UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
20-F
¨
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE
SECURITIES EXCHANGE ACT OF 1934
OR
ý
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the
fiscal year ended December 31, 2007
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
OR
¨
SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date
of
event requiring this shell company report……………………………
For
the
transition period from ______ to _______
Commission
File Number 1-11414
BANCO
LATINOAMERICANO DE EXPORTACIONES, S.A.
(Exact
name of Registrant as specified in its charter)
LATIN
AMERICAN EXPORT BANK
|
REPUBLIC
OF PANAMA
|
(Translation
of Registrant’s name into English)
|
(Jurisdiction
of incorporation or
organization)
|
Calle
50 y Aquilino de la Guardia
P.O.
Box 0819-08730
Panama
City, Republic of Panama
(507)
210-8500
(Address
and telephone number of Registrant’s principal executive
offices)
Securities
registered or to be registered pursuant to Section 12(b) of the
Act.
Title
of each class
|
Name
of each exchange on which registered
|
Class
E Common Stock
|
New
York Stock Exchange
|
Securities
registered or to be registered pursuant to Section 12(g) of the
Act.
None
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act.
None
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual report.
6,342,189
|
|
Shares
of Class A Common Stock
|
2,660,847
|
|
Shares
of Class B Common Stock
|
27,367,113
|
|
Shares
of Class E Common Stock
|
36,370,149
|
|
Total
Shares of Common Stock
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act.
¨
Yes
ý
No
If
this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d)
of
the Securities Exchange Act of 1934.
¨
Yes
ý
No
Note –
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from
their obligations under those Sections.
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
ý
Yes
¨
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
¨
Large
Accelerated Filer
ý
Accelerated Filer
¨
Non-accelerated Filer
Indicate
by check mark which basis of accounting the registrant has used to prepare
the
financial statements included in this filing:
ý
U.S.
GAAP
¨
IFRS
¨
Other
Indicate
by check mark which financial statement item the Registrant has elected to
follow.
¨
Item
17
ý
Item
18
If
this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
¨
Yes
ý
No
BANCO
LATINOAMERICANO DE EXPORTACIONES, S.A.
TABLE
OF CONTENTS
|
Page
|
PART
I
|
|
|
|
Item
1. Identity of Directors, Senior Management and
Advisers
|
5
|
|
|
Item
2. Offer Statistics and Expected Timetable
|
5
|
|
|
Item
3. Key Information
|
5
|
A.
|
Selected
Financial Data
|
5
|
B.
|
Capitalization
and Indebtedness
|
6
|
C.
|
Reasons
for the Offer and Use of Proceeds
|
6
|
D.
|
Risk
Factors
|
6
|
|
|
Item
4. Information on the Company
|
9
|
A.
|
History
and Development of the Company
|
9
|
B.
|
Business
Overview
|
9
|
C.
|
Organizational
Structure
|
21
|
D.
|
Property,
Plant and Equipment
|
21
|
|
|
Item
4A. Unresolved Staff Comments
|
21
|
|
|
Item
5. Operating and Financial Review and Prospects
|
21
|
A.
|
Operating
Results
|
22
|
B.
|
Liquidity
and Capital Resources
|
33
|
C.
|
Research
and Development, Patents and Licenses, etc.
|
38
|
D.
|
Trend
Information
|
38
|
E.
|
Off-Balance
Sheet Arrangements
|
39
|
F.
|
Contractual
Obligations and Commercial Commitments
|
39
|
|
|
Item
6. Directors, Executive Officers and Employees
|
40
|
A.
|
Directors
and Executive Officers
|
40
|
B.
|
Compensation
|
44
|
C.
|
Board
Practices
|
48
|
D.
|
Employees
|
52
|
E.
|
Share
Ownership
|
52
|
|
|
Item
7. Major Shareholders and Related Party
Transactions
|
52
|
A.
|
Major
Shareholders
|
52
|
B.
|
Related
Party Transactions
|
54
|
C.
|
Interests
of Experts and Counsel
|
54
|
|
|
Item
8. Financial Information
|
54
|
A.
|
Consolidated
Statements and Other Financial Information
|
54
|
B.
|
Significant
Changes
|
55
|
|
|
Item
9. The Offer and Listing
|
55
|
A.
|
Offer
and Listing Details
|
55
|
B.
|
Plan
of Distribution
|
55
|
C.
|
Markets
|
55
|
D.
|
Selling
Shareholders
|
55
|
E.
|
Dilution
|
56
|
F.
|
Expenses
of the Issue
|
56
|
|
|
Item
10. Additional Information
|
56
|
A.
|
Share
Capital
|
56
|
B.
|
Memorandum
and Articles of Association
|
56
|
C.
|
Material
Contracts
|
56
|
D.
|
Exchange
Controls
|
56
|
E.
|
Taxation
|
56
|
F.
|
Dividends
and Paying Agents
|
60
|
G.
|
Statement
by Experts
|
60
|
H.
|
Documents
on Display
|
60
|
I.
|
Subsidiary
Information
|
60
|
|
|
Item
11. Quantitative and Qualitative Disclosure About Market
Risk
|
60
|
|
|
Item
12. Description of Securities Other than Equity
Securities
|
63
|
|
|
|
PART
II
|
|
|
|
Item
13. Defaults, Dividend Arrearages and
Delinquencies
|
63
|
|
|
Item
14. Material Modifications to the Rights of Security Holders and
Use of
Proceeds
|
63
|
|
|
Item
15. Controls and Procedures
|
63
|
|
|
Item
16. Reserved
|
65
|
Item
16A. Audit and Compliance Committee Financial Expert
|
65
|
Item
16B. Code of Ethics
|
65
|
Item
16C. Principal Accountant Fees and Services
|
65
|
Item
16D. Exemptions from the Listing Standards for Audit
Committees
|
66
|
Item
16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
|
66
|
|
|
|
PART
III
|
|
|
|
Item
17. Financial Statements
|
67
|
|
|
Item
18. Financial Statements
|
67
|
|
|
Item
19. Exhibits
|
67
|
In
this
Annual Report on Form 20-F (this “Annual Report”), references to the “Bank” or
“Bladex” are to Banco Latinoamericano de Exportaciones, S.A., a specialized
supranational bank incorporated under the laws of the Republic of Panama
(“Panama”) and its subsidiaries. References to “dollars” or “$” are to United
States dollars.
The
Bank
accepts deposits and raises funds principally in United States dollars, grants
loans mostly in United States dollars and publishes its
consolidated
financial statements in
United
States dollars. The numbers and percentages set out in this Annual Report have
been rounded and, accordingly, may not total exactly.
Upon
written or oral request, the Bank will provide without charge to each person
to
whom this Annual Report is delivered, a copy of any or all of the documents
listed as exhibits to this Annual Report (other than exhibits to those
documents, unless the exhibits are specifically incorporated by reference in
the
documents). Written requests for copies should be directed to the attention
of
Jaime Celorio, Chief Financial Officer, Bladex, as follows: (1) if by regular
mail, to P.O. Box 0819-08730, Panama City, Republic of Panama, and (2) if by
courier, to Calle 50 y Aquilino de la Guardia, Panama City, Republic of Panama.
Telephone requests may be directed to Mr. Celorio at 011-507-210-8563. Written
requests also may be faxed to Mr. Celorio at 011-507-269-6333 or sent via e-mail
to jcelorio@bladex.com. Information is also available on the Bank’s website at:
www.bladex.com.
Forward-Looking
Statements
This
Annual Report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Forward-looking statements involve risks and uncertainties, and actual
results may differ materially from those discussed in any such statement.
Factors that could cause actual results to differ materially from these
forward-looking statements include the risks described in the section titled
“Risk Factors.” Forward-looking statements include statements
regarding:
|
·
|
the
anticipated growth of the Bank’s credit portfolio, including its trade
finance portfolio;
|
|
·
|
the
Bank’s ability to increase the number of corporate
clients;
|
|
·
|
the
continuation of the Bank’s preferred creditor
status;
|
|
·
|
the
effects of changing interest rates and of an improving macroeconomic
environment in the Region on the Bank’s financial
condition;
|
|
·
|
the
execution of the Bank’s strategies and initiatives, including its revenue
diversification strategy;
|
|
·
|
the
anticipated operating income and return on equity in future
periods;
|
|
·
|
the
implied volatility of the Bank’s Treasury and Asset Management
revenues;
|
|
·
|
the
adequacy of the Bank’s allowance for and provisions for credit
losses;
|
|
·
|
the
Bank’s ability to maintain its investment-grade credit
ratings;
|
|
·
|
the
availability and mix of future sources of funding for the Bank’s lending
operations; and
|
|
·
|
the
adequacy of the Bank’s sources of liquidity to replace large deposit
withdrawals.
|
In
addition, the statements included under the headings “Strategy” and “Trends” are
forward-looking statements. All forward-looking statements in this Annual Report
are made as of the date hereof, based on information available to the Bank
as of
the date hereof, and the Bank assumes no obligation to update any
forward-looking statement.
PART
I
Item
1.
Identity
of Directors, Senior Management and Advisers
Not
required in this Annual Report.
Item
2.
Offer
Statistics and Expected Timetable
Not
required in this Annual Report.
Item
3.
Key
Information
A.
Selected
Financial Data
The
following table presents consolidated selected financial data for the Bank.
The
financial data presented below are at and for the years ended December 31,
2003,
2004, 2005, 2006 and 2007 and are derived from the Bank’s consolidated financial
statements for the years indicated, which were prepared in accordance with
U.S.
generally accepted accounting principles (“U.S. GAAP”). The 2003, 2004, 2005 and
2006 consolidated financial statements were audited by the registered public
accounting firm KPMG, and the consolidated financial statements for the year
ended December 31, 2007 were audited by the registered public accounting firm
Deloitte, Inc. The consolidated financial statements of the Bank at December
31,
2006 and 2007 and for each of the three years in the period ended December
31,
2007 (the “Consolidated Financial Statements”) are included in this Annual
Report, together with the reports of the registered public accounting firms
KPMG
and Deloitte Inc. The information below is qualified in its entirety by the
detailed information included elsewhere herein and should be read in conjunction
with Item 4, “Information on the Company”, Item 5, “Operating and Financial
Review and Prospects” and the Consolidated Financial Statements and notes
thereto included in this Annual Report.
