Q1 2020 Earnings Call
Hello, everyone and welcome to politics first quarter Twentytwenty conference call I missed it keeps damp April 2020.
This call is being recorded and is for investors and analysts only if you remember if the media you everybody to listen only.
Next is prepared to Powerpoint presentation to accompany that discussion. It is available to the webcast on the beach corporate website at Www Dot blood ex dotcom.
Joining us today are Mr., Jorge Sanish, Chief Executive Officer Mr. Ana.
Cristiana diminish chief financial Officer.
How much will be based on the earnings release, which was issued earlier today and is available on the corporate website.
The only statement is made pursuant to the safe Harbor for forward looking statements described in the private Securities Litigation Reform Act.
1995, and section 21, each of these Securities Exchange Act of 1934.
And he's communications, we may make certain statements that are forward looking statements regarding Blake's feature results Lance and I guess in dissipated trends in the markets affecting this results in financial condition.
These forward looking statements athletics expectations on the day. The initial broadcast of this conference call Athletics does not undertake to update the its expectations based on subsequent events of knowledge.
These risks uncertainties and assumptions are detailed in the banks press release and the filings with the Securities and Exchange Commission.
Good morning, where these risks or uncertainties materialize or should any of our underlying assumptions prove incorrect actual results may vary.
May differ significantly from results expressed or implied in these communications.
With that I'm. Please to turn the conference over to Mr. Stylists first presentation. Please go ahead.
[laughter].
Thank you Stephanie good.
Good morning, everyone.
Joining us today to discuss our first quarter.
Twentytwenty results in how we're navigating occurring.
And clearly extraordinary economic tomorrow.
On the call with me today are our chief financial officer hanging in there.
Okay, well start chief risk officer.
She's only.
As many as you know I started working in colleagues.
This year on Monday March nine I see.
Two days later Wednesday the language.
The World Health organization declared.
Rapidly expanding corona wires other global index.
The next day Thursday deep 12.
The bank successfully activated its business continuity.
And then all of our staff.
Total 177 employees.
How do you mean operating remote deep from their homes.
Six different countries.
And the bank day to day operations have been running smoothly without interruption.
As of today I'm very happy to report we are no cases of Cobiz 19 your workforce.
Furthermore, the team is working well and join commit names sharp focus.
An amazing collaborate scary.
Across the whole organization.
Yes.
I have to say I'm honored and also grateful to lead an organization.
Can adapt so fast.
The such extreme circumstances.
I want to thank our employees and our board of directors, who have made this possible.
Those of you know blogs.
No doubt our strengths and adaptability are built in.
And have been so for a very long.
These qualities are vitally important today as the world it's going from good.
With a crisis like no one.
Before we talk about business I want to take a moment she's note that this pandemic it's having.
More than an economic and.
It is taking a worldwide human toll.
[noise] thousands of lives lost.
Our deepest sympathy prayers are with all of those affected.
Before cope with 19.
We were expecting I like recovery in Latin America's GDP.
It is clear today.
It's not going to happen.
Experts are estimated at an average seat GDP contraction in the region that ranges from negative three.
The negative 6%.
Obviously, the magnitude the shop for each country.
It will depend on the length of the shut downs the structure and the shape of the economy.
And the extent of the government's assistant programs and the potential access to move to absolutely.
Against this complex and uncertain reality.
I want to cover two main topics today.
On a.
The high level overview of our first quarter results.
And why are you a demonstration.
Our unique strengths.
Adaptability can this difficult circumstances.
Secondly.
The dividend decision made by our board.
And how it reflects our commitment to maintaining.
A solid capital base.
Then I will turn the call works money she can discuss our first quarter financial results in more detail.
After out east presentation in my closing remarks.
Well open it up for questions.
Let's start with a hard legs of the results.
I've heard some express the sentiment.
Historic results are less important thing right now given the uncertainty we are all experience.
I haven't different view.
Health and fitness or patient usually that Darren.
Well, that's a very deep interest incomes and the speed at which.
They recover.
Blogs.
It's a fit and healthy patients.
Our results for Q1, 2020, showing well capitalized highly liquid bank with a strong balance sheet.
Industry, leading appreciate your metrics very girls reported for you.
And perhaps more importantly.
The ability to adapt to the rapidly changing.
Circumstances.
So starting with our balance sheet.
By March 31st our cash position was $1.3 billion.
We are willing to 19% of told classes.
