Banco Latinoamericano de Comercio Exterior, S.A.

Good morning, ladies and gentlemen, and welcome to Bladex's third quarter 2025 earnings conference call. A slide presentation is accompanying today's webcast and is also available in the investor relations 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 that today's conference call is being recorded. As a reminder, all participants will be in listen-only mode. I will 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 to discuss our third quarter results. I'll start with the quarter's highlights, and then Annette will walk you through the financials in detail. After that, I'll briefly comment on the region's economic outlook and also provide an update on the implementation status of the two main IT platforms that underpin our path towards scalability and enhanced fee generation. After that, we will open the call for questions. Despite the more challenging environment marked by rate cuts, high regional liquidity, and wide open capital markets for Latin American issuers, at historically tight spreads, we delivered very solid results in the third quarter, fully aligned with our expectations and guidance. And I'm particularly proud of the fact that in mid-September, we successfully issued our first additional tier one capital instrument. The deal was led by JP Morgan and Bank of America as joint book runners and was more than three times oversubscribed. It attracted investors across Latin America, the United States, Canada, Europe, and the Middle East. I want to recognize Annette, our CFO, for her leadership in this landmark transaction for Blavix. Annette will cover the details shortly. The objective of this additional Tier 1 capital is straightforward. Strengthen our capital base to support the very robust pipeline of high-value transactions we're building and executing. This will ensure we sustain growth through the remainder of this year and into the future. Now, turning to our commercial portfolio, balances were stable quarter over quarter and up 12% year over year, driven by loan origination in Mexico, Guatemala, and Argentina. Notably, the commercial team has continued to onboard new clients. As a matter of fact, new client onboarding is up 7% year to date. Regarding funding, deposits rose 6% quarter on quarter and 21% year on year with a quarter end record of $6.8 billion. The quarter also benefit from another significantly oversubscribed issuance in the Mexican debt capital markets, allowing us to secure medium term funding at highly competitive terms. On the P&L front, interest income was stable quarter over quarter, despite the impact on rate cuts and ample market liquidity. Non-interest income performed well, down sequentially given the one-off transaction we highlighted last quarter, but up 40% year over year, supported by strong activity in both letters of credit and our syndication and structuring team. During the third quarter, Blight acted as sole lead ranger in the acquisition financing of Cemex Panama by a leading Dominican business group. Another clear example of how Blight supports intra-regional expansion across Latin America. Our net interest margin show a slight decline of four basis points down to 232%, but still remains above our full year guidance. This stability on margins is a reflection of proactive portfolio management, including a shift towards corporate clients that now represent 73% of our portfolio versus 68% last quarter, and a healthy momentum in medium-term transactions, all without extending the average duration of our commercial exposures, which remains slightly below 14 months. Operating expenses were stable and our efficiency ratio closed at 25.8%, even better than our full year guidance of 27%. We closed a solid quarter with $55 million in net income and a 15% return on equity. The quarter-over-quarter decline in ROE reflects the one-off transactions reference in Q2, as well as the delusion from the increase in the capital base resulting from our AT1 issuance. If you exclude these two effects, it is very clear that the performance is consistent with the guidance for the year. Let me now hand it over to Annette for a more detailed look at the financials. Annette, please go ahead.