Consolidated
Selected Financial Information
|
|
At
and for the Year Ended December 31,
|
|
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ thousand, except per share amounts and ratios)
|
|
Income
Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
$
|
53,987
|
|
$
|
42,025
|
|
$
|
45,253
|
|
$
|
58,837
|
|
$
|
70,570
|
|
Fees
and commissions, net
|
|
|
7,446
|
|
|
5,928
|
|
|
5,824
|
|
|
6,393
|
|
|
5,555
|
|
Reversal
of provision for credit losses
1
|
|
|
58,905
|
|
|
112,271
|
|
|
38,374
|
|
|
13,045
|
|
|
1,475
|
|
Trading
gains
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
879
|
|
|
23,866
|
|
Net
gain on sale on securities available for sale
|
|
|
22,211
|
|
|
2,922
|
|
|
206
|
|
|
2,568
|
|
|
9,119
|
|
Total
operating expenses
|
|
|
(22,561
|
)
|
|
(21,352
|
)
|
|
(24,691
|
)
|
|
(28,929
|
)
|
|
(37,027
|
)
|
Income
before cumulative effect of changes in accounting
principles
|
|
|
111,496
|
|
|
141,730
|
|
|
77,518
|
|
|
57,902
|
|
|
72,177
|
|
Cumulative
effect of accounting changes
|
|
|
0
|
|
|
0
|
|
|
2,583
|
|
|
0
|
|
|
0
|
|
Net
income
|
|
|
111,496
|
|
|
141,730
|
|
|
80,101
|
|
|
57,902
|
|
|
72,177
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
assets
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
130,076
|
|
|
52,597
|
|
Investment
securities
|
|
|
77,793
|
|
|
192,856
|
|
|
208,570
|
|
|
471,351
|
|
|
468,360
|
|
Loans
|
|
|
2,275,031
|
|
|
2,441,686
|
|
|
2,610,019
|
|
|
2,980,772
|
|
|
3,731,838
|
|
Allowance
for loan losses
|
|
|
224,347
|
|
|
106,352
|
|
|
39,448
|
|
|
51,266
|
|
|
69,643
|
|
Total
assets
|
|
|
2,560,612
|
|
|
2,732,940
|
|
|
3,159,231
|
|
|
3,978,337
|
|
|
4,790,532
|
|
Total
deposits
|
|
|
702,955
|
|
|
864,160
|
|
|
1,046,618
|
|
|
1,056,277
|
|
|
1,462,371
|
|
Trading
liabilities
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
54,832
|
|
|
90,765
|
|
Short-term
borrowings
|
|
|
687,214
|
|
|
704,718
|
|
|
760,699
|
|
|
1,595,604
|
|
|
1,504,710
|
|
Borrowings
and long-term debt
|
|
|
485,516
|
|
|
403,621
|
|
|
533,860
|
|
|
558,860
|
|
|
1,010,316
|
|
Total
liabilities
|
|
|
1,976,283
|
|
|
2,076,810
|
|
|
2,542,449
|
|
|
3,394,442
|
|
|
4,178,281
|
|
Total
stockholders’ equity
|
|
|
584,329
|
|
|
656,130
|
|
|
616,782
|
|
|
583,895
|
|
|
612,251
|
|
Average
number of shares outstanding
|
|
|
28,675
|
|
|
39,232
|
|
|
38,550
|
|
|
37,065
|
|
|
36,349
|
|
Average
number of diluted shares outstanding
|
|
|
28,675
|
|
|
39,372
|
|
|
38,860
|
|
|
37,572
|
|
|
36,414
|
|
Per
Common Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
6
|
|
|
3.88
|
|
|
3.61
|
|
|
2.01
|
|
|
1.56
|
|
|
1.99
|
|
Diluted
earnings per share
6
|
|
|
3.88
|
|
|
3.60
|
|
|
1.99
|
|
|
1.54
|
|
|
1.98
|
|
Book
value per share (period end)
|
|
|
14.84
|
|
|
16.87
|
|
|
16.19
|
|
|
16.07
|
|
|
16.83
|
|
Regular
cash dividends per share
|
|
|
0.00
|
|
|
0.50
|
|
|
0.60
|
|
|
0.75
|
|
|
0.88
|
|
Special
cash dividends per share
|
|
|
0.00
|
|
|
1.00
|
|
|
2.00
|
|
|
1.00
|
|
|
0.00
|
|
Selected
Financial Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on average assets
|
|
|
4.24
|
%
|
|
5.83
|
%
|
|
3.00
|
%
|
|
1.70
|
%
|
|
1.71
|
%
|
Return
on average stockholders’ equity
|
|
|
23.91
|
%
|
|
22.75
|
%
|
|
12.85
|
%
|
|
9.96
|
%
|
|
11.91
|
%
|
Net
interest margin
2
|
|
|
1.87
|
%
|
|
1.65
|
%
|
|
1.70
|
%
|
|
1.76
|
%
|
|
1.71
|
%
|
Net
interest spread
2
|
|
|
1.23
|
%
|
|
0.98
|
%
|
|
0.67
|
%
|
|
0.70
|
%
|
|
0.80
|
%
|
Total
operating expenses to total average assets
|
|
|
0.86
|
%
|
|
0.88
|
%
|
|
0.93
|
%
|
|
0.85
|
%
|
|
0.88
|
%
|
Regular
cash dividend payout ratio
|
|
|
0.00
|
%
3
|
|
13.84
|
%
|
|
29.84
|
%
|
|
48.01
|
%
|
|
44.32
|
%
|
Special
cash dividend payout ratio
|
|
|
0.00
|
%
3
|
|
27.68
|
%
|
|
99.46
|
%
|
|
64.01
|
%
|
|
0.00
|
%
|
Asset
Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans to total loans
4
|
|
|
19.62
|
%
|
|
10.50
|
%
|
|
1.11
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
Charged-off
loans to total loans
|
|
|
6.1
|
%
|
|
0.5
|
%
|
|
0.4
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
Allowance
for loan losses to total loans, net of unearned income and deferred
commission
|
|
|
9.89
|
%
|
|
4.37
|
%
|
|
1.51
|
%
|
|
1.72
|
%
|
|
1.87
|
%
|
Allowance
for credit losses to non-accruing credits
|
|
|
53
|
%
|
|
48
|
%
|
|
217
|
%
|
|
n.a.
|
|
|
n.a.
|
|
Capital
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity to total assets
|
|
|
22.82
|
%
|
|
24.01
|
%
|
|
19.52
|
%
|
|
14.68
|
%
|
|
12.78
|
%
|
Tier
1 capital to risk-weighted assets
5
|
|
|
35.42
|
%
|
|
42.90
|
%
|
|
33.74
|
%
|
|
24.45
|
%
|
|
20.92
|
%
|
Total
capital to risk-weighted assets
5
|
|
|
36.67
|
%
|
|
44.15
|
%
|
|
34.99
|
%
|
|
25.70
|
%
|
|
22.17
|
%
|
1
Includes
Reversal (provision) for loan losses to on and off-balance sheet credit risks.
For information regarding reversal (provision) for credit losses, see Item
5,
“Operating and Financial Review and Prospects/Operating Results”.
2
For
information regarding calculation of the net interest margin and the net
interest spread, see Item 5A, “Operating and Financial Review and
Prospects/Operating Results/Net Interest Income and Margins”.
3
During
2003, the Bank suspended its dividend payment. In 2004, the Bank re-established
its dividend payment.
4
Repossessed
assets or troubled debt restructurings as defined in Statement of Financial
Accounting Standards No. 15 amounted to $23 million in 2005, and $202 million
in
2004, and related mostly to Argentine credits.
5
Calculated
using the U.S. Federal Reserve Board’s 1992 fully phased-in risk-weighted
capital guidelines.
6
For
2005,
exclude the cumulative effect of changes in accounting principles, which
represented $0.07 per share.
B.
Capitalization
and Indebtedness
Not
required in this Annual Report.
C.
Reasons
for the Offer and Use of Proceeds
Not
required in this Annual Report.
D.
Risk
Factors
Risks
Relating to the Region
The
Bank’s credit portfolio is concentrated in Latin America and the Caribbean. The
Bank also faces borrower concentration. Adverse economic changes in those
countries or in the condition of the Bank’s largest borrowers could affect
adversely the Bank’s growth, asset quality, prospects, profitability and
financial condition.
The
Bank’s credit activities are concentrated in Central and South America and the
Caribbean (the “Region”), which is a reflection of the Bank’s mission and
strategy. Historically, economies of countries in the Region have occasionally
experienced significant volatility characterized, in some cases, by political
uncertainty, slow growth or recession, declining investments, government and
private sector debt defaults and restructurings, significant inflation and/or
devaluation. Global economic changes, including oil prices, commodities prices,
the U.S. dollar interest rates and exchange rate, and slower economic growth
in
industrialized countries, could have a significant adverse effect on the
economic condition of countries in the Region. In turn, adverse changes
affecting the economies of countries in the Region could have a significant
adverse impact on the quality of the Bank’s credit portfolio, including
increased loan loss provisions, debt restructurings, and loan losses. As a
result, this could also have an adverse impact on the Bank’s asset growth, asset
quality, prospects, profitability and financial condition.
The
Bank’s credit activities are concentrated in a relatively small number of
countries, which could have an adverse impact on the Bank’s credit portfolio
and, as a result, its financial condition, growth, prospects, results of
operations and financial condition if one or more of those countries encounters
economic difficulties. At December 31, 2007, approximately 67% of the Bank’s
credit portfolio was outstanding to borrowers in the following four countries:
Brazil ($1,728 million, or 36%); Colombia ($530 million, or 11%); Peru ($484
million, or 10%); and Mexico ($451 million, or 9%).
In
addition, at December 31, 2007, 11% of the Bank’s total credits were to five
borrowers in Brazil, and 13% of total credits were to four borrowers from Peru
(5%), Colombia (3%), Mexico (2%) and Venezuela (3%). A significant deterioration
of the financial or economic condition of any of these countries or borrowers
could have an adverse impact on the Bank’s credit portfolio, requiring the Bank
to create additional allowances for credit losses, or suffer credit losses
with
the effect being accentuated because of this concentration.
Local
country foreign exchange controls or currency devaluation may harm the Bank’s
borrowers’ ability to pay U.S. dollar-denominated obligations.
The
Bank
makes mostly U.S. dollar-denominated loans and investments. As a result, the
Bank faces the risk that local country foreign exchange controls will restrict
the ability of the Bank’s borrowers, even if they are exporters, to acquire
dollars to repay loans on a timely basis, and/or that significant currency
devaluation will occur, which could increase the cost, in local currency terms,
to the Bank’s borrowers of acquiring dollars to repay loans.
Increased
risk perception in countries in the Region where the Bank has large credit
exposure could have an adverse impact on the Bank’s credit ratings, funding
activities and funding costs.
Increased
risk perception in any country in the Region where the Bank has large exposures
could trigger downgrades to the Bank’s credit ratings. A credit rating downgrade
would likely increase the Bank’s funding costs, and reduce its deposit base and
access to the debt capital markets. In that case, the Bank’s ability to obtain
the necessary funding to carry on its financing activities in the Region at
meaningful levels could be severely hampered.
Risks
Relating to the Bank’s Business
Bladex
faces liquidity risk, and its failure to adequately manage this risk could
result in a liquidity shortage, which could adversely affect its financial
condition, results of operations and cash flows.
Bladex,
like all financial institutions, faces liquidity risk, or the risk of not being
able to maintain adequate cash flow to repay its deposits and borrowings, and
fund its credit portfolio on a timely basis. Failure to adequately manage its
liquidity risk could produce a cash shortage as a result of which the Bank
would
not be able to repay these obligations as they become due.
Approximately
one third of the Bank’s funding represents short-term borrowings from
international banks, the majority of which are European and North American
institutions, which also compete with the Bank in its credit extension activity,
and represent a source of business for the Bank, as well. If these international
banks ceased to provide funding to the Bank, the Bank would have to seek funding
from other sources, which may not be available, or if available, may be at
higher interest cost.
Financial
turnmoil in the international markets could negatively impact liquidity in
the
financial markets, reducing the Bank’s access to credit or increasing its cost
of funding, which could lead to tighter lending standards. An example of this
situation is the liquidity constraint experienced since the second half of
2007
in the international financial markets, driven by the subprime crisis in the
United States. The persistence or worsening of these unfavorable market
conditions could have a material adverse effect on the Bank's liquidity.
