Banco Latinoamericano de Comercio Exterior SA Q3 FY2025 earnings call

• Successfully issued first additional Tier 1 capital instrument in mid-September, more than 3x oversubscribed.
• Commercial portfolio balances stable QoQ, up 12% YoY; new client onboarding up 7% YTD.
• Deposits up 6% QoQ, 21% YoY, with quarter end record of $6.8 billion.
• Interest income stable QoQ; noninterest income down QoQ but up 40% YoY.
• Net interest margin down 4bps to 2.32% but still above full year guidance.
• Operating expenses stable, efficiency ratio 25.8% better than full year guidance.
• Credit portfolio totaled $12.3 billion, new all-time high; commercial portfolio $10.9 billion.
• Investment portfolio $1.4 billion, up 4% QoQ, 18% YoY; liquidity $1.9 billion, 15.5% of total assets.
• Asset quality strong, 97% of total exposures Stage 1, nonperforming loans near 0.
• Deposits continued strong upward trend, reaching $6.8 billion, accounting for 2/3 of total funding.
• Net interest income stable; net interest margin 2.32%, down 4bps.
• Noninterest income $15.4 million, led by letter of credits and syndication/structuring.
• Operating expenses $21.3 million, efficiency ratio 25.8% better than guidance.

Commercial portfolio balances were stable quarter-over-quarter and up 12% year-over-year, driven by loan origination in Mexico, Guatemala and Argentina. Deposits rose 6% quarter-on-quarter and 21% year-on-year with a quarter end record of $6.8 billion. Interest income was stable quarter-over-quarter. Noninterest income performed well, down sequentially given the one-off transaction but up 40% year-over-year. Net interest margin showed a slight decline of 4 basis points down to 2.32%. Operating expenses were stable, and the efficiency ratio closed at 25.8%, even better than the full year guidance. We closed a solid quarter with $55 million in net income and a 15% return on equity.

• Reaffirm full year guidance based on year-to-date performance.
• Expect to deploy AT1 capital over 12-18 months.
• Maintain mid-teens capital ratio target.

• Global economy adapting to protectionist trade setting with volatility.
• Inflation above target in US could limit rate cuts and point to structurally higher terminal rate.
• Latin America inflation advancing unevenly, affecting policy rates.
• Tariff noise and policy uncertainty weighing on Mexico and parts of Central America.

Q: On capital, what is the new target in terms of capital ratios once AT1 is done and timing to deploy that capital?

A: Target remains mid-teens and 15%, expect to deploy capital over 12-18 months.

Q: On credit quality, visibility on Stage 2 ticket and probability of default?

A: Stage 2 driven by single client in petrochemical sector, client is current, well provisioned and guidance reaffirmed.

Q: Timing of announcing new stake plan?

A: In final stages, to share 2030 plan right after full year 2025 results.

Q: On funding, opportunity to improve funding cost with operational deposits?

A: Seen as low-hanging fruit, to be detailed in Investor Day, expecting growth in organic deposit balances.

Q: On loan growth opportunities to deploy AT1 capital, market attention and Argentina?

A: Strong momentum in Central America, balanced growth in South America, selective in Argentina, positive on recent election results in Argentina.

Q: On NIM, performance considering interest rate movement and funding changes?

A: Bank proactively manages assets and liabilities, maintaining NIM guidance of 230 for 2025.

Q: Evolution of deposit composition, impact on cost of funding?

A: Growth from cross-selling efforts, result of working with clients and fostering strong relationships, deposits mostly market rates.

Q: Profile of clients with 7% new client onboarding YTD, market share?

A: Balanced profile, low market share, focus on profitable client onboarding.

Q: Reason for moving to Stage 2, profile and expectation ahead?

A: Single case in petrochemical sector, client current, well provisioned, no systemic issues, guidance reaffirmed.

Q: Types of loans in 15% exposure to oil and gas and business in Argentina?

A: Combination of short-term trade-related exposure to national oil companies in Latin America, selective business in Argentina with focus on top tier names in dollar-generating sectors.