Thank you, Jorge, and good morning, everyone. Let me walk you through the main financial highlights for the third quarter, which once again reflects disciplined execution and solid results, supported by resilient margins and strong fee generation, while further strengthening our capital and funding base, all of these while navigating a more competitive environment with abundant liquidity and continued rate cuts. Let me start with capital, given the relevance of the 81 issuance this quarter. In September, we executed a $200 million perpetual non-call seven additional tier one for 81. Market conditions were exceptionally constructive for this asset class. And we timed the issuance to capture a favorable window with comparable 81s trading near historical tight spreads and well below our estimated cost of equity. This instrument is Basel III compliant and meets local regulatory requirements, and under IFRS, it is recorded as equity, further strengthening our capital base. Its perpetual non-code 7 structure provides the optionality to re-tap the instrument over the next two years if additional capital is required while still in full compliance with local regulation, giving us the flexibility to support portfolio growth and capture opportunities across the region while maintaining a solid capital position. Following this transaction, our regulatory capital adequacy ratio rose to 15.8% and our Basel III tier one ratio increased to 18.1%, both comfortably above internal targets and well ahead of regulatory minimums. This additional layer of capital reinforces our strong positions and keep us well prepared to execute on our growth plans. In lines with these solid fundamentals, the board approved a quarterly dividend of 62.5 cents per share, consistent with recent quarters, representing a 42 payout ratio, reaffirming our confidence in the bank's sustainable earnings capacity. Let's now take a look at earnings and returns. Third quarter's net income total $55 million compared to 64 millions in the previous quarter, which included the extraordinary syndication fee from the StatSolid transaction book in the second quarter. This quarter's performance translate into a return on assets of 1.8% and a return on equity of 14.9%, fully in line with our full year guidance of 15 to 16%. The decline in ROE versus the prior quarter mainly reflects the impact of the 81 issuance in late September, which increased our equity base ahead of deployment, as well as the one-off fee recognized last quarter, which boosted those results. Looking at the first nine months of the year, ROA stood at 1.9% and ROE at 16.2%, highlighting the bank's solid and consistent profitability. As mentioned earlier, the AT1 is recorded as equity under IFRS, expanding the denominator and mechanically diluting the ROE. On this basis, our reported ROE was 14.9% for the quarter and 16.2% year-to-date. To provide additional clarity, we also calculated an adjusted return on equity, which excludes the AT1 from the denominator, reflecting the return to our shareholder base. This matrix provides a clear view of underlying profitability from a shareholder's perspective. Under this measure, the adjusted ROE was 15.1% for the quarter and 16.3% year-to-date, with the slight difference versus reported ROE mainly reflecting timing as the transaction closed late in September and its full effect will be seen next quarter. As we deploy the new capital into medium-term pipeline, we expect returns to normalize toward historical levels, reaffirming the strength and consistency of Bladex earnings model. Overall, this result confirmed that Bladex profitability is driven by a diversified and recurring earning base, not dependent on one-off transactions, and that our strategy continues to deliver sustainable, predictable returns. Let's move on to the credit portfolio. Total credit portfolio reached $12.3 billion, a new all-time high, up 1% from the previous quarter and 13% year over year, supported by growth across loans, contingencies, and investments, while maintaining a conservative liquidity position. Our commercial portfolio, which includes loans and contingencies, stood at $10.9 billion, reflecting a slight growth quarter over quarter and up 12% year over year. Within this total, the loan portfolio closed at $8.7 billion, an increase of 2% from June and 8% compared to last year, reflecting a steady client demand despite high market liquidities and tighter capital market spreads. In this environment, we continue to prioritize discipline short-term origination during the quarter, complemented by the execution of our medium-term pipeline. This moderation in growth also reflected prudent balance sheet management leading up to the 81 issues, as we maintain a capital accruation while the transaction's timing was being finalized. Now that the transaction has been completed, we are well positioned to resume discipline expansion in the coming quarters. On the contingent business side, which includes letter of credits, guarantees, and credit commitments, balances close the quarter at $2.1 billion, down 4% from the previous quarter after a very strong first half, but still 33% year over year. What is important is that our letter of credit business continues to grow, both in average volumes and fee income, showing healthy underlying activity. Letter of Credits remain central to this business line, directly supporting our mission of facilitating regional trade flows, while commitments have evolved into a resilient income source as we continue to structure medium-term transactions that foster lasting client relationships. With our new trade finance platform implemented, we are prepared to support higher transaction volumes of Letter of Credits and expand our client base. In terms of performance by country, Guatemala, Mexico, and Argentina were the main drivers of growth these quarters, reflecting healthy commercial activity and strong client engagement in these markets. Looking at the commercial portfolio diversification, financial institutions remain our largest exposure, representing about one quarter of total credits, while our exposure to corporate clients continue to grow across sectors and countries. This mix helps us to stabilize margins and reinforce the resilience of our earning base. Overall, our commercial portfolio continues to expand with discipline, supported by the successful completion of the 81 issuance, growth across key markets, and a well-diversified client base that positions us to capture new opportunities ahead. Now turning to the investment portfolio and liquidity. The investment portfolio total $1.1 billion, up 4% from the prior quarter and 18% year over year, consistent with our liquidity strategy. It remains predominantly investment-grade, about 88% of the portfolio, and is largely composed of non-Latin American issuers, providing both credit diversification and a reliable source of contingent liquidity. The portfolio is short in duration by design, with an average maturity of about two years, and is primarily held through our New York agency, where these securities are eligible as collateral at the Federal Reserve discount window. Liquidity ended the quarter at $1.1 billion, representing 15.5% of total assets, in line with our target range. As of September 30th, 95% of liquidity was placed with the Federal Reserve, highlighting our prudent and proactive liquidity management. Together, our high-quality, well-diversified investment portfolio and strong cash position with the Federal Reserve provides a robust liquidity foundation and the flexibility to fund