Bladex, Inc. Class E

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.