Banco Latinoamericano de Comercio Exterior SA Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Business Momentum: 2025 began with a solid first quarter, seeing a pickup in activity and client engagement. The commercial team built a diversified pipeline with long-standing clients across the region, with some deals executed in Q1 and more in progress.
• Loan and Deposit Growth: The commercial loan portfolio grew 6.5% quarter-over-quarter and 23% year-over-year; deposits grew 8% quarter-over-quarter and 24% year-over-year.
• P&L and Margin: Net interest income was $65.3 million, with a resilient interest margin of 2.36%. Fee income increased 12% year-over-year from letters of credit and syndications.
• Efficiency: The cost-to-income ratio improved to 26.9%, reflecting disciplined execution of strategic initiatives. Net income was $51.7 million, and return on equity was 15.4%.
• Macro Context: Global trade policy shifts created uncertainty, but Latin America remained relatively insulated. Banco Latinoamericano de Comercio Exterior, S.A. was well-positioned to manage exposures and leverage opportunities in the environment.

Segment Performance

• Loan Portfolio: The commercial loan portfolio reached $10.7 billion, showing a solid 6.5% quarter-over-quarter growth and a 23% year-over-year growth. Growth was well-distributed across Argentina, Mexico, and Guatemala. Asset quality remained pristine with nonperforming loans close to zero.
• Deposits: Deposits rose to $5.9 billion, up 8% quarter-over-quarter and 24% year-over-year, representing almost 60% of total funding.
• Net Interest Income: Net interest income totaled $65.3 million, with an interest margin of 2.36% remaining resilient.
• Fee Income: Fee income was $10.6 million, up 12% year-over-year, led by the letters of credit business and syndications.
• Expenses: The cost-to-income ratio improved to 26.9%. Net income was $51.7 million, and the return on equity was 15.4% with a capital ratio above 15%.

Guidance

• Full-Year Outlook: The company remains on track to deliver full-year objectives, supported by consistent execution and the solid fundamentals of the business.
• Margin Potential: There is potential for margin improvement ahead, driven by market volatility and a robust pipeline of medium-term transactions.

Risks

• Global Uncertainty: Global trade policy shifts have led to heightened uncertainty, with potential spillover to real economic activity.
• Interest Rate Impact: A soft interest rate environment and inverted yield curve have affected the net interest margin, though potential margin expansion is expected in upcoming quarters.

Question and Answer

• Q: On expenses, what's driving the increase and future outlook? A: Jorge Salas: Expense increases are mainly due to headcount growth, IT investments, and consulting fees tied to the strategic plan. The hiring pace will decelerate, and the efficiency ratio is expected to be around 27%.
• Q: On growth, Q1 commercial book growth and sustainability? A: Jorge Salas and Samuel Canineu: Off-balance sheet growth in Q1 was higher than expected, tied to Argentina's oil and gas sector. Letters of credit business is growing with a short-term nature and is expected to continue growing with ongoing investments.
• Q: Spreads and NIM guidance, letters of credit fee income dynamics? A: Annette Vanjorde and Samuel Canineu: Spreads have been affected by interest rate cuts, but discipline in loan pricing is maintaining margins. Letters of credit balance increased at the end of the quarter, with fees expected to normalize in Q2 due to the short-term and recurrent nature of the business.