Banco Latinoamericano de Comercio Exterior S A : Full Report (PDF 443.61 KB)

BLADEX ANNOUNCES SECOND QUARTER 2021 PROFIT OF $14.1 MILLION, OR $0.36 PER SHARE,

ON IMPROVED CORE REVENUES AND CREDIT PORTFOLIO GROWTH

PANAMA CITY, REPUBLIC OF PANAMA, July 28, 2021

BUSINESS HIGHLIGHTS

Banco Latinoamericano de Comercio Exterior, S.A. (NYSE: BLX, "Bladex", or "the Bank"), a Panama-basedmultinational bank originally established by the central banks of 23 Latin-Americanand Caribbean countries to promote foreign trade and economic integration in the Region, today announced its results for the Second Quarter ("2Q21") and six months ("6M21") ended June 30, 2021.

The consolidated financial information in this document has been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

FINANCIAL SNAPSHOT

(US$ million, except percentages and per	2Q21	1Q21 2Q20	6M 21	6M 20
share amounts)
Ke y Income S tate me nt Highl ights
Net Interest Income ("NII")	$21.0	$18.9	$21.7	$39.9	$47.5
Fees and commissions, net	$4.3	$3.0	$1.9	$7.3	$5.0
Gain (loss) on financial instruments, net	$0.2	($0.1)	($3.9)	$0.2	($4.3)
Total revenues	$25.6	$22.0	$19.9	$47.6	$48.7
(Provision) reversal for credit losses	($1.4)	$0.0	$2.6	($1.4)	$2.7
Operating expenses	($10.1)	($9.1)	($8.3)	($19.3)	($18.8)
Profit for the period	$14.1	$12.8	$14.1	$26.9	$32.4
Pr ofitabil ity R atios
Earnings per Share ("EPS") (1)	$0.36	$0.32	$0.36	$0.68	$0.82
Return on Average Equity ("ROAE") (2)	5.4%	5.0%	5.5%	5.2%	6.4%
Return on Average Assets ("ROAA")	0.8%	0.8%	0.8%	0.8%	1.0%
Net Interest Margin ("NIM") (3)	1.27%	1.24%	1.28%	1.26%	1.43%
Net Interest Spread ("NIS") (4)	1.11%	1.04%	1.01%	1.08%	1.09%
Efficiency Ratio (5)	39.6%	41.6%	41.5%	40.5%	38.7%
Asse ts, C apital , Liquidity &
C r e dit Qual ity
Credit Portfolio (6)	$6,531	$6,097	$5,011	$6,531	$5,011
Commercial Portfolio (7)	$6,008	$5,708	$4,915	$6,008	$4,915
Investment Portfolio	$523	$389	$96	$523	$96
Total assets	$6,723	$6,375	$6,627	$6,723	$6,627
Total equity	$1,031	$1,037	$1,022	$1,031	$1,022
Market capitalization (8)	$605	$601	$456	$605	$456
Tier 1 Capital to risk-weighted assets	23.6%	26.3%	24.8%	23.6%	24.8%
(Basel III - IRB) (9)
Capital Adequacy Ratio (Regulatory) (10)	18.2%	19.4%	22.1%	18.2%	22.1%
Total assets / Total equity (times)	6.5	6.1	6.5	6.5	6.5
Liquid Assets / Total Assets (11)	14.9%	15.6%	29.6%	14.9%	29.6%
Credit-impaired loans to Loan	0.20%	0.21%	0.00%	0.20%	0.00%
Portfolio (12)
Total allowance for losses to Credit	0.71%	0.73%	0.95%	0.71%	0.95%
Portfolio (13)
Total allowance for losses to credit-	4.4	4.2	n.m.	4.4	n.m.
impaired loans (times) (13)
"n.m." means not meaningful.

