Q1 2025 Banco Latinoamericano de Comercio Exterior SA Earnings Call
Speaker Change: Good morning, ladies and gentlemen, and welcome to Bladex' first quarter 2025 earnings conference call.
Speaker Change: A slight presentation is accompanying today's webcast and is also available on the Investors' section of the company's website, www.bloodx.com.
Speaker Change: There will be an opportunity for you to ask questions at the end of today's presentation. Please know today's conference call is being recorded. As a reminder, all participants will be in the lesson only mode.
Speaker Change: I would now like to turn the call over to Mr. Jorge Salas, Chief Executive Officer. Sir, please go ahead.
Speaker Change: Good morning everyone and thank you for joining us today to discuss Blacks' results for the Reverse Quarter of 2025.
Speaker Change: I will begin by reviewing our performance during the year, and then Annette Garcia Foil will walk you through the financials in more detail.
Speaker Change: Finally, before opening the call for questions, I want to share our thoughts on the current tariff environment and the potential implications for the region and for blotics.
2025 began in line with expectations of expectations.
Speaker Change: with a solid first quarter that reflects a disciplined execution with scene in previous quarters. Well, the first quarter is traditionally less active due to seasonal factors. This time around, we saw a pickup and activity in fine engagement, setting a strong tone for the rest of the year.
Speaker Change: This is not accidental. Well, last year our commercial team has been consistently building a robust and diversified pipeline with long standing clients across the region, particularly sectors that exposed to the ongoing tire of discussion. Thank you very much for your question.
Speaker Change: The pipeline includes medium-term transactions, some of which were executed in the first quarter, while the bulk of them still are in progress and expected to materialize in the upcoming borders.
Speaker Change: This deals are not only world structure, but also generate attractive margins and fee income contributing even more to our top line in the near future.
Speaker Change: This proactive commercial execution underpinned by close-clined relationships and deep local market insight has positioned us to enter 2025 with powerful momentum in a high level of confidence in our ability to deliver on our guidance for the year.
Speaker Change: Our commercial loan portfolio reached $10.7 billion, reflecting a solid, 6.5% increased quarter over quarter, and that 23% increased year over year.
Speaker Change: Growth was well-distributed with particularly strong performance in Argentina, Mexico, and Guatemala. Importantly, as a quality, remained pristine with non-performing loans close to zero.
Speaker Change: The posits rose $5.9 billion, up 8% quarter over quarter, and 24% year over year, and now 1% almost 60% of our total fund week.
Speaker Change: As discussed during our previous call in the last days of December , the positive volumes declined slightly due to year and seasonality. However, since the beginning of January , they have resumed their upward trajectory, while allow us, generally to maintain an average quarterly balance in line with the levels of the fourth quarter 2024. [inaudible]
Speaker Change: but also to achieve another record quorum with balances as of March 31st.
Speaker Change: Moving on to the PNL, net inter-thinkum reached $65.3 million, enters margin of 2.36% remained resilient and in line with guidance for the year.
Speaker Change: Looking ahead, we see potential for margin improvement. Since the end of the quarter increased market volatility and uncertainty have begun to drive credit spreads wider in certain countries particularly in Mexico in Brazil.
Speaker Change: The income total is $10.6 million of 12% year-over-year, reflecting our ongoing efforts to strengthen non-interess income generation.
Speaker Change: Performance was led by a layers of credit business, followed by syndications, both of which continue to benefit from strong client demand.
Speaker Change: Our syndications team was particularly active during the border, successfully executing four transactions with a combined value of roughly $500 million across key markets, including Greenbrew, Costa Rica, Mexico, and the Dominican Republic.
Speaker Change: On expenses, we continue to execute our strategic initiatives while maintaining efficiency. Our cost to income ratio improved to 26.9% in line with expectations, a notable achievement given are investing in transformation.
Speaker Change: As a result, we reported a net income of $51.7 million in line with the biggest quarter and a return on equity of 15.4%. Our capital ratio remains strong above 15%.
Speaker Change: Let me now hand it over to Annette or see a full for a detailed financial announcement. Annette, please go ahead.
Annette: Thank you Jorge and good morning everyone. I'll start by taking through the highlights of our financial performance for this quarter, beginning with a closer look at the credit portfolio growth on slide three.