As
a U.S.
dollar-based economy, Panama does not have a central bank in the traditional
sense, and there is no lender of last resort to the banking system in the
country. Central banks in other Latin American and Caribbean countries would
not
be obligated to act as lenders of last resort if Bladex were to face a liquidity
shortage. Accordingly, if the Bank faced a liquidity shortage, it would have
to
rely on commercial liquidity sources to resolve the liquidity shortage.
The
Bank’s allowances for credit losses could be inadequate to cover credit losses
related to its loans and contingencies.
The
Bank
determines the appropriate level of allowances for credit losses based on a
process that estimates the probable loss inherent in its portfolio, which is
the
result of a statistical analysis supported by the Bank’s historical portfolio
performance and the Bank’s management’s qualitative judgment. The latter
includes assumptions and estimates made in the context of changing political
and
economic conditions in the Region. The Bank’s allowances could be inadequate to
cover losses in its credit portfolio due to exposure concentration, which in
turn, could have a material adverse effect on the Bank’s financial condition,
results of operations and cash flows.
The
Bank’s businesses are subject to market risk.
Market
risk generally represents the risk that values of assets and liabilities or
revenues will be adversely affected by changes in market conditions. Market
risk
is inherent in the financial instruments associated with many of the Bank’s
operations and activities, including loans, deposits, investment and trading
securities, short-term borrowings, long-term debt, derivatives and trading
positions. Among many other market conditions that may shift from time to time
are fluctuations in interest and currency exchange rates, changes in the implied
volatility of interest rates and changes in securities prices, due to changes
in
either market perception or actual credit quality of either the issuer or its
country of origin. Accordingly, depending on the instruments or activities
impacted, market risks can have wide ranging, complex adverse affects on the
Bank’s financial condition, results of operations, cash flows and business. See
Item 11, “Quantitative and Qualitative Disclosure About Market
Risk”.
The
Bank faces interest rate risk which is caused by the mismatch in maturities
of
interest earning assets and interest bearing liabilities. If not properly
managed, this mismatch can reduce net interest income as interest rates
fluctuate.
As
a
bank, Bladex faces interest rate risk because interest-bearing liabilities
generally reprice at a different pace than interest-earning assets. Failure
to
adequately manage eventual mismatches may reduce the Bank’s net interest income
during periods of fluctuating interest rates.
Operational
problems or errors can have a material adverse impact on the Bank’s business,
financial condition, results of operations and cash flows.
Bladex,
like all financial institutions, is exposed to operational risks, including
the
risk of fraud by employees and outsiders, failure to obtain proper internal
authorizations, failure to properly document transactions, equipment failures,
and errors by employees. Operational problems or errors may occur, and their
occurrence may have a material adverse impact on the Bank’s business, financial
condition, results of operations and cash flows.
Bladex,
has an Operational Risk department that evaluates the operational risk level
of
every key product or process that could have an impact on the financial
statements. This department coordinates periodic training for all personnel
and
auto-evaluations with the participation of those personnel controlling each
process. Each incident reported, with real or potential loss, is registered
in
an operational risk database, and on a quarterly basis, the Bank’s management is
informed of the relevant incidents that occurred (if any) and the suggested
mitigation plan.
The
Bank’s credit portfolio may not continue to grow at the same or similar
rate.
No
assurance can be given that, in the future, the Bank’s credit portfolio,
including the Bank’s foreign trade portfolio, will continue to grow at
historical rates. A reversal in the growth rate of the Region’s economy and
trade volumes could adversely affect the growth rate of the Bank’s credit
portfolio.
Increased
competition and banking industry consolidation could limit the Bank’s ability to
grow and may adversely affect results of operations.
Most
of
the competition the Bank faces in the trade finance business comes from
international banks,
the
majority of which are European and North American institutions
.
Many of
these international banks have substantially greater resources than the Bank
and
enjoy access to less expensive funding than the Bank does. There can be no
assurance that increased competition will not adversely affect the Bank’s growth
prospects and results of operations.
Merger
activity in the financial services industry has produced companies that are
capable of offering a wide array of financial products and services at
competitive prices. Globalization of the capital markets and financial services
industries exposes the Bank to further competition. The Bank's ability to grow
its business and, therefore, its earnings, is affected by these competitive
pressures.
Any
delays or failure to implement business initiatives that the Bank may undertake
could prevent
the
Bank from realizing the anticipated revenues and benefits of the
initiatives.
Part
of
the Bank’s strategy is to diversify income sources through business initiatives,
including targeting new clients and developing new products and services. These
initiatives may not be fully implemented within the time frame the Bank expects,
or at all. In addition, even if such initiatives are fully implemented, they
may
not generate revenues as expected. Any delays in implementing these business
initiatives could prevent the Bank from realizing the anticipated benefits
of
the initiatives, which could adversely affect the Bank’s business, results of
operations and growth prospects
.
Item
4.
Information
on the Company
A.
History
and Development of the Company
The
Bank,
headquartered in Panama City, Panama, is a specialized supranational bank
originally established by central banks of Latin American and Caribbean
countries to promote trade finance in the Region. The Bank was established
pursuant to a May 1975 proposal of the XX Assembly of Governors of central
banks
in the Region, which recommended the creation of a supranational organization
to
increase the Region’s foreign trade financing capacity. The Bank was constituted
in 1978 as a corporation pursuant to the laws of the Republic of Panama as
“Banco Latinoamericano de Exportaciones, S.A.” and commenced operations on
January 2, 1979. The Bank operates under the commercial name of “Bladex.” Panama
was selected as the location of the Bank’s headquarters because of the country’s
importance as a Regional banking center, the benefits of a fully U.S.
dollar-based economy, the absence of foreign exchange controls, its geographic
location, and the quality of its communications facilities. Under special
legislation enacted in 1978, the Bank was granted certain privileges by the
government of Panama, including an exemption from payment of income taxes in
Panama.
Bladex
offers its services through the Bank’s head office and subsidiaries in Panama
City, and its subsidiaries and offices in New York City, including its agency
(the "New York Agency") and Bladex Asset Management, Inc. (“Bladex Asset
Management”), its subsidiaries in Brazil and the Cayman Islands, its
international administrative office in Miami and its representative offices
in
Mexico City and Buenos Aires as well as through a worldwide network of
correspondent banks. Bladex’s head office is located at Calle 50 y Aquilino de
la Guardia, Panama City, Panama, and its telephone number is 011-507-210-8500.
See Item 18, “Financial Statements”, note 1.
B.
Business
Overview
Overview
The
Bank’s mission is to provide seamless support to Latin America’s foreign trade,
while creating value for its stockholders. The Bank is principally engaged
in
providing trade financing to selected commercial banks and corporations in
the
Region.
Bladex
intermediates in the financial and capital markets throughout the Region,
through three business platforms:
The
Commercial Division
,
which
comprises the Bank’s financial intermediation and fee generation activities,
including the Bank’s trade finance products, such as loans for pre - and
post-export financing and import of goods, letters of credit, banker’s
acceptances and guarantees. The majority of the Bank’s loans are extended in
connection with specific identified foreign trade transactions. Through its
revenue diversification strategy, the Bank’s Commercial Division has introduced
a broader range of products, services and solutions associated with foreign
trade, including co-financing arrangements, underwriting of syndicated credit
facilities, structured trade financing, asset-based financing in the form of
factoring, vendor financing and leasing, as well as other fee-based business,
like U.S.-clearing electronic services.
The
Treasury Division
,
which
is responsible for ensuring the Bank’s funding and liquidity, for the management
of its interest rate, liquidity and currency risks, and for Bladex’s investments
in fixed-income securities.
The
Bank’s lending and investing activities are funded by interbank deposits,
primarily from central banks and financial institutions in the Region, by
borrowings from international commercial banks and, to a lesser extent, by
sales
of the Bank’s debt securities to financial institutions and investors in Japan,
Europe, North America and the Region. The Bank does not provide retail banking
services to the general public, such as retail savings accounts or checking
accounts, and does not take retail deposits.
The
Asset Management Division
,
which
is based in New York and commenced operations in April 2006, provides investment
advisory services to funds and managed accounts, and conducts business through
the Bladex Offshore Feeder Fund (“the Feeder”) and the Bladex Capital Growth
Fund (“the Fund”) incorporated in the Cayman Islands. The Asset Management
Division incorporates the investment manager, Bladex Asset Management, and
the
Bank’s investment in any of the managed funds or accounts. The Asset Management
Division’s objective is to achieve above average long-term rates of return,
while also attempting to preserve capital, mitigate risk and produce returns,
which, over the long-term, have low correlation to the returns of the major
U.S.
equity and investment grade fixed income indices.
At
December 31, 2007, the Bank had 49 officers across its offices responsible
for
marketing the Bank’s financial products and services to existing and potential
customers.
Historically,
trade finance generally has not been negatively affected by Latin American
debt
restructurings. This has been due, in part, to the perceived importance that
governments and borrowers in the Region attach to maintaining their access
to
trade finance. In the case of Bladex, the Bank generally has enjoyed “preferred
creditor” status in several countries in the Region, which has strengthened its
position in respect of debt restructurings. The Bank, due in part to its
preferred creditor status, generally has been allowed to negotiate directly
with
the governments of these countries concerning its loans, as opposed to
negotiating indirectly as a member of a group of creditors in debt restructuring
proceedings. In addition, the Bank’s preferred creditor status has generally
exempted it from convertibility and transfer limitations of U.S. dollars for
payment of external obligations. The Bank believes that its preferred creditor
status is partially attributable to its relationship with its Class A
stockholders consisting of central banks or governmental financial institutions
from 23 countries in the Region.
Developments
During 2007
During
2007, the Bank continued the successful execution of its revenue diversification
strategy among its three business divisions.
The
Commercial Division achieved corporate client base growth and portfolio
diversification, resulting in a 16% increase in its average credit portfolio
over 2006, with approximately $8 billion in credits granted. The growth of
the
Bank’s credit and other business activities was achieved while maintaining
credit quality, resulting in no past due or non-accrual loans at the end of
the
year 2007.
The
Treasury Division continued the expansion of its revenue-driven activities,
increasing its securities available-for-sale portfolio by 35%. This portfolio
is
comprised of liquid, Latin American fixed income securities of high credit
quality. In addition, the Treasury Division was able to effectively manage
and
strengthen the Bank’s liquidity position, in spite of the increased level of
uncertainty in international markets since August of 2007, as a result of the
subprime crisis in the United States. During 2007, the Bank closed its
first-ever funding transactions denominated in local currencies of the Region,
including a bond issuance in Peruvian Nuevo Soles and inter-bank borrowings
and
loans denominated in Mexican Pesos; the Bank also signed a five-year
international loan syndication for an amount of $150 million, and a three-year
borrowing for an additional $75 million, and updated its $2.25 billion European
Medium-Term Note (“EMTN”) program.
The
Asset
Management Division was successful in its proprietary asset management
activities and earned above-average returns. As a result, along with the Bank’s
commitment to the industry’s best practices in risk management and operational
control, the Bank obtained the approval of U.S. regulators to offer investment
advisory services to qualified offshore investors.
In
quantitative terms, these activities resulted in a 25% increase in net income,
which totaled $72 million, compared to $58 million in 2006. See Item 5,
“Operating and Financial Review and Prospects/Operating Results/Net Income” and
Item 18, “Financial Statements”, note 22.
