability. So it was a nice saw year over year increase between 2018 and 29 team.

The biggest driver of that was the impairments that you incurred in 28 he.

Can you just provide a little bit of color in regards to the why those impairments occurred in 20 <unk> and.

What we can expect in 2020.

I know, it's very hard to estimate impairment losses, but if you could just provide a little bit of color on that regard that'd be great.

That thank you Jim a I will take that question I think that what we can say is that we've done a significant shift a in the composition of our opposite based to or lower risk.

Bowsher that is reflected if you see for example, or overall stage to has been declining our stage three exposure has been completely stable and.

Those are the trends that we've seen a throughout 2019 and or I don't know the trends that we intend to keep a on a go forward basis. So yes, there were some.

Individually I'll located reserves that needed to be allocated to a problem credits in 2018 that was done.

The bank right now is in a very good position from a risk profile to continue with the path. It embarked on for the past five quarters and the via exposure in the portfolio.

And the exposure in the watch list categories show that so I'm not sure if that answers. Your question, but stability is a is part of what we expect and primarily we think that that is the.

Right approach to what we believe is a challenging macroeconomic context and.

And that is how the bank is planning to come from and that these environments. Now obviously these environments doesn't last forever and our expectations is that our returns can get better you know maybe even significantly.

Better if a instead of having headwinds I will start having a little tailwinds and and see a more uncertain growth a picture from Latin America, and trade flows overall and and be up.

<unk> liquidity that seems to be sloshing around.

Chasing the same that names gets better distributed throughout the year, the economy and and margins start reflecting that overall, increasing credit demand that really we have not seen.

In the last two years.

[noise] [noise] life, a lot more clarity thank you.

You're welcome.

Our next question Robert tape.

Capital.

Good good day, Gambrill, and Gabriel and thank you very much for who being the CRM and providing.

Good.

Good performance over the near that you've been CEO and as well as a.

Providing useful information and the presentations on quarterly basis.

Thank you thank you Robert.

I just have a two questions. The first question.

Is it related.

Credit risk in the portfolio and the second question is related to the sources of funding.

So just on the first question in the portfolio.

The credit risk, which which I think has been talking about quite a bit already but.

Just the previous C O M.

Mr. marrow you resign thing in the second quarter 2018 and accordingly.

Yeah, the massive ratable.

Oh that should be mine, which school.

On a substantial drop in shareholder value I'm presuming that was just a coincidence and I wouldn't expect that to happen again, but nevertheless, I just want to.

Awesome questions on the credit risk in the portfolio, specifically relating to the watch list and stage two.

Credit lines.

Just wondering if you could just at you and expand on the nature of the nines into watch list and in stage two sort of what industries. They are what countries and.

With that you're seeing any increased risk there or not I know that at this stage do not have come down.

And if you could just given some color on that they would be that would be great. Thank you.

Oh sure. Thank you Robert Let me just say that in our watch list category. Our single largest exposure is 10 and a half million dollars.

So that should give you a [laughter].

Paul.

Oh, the risk and I see you've seen it's a category that has been constantly shrinking.

Yeah.

Yes and.

The total has that [laughter]. So we tend to stage took integrity.

We may have exposures that on an individual basis have not that we have not seen a deterioration in their indicators that we follow up but they are in countries, which the bank has decided to downgrade because of credit.

And.

Hey, Chris that that having please.

And so the exposures that are you originate it in this country.

Automatically food on our stage to contain Reid.

And that it those are not part of our watch list, but part of the reductions we have seen in that can take we it relates to the maturity of exposure is in Argentina, and Costa Rica for example that underwent a credit downgrade or internal downgrades countries downgrade and a and so that it.

Oh sure has been maturing and we have been collecting it and then the other part of the stage two exposure relate to this watch list can take only we chat also decreased significantly and that accounts for like have you mentioned the highest is it $10 million and and really the total these lisbon, even $25 million as of December.

30 for it but it has been decreasing significantly also and these are exposures that we do have said individually and because of the trends that we see not necessarily and actually they have not failed aimed every payment schedule that they have with us.

But we see in the individual analyses that there is some deterioration in their indicators and so our credit risk area puts them in a watch list and pretty much on burn off mode and so that has also decreased significantly over the back here.

Thank you on me and just as a point of comparison 2018 to watch list category was about $53 million. So that is also an indication off the overall improved quality of our portfolio.

What was your second question Robert Please.

Yes, so that the second question is just on the financing.

Thank you by the way for the first question.

So you mentioned that you continue to diversify your funding sources beyond your typical central bank deposits and and they you know the central bank deposits, obviously make up the bulk of your.

Funding and really good and interest rates.

