Banco Latinoamericano de Comercio Exterior, S.A.

Hello, everyone, and welcome to Bladex First Quarter 2020 Conference Call on this 15th day of April 2020. This call is being recorded and is for investors and analysts only. If you are a member of the media, you are invited to listen only. Bladex has prepared a PowerPoint presentation to accompany their discussion. It is available through the webcast and on the bank's corporate website at www.bladex.com. Joining us today are Mr. Jorge Salas, Chief Executive Officer, and Ms. Ana Graciela de Mendez, Chief Financial Officer. Their comments will be based on the earnings release, which was issued earlier today and is available on the corporate website. The following statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. In these communications, we may make certain statements that are forward-looking, such as statements regarding Bladix's future results, plans, and anticipated trends in the markets affecting its results and financial condition. These forward-looking statements are Bladix's expectations on the day of the initial broadcast of this conference call, and Bladix does not undertake to update its expectations based on subsequent events of knowledge. Various risks, uncertainties, and assumptions are detailed in the bank's press release and the filings with the Securities and Exchange Commission. Should more and more of these risks or uncertainties materialize, or should any of our underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in these communications. And with that, I am pleased to turn the conference over to Mr. Salas for his presentation. Please go ahead.

Thank you, Stephanie. Good morning, everyone. Thank you for joining us today to discuss our first quarter 2020 results and how we're navigating the current and clearly extraordinary economic environment. On the call with me today are our Chief Financial Officer, Annie Mendez, as well as our Chief Risk Officer, Alex Tisoni. As many as you know, I started working in Gladys this year on Monday, March 9 at CEO. Two days later, Wednesday, the 11th, the World Health Organization declared the rapidly spreading coronavirus as a global pandemic. The next day, Thursday, the 12th, the bank successfully activated its business continuity plan. Since then, all of our staff, a total of 177 employees, have been operating remotely from their homes in six different countries, and the bank's day-to-day operations have been running smoothly without interruption. As of today, I am very happy to report we have no cases of COVID-19 in our workforce. Furthermore, the team is working with enduring commitment sharp focus, and an amazing collaborative spirit across the whole organization. I have to say I'm honored and also grateful to lead an organization that can adapt so fast to such extreme circumstances. I want to thank our employees and our board of directors who have made this possible. Those of you who know VLADIX, know that our strengths and adaptability are built in and have been so for a very long time. These qualities are vitally important today as the world is confronted with a crisis like no other. Before we talk about business, I want to take a moment to note that this pandemic is having more than an economic impact. It is taking a worldwide human toll and thousands of lives lost. Our deepest sympathies and prayers are with all of those affected. Before COVID-19, we were expecting a slight recovery in Latin America's GDP. It is clear today that that is not going to happen. Experts are estimating an average GDP contraction for the region that ranges from negative 3 to negative 6 percent. Obviously, the magnitude of the shock for each country will depend on the length of the shutdowns, the structure and the shape of the economy, and the extent of the government's assistance programs and the potential access to multilateral aid. Against this complex and uncertain reality, I want to cover two main topics today. One, a high-level overview of our first quarter results and why they are a clear demonstration of our unique strengths and adaptability in these difficult circumstances. Secondly, the dividend decision made by our Board and how it reflects our commitment to maintaining a solid capital base. Then I will turn the call over to Annie so she can discuss our first quarter financial results in more detail. After Annie's presentation and my closing remarks, we will open it up for questions. Let's start with the highlights of the results. I've heard some express the sentiment that historic results are less important right now given the uncertainty we are all experiencing. I have a different view. The health and fitness of a patient usually determine both the severity and the symptoms and the speed at which they recover. Vladex is a fit and healthy patient. Our results for Q1 2020 show a well-catalyzed, highly liquid bank with a strong balance sheet, industry-leading efficiency metrics, very healthy portfolio, and perhaps more importantly, the ability to adapt to the rapidly changing circumstances. So starting with our balance sheet, by March 31st, our cash position was $1.3 billion, equivalent to 19% of total assets, up from 16% at the end of 2019, and well in excess of Basel III liquidity ratios. As soon as COVID-19 storm started, Bladix was able to significantly increase liquidity, actually in a matter of weeks, thanks to its historically diversified and stable funding sources that include many long-lasting relationships with correspondent banks across the globe, as well as deposits from central banks across the region, who are also our Class A shareholders. On the asset side, the bank has maintained a high-quality portfolio with a country mix that, thanks to the strategies implemented during the last several quarters, is weighted toward lower-risk countries, quasi-sovereign corporations, and perhaps more importantly, top tier banks across the region that account for 55% of our total exposure at quarter end. Our capital was over a billion dollars in equity, quarter end, which translates into a Basel III Tier 1 ratio of 22%. Moving on to our P&L, our net income for the quarter was in excess $18 million, which is 14% lower than Q1 2019. These profits resulted in an average ROE of 7% and average return on assets of 1.1%. This decline mostly resulted from lower net interest revenues, plus market rates decreased, and from lower structuring fees. It's worth mentioning that the operating expenses remained on track for the quarter, contributing to our resilient efficiency levels. I'm going to leave my general comments here. Annie will share more details about our results, and we can talk more about them in the Q&A session. Now, let me talk about our dividend. In the view of the bank's strong balance sheet, together with our demonstrated capacity to generate capital for earnings, the Board decided to continue to distribute dividends. However, now that capital preservation is a top priority, the Board agreed to reduce the first interim dividend to 25 cents per share. which equates to a payout ratio of 54% on our first quarter earnings. Because of the volatile nature of the region in which we operate, the bank has historically maintained solid levels of capitalization, which in this context become a unique strength, enabling us to serve our clients' needs in difficult times like this one. I will now pass on the call over to Annie, and after she finishes, I will make additional remarks before we open it up for questions. Annie?

