Banco Latinoamericano de Comercio Exterior SA Bladex (NYSE:BLX) Q3 2019 Earnings Conference Call - Final Transcript

Oct 18, 2019 • 11:00 am ET

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Banco Latinoamericano de Comercio Exterior SA Bladex (NYSE:BLX) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions]. Our first question will come from Robert Tate, Global Rational Capital.

Analyst
Robert Tate

Hi, Gabriel and Ana. Thank you very much. I was just wondering if you could just elaborate on what sectors you think may lead to an improvement in net -- in the net interest rate over time?

Executive
N. Gabriel Tolchinsky

Yes. Thank you, Robert for the question. What we see from -- and I'm going to go -- approach this from a top down perspective, is its a very challenging global and regional environment, in which we have to be very diligent and careful with respect to our credit underwriting. And we are in a happy position to be able to maintain our credit spreads where they are. We are looking for value-added transactions with key customers, and that is essentially what should be able to make us sustain those credit spreads on a go-forward basis. We are identifying some opportunity, as we mentioned in the Andean region, in Chile, in Colombia, in Peru, and I think that we are about to see more opportunities, particularly in Brazil. It's very difficult as of yet to determine the potential there, but we see very good signs, starting with the fact that they are opening up the economy with an aggressive privatization program, and very importantly, as it relates to the impact on overall credit demand, is the fact that this administration is not keen on maintaining the subsidy that previous administrations had, with respect to the involvement of National Development Bank in lending to industry as a whole.

So as we see the privatization program progressing, we should see credit demand go up, and if the private sector is the one that needs to fulfill this credit demand, that should be a good sign in terms of margin improvement, particularly, given that short-term rates in Brazil have come down to a very low historical levels, the SELIC rate right now is about 5.5%, and we believe that that should stimulate credit demand growth, and we could see a pick-up in margins as the private sector banks start fulfilling that demand for credit.

Analyst
Robert Tate

All right, thank you very much. And just noting that your Tier 1 Basel III capital ratio is quite high at 21%. Do you see the opportunity to make use of more leverage over time? And you mentioned that you're optimistic for business of the remainder of 2019. Do you think that a return-on-equity of closer to 10% is achievable in, say, the next 12 months in light of your optimism?

Executive
N. Gabriel Tolchinsky

12% continues to be our goal on a long-term basis, but we will grow exposure, portfolio, leverage on what we consider to be a prudent and solid credit underwriting strategy. And as such, we will approach it opportunity by opportunity, and as you well know, we don't give projections on how our different ratios will evolve over time. But we are very happy with our portfolio. We're very happy with our capacity to maintain relatively stable margins, and we