• Bladex's Profit increased 10% QoQ (Stable YoY) to $14.1 million for the 2Q21, driven by solid quarterly revenue growth (+17% QoQ) from increased Net Interest Income ("NII") on higher average credits, and from an uplift in Fees.
• The Bank's Profit for 6M21 totaled $26.9 million, down 17% YoY, mostly impacted by the net effect of lower Libor-based market rates on the Bank's assets and liabilities, reducing NII by 16% YoY.
• Commercial Portfolio reached $6 billion at quarter-end, up 5% QoQ and 22% YoY, on a continued quarterly growth trend since a year ago, having increased lending origination by 11% QoQ and by 205% YoY.
• The Bank maintains its collection rate of close to 100% on loan maturities, evidencing the high quality of its borrower base of financial institutions (49%) and sovereign and state-owned corporations (18%), as well as the short-term nature of its business (78% maturing in less than a year).
• Growth in the Investment Portfolio (+34% QoQ) continues to be well diversified and predominantly investment grade rated, propelled by a 72% QoQ increase in Latin American securities complementing the Bank's Loan Portfolio, in addition to a stable high quality liquid asset ("HQLA") bond portfolio aimed to enhance liquidity yields.
• NII increased 11% QoQ to $21 million in 2Q21, mainly on higher average lending volumes (+12% QoQ) and lower average funding costs (-17 bps QoQ), partly offset by the continued downward pressure of lending rates (-23 pbs QoQ). Tighter lending spreads, reaching pre-pandemic levels, relate to sustained solid credit quality and ample market liquidity.
• On a YoY comparison, NII was down 3%, as the positive volume net effect driven by an improved interest-earning asset mix, with increased average loans and investments and decreased cash position, was offset by the impact of lower Libor-based market rates.
• Fees and commissions income totaled $4.3 million for 2Q21, up 41% QoQ and 120% YoY, due to the sustained positive trend in the Bank's letters of credit business, along with the return of loan syndications activity.
• Asset quality remains sound, with credit-impaired loans ("NPLs") representing 0.2% of total loans at June 30, 2021. Provision for credit losses of $1.4 million in 2Q21 mostly relate to strong credit origination, having 96% of total credits classified as Stage 1 (low risk) under IFRS 9.
• Bladex´s liquidity position stood at $999 million, or 15% of total assets as of June 30, 2021, supported by its sound and well diversified funding structure, led by steady growth of its deposit base (+5 QoQ; +16% YoY).
• As of June 30, 2021, the Bank´s capitalization remained solid with a Tier 1 Basel III Capital Ratio of 23.6% and a Regulatory Capital Adequacy Ratio of 18.2%. Ongoing Stock Repurchase has been executed as planned since mid-May 2021, having repurchased 728 thousand shares for a total of $11.2 million as of the date of this report.

CEO's Comments

Mr. Jorge Salas, Bladex's Chief Executive Officer said: "Despite a slow vaccine rollout for most countries and daily new infections having peaked only a month ago, growth in the Region is starting to regain traction as the economies reopen, commodity prices hit record levels and remittances are also at record highs. In fact, just yesterday the IMF revised for the second time this year, its growth projection for 2021 for Latin America from 4.6% in April to 5.8%, with the two largest economies in the Region, Mexico and Brazil, growing at 6.3% and 5.3% respectively this year. Latam trade flows are expected to grow 21% in 2021, as world growth, especially in the U.S. and China, is fueling trade flows. In this context, second quarter results improved, with consistent growth and pristine asset quality, as we grew our loan and investment portfolios for the fourth consecutive quarter, while keeping asset quality sound with only 0.2% of NPLs to total loans. Most of the growth was once again, related to the recent commodity boom, which is associated to both prices and volumes. Revenues increased by 17% and net profit also rose 10% with respect to the previous quarter."

Mr. Salas added: "To further align our organizational structure and enhance our execution capabilities, during the second quarter, we created a new executive VP of Strategy to coordinate strategic planning and lead a project management office. New value-added structured services, that were driven by this new unit, are already in place. I am also pleased to report that the share buyback plan of up to $60 million announced last quarter, is being executed as planned and that the Board of Director decided to maintain the quarterly dividend of 25 cents per share."