new opportunities while maintaining a prudent balance sheet strategy. Let's now look at asset quality. Credit quality remains remarkably strong. By the end of the quarter, 97% of total exposures were classified as stage one, reflecting low credit risk across the portfolio, while non-performing loans stayed near zero, at just 0.2% of total credits. Our coverage ratio remained above five times, confirming the strength and resilience of our asset base. Provisions charges total $6.5 million, slightly higher than in the previous quarter, mainly reflecting the reclassification of a single client exposure from stage one to stage two. With this, total allowances reach $101.5 million, or 0.8% of total exposures, fully consistent with our prudent and proactive credit management approach. All in all, credit portfolio remains solid and well diversified, with stage three exposures stable at 0.2% and overall asset quality remaining very strong. Let's move on to funding, where we continue to see strong momentum in deposit growth. Deposits continue their strong upward trend, growing 6% quarter over quarter and 21% year over year. reaching $6.8 billion and now accounting for two-thirds of total funding, the highest share in Bladex history. Deposit growth was driven by corporate clients' deposits, which rose over 26 percent from June, supported by cross-selling efforts, while higher balances from financial institutions also contributed to the overall growth. At the same time, Class A shareholders' deposits remain stable, providing an anchor of funding stability. This performance highlights the depth of our client relationships and the success of our Yankee City program as a diversification strategy, which continues to lower our overall cost of funds. In July, we issued 4,000 Mexican pesos in the local market. The deal was very well received and oversubscribed, giving us a competitive cost and further diversifying our funding base. The proceeds were swapped to US dollars, which provided a cost-efficient source to fund new business opportunities. The favorable evolution of our deposit base combined with the proceeds from the 81 issuance provided the resources to repay our 400 million benchmark bond that matured in mid-September. And looking ahead, we continue to monitor medium-term funding opportunities to further diversify our investor base and maintain an efficient cost of funds structure. This combination of strong deposit growth and continued access to market funding has strengthened our liability profile, making it more diversified, stable, and well aligned with the growth of our commercial portfolio. Moving now to net interest income and margins. Net interest income remains stable at $67.4 million, showing resilience despite margin pressure from higher market liquidity, and the gradual impact of lower reference rates. Our net interest margin stood at 2.32%, down four basis points from the second quarter, while the net interest spread narrowed from 1.70 to 1.64%. This slight margin compression is the result of a short-term liability-sensitive position in the context of an inverted year curve. It also captures the initial impact of the recent Fed rate cuts on our liquidity balances, which will be followed by the repricing of the remaining assets and liabilities in the upcoming months, consistent with our largely neutral positions to base rate movements. These effects were partially upset by a lower cost of funds supported by continued deposit growth, greater funding diversification, and disciplined loan origination across the portfolio. Overall, margins remain stable and well-managed, reflecting disciplined pricing, a strong funding base, and the resilience of our core earnings models. Now let's turn to non-interest income. Non-interest income totaled $15.4 million for the quarter, following the record level we reached in the second quarter. If we exclude the extraordinary fee from the statutory transaction last quarter, this would have been a new record, with results stronger than our historical quarterly fee results, with contribution across all line of business. Free income this quarter was led by letter of credits and credit commitments, reflecting healthy trade activity and client engagement. As announced last quarter, we launched our new trade finance platform. And while we are still in the fine tuning phase, this marks a major step towards future scalability. The platform is expected to be fully optimized by the end of the year, enabling us to process higher transaction volumes and enhance client experience, reinforcing our competitive position in trade finance. In syndications, we closed four transactions totaling $431 million, including new originations and upsize deals across Panama, Costa Rica, Paraguay, and El Salvador. Among them was the acquisition financing for Cemex Panama, where Bladex acted as the sole leader ranger. Together, these operations generated around $2 million in fees, reflecting the depth and strength of our restructuring and distribution capabilities across the region. As we expand our presence in structured medium-term transactions, credit commitments continue to grow as a relevant and stable source of fees, since many of these deals include committed facilities as part of their structure. We also saw additional contributions from the other non-interest income sources. Our secondary market distribution desk generated almost $1 million in loan sales this quarter and about $2.5 million year to date. We expect this figure to continue rising over time as our deal flow expand and market activity remains strong. In addition, our treasury team closed a large interest rate swap tied to a project finance deal we led in Peru, a transaction that validates our growing project finance and infrastructure strategy. This type of business not only brings healthy margins and structuring fees, but also creates cross-selling opportunities in areas like derivative. These early derivative transactions mark an important first step in building our treasury-related non-interest income business, positioning the bank to capture future hedging and risk management opportunities once the Nasdaq platform goes live in the second half of 2026. overall fees and non-interest income and gaining strong momentum, supported by recurring fees, broader diversification, and solid activity in trade and syndications. They now account for around 19% of total revenues, up from 14% last year, and will continue to grow as new platforms and client solutions drive the next phase of our diversification strategy. Finally, let's look at expenses and efficiency. Operating expenses total $21.3 million, about half a million above last quarter, reflecting a 2% sequential increase. This was mainly driven by higher personal expenses related to compensation adjustments and new hires supporting strategic projects, partially offset by lower operational costs. As several technology and strategic initiatives move into production, we expect depreciation costs to begin rising next quarter. Our efficiency ratio closed at 25.8%, slightly better than our guidance of 27%, and we continue to expect to end the year within that range. This demonstrates our ability to grow revenues faster than expenses, while continuing to invest in modernization and future growth. Overall, BlackX continues to operate with one of the best efficiency levels among the regional peers, a reflection of disciplined cost management and our focus on sustainable growth. That concludes my reviews of the financials. I will now turn the call back to Jorge for his closing comments.