Strategy
for 2008
For
2008,
Bladex intends to continue focusing its efforts on diversifying its revenue
sources across its three business units, with the objective of achieving
improved return on equity levels, while preserving and optimizing the Bank’s
stockholders’ equity.
The
Commercial Division intends to continue developing a stronger client base,
focused towards a growing corporate segment, and continuing the implementation
of a wider product range, including factoring, vendor financing and leasing,
which in turn should result in increasing the Bank’s capacity and execution of
fee income generation.
The
Bank
also intends to continue to expand its Treasury Division activities, by
increasing its available-for-sale and held-to-maturity fixed income portfolio
throughout the Region, and to issue additional bonds in other Latin American
markets.
The
Asset
Management Division intends to continue to expand its operations and expects
to
offer its services to third-party investors, in order to generate additional
fee
income.
Lending
Policies
The
Bank
extends credit directly to banks, corporations and state-owned export
organizations within the Region. The Bank analyzes credit requests from eligible
borrowers in light of credit risk criteria, including economic and market
conditions. The Bank maintains a consistent lending policy and applies the
same
credit criteria to all types of potential borrowers in evaluating
creditworthiness.
The
Bank
finances import and export transactions for all goods and products, with the
exception of articles such as weapons, ammunition, military equipment,
hallucinogenic drugs or narcotics not utilized for medical purposes. Imports
and
exports financed by the Bank are destined for buyers/sellers in countries both
inside and outside the Region.
The
Bank’s loans generally are unsecured. However, in certain instances, based upon
its credit review of the borrower and the economic and political situation
and
trends in the borrower’s home country, the Bank has determined that the level of
risk involved requires that a loan be secured by pledged deposits.
Country
Credit Limits
Bladex
has a methodology for capital allocation by country and its risk weights for
assets. The Credit Policy and Risk Assessment Committee of the Board of
Directors (“CPER”) approves a level of “allocated capital” for each country,
instead of nominal exposure limits. These country capital limits are reviewed
at
least annually in the quarterly meetings of the CPER. The system establishes
the
capital equivalent of each transaction, based on the internal numeric rating
assigned to each country, which is approved by the CPER.
The
amounts of capital allocated take into account the customer type (sovereign,
state-owned or private, corporate or financial institutions), the type of
transaction (trade or non-trade), and the average remaining term of the
transaction (from 1 to 180 days, 181 days to a year, between one and three
years, or more than three years). Capital utilizations by the business units
should not exceed the Bank’s reported stockholders’ equity.
Borrower
Lending Limits
Generally
the Bank establishes lines of credit for each borrower according to the results
of its risk analysis and potential business prospects; however, the Bank is
not
required to lend under these lines of credit. Once a line of credit has been
established, credit generally is extended after receipt of a request from the
borrower for financing, usually related to foreign trade. Loan pricing is
determined in accordance with prevailing market conditions and the borrower’s
creditworthiness.
For
existing borrowers, the Bank’s management has authority to approve credit lines
up to the legal lending limit prescribed by Panamanian law (see Item 4,
“Information on the Company/Business Overview/Regulation—Panamanian Law”),
provided that the credit lines comply fully with the country credit limits
and
conditions for the borrower’s country of domicile set by the Bank’s Board of
Directors (the “Board”). Approved borrower lending limits are reported to the
CPER quarterly. Panamanian Banking Law prescribes certain concentration limits,
which are applicable and strictly adhered to by the Bank, including a thirty
percent (30%) limit as a percentage of capital and reserves for any one borrower
and borrower group, in the case of financial institutions, and a twenty-five
percent (25%) limit as a percentage of capital and reserves for any one borrower
and borrower group, in the case of corporate and sovereign borrowers. As of
December 31, 2007, the legal lending limit prescribed by Panamanian law for
corporations and sovereign borrowers amounted to approximately $153 million,
and
for financial institutions and financial groups amounted to approximately $184
million. On a quarterly basis, the CPER reviews the impaired portfolio, if
any,
along with certain non-impaired credits.
At
December 31, 2007, the Bank was in full compliance with all regulatory limits.
See Item 4, “Information on the Company/Business Overview/Regulation/Panamanian
Law”.
Credit
Portfolio
The
Bank’s credit portfolio consists of the commercial portfolio and the treasury
portfolio.
The
Bank’s credit portfolio increased from $3,616 million at December 31, 2005 to
$4,006 million at December 31, 2006 and $4,753 million at December 31, 2007.
Commercial
Portfolio
The
commercial portfolio includes the book value of loans, securities purchased
under agreements to resell and contingencies and other assets (including
confirmed and stand-by letters of credit and guarantees, credit commitments,
reimbursement undertakings, equity investments and customers’ liabilities under
acceptances).
The
Bank’s commercial portfolio (excluding non-accruing credits in 2005) increased
from $3,365 million at December 31, 2005 to $3,634 million at December 31,
2006
and $4,281 million at December 31, 2007.
At
December 31, 2007, 63% of the Bank’s commercial portfolio represented trade
related credits. The corporate market segment represented 49% of the total
commercial portfolio, of which 68% represented trade financing. The following
table sets forth the distribution of the Bank’s commercial portfolio (excluding
non-accruing credits), by product category at December 31 of each year:
|
|
At
December 31,
|
|
|
|
2003
|
|
%
|
|
2004
|
|
%
|
|
2005
|
|
%
|
|
2006
|
|
%
|
|
2007
|
|
%
|
|
|
|
(in
$ million, except percentages)
|
|
Loans
|
|
$
|
1,830
|
|
|
79.8
|
|
$
|
2,186
|
|
|
88.7
|
|
$
|
2,581
|
|
|
76.7
|
|
$
|
2,981
|
|
|
82.0
|
|
$
|
3,732
|
|
|
87.2
|
|
Securities
purchased under agreements to resell
|
|
|
132
|
|
|
5.8
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
Contingencies
and other assets
|
|
|
330
|
|
|
14.4
|
|
|
277
|
|
|
11.3
|
|
|
784
|
|
|
23.3
|
|
|
654
|
|
|
18.0
|
|
|
550
|
|
|
12.8
|
|
Total
|
|
$
|
2,292
|
|
|
100.0
|
|
$
|
2,463
|
|
|
100.0
|
|
$
|
3,365
|
|
|
100.0
|
|
$
|
3,634
|
|
|
100.0
|
|
$
|
4,281
|
|
|
100.0
|
|
Loan
Portfolio
At
December 31, 2007,
the
Bank’s total loans amounted to $3,732 million, compared to $2,981 million at
December 31, 2006. See Item 5, “Operating and Financial Review and
Prospects/Operating Results/Changes in Financial Condition” and Item 18,
“Financial Statements”, note 6.
Loans
by Country
The
following table sets forth the distribution of the Bank’s loans by country at
December 31 of each year:
|
|
At
December 31,
|
|
|
|
2003
|
|
%
|
|
2004
|
|
%
|
|
2005
|
|
%
|
|
2006
|
|
%
|
|
2007
|
|
%
|
|
|
|
(in
$ million, except percentages)
|
|
Argentina
|
|
$
|
398
|
|
|
17.5
|
|
$
|
207
|
|
|
8.5
|
|
$
|
51
|
|
|
2.0
|
|
$
|
203
|
|
|
6.8
|
|
$
|
264
|
|
|
7.1
|
|
Bolivia
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
5
|
|
|
0.2
|
|
|
5
|
|
|
0.1
|
|
Brazil
|
|
|
1,011
|
|
|
44.4
|
|
|
1,054
|
|
|
43.2
|
|
|
1,095
|
|
|
42.0
|
|
|
1,317
|
|
|
44.2
|
|
|
1,379
|
|
|
37.0
|
|
Chile
|
|
|
131
|
|
|
5.8
|
|
|
322
|
|
|
13.2
|
|
|
283
|
|
|
10.8
|
|
|
175
|
|
|
5.9
|
|
|
10
|
|
|
0.3
|
|
Colombia
|
|
|
96
|
|
|
4.2
|
|
|
148
|
|
|
6.1
|
|
|
249
|
|
|
9.5
|
|
|
163
|
|
|
5.5
|
|
|
400
|
|
|
10.7
|
|
Costa
Rica
|
|
|
59
|
|
|
2.6
|
|
|
38
|
|
|
1.5
|
|
|
54
|
|
|
2.1
|
|
|
85
|
|
|
2.9
|
|
|
77
|
|
|
2.1
|
|
Dominican
Republic
|
|
|
24
|
|
|
1.1
|
|
|
0
|
|
|
0.0
|
|
|
1
|
|
|
0.0
|
|
|
9
|
|
|
0.3
|
|
|
29
|
|
|
0.8
|
|
Ecuador
|
|
|
22
|
|
|
1.0
|
|
|
51
|
|
|
2.1
|
|
|
25
|
|
|
1.0
|
|
|
43
|
|
|
1.4
|
|
|
61
|
|
|
1.6
|
|
El
Salvador
|
|
|
26
|
|
|
1.1
|
|
|
44
|
|
|
1.8
|
|
|
81
|
|
|
3.1
|
|
|
82
|
|
|
2.8
|
|
|
47
|
|
|
1.2
|
|
Guatemala
|
|
|
34
|
|
|
1.5
|
|
|
38
|
|
|
1.6
|
|
|
41
|
|
|
1.6
|
|
|
89
|
|
|
3.0
|
|
|
96
|
|
|
2.6
|
|
Honduras
|
|
|
0
|
|
|
0.0
|
|
|
6
|
|
|
0.2
|
|
|
26
|
|
|
1.0
|
|
|
36
|
|
|
1.2
|
|
|
49
|
|
|
1.3
|
|
Jamaica
|
|
|
14
|
|
|
0.6
|
|
|
26
|
|
|
1.1
|
|
|
24
|
|
|
0.9
|
|
|
49
|
|
|
1.6
|
|
|
77
|
|
|
2.1
|
|
Mexico
|
|
|
183
|
|
|
8.0
|
|
|
262
|
|
|
10.7
|
|
|
161
|
|
|
6.1
|
|
|
168
|
|
|
5.6
|
|
|
410
|
|
|
11.0
|
|
Nicaragua
|
|
|
9
|
|
|
0.4
|
|
|
5
|
|
|
0.2
|
|
|
2
|
|
|
0.1
|
|
|
10
|
|
|
0.3
|
|
|
13
|
|
|
0.3
|
|
Panama
|
|
|
44
|
|
|
1.9
|
|
|
89
|
|
|
3.7
|
|
|
156
|
|
|
6.0
|
|
|
180
|
|
|
6.1
|
|
|
140
|
|
|
3.7
|
|
Paraguay
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
Peru
|
|
|
65
|
|
|
2.8
|
|
|
55
|
|
|
2.2
|
|
|
180
|
|
|
7.0
|
|
|
262
|
|
|
8.8
|
|
|
454
|
|
|
12.2
|
|
Trinidad
& Tobago
|
|
|
100
|
|
|
4.4
|
|
|
92
|
|
|
3.8
|
|
|
177
|
|
|
6.8
|
|
|
104
|
|
|
3.5
|
|
|
88
|
|
|
2.3
|
|
Uruguay
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
4
|
|
|
0.1
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
Venezuela
|
|
|
61
|
|
|
2.7
|
|
|
5
|
|
|
0.2
|
|
|
0
|
|
|
0.0
|
|
|
1
|
|
|
0.0
|
|
|
135
|
|
|
3.6
|
|
Total
|
|
$
|
2,275
|
|
|
100.0
|
|
$
|
2,442
|
|
|
100.0
|
|
$
|
2,610
|
|
|
100.0
|
|
$
|
2,981
|
|
|
100.0
|
|
$
|
3,732
|
|
|
100.0
|
|
Loans
by Type of Borrower
The
following table sets forth the amounts of the Bank’s loans by type of borrower
at December 31 of each year:
|
|
At
December 31,
|
|
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ million)
|
|
Private
sector commercial banks
|
|
$
|
986
|
|
$
|
1,243
|
|
$
|
1,583
|
|
$
|
1,167
|
|
$
|
1,491
|
|
State-owned
commercial banks
|
|
|
422
|
|
|
563
|
|
|
118
|
|
|
273
|
|
|
241
|
|
Central
banks
|
|
|
0
|
|
|
13
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Sovereign
debt
|
|
|
50
|
|
|
58
|
|
|
49
|
|
|
123
|
|
|
113
|
|
State-owned
exporting organizations
|
|
|
424
|
|
|
363
|
|
|
402
|
|
|
138
|
|
|
282
|
|
Private
corporations
|
|
|
392
|
|
|
201
|
|
|
458
|
|
|
1,279
|
|
|
1,605
|
|
Total
|
|
$
|
2,275
|
|
$
|
2,442
|
|
$
|
2,610
|
|
$
|
2,981
|
|
$
|
3,732
|
|
During
2007, the Bank increased its exposure to private corporations by $326 million,
reflecting its strategy of developing a stronger client base, focused towards
a
growing corporate segment.
