Banco Latinoamericano de Comercio Exterior, S.A (NYSE:BLX) Q2 2019 Earnings Conference Call - Final Transcript

Jul 19, 2019 • 11:00 am ET

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Banco Latinoamericano de Comercio Exterior, S.A (NYSE:BLX) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Ana Graciela de Mendez

Argentina matures in the next 12 months, and the average tenor of the portfolio is approximately 13.5 months.

We have successfully increased our portfolio in Chile, where we continue to see good risk reward opportunities. At June 30, 2019 Chile's exposure accounted for 8% of total portfolio, compared to 4% in the previous quarter. And we also maintain a 30% exposure in the Central American and Caribbean region. The bank's natural market for its geographic proximity, of which 72% is with bank's sovereigns and quasi-sovereigns. 76% of this portfolio in this region matures in the next 12 months and the average tenor of the portfolio is approximately 10 months.

On Page 10 now, represent the evolution of credit repair loans or NPL and of allowances of credit losses. NPL balances remained unchanged during the quarter at $65 million, representing 1.16% of total loans, with a reserve coverage of 1.6x. IFRS 9 Stage 3, individual allowances allocated to these NPL portfolio increased to $57 million during the quarter, representing 8% -- 88% of NPL balances in view of this credit restructurings evolution. IFRS 9 Stage 2 allocated reserves decreased during the quarter on the account of reduced credit exposure in this category related to collections in our watchlist exposure, as well as reductions in exposures to countries impacted by internal country ratings; such as Argentina. All of the exposure in this category remains current.

Our IFRS 9 Stage 1 exposure and its associated credit allowances increased on the account of higher portfolio origination relative to maturities, reflecting an improved composition of our commercial portfolio. This Stage 1 exposure, which relates to the performing portfolio with credit conditions unchanged since origination continued to be the most relevant with 94% of total exposure at quarter end.

On Page 11, the bank continued to improve its efficiency with a sustained focus on expense control and process improvement. Evidenced by the declining trend in year-to-date expenses and by the improvement on the bank's efficiency ratio for the second quarter and first half of 2019 to 31%. Second quarter 2019 expenses amounted to $10.6 million, representing a 7% decrease year-on-year, and a 7% increase quarter-on-quarter, while operating expenses for the first half of the year were down 20% from the year before, totaling $20.4 million.

The year-on-year expense reduction mostly relates to lower variable compensation and other employee expenses related to the personnel restructuring process that the bank underwent in the first month of 2018, as well as to the resulting lower salary expense paid. The quarter-on-quarter increase is mainly attributable to higher business related expenses, when compared to a seasonally low first quarter.

On Page 12, we present the positive ROE evolution, which reached 9% in this past quarter, while the bank remained a capitalization of over 20%. Like Gabriel mentioned, the Board Directors kept the dividend payment unchanged at $0.135 per share, which represents a 68% payout over quarterly earnings.

I will now -- will turn the call back to Gabriel to open the