Thanks very much, Annette. Very clear. Great job. The global economy is adapting to a more protectionist trade setting. Recent agreements have tempered some tariff pressures and pushed growth expectations higher as recession risks have largely faded. Having said that, volatility persists. This is visible in international financial market swings and a stronger safe haven demand, including gold. In the United States, our base case continues to be a soft landing. However, inflation remains above target and could face upside risk from tariff tensions. In our view, this limits the scope for rate cuts and points to a structurally higher terminal rate than in the prior cycle. Latin America, however, has largely remained insulated from global trade frictions, supporting stable growth in 2025, although with significant variations across countries. The IMF now projects 2.4% growth for the region in 2025 and 2.3% in 2026. with the 2025 upgrade led by stronger performance in several economies, especially Mexico, where recession risks have diminished. As usual in Latin America, inflation is advancing unevenly. Most of Central America has converged faster to inflation targets, allowing lower policy rates, while the larger economies in South America and Mexico are normalizing at a slower pace, leaving less room for further interest rate cuts. For trade, the outlook is mixed. Tariff noise and policy uncertainty weight on Mexico and parts of Central America, while nearshoring and supply chain diversification continue to create structural opportunities, particularly in manufacturing and agribusiness. In this context, Bladex is well-positioned to help clients navigate uncertainty and capture these opportunities through medium-term structured solutions in our trade finance expertise, reinforcing our role as a trusted partner in cross-border flows. Next slide, please. Let me now close with a quick update on strategy execution. Since launching our strategic plan in 2022, we have strengthened our operating capabilities to support a meaningful growth in volumes and profitability. At the same time, we have developed new business lines to raise non-interest income and diversify revenue sources. As we announced last quarter, reaching full operational capacity on our new trade finance platform powered by CGI will take until next year. That said, the first quarter operation with the new platform is already delivering tangible results. Higher transaction volumes and faster cycle times, including shorter processing times for letters of credit. These early outcomes enhance the client experience and improve our operational leverage. Also, as you probably saw, we recently announced our partnership with Nasdaq's Treasury and Capital Markets platform. We selected its front-to-back, cloud-enabled, API-driven solution to scale Treasury and Capital Markets. The state-of-the-art platform supports client hedging in FX and rates, broadens local currency and structured funding, and automates core workflows, enhancing speed, controls, and risk management. Teams from both Bladex and Nasdaq are already making good progress on the implementation, and we expect to have the first phase fully operational by Q3 2026. Moving on to the next and final slide, just to note here that based on year to date performance, we reaffirm our full year guidance. With that, let's open the line for your questions.