Mr. Salas concluded: "We believe the Bank's sustained growth trend is very relevant, and remain confident that there is ample room to continue this trend as the Region recovers. We stand cautiously optimistic and are well positioned to make the best of the many opportunities that keep arising."

RESULTS BY BUSINESS SEGMENT

The Bank's activities are managed and executed through two business segments, Commercial and Treasury. Information related to each reportable segment is set out below. Business segment results are based on the Bank's managerial accounting process, which assigns assets, liabilities, revenue and expense items to each business segment on a systemic basis.

COMMERCIAL BUSINESS SEGMENT

The Commercial Business Segment encompasses the Bank's core business of financial intermediation and fee generation activities developed to cater to corporations, financial institutions and investors in Latin America. These activities include the origination of bilateral short-term and medium-term loans, structured and syndicated credits, loan commitments, and financial guarantee contracts such as issued and confirmed letters of credit, stand-by letters of credit, guarantees covering commercial risk, and other assets consisting of customers' liabilities under acceptances.

Profits from the Commercial Business Segment include (i) net interest income from loans; (ii) fees and commissions from the issuance, confirmation and negotiation of letters of credit, guarantees and loan commitments, as well as through loan structuring and syndication activities; (iii) gain on sale of loans generated through loan intermediation activities, such as sales and distribution in the primary market; (iv) gain (loss) on sale of financial instruments measured at FVTPL; (v) reversal (provision) for credit losses, (vi) gain (loss) on non-financial assets; and (vii) direct and allocated operating expenses.

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Commercial Portfolio by Product

(EoP Balances, US$ million)

	5,708	6,008
4,915	11%	13%
9%	31%	31%
43%
48%	58%	56%
30-Jun-20	31-Mar-21	30-Jun-21

Letters of Credit, Acceptances, loan commitments and financial guarantees

contracts

Medium- and long-term loans

Short-term loans at amortized cost

Bladex's maintained its Commercial Portfolio's quarterly growth trend since a year ago, propelled by the Region's recovery, reaching $6.0 billion at the end of 2Q21, a 5% QoQ increase compared to $5.7 billion a quarter ago, and a 22% YoY increase compared to a year ago. Quarterly increases were mainly driven by higher lending origination (+11% QoQ; +205% YoY), with tighter lending spreads at pre-Covid levels due to sustained solid credit quality and ample market liquidity. Meanwhile, during 2Q21 the Bank maintains its collection rate of close to 100% on loan maturities, evidencing the high quality of the Bank's borrower base and short-term nature of its business. On an average basis, Commercial Portfolio balances reached $6.1 billion for the 2Q21 (+12% QoQ; +16% YoY) and $5.7 billion for the first 6M21 (stable YoY), also evidencing the steady growth during the year.

As of June 30, 2021, 78% of the Commercial Portfolio was scheduled to mature within a year, up 1 pp compared from the previous quarter and up 7 pp from a year ago. Trade finance transactions represented 62% of the short-term origination, up 5 pp compared to a quarter ago and up 10 pp compared to a year ago.

The following graphs illustrate the geographic distribution of the Bank's Commercial Portfolio, highlighting the portfolio´s risk diversification by country and across industry segments, as of June 30, 2021:

Commercial Portfolio by Country	Commercial Portfolio by Industry
			IG: 43%		Mexico		1%			Financial institutions
2%				Chile				Oil and gas (Downstream)
1%3%			10%		Non-Latam		1% 4%			Food and beverage
3%							2%
							2%
4%					Peru		2%			Electric power
					Panama		2%
5%			10%		2%			Metal manufacturing
					T. & Tobago	3%				Oil and gas (Integrated)
7%					Uruguay	4%
							Other services
			9%		Brazil		$6,008	49%
$6,008		6%		Oil and gas (upstream)
					Colombia
									Other manufacturing industries
12%					Guatemala
		6%		6%				Grains and oilseeds
			Dominican Republic
									Retail trade
			4%		Ecuador		7%
			2%2%		Costa Rica				Mining
20%					9%			Coffee
				Argentina
					Paraguay					Sugar
Non-IG: 57%			Other Latam ≤ 1%					Other Industries <1%