Thank you, Jorge, and good morning to all. I will now go through the results for the first quarter of 2020 into more detail, making reference to the presentation uploaded on our website. So let's start with slide number three on our current financial position. Given today's uncertainty in global markets, I want to emphasize Jorge's comments about the strength of our balance sheet. Our solid liquidity position of $1.3 billion, or 19% of total assets at order end, is mostly placed with the Federal Reserve Bank of New York, and is the result of the bank's top priority in response to the situation created by this global pandemic, which is to ensure a robust liquidity pool. Liability deposits accounted for 47 percent of average funding sources during the first quarter of 2020. Class A shareholders represented by Latin American central banks continued to maintain a relevant participation in the bank's funding base of about one-half of total profits. Although quarter-end deposit balances decreased by 15 percent compared to the end of 2019, average balances for the quarter have remained within normal ranges, and the deposit base has continued to evolve quite favorably during the first two weeks of April now at similar levels of a quarter and a year ago. The rest of the bank's funding sources are short-term facilities, which on average represented 25% of the total for the quarter and which increased by 5% at the end of the quarter compared to December 2019 in the period balance. The remaining 28% of average funding came from medium-term facilities and debt capital market issuances. We have a fluent dialogue with the major depositors and funding providers, both global and regional financial institutions and investors from different geographies and markets who have widely reaffirmed their commitment to the bank as a strategic business partner even in this stressed financial environment. A second pillar of the bank's solid financial position is our strong capitalization, having recorded over $1 billion in equity at quarter end, which consists entirely of issued and fully paid ordinary common stock. Our 22% CO1 ratio and seven times leverage of assets to equity represent conservative levels way in excess of regulatory requirements and Basel III guidelines. In addition, and also significant, the bank maintains its high-quality portfolio profile with a country mix that continues to weigh more on lower-risk countries. as exposure to investment-grade countries accounted for 55% of the total, and with a concentration in lending predominantly to top-tier financial institutions and quasi-sovereign corporations, with a combined total of 70% of total exposure at quarter end, and which constitutes the bank's traditional and long-standing client-business relationship and represent key systemic players in each of their markets. The remaining exposure is mostly placed with sub-tier private local corporations across the region, which are leaders in their respective industries, and with regional players or multi-Latina. In this environment, we are serving our strategic customer base focusing on client segments and industries that are better suited to face the challenges posed by the current crisis. Now moving on to slide four on our P&L results. Net income for the quarter totaled $18 million, or 46 cents per share, down 17% from the previous quarter and down 14% from a year ago. This decline mostly resulted from lower net interest revenue as market rates continued to decrease and from lower structuring fees related to the uneven nature of fee generation for this business on a quarterly basis. On the other hand, there was virtually no impact from credit provisions recorded as impairment loss and financial instruments and operating expenses remain adequate at stable run rate levels. I will go into more detail on quarterly results later in this presentation, but now I will refer to slides five and six, which provide details on the evolution and composition of our commercial portfolio, which includes loans and off-balance sheet exposures, such as letters of credit and guarantees. Average commercial portfolio during the first quarter 2020 remained stable with respect to the previous quarter at $6.2 billion and experienced a 10% decline in end of period balances to $5.8 billion, mainly due to strict credit underwriting parameters that we activated in March when the COVID-19 crisis rapidly intensified. We believe the bank is defensively positioned to face this crisis on the account of its sound portfolio quality in view of the substantial impact of COVID-19 on Latin American economies. After the commodity crisis from 2014 through 2016, the bank shifted its origination strategy and adjusted its underwriting policies to reduce exposures to commodity-related risks and increased the participation of regulated top-tier financial institutions throughout