Q3 2023 Banco Latinoamericano de Comercio Exterior SA Earnings Call
There will be an opportunity for you to ask questions at the end of todays presentation.
Speaker 1: Please note today's conference call is being recorded. As a reminder, all participants will be in listen-only mode. I would now like to turn the call over to Mr. Jorge Salas, CEO , Sir.
Please note todays conference call is being recorded as a reminder, all participants will be in listen only mode.
I would now like to turn the call over to Mr. Jorge Stylus CEO . Sir Please go ahead.
Speaker 2: Thank you, operator. Good morning to everyone joining us today to discuss our third quarter results.
Thank you operator.
Good morning to everyone joining us today to discuss our third quarter results.
Speaker 2: Q3 was a record breaking quarter.
Q3 was a record breaking quarter.
Speaker 2: As you will see in today's presentation, we continue to make progress on our 2026 strategic plan aimed at attaining sustainable mid-team returns.
You will see in today's presentation, we continued to make progress on our 2026 strategic plan.
And attaining sustainable mid teen returns today.
Speaker 2: Today, I will start with a high-level summary of the results highlighting our key achievements, and then Annie, our CFO , will provide a detailed breakdown of the numbers. After that, given the better than expected performance so far, I will update our guidance for the remaining of the year, and then I'll open the call for questions. That's for…
Today, I will start with a high level summary of the results highlighting our key achievements and then <unk>, our CFO will provide a detailed breakdown.
The numbers after that given the better than expected performance, so far and we'll update our guidance for the remainder of the year and then I'll open the corporate risks. Let's proceed to the next slide.
So we're here, we have all relevant financial metrics.
Clearly once again, a very positive thing.
This time with record figures clearly we are being able to capitalize on the bank structural competitive position in Latin America.
We are consistently taking advantage of the different avenues for profitable growth, we identified in our strategic plan.
Speaker 2: Starting with the asset side of the balance sheet, the growth on the portfolio was 4% year on year, but perhaps more important is the fact that the asset quality has remained very healthy with NPLs below 0.1% despite the challenging environment marked by high interest rates, both in dollars and in local currencies in Latin America.
Starting with the asset size of the balance sheet.
Growth in the fourth quarter was 4% year on year, but perhaps more important is the fact that the asset quality has remained very healthy with npls below 1%. Despite the challenging environment marked by high interest rates both in dollars and in local currencies in Latin America one.
Again, an Undisputable Testament of the quality of our client.
Our underwriting standards on.
Speaker 2: On the liability side, time deposits are most cost-efficient funding source, continue to grow steady, both in nominal terms, as much as 23% year on year, and also as a fraction of total funding. Now representing 50% of total funding compared to 42% just a year.
On the liability side client deposits are most cost efficient funding source continued to grow steadily both in nominal terms as much as 23% year on year and also as a fraction of total funding now representing 50% of total funding compared to 42%.
Just a year ago.
Speaker 2: On the B&L side, we have achieved a new record for net entry income in the quarter, selling $60.5 million. A 11% increase compared to the previous quarter, and an impressive 51% growth compared to the same period of life.
On the P&L side, we have achieved a new record for net interest income in the quarter totaling $65 million.
11% increase compared to the previous quarter, and an impressive 51% growth compared to the same period of last year. Our net interest margin now stands at 248%, reflecting 71 basis point improvement year on year also fee income was 71% quarter on quarter increase.
Speaker 2: Our net interest margin now stands at 2.48% reflecting 71 basis for improvement year-on-year. Also, fee income was 71% for our increase, 77% year-on-year.
77% year on year or.
Speaker 2: Our letters of grad unit, essential for us as a trade bank, continue to deliver exceptional results, setting new records, both in volume and in peace.
Our letters of credit unit essential for us as a trade bank continued to deliver exceptional results setting new records, both in volume and in fee.
Speaker 2: Also, our syndication team had an outstanding performance. The team successfully executed two very relevant transactions last quarter confirming our strong presence in the regional syndication.
Also our syndication team now.
Outstanding performance the team successfully executed two very relevant transactions last quarter, confirming our strong presence in the regional syndication market. One we serve as joint lead arranger and book runner for an $80 million committed facility for Geoponic and oil and gas company with <unk>.
Speaker 2: One, we serve as joint leader ranger and bookrunner for an 80 million committed facility for Geo Park and oil and gas company with operations across Colombia, Peru, Chile and Brazil.
Operations across Colombia, Peru, Chile, and Brazil.
Speaker 2: Secondly, we access this joint leader ranger on a 1 billion term loan facility for eco petro.
Secondly, we acted as joint lead arranger on a $1 billion term loan facility for Ecopetrol.
Speaker 2: a landmark transaction for blacks, supporting the largest Colombian company and one of the largest lap time entities, again, with presence in Colombia, Mexico, Peru, Chile, and Brazil.
A landmark transaction for blacks supporting the largest Colombian company and one of the largest Latam entities again with presence in Colombia, Mexico, Peru, Chile and Brazil.
Speaker 2: All this resulted in a historical record figure of net income for the quarter or 45.8 million dollars. Biggest bottom line result ever for Black. The resulting query return on equity was almost 16% also the highest in our recent bank history. Several factors are behind
All of this resulted in a historical record figure of net income for the quarter.
Were $45 8 million.
Biggest bottomline result ever for block, the resulting quality return on equity was almost 16% also the highest in our recent bank's history.
Several factors are behind these outstanding results ongoing client on boarding effort has yielded an increase in our customer base of over 30% year on year also higher participation of corporate clients in our portfolio mix, which now represent 63% of our loan portfolio has resulted in the consolidation of <unk>.
Speaker 2: ongoing plan on warning effort has yielded an increase in the customer base of over 30% year and year, also higher participation of corporate clients in our portfolio make.
