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

Good day, and welcome to the Bladex 2021 Annual Meeting of Shareholders. And now I turn the call over to Mr. Miguel Heras, Chairman of Bladex Board of Directors. Please go ahead.

Good morning, ladies and gentlemen. I would like to welcome you to our 2021 Annual General Meeting of Shareholders, and thank you for your interest in Banco Latinoamericano de Comercio Exterior. I am Miguel Heras, Chairman of the Board of Directors. 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 translations of the rules of conduct have been provided. In keeping with our strict social distancing guidelines, most of the members of our Board of Directors and our Executive Committee are joining us on the call from separate locations. I would now like to recognize the members of our Board of Directors who are joining us today: Alexandra Aguirre, Ricardo Manuel Arango, Herminio Blanco, Isela Costantini, Mario Covo, José Alberto Garzón, Eduardo Hecker, Roland Holst and João Carlos de Nóbrega Pecego. In addition to our directors, I am also glad to be joined by the bank's Chief Executive Officer, Mr. Jorge Salas; and Chief Legal Officer and Corporate Secretary, Mr. Jorge Real, who will be acting as Secretary for this meeting. Finally, our representative of KPMG, which is our bank's independent accounting firm, has also joined us on the line and will be available to respond to questions during the question-and-answer session. 2020 was without a doubt an extremely difficult year for everyone on the planet. The effects of the COVID-19 pandemic have gone beyond what most could have anticipated and has become the catalyst for one of the greatest transformations of our lifetime. How we go about our daily lives, where and how we work, exercise, shop, learn, communicate and, of course, how we do business will be changed forever. The impact of this pandemic has also forced governments to implement large and unprecedented measures to contain the spread of virus, which triggered a major contraction in international trade, high volatility in financial markets throughout the world and major fluctuations in commodity prices. The nature of the health crisis and the scale of the economic damage varies widely from country to country. Some countries have largely reopened their economies, while others are still in the thick of the battle against the virus, and yet others are reverting to closures in the wake of subsequent waves. The world economy entered a strong recession in 2020, registering a 3.6% decrease in world output according to IMF estimates, to become the largest contraction in world production since 1946, caused by a general decline in economic activity in both developed and emerging economies. Latin America registered a GDP contraction of 7.4% in 2020, the worst performance since the Great Depression of the 1930s. However, some hope is foreseen as prospects for a quick recovery in world trade have improved as merchandise trade expanded more rapidly than expected in the second half of 2020. According to the latest estimates from the World Trade Organization, the volume of world trade is expected to increase by 8% in 2021 after having fallen 5.3% in 2020, continuing its rebound from the pandemic-induced collapse that bottomed out in the second quarter of last year. Nevertheless, the WTO states that such improvement is marred by regional disparities, continued weaknesses in services trade and lag in vaccination timetables, particularly in emerging countries across the globe and Latin America. Short-term risks to the forecast are firmly on the downside and centered on pandemic-related factors as COVID-19 continues to post the greatest threat to the outlook for trade. New ways of infection could easily undermine any hope for a recovery. Over the medium to long term, public debt and deficits could also weigh on economic growth and trade, particularly in highly indebted developing countries in our region. In this difficult economic environment, with Jorge Salas who took office on March 9 last year, [indiscernible] billion dollars in short- and medium-term financing. Our Commercial portfolio reached $5.6 billion for the year, remaining well diversified and focused on high-quality exposures, which 59% deployed in investment-grade countries, 54% with financial institutions and 16% with sovereign and state-owned corporations. In addition, exposure to higher risk sectors have been downsized since the onset of COVID-19 such as sugar and airlines now representing only now 1% and 0.9% of the total portfolio, respectively. Bladex has unique model characterized by its short-term trade nature and high-quality borrower base proved to be a fundamental and comparative advantage throughout the year, allowing us to swiftly recompose the risk of our portfolio while working closely and attending to our clients' needs under tighter credit underwriting standards as we also strengthened our liquidity levels, supported by broad access to debt capital markets and the continued support of deposits from our Class A shareholders. Bladex achieved earnings of $63.6 million in 2020 or $1.60 per share compared to $86.1 million in 2019 or $2.17 per share, representing a return on average equity of 6.2%. And noting the single result of Bladex's unique business model represents a key advantage in a year deeply impacted by the COVID-19 pandemic and prevailing market uncertainty. Reviewing the balance sheet, the year closed with $44.6 million in allowance for credit losses or 0.75% of the total credit portfolio, while the impaired portfolio stood at 0.22% of total loans, which highlights the strength of our business model and the soundness of our loan portfolio. By the end of the year, the bank reduced its liquidity position, which stood at $1 billion on December 31, representing 17% of total assets, while its funding was well distributed among various regions, terms and sources, including ample and constant access to interbank and debt capital markets, 60% of which was a deposit base that totaled $3.1 billion. The continued growth in the bank deposit base denotes the growth of its new Yankee CD program, which complements the short-term funding structure and the steady support for the bank's A Class shareholders, which represents 50% of total deposits at the end of 2020. The bank will maintain a solid Basel III Tier 1 capital ratio of 26% after having kept the annual dividend of $1 per share. Bladex's solid financial position remains intact despite all the challenges faced throughout a very complex economic year, underlined by the bank's ability to deliver sustainable results with a healthier and well-diversified asset composition and a stronger funding structure with increased tenors and diversification. Because of the volatile nature of the Latin American region in which we operate, the bank has historically maintained a solid capitalization, which in our -- in this context becomes a unique strength, enables to us -- enabling us to keep serving our clients' needs in difficult times like these. Capital management decisions will be subject to the financial condition of the bank and the economic repercussions of the unprecedented COVID-19 crisis. Capital and liquidity preservation are of paramount importance to the Board and management of the bank at this juncture. As I indicated to you last year, in keeping with the Board's commitment to gender diversity in leadership and representation, Isela Costantini and Alexandra Aguirre were appointed as new directors representing the shareholders of all classes in July 2019 and February 2020, respectively, as a result of an extensive and thorough selection process carried out by the Board's Compensation Committee. We are extremely lucky to have 2 board members with their professional experience, very robust credentials and the fact that the Compensation Committee of the bank has decided to nominate these great professionals to be elected in representation of shareholders of all classes at its Annual Shareholders' Meeting is a testament to that commitment. On the corporate social responsibility front, the work carried during the year by the 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 2020, we continue to invest in projects and programs focused mainly on providing educational and personal growth opportunities to children and young people from the most vulnerable sectors, but also contributed to different initiatives aimed at helping those suffering the effects of the pandemic. Our human development department put in place a well-being program, which include the mental health support, close monitoring of all employees and their families as well as carrying out many activities aimed at fostering connectivity, communication and engagement amongst our collaborators. During a crisis, the true meaning of put it together is revealed. On behalf of the entire Board, I would like to cordially thank all of our employees as they have been at the heart of our success and navigating through the storm. I'm very proud of what they have accomplished. We stepped up to support each other so that we could have the ability to support our clients, transitioning well to working in a remote environment without disruption of services to our customers. It is true that from any vantage point and by any measure, 2020 was an unparalleled year. Yet for all of its unique challenges, the year also inspired exceptional levels of resilience, collaboration and determination. Through it all, Bladex adopted and adjusted to ensure we continue to deliver on our commitments. To conclude, I would like to offer my appreciation not only to the bank's directors, administration and workforce but to our customers and to all of our stakeholders. Importantly, I would like to thank our stockholders once again for the support and trust 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 betterment and develop of our beloved Latin America. Thank you. [Audio Gap] [ register ] 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: one, the quorum of this meeting; two, the items in the agenda; and three, the number of votes already cast by shareholders for each of such items prior to this meeting.

