Bladex, Inc. Class E

Good morning ladies and gentlemen and welcome to the Bledex third quarter 2026 earnings conference call. A slide presentation is accompanied today's webcast and is also available on investor section of the company's website www.bledex.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 BLAX's results for the third quarter of 2026. I will begin with the key highlights. Annette, our CFO, will then take the call to walk you through the financial results in more detail. After that, I will return with an update on strategy and our outlook for the rest of the year. Finally, we will open the call for questions. This was an outstanding quarter for Bladix. Our commercial portfolio and net interest income both reached new record levels. Also, net interest income grew significantly from a year ago, and we delivered strong earnings. We did this while maintaining strong credit quality, further improving the portfolio's risk profile as Stage 2 exposures declined, and preserved a strong capital position. It is an encouraging combination of financial KPIs as we enter the final part of the year. Our commercial portfolio reached a record of $15 billion, up 15% from the second quarter and 38% from a year ago. The quarter included a $1 billion one-year sovereign loan to the Republic of Panama in support of the government's liability management program. This was a one-time opportunity distinct from the transactions we typically originate. It's a sovereign exposure to Panama, which S&P and Moody's rate investment grade with relatively low capital assumptions for its size and the spread well above the sovereign born curve. This transaction clearly demonstrates our ability to execute at scale supported by our funding flexibility. Even excluding that single Panama sovereign loan, loans grew 7% from the second quarter and 29% from a year ago. That growth included trade and working capital financing with established clients, as well as medium-term financing for acquisitions and energy projects, mostly in Colombia and Argentina. Needless to say, we have not relaxed our underwriting standards to achieve this growth. Most of the growth this quarter came from the higher grade segments where we found attractive arbitrage opportunities. We know the sponsors, we understand the exposures, and we know the risks. Competition for high quality assets continue to pressure lending spreads across the region. Latin American assets continue to attract investors' interest, supported by the region's relative distance from major conflicts and its role as a supplier of energy and other commodities. Regional sovereign risk premiums remain near historical lows. Net interest income reached a record of $79.8 million, up 9% from the second quarter and net interest margin rose to 2.30%. It is worth mentioning, however, that this quarter's margin improvement reflected lower funding costs and a temporary benefit from loan repayments even as lending spreads remain under pressure. Annette will comment more on that shortly. As planned, deposits continue to grow. Average deposits increased 6% quarter over quarter and 22% year over year, helping lower our funding costs and supporting margins while the commercial portfolio expanded. Our fee generating businesses Keep making good progress. Non-interest income reached $19.3 million, up 26% from a year ago. Letters of credit generated record quarterly income, supported by strong and trade finance activity, particularly in the commodity sector. In addition, we completed four structured transactions, bringing our total to 13 for the first nine months of 2026. Our syndication and project finance teams continue to generate strong distribution fees while working closely with our client derivatives teams to provide hedges that help mitigate risk, improve cross-sell, and boost client profitability. Total revenues reached $99.1 million, nearly 20% higher than a year ago. Our efficiency ratio stood at 25.8% for the quarter. Revenue growth is allowing us to advance our strategic initiatives while maintaining cost discipline. With budgeted planned investments underway next quarter, we expect the full-year efficiency ratio to move closer to our guidance of 27% for the year. Provision expense increased as a result of portfolio growth and additional reserve coverage on existing Stage 3 exposures. reinforcing our conservative approach to credit risk management. Credit performance remains solid. Net income reached $63.2 million, 15% higher than a year ago, and adjusted ROE was 15%. Our tier one ratio ended the quarter at 16.2%. Both our ROE and our capital ratios are at the higher end of the range of our guidance for the year. In summary, we are pleased with the profitability we delivered this quarter as the business continues to grow and we expect a solid business pipeline for the remainder of the year. With that overview, let me turn it over to Annette for a closer look at the financial results. Annette, over to you.

