Bladex, Inc. Class E

Hello, everyone, and welcome to Bladex's fourth quarter 2021 conference call on this 22nd day of February 2022. 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 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 and such as statements regarding Bladex's future results, plans, and anticipated trends in the markets affecting its results and financial condition. These forward-looking statements are Bladex's expectations on the day of the initial broadcast of this conference call, and Bladex does not undertake to update 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, Chelsea, and good morning, everyone. I'm here today with our CFO, Annie Mendez, our Chief Commercial Officer, Sam Canineu, and a few other members of the executive team. Today we will discuss fourth quarter and year-end results for 2021. Please let's go straight to slide three. All right, so simply put, last quarter was the best quarter for our bank since 2019. Profits were up 28% quarter-on-quarter, 27% year-on-year. Quarter portfolio continued the growth trend. now for six consecutive quarters. In Q4, the commercial portfolio grew 6% from previous quarter, and that's 24% year-on-year. Lending spreads also increased by eight basis points, while funding costs remain stable. Our fee income was 30% higher than the previous quarters, basically driven by our loans indication and letters of credit business. All this while operating expenses and credit quality remain under control. Annie will later comment on dividends and no surprises there and on the stock repurchase program that was completed last year. But the real question is, of course, what exactly is behind this positive trend and whether it is sustainable going forward in the current environment. We'll be addressing that too later in this presentation. Moving on to slide four. In this slide, we show the usual waterfall graph that illustrates the fast turnover of our portfolio during the quarter. In this quarter, Q4, we had more than $4.3 billion in credits maturing, and we were able to disburse $4.7 billion That's more than 70% of our book in one single quarter. Last quarter was the biggest quarterly disbursement since the second quarter of 2018. There are a couple of important insights that are not captured in this graph. First, almost $1 billion of those $4.7 billion is very short-term financing, basically generated through our vendor finance in the commodity sector. blogs, or trade finance business. Second, there are two main reasons why, despite the relative high impact of this short-term financing, margins increased by 13 basis points on new disbursements. One, we originated over $500 million in medium-term deals with approximately three years of average life. And two, financial institutions spread in the region increased by five basis points on average. In slide five, we show the breakdown of our portfolio, both in terms of countries and sectors. No significant changes here. Most of our growth for the quarter was in Colombia with financial institutions and in Peru in the oil and gas sector. Most of this growth is in resilient sectors and In slide six, we illustrate growth of our investment portfolio. During the last quarter of 2021, the bank's investment portfolio grew by $54 million, a modest amount compared to the two previous quarters. As these investments are conceived as a complement to our loan portfolio, the bank decided to adopt a more gradual pace of new bond purchases in view of the robust performance of the commercial team led by Sam here, and the expected anticipation of great hikes for 2022. In slide seven, we see both assets and liabilities evolution for the quarter, but perhaps more importantly, the trend since 2019. On the left, on the asset side, we show consistent growth trends in both the commercial portfolio and the credit investment ultimate portfolio that has grown 10x since 2019. Today, interest rate, interest earning assets are higher than pre-pandemic levels by almost 10%. On the right, we illustrate the evolution of Blythe's funding structure. In Q4, we saw a slight reduction of the bank's deposit base, which nevertheless remained above $3 billion. This is a seasonal behavior typical of the last months of the year. As a matter of fact, we have already seen a rebound in deposit volumes earlier this year. The bank has been making more intensive use of bilateral lines, private placements, through its EMTN program and repos to fund the growth of both the loan portfolio and the investment portfolio. In addition to this, in order to further reinforce the bank's funding base, in November, we successfully completed a new debt placement in the Mexican market for 3 billion Mexican pesos. $150 million, which was considerably oversubscribed and followed by a reopening of a similar amount, also oversubscribed a few weeks ago in late January. Finally, the bank has also launched a global syndicated loan, which we expect to close early March. With these new resources, DICE is well prepared to keep funding its asset growth while maintaining a cost-efficient and resilient funding base. I'm going to leave it here for now and turn it to Annie so she can walk you through our P&L. Afterwards, I will make some closing comments related to how VLADIX is positioned to tackle the current environment, particularly as it relates to raising rates in the U.S., and also in Latin America. Annie?