Maturities
and Sensitivites of the Loan Portfolio
The
following table sets forth the maturity profile of the loan portfolio at
December 31, 2007, by type of rate and type of borrower:
|
|
At
December 31, 2007
|
|
|
|
(in
$ million)
|
|
|
|
Due in one year or less
|
|
Due after one year
through five years
|
|
Due after five
years
|
|
Total
|
|
FIXED RATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private
sector commercial banks
|
|
$
|
830
|
|
$
|
30
|
|
$
|
0
|
|
$
|
860
|
|
State-owned
commercial banks
|
|
|
145
|
|
|
20
|
|
|
0
|
|
|
165
|
|
Sovereign
debt
|
|
|
30
|
|
|
83
|
|
|
0
|
|
|
113
|
|
State-owned
exporting organizations
|
|
|
148
|
|
|
0
|
|
|
0
|
|
|
148
|
|
Private
corporations
|
|
|
538
|
|
|
29
|
|
|
2
|
|
|
569
|
|
Sub-total
|
|
$
|
1,692
|
|
$
|
162
|
|
$
|
2
|
|
$
|
1,856
|
|
FLOATING
RATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private
sector commercial banks
|
|
$
|
355
|
|
$
|
220
|
|
$
|
56
|
|
$
|
631
|
|
State-owned
commercial banks
|
|
|
41
|
|
|
35
|
|
|
0
|
|
|
76
|
|
State-owned
exporting organizations
|
|
|
131
|
|
|
3
|
|
|
0
|
|
|
134
|
|
Private
corporations
|
|
|
307
|
|
|
710
|
|
|
19
|
|
|
1,036
|
|
Sub-total
|
|
$
|
833
|
|
$
|
968
|
|
$
|
75
|
|
$
|
1,876
|
|
Total
|
|
$
|
2,525
|
|
$
|
1,129
|
|
$
|
77
|
|
$
|
3,732
|
|
Contingencies
and other assets
The
Bank’s contingencies and other assets included in the commercial portfolio
consist of selected financial instruments with off-balance sheet credit risk
and
customer liabilities under acceptances.
The
Bank,
on behalf of its client base, advises and confirms letters of credit to
facilitate foreign trade transactions. The Bank also provides stand-by letters
of credit and guarantees, including country risk guarantees, which cover the
country risk arising from the risk of convertibility and transferability of
local currency of countries in the Region into hard currency and from political
risks, such as expropriation, nationalization, war and/or civil disturbances.
The Bank also provides commitments to extend credit, which are a combination
of
either non-binding or legal agreements to lend to a customer.
The
Bank
applies the same credit policies used in its lending process to its evaluation
of these instruments, and, once issued, the commitment is irrevocable and
remains valid until its expiration. At December 31, 2007, total contingencies
and other assets in the commercial portfolio amounted to $550 million,
representing 13% of the Bank’s total commercial portfolio. See Item 18,
“Financial Statements,” note 16.
Treasury
Portfolio
The
treasury portfolio includes investment securities and credit default swaps
(an
off-balance sheet credit derivative product), which totaled $468 million and
$3
million, respectively, at December 31, 2007.
Investment
Securities
The
Bank’s investment securities consist mostly of debt securities held to maturity
and securities available for sale. See Item 18, “Financial Statements”, notes 2
(g) and 5.
In
the
normal course of business, the Bank utilizes interest rate swaps for hedging
purposes in its assets (mainly its investment securities) and liabilities
management activities.
At
December 31, 2007, the Bank's investment securities portfolio totaled $468
million and consisted of investments with issuers in the Region, of which 67%
were banks and sovereign borrowers and 33% were corporations. For the year
2007,
the Bank’s total securities portfolio had a weighted average interest rate of
5.99% per annum.
Asset
Management Portfolio
The
asset
management portfolio includes trading assets and liabilities of the Asset
Management Division, which is the investment manager of the Fund. At December
31, 2007, the fair value of trading assets was $53 million and the fair value
of
trading liabilities was $91 million. See Item 18, “Financial Statements”, notes
1, 2 (f), 4, and 20.
The
Fund
follows a multi-strategy/multi-product trading approach striving to take
advantage of Latin American and Caribbean opportunities. The Fund takes long
and
short positions within the equity, fixed income and foreign exchange
markets.
The
Board
of Directors of the Fund controls the exposure of the Fund to certain risks
through a risk matrix, which contains guidelines and parameters that the Fund’s
managers must follow. Specific risk management guidelines include constraints
regarding capital usage, portfolio concentration, among other factors.
Total
Outstandings by Country
The
following table sets forth the aggregate amount of the Bank’s cross-border
outstandings, consisting of cash and due from banks, interest-bearing deposits
in other banks, investment securities, trading assets and loans, but not
including contingencies and other assets (collectively “cross-border
outstandings”) at December 31 of each year:
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
Amount
|
|
% of Total
Outstandings
|
|
Amount
|
|
% of Total
Outstandings
|
|
Amount
|
|
% of Total
Outstandings
|
|
|
|
(in
$ million, except percentages)
|
|
Argentina
|
|
$
|
55
|
|
|
1.8
|
|
$
|
229
|
|
|
5.9
|
|
$
|
283
|
|
|
6.0
|
|
Austria
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
45
|
|
|
1.0
|
|
Brazil
|
|
|
1,193
|
|
|
39.1
|
|
|
1,494
|
|
|
38.2
|
|
|
1,544
|
|
|
32.7
|
|
Chile
|
|
|
315
|
|
|
10.3
|
|
|
210
|
|
|
5.4
|
|
|
52
|
|
|
1.1
|
|
Colombia
|
|
|
260
|
|
|
8.5
|
|
|
278
|
|
|
7.1
|
|
|
526
|
|
|
11.1
|
|
Costa
Rica
|
|
|
54
|
|
|
1.8
|
|
|
85
|
|
|
2.2
|
|
|
77
|
|
|
1.6
|
|
Ecuador
|
|
|
25
|
|
|
0.8
|
|
|
43
|
|
|
1.1
|
|
|
61
|
|
|
1.3
|
|
El
Salvador
|
|
|
101
|
|
|
3.3
|
|
|
87
|
|
|
2.2
|
|
|
57
|
|
|
1.2
|
|
France
|
|
|
1
|
|
|
0.0
|
|
|
50
|
|
|
1.3
|
|
|
45
|
|
|
1.0
|
|
Germany
|
|
|
40
|
|
|
1.3
|
|
|
0
|
|
|
0.0
|
|
|
60
|
|
|
1.3
|
|
Guatemala
|
|
|
41
|
|
|
1.4
|
|
|
89
|
|
|
2.3
|
|
|
96
|
|
|
2.0
|
|
Honduras
|
|
|
26
|
|
|
0.8
|
|
|
36
|
|
|
0.9
|
|
|
49
|
|
|
1.0
|
|
Jamaica
|
|
|
24
|
|
|
0.8
|
|
|
51
|
|
|
1.3
|
|
|
77
|
|
|
1.6
|
|
Mexico
|
|
|
199
|
|
|
6.5
|
|
|
268
|
|
|
6.8
|
|
|
442
|
|
|
9.4
|
|
Panama
|
|
|
161
|
|
|
5.3
|
|
|
200
|
|
|
5.1
|
|
|
212
|
|
|
4.5
|
|
Peru
|
|
|
180
|
|
|
5.9
|
|
|
271
|
|
|
6.9
|
|
|
484
|
|
|
10.2
|
|
Spain
|
|
|
48
|
|
|
1.6
|
|
|
73
|
|
|
1.9
|
|
|
48
|
|
|
1.0
|
|
Trinidad
& Tobago.
|
|
|
177
|
|
|
5.8
|
|
|
104
|
|
|
2.6
|
|
|
88
|
|
|
1.9
|
|
United
States
|
|
|
5
|
|
|
0.2
|
|
|
135
|
|
|
3.5
|
|
|
110
|
|
|
2.3
|
|
Venezuela.
|
|
|
0
|
|
|
0.0
|
|
|
1
|
|
|
0.0
|
|
|
135
|
|
|
2.8
|
|
Other
countries
1
|
|
|
142
|
|
|
4.6
|
|
|
209
|
|
|
5.3
|
|
|
240
|
|
|
5.1
|
|
Total
|
|
$
|
3,048
|
|
|
100.0
|
|
$
|
3,914
|
|
|
100.0
|
|
$
|
4,730
|
|
|
100.0
|
|
1
Other
consists of cross-border outstandings to countries in which cross-border
outstandings did not exceed 1% of total assets outstandings.
In
allocating country risk limits, the Bank takes into consideration several
factors, including the Bank’s perception of country risk levels, business
opportunities, and economic and political analysis, applying a portfolio
management approach.
Cross-border
outstandings in countries outside the Region correspond principally to the
Bank’s liquidity placements. See Item 5, “Operating and Financial Review and
Prospects/Liquidity and Capital Resources/Liquidity”.