Speaker 2: which now represent 63% of our loan portfolio as resulted in the consolidation of wider lending supports. And furthermore, our commercial team has also been actively originating new million-turn transactions, as I just mentioned, which have benefit margins with a minimal effect on the average duration of the portfolio.
<unk> lending spreads and Furthermore, our commercial team has also been actively originating new medium term transactions as I, just mentioned, which have benefited margins with a minimal effect on the average duration of the portfolio.
Speaker 2: It's essential to note that this achievements have occurred in a more competitive land.
It's essential to note that these achievements have occurred in a more competitive landscape.
Speaker 2: driven by the reopening of capital market in a region with increased competition, not only for local banks but also for the internet.
Driven by the reopening of capital market in our region with increased competition not only for a loan from local banks, but also from international banks now.
Speaker 3: Now I'll hand it off to Annie for more detailed financial analysis and then our resume after Annie. Please. Thank you, Jorge. Good morning to everyone.
Now I'll hand, it off Brian for more detailed financial analysis, and then our resume after any piece.
Thank you Jorge and good morning to everyone.
Please let's move to slide number eight.
Speaker 4: Coraline and Incoma have been steadily increasing from the last year and a half.
Quarterly net income has been steadily increasing over the last year and a half.
Speaker 3: reaching close to $46 million for the third quarter of 2023, or $1.25 per share.
Reaching close to $46 million.
2020.
Great.
One dollar.
And 25 cents per share.
Speaker 4: representing an annual increase of 70% and of 23% of the sequential quarterly
We are presenting an annual increase of 70%.
23% on a sequential quarter to date.
Speaker 3: This record, the green operating results, growth and annual life return an equity close to 16% for the quarter.
These record recurring operating results.
And annualized return on equity close to six 8% for the quarter.
Speaker 3: The budget trends in bottom line results, we have seen over the last several quarters, has consistently been driven by higher top line ribbons, primarily on strong business volumes and margins.
The positive trend in bottom line results, we have seen over the last several quarters.
Consistently being driven by higher topline revenues, primarily on strong business volume and margin.
Speaker 3: Let me now walk you through our balance sheet and profit and loss underlining the main items, driving the solid performance.
Let me now walk you through our balance sheet and profit and loss underlining the main items driving this volume performance.
Speaker 3: So moving on to slide four, total assets in excess of $10 billion a quarter and increased by 8% from last year.
So moving on to slide four.
The assets in excess of $10 billion at quarter end.
<unk> by 8% from last year.
Speaker 3: On the back of robust local portfolio balances, complemented by a stable investment security support for you and it sounds equally to the position.
On the back of robust loan portfolio balances complemented by a stable investment securities both volume and 8000 equates to completion.
Operator: at bloodbex.com. There will be an opportunity for you to ask questions at the end of today's presentation. Please note, today's conference call is being recorded. As a reminder, all participants will be in listen-only mode.
Speaker 3: The commercial portfolio, including loans and up-to-date letters of credit and grantees, once again reached record levels at $8.2 billion at quarter end, up 5% from last year and 2% from the receiving quarter.
The commercial portfolio, including loans and off balance sheet letters of credit and guarantees once again reached record level at $8 2 billion at quarter end.
Up 5% from last year, and 2% from the preceding quarter.
Operator: I would now like to turn the call over to Mr. Jorge Salas.
Speaker 3: This portfolio remains well-diversified across countries and industries in the Latin America, and 3D and 3D. With top exposures in Brazil and Colombia, at 13% each, and Mexico at 12%. Complimented by relevant exposures in other central and South American countries.
This portfolio remains well diversified across country and industry in the Latin America.
Operator: CEO, sir, please go ahead. Thank you, operator.
Agree.
With top exposures in Brazil, and Colombia.
At 13%, each and Mexico at 12% complemented by relevant exposures in other central and South American countries.
Jorge Salas: Good morning to everyone joining us today to discuss our third quarter results. Q3 was a record-breaking quarter. As you will see in today's presentation, we continue to make progress on our 2026 strategic plan aimed at attaining sustainable mid-teen returns. Today, I will start with a high-level summary of the results, highlighting our key achievements, and then Annie, our CFO, will provide a detailed breakdown of the numbers. After that, given the better than expected performance so far, I will update our guidance for the reminding of the year, and then I will open the call for questions.
Speaker 3: New client onboarding and product cross selling continue to drive strong business policies, particularly in the letter of credit business and vendor finance, both closely related to short term commodity trade finance.
New client Onboarding and product cross selling continue to drive strong business volumes, particularly in the letter of credit business and builder finance.
Closely related to short term commodity trade finance.
Speaker 3: This explains the short term nature of the portfolio. 69% of which is scheduled to mature within the next four months.
This explains the short term nature of the portfolio.
69% of which are scheduled to mature within the next 12 months.
Speaker 3: The $1 billion investment security support volume provides further country risk diversification.
The $1 billion of investment Securities portfolio provides further constant risk diversification.
Speaker 3: at 59% its place with non-lapam issuer, mostly from the US.
At 59% display with non Latam issue, mostly from the U S.
Speaker 3: This portfolio is fully comprised of security, health, maturity accounted for at Amortite's cost. 77% of each is placed with investment-grade issues.
This portfolio is only comprised of securities held to maturity accounted for at amortized costs.
97% of <unk>.
With investment grade issuers.
Speaker 3: The average remaining center of the portfolio is less than 2.5 years.
The average remaining tenor of the portfolio is less than two and a half years.
Jorge Salas: We are consistently taking advantage of the different avenues for profitable growth that we identified in our strategic plan. Starting with the asset side of the balance sheet, the growth on the portfolio was 4% year on year. Once again, an undisputable testament of the quality of our clients and our underlying standards. On the liability side, climate deposits are most of the efficient funding source, continue to grow steadily, both in nominal terms, as much as 23% year on year, and also as a fraction of total funding, now representing 50% of total funding compared to 42% just a year ago.