From 16 person at the end of twin Yankee and well in excess of bass Oaktree liquidity ratios.
As soon as Koby 19 storms started.
Likes was able to significantly increase liquidity actually in a matter of weeks.
Thanks to its historic diversified in stable funding sources.
That include many long lasting relationship with of course Netbacks.
No.
It was one of the Pos and some central banks across the region.
We're also our capacity shareholders.
The arc inside the bank has maintained a body portfolio with a country mix dot thanks to the strategies implemented during the last several quarters is weighted toward lower risk increase quite sovereign corporations.
And perhaps more importantly talk to your banks across the region better account for 55%.
Of our total exposure quota.
Our capital was over a billion dollars equity.
Bordering.
Translate into a passive three tier one ratio.
22%.
Well you know onto our piano, our net income for the quarter was in excess $18 million.
Just 14% lower in Q1 2019.
He's profits resulted in an average I wrote 87% and average return on assets 1.1%.
This decline.
Mostly resulting from lower net interest revenue.
Yes market rate speaking.
Lower structuring fees.
It's worth mentioning you got the operating expenses remained on track for the quarter.
Attributing to our resilient efficiency.
I'm going to leave my general comments here and he will share more details about our results and we can talk more about.
Actually running session.
Now, let me talk about our dividend.
If you.
Oh, the bank strong balance sheet together with our demonstrated capacity to generate cockerels learnings.
The board decided to continue to distribute dividends.
However, now the capital preservation is a top priority the board agreed to reduce their first interim dividend to 25 cents Fisher.
Which equates to a payout ratio of 54%.
First quarter earnings.
Because of the volatile nature of the region, which we operate the bank has historically maintain.
Solid levels.
Jason.
In this context become a unique strength.
Enabling us to serve our clients' needs in difficult times like this one.
I'll now pass on the <unk> the call over 20, and after she finishes I will make additional remarks, well before we open up for questions.
Andy.
Thank you Jorge and good morning pool.
Hi, no true because we call.
Nice quarter 20 to 28 to more detail.
Making reference.
Thanks, Karen noted on our website.
Well, let's start with like number three on our currently nice thank you.
Even today I'm certain <unk> global market I want to answer right well, it's common about right.
Our balance sheet.
I would probably be quite the completion of $1.3 billion or 19% [laughter] order in.
It's mostly play with the Federal Bank of New York.
And he's vivitrol is that Hillary even though it's way too created by these global family.
If you blend sure even about [laughter].
Liability the topic accounted for 47% average funding for.
Nice quarter 2020.
Lastly, shareholder we sent to Latin American Central Bank.
My name is relevant basin in the bank funding base of about one half.
Okay.
Although quarter end deposit balances degree by.
When compared to the end of 2019.
Average balances for the quarter have remained within normal ranges.
And the deposit base has continued to we'd know quite favorably during the first week. The April now at similar level, a quarter and year ago.
That makes the bank funding sources, our short term facility.
On average.
Same thing, but despite this thing.
For the quarter.
Which increased by 5% at the end of the quarter compared to December 29 mm mm <unk> balance.
The remaining 28% average funding came from medium term neely and that type of doesn't like HM.
We have no one dialogue with the major pockets there Anthony provider.
<unk> mobile and we can all financial institution and better.
The leap radiotherapy and Mike.
Why do we have current they're coming from the bank.
[laughter] on them.
And can be quick financial environment.
A second pillar of the bank solid financial position <unk> hours keep it doesn't take him.
Having recorded over 1 billion in equity at quarter end.
[laughter].
Hi, early he should be paid ordinary common stock.
Oh, 22% tier one ratio and seven times Maverick [laughter], we'd be Sen conservative level weigh in Mexico, all regulatory requirements and by three guideline.
In addition, and also think me begun.
The back my thing it high quality portfolio profile.
Got it makes that continues to weigh more on lower with concrete.
Exposure to investment grade concrete accounted for 55% I've been talking.
And with a concentration.
Lending predominantly.
Here I nationally completion and costs I Southern Corporation.
With a combined total 70% total exposure at quarter end [laughter].
[laughter] constitute the bank, but did you know and long claims <unk> relationship and we plan <unk>.
Let me player.
Each of their market.
The remaining exposure multi play.
Your private local corporation across the region.
Try to either in their respective industry and with regional player or lumpy.
These environment, we are starving our strategic customer base.
On pipeline segment and industries that are better suited to face a challenging oh by the couldn't quite.
