Q3 2020 Foreign Trade Bank of Latin America Inc Earnings Call
Thank you and good morning. Everyone joining us today to discuss our third quarter results.
Today I'm here with I'm going to see that in this or CFO and a few members of my executive team this morning. I will be going through the presentation and talking about her Dodge management during the quarter. And then finally we'll discuss the female implications of it after any remarks. I'll make some closing comments and then I will open it off.
Let me start by saying that overall for the porter or we're still in a very uncertain environment the underlying this is fundamental performed quite well.
Do you need flexibility of our business model in the quality of a customer base continue to be?
Moving to the presentation on strike three as you probably recall during the second quarter our loan portfolio Trunk by as much as 16% close to a billion dollars off, but we're in the process of reassessing credit risk in favoring liquidity during the first few weeks of this one.
Talk to a very solid collection in Q2. We entered the third quarter with a very healthy portfolio close to five billion dollars mostly short-term focus on talk to your bank and talk to your corporation.
You can see that we have we had over two billion dollars in the touring during the third quarter more than 40% of our 40 40 minutes during two or three months again. Just like we didn't kill two we collected virtually one hundred percent of all maturities across all Industries in all the eighteen countries off operated.
Moving on since like 5 in Q3, we managed to grow up or forty by dripping. They continue working closely with clients and disbursed over two point five billion.
I'm trying to log in this word in the previous board. It's useful is remotely short-term regulated loans the average standard 188 in the average wage with Viber plus $227. That is an average of 32 basis points higher than the maturing known for the Border.
There was something long before you for a Q3 and fly six or slightly above $10 fully performing with zero and p.m.
73% of this portfolio is maturing less than a year with an average rate. That is 14 basis points higher or
Like seven highlights the fact that our credit supposed to remain very conservative both in terms of country and things.
59% of our loan book is now in investment-grade countries and similarly fifty-five sixty 3% of our book is based in stock your financial institution across you can see the remaining exposure is well Diversified among countries and sex.
Give me a second here.
Yeah, sorry 7:00 highlight the fact that our credit scores remains very conservative both in terms of countries and
It's worth mentioning that as I matured. We keep introducing our exposures in high risk countries like Argentina Ecuador in cost every month.
Like 160 A specter has also been declining as an example our exposure in the airline industry continues to follow a downward Trend in life. It has come down almost a hundred million dollars sixty-seven percent in today represent less than 1% over for for you.
Very moving on this like we show how I asked composition has varied throughout the year.
but I think
Like ordering is in line with a strategy of resuming commercial portfolio.
We have gradually reduce our liquidity position which by the end of the quarter was one point five billion dollars, but always making sure when when paying a robust level.
Oh so I can afford to increase the prefer to be different cash position are relatively small Investment Portfolio increased by $138 144% and reached 237 million dollars invested in hiding in high quality liquid assets an appointment to the specification of the month.
The liability side of our balance sheet like 9 we show how our funding structure has varied over the years.
Several points should be highlighted.
One a deposit base continues to grow as much as 6% quarter-on-quarter.
Couple of things here one black new CD program has observed a very positive Evolution or 70% or on border and reached 359 minutes are the certificates are serving to be an efficient tool to further diversify our funding base and attract new event.
Also on the deposit side many American central banks continue to comprise more than half of total deposit.
Are we have said before the deposits represents not only stable cost-effective funding source, but also a clear demonstration of the support that central banks across the region continues to wage in line During certain times.
Yes, I think worth mentioning. Is that bondage?
as you probably saw
Early September the banks are sesame. Paste is Third Ward issuance on the 144 a reg s market for $400. The bonds have a five years fix rate of 2.375.
The placement was four times oversubscribed the robustness of the demand allowed different sections to be completed with the lowest coupon of $544 eight issues. Carry Out by 9 so far. Also, the bank says a new syndicated facility $450 amount invested in Asia Europe and the bank enter into this transaction to the subjective of birth further be enforcing Destructor.
Expanding day increasing the rest of your vacation and extending the residual time to maturity of a financial.
Merle moreover with the purpose of generating efficient Financial Resources to capture new medium term lending opportunities that have been identified off my card commercials.
I will not not trying to call to honey so you can walk us through the piano indication. Thank you and good morning 12 or so. Let's move on to slide number ten what we present the results for the third quarter 2020 with a net income of 15.4 million dollars representing a 9% increase quarter quarter. And this is mainly due to increased revenues from interests these and other English a combined total of 1.8 million or 7% due to higher net interest margin and spread and to a better performer fees from the LT business.
which has
But he recovered levels in addition the combined impact of credit provision charges and of changes in. Your financial instrument total 1.9 million for the third quarter a zero point six million dollar increase compared to the previous quarter off. The ugly noting is relatively stable Trend in provision charges in line with historical level.
