Bladex, Inc. Class E

Good morning, ladies and gentlemen, and welcome to Bladex's third quarter 2024 earnings conference call. A slide presentation is accompanied in today's webcast and is also available on the investor section of the company's website, www.bladex.com. there will be an opportunity for you to ask questions at the end of today's presentation. Please note today's conference call is being recorded. As a reminder, all participants will be in a listen-only mode. I would now like to turn the call over to Mr. Jorge Salas, Chief Executive Officer. Sir, please go ahead.

Good morning, everyone, and thank you for joining us today to discuss our third quarter results. I'll begin with an overview of another record-breaking quarter for Blacks. Following that, Annie, our CFO, will provide a detailed analysis of our financial results for the quarter. Right after that, I will update you on the progress of our strategic plan and also provide a revised guidance for the remaining of the year. After that, we'll open the call for questions. So moving on to slide two, the summary slide. On the balance sheet, the commercial portfolio reached $9.7 billion for the first time, representing a quarter-on-quarter growth of 5% and a year-on-year growth of 17%. Deposits also 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. This remarkable growth in our most cost-efficient source of funding is a result of the coordinated efforts of our commercial and treasury teams, guided by clear deposit growth KPIs in their balance scorecards. The resulting shift in the funding mix has allowed us to reduce our funding spreads. We're very pleased with the progress, but more importantly, we see significant potential for further expanding our deposit base in the near future. On the P&L side, despite the more competitive lending environment due to increased dollar liquidity, widely open debt capital markets for Latin American stop names, the lower local interest rates in most countries, we have once more achieved record results. I would especially like to highlight the evolution of non-interest income. Total fees for the first three quarters are up 45% compared to the same period last year. The letters of credit business also had a record performance generating $7 million in the last three months, a growth of 8% Q&Q and 12% year-on-year. Syndication fees decreased slightly this quarter, but we feel confident that with the pipeline we have, we are on track to close the year also with record figures in both number of deals and total syndication fees. Regarding expenses, as we have forecasted in previous calls, our costs have increased in line with the anticipated investments required by this second phase of our strategic plan. As a result, and in line with expectations, our efficiency ratio rose slightly to 27%, which is in line with the guidance we have been providing for the year. These strong financial results culminated in a record net income of $53 million for the quarter, a 16% increase compared to the same period last year, which results in a return on equity of 16.4%. Given this stronger than expected performance, I will provide you all with a revised guidance for the year before opening the call for questions. Let me now hand it over to Annie, our CFO, for a detailed financial analysis. Annie, please go ahead.