Now moving on like for an hour PML, we sell.
Net income for the quarter totaled $18 million or what do you think.
Here.
Down, 17% from <unk> quarter and down.
Then.
For many years.
These decline, mostly with both the lower net interest revenue.
Not that we continued to degree.
And I'm always stuff, we see related the and even nature generation for disease.
What are you bake.
On the other hand.
There was virtually no impact from credit provision.
Recorded as women love financial instruments.
And upgrading their main adequate at Sable run rate level.
I will go into more detail on quarterly so made right.
Hey, Jim.
No I would refer to slide five M.C.
Which provide details on the evolution and completion our commercial portfolio.
Good loan and southern she didn't hold true.
Chad letters of credit and guidance.
I guess can makes it before you're going into first quarter plenty plenty remain stable [laughter] paid this quarter at 6.2 billion dollar and experience he tencent decline.
And you would balance it.
5.8 billion dollar.
Okay.
Great credit underwriting parameters.
We activated in March when they come at night quite rapidly intensified.
We believe the back [laughter] Beacon basically right.
On the account, okay sounds pretty good quality.
You have that substantially that governs nicely on Latin American economies.
After the commodity prices from one for.
HM.
The bank ship.
The nation right and adjusted underwriting policy.
Reduce exposure to commodity related with.
HM Queen participation regulated.
Your financing institutions, who love region.
At quarter end.
Exposure to these your financial institutions represented 55% [laughter] bullion.
They're they've got to 19 scenario.
Got it either these financing solution.
The most relevant and keep me.
Each of their market.
Among the more defensive sectors.
Letter to negate <unk> that the crisis.
That's the real quarter.
The bank has also adjusted its concrete bolger.
Focusing on originations going investment weight concrete in Latin America, and none left Boise concrete.
The latter related to transaction carried out in Latin America, mostly with multinational operating in the region.
We believe that he's gone piece, you would be better position in the quarter in local content.
The short term nature of a before you would be the language and maturing in the next 12 months.
Coupled with the quality of a client.
Our advantage in managing our portfolio exposure.
With a focus on maintaining credit saumen on this great and who then credit underwriting standards.
Undercover 19, we have implemented it couldn't <unk> review processes are in higher for you on a name by name basis.
We have classified that's true respectively.
Those included a hybrid.
Representing close to 12% Oh, California at quarter end.
That does need high risk in February include airline.
Oil and gas green and supply chain.
Sure.
And this includes our NPL gold you're already 89% <unk> third.
Retail and auto industry.
None of these sector represents more than one it happens then.
Before you.
Furthermore.
Oh.
Oh sure art with relevant later in their respective markets.
And or.
Suffering and once I celebrate institution.
They track record Oh no before.
We've been pretty good pricing.
That could have adversely impact them.
He has also classified country, we hold true identifying who country hybrid.
Mainly Argentina and Ecuador.
We have been reducing our exposure in both the country for the last several quarters.
At the end of March 2020 <unk>.
The exposure in Ecuador was 355 million dollar or 6% [laughter] before you.
Down 17% what is important.
[laughter] spend of adult, though it off balance sheet exposure related.
Letters of credit confirmation on the import Oh refined oil products.
With a track record of more than 20, you without any need for <unk>.
Even doing suffering international deep pool.
Even the strategic nature of the oil imports.
It was the concrete.
Indication of Argentina.
Exposure was $195 million at quarter end for 3% total before you.
Down for the same quarter on quarter, I'm down [laughter], which then from a year ago.
As I decided to reduce exposure in Argentina fees, the beginning of 2019.
Most of the company's exposure is with the larger they integrated oil companies.
[laughter] energy generation and 83 among people.
Even under suffering for the path.
On slide seven.
Credit impaired no.
NPL remain stable at $62 million at March 31st 2020.
<unk> accounted for a single client exposure in Brazil.
Under eight complex and the long dropped pretty cool.
[laughter] exposure has an easy is really allocated great loan allowance 89%.
Let me a book value of around $8 million.
And he has been presented 1%.
Oh.
With an overall reserve coverage of 1.7 times.
The remaining 99% of the loan volume remained current.
The bank total allowance for credit losses.
Relative to the chain.
Back through December 31st 29 imbalance.
Having we quoted usually knowing that you quit privy to for the first quarter 21.
That was the result of lower we serve frequently.
Creep in the future grade before your balances.
Oh, that's by increase they do Oh sure.