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Bladex's credit quality remains sound with a well-diversified exposure across countries. As of June 30, 2021, 43% of the Commercial Portfolio was geographically distributed in investment grade countries, down 14 pp from the previous quarter and 15 pp from a year ago, mostly explained by the Bank´s decision to classify Colombia, the Bank's second largest country-risk exposure at 12% of the Commercial Portfolio, as non-investment grade following the recent downgrades by two main credit rating agencies, even though Colombia is still rated investment grade by one of the major credit rating agencies. Brazil continues to represent the largest country-risk exposure at 20% of the total Commercial Portfolio, of which 89% was with financial institutions. Other relevant country-risk exposures were to investment grade countries such as Mexico and Chile at 10% and top-rated countries outside of Latin America (which relates to transactions carried out in Latin America) at 9% of the total portfolio.

The Commercial Portfolio by industries also remained well-diversified and focused on high quality borrowers, as exposure to the Bank's traditional client base of financial institutions represented 49% of the total Commercial Portfolio, and exposure to sovereign and state-owned corporations remained at 18% of the total portfolio at the end of 2Q21. The remainder of the portfolio comprises top tier corporates throughout the Region. Across corporate sectors, most industries represented 5% or less of the total Commercial Portfolio, except for certain sectors that the Bank considers as defensive under the current context supported by higher commodity prices and LatAm trade flows, such as Oil & Gas (Downstream) at 9%, Food and beverage at 7%, Electric power and Metal manufacturing at 6% of the Commercial Portfolio at the end of 2Q21. In addition, high risk sectors, such as sugar and airline industries, remained downsized at 1% and 0.8% of the total portfolio at the end of 2Q21, respectively.

Refer to Exhibit IX for additional information related to the Bank's Commercial Portfolio distribution by country, and Exhibit XI for the Bank's distribution of loan disbursements by country.

(US$ million)	2Q21	1Q21	2Q20	QoQ (%)	Y oY (%)		6M 21	6M 20	Y oY (%)
C omme r cial Busine ss S e gme nt:
Net interest income	$20.5	$18.7	$20.9	9%	-2%		$39.2	$45.7	-14%
Other income	4.5	3.3	(0.8)	38%	667%		7.7	2.6	202%

Total r e ve nue s	25.0	22.0	20.1	14%	24%	46.9	48.2	-3%
(Provision) reversal for credit losses	(1.0)	0.0	2.6	n.m.	-140%	(1.0)	2.7	-137%
Gain (loss) on non-financial assets, net	0.0	0.0	(0.1)	n.m.	100%	0.0	(0.1)	100%
Operating expenses	(7.9)	(7.1)	(6.3)	-10%	-26%	(15.0)	(13.6)	-10%
Pr ofit for the se gme nt	$ 16.0	$ 14.9	$ 16.3	8%	-2%	$ 30.9	$ 37.2	-17%
"n.m." means not meaningful.

The Commercial Business Segment's Profit was $16.0 million for 2Q21 (+8% QoQ; -2% YoY). The 8% quarterly increase was mostly attributable to higher revenues (+14% QoQ) driven by increased NII (+9% QoQ) mainly on higher average loans (+12% QoQ), and from an uplift in fees and commissions.

Compared to 2Q20, the Commercial Business Segment's Profit for 2Q21 decreased by 2%, mostly impacted by a $1.0 million charge in provision for credit losses due to Commercial Portfolio's growth, compared to a $2.6 million reversal registered in 2Q20, as well as by higher allocated expenses, up 26% YoY. These effects were partly offset by increased other income YoY, related to $2.4 million in higher fees, mostly from the Letters of Credit business, and to a $3.0 million loss on financial instruments during 2Q20, related to the fair value adjustment of a debt instrument received as part of a loan restructuring back in 2018.

