Banco Latinoamericano de Comercio Exterior, S. A. (BLX) Earnings Call Transcript & Summary

Good day, and welcome to the Bladex 2020 Annual Meeting of Shareholders. I would now like to turn the call over to Mr. Miguel Heras, Chairman of Bladex Board of Directors. Please go ahead.

Good morning, everyone. It is my pleasure today to welcome you to the 2020 Annual Shareholder Meeting of Banco Latinoamericano de Comercio Exterior, Bladex. I am Miguel Heras, Chairman of the Board of Directors. Before we begin the formal meeting, I want to discuss a few items regarding today's call. This is our first online shareholders' meeting, and we appreciate everyone's patience and understanding regarding this new format. While we are all accustomed to an in-person event that was not possible this year due to the health and safety concerns related to COVID-19 pandemic, these extraordinary times required us to do things differently. For information regarding the rules of this meeting and the relevant aspects thereof, please review the rules of conduct available as a link on this website. We are conducting this meeting in English, but Spanish translation of the rules of conduct have been provided. Before I go any further, I want to stress our thoughts are with everyone in the international community as we suffer the worldwide human toll of thousands of lives lost as a result of this pandemic. Our deepest sympathies and prayers are with all of those affected. I am also very grateful to our 177 employees, who have managed to adapt and persevere in these challenging times by operating the bank remotely from their homes in 6 different countries. Since the business continuity plan was activated in mid-March, day-to-day activity and operations have been running efficiently without interruption, and teams have been working in a dynamic and integrated way. And so far, I am thankful to say we have had no COVID-19 cases within the organization, while everyone has adapted to these extreme circumstances. In keeping with our strict social distancing guidelines, the members of our Board of Directors as well as our newly appointed Chief Executive Officer, Mr. Jorge Salas, and members of our Executive Committee are joining us on the call from separate locations. I would now like to recognize the members of the Board of Directors who are joining us today: Alexandra Aguirre, Ricardo Manuel Arango, Herminio Blanco, Isela Costantini, Mario Covo, José Alberto Garzón, Roland Holst, João Pecego. In addition to our directors, I am also joined by the bank's Chief Legal Officer and Corporate Secretary, Mr. Jorge Real, who will be acting as secretary for this meeting. Finally, a representative of KPMG, which is our bank's independent accounting firm, has also joined us and will be available to respond to questions during the question-and-answer session. 2019 was a year of contrast for Bladex in which we proudly celebrated 40 years of a successful track record in Latin America, driving foreign trade growth and playing a major role in regional development and partnership. But it was also a year marked by the sad passing of Gonzalo Menendez Duque, a respected board member and Chairman of the Board of Directors of the bank until his death last June in his native Chile. For 29 years, Gonzalo Menendez Duque dedicated all of his talent, leadership and business vision to promoting Bladex' growth as well as strengthening its increasingly important role as a financial institution focused on developing Latin American trade. We will miss him dearly. On the macroeconomic front, 2019 was a lackluster year with global growth remaining well below its potential, while Latin America's GDP recorded the second worst performance in the past 10 years. As a result of the global economic slowdown and the foreign commodity crisis, foreign trade flows decreased 3.4% in 2019. In this difficult economic environment, Bladex disbursed over $14 billion in short-term and medium-term financing on a bilateral or syndicated basis for a total of $288 billion during its 40-year history. Commercial loans reached $6.5 billion for the year. This loan book was broadly distributed geographically with a notable increase in volumes in the more robust economies, along with outstanding sector diversification. Worth noting is the positive development of our syndication and structure transaction business in which we closed 6 transactions in 2019. Bladex achieved earnings of $86.1 million in 2019 or $2.17 per share compared to $11.1 million in 2008 (sic) [ 2018 ] or $0.28 per share, representing a return on average equity of 8.6% compared to 1.1% in 2018. This result was made possible by robust top line revenues, stable financial margins and steady volumes in the commercial portfolio, along with higher commissions. At the same time, asset quality remains strong with virtually no credit impairment losses, while efficiency was boosted by a significant reduction in the cost base. Reviewing the balance sheet, the year closed with a total of $102 million in allowance for loan losses or 1.57% of total commercial portfolio, while the impaired portfolio reached only 1% of total loans. Our liquidity position reached $1.2 billion at the end of the year, representing 16% of total assets, while the bank's funding was well distributed among various regions, terms and sources, half of which was a deposit base that totaled $2.9 billion. The bank also maintained a solid Basel III Tier 1 capital ratio of 19.8% after having kept the annual dividend at $1.34 per share. Looking ahead at 2020, the world and especially our region is facing an extraordinarily difficult economic environment. Latin America is most likely going to experience a yearly GDP contraction that ranges from minus 3% to minus 6% according to different experts. Despite this business environment, our results for Q1 2020 have shown a well-capitalized, highly liquid bank with a strong balance sheet, industry-leading efficiency metrics, very healthy portfolio and perhaps most importantly, the capacity to adapt to rapidly changing circumstances. Because of the volatile nature of the Latin American region in which we operate, the bank has historically maintained a solid level of capitalization, which in this context becomes a unique strength, enabling us to service our clients' needs in difficult times like this. With a capital base of over $1 billion and a Basel III tier ratio of 22% and in view of the bank's strong balance sheet and continued capacity to generate earnings, the Board decided to continue to distribute dividends in the first quarter of the year with a declared dividend of $0.25 per share. Board approval of future dividends will be subject to the financial condition of the bank and the economic impact of the COVID-19 crisis. Capital and liquidity preservation are of paramount importance to the Board and management of the bank at this juncture. At the end of January, we announced the orderly and planned succession of our CEO with Mr. Jorge Salas stepping in on March 9 in replacement of Mr. Gabriel Tolchinsky. On behalf of the Board, I would like to express our appreciation to Gabriel for his management of the bank during the last 2 years, and our certainty that under Jorge Salas' leadership, the bank will continue to thrive and enhance its role as a strategic partner for Latin America and our clients while delivering value to our shareholders. In keeping with the Board's commitment to gender diversity in leadership and representation on the Board, Isela Costantini and Alexandra Aguirre were appointed as new directors representing the shareholders of all classes in July 2019 and February 2020, respectively. Both appointments were the result of an extensive and thorough selection process carried out by the Board's Compensation and Organizational Management Committee. We are extremely lucky to have 2 board members of their experience and qualifications. Finally, during 2019, Bladex advanced several projects to strengthen internal controls and improve operating efficiency. Through the implementation of information technology solutions and the automation of processes, the bank significantly improved its workflow and customer service. On the corporate social responsibility front, the work carried during the year by the Fundación Crece Latinoamérica, renamed in memorial to Fundación Crece Latinoamérica, Gonzalo Menendez Duque, reaffirms the commitment of our organization to directly support the sustained development of the communities where we are privileged to operate. In 2019, we invested in projects and programs focused mainly on providing education and personal growth opportunities to children and young people from the most vulnerable sectors. To conclude, I would like to offer my appreciation to the bank's administration, to our customers and to all of our stakeholders. Importantly, I would like to thank our stockholders once again for their support and the trust that they have placed in Bladex and its Board of Directors. We remain faithful to our corporate values and our commitment to ensure that Bladex continues to play an increasingly important role in the development of our beloved Latin America. Thank you. We will now proceed to consider and vote on the items in the agenda. After the shareholders have an opportunity to vote on these items, there will be an opportunity for general questions. Jorge, would you please present to the shareholders the secretary's report regarding the quorum for this meeting, the items in the agenda and the numbers of votes already cast by shareholders for such items prior to this meeting?