Ladies exposure, which has deteriorated think origination as the back me a downward revision.
The outlook for certain industry impacted my Dickering environment, which I commented on before.
Net interest income presented on Nike.
Creep HM $25.8 million supported.
On the account of 86 basis points victory net interest margin.
1.9 person.
As market, we continued to decline.
Impacting the overall yield assets.
Fine then by our ample happy.
He was offset by lower Cook a fun.
Also on lower market rate.
And by stable level.
Average long before you're bound.
And on net lending spreads and net interest spread.
During the quarter.
[music].
Continuing on to slide nine.
Operating expenses for the first quarter Twentytwenty degree bite [laughter] Ben quite important.
Depending on a half million dollar.
The account of the typical first quarter does not affect.
Yeah on year.
Expenses increased by 7%.
On higher personnel related costs.
Mainly associated to the CEO transition.
And we create that every day on employee Bacon.
Mtwenty 19 that what field support yearend.
[laughter] food.
37% for the quarter up from 36% a quarter ago, and 31 person a year ago.
I mean on lower revenue.
With me I will now turn the call back the one thing.
Thanks, Andy.
As you can see or the hard.
These results nice its ability to adapt to rapidly changing circumstances.
On the I'm sorry.
Short term nature apart facilities.
Coupled with our geographic diversification.
The unique access to blue chip clients.
Gave us the ability to rearrange support for.
As we get dropped 20 ranking.
On the liability side.
Our diversified and stable funding sources have enabled us to increase our liquidity significantly.
In a matter weeks.
Emerging our strong capital.
Gave us the ability.
To pay our 50% of our net income and dividends.
And still maintain a solid capital base.
In summary, starting with the seamless activation or business continuity plan.
Like so it's clearly use its levers so take early action to navigate the cope with 19 stores.
We recognize the uncertainty created by the coal was 19 start.
We know it will have an impact in Latin America and in our portfolio in the months to come.
Having said that logic is not only in very good shape.
The faces arm has gone through many storms over its 40 years history in the region and we are determined to emerge from just one do you continue serving our clients.
That's all I have to say for now operator, please open the call for questions.
[noise]. Thank you if you'd like to ask a question. Please take note by pressing star one on your telephone keypad I've always pumped on the phone line will indicate when your line is open. Please state your name Purposing Your question.
Again press Star one to ask a question well. That's we're just how much will every when an opportunity to signal for questions.
My first question.
[noise], yes, a good morning, My name is Jim Moroney with singular research and I guess my first question is in regards to the [noise].
[noise].
The shift to the <unk> cash position. So I believe it's a very strategic it's right. They are.
Hawaii's move, but can you give us an idea going forward.
On what the positioning is gonna be isn't going to.
Take a defensive stance as far as just ensuring that others liquidity or could there be or the opportunity or opportunistic.
Position with regards to lower asset values.
In the marketplace that you could take advantage of or.
Increasing loan portfolio.
Can you give us a sense of.
What the capital position is going be going forward. Thank you.
Oh, Thank you for your question.
The short answer is that.
As long as there is uncertainty.
We will have access to liquidity to sustain the banks.
The resiliency in nine environment, Oh I like this one.
As soon as we have like opening up the armies.
And you know the Progressive me opening up the debt markets. Then we will we think our liquidity management approach, but in the meantime.
The banks priority is to ensure that might change.
He robust liquidity pool.
I don't know.
Many of you want.
Or Alex if you want to comment on that.
Oh, yes, I can I can I can ask that of course, we will continue to moniker you evolution of financial and that capital markets.
You know and they expected behavior in availability of different funding sources.
You know as well as our it but HM painting capabilities of our claims and then we will as well is that <unk>, we'll be watching closely you know how all these factors are behaving going forward and a an act accordingly.
Thank you as a quick I wonder if you like to ask a question you May press Star one.
[music].
Your next question here.
Good morning, My name is Solomon up here. My question is on the payment of dividends.
What would be the or can you repeat what would be the cost.
So call it Andy.
It is the number quarter do you think.
Yeah, so the dividend for the quarter is 25 cents for sure.
Which is a 35% decline.
Oh for.
For the quarter.
Thank you you know until when you will keep dish is what do you see or it all depends on the influx of cash.
So oh good question.
I prefer not to speculate on on future dividend at this point.
Not only because the dividend policy is up to the board, but also because it's a decision that it's made every quarter and it's still very early in the storm or just think on how Q2 in Q3 are going to me I would say, though that.