But do you see any do you foresee any difficulties in obtaining access to the central bank deposits going forward and do you foresee any pressure on on the net interest spreads as the result of increases in the cost of interest bearing.

These.

Yeah.

I know, we actually I'm very confident and we do analysis on that historical trends of Central bank deposits and they are correct right forward, there's stability over time, even though they're very short tenor and cost effective for the bank. So we do not for C that line Oh funding source.

Being produced under country. They also represent our class a shareholders and the and there is a historical relationship there, but the bank. Its old also on it continues.

You know search to it diversifying our funding sources and that's why it's got real mentioned, we lounge and you program Yankee C.D. program that a you know we see actually as I now turn thieves, a low cost funding source or that you know.

We expect to do start to build up.

Okay, great things you'd be diversifying our funding.

We have here with us a as one of the Weve owner, who sort of treasurer and head of the Oh portfolio management area.

So he can provide you with more specific color about on funding sources.

Yes, I mean.

And in a few words, because I'm just something was committed to diversify that funding base. We've got about because in many different capital markets Luckier, we should things up on wages in Mexico.

We also participating as well so he's just give me because in most of them Busby Asian and European investors I will show was with a very wide ranging alpha must be most of them institutions and get them convenience and also the posadas from before them goggins, but compliment, but possibly base that there's going to run.

So I mean.

So when we do I looked at the diversification, we look forward versus the occasion for that complementarity I mean, Dave.

Causes for the had been provides because it allows us for those.

Coupon efficient and very competitive climate goals.

Thank you okay.

Thank you. Thank you very much.

Yeah do you have time for just one more question.

Sure.

Okay. Thank you just just back onto the portfolio exposure to financial institutions has grown in the last three years from getting onto St. In 2016 seems to be six Hussein.

It doesn't 19 I was just wondering you know what's caused the strain why you said competent in financial institutions and in which industries do you see the most risk.

Thank you Robert.

Let me just Ah Ah give you a little bit of historical perspective lot of they started as the bank of bank and the reason for blogs founding was to be a conduit between the local.

Financial sector, and the international capital market.

For us financial institutions is is a core market segment.

That's a client base that that we know understand very well, we finance underlying trade transactions.

That Ah Ah these local banks do in their respective countries. So for US. This is a very known exposure and exposure that that we understand and like quite a bit we have about.

We have a significant amount off or in the financial institutional clients throughout the region with a deep a longstanding relationship with them. So from our perspective. This is a exposure, we like and and we understand and.

It's it's very much part and parcel of the core of blogs as business. So it may fluctuate swell and fluctuate when we see opportunities in the corporate sector down to 39 or 40%. It may go up to exposure in the fixed thesis.

We see less opportunity in the corporate sector and and more opportunity in the in the financial sector, but we we're very very comfortable without exposure and as far as industry risk category.

We really have done a significant amount of de risking.

From a industry categories that that we consider I'm not saying like the sugar industrial <unk> in Brazil, So what you're seeing right now is a portfolio that we believe meets our risk reward parameter.

And that reflects the risk appetite Oh every single industry sector, obviously, right now with sugar prices closer to 15 sends a pound the Brazilian sugar industry becomes a bit more viable but.

We know that these things are highly volatile we have countries like in yeah, and Thailand that overproduce and if the price of should work and go down to the single digits again, So we decided as part of bar tightening up our under.

<unk> credit underwriting parameters.

That we will not take what we call naked commodity exposure, which was never.

As such simply that we didnt follow the prevailing a wisdom all on the rule of thumb for lending to the commodity industry, which is you lend to the top core dial up efficiency and you think that that's going to protect you from the fluctuations of the.

Underlying commodity prices as we've been able to see with the price of sugar. It can trade significantly below the marginal cost of production even for the most efficient a country producing country in the world, which is Brazil. So what we look for when we lend to the commodity industry.

These are more risk mitigation like vertical integration of control of their margins control over end markets were our company Sal. So those are the type of credit underwriting standards that we follow right now and as such.

Our very comfortable with the odd resulting exposure.

Okay excellent. Thank you that was very useful Gabrielle <unk>. Thank you so much gambro and a and good luck Gabriel and your next adventure. Thank you.

Thank you thank you Robert.

There are no further questions in queue at this time.

Thank you Travis and thanks, everyone for participating in the call I won a wish everybody. A continued success and we really want to thank you for Youre supply.

Board of blogs and for being shareholders and interested parties and that is all I have to say thank you and me. Thank you. Thank you.

Thanks, everybody bye bye.

Thank you, ladies and gentlemen, supposedly teleconference. You may now disconnect.

Thank you.