the region. At quarter end, exposure to these top-tier financial institutions represented 55% of total portfolio. Under this COVID-19 scenario, we consider these financial institutions, which are the most relevant and key players in each of their markets, among the most defensive sectors with better tools to mitigate the impact of the crisis. In the past several quarters, the bank has also adjusted its country exposure, focusing origination towards investment-grade countries in Latin America and non-LATAM OECD countries. The latter related to transactions carried out in Latin America, mostly with multinationals operating in the region. We believe that this country should be better positioned in the current global context. The short-term nature of our portfolio, with 69% maturing in the next 12 months, coupled with the quality of our clients, play to our advantage in managing our portfolio exposure with a focus on maintaining credit soundness under strict and prudent credit underwriting standards. Under COVID-19, we have implemented a continuous review process of our entire portfolio on a name-by-name basis. We have classified sectors in risk categories, with those included at high risk representing close to 12% of our portfolio at quarter end. Sectors in this high-risk category include airlines, oil and gas upstream and supply chain, sugar, and this includes our NPL exposure already 89% reserves, retail, and auto industry. None of these sectors represent more than 2.5% of total portfolio. Furthermore, most of these exposures are with relevant players in their respective markets and or with sovereign and quasi-sovereign institutions with a track record of no default, even in previous crisis that could have adversely impacted them. We have also classified country risk exposures, identifying two countries at high risk, mainly Argentina and Ecuador. We have been reducing our exposure in both of these countries for the last several quarters. At the end of March 2020, the exposure in Ecuador was $355 million, or 6% of total portfolio, down 17% quarter-on-quarter. 62% of the total is off-balance sheet exposure related to letters of credit confirmation on the import of defined oil products with a track record of more than 20 years without any default, even during sovereign international default, given the strategic nature of these oil imports for the country. In the case of Argentina, the exposure was $195 million at quarter end, or 3% of total portfolio, down 14% quarter on quarter, and down 66% from a year ago, as the bank decided to reduce exposure in Argentina since the beginning of 2019. Most of the country's exposure is with the largest state-owned integrated oil company, with interest in energy generation and a history of non-default, even under sovereign default in the past. On to slide seven, credit-imperred loans, or MPLs, remain stable at $62 million at March 31, 2020, and accounted for a single client exposure in Brazil still under a complex and prolonged restructuring process. This exposure has an individually allocated credit loss allowance of 89%, reflecting a book value of around $8 million. NTLs represented 1% of total loans with an overall reserve coverage of 1.7 times. The remaining 99% of the loan portfolio remains current. The bank's total allowance for credit losses were relatively unchanged with respect to December 31, 2019 balances, having recorded virtually no impact in credit provisions for the first quarter of 2020. This was the result of lower reserve requirements on decreased end-of-period credit portfolio balances, offset by increased Stage 2 exposure, that is, exposure which has deteriorated since origination, as the bank made a downward revision in the outlook for certain industries impacted by the current environment, which I commented on before. Net interest income, presented on slide eight, decreased to $25.8 million for the quarter, on the account of a six basis points decrease in net interest margin to 1.59%, as market rates continued to decline, impacting the overall yields of assets financed by our ample capital base. This was offset by lower cost of funds also on lower market rates, and by stable levels of average loan portfolio balances, and on net lending spreads and net interest spreads during the quarter. Continuing on to slide nine, operating expenses for the first quarter of 2020 decreased by 6% quarter-in-quarter, to $10.5 million on the account of the typical third quarter seasonal effect. Year-on-year, expenses increased by 7% on higher personnel-related costs, mainly associated to the CEO transition, and to increase salary base on employee vacancies in 2019 that were filled toward year-end. Efficiency stood at 37% for the quarter, up from 36% a quarter ago, and 31% a year ago, mainly on lower revenues. With this, I will now turn the call back to Jorge. Thank you.