The
following table sets forth the amount of the Bank’s cross-border outstandings by
type of institution at December 31 of each year:
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ million)
|
|
Private
sector commercial banks
|
|
$
|
1,784
|
|
$
|
1,595
|
|
$
|
1,943
|
|
State-owned
commercial banks
|
|
|
184
|
|
|
324
|
|
|
306
|
|
Central
banks
|
|
|
20
|
|
|
0
|
|
|
0
|
|
Sovereign
debt
|
|
|
157
|
|
|
424
|
|
|
436
|
|
State-owned
exporting organizations
|
|
|
434
|
|
|
219
|
|
|
364
|
|
Private
corporations
|
|
|
470
|
|
|
1,352
|
|
$
|
1,680
|
|
Total
|
|
$
|
3,048
|
|
$
|
3,914
|
|
$
|
4,730
|
|
Revenues
Per Country
The
following table sets forth information regarding the Bank’s net revenues per
country at the dates indicated, with net revenues calculated as the sum of
net
interest income, fees and commissions, net, activities of hedging derivative
instruments, trading gains, net gain on sale of securities available for sale,
gain (loss) on foreign currency exchange and other income (expense),
net
1
.
|
|
For
the year ended December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ million)
|
|
Argentina
|
|
$
|
5.7
|
|
$
|
4.2
|
|
$
|
4.8
|
|
Brazil
|
|
|
23.4
|
|
|
31.4
|
|
|
33.2
|
|
Chile
|
|
|
2.9
|
|
|
2.7
|
|
|
1.4
|
|
Colombia
|
|
|
3.4
|
|
|
3.6
|
|
|
7.8
|
|
Costa
Rica
|
|
|
0.0
|
|
|
1.6
|
|
|
0.9
|
|
Dominican
Republic
|
|
|
1.0
|
|
|
1.0
|
|
|
0.9
|
|
Ecuador
|
|
|
2.5
|
|
|
2.9
|
|
|
3.2
|
|
El
Salvador
|
|
|
1.2
|
|
|
1.5
|
|
|
0.9
|
|
Guatemala
|
|
|
0.0
|
|
|
1.3
|
|
|
1.5
|
|
Jamaica
|
|
|
1.2
|
|
|
1.5
|
|
|
1.5
|
|
Mexico
|
|
|
4.7
|
|
|
5.0
|
|
|
12.4
|
|
Panama
|
|
|
1.6
|
|
|
3.6
|
|
|
3.8
|
|
Peru
|
|
|
1.4
|
|
|
3.4
|
|
|
4.5
|
|
Trinidad
and Tobago
|
|
|
0.0
|
|
|
1.8
|
|
|
2.4
|
|
Venezuela
|
|
|
0.7
|
|
|
1.0
|
|
|
3.3
|
|
Other
countries
2
|
|
|
3.9
|
|
|
1.2
|
|
|
1.5
|
|
Asset
Management Division
|
|
|
0.0
|
|
|
0.6
|
|
|
24.1
|
|
Total
|
|
$
|
53.6
|
|
$
|
68.2
|
|
$
|
108.2
|
|
1
|
Net
revenues per country exclude operating expenses, reversal (provision)
for
loan losses, reversal (provision) for losses on off-balance sheet
credit
risk, recoveries on assets, net of impairments and cumulative effect
on
prior years of changes in accounting principles
.
|
2
|
Other
consists of net revenues per country in which net revenues did
not exceed
$1 million for any of the periods indicated
above
|
Net
revenues per country reflect the net revenues derived from the Bank’s commercial
portfolio (loans and contingencies), treasury portfolio (investment securities
and credit default swaps) and asset management portfolio (trading assets and
liabilities), throughout the Region. See Item 4, “Information on the
Company/Business Overview/Commercial Portfolio, Treasury Portfolio and Asset
Management Portfolio” and Item 5, “Operating and Financial Review and
Prospects/Operating Results/Net Income”.
Competition
The
Bank
operates in a highly competitive environment in most of its markets, and faces
competition principally from regional and international banks in making loans,
and providing fee-generating services. The Bank competes in its lending and
deposit taking activities with other banks and international financial
institutions, many of which have greater financial resources and offer
sophisticated banking services. Whenever economic conditions and risk perception
improve in the largest countries of the Region, competition from commercial
banks, the securities markets and other new participants tends to increase.
Competition may have the effect of reducing the spreads of the Bank’s lending
rates over its funding costs and constraining the Bank’s profitability.
The
trade
finance business is subject to change. Increased open account exports and new
financing requirements from multinational corporations are changing the way
banks intermediate foreign trade financing. The Bank cannot predict with
certainty the changes that may occur and how these may affect the
competitiveness of its businesses.
The
Bank
believes that competition also comes from investment banks and the local and
international securities markets, which provide liquidity to the financial
systems in certain countries in the Region, as well as non-bank specialized
financial institutions. The Bank competes primarily on the basis of pricing
and
quality of service. See Item 3, “Key Information/Risk Factors”.
Regulation
General
The
Superintendency of Banks of Panama (the “Superintendency of Banks”) regulates,
supervises and examines Bladex. The New York Agency is regulated, supervised
and
examined by the New York Banking Department and the Federal Reserve Board and
the Florida International Administrative Office is regulated, supervised and
examined by the Florida Office of Financial Regulation and the Federal Reserve
Board. Bladex Offshore Feeder Fund and Bladex Capital Growth Fund are regulated
by government authorities in the Cayman Islands. The regulation of the Bank
by
relevant Panamanian authorities differs from the regulation generally imposed
on
banks, including foreign banks, in the United States by U.S. federal and state
regulatory authorities.
The
Superintendency of Banks has signed and executed agreements or letters of
understanding with twenty-four foreign supervisory authorities for the sharing
of supervisory information under the principles of reciprocity, appropriateness,
national agreement, and confidentiality. Those twenty-four entities include
the
Federal Reserve System, the Office of the Comptroller of Currency and the Board
of Governors, the Federal Deposit Insurance Corporation and the Office of Thrift
Supervision. In addition, the Statement of Cooperation between the United States
and Panama promotes cooperation between U.S. and Panamanian banking regulators
and demonstrates the commitment of the U.S. regulators and the Superintendency
of Banks to the principles of comprehensive consolidated supervision.
Panamanian
Law
The
Bank
operates in Panama under a General Banking License issued by the National
Banking Commission, predecessor of the Superintendency of Banks, and is subject
to supervision and examination by the Superintendency of Banks, pursuant to
Decree-Law No. 9 of February 26, 1998 (the “Banking Law”). Banks operating under
a General Banking License (“General License Banks”) may engage in all aspects of
the banking business in Panama, including taking local and offshore deposits,
as
well as making local and international loans.
General
License Banks must have paid-in capital of not less than $10 million.
Additionally, General License Banks must maintain minimum capital of 8% of
their
total risk-weighted assets. The capital adequacy standards used by the
Superintendency of Banks are based on the Basel Capital Accord. The
Superintendency of Banks is authorized to increase the minimum capital
requirement percentage in Panama in the event that generally accepted
international capitalization standards as set forth in the Basel Capital Accord
become more stringent.
General
License Banks are required to maintain 30% of their global deposits in liquid
assets (which include short-term loans to other banks and other liquid assets)
of the type prescribed by the Superintendency of Banks. Under the Banking Law,
deposits from central banks and other similar depositories of the international
reserves of sovereign states are immune from attachment or seizure
proceedings.
Pursuant
to the Banking Law, banks cannot grant loans or issue guarantees or any other
obligation (“Credit Facilities”) to any one person or a group of related persons
in excess of twenty-five percent (25%) of the Bank’s total capital. However, the
Banking Law established that in cases of loans and other credits granted by
mixed-capital banks with headquarters in Panama whose principal business is
the
granting of loans to other banks, the limit will be thirty percent (30%) of
the
Bank´s capital funds. As confirmed by the Superintendency of Banks, the Bank
currently applies the limit of thirty percent (30%) of the Bank’s total capital
with respect to the Bank’s credit facilities in favor of financial institutions
and the limit of twenty-five percent (25%) of the Bank’s total capital with
respect to the Bank’s credit facilities in favor of corporations and sovereign
borrowers.
Under
the
Banking Law, a bank may not grant loans or issue guarantees or any other
obligation to “related parties” that exceed (1) 5% of its total capital, in the
case of unsecured transactions, (2) 10% of its total capital, in the case of
collateralized transactions (other than loans secured by deposits in the bank),
and (3) 50% of its total capital in the case of loans secured by deposits in
the
bank. For these purposes, a “related party” is (a) any one or more of the
bank’s directors, (b) any stockholder of the bank who directly or indirectly
owns 5% or more of the issued and outstanding capital stock of the bank, (c)
any
company of which one or more of the bank’s directors is a director or officer or
where one or more of the bank’s directors is a guarantor of the loan or credit
facility, (d) any company or entity in which the bank or any one of its
directors or officers can exercise a controlling influence, (e) any company
or
entity in which the bank or any one of its directors or officers owns 20% or
more of the outstanding and issued capital stock of the company or entity and
(f) managers, officers and employees of the bank, or their respective spouses
(other than home mortgage loans or guaranteed personal loans under general
programs approved by the bank for employees).
The
Superintendency of Banks may authorize the total or partial exclusion of loans
or credits from the computation of these limitations in cases of unsecured
loans
and other credits granted by mixed-capital banks with headquarters in Panama
whose principal business is the granting of loans to other banks, which is
the
case of the Bank. This authorization is contingent on the following conditions:
(i) the ownership of shares in the debtor bank -directly or indirectly-by the
shared director or shared officer, may not exceed five percent (5%) of the
bank's capital, or may not amount to any sum that would ensure his or her
majority control over the decisions of the bank; (ii) the ownership of shares
in
the creditor bank-directly or indirectly-by the debtor bank represented in
any
manner by the shared director or shared officer, may not exceed five percent
(5%) of the shares outstanding of the creditor bank, or may not amount to any
sum that would ensure his or her majority control over the decisions of the
bank; (iii) the shared director or shared officer must abstain from
participating in the deliberations and in the voting sessions held by the
creditor bank regarding the loan or credit request, and (iv) the loan or credit
must strictly comply with customary standards of discretion set by the grantor
bank's credit policy. The Superintendency of Banks will determine the amount
of
the exclusion in the case of each loan or credit submitted for its
consideration.
The
Banking Law contains additional limitations and restrictions with respect to
related party loans and credit facilities. For instance, under the Banking
Law,
all loans made to managers, officers, employees or stockholders who are owners
of 5% or more of the lending Bank’s outstanding and issued capital stock will be
made on terms and conditions similar to those given by the bank to its clients
in arm’s-length transactions and which reflect market conditions. Shares of a
bank cannot be pledged or offered as security for loans or credit facilities
issued by the bank.
In
addition to the foregoing requirements, there are certain other restrictions
applicable to General License Banks, including (1) a requirement that a bank
must notify the Superintendency of Banks before opening or closing a branch
or
office in Panama and obtain approval from the Superintendency of Banks before
opening or closing a branch or subsidiary outside Panama, (2) a requirement
that
a bank obtain approval from the Superintendency of Banks before it liquidates
its operations, merges or consolidates with another bank or sells all or
substantially all of its assets, (3) a requirement that a bank must notify
the
Superintendency of Banks, within sixty (60) days prior to the beginning of
each
fiscal term, the name of the certified public accounting firm that it wishes
to
contract to carry out the duty of external auditing for the new fiscal term,
and
(4) a requirement that a bank obtains prior approval from the Superintendency
of
Banks of the risk rating entity it wishes to hire to perform the risk rating.
The subsidiaries of Panamanian banks established in foreign jurisdictions must
observe the legal and regulatory provisions applicable in Panama regarding
the
sufficiency of capital, as prescribed under the Banking Law.
The
Banking Law provides that banks in Panama are subject to inspection by the
Superintendency of Banks, which must take place at least once every two years.