Thank you, Mr. Chairman. Good morning to all. It's an honor to present the shareholders -- to shareholders my report. The Board of Directors fixed March 23, 2020, as the record date for determining the shareholders entitled to vote at this meeting. An affidavit has been delivered attesting to the fact that proper notice of the meeting was sent to all shareholders as of the record date and will be incorporated into the minutes of this meeting. The stockholder list shows that as of the record date, there were 39,614,066 shares of common stock outstanding and entitled to vote at this meeting. I'm pleased to report that there are present or duly represented by proxy at this meeting a total of 28,067,189 shares of common stock, which represents 70.85% of shares entitled to vote at this meeting. Therefore, a quorum of shareholders is present to conduct our meeting today. There are 5 items of business for this meeting. As you all know, shareholders can vote by proxy cards prior to the meeting. We have already received a number of votes from shareholders for each of the items to be voted today. All these votes have been counted and tabulated. I will proceed to read each of the 5 items of business and inform about the number of votes that have already been cast for each item. After all items have been read, any shareholder who hasn't yet voted may do so by clicking on the voting button on the web portal and following the instructions therein. Shareholders who have sent in proxy cards or voted via telephone or Internet and do not want to change their vote do not need to take any further action. Only one observation needs to be made with respect to the above procedure. When we get to item 3b, for courtesy to our Class A shareholders, we will conduct the portion of the meeting where they vote for Class A directors in Spanish. After we're done with this portion of the meeting, we will continue in English. Thank you for your understanding. Mr. Chairman, the first order of business is to approve the bank's audited financial -- consolidated financial statements for the fiscal year ended December 31, 2019. This proposal has already received a positive vote of 26,505,134 shares, representing 94.43%. The second item of business is the ratification of the appointment of KPMG as the bank's independent registered public accounting firm for the current fiscal year ending December 31, 2020. For this proposal, we have already received a positive vote of 27,638,565 shares, representing 98.47%. The third order of business is the election of 3 directors: 1 director for the Class E shareholders, proposal 3a; and 2 directors for Class A shareholders, proposal 3b. In the case of proposal 3a, Board of Directors has nominated Mr. Mario Covo for election as director to represent the holders of Class E shares to hold office until the 2023 annual meeting of shareholders. No other candidate has been nominated. For this proposal, we have already received a positive vote of 21,364,134 shares, representing 97.36% of Class E shares. Now going -- moving forward to Class A shareholder directors. As mentioned before, in consideration of our Class A shareholders participating in the meeting, composed by central banks and governmental entities from different countries in Latin America, we will briefly conduct a portion of this meeting in Spanish for the election of 2 Class A directors. And now I'm going to Spanish. [Foreign Language] Thank you, ladies and gentlemen, for your patience and understanding. We now proceed with the rest of the proposals. The fourth item of business is to approve on an advisory basis the compensation of the bank's executive officers as described in the proxy statement. For this proposal, we have already received a positive vote of 26,340,747 shares, representing a total of 93.85%. The fifth and last item of business is to amend Article 12 of the bank's Articles of Incorporation to delete a provision that requires that the Board always nominate the Chief Executive Officer as one of the directors to be elected by holders of all of the common shares. For this proposal, we have already received a positive vote of 27,287,865 shares, representing 97.22%, which includes already the vote of 86.6% of all issued and outstanding Class A shares, which is well above the minimum required for such proposal in accordance with our bank Articles of Incorporation. Mr. Chairman?