Thank you, Annie. As you can see, at the heart of LARIC's results lies its ability to adapt to rapidly changing circumstances. On the asset side, the short-term nature of our facilities coupled with our geographic diversification and the unique access to blue-chip clients gave us the ability to rearrange the portfolio as we did throughout 2019. On the liability side, our diversified and stable funding sources have enabled us to increase our liquidity significantly in a matter of weeks. Similarly, our strong capital gave us the ability to pay out 50% of our net income in dividends and still maintain a solid capital base. In summary, starting with the seamless activation of our business continuity plan, Ladix has clearly used its levers to take early action to navigate the COVID-19 storm. We recognize the uncertainty created by the COVID-19 storm. We know it will have an impact in Latin America and in our portfolio in the months to come. Having said that, Vladex is not only in very good shape to face this storm, but has gone through many storms over its 40 years history in the region, and we are determined to emerge from this one and continue serving our clients. That's all I have to say for now. Operator, please open the call for questions.

Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. A voice prompt on the phone line will indicate when your line is open. Please state your name before posing your question. Again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.

Our first questioner.

Yes, good morning. My name is Jim Maroney with Singular Research. And I guess my first question is in regards to the shift to the cash position. So I believe it's very strategic. a wise move, but can you give us an idea going forward on what the positioning is going to be? Is it going to take a defensive stance as far as just ensuring that there's liquidity, or could there be an opportunistic position with regards to lower asset values? in the marketplace that you could take advantage of or increasing the loan portfolio? Can you give us a sense of what the capital position is going to be going forward? Thank you.

Thank you for your question. The short answer is that as long as there is uncertainty, we will have excess liquidity to sustain the bank's resiliency in an environment like this one. As soon as we have a gradual opening of the economy and the progressive reopening of the debt capital markets, then we will rethink our liquidity management approach. But in the meantime, the bank's priority is to ensure that it maintains a a robust liquidity pool. I don't know, Annie, if you want to, or Alex, if you want to comment on that, too.

Yes, I can add that, of course, we will continue to monitor the evolution of financial and debt capital markets, you know, and the expected behavior and availability of different funding sources. as well as our expected training capabilities of our clients. And then we will, as Jorge said, we'll be watching closely how all these factors behave going forward and act accordingly.

Thank you. As a quick reminder, if you'd like to ask a question, you may press star 1. Our next questioner.

Good morning. My name is Solomon Atiyah. My question is on the payment of dividends. What would be the, can you repeat, what would be the cost, the cut, and is the number quarterly or yearly? Please. Thank you.

Yes, so the dividend for the quarter is 25 cents per share, which is a 35 percent decline for the quarter.

Thank you. Do you know until when you will keep this policy, or it all depends on the influx of cash?