Annette: Toro Lumpur Polio reached a new record of $8.7 billion, up 18% from a year ago, and 4% quarter or quarter.
Annette: In addition, our contingency portfolio, which includes letter of credit and guarantees through to nearly $2 billion, up 20% quarter over quarter and 49% year over year, driven mainly by a strong and sustained demand from our letter of credit business.
Annette: At the same time, we continue to maintain a well-diversified commercial portfolio across countries and industries. We grow this quarter mainly concentrated in Mexico, Panama, Guatemala, and Argentina, where the bank is gradually rebuilding its non-profolio in view of the significant improvement of the country's economic value.
Annette: Turning to our investment portfolio in the top right, balances increased to $1.3 billion, up 6% from the prior quarter and 50% year-over-year. These portfolio remains focused on investment in great issuers outside Latin America, diversifying our credit and country risk exposures.
Annette: I would like to highlight the short duration of this high quality portfolio in the zone of two years, which mitigates market volatility.
Annette: It must also be noted that with very few exceptions, the bonds are recorded at Amortizcos, with no impact on market price fluctuations on our OCI or P&A.
Annette: Be sure our strong asset growth and will diversify credit profile, reinforces blood excess resilience and positions as well to continue delivering sustainable growth across market
Let's now take a look at Slide 4. Slide 4.
Annette: Let us maintain a strong liquidity position at the end of the first quarter, with $1.9 billion of liquid assets representing 50% of total assets.
Annette: Most of these liquid assets are placed with the federal reserve back of New York, demonstrating our practice and prudent degree de management of work.
Annette: In addition, our investment portfolio continues to serve as an additional liquidity buffer as a significant portion of these securities are held to our New York agency and are eligible as collateral at the Federal Reserve discount window, reinforcing our contingent liquidity position.
Annette: As a result, our liquidity coverage ratio, or LCR, remains well above the regulatory minimum. Further strengthening blood access flexibility to navigate changing market conditions and continue supporting our clients' financing needs.
Annette: Moving on to effort quality, I'll show you on slide five, blood access discipline risk management framework continues to deliver outstanding credit performance.
Annette: At quarter end, non-performing loans classified as Phase III remain at $17 million, representing just 0.1% of total exposures with a robust reserve coverage of 5.3 times.
Annette: The credit portfolio continues to be predominately low with 97.9% of exposures classified of stage 1 and 2% of stage 2.
Annette: Total Crave Revision for the quarter were $5.2 million, mainly allocated to state-run exposures, driven by growth in our letter-of-create business.
Annette: In addition, Goveresh Reserve for stages 2-1-3 is strengthened from further reinforcing the portfolio receiving.
Annette: In summary, our outstanding credit quality and a strong reserve coverage highlights the discipline of our release management approach and distance of our client base.
Let's now cover funding detail on slide 6.
Annette: Total deposits reached $5.9 billion at the end of the first quarter, representing an 8% increase over the prior quarter and 24% growth year-over-year.
Annette: Deposites now represent nearly 60% of total funding, highlighting their growing importance and consistent contribution to the bank's funding structure.
Annette: This positive trend reflects strong client engagement complementing by the continued success of our thank you CD program, which adds granularity and diversification to broker-dealer distribution.
Annette: Our funding structure reflects broad access to diversified sources, accurate markets and tenors.
Annette: Short-term family levels, together with repos, remain stable compared to the previous quarter, continuing to play a significant role in supporting portfolio growth.
Annette: Meanwhile, long-term funding remains solid at $2.8 billion, representing 27% of total financial liabilities, highlighting our ongoing efforts to strengthen our maturity profile and maintain a resilient liability structure.
Annette: Consistent with our recent management policy, we hedge all non-U.S. order funding, except for that procured upon our relatively small Mexican-based portfolio.
Annette: If we have consistently stated, there is no material for any changes raised on our balance sheet.
Annette: Additionally, during periods of volatility, our funding benefits from a flight to quality dynamics, reflecting the strength of our credit profile and client franchise.
Annette: He has a neighborhood to maintain access to funding at stable spreads while preserving the strategic flexibility.