Speaker 3: The bank's cash position mostly placed in the New York Federal Reserve led to liquidity levels at 15% of total assets and 37% of the profits of quarter-end.
The bank cash position, mostly placed in the New York Federal reserves led to liquidity levels.
10% of total assets and 37% of deposits at quarter end.
Speaker 3: Even the wholesale nature of our business model, we follow a prudent liquidity management approach, following battle methodologies, liquidity coverage range of as required by Panama's banking regulator.
Even though wholesale nature of our business model.
We follow a prudent liquidity management approach.
Not only Banco methodology liquidity coverage ratio.
As required by Panama banking, Thank you David.
Speaker 3: On select files, funding sources remain well-diversified across products, geographies, and tenors.
On slide five.
Ending sources remain well diversified across products geographies and channels.
Speaker 3: The process, now representing 50% of total funding, the footage you just mentioned, reached $4.2 billion at the end of the third quarter, also at record level.
Deposits now representing 8% of total funding as Jorge just mentioned.
$4 2 billion.
At the end of the third quarter.
Also at record level.
Speaker 3: Explorers reflect our cross-cell strategy together with a continuous relevant participation from our class Asia-Orders Central Bank.
This growth reflects our cross sales strategy together with a convenient relevant participation from our cat Asia Central banks.
Jorge Salas: On the B&L side, we have achieved a new record for net interest income in the quarter, so in 60.5 million dollars, a 11% increase compared to the previous quarter and an impressive 51% growth compared to the same period of last year. Our net interest margin now stands at 2.48%, reflecting 71 basis for improvement year on year. Also, the income was 71% for our increase, 77% year on year. Our letters of grad unit, essential for us as a trade bank, continue to deliver exceptional results, setting new records, both in volumes and in fees.
Speaker 3: In addition, our YANTICD program exceeded $1 billion. After more than two years of having been launched, providing granularity to our funding base.
In addition, our Yankee CD program exceeded $1 billion.
After more than two years of having been launched to.
Providing granularity to our funding base.
Speaker 3: The other half of our funding comes to short and long term borrowings and debt, including several issues in the death capital market, mainly in the US, Mexico and Panama.
The other half of our funding constitutes short and long term borrowings and debt.
Including several issuances in the debt capital markets, mainly in the U S, Mexico and Panama.
Speaker 3: as well as private places under our Euromedium Terminal Probe.
As well as private placement on their hours year on medium term loan program.
Speaker 3: Flavix also continues to have ample availability of bilateral credit lines from many corresponding banks worldwide as well as constant access to the global, syndicated loan market.
<unk> also continues to have ample availability of bilateral credit lines from many correspondent banks worldwide.
As well as content asset.
Jorge Salas: Also, our syndication team had an outstanding performance. The team successfully executed two very relevant transactions last quarter, confirming our strong presence in the regional syndication market. One, we serve as joint leader ranger and bookrunner for an 80 million committed facility for Geo Park, an oil and gas company with operations across Colombia, Peru, Chile and Brazil. Secondly, we access this jointly arranger on a 1 billion term loan facility for ecopetroids, a landmark transaction for blacks, supporting the largest Colombian company and one of the largest Latam entities, again with presses in Colombia, Mexico, Peru, Chile and Brazil.
The global syndicated loan market.
Turning to slide six.
Speaker 3: Our sound capital position continues to be enhanced by early generation. With capital ratios, reflecting our internal risk appetite, even as we continue to grow our business and incorporate new clients.
Our sound capital position continues to be enhanced by earnings generation with.
With capital ratios, reflecting our internal risk appetite, even as we continue to grow our business and incorporate new clients.
Speaker 3: The board recently declared a dividend of 25 cents per share and amount unchanged from preceding quarters briefly sending 20 percent of core learning.
The board recently declared a dividend of.
<unk> 25 per share at about unchanged from preceding quarters, representing 20% of quarterly earnings.
Speaker 3: Now turning to flight seven. We continue to grow our average asset volume while maintaining a positive trend in financial margin, driving strong.
Now turning to slide seven we continue to grow our average asset volume, while maintaining a positive trend in financial margin.
Driving strong top line performance.
Speaker 3: net interest spread, reducing sensing assets and liability average rate differential, has shown an increase in trend over the past several
Net interest spread representing assets and liabilities average rate differential.
Jorge Salas: All this resulted in a historical record figure of net income for the quarter for $45.8 million. Biggest bottom line results ever for blacks. The resulting quarterly return on equity was almost 16% also the highest in our recent bank history. Several factors are behind this outstanding results, ongoing plan on warning effort has yielded an increase in the customer base of over 30% year and year, also higher participation of corporate clients in our portfolio mix, which now represent 63% of our loan portfolio as resulted in the consolidation of wider lending for blacks.
As shown an increasing trend over the past several quarters.
Reaching 183% in the third quarter of 2023 may.
Speaker 3: reaching 1.83% in the third quarter of 2023, mainly on the account of higher-level express and the vision cost of funds, with a proactive management of the interest rate gap in an increasing rate environment.
On the account of higher lending spread in addition cost of funds with a proactive management of the interest rate gap in an increasing rate environment.
Speaker 3: In turn, the net interest margin also denotes an improvement trend, reaching 2.48% for the quarter, reflecting both the positive evolution in net interest spread and the overall positive impact of higher asset rates improvement the return of equity funding such as
In turn the net interest margin also the note an improving trend.
Reaching to 48% for the quarter.
Reflecting both the positive evolution of net interest spread and the overall positive impact of higher asset rate in <unk>.
Jorge Salas: Furthermore, our commercial team has also been actively originating new million term transactions as I just mentioned, which have benefit margins with a minimum effect on the average duration of the portfolio. It's essential to note that these achievements have occurred in a more competitive landscape, driven by the reopening of capital markets in a region with increased competition, not only for local banks, but also for international banks.
And the return of equity funding such assets.