So, good question. I prefer not to speculate on future dividends at this point, not only because the dividend policy is up to the board, but also because it's a decision that is made every quarter, and it's still very early in the storm to think on how Q2 and Q3 are going to behave. I would say, though, that, you know, We have a historically high capital ratio, and that responds to a historically volatile region in which we operate, and I don't see that changing in the future. Thank you very much.

Thank you. Our next questioner. Rodrigo, your line is live. Rodrigo, are you on the line?

Patrick Brennan Hi, this is Patrick Brennan. I have a couple questions. One, can you just comment specifically on some of the jurisdictions where you have higher commercial portfolio exposure now? uh, in Chile and Columbia, what you're just sort of seeing on the ground and then, you know, maybe comment, uh, on a couple of your larger countries and sort of Mexico and, uh, in Brazil, what, what you sort of see, you know, both on the ground and in terms of just opportunities, um, yeah, to provide current, to provide credit in the current environment. Thanks.

Yeah, sure. I'm going to let our Chief Risk Officer answer this call. There is information, though, on slide six of our presentation, and you can see there that 55% of our exposure today is and investment, great countries, including Colombia and Brazil. But I'm going to let Alex share some more light on what we're seeing in the ground there.

Good morning. Well, talking about Colombia, I will say that most of our exposure is with financial institutions, top tier financial institutions. So as Annie mentioned before, I think we believe under this scenario with the projections of the GDP contraction in Latin America of 5.2% from the IMF, we believe we are in a defensive sector, one of the most defensive sectors, and I think This exposure is resilient under this scenario. The same thing happens in Chile. Chile, our main exposure is also in financial institutions. We also have exposures in other sectors with quasi-sovereign rates, and also we have a minor exposure in the airlines industry. We believe in that case that we have exposure in the top companies in the industry that they're going to serve this firm in a better way. They have liquidity buffers right now to manage this lockdown of their airline industry. So I will say that actually, yeah, we are concerned. There's a lot of uncertainty around. We don't know right now the length of the COVID-19 lockdown in economies and the impact that as I will reinforce the message from Annie that 65% of our exposure globally and in the main economy, because in Brazil it's the same situation, 80% of our exposure is in financial institutions, the top tier financial institutions. And as you maybe see in those countries, central banks, They are actually right now implemented measures to help the financial systems and to compensate the impact of COVID-19 in the local economy. So in my point of view, in general, those countries, well, I didn't mention nothing about Mexico, but Mexico, as you may be seeing the figures, we reduced our exposure almost over 30 percent. We reduced exposure mainly at the quasi-sovereign level entities. We narrowed down the scope. We decided several quarters ago to reduce the tenure of our portfolio of less than one year. So actually we have a maturity or a tenor of our portfolio in Mexico mostly within a year. So we are very well diversified in defensive industries in Mexico. We also have exposure in local currency and match it with local funding. So that's a defensive move under this scenario of devaluation of the currency. So in general, I think considering that 55% of our exposure is in financial institutions, the rest is with quasi-sovereign strategic companies with a very important footprint in their local economy, and the rest are mostly multinational, multi-Latina corporations, I think we are on the top of the pyramid. So I think, as Annie mentioned before, my final message is we are mostly in the defensive sectors all across the region.

Just one more comment on that. Having said that we're on the defensive sectors, we have seen, though, you know, an increase in rates. between 300 and 400 basis points even with the top tier companies in some of the best countries in the region.

Thank you. Our next questioner.

Hi, I want to understand a little bit better what is driving the decrease in the yield on interest earning assets and also how you are being able to fund at a lower cost as you see here as cost of interest earnings liabilities have also increased in the first quarter. Thank you.

So I had some trouble hearing the question. Can you repeat? Can you talk a bit louder, please? I'm sorry.

Okay, no. The first part of the question is trying to understand why the yield on interest earning assets has decreased between the fourth quarter and the first quarter of this year, and also understand how the funding costs have also decreased over the same time period. Thank you.

Annie, you want to comment on that?