These supervisory powers of the Superintendency of Banks also extend to a bank’s
subsidiaries and branches. The Superintendency of Banks last inspected the
Bank
during April and May 2006, and the results of this inspection were fully
satisfactory.
The
Superintendency of Banks is empowered to request from any bank or any company
that belongs to the economic group of which a bank in Panama is a member, the
documents and reports pertaining to its operations and activities. Banks are
required to file with the Superintendency of Banks monthly, quarterly and annual
information, including financial statements, an analysis of their credit
facilities and any other information requested by the Superintendency of Banks.
In addition, banks are required to make available for inspection any reports
or
documents that are necessary for the Superintendency of Banks to ensure
compliance with Panamanian banking laws and regulations. Banks subject to
supervision may be fined by the Superintendency of Banks for violations of
Panamanian banking laws and regulations.
On
February 22, 2008, the Panamanian cabinet voted to adopt Decree-Law No. 2 (the
“New Banking Law”), which is a revision and restatement of the Banking Law. This
new legislation will take effect on August 25, 2008. The New Banking Law
regulates banks and the entire “banking group” to which each bank belongs.
Banking groups are defined as the holding company and all direct and indirect
subsidiaries of the holding company, including the bank in question. Banking
groups must comply with audit standards and various limitations set forth in
the
New Banking Law, in addition to all compliance required of the bank in question.
Under
the
New Banking Law, a bank’s capital composition will include tertiary capital in
addition to primary and secondary capital, and the sum of secondary and tertiary
capital cannot exceed primary capital. Tertiary capital will be made up of
short-term subordinated debt incurred for the management of market risk. Capital
adequacy standards will require primary capital equal to no less than 4% of
the
bank’s assets and off-balance sheet operations that represent a contingency to
the bank, as well as the previous requirement of maintaining a minimum capital
of 8% of its total risk-weighted assets. Additionally, the Superintendency
of
Banks may take into account market risks, operational risks and country risks,
among others, to evaluate capital adequacy standards.
The
New
Banking Law will limit loans, guarantees and other similar obligations granted
to “related parties” by the bank as well as by the ultimate parent of the
banking group. The new definition of related parties also includes parties
related to the ultimate parent of the banking group.
The
supervisory powers of the Superintendency of Banks will extend to the bank
and
the banking group, and any inspection carried out by the Superintendency of
Banks may involve an inspection of the banking group. As a result, the bank,
as
well as the banking group, must make available for inspection any reports or
documents that are necessary for the Superintendency of Banks to ensure
compliance with Panamanian banking laws and regulations.
The
Bank
has not been significantly impacted by the incorporation of these changes
regarding the New Banking Law.
Panamanian
Anti-Money Laundering laws and regulations
.
In
Panama, all banks and trust corporations must take necessary measures to prevent
their operations and/or transactions from being used to commit the felony of
money laundering, terrorism financing or any other illicit activity contemplated
in the laws and regulations addressing this matter.
United
States Law
Bladex
operates a New York state-licensed agency in New York, New York and maintains
a
direct wholly-owned non-banking subsidiary in Delaware, Bladex Holdings Inc.
(“Bladex Holdings”), that is not engaged in activities other than owning one
wholly owned subsidiary incorporated under the laws of the State of Delaware:
Bladex Asset Management, Inc. incorporated on May 24, 2006. In february 2007,
another wholly-owned subsidiary Clavex, LLC,which was incorporated on June
15,
2006, was dissolved. On October 30, 2006, the Bank established an International
Administrative Office in Miami, Florida (the “Florida International
Administrative Office”).
New
York State Law
.
The New
York Agency, established in 1989, is licensed by the Superintendent of Banks
of
the State of New York (the “Superintendent”) under the New York Banking Law. The
New York Agency maintains an international banking facility that also is
regulated by the Superintendent and the Federal Reserve Board. The New York
Agency is examined by the New York State Banking Department and is subject
to
banking laws and regulations applicable to a foreign bank that operates a New
York agency. New York agencies of foreign banks are regulated substantially
the
same as, and have similar powers to, New York state-chartered banks, except
with
respect to capital requirements and deposit-taking activities.
The
Superintendent is empowered by law to require any branch or agency of a foreign
bank to maintain in New York specified assets equal to a percentage of the
branch or agency’s liabilities, as the Superintendent may designate. Under the
current requirement, the New York Agency is required to maintain a pledge of
a
minimum of $2 million with respect to its total third-party liabilities and
such
pledge may be up to 1% of the agency’s third party liabilities, or upon meeting
eligibility criteria, up to a maximum amount of $100 million. At December 31,
2007, the New York Agency maintained a pledge of $5.5 million, complying with
the minimum required amount.
In
addition, the Superintendent retains the authority to impose specific asset
maintenance requirements upon individual agencies of foreign banks on a
case-by-case basis. No special requirement has been prescribed for the New
York
Agency.
The
New
York Banking Law generally limits the amount of loans to any one person to
15
percent of the capital, surplus fund and undivided profits of a bank. For
foreign bank agencies, the lending limits are based on the capital of the
foreign bank and not that of the agency.
The
Superintendent is authorized to take possession of the business and property
of
a New York agency of a foreign bank whenever an event occurs that would permit
the Superintendent to take possession of the business and property of a
state-chartered bank. These events include the violation of any law, unsafe
business practices, an impairment of capital, and the suspension of payments
of
obligations. In liquidating or dealing with an agency’s business after taking
possession of the agency, the New York Banking Law provides that the claims
of
creditors which arose out of transactions with the agency may be granted a
priority with respect to the agency’s assets over other creditors of the foreign
bank.
Florida
Law
.
The
Florida International Administrative Office, established in October 2006, is
licensed and supervised by
the
Florida Office of Financial Regulation
under
the
Florida Financial Institutions Codes. The activities of the Florida
International Administrative Office are subject to the restrictions described
below as well as to Florida banking laws and regulations that are applicable
generally to foreign banks that operate offices in Florida. The Florida
International Administrative Office is also subject to regulation by the Federal
Reserve Board under the International Banking Act of 1978 (the
“IBA”).
Pursuant
to Florida law, the Florida International Administrative Office is authorized
to
conduct certain “back office” functions on behalf of the Bank, including
administration of the Bank’s personnel and operations, data processing and
record keeping activities, and negotiating and servicing loans or extensions
of
credit and investments. Under the provisions of the IBA and the regulations
of
the Federal Reserve Board, the Florida International Administrative Office
is
also permitted to function as a representative office of the Bank. In this
capacity it may solicit new business for the Bank and conduct research. It
may
also act in a liaison capacity between the Bank and its
customers.
Federal
Law
.
In
addition to being subject to New York and Florida state laws and regulations,
the New York Agency and the Florida International Administrative Office are
subject to federal regulations, primarily under the IBA, and are subject to
examination and supervision by the Federal Reserve Board. The IBA generally
extends federal banking supervision and regulation to the U.S. offices of
foreign banks and to the foreign bank itself. Under the IBA, the U.S. branches
and agencies of foreign banks, including the New York Agency, are subject to
reserve requirements on certain deposits. At present, the New York Agency has
no
deposits subject to such requirements. The New York Agency also is subject
to
reporting and examination requirements imposed by the Federal Reserve Board
similar to those imposed on domestic banks that are members of the Federal
Reserve System. The Foreign Bank Supervision Enhancement Act of 1991 (the
“FBSEA”) has amended the IBA to enhance the authority of the Federal Reserve
Board to supervise the operations of foreign banks in the United States. In
particular, the FBSEA has expanded the Federal Reserve Board’s authority to
regulate the entry of foreign banks into the United States, supervise their
ongoing operations, conduct and coordinate examinations of their U.S. offices
with state banking authorities, and terminate their activities in the United
States for violations of law or for unsafe or unsound banking
practices.
In
addition, under the FBSEA, state-licensed branches and agencies of foreign
banks
may not engage in any activity that is not permissible for a “federal branch”
(i.e., a branch of a foreign bank licensed by the federal government through
the
Office of the Comptroller of the Currency of the Treasury Department (“OCC”),
rather than by a state), unless the Federal Reserve Board has determined that
such activity is consistent with sound banking practices.
The
New
York Agency does not engage in retail deposit-taking in the United States,
and
deposits with the New York Agency are not insured by the Federal Deposit
Insurance Corporation (“FDIC”). Under the FBSEA, the New York Agency may not
obtain FDIC insurance and generally may not accept deposits of less than
$100,000.
The
IBA
also restricts the ability of a foreign bank with a branch or agency in the
United States to engage in non-banking activities in the United States, to
the
same extent as a U.S. bank holding company. Bladex is subject to certain
provisions of the Federal Bank Holding Company Act of 1956 (the “BHCA”) because
it maintains an agency in the United States. Generally, any nonbanking activity
engaged in by Bladex directly or through a subsidiary in the United States
is
subject to certain limitations under the BHCA. Under the Gramm-Leach-Bliley
Financial Modernization Act of 1999 (the “GLB Act”), a foreign bank with a
branch or agency in the United States may engage in a broader range of
non-banking financial activities, provided it is qualified and has filed a
declaration with the Federal Reserve Board to be a “financial holding company”
(“FHC”). As of the date hereof, Bladex has not filed such a declaration with the
Federal Reserve Board. At present, Bladex has one subsidiary in the United
States, Bladex Holdings that is incorporated under Delaware law. That subsidiary
is not engaged in any activity, other than owning one Delaware company, which
is
Bladex Asset Management, Inc.
In
addition, pursuant to the Financial Services Regulatory Relief Act of 2006,
the
Securities and Exchange Commission (“SEC”) and the Federal Reserve Board
finalized Regulation R. Regulation R defines the scope of exceptions provided
for in the GLB Act for securities activities which banks may conduct without
registering with the SEC as securities brokers or moving such activities to
a
broker-dealer affiliate. The “push out” rules exceptions contained in Regulation
R enable banks, subject to certain conditions, to continue to conduct securities
transactions for customers as part of the bank’s trust and fiduciary, custodial,
and deposit “sweep” functions, and to refer customers to securities
broker-dealer pursuant to a networking arrangement with the broker-dealer.
The
New York Agency is subject to Regulation R with respect to its securities
activities.
USA
PATRIOT Act of 2001
.
The USA
PATRIOT Act of 2001 (the “PATRIOT Act”) substantially broadened the scope of
U.S. anti-money laundering laws and regulations by imposing significantly new
compliance and due diligence obligations, creating new crimes and penalties
and
expanding the extraterritorial jurisdiction of the United States. Failure of
a
financial institution to comply with the PATRIOT Act’s requirements could have
serious legal and reputational consequences for an institution. Both the New
York Agency and the Florida International Administrative Office are “financial
institutions” within the meaning of the PATRIOT Act. The New York Agency has
adopted comprehensive policies and procedures to address the requirements of
the
PATRIOT Act.
Cayman
Islands Law
Bladex
Offshore Feeder Fund and Bladex Capital Growth Fund are exempted companies
incorporated in the Cayman Islands with limited liability, incorporated on
February 21, 2006 under the Companies Law of the Cayman Islands. The registered
office of these companies is at PO Box 309GT, Ugland House, South Church Street,
George Town, Grand Cayman, KY1-1104, Cayman Islands.