This is a reflection of the overall good performance and sound at the quality of the credit portfolio.
On the account of close to one hundred percent collections as Jorge mention and of know, and as I will go into with more detail later.
Yeah, I'm here quarterly profits decrease by 24% mostly on Lower net interest income and margin due to the change in our position since March of 2020 when the bank decided to increase its cash position and lower loan balances in view of the impact of COVID-19. And the market uncertainty is Tricia. Who alluded to before lower profits on stable and solid level of equity of over 1 billion dollar has resulted in decreased quarterly returns for 2020 with a 6% hourly for the third quarter.
Denoting nonetheless an improvement of 0.5 percentage points quote unquote.
On Friday 11, we presented drivers for quarterly net interest income Revolution which represents the main revenue for the bank off at approximately 90% of total revenue.
Quarterly net interest income or nii increased 4% quarter-on-quarter to twenty two point six million while letting too smart or ninja of 1.42% was up by 14 basis points.
The main driver of quarterly increases in income and margin was a continuous widening in met lending rate differential denoted by the 2.05% difference between loan and overall funding rates, which increased by another six basis points during the third quarter.
This in turn reflects higher lending spread. I told her referred to before even that black continues to take advantage of new loan origination at higher adjust the pricing with respect to free levels rarely compensating no root pricing on Lower market libor-based rate, which also plus positively impacted liabilities with writing.
on the other
An average volume effect continue to put pressure on nii due to acid mixed composition as I just mentioned which average cash feel represented about 27% of total assets for the third quarter and average loan at 70% Even though end of. Loan balances started to show off to keep growth Trends during the third quarter with a 2% increase and accounted for 74% of total assets at the end of the quarter. Why landing page by 31% during the quarter representing now 22%
The quarterly Nai decrease of 15% and the thirty five basis points drop in the net interest. Margin are mostly a privilege to the change in average acid composition that I just commented on as well as the lower Market rates. In fact the overall yield of assets financed by our faith equity-based.
Flight number 12, which is sent the evolution of allowances for credit losses, which under accounting Norm iOS 9 incorporation for looking expected losses.
so that black is best estimation of the impact of the current economic environment is already accounted for
No, new deteriorated credits were recorded during the quarter. So empty a balance remains at zero as of September 30th, 2020 moreover during the purchase order to exposure assessed by the bank as having increased risk was reduced by $178 million now representing 6% of total credit exposure mainly reflecting the reduction of credit balances in countries that have been downgraded by the bank during this year's
In this respect during the third quarter and given the recent development in Argentina allowances are located two exposures in that country song mainly in that country increased by 4 and 1/2 million dollars, which combined with lower stage one requirement on low-risk origination explain overall, 1.5 million dollar charge and credit Provisions for the third quarter.
Speak to a closer than a million dollar loan to a South American company in the airline sector reducing that company's exposure to zero down from $46 and $1,000 in March of 2020 this transaction led to a four point four million dollar right up against previously established credit allowance denoting an overall recovery rate, in excess of ninety percent of this client's exposure since the beginning of the current price.
Stage one exposure categorized as low-risk increased by $487 during the quarter to 94% of total exposure off over all the banks total allowance for credit losses represent the 84 basis point of total credit portfolio at September 30th, 2020 all dead. Which remains current
Continuing on to light on the 13 operating expenses for the third quarter of 2020 remained relatively stable quarter quarter at decreased level year mainly due to lower salary and other employee expenses the account of the do performance-based viral compensation provision while on personal experience has remained relatively stable.
A teacher ratio stood at 33.1% for the third quarter.
And Improvement of more than eight percentage points with respect to the previous quarter on higher Revenue.
I would now like to turn the call back to 4. Thank you.
Thank you, honey.
I said in my opening comments, the third quarter results are once again a good reflection of our conservative approach and the flexibility of our business model.
Practically deal is with top-tier corporations and Banks as an order to keep collecting Victory a hundred percent of all maturity on time and dispersed new gnome Union countries in Texas. Having said this there is no doubt that there is still a great deal of uncertainty in the months to come and therefore priorities will continue to be the same quality of our loan portfolio in keeping ample liquidity.
I'm very proud of the way. Our team has come together and navigate the storm so far. There is no doubt that opportunities for people rising as the economy's reopen throughout the region and I will continue to be there to support our clients during this uncertain time.
That it on our side open it up for questions.
Thank you, and at this time we will open the floor for questions. If you would like to ask a question, please press the star key followed by the one key on your touch tone phone now questions will be taken in the order in which they are received. If at anytime you would like to remove yourself from the questioning queue, press * 2.
And our first question comes from Navarra Lewis, please go ahead.
Borrow your line is now open. Please proceed with your question.