Yeah.
We have had historically high capital ratio.
And that response, Duane historically, volatiles, regeneron, which we operate and I don't see that changing in the future.
Thank you very much.
Thank you Hi next questioner.
I appreciate your line is life.
Hi, Rico are you on Neil how are you on the line.
[laughter].
Hi, This is Patrick.
A couple questions. One can you just comment specifically on.
Some of the jurisdictions, where you sort of huh.
That or higher.
Commercial portfolio exposure now price insane.
In Chile, and Colombia, what should you sort of sitting on the ground and then you know maybe comment.
On a couple of your larger countries and sort of Mexico and ER in Brazil, what what you sort of see those on the grounds in terms of just opportunities.
It is to provide correct about credit most current environment. Thanks.
Yes sure.
I'm going led our chief risk officer.
Huh.
Answer I'm sure this call.
There is information, though on slide [laughter].
I think it's a.
On slide six of our presentation.
Oh, Oh, and you can see there that.
65% of our exposure today is.
And indefinitely.
Great countries, including.
Oh.
Colombia and steel, but whenever that.
Oh sure somewhere like on on what we're seeing in the ground there.
Yeah, no good morning.
Well I'm talking about Colombia, I will stay down or most of our exposure is what I'm trying to do shouldnt up here and actually condition, but a lot on you mentioned before I think we believe under this scenario with Oh, the projections of the GDP contraction in Latin America, or 5.2% from that and that we believe we are enough.
Defensive sector, one of the most defensive sectors and I think this export hurried to Brazilian under this scenario. The same thing happens in Chile Helioffshore man exposure is also an entry conditions. They also have exposures or in other sectors, we are quite recovery rate and.
Also we have Oh I'm, a minor exposure in Ireland industry. We believe indicate that we are we have explored occurring in adult and adopt companies seem to industry Dod they're going to start this storm in a better way the how liquidity buffers right now Manish is a lot down there airline industry.
So I will say that actually yeah, we were concerned there's a lot of uncertainty around.
We don't know right now the land of the Cobbett Nice gene knockdown in economy, and the impact that a week or a I would reinforce the message from Anthony that 55%, if I were exposure globally and in vain economies because in Brasil. It's the same is the same.
Situation, 80% of our exposure if im not sure if it becomes the top tier I know two conditions and as you may be in those countries a central banks. Okay. There they are.
Yeah, Yeah actually right now implemented.
Measures to have the financial system and to compensate the impact of Kabi. My team you know local economy, though and my point of view in general those countries I didn't mention nothing about Mexico bad.
No Mexico, we do you maybe seem to figure it will reduce our exposure almost over 30%.
We reduced exposure mailing out the buckets operating level entities would not run down.
Let's go a we decided to several quarters ago.
To reduce the kind of if I went before you have less I'm gonna here. So actually we have a maturity or a 10 or 11 portfolio, Mexico, mostly skin and within a year. So we are very well diversified and defensive industries in Mexico. We also have exposure in local currency a match it with a local funding.
That's a defensible under different scenarios ventilation up the currency. So in general I think I'm confused about 55% of how we're exposure is im not sure institutions I read it would coffee submarine strategic company, a we've got a very important footprint in their local economy and the ramp.
Our mostly look like multi national I'm looking Lumpiness Corporation I think we are on the top of the permit under distress isn't out yourself I think as Andy mentioned before my final message here, we are mostly another defensive sectors all across the region.
Just want one more comment on that.
Having said that we're on this defensive sectors, we have seen though.
You know and increased anyways, we are Oh are.
Between 304 hundred basis points, even with a top tier companies and.
And some of the best countries.
<unk>.
Thank you our next questioner.
Hi, though he loves it.
Oh lunch on this guy who need to be better what is driving a degree the yield on <unk> are you asking.
And Oh well.
How you are maybe Bob.
I don't know call stuff.
He oh gosh, they made it easy open the sport.
Sure I had some trouble hearing the question can you repeat or you're talking a bit shakes I'm sorry.
Okay. That's the first part of his question.
Hi, I'm just that.
Why the yield on the are you asking five mm.
During the fourth waters as much water. So yes, I also want this bad.
Public funding Oh, we recently came back to you.
Thank you.
I know you want to comment on that.
Sure if I understood correctly, you wanted to understand the trends in acid yields and funding costs.
So Ali.
