Bladex, Inc. Class E

Ladies and gentlemen, hello everyone and welcome to Blodex's first quarter 2021 conference call on this fifth day of May 2021. 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. Blodex has prepared a PowerPoint presentation to accompany their discussion. It is available through the webcast and on the bank's corporate website at www.blodex.com. Joining us today are Mr. Jorge Salas, Chief Executive Officer at and Mrs. Ana Graciela de Mendes, 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 BloodX's future results, plans and anticipated trends in the markets affecting its results and financial condition. These forward-looking statements are BloodX's expectations on the day of the initial broadcast of this conference call, and BloodX does not undertake to uptake these expectations based on subsequent events or knowledge. Various risks, uncertainties, and assumptions are detailed in the bank's press releases and filings with the Securities and Exchange Commission. Should one or 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 call over to Mr. Salas for his presentation.

Thank you, David, and good morning to everyone joining us today to discuss our first four results. I'm here once again with Annie Mendes, a CFO, and a few members of our team. It's been just over a year since the start of this painful pandemic. The success in containing the virus and the severity of the economic impact vary significantly across the different countries in the region. With this in mind, I would like to take this opportunity to acknowledge the commitment of our employees, our clients, our corresponding banks, and all of who have helped us navigate this difficult time. To all of you, we express our most sincere gratitude. Let's begin with slide three. This morning, I would like to provide some context around our results for the first quarter after a year that has been unlike any other. I joined LADC a little more than a year ago. I joined a bank with a clean balance sheet, an incredibly competent and committed team, and a mandate from the board of directors to explore different avenues to grow the bank and to return more value to shareholders. No sooner had I started the job, the world has been hit with a global pandemic. Not surprisingly, priorities immediately changed. Like most companies at that time, the immediate steps for Blythe was to adopt a defensive approach to ensure the bank's stability, to serve capital, to maintain continuity of operations, and to protect the wellness of our employees. As I have mentioned in previous calls, to achieve this goal, Blythe newly used the different levels in the business model, including immediate and significant reduction by design of our credit portfolio in the second quarter of 2013. That allowed us to steer through what was perhaps the most difficult global environment since our founding more than 40 years ago. The results speak for themselves. We entered 2021 with a standard credit portfolio with almost zero NTLs, a robust funding structure, and a comfortable liquidity position. This is our third consecutive quarter of growth without relaxing credit underwriting standards. The level of our commercial portfolios of March 2021 was close to that of March 2020, more than 800 million below the level of December 2019. On the other hand, despite the uncertainty generated by the delayed vaccination campaign in some of the countries in the region, we are starting to see clear signs of recovery for all the regions. Recently, the IMS device is 2021 growth estimates for Latin America. from 3% to 4.6%. What is even more relevant for Bladis, the growth estimates for trade have also been revised upwards from 8.2% to, twice as much, 16.2%, mainly driven by higher volume and higher commodity prices. We will address this topic further into the presentation. The first quarter results do not yet reflect this recovery, but we are confident that this will happen as the region's economy continues on its upward path. This morning's announcement regarding the Board's decision to carry out a stock repurchase for up to $60 million on the open market program is a testament to our conviction. but at the same time providing us with the flexibility to respond to both opportunities and challenges in the region. Our board also maintains the bank's quarterly dividend of 25 cents per share, which also reflects life's financial strength and earnings quality. Today, as is customary, I will talk about the salient points of a balance sheet, And Annie will provide more details regarding the first quarter results, which I want to note, continue to reflect the impact of historically low labor rates and spreads returning to peak pandemic levels. We will then open it up for questions. Let's please move to slide four. As I said before, we continue to grow our loan portfolio for the third quarter in a row without relaxing underwriting standards. As of the end of March, our commercial portfolio grew 3% quarter-on-quarter. Disbursements were up 5%, and all maturities were again collected on time. As you can see in the graph, the average rate of new disbursements was Viber Plus 141 basis points. 46 basis points from the rate of the maturing portfolio for the quarter, as lending spreads continue to return to pre-pandemic levels. On slide five, I would like to highlight three main points. One, most of our growth for the quarter was concentrated in Brazil, Chile, and Uruguay, and we continue to decrease our exposure in Argentina with all residual exposures remaining current and performing. So almost 60% of our commercial portfolio, as you can see, continues to be deployed in investing-grade countries. And also, after our 3% growth for the quarter, we are almost at the same level of our commercial portfolio of March 2020, only 2% below. Moving on to slide six, this is just the same graph, but broken down by industry. As you can see, most of the growth for the quarter is commodity-related. Oil and gas was up 49%, mostly in investment-grade countries. And our metal and manufacturing portfolio was up 37%, also mostly in investment-grade countries. The recent increase in commodity prices and trading volumes is starting to have a positive impact on our loan growth. The basket of commodities has seen its 2021 projected growth revised from 9.1% at the end of last year to 27.1% by the IMF recently. As we all know, commodities have a significant relevance for Latin American economy, both on the export and on the import side. Latter stuff gives this with some of the strongest commodity players in the region, ranging from strategically important state-owned entities that import oil or oil derivatives to large local grain exporters, steel importers and exporters to the local subsidiaries of all major global commodity houses. We are seeing an increase of demand from these types of clients of at least 30% on average. I would like to highlight that our commodity exposure is of short-term, regulated nature that closely follows the cycle. This means that our indirect risk to commodity price volatility is non-existent. We expect this commodity driven growth to continue as the region recovers. Moving on to slide 17. I want to draw your attention to the chart on the left, first related to our asset-making side. In this respect, it is important to point out that even though we have been growing our loan portfolio for three quarters and building up our investment portfolio since June 2020, we're still close to 800 million, 14% below 2019 year-end levels as I said before. What this means is that live, has considerable room to grow our slum portfolio, along with the gradual reserving of the region. The chart on the right provides an overview of the funding structure, where you can see that our most efficient funding source, deposits, have grown steadily for over a year, both in relative and in absolute terms. Class A shareholders continues to have a minimum participation and the success of the bank's Yankee CD program has also contributed to the growth of our deposit base. LABIC continues to be an active, very active in the debt capital market with private placements in different countries, further enhancing its diversification of its funding force. With that, I will now turn the call over to Annie, who will walk us through the P&L implications for this quarter. Annie?