Let's not turn to capital on slide seven.
Annette: Our total capital increased to $1.37 billion, up 3% from the prior quarter and 11% year-over-year, providing sustained earnings generation.
Annette: This reflects our confidence in the bank's earnings outlook, while preserving the flexibility to support future growth and maintain our investment-grade ratings.
Annette: Next, we will look at our P&L performance to start with the net interest income on slide 8.
Annette: NII for the quarter totaled $65.3 million, reflecting a 4% increase year-over-year and a 3% decline versus the prior quarter. This result continues to be supported by strong credit for the growth, even as we navigate a softer interest rate environment.
Annette: Our net interest margin stood at 2.36% down from 2.47% a year ago and 2.44% in the prior quarter. Reflecting the impact of nowhere market rates and an inverted yield curve. Our net interest margin stood at 2.47% a year ago and 2.44% in the prior quarter. Reflecting the impact of nowhere market rates and an inverted yield curve.
Annette: Given the short-term or nature of our balance sheets, liabilities tend to reprise faster than assets.
Annette: And in a decline-grade environment with an inverted curve, this repressing structure leads to temporary compression of the net interest rates.
Annette: As a result, our net interest spread declined to 1.65% compared to 169% in the previous quarter.
Annette: At the same time, Daniel's spreads remain aligned with year-end levels, with ample market liquidity driving competitive pricing.
Annette: As we look ahead, current market volatility and economic uncertainty could create opportunities for wider spread.
Annette: which together with the execution of our strong pylign of longer-term opportunities, position to potentially benefit from an improved margin environment in the upcoming course.
Namuins, Felipe Ingram, on slide man.
The base revenues remain strong at $10.6 million.
Oh, 12% year over year.
Annette: As expected, result came in lower compared to the record levels as she is in the previous quarter, which benefited from the sectionally high transactional activity in non-destructuring. [inaudible]
Annette: Our little great activity which consistently accounts for around 60% of total income generated $6.7 million in piece, up 12% year-over-year and in line with the prior corners.
Annette: Growth in this business reflects successful cross-elimitiative process improvements and new client on board. Reinforcing its role as a stable and growing source of revenue slowly tied to our core financing activities.
Annette: Our non-structuring and syndication themes also deliver a strong performance.
Annette: Closing four confections at close, the Energy, Agribusiness, Manufacturing, and Financial Fectures.
Annette: totaling 468 million dollars and generating 2.4 million dollars in fees.
Annette: We are optimistic about the momentum in this business line and expect a full pipeline of indicated deals to contribute to fee growth in the upcoming waters.
Annette: Additionally, incomes from credit commitments and other fees total $1.5 million. Further complementing the recipients of our Transfections Revenue Model.
Annette: This result, we affirm the consistency of our being constraints and the momentum we are building to drive sustainable, non-interesting comforts.
We now turn to Expenses and Efficiencies.
Annette: Operating expenses for the quarter, sort of $21 million, reflecting a 15% increase year-over-year and an 8% decline compared to the previous quarter.
Annette: The annual increase is a direct result of the ongoing execution of our strategic plans, including continued investments in technology and business initiatives and the full impact of higher
Annette: The quarter-on-quarter decline mostly replaced, seasonally lower expenses related to investments
Annette: And to a lesser extent, lower performance-based variable compensation following last year's strong results which led to Chirea incentive accruals in the fourth quarter.
Annette: As I resolve, our efficiency ratio improved to 26.9% down from 29.2% in the prior quarter and remains well within our target range.
Annette: Driving this resolve is our ongoing focus on efficiency, ensuring sustainable growth by balancing and strategic investments with discipline for control.
Annette: Finally, let's wrap up with the net income and ROE on slide 11.
Annette: Despite market volatility and starting the year in a lower interest rate environment, Bladex continues to deliver strong results.
Annette: To put this in perspective, net income has grown significantly since the start of our strategic plan.
Annette: Resulting in a strong first quarter of 2025 with $51.7 million in net income, slightly above both the prior quarter and the same period last year.
Annette: This result was supported by strong sub-line performance, continued credit for 40-world, received the income, and contained great information.
Annette: Alongside Met income growth, we have also seen a significant improvement in returns over the course of our strategic plan.
