Bladex, Inc. Class E

Good morning, everyone, and thanks for joining our fourth quarter 2022 earnings call. Before we begin our presentation, allow me to remind you that certain statements made during the course of this discussion may constitute forward-looking statements which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to materially differ, including factors that may be beyond the company's control. For a description of this risk, please refer to our filings with the U.S. Securities and Exchange Commission and our earnings release. Speaking today's call is our CEO, Jorge Salas, and our CFO, Ana Mendez. Also joining us today are some of my colleagues from the executive team that will be available for the Q&A. With this, let me turn the call to Jorge. Please go ahead.

Gracias, Carlos. Hello, everyone, and thank you for joining. Today, we will discuss our fourth quarter results and take the opportunity to summarize the progress on the execution of our first year of our five-year strategic plan. Let me start by reviewing the highlights of 2022, and then I will turn the call to Annie, our CFO, who will explain the fourth quarter results in detail. Finally, I'll make some closing comments related to the outlook for 2023 how we're navigating the current environment, and provide some guidance. Let me go straight to slide three, please. Amid geopolitical tensions, record high inflation, and a global slowdown, Vladex delivered very strong results. In 2022, we managed to grow our loan book as much as 18% during the year, increase our margins, and maintain a very robust as a quality. Our NII was up 71% year-on-year. Net interest margin increased almost 40 basis points. In fees, both syndication and letter of credit fees were up 8% year-on-year. The results, net income for the year is almost 50% higher than last year. Return on equity is almost 300 basis points higher than last year. And perhaps more importantly, the trend, as we will see now, is very positive. Behind these results, there is a renewed management team that is carefully executing a well-thought-out strategy designed to capitalize the strong upside potential of our unique business model while taking advantage of the current macro scenario. Economic activity in Latin America exceeded our expectations and remained resilient last year. the region grew almost 4% and foreign trade flows reached record high. The anticipated and decisive action of Latin American central banks, our Class A shareholders, allowed a gradual absorption of global shocks. There is no doubt that the economic activity in the region, together with tight credit markets and high commodity prices, had a positive impact on Black's performance. Having said that, the main drivers of the solid financial results for 2022 were largely the product of the execution of our strategic plan. Moving to slide four, let me give you a brief update on the progress of our strategic plan. As I mentioned during our investor day in November, Black's has a clear opportunity to increase its profitability without changing the essence of its business model. Optimizing capital allocation, increasing cross-sell with fee-generating products, automating key processes, expanding our client deposit base, and growing our customer base without changing our credit risk appetite are some of the avenues for growth in the plan. Our renewed commercial team, now headed by Sam Canineo, has been able to expand our client base by 29% thus far. All of our new clients have the same risk profile that our current client base, top-tier corporations in the region. Furthermore, 42% of the average growth in 2022 came precisely from clients that were added during the year. The commercial team was also able to capitalize on our single point of contact model and managed to increase product penetration by 15%. That is 15% of our customer base has now at least one additional product. Moreover, we were able to increase our corporate deposit base, which together with a fixed rate medium term funding that the bank has been securing since 2020, have been key to mitigate the impact of interest rate hikes on our cost of funds. All of this was possible not only because we added new bankers in key markets. It was possible because we also streamlined our new client onboarding processes, reducing new onboarding time by 43%, and also redesigned our key operational procedures to reduce inefficiency allowing for additional transactional volume, which has increased already 30% over the last year. I'm going to leave it here for now and turn the call to Ani, our CFO, who will walk you through our fourth quarter results in detail. Ani?