Year-to-date Commercial Business Segment's Profit totaled $30.9 million (-17% YoY), mainly driven by a 14% decrease in NII primarily resulting from the impact of lower Libor-based loan rates.

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TREASURY BUSINESS SEGMENT

The Treasury Business Segment focuses on managing the Bank's investment portfolio and the overall structure of its assets and liabilities to achieve more efficient funding and liquidity positions for the Bank, mitigating the traditional financial risks associated with the balance sheet, such as interest rate, liquidity, price and currency risks. Interest-earning assets managed by the Treasury Business Segment include liquidity positions in cash and cash equivalents, as well as highly liquid corporate debt securities rated above 'A-', and financial instruments related to the investment management activities, consisting of securities at fair value through other comprehensive income ("FVOCI") and securities at amortized cost (the "Investment Portfolio"). The Treasury Business Segment also manages the Bank's interest-bearing liabilities, which constitute its funding sources, mainly deposits, short- and long-term borrowings and debt.

Profits from the Treasury Business Segment include net interest income derived from the above-mentioned Treasury assets and liabilities, and related net other income (net results from derivative financial instruments and foreign currency exchange, gain (loss) per financial instruments at fair value through profit or loss ("FVTPL"), gain (loss) on sale of securities at FVOCI, and other income), recovery or impairment loss on financial instruments, and direct and allocated operating expenses.

The Bank's liquid assets, mostly consisting of cash and due from banks, as well as highly rated corporate debt securities (above 'A-') aimed to enhance liquidity yields, totaled $999 million at the end of 2Q21, up from $992 million a quarter ago and down from $1,959 million a year ago, as the Bank adjusted its liquidity position considering a more stable market environment and the Bank's ample access to diversified funding sources. As of June 30, 2021, $691 million, or 69% of total liquid assets represented deposits placed with the Federal Reserve Bank of New York, while $201 million, or 20% of total liquid assets represented corporate debt securities classified as high quality liquid assets ("HQLA") in accordance with the specifications of the Basel Committee. As of the end of 2Q21, 1Q21, and 2Q20, liquidity balances to total assets represented 15%, 16% and 30%, respectively, while the liquidity balances to total deposits ratio was 30%, 31% and 68%, respectively.

The credit investment portfolio, related to the Treasury's investment management activities aimed to complement the Bank's Commercial Portfolio, increased to $322 million at the end of 2Q21, a 72% increase compared to $188 million a quarter ago and more than three times higher compared to $96 million a year ago.

Total Investment Portfolio balances amounted to $523 million as of June 30, 2021, up 34% from $389 million a quarter ago, and more than four times higher from $96 million a year ago. Overall, the Investment Portfolio mostly consisted of readily-quoted Latin American and Multilateral securities, out of which 49% represented sovereign or state-owned risk at the end of the 2Q21, compared to 61% a quarter ago and 80% a year ago (refer to Exhibit X for a per-country risk distribution of the Investment Portfolio).

On the funding side, deposit balances increased to $3.3 billion at the end of 2Q21, up 5% QoQ and 16% YoY. The continued growth in the Bank's deposit base denotes the growth of its Yankee CD program which complements the short-term funding structure, and the steady support from the Bank's Class A shareholders (i.e.: central banks and their designees), which represented 48% of total deposits at the end of 2Q21, compared to 46% and 53% of total deposits a quarter and year ago, respectively. As of June 30, 2021, total deposits represented 61% of total funding sources, same as the previous quarter and up from 52% a year ago. In turn, short- and medium-term borrowings and debt totaled $2.1 billion at the end of 2Q21 (+10% QoQ and -22% YoY). Weighted average funding costs improved to 0.93% in 2Q21 (-17 bps QoQ; -64 bps YoY) and 1.01% in the first 6M21 (-97 bps YoY), benefiting from the impact of lower market rates.

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