Annette: Our ROE stood at a strong 15.4% well above pre-strategic plans levels and consistent with our long-term profitability objectives.
Annette: Overall, this results demonstrate the strengths of flat access business model and the discipline execution of our strategy, providing a solid foundation to continue generating sustainable and profitable world.
Annette: With that, I will now turn the call over to Jorge for closing through March. Thank you all.
Thank you very much, Annette. Great job.
Annette: Before we open the call for questions, let me share a few thoughts on the macro economic context and its implications for gladics.
Annette: Clearly, global economic environment has shifted notably in recent months. As governments around the world, we assess their trade policies.
Annette: This shift has pushed uncertainty to historically high levels leading to a downward bias in global growth forecast.
Annette: While macro indicators, particularly in the US and China, remain broadly stable for now, their early signs of behavioral changes in response to this uncertainty.
In the US, we've seen...
Firms accelerate imports and build up inventories.
Annette: while in China, front-loaded activity has temporarily supported stronger than expected growth in the first quarter.
These dynamics have not yet been reflected in far data.
Annette: What we do anticipate that if uncertainty persists, their effects are likely to spill over into a real economic activity.
Annette: For now, the main impact has been a deterioration in business and consumer confidence compounded by financial market volatility and diverging policy signals globally.
Meanwhile,
Annette: With the exception for Mexico and Costa Rica, most countries in the region are net importers in their trade with the U.S.
Therefore, limiting their exposure to the immediate trade friction.
Annette: Most of Latin America's exports to the U.S. are heavily concentrated in Mexico, a smatch as 80 percent.
Annette: under the USMCA, except for Gerald Tars on steel and aluminum, as well as on the automotive sector. In the case of automotive sector in particular,
The deep integration of cross-border supply chains.
Annette: makes any sudden shift both costly and complex for U.S. manufacturers.
Annette: On the other hand, so far, remittance flows into the region have remained resilient.
Annette: with no significant impact from recent shifts in U.S. immigration policy.
From a blood expressive, our exposure remains well contained.
Annette: We are well positioned to manage our exposures and take advantage of the opportunities that keep arriving in this environment.
Annette: It is worth mentioning that only 15% of our trade finance portfolio is linked to transactions involving the US and roughly 90% of it consists of imports from the US into Latin America. Thank you very much.
Annette: Our short-term, highly flexible business model focused on large corporates and financial institutions across a diversified set of countries and sectors gives us flexibility to respond quickly as conditions deteriorate.
Annette: Once again, with the strengths of our capital rates, ample liquidity and robust asset quality, we are confident in our capacity to operate through this cycle. We remain focused on prudent execution and long-term value creation even amid a more uncertain global landscape. Thank you.
Annette: Lastly, despite the current global uncertainty, we want to reaffirm the full-year guidance shared at the beginning of the year where we remain on track.
Annette: to deliver on our objectives supported by consistent execution and the solid fundamentals of our business.
Annette: With that, let me now turn over the call to questions.
Thank you.
Annette: Thank you very much for the presentation. We will now begin the Q&A section for investors and analysts.
Annette: If you wish to ask a question, please click on Raise Hand. If your question has already been an answer, you can leave the queue by clicking on Put Hand Down.
Annette: 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.
Annette: Written questions that are not addressed during the earnings call will be returned by the Investor Relations team.
Our first question comes from John Souton.
Thank you and congratulations. I have a question on expenses.
Annette: Operating costs have increased significantly. What is driving this increase and what could we expect going forward?
Annette: Thank you for that question. Yes, a cost increases are mainly due to head count, head count growth, but also IT investments and also consulting fees. They're all tied to the execution of the strategic plan.
Annette: I mean all the expenses are grounded in detail business cases.
Annette: The quantified both obviously the costs and the revenues of all the initiatives we move forward. Now, if you take a step back and look, we've done since we started executing the plan a bit over three years ago.
Annette: Exterior expenses have doubled, but revenues have almost tripled in the same period. This is why we have a better efficiency ratio today than three years ago. Now, looking ahead,
Annette: The bulk of the hiring occurred during the first three years of the black.
Annette: Now, in fact, 80% of the hires were made in the first two years.