Sure. If I understood correctly, you wanted to understand the trends in asset yields and funding costs. So our balance sheet on both sides of our balance sheet, our assets and liabilities are priced based on live or market rates. So any impact, and this is what we actually experienced in the last quarter and several quarters, as a matter of fact, of lowering interest rates will have a similar impact on our assets and our liabilities. The repricing occurs within a very narrow interest rate gap. And so, and that's why, you know, this repricing occurs simultaneously and the net impact in net interest spreads which are the difference in rates of assets and liabilities, has kept nearly stable over the past quarter, reflecting precisely these repricings, of course, quite simultaneously. And like I mentioned, the reason why net interest margin decreased quarter over quarter is because, obviously, at lower yields, both on our assets and liabilities occur, there is a portion of assets that it is financed by our ample equity base. And so as asset yields go down, you know, that decrease goes right to the bottom line. I don't know if I answered your question.

Yes, I have this press report in the library. been maintained, or have those increased a little bit? Because we know that those have increased.

What we have seen actually is pretty stable overall average spread, both on our assets and our funding. Of course, as Rory mentioned, we are seeing some repricing also on both sides. As you know, I mean, international markets overall have overall, you know, um the cost of money has increased overall and we are obviously being impacted by that on our funding side but of course that is also being deployed into our asset pricing right now okay thank you you're welcome thank you our next questioner

Good morning. My question is, as I said before, have you looked at the long-term effect on the reduced yield on the loans? Since the majority of your loans are long-term loans, you can have more or less an effect on the yield, how it's going to affect

Jorge, do you want to? Sure, go ahead. Yes. Again, well, first of all, you mentioned that our asset duration is long-term, and it's not. I mean, we actually have a duration of about less than a year. But independent of that, again, the repricing, we have... our loans and liabilities are based on floating rate liable base. And so you could have lower yields or lower net interest income on obviously on lower rates precisely because of the portion of the assets that is financed by our equity. So if we have a billion dollar in equities that's financing, you know, our assets, part of our assets, you know, if you reduce 50 basis points in LIBOR-based rates and the asset yields are reduced by 50 basis points, that represents about $5 million.

Nothing happens.

I'm sorry?

No, that indicates that if you get a lower LIBOR rate and your spread maintains the same, then your yield is going to be the same because you reduce from both sides.

Right, but except for that portion that is financed by equity, which doesn't have a financial cost. You know, it doesn't have an interest cost. So there is a small portion that will be impacted. But you're right. The repricing on both sides is going to be quite simultaneous. The net interest spread, everything else being equal, should keep stable.

Okay, so you're basically only expecting to get hit if there is any type of default by any of your customers.

Well, by now, I think the short answer is yes, and I think there's more just to give a little bit more context. In slide eight of the presentation, in the top right, you can see the net input spread. maintained between 1.16 and 1.17 throughout the year. And you can have an idea of how short-term our loans are. $3 billion we originated in the first quarter, and we had $3.5 billion loans maturing in that same quarter.

Yeah. Yes, he then asked about potential losses. What I can tell you there is the estimation of expected losses is already incorporated in our quarterly results as of today, and we cannot speculate on that going forward.

Okay. Thank you very much.

Thank you. As a quick reminder, you may press star 1 to ask a question. We do have a question submitted via the webinar. To what extent, if at all, do you expect benefit and spread widening in the credit portfolio? Are there early indications that risk is being repriced? Have competitors reduced exposure to trade finance in the region?

I will take the latter part of the question. As I said before, we do see repricing in the region, I'll say significant between 300 and 400 basis points, even in the top tier countries, even with the top tier clients in those countries. I don't know, Alex, if you want to comment a little more on that too.

No, I think maybe I'll address the first part of the question that had to do with widening spread. Like I just mentioned, we are seeing some of that already. And it's hard to tell the end result right now because obviously, like I also said, we are also experiencing some repricing in our funding, but overall we should have a net positive effect on the repricing but I'm going to leave it there.

Thank you. We'll move back to our audio questioner.