Speaker 3: Overall, net interest income or NII continues to strongly benefit from higher margins and lending growing. As we have seen, quarterly net interest income constantly growing since the beginning of 2021.
Overall net interest income or NII continues to strongly benefit from higher margins and lending volumes as we have seen quarterly net interest income constantly growing since the beginning of 2021.
Speaker 3: with respect to the preceding quarter, the third quarter 2023 NII increased by 11% to 60 and a half million dollars.
With respect to the preceding quarter the third.
Third quarter 2023, NII increased by 11% to $16 5 million.
Annie: Now a handed off for Annie for more detailed financial analysis and then our resume after Annie please. Thank you Jorge and good morning to everyone. Please let's move to slide number three.
Speaker 3: About half of this quarter-leaf grease reflects the net effect of higher average spread volume.
About half of this quarterly increase.
The net effect of higher average credit volume.
Speaker 3: as average loans increased by $381 million or 6% over the quarter, and the investment portfolio grew and others $100 million or 11.
As average loans increased by $381 million.
Or 6% over the quarter and the investment portfolio grew 100 million or 11.
Annie: Quarterly net income has been steadily increasing from the last year and a half, reaching close to $46 million for the third quarter of 2023, or $1.25 per share, representing an annual increase of 70% and of 23% of the sequential quarterly rate. This record, recurring operating results growth and annualized return on equity close to 15% for the quarter. The positive trends in bottom line results we have seen over the last several quarters have consistently been driven by higher top line revenues, primarily on strong business volumes and margins.
11%.
Speaker 3: The other half of NII growth from the preceding quarter was driven by higher asset rates, which continued to reprise at a faster pace than liability. It supported by sustained strong lending spreads, which on average, have increased by 66% points in the first nine months of 2023 compared to last year.
The other half of NII growth from the preceding quarter was driven by higher asset rate.
Which continue to reprice at a faster pace than liabilities and is supported by sustained strong lending spreads, which on average have increased by 66 basis points in the first nine months of 2023 compared to last year.
Moving on to slide eight.
Speaker 3: The income growth also shows a solid performance during the third quarter. Having increased by 77% from last year, reaching $11 million.
Fee income growth also showed a solid performance during the third quarter.
Having increased by 77% from last year, reaching $11 million.
Annie: Let me now walk you through our balance sheet and profit and loss underlining the main items, driving the solid performance. So moving on to slide four, total assets in excess of $10 billion at quarter end increased by 8% from last year. On the back of robust local portfolio balances complemented by a stable investment securities portfolio and a sound equity position. The commercial portfolio including loans and off line sheet letters of credit and grantees once again reached record levels at $8.2 billion at quarter end.
Speaker 3: All fee income generating business lines had an outstanding performance.
All fee income generating business lines.
Outstanding performance.
Speaker 3: Feeds from letters of credit, a pillar of our business plan, continue to increase from higher business volume, reaching $6.2 million for the quarter, up 76% from last year and 23% from the breeding quarter.
Fees from letters of credit a pillar of our business plan.
To increase from higher business volumes.
$6 2 million for the quarter up 76% from last year and 23% from the preceding quarter.
Speaker 3: And for him, we also saw greater activity in the syndication field.
As Jorge mentioned, we also saw greater activity in the syndication statements.
Speaker 3: Having closed two structured transactions in the quarter, resulting in close to $3 million in fee.
<unk> closed two strategic transactions during the quarter.
He salting and close to $3 million.
Annie: Off 5% from last year and 2% from the receiving order. This portfolio remains well-diversified across countries and industries in the Latin America and 3D and 3D. With top exposures in Brazil and Colombia at 13% each and Mexico at 12%, complemented by relevant exposures in other central and South American countries. New client onboarding and product cross-selling continue to drive strong business policies, particularly in the letter of credit business and vendor finance, both closely related to short-term commodity trade finances.
Speaker 3: other fees mostly related to committed credit facilities, also benefited from upward lending transactions.
Other fees, mostly related to committed credit to see you all.
Also benefited from opportunistic transactions.
Speaker 3: As shown on slide 9, As the quality remains sound. With 97% of the total query for folio categorized as low risk on the stage 1 as defined by IFRS 9.
As shown on slide nine.
Asset quality remains sound with 97% of the total credit portfolio categorized as low risk on this stage one as defined by Ifr at nine.
Speaker 3: Accounting for another 3% will create a flat-on-site a stage 2 for a total of $273 million.
Accounting for another 3% while credit classified as stage two.
A total of $273 million.
Speaker 3: Most of these stage two exposure consists of credits in certain industries in which we foresee downturn in their operating cycles and hence reflects increased risk in our model days expected laws reserved allocation but are currently
Most of these stage two exposure consists of credits in certain industries in which we foresee downturn in their operating cycle and hence reflect increased risks in our model base expected loss reserve allocation.
But are currently all outperforming.
Speaker 3: Finally, stage 3 or in birth credits only represent 0.1% of total exposure.
Finally stage III or impaired credits.
Annie: At 59% is placed with non-latent issuers, mostly from the U.S. This portfolio is fully comprised of security, health, and maturity accounted for at Amortized Cost. 77% of which is placed with investment-grade issuers. The average remaining center of the portfolio is less than 2.5 years. The bank's cash position, mostly placed in the New York Federal Reserve, led to liquidity levels at 15% of total assets and 37% of deposits at quarter-end. Given the wholesale nature of our business model, we follow a prudent liquidity management approach, following brattle methodologies, liquidity coverage ratio, as required by Panama's banking regulators.
<unk> represent 0.1% of total exposure.
Speaker 3: amounting to 10 million dollars on change from the receiving water.
Amounting to $10 million.
Unchanged from the preceding quarter.
Overall credit provision charges for the third quarter of 2023, 46, and a half million dollars.
Speaker 3: Overall, credit provision charges for the third quarter of 2023, where $6.5 million. Reaching total allowances for credit losses of $56 million and quarter end.