Thank you, Jorge, and good morning to everyone. Let's now move to slide three. Quarterly profitability continues to be enhanced by sustained top-line performance, as Jorge mentioned, driving third-quarter net income to $53 million, marking an annual increase of 16% and up by 6% quarter-on-quarter, and representing a $1.44 per share. Year to date, net income for the first nine months of this year reached over $154 million, a solid 29% growth from the same period of last year. In the graph, you can see the growth trend since we started executing our strategy in 2022, with year to date results that have more than tripled from 2021's levels. The bank has sustained its profitability for the last three quarters at an ROE level above 16% and an ROA of 1.9%. When compared with the levels observed at the inception of our strategic plan, ROE has tripled from the same period of 2021, while ROA has more than doubled. Let me now go into more detail over balance sheet growth and other profitability drivers into more detail, starting with the asset composition on slide four. Total assets reached $11.4 billion, up by 13% from last year and 5% quarter-on-quarter. This was mainly the result of strong loan growth, surpassing the $8 billion mark for the first time in Bladex's history, up by 17% from last year and 9% from the preceding quarter. The commercial portfolio, which includes loans and off-balance sheet items, reached $9.7 billion, as our significant loan growth was coupled by a letter of credit business continuing to grow in scale. A liquidity position of $1.7 billion, mostly placed with the New York Fed, represented 15% of total assets and 30% of deposits, reflecting a prudent liquidity management aligned with Basel's liquidity coverage ratio. As can be seen in slide number five, on the left-hand side, the securities portfolio amounting to $1.2 billion is mostly placed with investment-grade non-LATAM issuers, mostly from the U.S., therefore providing further country risk diversification to our overall credit exposure. Most of this portfolio is booked in our New York agency and is therefore eligible to be discounted with the Federal Reserve, allowing for contingent liquidity funding if needed. The portfolio has a relatively short duration, with an average remaining tenure of approximately two years. The composition of the commercial portfolio on the right denotes a well-diversified country exposure across LATAM. Brazil and Mexico represent strategic markets for Bladix, given the size of their economies and relevance to the trade activity of the region. They are among the bank's top country exposures at 14% and 11% of the total, respectively, along with other relevant country exposures in South America, such as Colombia at 11% and Peru at 9%. We are also focusing our growth strategy in certain Central American and Caribbean countries, particularly the Dominican Republic and Guatemala, both with good economic fundamentals where we continue to execute on solid risk-reward opportunities, each representing 10% of total exposure at quarter end. The commercial portfolio remains short-term in nature, with 75% scheduled to mature within the next year, having an average remaining tenure of 12 months at quarter end. In fact, the portfolio has a high rotation of about two times in a year. This means that more than half of the portfolio matures every quarter, and new loans are placed. This agile business model allows us to quickly react to market conditions and be able to jump on profitable opportunities as they arise. This agile short-term business model with a top tier client base of banks and corporations across Latin American countries and industries is the foundation of Bladix's strong asset quality as shown on slide six. At quarter end, 95.7% of the credit portfolio, including loans, investment securities, and off-balance sheet items, was classified as low risk or Stage 1, as defined by IFRS 9. Only 4.1% of the portfolio was classified as Stage 2, down from close to 6% in the preceding quarter, as we collected maturities of exposures that had been classified in Stage 2 during prior quarters. Although Stage 2 exposures represent credits with increased risk since origination, all of them are currently performing. Finally, only a minimal 0.2% of total exposure is classified as Stage 3 impaired credits or NPLs, amounting to $17 million, with a total reserve coverage of close to five times. During the third quarter, a $7 million loan was classified from Stage 2 to Stage 3. This represents an isolated Colombian exposure in the oil and gas supply chain sector, which has been in runoff mode since before the pandemic and which in our assessment has recently further deteriorated. Credit provision charges for the third quarter were $3.5 million, mostly relating to individual reserves in Stage 3, partly offset by a $1 million recovery from a loan charged off several years back. Overall, the quality of the portfolio remains strong with a robust reserve coverage. Now moving to slide 7, our well-diversified funding sources continue to support strong asset growth. Our deposit base carries on with a strong growth trend, reaching yet another record level at $5.6 billion at quarter end, representing a notable 34% annual growth and 7% quarter-on-quarter. Deposits now account for 59% of total funding. Our Class A shareholders, mostly central banks who place part of their U.S. dollar international reserves with us, account for 43% of total deposits, a very stable source of funding over time. The remaining 57% comes from our client banks and corporations, a source that has been showing a positive growth trend over the last several quarters as a result of our cross-selling efforts. 24% of total deposits at the end of September came from our Yankee CD program, which operates out of our New York agency, predominantly through brokers-dealers distribution, and continues to provide both volume and granularity. The bank's equity position presented on slide 8 continues to be enhanced by strong earnings generation, remaining within our target capitalization levels despite strong balance sheet growth. Our board recently declared a 50 cents per share quarterly dividend, marking the third consecutive quarter at this level on the back of strong financial performance. We expect earnings generation to continue to support business growth as well as dividend distribution as decided and declared by our board on a quarterly basis. Moving on to P&L performance on slide nine, you can see the evolution of net interest income and margins. Net interest income of $66.6 million for the third quarter was up by 10% from the year before and by 6% from the preceding quarter. This top-line growth is mostly explained by the net effect of higher average loan balances, which were up by 9% annually and by 3.5 quarter-and-a-quarter, improving the mix of average interest-earning assets and positively impacting net interest spread and net interest margin. Despite a more competitive market environment, as Jorge pointed out, we have been able to sustain lending credit spreads over the last several quarters as we continue to emphasize on pricing optimization, coupled with improved levels of funding spreads benefiting from increased deposits. Hence, net interest spread and net interest margin for the quarter reached 1.78% and 2.55% respectively. Year-to-date, NIM at 2.49% reflects our stated target levels. As showcased in slide 10, the bank had a solid fee income performance, reaching $10.5 million for the quarter and $32.5 million for the first nine months of the year. This represents a 45% increase compared to the first nine months of last year. Our letter of credit business continues to perform well, with fees for the third quarter of close to $7 million. As we have mentioned before, the continued growth in this business has been the result of streamlined processes and client additions. We are currently in the process of implementing our new ELSI platform, which should start to bear fruits towards the end of next year, when we should be able to further scale this important fee revenue stream. Structuring and syndication fees decreased during the third quarter to $1.5 million, having closed two transactions after a stellar second quarter when we were able to close five transactions. As this is a transaction-based business, we see some quarterly fluctuations. But in any case, we foresee a strong performance for the remaining of the year with a solid pipeline of transactions on the way. On slide 11, even though expenses for the third quarter increased by 15% quarter-on-quarter and 8% from last year, our cost-to-income ratio stood at 27% right on target. The main driver in expense growth is a higher salary base due to increased headcount aimed at enhancing business volumes through product deployment and client additions, as well as new functions supporting our strategy. Personal expenses for the quarter also increased on the account of higher provisions for performance-based compensation, given yet another year of earnings growth above our initial projections. Let me leave it here for now and turn the call back to Jorge. Thank you.