Thank you very much for the presentation. We will now begin the Q&A section for analysts and investors. To ask a question, please press the button raise hand. If your question has already been answered, you can leave the queue by clicking on put hand down. For written questions, you may select the Q&A icon and type your name, company and question. Written questions that are not addressed during the earnings call will be returned by the investor relations team. Our first question comes from Inigo Vega with Jefferies. Mr. Vega, you may proceed.

Hi, good morning, everyone. A couple of very short questions. One is on capital. Obviously, you got the 81. You moved from a capital ratio of 15 to 18. So I'm wondering if you can give some color on what is your new target in terms of capital ratios once you've done this 81. And if you answer me like we're going back to 15, what is the timing to deploy that capital? Like how many quarters, how many years you could go back to if you say 15? The other question is on credit quality. I mean, I can see that stage three remains very low. And I think you commented that there's been a pickup on stage two. I mean, running the numbers, I get to something like 20 basis points more of credit. a stage two, which is like $50 million. So if you can sort of, you know, explain, you know, what is the visibility on that ticket, how concerned, and what is the sort of probability of default, I guess, you know, pre-classifications of of stage one to stage two is basically the day-to-day, but if you can give some color on that, it would be helpful. And probably the last one is, I reckon that you are working on a new estate plan. Do you have any timing in terms of announcing the new estate plan? And that's all.

Thank you. Thank you, Inigo. Good questions, as always. Regarding the capital, AT1, you know, you're right. I mean, our target remains unchanged in the mid-teens and 15. The AT1 transaction was more about having dry power there, too. to deploy, as we said, on the pipeline. In terms of that deployment, we expect to, you know, to put that additional capital to work over the, I would say, the 12, 18 months. You know, that's the time, that's a normal life cycle that... takes between origination, structuring, and syndicating the medium-term deal. So obviously, we'll prioritize risk-adjusted fee accretive opportunities. But the bottom line is the targets remain unchanged, and we'll deploy it in the next year to year and a half. So there's no impact on the guidance that we've communicated. the long-term guidances. In terms of increasing stage two, you're right. It was driven by mainly one client. In terms of how worrisome, Inigo, I'll put it this way. It's short-term. It's trade finance exposure, which is what we do. It's primarily letters of credit. to support imports for essential goods for the country. All facilities are uncommitted. They are maturing quarter by quarter. The client is current. We have increased reserves as we do with every loan that falls into into stage two, we're monitoring closely, but importantly, you know, even when running the stress scenarios with the info we have today and given the size and the terms, this will have no effect on our ROE we've indicated for the year. And that's why I just ratified the guidance. So in short, we're being prudent. We're on top of it. But this is as usual, and the bank remains strong. As far as the investor day, we're in the final stages of approval of our 2030 strategy and vision by the board. And we're super excited to host the new investor day with the 2030 vision in Q1. I mean, right after we have the the full year 2025 results. So right after we publish the first quarter, I mean, the end of the year 2025, I guess by the end of the first quarter, we'll share the 2030 plan.

Super clear. Thank you very much.

Our next question comes from Ricardo Busch-Pigel from BTG Pactual. Mr. Bush-Pigel, you may proceed.

Hi, everyone. I have a couple of questions here on funding. The bank deposit franchise has been growing very strong recently, especially in the last quarter, and its funding cost is a bit below the bank's overall borrowing cost, right? So I just wanted to understand whether this deposit would have mainly helped to lower the short-term funding cost over time, or if there could eventually... help to reduce long-term funding issues, bringing more meaningful reduction on NIMS. And it also will be great if you could comment on the opportunity to improve the funding costs with operational deposits, right? You already make several payments into our customer's account when you're granting loans, and I understand you already have been investing in this banking account offering. So I would like to understand whether we can see further contributions funding cost gains as kind of a low-hanging fruit over the next couple of years. Thank you.

The second question first on the... So let me start with the second question first on operational deposits. You're right. We see it as a low-hanging fruit. That's something that Bladix, despite being a trade bank, we don't... have too much of operational deposits. Of course, that involves some basic cash management capabilities that we're building. How are we going to do it? How much of that are we going to do? That's a big part of what the investor day is going to be telling about on Q1. So you have to wait until our investor day for that, but it could be a very significant upside there in terms of cost of funds. Regarding the shorter term investment, question on funding. It's true. I mean, this quarter, first of all, we had the AT1, and that helps, of course, fund that was an influx of $200 million. Then we increased deposits as obviously the more efficient cost of funding avenue that we have. And also we have an issuance in Mexico also at very good rates even when swap to dollars. So that was part of the increase in the, I mean, the benefit in cost of funds that we had this quarter. I don't know, Annette, if you want to compliment that.

This is Ricardo. Sorry. As Harry mentioned, funding keeps being complimented by the participation of deposits. We feel confident that going forward as we increase our cross-selling capabilities, we're able to keep growing our depositor base organically as we do the cross-selling and also as we increase our client base as part of the strategic plan. So we are projecting a growth in the organic deposits balances. And for the upcoming years, as part of the strategic plan, as Jorge mentioned, this will be further complemented with more powerful deposits from a cost point of view, even though these are new to the balance sheet.