Reaching total allowances for credit losses of $56 million at quarter end.
Speaker 3: covering NPL by 5.6 times.
Covering npls by five six times.
Speaker 3: On slide 10, strong revenue growth continues to have a positive impact on efficiency, allowing a close to income level of around 27% for the third quarter of 23, similar to the last two previous quarter. During the third quarter, expenses increased by 25% from the preceding quarter.
On slide 10 strong revenue growth continues to have a positive impact on efficiency.
Allowing a cost to income level of around 27% for the third quarter of 2003 similar to the last two previous quarters.
In the third quarter expenses increased by 25% from the preceding quarter.
Speaker 3: due to employee-related costs, including one type of sex, and which relate to a higher salary base over the last year on new hires, as well as provisions for performance-based compensation.
Due to employee related costs.
Including one time things and which relate to a higher salary base over the last year on new hires.
Annie: On slide 5, funding sources remain well diversified across products, geographies, and dinners. The process, now representing 50% of total funding, the financials mentioned, reached $4.2 billion at the end of the third quarter, also at record levels. Its growth reflects our cross-sale strategy, together with a continuous relevant participation from our class Asia-Orders Central Bank. In addition, our YANTICD program exceeded $1 billion, after more than two years of having been launched, providing granularity to our funding base.
As well as provisions are.
Orman, Spain compensation.
Speaker 3: congruent with our focus on strengthening blackest execution capabilities and our lines in our strategic plan and with the banks for on-performance.
Congruent with our focus on strengthening blacks is execution capability as outlined in our strategic plan.
And with the banks.
<unk> performance.
Speaker 3: Let me now leave it here and turn the call back to orange. Thank you.
Let me now leave it here and turn the call back to <unk>. Thank you.
Speaker 2: Thank you, Annie, moving on to slide 11. This slide attempts to break down the drivers behind the better than expected NII.
Moving on to slide 11.
This slide attempts to breakdown the drivers behind the better than expected NII results.
Speaker 2: As you can see here, net interest income for the first nine months of the year is 70% or 69 million higher than the same period of life.
As you can see here net interest income for the first nine months of the year is 70% or $69 million higher than the same period of last year.
Annie: The other half of our funding comes to two short and long-term borrowings and debt, including several issuances in the death capital margin, mainly in the U.S., Mexico, and Panama, as well as private placement under our U.M, term node program. Blaving also continues to have ample availability of bilateral credit lines from many corresponding banks worldwide, as well as constant access to the global-fabricated loan market.
Speaker 2: 40% of this NII or 20 more than 27 million dollars of this increase is explained by higher market interest rates so far
40% of this NII or 20 more than $27 million.
This increase is explained by higher market interest rates so far this year.
Speaker 2: The other 60% is the result of the combined effect of the execution of different initiatives in our class.
The other 60% as a result of the combined effect of the execution of different initiatives in our plan.
Speaker 2: All of them have contributed to strong margin expansion with sustained average voting.
All of them have contributed to strong margin expansion with sustained average volume growth.
Speaker 2: So moving on to the next slide, given the results so far, this slide shows our new guidance for the year.
So moving on to the next slide.
Annie: Starting to slide 6, our sound capital position continues to be enhanced by earnings generation. With capital ratios replacing our internal risk appetite, even as we continue to grow our business and incorporate new clients. The board recently declared a dividends of 25 cents per share, and amounts unchanged from preceding quarters, briefly sending 20% of quarterly earnings.
Given the results so far this slide shows our new guidance for the year.
Speaker 2: We foresee net interest margin for the year, similar to the current levels that is between 2.4 and 2.5.
We foresee net interest margin for the year similar to the current levels that is between two four and two 5% fee growth will end up substantially above our initial expectations driven by our fee generating business lines and primarily.
Speaker 2: Feed growth will end up substantially above our initial expectations driven by all feed generating business lines and primarily by our letters of credit.
Letters of credit.
Speaker 2: We also anticipate closing the year with an efficient duration of approximately 27% better than our initial estimates of 30.
We also anticipate closing the year with an efficiency ratio of approximately 27% better than our initial estimate of 32%.
Annie: Now turning to slide 7, we continue to grow our average asset volume, while maintaining a positive trend in financial margin, driving strong top-line performance. Net interest spread, representing assets and liability average rates differential, has shown an increase in trends over the past several quarters, reaching 1.83% in the third quarter of 2023, mainly on the account of higher-level interest rates and efficient cost of months, with a proactive management of the interest rate gap in an increasing rate environment.
Speaker 2: And all of these, for all of these reasons, we are revising our 2020 ROE guidance from 11 to 13% to a new range, now anticipated to be between 14 and 15% return equity by year.
And all of these for all these reasons, we're revising our 2020, we are OE guidance from 11% to 13% to a new range now anticipated to be between 14, and 15% return on equity by year end.
Speaker 2: Lastly, increased profits in the resulting rise in retained earnings continue to support our profitable growth and to preserve the bank's capital ratios as initially anticipated. So our initial guidance for core equity tier one ratio remains unchanged. I'll leave it there.
Lastly, increased profits and the resulting rise in retained earnings continued to support our profitable growth and to preserve the banks capital ratios as initially anticipated.
Our initial guidance for core equity tier one ratio remains unchanged.
I'll leave it there and open the call for questions.
Annie: In turn, the net interest margin also denotes an improvement trend, reaching 2.48% for the quarter, reflecting both the positive evolution in net interest spread and the overall positive impact of higher asset rates improving the return of equity funding such assets. Overall, net interest income or NII continues to strongly benefit from higher margin and lending growth as we have seen quarterly net interest income constantly growing since the beginning of 2021. With respect to the preceding quarter, the third quarter 2023 NII increased by 11% to 60 and a half million dollars.
Greater.
Speaker 1: Thank you very much for the presentation. We will now begin the Q&A session for investors and analysts. If you wish to ask a question, please press the button, raise hand. If your question has already been answered, you can leave the queue by clicking on, put your hand down.