Thanks, Jorge. Good morning, everyone. I am pleased to present our quarterly and annual results, starting on slide five. with a $31 million profit for the fourth quarter of 2022, reaching a total of $92 million for the year, denoting a 47% annual increase. In turn, annualized quarterly ROE has also been increasing, reaching a level of 11.6% in the fourth quarter, positioning the bank for sustained two-digit ROE. Actual ROE for the year 2022 reached close to 9%, up by 284 basis points from the previous year. In the next few slides, I will give you more color on the main drivers sustaining the positive trend that flowed to our bottom line and increased profitability. Turning to slide six, total assets increased by 15% on an annual basis to $9.3 billion, on the back of strong 18% growth in the loan portfolio, reaching $6.8 billion at year end, including another $0.9 billion in contingencies, mainly consisting of the issuance and confirmation of letters of credit Bladex's commercial portfolio closed at $7.7 billion, an 18% increase from the previous year. This strong growth in Bladex's core business reflects its focus on enhancing cross-selling and expanding the customer base, while taking advantage of the macro environment in LATAM with increased economic and trade flows activity. The bank's commercial business is complemented by an investment portfolio, allowing for further diversification of exposures by country, with a balance of over $1 billion at year-end. In addition, the bank's cash and due from banks, mostly placed with the New York Federal Reserve, stood at 13% of total assets at year-end. following a prudent liquidity management under Basel III standards as required by Panama's banking regulator. Turning to slide seven, you can see the high turnover of our commercial portfolio with maturities exceeding 60% of the total during the quarter and disbursement for a similar amount allowing us to quickly pick up the trend in higher lending spreads, which we continue to experience for several quarters now, as we continue to focus on margin expansion through optimization of portfolio mix and risk-adjusted returns. Hence, the average lending spread over the market base rate, which is mostly suffered, for the fourth quarter stood at 2.81%, denoting a 66 basis points increase from a year ago. The average duration of the portfolio remains short, at close to 12 months, with 72% maturing within the next year. As shown in slide number eight, our funding structure they will diversify. Deposits have historically represented an important and resilient source of funding throughout economic cycles, while also being the most cost-effective one. As of December 31st, 2022, deposits represented 40% of total funding, 45% of which came from our central bank class A shareholders, another 39% from our client banks and corporations, and the remaining 16% relate to our Yankee CD program. Apart from deposits, BLAGS' funding comes from several sources across the globe, including ample availability of bilateral credit lines from a wide range of correspondent banks, and the continuous access to the debt capital markets, as well as the global syndicated loan market. Turning to slide 9, VLADIX remains well capitalized, reaching a Basel III-TO1 ratio of 15.3%, and the Panamanian Regulators Capital Adequacy Ratio of 13.2% at year-end. During 2022, BLADIS achieved a more efficient use of capital, having increased its loan portfolio at higher margins and returns. As we commented on our last quarterly call, we saw a deceleration in loan growth during the fourth quarter, having favored margin expansion over balance sheet growth, while remaining committed to a sound capital position a pillar of our business model. In addition, the board recently declared a dividend of 25 cents per share for the quarter unchanged from preceding quarters and representing a payout of 29% of four quarter earnings. Turning now to slide 10. We present the continued positive trend in net interest margin and spread, driving strong top line performance. Net interest spread, representing the rate differential between interest earning assets and financial liabilities, reached 1.63% in the fourth quarter 22. An increase of 20 basis points from the previous quarter and of 37 basis points from a year ago, mainly on account of increased lending spreads. In turn, net interest margin, representing the yield of interest earning assets, including the portion financed by the bank's equity, reached 2.11% in 4Q22, an increase of 34 basis points from the previous quarter and of 69 basis points year-on-year, supported by both higher net interest spread and by the impact of increasing market rate on the overall yield of assets financed by the bank's equity. Moving on to slide 11, we can see that the overall impact of rate increases on assets and liabilities supported by higher lending spreads and market rates, as I just stated, was the reason behind about half of the $61 million increase in net interest income for the year 2022. The other half is attributed to strong average credit growth, mainly on the loan portfolio, which increased by over $1.4 billion, or 28%, when compared to the year before. complemented by another $536 million growth in average credit investment portfolio, accompanied by the related increase in financial liabilities and a continued prudent and proactive liquidity management. On slide 12, fee income from letters of credit have shown an increasing quarterly trend throughout 2022. resulting in a total of $14 million for the year, representing a 16% annual increase from the previous year. The other important component of fee generation for the bank relates to the structuring and syndication business. Given its transaction-based nature, its activity should be analyzed annually. rather than on a quarterly basis. So for the year 2022, it also showed stronger results, increasing by 15% to a level close to $5 million. As shown on slide 13, Bladex maintains sound asset quality levels. Low risk stage one exposure accounted for 98% of the total credit portfolio at $8.5 billion at year end. Accounting for another 1.7% were credits classified as Stage 2 for a total of $147 million, representing closely monitored credits which have experienced increased risk since origination but are still performing. Stage 3 or impaired credits represent merely 0.4% of total exposure for a total of $35 million at year-end 2022, as we classified new credits for a total of $25 million as impaired during the fourth quarter. total reserve coverage is about two times the balance of impaired credit. Total credit provision charges for 2022 amounted to $19.5 million, related to increased individually allocated allowances to Stage 3 credits, as well as to an increase of Stage 1 collective reserves on credit portfolio growth during 2022. On slide 14, we can see a positive trend in the bank's efficiency as solid revenue growth has consistently overcompensated higher expenses by design. For the year 2022, the cost to income efficiency ratio stood at 33% compared to 38% in the previous two years. With a focus on strengthening Bladex's execution capabilities, expense increases mainly reflect a higher salary base on new hires and a new performance-based variable compensation structure, along with other expenses related to strategic initiatives to improve processes and technology. Let me leave it here. and turn the call back to Jorge for his final remarks. Thank you.