Very clear. I'm just wondering that when I see the average balance of your interest-bearing liabilities that you have, like around a 2.6% billion dollars in terms of long term borrowings right I wanted to understand eventually if this component of the funding would be more diluted over time and this would improve your overall funding cost even without the benefits of the operational deposits or it should grow like kind of in a similar way over time like since it has a more long term duration what is the What can I expect here? Can the time deposits help to lower the funding costs on this longer part of the defunding?

Yes, Ricardo. I mean, as we have mentioned before, we always maintain a very well-structured funding profile, maintaining a percentage of funding in medium-term transaction, and that we're planning to do so. Here, I will pass the word to Eduardo from our treasury that can comment on different possibilities that we're seeing that will strengthen our medium-term funding structure.

Yes, Gerardo. Just to make it very, very short, I mean, on the one hand, the bosses have been growing and they're sharing the total funding, as you have seen. The incorporation of operational deposits, by definition, are much more stable, will very likely allow us to reduce the participation of medium term funding. But until that happens, video term funding will continue to have a similar participation on a funding mix because we want, as Annette said, we want to maintain a healthy maturity of our profile of our liabilities. Having said that, they have been gaining significant share as compared to other short-term sources of funding. So the expectation is that we will see efficiency, the cost of funding gaining efficiency in the next, in the forthcoming months. Eduardo Ochoa- Yes, and I would say that the key to reduce reliance on medium term funding will be the growth of operational deposit but doesn't mean that deposit will not benefit the overall cost of funds in other ways, because they have been replacing. Eduardo Ochoa- Other short term sources of funding that were more cost more costly for the bank.

Carlos Bernal- Perfect that's very clear, thank you. Carlos Bernal- Thank you, thank you.

Our next question comes from Daniel Mora with Credit Corp Capital. Mr. Mora, you may proceed.

Hi, good morning and thank you for the presentation. I have just two questions. The first one is regarding loan growth. I would like to understand where do you see the most interesting growth opportunities to deploy the 81 capital? Is there any market that is gaining your attention? Is Argentina a new option after the election results in the last weekend? That will be my first question. The second one is regarding NIM, considering that you use the sensibility to interest rates, what should be the NIM performance from current figures, considering one, the movement in interest rates, and two, the funding changes that you have been mentioning during the presentation. Thank you so much.

Thank you, Daniel. So the first question in terms of opportunities to deploy our capital in the pipeline, I'm going to let Samuel, our chief commercial officer, respond to that. But yes, we're being very cautious in Argentina. Argentina is one of those countries, and I'm going to let Samuel Sam, give a little bit more color on that pipeline. And then Annette will tackle the net interest margin question.

Sure. Well, we continue to see good momentum in the Central America region across the board. We're seeing a strong fit. In that region, with our enhanced capabilities of our structured trade and working capital solution business, with our project financing for structure business, and also our acquisition, financing, and syndication capabilities. There are less competitive pressure in that market, in that region, compared to South America. And of course, we see this positively and we drive resources accordingly. I think in South America, while we are ready to, we have more dry powder now with the 81 to tap potential opportunities that may arise from increased volatility in countries that will go through presidential elections next year, and there are a few. I would say that we see a more balanced growth in South America. We think important to say we keep building our pipeline for more structured transactions and syndicated ones in line with our target to continue to grow fees. I think also important that we are starting to see as we build up our derivative capabilities, the pipeline is starting to grow there and we hope to continue to show a gradual increase in that line of the business as well. And then going to Argentina. Yes, we have actually grew the last quarter. Argentina I think we're still, as Jorge referred to, we're still very selective and we are quite pleased with the quality and return for risk of our current exposure. We really only work with the top tier names, ones whom we have worked for years. We're mostly focused on exporters, dollar generating sectors, oil and gas and soft commodities. And while the quality of our exposure is not necessarily affected by an eventual change of government, We're very positive with the recent win of the ruling party in the latest elections, and that should bring good opportunities for us to grow, hopefully, next year. Thank you, Sam.

Hi, Daniel.

Net interest margin, right?

Yeah, sure. Regarding your questions regarding him, obviously the bank has been very successful as managing his assets and liability very proactively, and this is something that we'll keep doing. We have improved our mix both in the assets and liability side, increasing our exposure to corporates, increasing some of the medium-term transactions that we have been talking about that not only are very accreted from a margin point of view, but also from a fee point of view, trying to mitigate our impact of interest rates in our bottom line. So we'll keep doing that. Obviously on the liability side, we are doing the same thing, increasing the percentage of the deposits as part of the total funding of the bank. And as Eduardo just previously described, deposits will keep being an important part of the growth of the liabilities in the upcoming months. Regarding the operational deposits, we'll see those increasing gradually as we execute the new strategic plan. And we'll share more information about that in the investor day. Nonetheless, I mean, we are expecting interest rate cuts going forward. So those will have an impact on the NIM. And what we have shared before that the sensitivity of the about 100 basis points in rate cuts will impact. our NIM in around 12 to 13 basis points. So that's what we can share right now regarding the NIM. But for the 2025, we're maintaining our NIM guidance of 230 for the year.