Thank you, Jorge, and good morning, everyone. As Jorge highlighted, the third quarter was another strong quarter for Bladex, demonstrating the strength of our balance sheet and our ability to execute at scale. Turning to our financial performance, net income reached $63.2 million, up 15% year-over-year. Compared with the second quarter, net income was 5% lower. mainly reflecting the normalization of transaction-driven fee income, higher operating expenses, and increased provisions, partially offset by higher net interest income. Return on average assets was 1.8%, and adjusted return on equity was 15%, in line with our full year guidance. For the first nine months of the year, net income totaled $186 million. up 9% year-over-year with a return on average assets of 1.9% and an adjusted return on equity of 15.2%. Let me now walk you through the key financial drivers behind these results, beginning with the commercial portfolio. The commercial portfolio reached a record $15 billion at quarter-end, up 15% from the second quarter and 38% year-over-year. Two factors explain this growth. A landmark sovereign transaction and continued expansion would establish top-tier clients in markets and sectors we know well. The Panama sovereign transactions accounted for around half of our commercial portfolio growth during the quarter and includes flexibility for early repayment. I want to highlight this transaction because it demonstrates five strengths of our business model. First, execution capacity, our ability to underwrite and execute large transactions capturing significant market opportunities. Second, asset quality, a short-term exposure to an investment-grade sovereign, consistent with our risk appetite. Third, capital efficiency, relatively low capital consumption under Basel III, generating a very attractive risk-adjusted return on capital. Fourth, funding flexibility. Our ability to mobilize funding quickly through our correspondent banking network aligned with the tenor of the transaction. And fifth, earnings. A positive contribution to absolute net interest income despite temporarily diluting reported NIEM. Beyond this transaction, the growth was broad-based across our loan portfolio. Total loans reached $12.3 billion, up 18% quarter-over-quarter and 41% year-over-year. Growth was concentrated primarily in short-term lending, including increased financing requirements associated with higher oil prices and regional trade flows. Medium-term lending also contributed, supported by acquisition financing and energy sector transactions with attractive risk-adjusted returns. Contingencies reached $2.5 billion, up 5% quarter-over-quarter and 16% year-over-year, supported by letter of credits and commitments. The latter related mainly to project finance and infrastructure. From a geographic perspective, Panama became our largest country exposure at 17%. Excluding the sovereign transaction, Panama would have represented nearly 10% broadly in line with other major markets such as Colombia and Brazil. Importantly, this growth has not come at the expense of credit quality. Our portfolio remains focused on financial institutions, top-tier corporations, and sovereign exposures. with 68% scheduled to mature within one year, preserving flexibility to reprice and redeploy capital. Looking ahead, excluding the Panama transaction, we expect our full-year commercial portfolio growth to be around 25%. Turning now to asset quality. Credit quality remains strong, despite the significant expansion of our portfolio, reflecting our disciplined underwriting standards and proactive credit risk management. At quarter end, 99% of total credit exposure, or $16.4 billion, was classified as Stage 1, compared with 98.4% in the prior quarter. Stage 2 exposure declined to 82 million, or just 0.5% of the portfolio, from 162 million in the second quarter, reflecting the sale of one exposure, schedule amortizations, and credit rating improvements. Importantly, exposures requiring closer monitoring continue to decline, even as our portfolio expands. with no new exposure migrating to impaired status during the quarter. Additionally, Stage 3 exposure remained stable at $75 million while their share of the credit portfolio declined to 0.4% as the portfolio expanded. Credit provisions for the quarter totaled $10.4 million compared with $8.6 million in the prior quarter. The additional provisions primarily reflect increased reserve coverage on existing Stage 3 exposures, rather than new credit deterioration, together with provisions associated with the portfolio growth. This is consistent with our proactive credit oversight and prudent provisioning approach. As a result, total reserve coverage of impaired credits increased to 1.4 times compared with 1.25 times in the prior quarter. Overall, these results reinforce the strength of our credit portfolio and our proactive and prudent approach to credit risk management even as we continue to grow our business. Turning now to funding. This quarter clearly demonstrates the strength and flexibility of our funding platform. We expanded our balance sheet by $2 billion, supported by a diversified deposit franchise, broad access to international capital markets, and a deep network of longstanding correspondent banking relationships. Deposits remain a central pillar of our funding strategy. Average deposits grew 6% quarter over quarter and 22% year over year, supporting an improved funding mix and more competitive funding spreads. At quarter end, deposits stood at $7.9 billion, up 16% year over year. Our deposit base remains well diversified. Central banks and Class A shareholders accounted for 36% of deposits, corporations 26%, financial institutions 23%, brokers 13%, and multilaterals 2%. Yankee CDs continue to perform well, with average balances increasing 19% during the quarter, further supporting diversification and the depth of our deposit franchise. What distinguished this quarter, however, was our ability to leverage our broader funding platform to support significant balance sheet growth. The one billion Panama sovereign transactions was mostly funded through short-term facilities from our correspondent banking network, aligned with the tenor of the transaction. This demonstrated the depth of our strategic banking relationships and our ability to mobilize substantial funding efficiently. We also continue to diversify our medium-term funding, raising approximately $450 million across three debt programs, public issuance in Mexico, public offerings in Panama, and private placements under our EMTM program. The Mexican issuance also generated additional demand, allowing for a reopening executed during the quarter. Together, these funding capabilities provide diversification across products, maturities, geographies, and investor types, giving us the flexibility to support significant business opportunities while maintaining a prudent approach to liquidity and balance sheet management. Regarding