Annette: to what we call traditional functions aligned with face one of the plans. So primarily focus on improving balance sheet efficiency and strengthening the core operations of the back, that is frontline team, credit, pains, and so on.
Annette: Around 80% of the hires have been specialized profiles tied to phase two and phase three of the plan.
Annette: With completely different set of skills, these are product development experts, technology experts, digital infrastructure experts.
I would take going forward the pace of hiring.
Annette: We'll materially disaccel this, celebrate and the profile of new hires will continue to be highly tied. So we expect efficiency ratio to be around 27% which is
Our Guidance for the Year Thank you.
Annette: Thank you. Our next question comes from Inigo Vega with Jeffries. You can open your microphone.
Hi, good morning, everyone. Are you here, me?
Yes, we do.
Speaker Change: Jorge, a question on growth. I'm looking at the numbers. There's 6.4% growth, quarter on quarter on the Comercio book.
Speaker Change: That includes like tungsten growth in oparancy, like guarantees, and all that. It's impressive growth.
Speaker Change: But always be that it's higher than what you're expected for this sort of run rate for the two years. Can you comment if there's anything specific in your scene in the market? Like, well, yes.
Seasonality, opportunistic growth in some of the country.
business
Speaker Change: Ankari, being sustained for the first of the year because show is much higher than the...
You are expecting on the guidance?
Speaker Change: You would have to capital at this level of payout for that sort of growth. So if you can comment on that level of growth in Q1, it would be great. Thank you so much.
Sí, claro. Gracias, Inigo.
Speaker Change: So yes, particularly off-balance sheet growth was higher than expected, that's for sure, but I would like to pick the opportunity to make a couple of points here, not only on capital, but the growth of up balance sheet itself. Ah!
Speaker Change: As we have said, and we talked about this before, the essence of this strategy is to build a business model that can consistently generate the income to make our results less sensitive to interest rate fluctuations.
Amen, this is Crucio.
Speaker Change: If you consider that our balance sheet is essentially matched and have and have floating rates on both sides both in assets and liabilities.
Speaker Change: This is why this is exactly what we're doubling down on our bets on the layers of credit. This is why we have invested.
Low Capital Allocation and therefore very attractive retracts.
Speaker Change: We expect, given the network of corresponding bonds, commodity traders, in clients of Blacks in the region.
Speaker Change: We can and we will scale this business in the future.
Speaker Change: Now, going particular to your question on the growth in the in the last quarter is basically related to the oil and gas sector in Argentina.
Speaker Change: There are these are commitments to confirm 45 to 60 days letters of credit issued by Banco Ana Mendez, Daniel Mora, Eduardo Vivone, Iigo Zabala, Annette Hoorde, Ana Mendez, Iigo Zabala, Annette Hoorde,
And we do anticipate continuous increase.
Speaker Change: from this sector and this country, but overall in LCs in the future.
I don't know, Sam, if you want to comment also.
Yeah, no, thanks Jorge. I just want to. Thank you.
Speaker Change: to remind that particularly the letters of credit in guarantee business, which is the book of the volume of the contingencies.
Speaker Change: It's a very short-term book. We're talking about even shorter than the average book of Bladix. It's about around four months. So within the quarter, more than half of our exposure will be renewed.
Speaker Change: and particularly this business, even though we're growing the core of the business has been growing.
The recurrence of the business has been growing.
Speaker Change: The number of the clients in that business have been growing and they were all positive in the first quarter. From one quarter to the other, there can be differences. For example, the first quarter tends to be. In terms of seasonality, less there has been historically less than in the first quarter, so we took advantage. [inaudible]
And we have...
Speaker Change: Done more volumes in the first quarter to make sure that... [inaudible]
Speaker Change: Our top line in that business continued to be at a good level, but those mature fast.
Speaker Change: And given their capital efficient, we can make use of those to really, or more volumes to compensate when there are situations of less.
Lower Feast [inaudible]
Speaker Change: So, the more important to focus is that the core of the business is in a growing direction and we expect that to remain throughout the year giving the investments that we're making not only in terms of technology but also in how we originate and the people who originate that business. [inaudible]
Uncapital here.
and we might see tightening because precisely of the of the pipeline.