Perfect. Thank you.

Our next question comes from Mario Estrella from Itaú. Mr. Estrella, you may proceed.

Hi, Jorge. Hi, Annette. How are you? Thank you for the presentation. Just one question on, I mean, I had a question about the name, but I guess it must be already answered. So I'm focusing on the evolution of the deposits composition. I saw that the corporations actually increase their share from 30% to 35% in just one quarter, right? So that's, I mean, that seems like a huge impact very rapidly, right? So I just wanted to understand, I mean, how positive, if it's positive for the cost of funding, and how should that evolve, you know, going forward? I mean, what's behind that? I mean, I know that you talk about your relationships with many clients, but that seems like a huge advance in just one quarter, right? So I just want you to understand what's to come going forward and how that should impact the cost of funding. Thank you.

Hi, Mario. I think Eduardo was very clear about the growth of the deposits coming from different type of client exposures. They're all growing proportionally. But as we grow our client base on the commercial side and we are working on the gross selling efforts, we're seeing those translated as well into our depository balances. And that's kind of the reason why you see the growth in the corporate section of the of the deposits. This is not a one-off. This is the result of working with our clients, working the gross selling capabilities as we develop and foster more a strong relationship where clients were seeing that translated into our deposit balances as well.

I would just add, I mean, if you zoom out, Mario, a little bit and you look at this sort of a broader picture with five year back, I mean, believe it or not, our client deposits were minimal. I mean, they've been growing because we basically changed the incentive structure. And now simply the commercial team, the frontline has some KPIs in their balance scorecards that simply foster this. And that will continue to be the case going forward.

Okay, thank you. That's very clear. And just to be clear, I mean, those deposits are remunerated

uh close to the to the to the fat race right or the software the software rate mostly market rate yes okay yeah okay our next question comes from andres soto from santander mr soto you may proceed good morning to all thank you for the presentation

My first question is regarding the growth in clients that Jorge mentioned at the beginning of the call. I heard an increase in 7% in new client onboarding year to date. I would like to understand what is the profile of those clients, number one. Number two, if you expect this strategy to continue, are you expecting to add clients or growth? ahead is mostly based on doing more business with your existing client base and benefiting from increased trade across the region.

Just to start, yeah, 7% growth in onboarding so far, year to date. The profile is the same, Andres, so we're not changing our client profile. Going forward, we do expect growth, and I'm going to let Sam talk a little bit about that. Where are we seeing more potential of client growth? And it's basically, I mean, the two biggest economies in Latin America. Sam, you want to put some color there?

Sure. When it comes to, first of all, I think we're always looking to grow our client base. And that's how we help to be concentrated, which is one of our objectives. I think our clients, the 7%, I think is very balanced. I think balanced in terms of all the countries we operate. But I think what is important to mention there is the new clients are very tied to us. to our enhanced product capability. Most of the clients that we are onboarding are clients that have been there, that we know for a while we want to get in, but we didn't have the right product suit to be able to add value to them, to be very transparent. And as we develop new products, we start to have a product offering that is more attractive to them and profitable enough for us Right. To be able to onboard such clients, for example, this year, I think I would say the, the, the, the, the, probably in terms of a percentage, the biggest growth has been on the letters of credit business. So, uh, both in terms of new clients, which were not, uh, were not active before, but also in terms of cross-sell. And I think to the second point you made, we, of course, I think it's cheaper to cross-sell is more efficient to cross-sell to existing clients. And we are very strongly focused on that. But we also see opportunity to continue to grow our client base. So in terms of speed of growth or quantity is really it's hard to say again, it's we know I would say that we almost know all the players that we want to bank, right? Latam is not such a great region in terms of number of corporations that fit our credit profile. But we have a very... I would say target plan to where we want to get in. And there's many names that are in our pipeline that we're about to onboard. So I think we hope to continue to onboard new clients as we did in the past.

And it's both FIs and corporate, but perhaps more corporates.

Perfect. That is very clear. And can you give us a sense of what is your current market share?