liquidity, we maintain a solid and conservative position with nearly $2 billion in liquid assets, representing 12% of total assets consistent with our internal liquidity risk appetite and regulatory requirements. Let me now turn to capital. The Basel III Tier 1 ratio ended the quarter at 16.2%, compared with 16.6% in the second quarter, remaining above our 15 to 16% operating range. The regulatory capital adequacy ratio under SPANAMA's framework stood at 14.3%, well above the regulatory minimum and consistent with our internal risk appetite. What is important this quarter is what these ratios show. Loan growth was supported by our available capital, with the Tier 1 ratio adjusting by less than 50 basis points. This is because most of the incremental growth came from investment-grade sovereigns and quasi-sovereign exposures, which carry a lower capital consumption under Basel III and do not compute under Panama's local methodology. This is consistent with the capital management strategy we outlined following our AT1 issuance, deploying capital selectively into attractive opportunities while preserving financial flexibility. Looking ahead, we expect our Tier 1 ratio to move towards our operating range, supporting continued business growth. Finally, reflecting our solid earnings performance, the board approved to maintain a quarterly cash dividend of 68.75 cents per share, reinforcing our commitment to shareholder returns while retaining capital to support our growth and protect our investment grade credit profile. Moving now to net interest income and margins. Net interest income reached a record of $79.8 million in the third quarters, up 9% from the prior quarter and 18% year-over-year. For the first nine months, NII totaled $223 million, up 11% compared with the same period last year. The main driver was volume. Average loan balances increased 8% during the quarter, more than offsetting continued pressure on underlying lending spreads. Net interest margin stood at 2.30% in the quarter, six basis points higher than in the second quarter, while net interest spread improved to 1.73%. Three factors contributed to this improvement. First, the accelerated recognition of deferred fees following early repayments of certain medium-term loans, providing a temporary benefit to lending yields. Second, improved funding spreads supported by continued growth in average deposits and optimization of our funding mix. And third, efficient yet prudent liquidity management, maintaining adequate liquidity levels with our risk appetite. Importantly, underlying lending spreads remain under pressure, particularly in the highly competitive market for high-quality assets. As for the Panama sovereign transaction, it was originated during the second half of September, so its impact on the third quarter NIM was limited. In the fourth quarter, its full quarter contribution is expected to temporarily dilute reported NIM, while adding meaningfully to absolute NII. We are not managing our business to maximize name in isolation. Our focus remains on generating attractive risk-adjusted returns and sustainable earnings while maintaining strong asset quality. With the significant growth in average earning assets and our strong ending loan portfolio, we entered the fourth quarter with a solid base to sustain strong net interest income generation supported by our diversified and efficient funding platform. Let me now turn to non-interest income, which continues to be a key pillar of our revenue diversification strategy. For the first nine months of the year, non-interest income, excluding the impact of hedging derivative, reached a record $57.6 million, up 19% year over year. In the third quarter, non-interest income reached $19 million, up 15% year over year, following an exceptionally strong second quarter. Within this total, fees and commissions amounted to $16.3 million. Letter of credits and guarantees generated $9.6 million, their highest historical quarterly level, supported by a strong trade finance activity. Credit commitments contributed $3.6 million, primarily from credit finance transactions and medium term committed facilities, providing an additional source of stable fee income. Structuring and distribution generated $3.9 million in upfront structuring and syndication fees. During the quarter, we closed four transactions across the region, mobilizing $470 million, with Bladex retaining $365 million. This financing also created opportunities for Bladex to arrange and distribute longer-term takeout facilities, which we expect to execute between the fourth quarter of 2026 and the first quarter of 2027. Year to date, we have completed 13 transactions, mobilizing about $2.7 billion. Client derivatives doubled to $2.6 million in the quarter. These pilot transactions continue to perform well, mainly linked to interest rate hedges on project finance transactions, and provide a solid starting point as we prepare to launch our new treasury platform. Overall, non-interest income represented 19% of total revenues. for enforcing the growing contribution of these activities to our business. While these revenues are transactional in nature and may fluctuate between quarters, the breadth of contributions across business lines reflect continued progress in our revenue diversification strategy. And for the full year, we expect non-interest income to be closer to 18% of total revenues. Turning now to expenses and efficiency. Operating expenses totaled $26.6 million, up 7% from the prior quarter. The increase was mainly driven by higher personal expenses, including specialized talent to support our strategic initiative and variable compensation reflecting the bank's performance. For the first nine months of the year, expenses totaled $71.4 million with an efficiency ratio of 25.4, while the third quarter ratio stood at 25.8% compared with 24.1% in the second quarter. Looking ahead, we expect operating expenses to increase in the fourth quarter, reflecting the usual seasonality of our business and the timing of planned strategic initiative, which concentrates certain operating expenses at year-end. Based on our year-to-day performance and expected four-quarter expenses, we now anticipate a full-year efficiency ratio better than our original guidance. Before I hand the call back to Jorge, let me briefly sum up. We entered the fourth quarter with a solid earning asset base supporting continuous strong net interest income generation. Looking ahead, two variables would influence fourth quarter profitability. The timing of transaction driven fee income and seasonally higher operating expenses as we continue to execute on our strategic initiative. and as Jorge mentioned, the main market challenge remains the continued pressure on lending spreads. Overall, this quarter shows that we can grow at scale while preserving the asset quality, capital strength and returns that define Bladex. With that, I'll turn the call back to Jorge.