Hi there, this is Rob Tait speaking from Global Rational Capital. Hi Jorge, Alex and Annie, thank you for your comments, very useful. I just have a few questions. The first question is on the portfolio exposure and I was just wondering why has the percentage of the portfolio exposure to oil and gas and airlines increased? And perhaps this is a question for Alex, the chief risk officer. On that point, what makes you comfortable with these exposures not requiring increased provisions? And can you give more detail on the nature of these exposures and where they are and how you're managing the risk in these hard industries?

All right. Thank you for your question. Well, where we increase exposure in oil and gas is basically in downstream, OK, with quasi sovereign rates that we have a long lasting relationship. And you know, these are short term tenor transactions usually vendor finance, where they buy refined products abroad. So actually, this is something that we're doing business, not necessarily this time, that there's sometimes at the end of the period, you don't have the balance sheet. But this is very short-term tenor with quasi-sovereign rates in Peru, Chile, Uruguay. So we believe those countries right now under this COVID-19 scenario are better prepared And they have the support from the sovereign level, proven track record. So I'm not worried about the kind of transactions we're doing there. So that's my answer at this moment for oil and gas, where we actually increase. And the other thing is, yeah, we also increased in upstream. We have an exposure of 2%. If you compare with the beginning of last year, the first quarter of 2019, So we used to have a company that was integrated in the industry. They used to have a refinery. They shut it down. They did liability management. We support them. We have a long-lasting relationship. They have the support from the federal level. In other crisis, you know, Latin America being with commodity crisis in the period 2014-16. So in the past, we, in a way, experienced this kind of scenario with prices of oil at $20. So actually, we have... The experience, and we believe the link between Sovereign, in that case, I think it's mainly focusing Trinidad and Tobago, the link between the Sovereign and the company is 100%. So we believe in that case we are well-coveraged, and the foreign support, the Sovereign support, we stay there as independent. And you also talk about airlines. We always approach these industry airlines very carefully. It's a very conservative approach. We know this is a very volatile industry, so we only have exposure with two companies that we believe they're going to survive this scenario. And looking to their figures, what they've been doing right now, there is saving costs, variable costs. in a way, extending the tenure of their leasing. And they have a liquidity buffer that, in my point of view, gives the chance to survive under this stressor scenario for more than a year. And we have a relationship with them, a long-lasting relationship, not only in the asset side, but also in the liability side. So actually, we're pretty confident, even though we know that we are under uncertainties. major uncertainties in this scenario and the length of the COVID-19 impact and the lockdown, quarantine in the different economies, we're pretty comfortable with the kind of risk that we have in this industry. We're talking about top-tier companies that are better shaped to weather this storm.

Great. Thank you, Alex. That was very useful. My second question is in regard to the interest rates generally, and I think this may be a question for Annie. Since the market rates declined in the last month of the first quarter in March, and assuming rates remain low, would you expect the net interest income and margins to decline further in the second quarter, given that the second quarter will have the full effect of the lower interest rates for the full quarter, not just one month?

Thank you, Robert. Well, like I just mentioned, there are several factors impacting our margin. But you're right, as rates continue to decline, we're probably going to continue to see the repricing of this LIBOR-based assets and liabilities. But at the same time, I also mentioned that we are obviously also seeing some increase in net lending spread. So I really cannot speculate because it will depend on the size of our balance sheets and so forth and the length of the, you know, this contained and management of the liquidity as we are doing but the repricing effect is probably going to continue to happen but it's going to be offset by higher net lending margins as we anticipate. Thank you.

Thank you. We do have one additional question. With BLX portfolio having an average term of 12 months or less, your turnover is 8% plus per month on average. Do you see current activity, deals in process, loan origination, keeping pace, or are they substantially lower than average?

So, as I said before, We are in business. We've been originating over $3 billion for the quarter. We are, though, being writing standards, but we do see some interesting deals in the region. with a good risk reward return.

Thank you. That concludes today's question and answer session. At this time, I'd like to turn it back to our speakers for closing remarks.

Yes, thank you. I just want to thank everybody that joined our call today for their interest and their support to BLAGS and wish everybody to stay safe. Nothing more on our side. Goodbye now.

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.