Banco Latinoamericano de Comercio Exterior SA Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Strategic Plan: Three years into a five-year plan. Phase one (efficiency) completed: reduced client onboarding time by 52%, expanded client base by 70%, increased deposit base by 78%. Phase two (product offering expansion) ongoing: trade finance platform 56% complete, scheduled for second half 2025; treasury platform implementation in initial stage, expected first phase completion mid-2026.
• Financial Results: 2024 net income $206M, up 24% y/y. Q4 2024 net income $51.5M, up 11% y/y but down 3% q/q due to higher strategic initiative expenses. Credit portfolio $11.2B, up 18% y/y. Investment securities portfolio focused on investment-grade non-LatAm issuers, primarily US. Funding structure: deposits $5.4B, up 23% y/y; non-US dollar funding fully hedged. Dividend increased from $0.50 to $0.625 per share.

Segment Performance

• Commercial Portfolio: Grew 18% in 2024 to $10 billion, strong in Brazil, Dominican Republic, Guatemala; non-performing loans close to zero.
• Deposits: Year-end closing balances up 23%, average balances up 33% (surpassing 30% guidance); resumed growth in first weeks of 2025.
• Capital Ratio: Tier one capital ratio at 15.5%, within target.
• Profitability: Net interest income up, net interest margin 2.47% for the year; fee income grew 37% in 2024; annual net income $206 million, up 24% y/y; return on equity 16.2%.
• Efficiency Ratio: Below 27% in 2024.

Guidance

• 2025 commercial portfolio growth 10%-12%.
• Average deposits increase 15%-17%.
• Net interest margin around 2.3%.
• Aim to maintain efficiency ratio around 27%.
• Return on equity 15%-16%.
• Basel III capital ratio 15%-16%.

Risks

• Macroeconomic and Trade: Impact of President Trump's America First policy on remittances (medium-term concern if mass deportations continue) and trade policy (uncertainty around USMCA renegotiation, potential tariffs and supply chain disruptions).
• Portfolio Exposure: Potential impact of tariffs on clients exposed to US trade, though focus on short-term, low-leverage, resilient corporations in Mexico and other regions.

Question and Answer

• Q: Comment on NIM contraction estimate for 2025 and drivers; loan structuring syndication performance and fee income outlook.
  • A: NIM compression not only from Fed funds rate but also competitive market environment and lending spreads. Syndications fee income driven by M&A activity, strong pipeline, and new professionals. Fee income expected to grow ~10% in 2025 post 37% growth in 2024, with letters of credit and syndications driving growth.
• Q: Impact of Trump administration tariffs on portfolio outlook; status of trade finance and treasury platforms.
  • A: Mexico exposure (12% of portfolio, 78% short-term, low-leverage) resilient. Trade finance platform 56% complete, launching second half 2025; treasury platform in initial stage, deploying to countries with opportunities, starting with key clients.
• Q: ROE guidance for 2026; portfolio exposure to US trade; deployment of trade and treasury platforms.
  • A: 2026 ROE expected higher than previous guidance due to plan execution. Portfolio exposure to US trade mostly Mexico, with resilient clients. Trade and treasury platforms country-agnostic, piloting with key clients then expanding.
• Q: Portfolio growth countries in 2025; provisions target; investment portfolio details.
  • A: Growth balanced across countries, focusing on Mexico, Central American conglomerates, and countries with economic recovery (e.g., Argentina). Reserves model-based, expected ~$17-20M in 2025. Investment portfolio mostly US, short duration, investment grade, providing diversification.