Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Banco Latinoamericano de Comercio Exterior SA (BLX, Financial) achieved a record net income of $53 million for the quarter, marking a 16% increase compared to the same period last year.
- The Commercial Portfolio reached $9.7 billion, representing a quarter-on-quarter growth of 5% and a year-on-year growth of 17%.
- Deposits reached a new record of $5.6 billion, growing 34% in the last 12 months, with corporate client deposits nearly doubling compared to last year.
- Noninterest income saw significant growth, with total fees for the first three quarters up 45% compared to the same period last year.
- The bank's efficiency ratio remained strong at 27%, in line with the guidance provided for the year, despite increased costs due to strategic investments.
Negative Points
- Syndication fees decreased slightly this quarter, although the bank remains confident in closing the year with record figures.
- The efficiency ratio rose slightly due to anticipated investments required by the second phase of the strategic plan.
- A $7 million loan was classified from stage two to stage three, representing an isolated Colombian exposure in the oil and gas supply chain sector.
- The bank faces a more competitive lending environment due to increased dollar liquidity and lower local interest rates in most countries.
- There is potential for spread compression in Brazil due to increased competition, particularly from international DCM.
Q & A Highlights
Q: Are you seeing lower spreads in loans specifically in Brazil, and should we expect spread compression in this region? Also, how might a potential Trump election impact trade volumes in Latin America and Bladex's commercial portfolio?
A: (Jorge Salas Taurel, CEO) The US elections are significant for the region, affecting remittance flows, trade, and inflation. We are monitoring these impacts, especially in countries like Guatemala and Mexico. Our short-term business model allows us to navigate potential volatility. (Samuel Canineu, EVP - Commercial Banking) In Brazil, we see more competition, especially from international DCM, which pressures spreads. However, our growth is driven by a better product offering and capturing market share, not just market conditions.
Q: What is the current Net Interest Margin (NIM) sensitivity to interest rates, and what can we expect given potential rate decreases by the Fed?
A: (Ana Graciela De Méndez, CFO) Our NIM is sensitive to interest rates, with a 100 basis point movement potentially impacting NIM by 12 basis points and ROE by 100 basis points. Our floating book on both sides of the balance sheet allows for similar repricing of assets and liabilities. We anticipate that our strategy, including new product deployments, will sustain profitability despite rate changes.
Q: With the expansion phase and new initiatives, what percentage of total income do you expect non-interest income to represent by 2026?
A: (Jorge Salas Taurel, CEO) Currently, non-interest income represents about 13% of total revenues. We aim to increase this to 18% by the end of 2026, driven by new platforms and product offerings.
Q: Where do you see loan growth over the next two years, and how do you view long-term growth opportunities and capital management?
A: (Jorge Salas Taurel, CEO) Loan growth has exceeded expectations, particularly in Brazil, Guatemala, and the Dominican Republic. Our strategy focuses on quality over quantity, maintaining pricing discipline while efficiently using capital. We expect continued growth as we roll out new strategies and products.
Q: Given the strong results, when do you intend to increase the payout of earnings through dividends?
A: (Jorge Salas Taurel, CEO) Dividend policy is an ongoing discussion at the board level, balancing growth and capital return. We aim to ensure attractive dividend yields while maintaining strong financial performance. (Ana Graciela De Méndez, CFO) The current dividend level reflects our strong ROE and is reviewed quarterly by the board.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