That's a hard question and a very good question. If you take the profit pools of dollar financing in LATAM, then you get about between five and six billion dollars in dollar financing in letters of credit. Our revenues are around 300 million dollars, so you do the math there. We have obviously more uh share if we uh if you consider you know the smaller countries central america in the caribbean than uh the bigger countries so that's uh if we take share as dollar financing in in terms of loans and trade finance in general that would be that would be my answer i don't know certainly want to compliment them i think the message maybe is that i think we still have a low market share uh we don't

measure our business by market share. I think in wholesale banking, that is our business. I think it's very dangerous to try to grow by gaining market share. We try to grow by really onboarding the clients profitably. We don't even measure so much what our market share is. I think There is an opportunity to grow as we lower our cost of funds. I think then we could enter clients that today we cannot tap because we're not competitive enough. But as the cost of funds start coming down, we could enter those clients more competitively. So I think that could grow our market share. But the message is, yes, it's not, I would say, it's not that we don't target the growing market share. We target to grow and grow profitably. Good insight. Yeah.

Thank you, guys. That's helpful. And my other question is regarding the asset quality and the stage two that we saw this quarter. I would like to understand a little bit more about what was the reason why you had to move to stage two. And I understand the claim is still current. A little bit more about the profile and what to expect going ahead.

I mean, the definition of stage two is clients, again, that are current, but the conditions have deteriorated. And that's exactly what's going on with this client in the petrochemical sector.

And the duration is specifically to this client or is more sector-based, country-based? What is the driver?

No, I mean, we reviewed the whole portfolio and this is a single case. There's nothing systemic about the country or the sector. That's the question. And we feel very comfortable with, again, with the information that we have today and the scenarios that we run. That's why we're confirming guidance and profitability guidance in particular for the year.

And for as long as the client remains current, no additional provisions will be required, correct?

No, I mean, the client, we have proactively provisioned as we do with every client that falls in stage two. Even including that provision, we're ratifying the guidance. That's what I'm saying.

I think maybe to complement with the information that we have available, I think we're well provisioned for that specific name. And it's very straightforward. As there are rating downgrades, you know, like in our models, a certain rating downgrade takes to stage two. And this is... And that's what happened. But the client, as Jorge said, is current and our exposure is short-term trade and we expect to collect.

As a matter of fact, in this same quarter, actually our biggest exposure in stage two was fully repaid and that went out of stage two. So, I mean, there's a lot of moving parts in stage two provisions.

Right. That's very clear. Thank you.

Our next question is from Arthur Bynes, Dell Tech Asset. What types of loans constitute your 15% exposure to oil and gas? And what type of business are you doing in Argentina?

Okay, I'll take that one. One second. It's a good question. I would say oil and gas is a key sector for us. We're seeing excellent opportunities to continue to grow. and is a great fit with our product suit. Not less important, along with financial institution, is probably the sector that we have built the most knowledge throughout the years. In terms of what type of loans we're doing, say it's a combination, very short-term trade-related exposure to national oil companies in several of the countries that we operate. I dare to say that we have the widest coverage in such names in Latin America compared to any other bank. which makes us a key counterparty to the global trading companies that wants to discount their sales to such companies, which is something we do much more profitable than if we sometimes lend directly to those companies. So this is a very important source of business. It's short term. Some of those clients we've been doing for over 20 years. So we have built a lot of experience in doing the business and I would say it's the bulk of our exposure. Of course, then we on the more longer term on the capex financing for such companies. I think we've also been active in financing CAPEX. We're, of course, much more selective for medium-term exposure. Those are typically secured. For example, when we're financing EMP players, we're looking at the ones with the projects that have the lift costs, the more competitive that they could sustain prices of low cycle in terms of oil prices. Also fields that are not very difficult to extract and with the right operators, the right partners. So we've been doing some of that. I think we're also growing our project in infrastructure business into midstream, which is, I would say, a low risk sector, which very moderate, if no construction risk, no demand risk and typically no price risk. We as a bank, we don't like to take commodity price risk. And as we work and expand our oil and gas portfolio, that's something we look at very carefully.

Thank you very much. That's all the questions we have for today. I'll pass the line back to the Bladex team for their concluding remarks.

Well, thank you. Thank you everybody for joining. I mean, this was clearly a very strong quarter for Bladex. You know, we're very happy with the execution and the progress we're making on the two platforms. The pipeline, as I said, you know, remains robust and we are confident in delivering the full year guidance. Thank you everybody for joining. And we look forward to speaking with you in the next quarter and also on the Investor Day, hopefully before the end of March.