Sorry, can you hear me? I wasn't yes. Go ahead. Perfect. Thank you. Well, thank you for the update on for taking the question. I have two questions. I'll I'll start with one. So I'm doing that border. The bank resume is portfolio bro, and I just wanted to see if you could elaborate on the sustainability of this growth going forward considering the current economic conditions in the office. And also if there's any particular sector in which anticipated Focus this proton.
Sure, thank you for for your question is is a very good question related to to opportunities.
Going forward and and this has been ability. We do see, you know opportunities going forward as the apartment. We open we're seeing wage increase demand from from assigned based both corporate clients and and banking clients that are actually seeing an uptick in their demand wage online.
Also, some of our corporate clients are looking to take advantage of the situation to grow.
Organically and inorganically so we have some some demand there.
There's also an interesting thing going on with letters of credit and there's some some wage to the extent that sometimes I could be switching, you know suppliers. Uh, there's some some, you know opportunities there as well so long, you know, I would say we do think that the man will be there in short as economy real.
As far as as far as sectors of we do have a very clear understanding understanding of what what sectors are are, you know more resilient than we than we have a lot of them a lot of the men in those, Texas.
Perfect. Thank you so much. And is there a time for another question?
Sure.
Perfect. The other question is in regards to liquidity. The bank has gradually reduces security position during the last quarter. It's too. Around 1.5 billion off the end of the quarter. So I just wanted to see what are your plans to optimize your liquidity at this point.
Yes liquid has been coming down as I mentioned because of you know, we're positioning or commercial portfolio work for your broke. I cannot give you a specific Target on the quality. I can say though that opportunities arrive with poppy seed liquidity coming down and also, you know to increase the possibility of our you know, past position wage are also increasing our phones before you as I mention with high low risk assets, but that's the way to you know, increase the visibility on Thursday.
You know cash message.
Perfect. Well, thank you so much for the update and for for that feedback on these questions.
Thank you. Thank you. And our next question comes from Robert Tate, please go ahead sir.
Hello. Good morning. Can you hear me?
Yes, we can hear you. Great. Thank you. Congratulations on the on the good results. Very solid. I just have three questions if that's okay. So the first one was on the loan learned in the airline industry the second one in loans and other high-risk Industries in the third one is just on dividends. So the first one but I just wanted to ask what is the remaining average number of months to maturity for the remaining Airline loan balance of 58 million and is it due to just one borrower or more than one borrower?
That's the first question.
Thank you Robert. So it's just it's just one borrower and it's we feel very comfortable with the exposure. The airline has money, you know over a billion dollars in in cash and. Exposure is it's two more years.
Okay.
Thank you. And so the second question is just on other high-risk Industries loaned, you know, the high-risk Industries and early in the year you you had spoke about and reported on a number of them including the others of of particular interest. I think our Automotive retail and Upstream oil and gas. So I was wondering if you could just give us just talk about those Industries and give us a bit more background as to what is happening in terms of the lines those Industries. Um, that would be great. Thanks.
Oil and gas upstream and supply chain and and and also to a lesser extent we have, you know car industry month including including car dealer and then and then sugar and ethanol among others, you know, we've been able to reduce our exposure to this higher wage industry by about 130 million dollars. That's that's 31% compared to to q1 number.
So, you know with a major Construction in car trade Airlines and then sugar sugar and Retail as well. So
Oil and guy are supposed to be 85% focused in the oil industry mainly go. Our main main exposure is with a great company with a big company there and you know, we believe that the Sovereign, you know, make a key role under stress tonight. So we feel comfortable there in the sugar and ethanol cut our exposure off the industry by 46% since the opposite, you know of the of the prices after we stole the the r n p l case in Brazil.
Right. I don't know. That's what I can say. Yes, that's fine. Thank you. How long the and in the final question? The third question is just on the dividend and I was wondering if you could comment on the most important considerations that the board would focus on uh, in assessing the dividend and whether to raise it back to its previous levels, like what are the things that they take that that that you tend to? Um, uh, I guess place the most emphasis on in making that decision.
Hey Robert, I'm going to say again as you all know, you know, the dividend policy is it's up to the board. It's a poorly decision considered the result, but also.
You know the situation, you know going forward. I prefer not to speculate on future dividends. I cannot tell you. This is the new normal life cannot tell you otherwise, you know, historically high levels of of our Capital are a reflection of the nature of the you know region. We operating Capital participation is a priority in honesty. Changing until we have more visibility on how this whole situation
Okay. Thank you very much. Congratulations on the solid results.
Thank you. Thank you, brother. Thank you. And as a reminder to our audience, you may ask a question by pressing star one now.
And it appears that we have no additional questions at this time.
All right, then. Thank you everybody for joining the call and please stay safe by now. Thank you all for your attention. This concludes today's conference. All participants may now disconnect.