Thank you very much for the presentation. We will now begin the Q&A session for investors and analysts if you wish to ask a question. Please press the button race hand, if your question has already been answered you can leave the queue by clicking on your handout.
Speaker 1: There's also the possibility to ask your question through the Q&A icon at the bottom of the screen.
There's also the possibility to ask your questions through the Q&A icon at the bottom of the screen you.
Speaker 1: You may select the icon and type your question with your name and company.
You may select the icon and tie to your question with your name and company.
Speaker 1: Written questions, they are not addressed during the earnings call, will be returned by the investor relations team.
Written questions that are not addressed during the earnings call will be returned by the Investor Relations team.
Annie: About half of this quarterly increase reflects the net effect of higher average spread volume, as average loans increased by 381 million dollars for 6% over the quarter, and the investment portfolio grew and others 100 million dollars for 11%. The other half of NII growth from the preceding quarter was driven by higher asset rates, which continued to reprise at a faster pace than liability, and it supported by sustained strong lending spreads which on average have increased by 66% in the first nine months of 2023 compared to last year.
Speaker 1: Our first question is from Inigo Vega from Jeffrey.
Our first question is from illegal Vega from Jefferies.
Speaker 1: What are the 2.2 million in other net fees in the quarter? Are they sustainable going forward?
What are the $2.2 million and other net fees in the quarter are they sustainable going forward.
Yeah.
Speaker 3: I need one to take that. Yes, sure. Hi, you know, thank you for your question. As I mentioned, if these represent opportunistic for the community's committed transactions that generated additional fees in this quarter.
Well I mean, we're going to figure out yes, sure Hi, Daniel and thank you for your question.
As I mentioned this.
This represents opportunistic credit committed committed transactions.
That generated additional fees in this quarter.
Speaker 3: We do estimate that the runway of this report is this line item is around $1 million going forward. So that'll give you a time for some.
Estimate that the run rate reported in this line item is around one.
1 million going forward, so that'll give you a sense.
The magnitude.
Annie: Moving on to slide 8, the income growth also shows a solid performance during the third quarter, having increased by 77% from last year reaching 11 million dollars. All three income generating business lines had an outstanding performance. Feeds from letters of credit, a pillar of our business plan, continued to increase from higher business volumes, reaching 6.2 million dollars for the quarter, up 76% from last year and 23% from the preceding quarter. As Jorge mentioned, we also saw greater activity in the syndication business, having closed two structured transactions during the quarter, resulting in close to 3 million dollars in fees. Other fees, mostly related to committed credit facilities, also benefited from opportunistic transactions.
Speaker 1: And you also have another question. NII up to 11% quarter over quarter. Can you bridge the increase in one changing volume, two, impact from higher spreads, either loans of funding, and three, impact from rates?
And Eagle also has another question NII up to 11% quarter over quarter can you bridge, the increase and one changing fallen to impact from <unk>.
Spreads either loans or funding and three impact from rates.
Okay, I'll take that too.
No.
Speaker 3: The net effect of higher volumes represented around $3 million in the NII growth.
The net effect of higher volumes represented around $3 million in the NII growth.
Speaker 3: average earnings overall increased by $814 million during the quarter, which respectively is receiving quarter, of which about $400 million relates to higher average lending. And of course, this was all set by increased average liability. So the overall impact and quality is around $3 million. And then on the other hand, assets continue to show a better reflecting than liability.
Average earnings overall increased by $843 million during the quarter with respect to the preceding quarter.
<unk> about 400 million relates to higher average lending.
And of course, this was offset by increased average liabilities of the overall impact on volumes is around $3 million and then on the other hand assets continue to show a better with pricing than liability.
Speaker 3: The overall asset rate increased by 38 basis points during the quarter while I am using the supply 34 basis points. So this resulted in another $34 million in NII.
Annie: As shown on slide 9, asset quality remains sound, with 97% of the total credit portfolio categorized as low risk on the stage 1 as defined by IFRS 9. Accounting for another 3% will credit classified as stage 2 for a total of 273 million dollars. Most of these stage two exposure consists of credits in certain industries in which we foresee downturn in their operating cycles and hence reflects increased risk in our modern days expected laws reserve allocation, but are currently all performing Finally, stage three or first credits only represent 0.1% of total exposure, amounting to $10 million on changed from the Brazilian quarter. Overall, credit provision charges for the third quarter of 2023 were $6.5 million, reaching total allowances for credit losses of $56 million at quarter covering NPL by 5.6 times.
The overall asset rate increased by 38 basis points during the quarter, while liabilities was up by 34 basis points. So they should result in another $34 million in <unk>.
With respect to lending spreads quarter over quarter. They remained do remain pretty similar.
Speaker 5: The respect to lending spreads. Water on water, they remain pretty similar. We do have seen an important increase of dimensions of 56 basis points of lending spread when we compared this year with last year in terms of the nine month period. And funding rates also, and spread also remain pretty stable during the quarter for the last couple of quarters.
We do have seen.
And importantly, as I mentioned, a 56 basis points of lending spreads when we compare it this.
This year with last year in terms of the nine month period and funding rates also in spreads also remained pretty stable during the quarter.
For the last couple of quarters.
Next question from Patrick Brown.
Speaker 1: With respect to the Israel Hamas conflict, please comment about your view on any implication in the Latin region and in the bladix in particular.
With respect to the Israel Hamas conflict. Please comment about your view on any implication in the Latin region any blacks in particular.
Speaker 2: Let me take that one, Annie. It's a very good question with no easy answer here. Because the implications are mixed depending on which countries in Latin America we talk about and the extent of the escalation of the conflict if it happens.
Let me take that one.
Yes.
Very good question with with no easy answer here.
Because the implications are mixed depending on which countries in Latin America, we talked about.
And the extent of the escalation of the conflict.
