Banco Latinoamericano de Comercio Exterior SA Q3 FY2026 earnings call

• Record Portfolio Growth: The commercial portfolio reached a record $15 billion, up 38% year-over-year. This included a one-time $1 billion sovereign loan to Panama. Excluding this transaction, organic loan growth was 29% year-over-year, concentrated in high-grade segments, trade finance, and medium-term financing for energy and M&A projects in Colombia and Argentina.
• Strong Credit Quality: Asset quality remained robust with 99% of exposure classified as Stage 1. Stage 2 exposures declined to $82 million (0.5% of the portfolio), and Stage 3 exposures remained stable at $75 million (0.4%). No new exposures migrated to impaired status during the quarter.
• Funding and Liquidity Strength: Average deposits grew 22% year-over-year to support lower funding costs. The bank demonstrated funding flexibility by utilizing its correspondent banking network for short-term facilities, including the Panama transaction. Liquid assets remain at $2 billion (12% of total assets).
• Capital Adequacy: The Tier 1 capital ratio ended the quarter at 16.2%, well within the 15-16% operating range. Capital consumption was low due to the investment-grade nature of recent growth.
• Operational Efficiency: The efficiency ratio improved to 25.8% in Q3, benefiting from revenue growth outpacing expense increases. Planned strategic investments are expected to raise the full-year ratio closer to 27%.

The company reported total revenues of $99.1 million, an increase of nearly 20% year-over-year. Net interest income reached a record $79.8 million, up 9% from the second quarter and 18% year-over-year, contributing approximately 80.6% of total revenue. Non-interest income totaled $19.3 million, representing about 19.4% of total revenue, driven by record letters of credit income and structured transaction fees. The efficiency ratio stood at 25.8%, indicating strong cost discipline relative to revenue growth.

• Commercial Portfolio Growth: Full-year growth is expected to be around 35%. Excluding the one-off Panama transaction, organic growth is projected at approximately 25%, significantly above the original guidance of 13-15%.
• Deposit Growth: Average deposit growth is expected to end the year at around 20%, exceeding previous expectations.
• Net Interest Margin (NIM): Management expects NIM compression of approximately five basis points due to liquidity abundance and competition, projecting a year-end NIM of roughly 2.25%.
• Efficiency Ratio: The full-year efficiency ratio is anticipated to be around 27%, which is slightly better than prior guidance.
• Profitability Metrics: Adjusted Return on Equity (ROE) guidance is reaffirmed at 14-15%, and the Tier 1 capital ratio operating range remains at 15-16%.

• Spread Compression: Intense competition for high-quality Latin American assets continues to pressure lending spreads, although management notes potential widening in global bond spreads could create opportunities.
• Brazil Political Risk: Following the presidential election, there is market volatility and fiscal uncertainty in Brazil. However, Bladex maintains comfort with its exposures due to conservative underwriting, cautious positioning in recent quarters, and the short maturity profile (>75% maturing in <12 months).
• One-Time Transaction Impact: The $1 billion Panama sovereign loan, while highly profitable on a risk-adjusted basis, dilutes reported Net Interest Margin in Q4 and represents a non-recurring event that may not be repeated.
• Prepayment Volatility: Accelerated recognition of deferred fees from higher-than-normal prepayments provided a temporary boost to Q3 NIM, creating variability in margin reporting.

Q: Ricardo Fuchipigo asked if 15% portfolio growth in 2027 is feasible given current momentum and which products drove the pickup, noting that DCM spreads are widening. / A: Tim explained that growth is driven by short-term trade finance and bridge loans as the bank avoids trapping capital in low-spread medium-term deals during market exuberance. He noted that widening DCM spreads allow them to capture clients delaying bond issuance, positioning for repricing upside in 2027.

Q: Daniel Mota asked about the specific impact of the $1B Panama transaction on NIM/NII and what normalized NIM looks like excluding one-off benefits. / A: Annette clarified that the transaction dilutes NIM but significantly boosts absolute NII due to low capital consumption and efficient funding. Jorge added that normalized NIM faces pressure, mitigated by deposit growth, while the Panama deal's RERA is excellent despite NIM dilution.

Q: Andrés Soto requested clarity on the trajectory of NIM into Q4, specifically the magnitude of compression from reversing Q3 prepayment benefits and adding Panama pressure. / A: Annette detailed that Q3 NIM was boosted by liquidity management, funding spread improvements, and accelerated fee recognition from prepayments. She confirmed Q4 will see NIM dilution from the Panama transaction but emphasized that the overall strategy focuses on risk-adjusted returns rather than maximizing NIM in isolation.

Q: Ricardo Fuchipigo followed up on whether the revised NIM guidance assumes Fed rate hikes or if those are upside risks. / A: Annette stated the bank maintains a neutral interest rate gap position. Rate hikes would initially benefit deposits before loans reprice, eventually neutralizing the impact. However, a positive yield curve would continue to benefit the bank’s net interest margin.

Q: Juan Soto (written) asked about the medium-term target for total allowances for losses on impaired credit and if substantial increases in impairment losses are expected. / A: Jorge Salas responded that the cost of risk has been stable at approximately 20 basis points per year and expects this to continue, indicating no substantial increase in impairment losses is anticipated.