Thank you, Mr. Chairman. It's an honor to present to shareholders my report. The Board of Directors picked March 15, 2021, 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 39,702,687 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 25,550,648 shares of common stock, which represents 64.35% of shares entitled to vote at this meeting. Therefore, a quorum of shareholders is present to conduct our meeting today. There are 4 items of business for the meeting. As you all know, shareholders can vote by proxy cards prior to the meeting. We have already received a significant 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 4 items of business and inform about the number of votes that have already been cast for each item. After all items are read, any shareholder who hasn't yet voted may do so by clicking on the voting button on the web portal and following 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. The first order of business is to approve the bank's audited consolidated financial statements for the fiscal year ended December 31, 2020. For this proposal, we have already received a positive vote of 23,381,802 shares, representing 91.51% of the total stock. 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, 2021. For this proposal, we have already received a positive vote of 24,608,709 shares, representing 96.31% of the total stock. The third order of business is the election of 3 directors. One director for Class E shareholders, proposal 3a, and 2 directors representing all classes of common shares, proposals 3b and 3c. I would like to note that Mr. Heras will not participate in any deliberations or discussions related to his election as Class E Director. For proposal 3a, the Board of Directors has nominated Mr. Miguel Heras Castro for election as director to represent the holders of the Class E shares to hold office until the 2024 Annual Meeting of Shareholders. No other candidate has been nominated. For this proposal, we have already received a positive vote of 50,674,936 shares, representing 96.3% of the total stock. For proposal 3b, the Board of Directors has nominated Ms. Isela Costantini for election as director to represent the holders of all classes of shares to hold office until the 2024 Annual Meeting of Shareholders. No other candidate has been nominated for this position. And for this proposal, we have already received a positive vote of 24,889,224 shares, representing 97.41% of the total stock. For proposal 3c, the Board of Directors has nominated Ms. Alexandra Aguirre to be elected as director representing the holders of all classes of shares to hold office until the 2024 Annual Meeting of Shareholders. No other candidate has been nominated. And for this proposal, we have already received a positive vote of 24,803,459 shares, representing 97.8% of the total stock. The fourth item of business is to approve on an advisory basis the compensation of the bank's executive officers' compensation -- sorry, of the bank's executive officers as described in the proxy statement. For this proposal, we have already received a positive vote of 23,538,011 votes, representing 92.4% of total share. Mr. Chair?

It is 10:48 Panama Time on April 21, 2021, and the polls are now open for all proposals. Polls will remain open for 1 minute. [Voting]

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

We do, Mr. Chairman. I'm pleased to report that the items 1, 2 and 4 in the agenda have been duly approved by the shareholders. I'm also pleased to report that Mr. Miguel Heras Castro has been elected as Class A (sic) [ Class E ] Director by Class E shareholders. And that Ms. Isela Costantini and Alexandra Aguirre have been elected as directors representing all classes of shareholders.

Many thanks for the trust you have placed in me as Class E shareholders director and Chairman of the Board. Having gone through all formal items of the business and 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 can submit a proposal to be voted on. However, it is important to highlight that our articles of corporation also provides that such proposal 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 this commencement. And given the number of Class E shares already voted that did not give proxy holders discretion to vote on any matter not on the agenda, no proposal presented at this time will have the necessary 2/3 of the votes to be seconded. As such, we now consider that this item of business is closed, and we'll proceed to the questions-and-answers portion of this meeting.

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 of 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 2021 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. Thank you for your attention, and please stay safe and healthy. [Foreign Language] You may now disconnect your lines.