Thank you, Jorge, and good morning to all. Let's move on to slide number eight, please, on the bank's quarterly reports of operations. So, profit for the first quarter of 2021 was $12.8 million, down 19% on a sequential quarter basis, and 30% year-on-year, mainly driven by lower net interest income. This relates to the impact of a sharp decrease in LIBOR-based rates in the bank's assets and liabilities, coupled with loan average volumes still behind pre-COVID levels, even though the bank has shown a steady loan growth trend for three consecutive quarters, as Jorge just mentioned. I will be addressing the NII variation in more detail in a few minutes. Results for the quarter also reflect stable commission income, mainly from the letters of credit business with an important participation in the LC confirmations for the import of refined oil. With respect to fees from the structuring and syndications activity, for the first time since the onset of the crisis, we are starting to see traction in a pipeline of value-added transactions. We just announced one in late April, a $300 million facility for CMAE Energia, a leading player in renewable energy generation in Central America, in which Flavix acted as joint lead arranger. We expect to see more of this kind of activity in the coming quarters. Expenses remained closely controlled, down 10% on a sequential quarter basis due to the usual seasonality of the third quarter of the year. Year on year, expenses were down by 13%, mainly on lower personal expenses, mostly related to decreased performance-based variable compensation provision. In addition, the bank recorded no credit provisions during the quarter, as origination remains focused on high quality countries and sectors, while the bank continues to downsize riskier exposures, being able to collect virtually 100% of schedule maturity. So let's move on to slide nine, where we present the trend in annual rates and volumes, which explain lower net interest income of $18.9 million for the quarter, down $6.9 million or 27% year-on-year. Even with the same net lending spread differential of about 150 basis points when compared to the same period of 2020 and of 2019, net interest income was down $4.2 million year-on-year, mainly on lower LIBOR base rates, which decreased 76% or about 153 basis points year-on-year and by 83% or around 239 basis points when compared to a normalized 2019. Since the bank runs a mostly floating rate book, it's obvious that in a changing market rate environment, both sides of the balance sheet reside within a short period of time. In this manner, the portion of assets financed by liabilities is generally naturally hedged. This is why net lending spread remains relatively unchanged at 150 basis points. But the major impact relates to the portion of assets financed by the bank's equity, as the overall asset yield decreases on lower market rates, with the impact resulting in lower net interest margin and net interest income. In addition, as a consequence of the bank's defensive measures implemented last year, During the first half of 2020, loan portfolio went down by as much as $1.4 billion, or 24%, from 2019 year-end balances to $4.5 billion at June 30, 2020. We then started to resume loan growth and have kept a positive trend, reaching close to $5.1 billion at March 31, 2021, although still short of pre-COVID levels. As such, average loan portfolio balance for the first quarter of 2021 was still 16% lower than the same period of 2020, negatively impacting net interest income. This was partly upset by the increase of the investment portfolio to close to $400 million, evenly split between a high-quality liquid asset portfolio aimed at enhancing the return on liquid assets, otherwise mostly invested with the Fed, and a credit portfolio of Latin American name, conceived as a complement to the bank's commercial portfolio. Overall, the net change in average volume resulted in an additional negative impact of 2.7 million on NII when compared to the first quarter of last year. With respect to the sequential quarterly trend in slide 10, The reduction of $3.4 million in NII is mostly explained by the bank reaching pre-COVID levels in terms of lending spreads. Thanks to ample U.S. dollar liquidity availability, particularly to our financial institution clients throughout the region, representing more than half of our exposure. In addition, during the first quarter of 2021, LIBOR-based lending rates continued its downward-trip pricing While in the case of liabilities, this repricing was faster and mostly took place in 2020, as the bank's interest rate gap was favorably positioned for a decrease in market rate back in March of 2020. The negative rate effect of $4.4 million was partly offset by the 3% quarter-on-quarter increase in average loan portfolio, coupled with lower funding to finance a decreased cash position, with a combined net positive volume effect of $1 million on NII. On to slide 11, we present the evolution of allowances for credit losses, which reflects the bank's high-quality credit exposure, having 57% of its commercial portfolio and 84% of its investment portfolio in investment-grade countries. so that 95% or $5.8 billion of all credits are classified as low risk or stage one under IFRS 9. This includes increased origination in lower risk countries, such as Chile and Uruguay, as well as financial institutions in Brazil, all of which generally have a relatively lower collective reserve requirement. Exposure with increased risk or IFRS 9 Page 2 represents 5% of the total exposure and includes loans in our watch list totaling $9.3 million, as well as exposures in countries and sectors assessed by the bank as having increased risk since their origination, amounting to an additional $280 million, down $42 million from the previous quarter. As the bank continues to collect exposures to higher-risk countries, such as Argentina on a timely basis. Non-performing stage three loans remain unchanged from the previous quarter at $11 million, representing 0.2% of total loans. As a result of all these, there was virtually no impact in credit provisions during the first quarter of 2021. Overall, the bank's total allowance for credit losses which incorporates forward-looking expected losses under IFRS 9, represented 73 basis points of the total credit portfolio at March 31, 2020. And all of the bank's exposure remains current. With this, let me turn the call back to Jorge.