It is 10:52 a.m. Panama Time on April 29, 2020, and the polls are now open for all proposals except for proposals regarding the election of Class A directors that has already been voted on. Polls will remain open for 2 minutes. Let me remind you that any shareholder who hasn't voted may do so by clicking on the voting button on the web portal and following the instructions therein. Shareholders who have sent in proxy cards or voted via telephone or Internet and do not want to change their vote do not need to take any further action. [Foreign Language] [Voting]

Now that everyone has had the opportunity to vote, I now declare the polls closed. [Foreign Language] Jorge, do we have preliminary voting results?

We do, Mr. Chairman. I'm pleased to report that items 1, 2, 4 and 5 in the agenda have been duly approved by shareholders. I'm also pleased to report that Mr. Mario Covo has been elected as director by the Class E shareholders. And finally, with respect to Class A directors, I'm also pleased to report that Mr. José Alberto Garzón and Mr. [ Eduardo Recquin ] were elected as directors representing the Class A shareholders. Now I'll turn it back to you for the next portion of meeting, sir.

Thank you, Jorge. Having gone through all formal items of business in the agenda, I now move to ask the shareholders if anyone would like to bring forth any proposals to be formally considered and voted on by shareholders. Jorge, please explain the rules.

Thank you, Mr. Chairman. Since this is a general meeting, according to our articles of incorporation, any shareholder may submit a proposal to be voted on. However, it is important to highlight that our Articles of Incorporation also provide that such proposals will only be considered and voted on if it is seconded by the vote of 2/3 of all issued and outstanding shares of common stock. Please note that no proposals have been brought before the meeting prior to its commencement, and given the number of Class E shares already voted that did not give proxy holders discretion to vote on any other matter not in the agenda, no proposals presented at this time will have the necessary 2/3 of the votes to be seconded. As such, we now consider the item of business closed, and we'll proceed to the questions-and-answers portion of this meeting.

Thank you, Jorge. Now we would like to open the floor for shareholder questions and comments. Please note, we will attempt to answer as many questions as time allows and in accordance with the rules of conduct for this meeting.

Mr. Chairman, no questions have been asked at this time.

There being no further business to come before the meeting at this time, the 2020 annual meeting of shareholders of Banco Latinoamericano de Comercio Exterior is now adjourned. Once again, thank you all for joining us today. I appreciate your interest and your support for our company during these challenging times. Ladies and gentlemen, the conference has now concluded. Please stay safe and healthy. [Foreign Language] You may now disconnect your lines.