If it happens.
Annie: On slide 10, strong revenue growth continues to have a positive impact on efficiency, allowing a close to income level of around 27% for the third quarter of 2023, similar to the last two previous quarter. During the third quarter, expenses increased by 25% from the preceding quarter due to employee-related costs including one-time sales and which relate to a higher salary base over the last year on new hires as well as provisions for performance sales compensation congruent with our focus on strengthening blackest execution capabilities and our line in our strategic plan and with the bank's wrong performance.
Speaker 2: On the one hand, we have the effects on commodities. They went the conflict hit in the Middle East a couple of weeks ago that the West Texas was about $80 a barrel. Yesterday it closed around over $90 a barrel. That's more than 10% in two weeks.
On the one hand, we have video effects on commodities.
And the conflict hit in the Middle East a couple of weeks ago that the West, Texas was about $80 a barrel yesterday close around over over $90 a barrel that's more than 10% in two weeks. So.
Speaker 2: This obviously benefits oil exporters in Latam, so mostly South American countries.
This obviously benefits oil exporters.
In Latam so mostly so.
The South American countries.
Speaker 2: But the opposite will happen for Central American and Caribbean economies that are mainly importers of refined products. In Bladix as a trade bank, we finance both imports and exports.
But the opposite will happen.
And for American and Caribbean economies.
There are many importers of of refined of refined products in <unk> as a trade bank.
We've financed both imports and exports so in general and increasing commodity prices, particularly oil has been historically.
Speaker 2: So in general, an increase in commodity prices, in particular, the oil has been historically a possible beneficial for...
Jorge Salas: Let me now leave it here and turn the call back to orange. Thank you. Thank you, Annie.
Beneficial for for blacks.
Speaker 2: However, if the conflict continues to escalate, there will be more volatility, of course, in the financial markets. And obviously the world's aggregate demand will be affected. So...
However, if the conflict continues to escalate it will be more volatility of course in the financial markets.
Jorge Salas: Moving on to slide 11, this slide attempts to break down the drivers behind the better than expected NII results. As you can see here, net interest income for the first nine months of the year is 70% or 69 million higher than the same period of last year. 40% of this NII or 20 more than 27 million dollars of this increase is explained by higher market interest rates so far this year. The other 60% is the result of the combined effect of the execution of different initiatives in our plan. All of them have contributed to strong margin expansion with sustained average volume growth.
And obviously the world aggregate demand will be affected.
Speaker 2: We are, I mean the worst causes were being cautious. We are closely following the turn of events, monitoring our exposures that are mostly short term and also our liquidity sources that are ample and very diversified. So, but the worst, we're being cautious and be very attentive of the turn of events.
We are I mean, we're as cautious we're being cautious we are closely following the turn of events monitoring or.
Our exposures that are mostly short term.
So our liquidity sources that are affluent and very diversified so but.
The word is we're being cautious and can be very attentive.
Current events.
Speaker 1: Patrick has a follow up on any plan to modify your dividend policy given the amazing result.
Patrick has a follow up any plans to modify your dividend policy given the amazing results.
Speaker 2: Yes, thank you. Again, as I mentioned, capital management.
Yes. Thank you.
Again as I mentioned.
Jorge Salas: So moving on to the next slide, given the results so far, this slide shows our new guidance for the year. We foresee net interest margin for the year similar to the current levels that is between 2.4 and 2.5%. Feed growth will end up substantially above our initial expectations driven by all fee generating business lines and primarily by our letters of credit. We also anticipate closing the year with an efficiency ratio of approximately 27% better than our initial estimates of 30%.
You mentioned capital management.
Speaker 2: including dividends, potential buybacks, are ongoing discussions at the board level. Obviously, always focusing on maximum total shareholder return. Board is well aware that on the one hand, our pay-arresture has been decreasing as we have extraordinary results. On the other hand, the commercial team does have a very strong pipeline for...
Including dividends and potential buybacks.
Our ongoing discussions at the board level.
Obviously always focusing on on maximizing total shareholder return.
The board is well aware that on the one hand.
Our payout ratio has been decreasing as well.
We have extraordinary results on the other hand, the commercial team does have a very strong.
Pipeline.
Four.
Speaker 2: profitable growth, which is the end of all of our plan. In any case, we have provided guidance for 2026. That includes managing capital ratios, as I said, between 15 and 16%. On a target portfolio, we're 10 billion.
Profitable growth, which is.
And the angle of our plan in any case, we have provided guidance for 2026 that includes kind of managing capital ratios as I said between 15 and 16% on a target portfolio over $10 billion.
Jorge Salas: And all of these for all of these reasons, we are revising our 2020 ROE guidance from 11 to 13% to a new range now anticipated to be between 14 and 15% return equity by year. Lastly, increased profits in the resulting rise in retained earnings continued to support our profitable growth and to preserve the banks' capital ratios as initially anticipated. So our initial guidance for core equity tier one ratio remains unchanged.
Speaker 2: And we will remain strongly capitalized and not risk or investment grade by any means. So whatever decision the board decides to make regarding capital management shouldn't be in principle be aligned with our 2026 guidance and again focusing on maximizing shareholder return. Today, the audience is a quarterly decision at the board level. So it's up to the board and I can tell you ongoing discussions are having on a continuous basis.
And we will remain strongly capitalized and not risk our investment grade by any means.
So whatever decision the board decides to make regarding capital management should in principle will be aligned with our 2026 guidance and again focusing on maximizing shareholder return today dividends as a quarterly decision at the board level.
Jorge Salas: I'll leave it there and open the call for questions now. Operator. Thank you very much for the presentation.
So it's up to the board and I can tell you the ongoing discussions are having on a continuous basis.
Operator: We will now begin the Q&A session for investors and analysts. If you wish to ask a question, please press the button raise hand. If your question has already been answered, you can leave the queue by clicking on put your hand down. There's also the possibility to ask your question through the Q&A icon at the bottom of the screen. You may select the icon and type your question with your name and company.