Thank you, Jorge. Good morning, everyone. I'm happy to comment on Braddock's fourth quarter results, starting on slide number eight. The profit for the fourth quarter of 2021 was up by 28% on a sequential quarterly basis and up 27% year-on-year, reaching over $20 million. Driving these results were top-line revenues, up 11% quarter-on-quarter and 18% year-on-year, with a positive quarterly trend on both net interest income, or NII, and fee income, coupled with relatively stable operating expenses. NII quarterly growth was supported by higher credit portfolio balances on the back of strong loan origination and the ongoing buildup of the bond portfolio, complemented by a pickup in lending spread, reflecting growth in medium-term lending, as Jorge just mentioned, and higher loan demand on the back of increased trade volumes and commodity prices. Free generating business recorded a strong quarter, up 31% quarter-on-quarter and more than doubling year-on-year, as the bank continued on a good performance of its letters of credit business and a solid quarter in its transaction-based structuring, and syndications activity after closing two transactions during the quarter, consolidating its reactivation during 2021, following a pandemic year 2020 with practically no market activity in this segment. Moving on to slide nine, we can see the annual profits evolution, having recorded $62.7 million for the year 2021, slightly lower than the year before, down 1%, and still trailing pre-pandemic levels of $86 million in 2019. The main factor impacting annual profit has been lower net interest income, down 6% year-on-year, and well below 2019 levels, mainly on the account of lower market rate, hardly compensated by increased average balances, as we shortly see in more details. Strong fee income was up 76% year-on-year and exceeded 2019 levels by close to $3 million, or 17%. These increases are mostly related to higher fees from the letters of credit business, as a result of the bank's focus on enhancing its capabilities for its trade finance products deployment. The combined NII and fee income effects resulted in an annual increase in revenues of 5%, while expenses returned to pre-pandemic levels, although still slightly below 2019, but increasing by 7% year on year. On slide 10, there is more detail on the elements driving NII's annual evolution. As presented in the graph at the top left, the combined effect of increased average productive assets, both the loan and investment portfolios, coupled with reduced low-yielding liquidity levels, with cash balances mostly invested in the Fed, resulted in a positive net volume effect of close to $20 million when compared to 2020. Lower market rates, however, have had the most relevant impact in NII evolution, negatively affecting it by close to $26 million year-on-year, so that overall, Annual NII was down by close to $6 million in 2021 when compared to the year before. To illustrate this, in the graph at the bottom left, the bar series represent the average loan and financial liabilities base rate, priced on market libel rate. Both have come down by over 220 basis points from 2019 level. During 2020, liabilities repriced faster than loans But in 2021, both loans and financial liabilities completed the repricing at prevailing low market rates. We also present the all-in rates for loans and financial liabilities in the line series of that same graph, illustrating the rate differential between them both during 2021 has reached the same level than in 2019. So 2021 depicts a normalized year in terms of net lending spread after an increase during the peak of the pandemic in 2020, with lower market rates representing the main difference with respect to 2019. This is the main reason why net interest margin, that is net interest income to total average earning assets, has come down to 1.32%, compared to 1.41% in 2020 and 1.74% in 2019, as shown in the graph at the bottom right. On the other hand, net interest spread, or the all-in rate differential between average earning assets and financial liabilities stood at 1.15% in 2021, relatively stable compared to 1.13% in 2020 and 1.19% in 2019. The fact is that as the majority of the bank's assets and liabilities reprice in a very short tenor, market rate variations impact the yield of equity invested in productive assets with the full effect in place once the repricing in both sides of the balance sheet have finalized. Moving on to slide 11, the evolution of asset quality and allowances for credit losses continues to reflect the bank's high-quality credit exposure in its commercial and investment portfolios. Provisions for credit losses during the quarter amounted to $0.2 million for a total of $2.3 million during the year 2021, mostly related to credit portfolio growth and also reflecting the bank's sound asset quality with close to 0% in NPLs and the remaining exposure performing well. During 2021, the bank reduced its IFRS 9 Stage 2 credit, representing loans with increased risk since origination, to a level of 2% of total credits, down from 6% a year ago. These credits mostly relate to exposures in countries and sectors downgraded by the bank at the onset of the pandemic in 2020, classified as high risk at the time. These exposures have been consistently reduced over time as they were able to sort out the effects of the pandemic. The remaining exposure at year end 2021 accounting for 98% of total credit is categorized as stage one or low risk with credit provisions calculated for one year expected losses as opposed to lifetime in stages two and three. Finally, on slide 12, we present several aspects with respect to the bank's capital level and capital management. At year-end 2021, Basel III Tier 1 capitalization, considering the bank's credit loss history through the Advanced Internal-Based Ratings Approach, or IRB, remained solid at 19.1%. Also strong and well above the regulatory minimum of 8%, to the capital adequacy ratio of 15.6%, calculated under Panama's banking regulators' metrics, which considers the Basel standardized approach for credit risk-weighted assets calculation. The Board recently declared a quarterly dividend of $0.25 per share, stable from preceding quarters, and representing 46% of quarterly earnings. In addition, towards year end, Bladex completed its open market stock repurchase program for a total $60 million under the SEC Rule 10b-18, through which a total of 3.6 million Class E common shares were repurchased at prevailing market prices, resulting in a volume-weighted average price of $16.86 per share since the program was launched in mid-May of 2021. So at December 31st, 2021, after the completion of the program, the bank's Class E shares listed in the New York Stock Exchange and representing the public float accounted for 77% of total outstanding common stock, down from 79% at year-end 2020. At the same date, Class A shares held by Latin American central banks or their designees own 17% of total common stock with the remaining 6% in Class B shares owned by financial institutions and which have convertibility rights to Class E shares at no discount. With this, let me now turn the call back to Jorge. Thank you very much.