Now via any generation that we'll turn to.
Speaker Change: We'll tend to finish where we said we were going to be.
super clear. Thank you so much.
Thank you.
Speaker Change: Our next question comes from Ricardo Buchpiguel with BTG. You can open your microphone.
Speaker Change: Hi everyone, and thank you for the opportunity to make questions. I have two here on my side.
Speaker Change: So first, you mentioned that the high volatility following terms liberation day
Speaker Change: Pat Sprez been looking bad during Q2 and if it could eventually trigger potential upside-risk to your name guidance, think of your account that this event wasn't expected for this year.
And for my second question, quick one.
Speaker Change: You guys haven't mentioned that letters of credit between Hesbina.
He is an important driver for the Comercio portfolio growth squadron.
Speaker Change: But when I look at the Fincom breakdown, I see that the letters of play decrease quarter to quarter So if you could also explain a little bit the difference from the balance, the off balance dynamics and the Fincom performance would be helpful Thank you [inaudible]
Speaker Change: Thank you, Ricardo. Great questions. On the first question, I'm going to let Annette talk about
Spreds
Speaker Change: And then on this second question, maybe a summer chief commercial officer can jump in and explain a little bit more of the dynamics of the commitments and the letters of credit and wire fees. Not apparently not consistent with both. So I need you want to tackle that one.
Speaker Change: And the 100 basic points caught that we saw at the end of the last year, along with the expectations of further rate cuts during this year, have pushed as a deal down and reduce the benefits of the equity we have invested in these assets.
Speaker Change: And these add pressure to our name. That said, despite a competitive pricing environment in Q1, we kept our London margins above December 2024 and slowly be slightly below the Q2 average. Thank you for your time.
that we saw last year.
Speaker Change: This really shows the disciplines we have in loan pricing allowing us to maintain the margins where we're expecting them to be at.
Speaker Change: The bigger impact on Martin is coming from the balance it's repressing.
Speaker Change: especially in an inverted curve environment. Our loans typically reprise with...
Speaker Change: Longer ten or reference rates than deposits and this puts pressure both in our name and the needs that we're publishing. Thank you.
Speaker Change: But looking ahead, our active balance management and the strong pipeline of medium term transactions is positioned as well to benefit from potentially higher margin environment. And with that, we feel confident that we can continue to upset that margin pressure as we move forward.
Speaker Change: And on the second question is actually rather simple because what happened was that
The increase in the balance.
It came mostly towards the end of the quarter.
Speaker Change: And particularly the one that Jorge mentioned related to the confirmation of letters of credit in Argentina.
Speaker Change: It came at the very end, so you see the balance, but you don't see the benefit of the income yet in the quarter, and that should reflect more in the second quarter, and also you do see the reserves.
Speaker Change: So in a way, the second, the first quarter is subsidized in the second quarter in that regard. The second is also, I think, tied to my previous answer, this quarter, I think there was a bit of a...
Speaker Change: A shift on the portfolio that is just momentarily and that we went to increase the volumes to compensate lower in fees but that increasing volumes were more with high grade names.
Speaker Change: In particular, a couple of quasi-sovereign that are very low risk that comes at a very low margin or low fees and that drove the volume up but the fees down.
Speaker Change: But, and also that trend should be, I'll say, normalize in the second quarter. So again, it's a business that is very short term. [inaudible]
Speaker Change: and Recurrent, and we see, yeah, like mentioned, better prospects to normalize in the second quarter of the year.
Speaker Change: Yes, good point, Sam. I think Ricardo, the most important point is that we do not see you in.
Spread Steinend in the near future. I mean, and quite the opposite [inaudible]
Speaker Change: As Annette mentioned, and as I said before, we see margin expansion.
in the upcoming quarters for two reasons. One,
Speaker Change: And also, because as I mentioned, we do have a robust medium term, I mean, aside of the letters of credit, a very robust medium term pipeline of deals with higher margins than our stock.
Very clear. Thank you.
Speaker Change: Okay, thank you very much. That's all the questions we have for today. I'll pass the line back to the Black X Team for their concluding remarks.
Speaker Change: Thank you everyone for your support and for the questions and we look forward to talking to you.
in our next call. Thank you very much.