Wait while we pull for questions.
Speaker 1: Next question from Andrea Patricia. Hello, thank you for the presentation. Congratulations for the results. Could you give us some color about the guidance, expectations of the result for 2024?
Next.
<unk> from Andrea Patricia Hello, Thank you for the presentation. Congratulations for the results could you give us some color about the guidance expectations. After result for 2024.
Operator: Written questions there are not addressed during the earnings call will be returned by the investor relations team.
Speaker 2: Yes, we're working. Thank you, Andrea. We're working on our 2024 budget now. And I believe in the next call, we will give some call on on 2024 guidance.
Yes, we're working on thank you.
Andrea.
Inigo Vega: Our first question is from Inigo Vega from Jefferies. What are the 2.2 million in other net fees in the quarter? Are they sustainable going forward?
We're working on our 2020 for a budget now and.
And I believe in the next call we will give some color.
<unk> 2024.
Guidance.
Annie: I need one to take that. Yes, sure. Hi Inigo. Thank you for your question. As I mentioned, this fees represent opportunistic credit committees or made transactions that generated additional fees in this quarter. We do estimate that the wrong way of fees reported in this line item is around the $1 million going forward. That will give you a sense of the magnitude.
Speaker 1: Okay, thank you very much. That's all the questions we have for today. I'll pass the line back to Bladix, for their concluding remarks.
Okay. Thank you very much that's all of the <unk>.
<unk>, we have for today I'll pass the line back to <unk> for concluding remarks.
Speaker 2: No, I just want to thank everybody for your questions and your interest and we'll continue focusing on profitable growth going forward as indicating a guidance for 2020-26. Thank you very much.
No I just want to thank everybody for your questions and your interest and we'll continue focusing on unprofitable.
Going forward as indicated in our guidance for 2026, Thank you very much.
Annie: Inigo also has another question. NII up to 11% quarter over quarter. Can you bridge the increase in one changing volume to impact from higher spreads either loans of funding and three impacts from rates?
Speaker 1: This conference is now closed. Thank you very much for attending. Have a good one.
This conference has now close thank you very much for attending have a good one.
Goodbye.
Annie: Okay, I'll take that too. So the net effect of higher volumes represented around $3 million in the NII growth. Average earnings overall increased by $843 million during the quarter, which respectively preceding quarter, of which about $400 million relates to higher average lending. Of course, this was all set by increased average liability. The overall impact from volumes is around $3 million. And then on the other hand, assets continue to show a better reprising than liability.
Annie: The overall asset rate increased by 38 basis points during the quarter, while liability was applied 34 basis points. So this resulted in another $34 million in NII. With respect to lending spread, quarter of quarter, they remained pretty similar. We do have seen an important increase by measures of 56 basis points of lending spread when we compared this year with last year in terms of the nine month period. And funding rates also and spread also remained pretty stable during the quarter for the last couple, of course.
Annie: Next question from Patrick Brown. With respect to the Israel Hamas conflict, please comment about your view on any implication in the Latin region and in the bladx in particular. Let me take that one, Annie.
Jorge Salas: It's a very good question with no easy answer here, because the implications are mixed, depending on which countries in Latin America we talk about and in the extent of the escalation of the conflict if it happens. On the one hand, we have the effect on commodities. I think when the conflict hit in the Middle East a couple of weeks ago, the West Texas was about $80 a barrel yesterday close around over $90 a barrel that's more than 10% in two weeks. This obviously benefits oil exporters in Latin, mostly South American countries, but the opposite will happen for Central American and Caribbean economies that are mainly importers of refined products.
Jorge Salas: In bladx, as a trade bank, we finance both imports and exports. In general, an increase in commodity prices, in particular, oil has been historically possible beneficial for bladx. However, if the conflict continues to escalate, there will be more volatility, of course, in the financial markets and obviously the world's aggregate demand will be affected.
Jorge Salas: We are, I mean, the worst causes will be in causes. We are closely following the turn of events, monitoring our exposures that are mostly short-term and also our liquidity sources that are ample and very diversified. But the word is, we're being cautious and be very attentive of the turn of events.
Patrick: Patrick has a follow-up.
Jorge Salas: Any plans to modify your dividend policy? Given the amazing results? Yes, thank you. Again, as I mentioned, capital management, including dividends, potential buybacks are ongoing discussions at the board level. Obviously, always focusing on maximizing total shareholder return. The board is well aware that on the one hand, our pay or ratio has been decreasing as we have extraordinary results. On the other hand, the commercial team does have a very strong pipeline for profitable growth, which is the end-of-the-end of all of our plan.
Jorge Salas: In any case, we have provided guidance for 2026. That includes managing capital ratios, as I said, between 15 and 16%. On a target portfolio, we're 10 billion. And we will remain strongly capitalized and not risk or investment grade by any means. So whatever decision the board decides to make regarding capital management, shouldn't build, in principle, be aligned with our 2026 guidance and, again, focusing on maximizing shareholder return. Today, dividends is a quarterly decision at the board level. So it's up to the board, and I can tell you that ongoing discussions are having on a continuous basis.
Operator: Wait, why we pull for questions?
Andrea Patrusia: Next question from Andrea Patrusia.
Jorge Salas: Hello, thank you for the presentation. Congratulations for the results. Could you give us some color about the guidance expectations of the result for 2024? Yes, we're working. Thank you, Andrea. We're working on our 2024 budget now and I believe in the next call we will give some color on our 2024 guidance. Okay, thank you very much.
Jorge Salas: That's all the questions we have for today. I'll pass the line back to Blattix Singh for their concluding remarks. I just want to thank everybody for your questions and your interest and we'll continue focusing on profitable growth going forward as indicating our guidance for 2022. Thank you very much.
Operator: This conference is now closed. Thank you very much for attending. Have a good one. Goodbye.