Our balance sheet, both sides of our balance sheet.
Our assets and liabilities are cry, they on lively market rate.
Uh huh, so any impact and that this is what we actually experienced in the last quarter and several quarters. It might have pack oh of lowering interest rates will have a similar impact on or assets on our liabilities. The repricing occurred within a very narrow interest rate gap.
And so and that's why are you know the repricing of course people tend to me and binetti, but net interest spread.
That's right.
The decrease in rate of assets and liabilities Uh huh, okay, nearly stable over the past quarter, reflecting precisely that district <unk> read these repricing of course quite seen them from a penny and like I mentioned the reason why net interest margin decreased.
It quarter over quarter is because obviously at lower you.
Both on our assets and liabilities.
CRE there is a portion of asset that is financed by our ample equity base and so as I think you'll go down or you know that degree it goes right to the bottom line and a nice night if I.
Answering your question.
[laughter].
Yes, Oh I've been spread over LIBOR, then maintain or how big of those greed, let me to that.
Because we felt.
We.
Well, we have seen actually it's pretty stable overall average spread spoken or assets kind of and I know funding of course as Larry mentioned, we are seeing some repricing all sort of insight.
As you know I mean international markets overall have overall you know.
And the cost of money has increased overall and we are obviously it being impacted by that on our funding side, but of course that he's also been deployed into our asset pricing yeah right now.
Okay. That's it.
Hello.
Thank you and next question.
[noise] I'm. Good morning, My question is.
Before I have few.
Hey look.
Long term effects.
On the reduce yield on the on the loans She's majority of remains or long term loans you can have more doesn't affect on the yield how is going to affect.
<unk>.
Oh, hi minute vocally one like.
Right.
Yeah.
Again, well first of all you mentioned that are after drinking is long term and and it got I mean, we actually had a duration of a about less than a year, so but independent of that again the repricing we have.
Hello.
Loans and liabilities are are based on floating rate Nairobi.
Yeah and so.
You could have.
Lower yield nowhere and net interest income on obviously on a lower rate.
Precisely because of the portion of the apathetic financed by our equity.
So if we hadn't really like inequities that financing you know or other oh are.
Part of <unk> acid.
You know if you read you.
50 basis points in life in that were based rate and then Dave I feel I would just by 50 basis points that we'd be saying.
I think even though nothing.
I'm sorry.
Right, but like except for that for somebody financed by equity, which doesn't have a financial costs or you know it doesn't have any interest the various oh portion that will be impacted but but you're right every pricing on both sides I think it's going to be quite similar tank.
The net interest spread.
ER everything else being equal should keep stable.
Okay. So you're basically all expecting to get hit if there's any type of a default by any of your customers.
Well, yes, you're right now.
It's wrong haven't yet and I think there's more there's more just to get little bit more fun, but it's like eight of the presentation in the top right Oh, you can see the net interest spread.
Uh huh.
Mid teen between 115 117 throughout the year.
And you can have an idea of how short term.
Our known saw.
We billion dollars, we originated into first quarter, and we had $3.5 billion.
Loans maturing in that same quarter.
Yeah and then.
Mhm, Yeah. He then ask about a potential losses, what I can tell you there is.
Estimation of are expected losses is already incorporated in our quarterly result as of today.
And Ah, we cannot speculate on that going forward.
Okay. Thank you very much.
Yes.
Thank you as a cross your mind or you May press Star one to ask a question. We do have a question to me to be other webinars to what extent if at all do you expect benefit in spread widening in the credit portfolio are there early indications at risk is being reprice, how competitors reduced exposure to trade finance.
In the region.
I'll take the latter part of Oh good question.
He said before we'd do we do see.
Be pricing.
In the region.
Okay significant can be thinking on in Florida.
Basis going even in the top tier countries, even with the top here plans are in those countries I don't know Alex or any Fiona.
Calling it a little more on that too.
Oh, no I think maybe I'll address the first part of the questions that have to do with a widening spreads like I. Just mentioned, we are seeing or some of that already.
And.
It's hard to tell a b and Dnbi. So right now because obviously like I said, we are also experiencing some repricing our funding, but overall we should.
Haven't it wasn't if in fact I'm on the repricing, but I'm going to leave it there.
Thank you will move back to our audio.
Listeners questionnaire.
Hi, This is Rob tight speaking from global rational capital Hi, Jorge Alex in any thank you for your come in very useful.
Uh huh.
I just have a it's a few questions. The first question is on the portfolio exposure and I was just wondering why has the percentage of the portfolio exposure to oil and gas an airline.
Increased and pass this is the question fuel for Alex that Chief risk Officer.
You know in on that point, you know what makes you comfortable with these exposures not requiring increased provision.
And Kevin can you give more detail on way on the nature of these exposures and way they all in and how you're managing.
The risk in these hard it industry.
Alright. Thank you for your question, well, where we increased exposure in oil and gas.
Yes, basically in downstream, okay with that but its operating rates that we have a long lasting relationship. A you know just or short term 10 or transactions, usually bender finer word they buy refined product abroad. So actually this is something that we're doing business not necessarily.
This time.
There's sometimes a again of the theory you don't have the partnership bad. This is very short term 10, or a weight watchers have embraced a in Peru, Chile, Uruguay. So we believe we believe those countries right now under destock, probably 19 as an IR better prepare.
And they have to support from the summary level proven track record. So I'm not worried about the kind of transactions were doing there.
So that's my my answer a this morning for oil and gas, where we actually increased on the other thing is yeah. We also increased in upstream. Okay. We have an exposure 2%. If you compare we did beginning of the last year. The first quarter 2019. So we used to have a company to the west concept that <unk>.
Integrated in the industry they used to have a refinery they shut it down they data liability management and we support them, we have a long lasting relationship they have to support from the federal level.
In other prices you know I should add Latin America, Benin and with commodity prices. If your 2014 16, so into bad we are in a way experienced this kind of as an area where the prices boy I'm 20 daughters.
So actually we have experience and we believe the link between sell brain in that case, I think it's mainly focusing preneed onto boggle the link between the Sabrina and they're under company a 100%. So we believe in that case, where well coverage and the foreign support.
Suffering support we stay there I think the pen.
And you also you also.
Talking about airline so.
We always approach these industry enrolling very carefully it's very conservative approach. We know this embedded volatiles industry. So we only have exposure with two companies that we believe a they got enough there by this scenario and the well and looking to Doug Fieger what.
There are being doing right now, they're saving cost variable costs. They are in a way or extending the tenor oh, they're leaving and they have about liquidity buffer that and my point of view or give the chance to survive under de stress scenario for more than a year.
And we haven't relationship with them long lasting relationship not only in the office side I also think liabilities not so actually a we're pretty confident even Doug we know yet we are under.
An uncertainty is a major insurgency since this is an area on the landfill for Gabi Nike in impact in under close down or the love down starting team little different economy, a were pretty comfortable with the kind of break that we have entered this industry know what we're talking about top health care companies that are better shape to weather the storm.
[laughter].
Great. Thank you Alex said that it's very useful M. My second question is in regard to the a the interest rates generally and I think this maybe a question for for any is just the since since the rates market rates declined a in.
The last month of the first quota in March.
And assuming rates remain low.
Would you expect the net interest income and margins to decline further in the second quarter.
Given that the second quarter, we'll we'll have the full effect go up low interest rates with it for the full quota not just one man.
Oh, Thank you Robert well like I, just mentioned a there is several factors impacting our Morgan.
But you're right as we continue to decline, we're probably going to continue to see the repricing.
Big driver based assets and liabilities.
At the same time I also mentioned that we are obviously also seen some increase in net lending spreads.
So I really cannot speculate because it will depend on the and the size of our balance sheet and so forth and the length of the you know so.
Contain ER and management of the liquidity as we are doing but are they a brief pricing effect. If it is probably going to continue to happen.
But it's going to be offset by higher net lending market as we.
[music].
Thank you.
Thank you we do have one additional question would be ilecs portfolio, having an average trailing 12 months or less your turnover is 8% plus per month on average do you see current activity deals in process loan or <unk>, Oh origination keeping pace or are they substantially lower than.
Average.
So.
As I said as I said before we we are in business. We are we've been originating over $3 billion or for the quarter. We are there will be Uh huh.
You're running standards or we do see.
Oh I'm, some interesting deals in the region or whether good or risk reward.
Oh.
[noise] return.
Thank you that concludes today's question and answer session. This time and like to turn it back to our speakers for closing remarks.
Yes. Thank you I just wanted to thank everybody.
The joint or our call today for their interest.
In their support Oh, two blogs and.
I wish everybody to Tuesday space.
Okay more on our site.
Good banker.
Thank you ladies and gentlemen. This concludes today's presentation you may now disconnect.