The
Companies Law (2007 Revision) of the Cayman Islands (the "Companies Law") is
derived, to a large extent, from the older Companies Acts of England, although
there are significant differences between the Companies Law and the current
Companies Act of England. Section 193 of the Companies Law requires that Bladex
Offshore Feeder Fund and Bladex Capital Growth Fund shall not trade in the
Cayman Islands with any person, firm or corporation except in furtherance of
the
business of these companies carried on outside the Cayman Islands. This does
not
prevent Bladex Offshore Feeder Fund and Bladex Capital Growth Fund from
effecting and concluding contracts in the Cayman Islands and exercising in
the
Cayman Islands all of its powers necessary for the carrying on of its business
outside the Cayman Islands.
The
Proceeds of Criminal Conduct Law (2007 Revision) and the Terrorism Law, 2003
of
the Cayman Islands impose reporting obligations on residents of the Cayman
Islands who know or suspect the involvement of another person in money
laundering or terrorist activities.
C.
Organizational
Structure
For
information regarding the Bank’s organizational structure see Item 18,
“Financial Statements”, note 1.
D.
Property,
Plant and Equipment
The
Bank
owns its main branch, with space of 6,161 square meters, located at Calle 50
and
Aquilino de la Guardia in Panama City. The Bank leases 11.2 square meters of
computer equipment hosting located at Gavilan Street Balboa in Panama City
and
21.2 square meters of office space and Internet access to be used in case of
a
contingency, located at 75E Street San Francisco in Panama City. In addition,
the Bank leases office space for its representative offices in Mexico and Buenos
Aires, Bladex Representação Ltda. in Brazil, its New York Agency, Bladex Asset
Management in New York, and its International Administrative Office in Miami.
See Item 18, “Financial Statements”, notes 2 (m) and 17.
Item
4A.
Unresolved
Staff Comments
None.
Item
5.
Operating
and Financial Review and Prospects
The
following discussion should be read in conjunction with the Bank’s Consolidated
Financial Statements and the notes thereto included elsewhere in this Annual
Report.
Nature
of Earnings
The
Bank
derives income from net interest income, fees and commissions, trading gains,
and net gains on sale of securities available-for-sale. Net interest income,
or
the difference between the interest income the Bank receives on its
interest-earning assets and the interest it pays on interest-bearing
liabilities, is generated principally by the Bank’s lending activities. The Bank
generates fees and commissions mainly through the issuance, confirmation and
negotiation of letters of credit and guarantees covering commercial and country
risk, and through loan origination and sales.
A.
Operating
Results
The
following table summarizes changes in components of the Bank’s net income and
performance at and for the periods indicated.
|
|
At
and For the Year Ended December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in $ thousand, except per share amounts and percentages)
|
|
Total
interest income
|
|
$
|
116,823
|
|
$
|
203,350
|
|
$
|
264,869
|
|
Total
interest expense
|
|
|
71,570
|
|
|
144,513
|
|
|
194,299
|
|
Net
interest income
|
|
|
45,253
|
|
|
58,837
|
|
|
70,570
|
|
Reversal
(provision) for loan losses
|
|
|
54,155
|
|
|
(11,846
|
)
|
|
(11,994
|
)
|
Net
interest income after reversal of (provision for) loan losses
|
|
|
99,408
|
|
|
46,991
|
|
|
58,576
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
Reversal
(provision) for losses on off-balance sheet credit risk
|
|
|
(15,781
|
)
|
|
24,891
|
|
|
13,468
|
|
Fees
and commissions, net
|
|
|
5,824
|
|
|
6,285
|
|
|
5,555
|
|
Activities
of hedging derivatives instruments
|
|
|
2,338
|
|
|
(225
|
)
|
|
(989
|
)
|
Recoveries
of assets, net of impairments
|
|
|
10,206
|
|
|
5,551
|
|
|
(500
|
)
|
Trading
gains
|
|
|
0
|
|
|
879
|
|
|
23,866
|
|
Net
gain on sale of securities available for sale
|
|
|
206
|
|
|
2,568
|
|
|
9,119
|
|
Gain
(loss) on foreign currency exchange
|
|
|
3
|
|
|
(253
|
)
|
|
115
|
|
Other
income (expense), net
|
|
|
5
|
|
|
144
|
|
|
(6
|
)
|
Net
other income
|
|
|
2,801
|
|
|
39,840
|
|
|
50,628
|
|
Total
operating expenses
|
|
|
(24,691
|
)
|
|
(28,929
|
)
|
|
(37,027
|
)
|
Income
before cumulative effect of changes in accounting principles
|
|
$
|
77,518
|
|
$
|
57,902
|
|
$
|
72,177
|
|
Cumulative
effect on prior years (to December 31, 2004) of a change in the credit
loss reserve methodology
|
|
|
2,733
|
|
|
0
|
|
|
0
|
|
Cumulative
effect on prior years (to December 31, 2004) of an early adoption
of the
fair-value-based method of accounting stock-based employee
compensation
|
|
|
(150
|
)
|
|
0
|
|
|
0
|
|
Net
income
|
|
$
|
80,101
|
|
$
|
57,902
|
|
$
|
72,177
|
|
Basic
earnings per share
|
|
$
|
2.01
|
|
$
|
1.56
|
|
$
|
1.99
|
|
Diluted
earnings per share
|
|
$
|
1.99
|
|
$
|
1.54
|
|
|
1.98
|
|
Return
on average assets
|
|
|
3.0
|
%
|
|
1.7
|
%
|
|
1.7
|
%
|
Return
on average stockholders’ equity
|
|
|
12.9
|
%
|
|
10.0
|
%
|
|
11.9
|
%
|
Net
Income
For
2007,
net income was $72 million, compared with $58 million for 2006, a $14 million,
or 25%, increase, mainly attributable to a $12 million, or 20%, increase in
net
interest income (mostly from the Commercial Division), $23 million in higher
trading gains from the Asset Management Division, and a $7 million increase
from
gain on sale of securities available-for-sale from the Treasury Division. These
increases were partly offset mainly by an $8 million increase in operating
expenses.
The
Commercial Division’s net income, which includes net interest income from loans,
fees and commissions and other income derived from financial services and
off-balance sheet credits (such as letters of credit, guarantees and credit
commitments), allocated operating expenses and reversals (provisions) for credit
losses, amounted to $43 million in 2007, compared to $47 million in 2006. The
$4
million decrease was mainly driven by lower reversals for credit losses which
amounted to $1 million in 2007 compared to $13 million in 2006. This decrease
was partly offset mainly by net interest income growth, due to higher average
balances of the loan portfolio and higher weighted average lending spreads
over
cost of funds.
The
Treasury Division’s net income, which includes net interest income on investment
securities, gains and losses on the sale of securities, on activities of hedging
derivative instruments and on foreign currency exchange transactions, allocated
operating expenses and recoveries on assets, net of impairment, amounted to
$10
million in 2007, compared to $11 million in 2006. The $1 million, or 7%,
decrease is mainly attributable to recoveries on assets which amounted to $0
during 2007, compared to $6 million during 2006 (related to collections of
Argentine securities which had been written-off and charged to earnings in
prior
years). This decrease was partly offset mainly by gains in the
available-for-sale portfolio.
The
Asset
Management Division’s net income, which includes net interest income on trading
securities, trading gains and allocated operating expenses, totaled $19 million
for the year 2007, compared to $21 thousand in 2006. The increase is
attributable principally to higher trading gains from asset management
activities, which amounted to $24 million in 2007 compared to $0.9 million
in
2006.
For
2006,
net income was $58 million, compared to $80 million for 2005. The $22 million
reduction in net income during 2006 mainly resulted from lower reversals of
credit provisions and recoveries on assets, net of impairments, which, for
2006,
amounted to $19 million, compared to $51 million in 2005. This reduction was
partly offset mainly by higher net interest income derived from the Commercial
Division’s loan portfolio growth and diversification.
For
further information on net income by business segment, see Item 18, “Financial
Statements”, note 22.
Net
Interest Income and Margins
The
following table sets forth information regarding net interest income, the Bank’s
net interest margin (the net interest income divided by the average balance
of
interest-earning assets), and the net interest spread (the average yield earned
on interest-earning assets, less the average yield paid on interest-bearing
liabilities) for the periods indicated.
|
|
For
the Year Ended December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ million, except percentages)
|
|
Net
interest income
|
|
|
|
|
|
|
|
|
|
|
Commercial
Division
|
|
|
|
|
|
|
|
|
|
|
Accruing
portfolio
|
|
$
|
33.2
|
|
$
|
49.0
|
|
$
|
64.1
|
|
Non-accruing
portfolio
|
|
|
6.2
|
|
|
2.0
|
|
|
0.0
|
|
Commercial
Division
|
|
$
|
39.4
|
|
$
|
50.9
|
|
$
|
64.1
|
|
Treasury
Division
|
|
|
5.9
|
|
|
6.9
|
|
|
6.2
|
|
Asset
Management Division
|
|
|
0.0
|
|
|
1.0
|
|
|
0.2
|
|
Consolidated
|
|
$
|
45.3
|
|
$
|
58.8
|
|
$
|
70.6
|
|
Net
interest margin
|
|
|
1.70
|
%
|
|
1.76
|
%
|
|
1.71
|
%
|
Net
interest spread
|
|
|
0.67
|
%
|
|
0.70
|
%
|
|
0.80
|
%
|
The
$12
million, or 20%, increase in net interest income in 2007 compared to 2006 was
the result of higher average balances in the loan portfolio (24%) and increased
weighted average lending spreads over the cost of funds. The increase in loan
portfolio average balances and lending spreads is attributable to the Bank’s
strategy to improve client and geographic portfolio diversification, by
increasing its exposure to the corporate client segment in several countries
in
the Region. The 5 basis point decrease in net interest margin during 2007
compared to 2006 was mainly due to higher leveraging of the balance sheet and
by
non-recurring interest income on non-accrual loans received on a cash basis
during 2006, both of which offset higher lending spreads during 2007.
The
$14
million increase in net interest income and the 6 basis point increase in net
interest margin in 2006 compared to 2005 were mainly due to an increase in
the
average accruing loan and investment portfolio, increasing interest rates on
the
Bank’s available capital, wider lending spreads reflecting changes in the Bank’s
portfolio mix, and a lower cost of funds. These factors were partially offset
by
the lower interest collections on the Bank’s non-accruing portfolio over 2006,
compared to 2005.
Distribution
of Assets, Liabilities and Stockholders’ Equity; Interest Rates and
Differentials
The
following table presents the distribution of consolidated average assets,
liabilities and stockholders’ equity, as well as the total dollar amounts of
interest income from average interest-earning assets and the resulting yields,
the dollar amounts of interest expense and average interest-bearing liabilities,
and corresponding information regarding rates. All impaired loans are on a
non-accruing basis, and interest on these loans is accounted for on a cash
basis. Average balances have been computed on the basis of consolidated daily
average balance sheets.
|
|
Year
ended December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
Description
|
|
Average
balance
|
|
Interest
|
|
Average
yield/rate
|
|
Average
balance
|
|
Interest
|
|
Average
yield/rate
|
|
Average
balance
|
|
Interest
|
|
Average
yield/rate
|
|
|
|
(in
$ million, except percentages)
|
|
Interest-Earning
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits with banks
|
$
|
158
|
|
$
|
5
|
|
|
3.19
|
%
|
$
|
180
|
|
$
|
9
|
|
|
4.90
|
%
|
$
|
327
|
|
$
|
17
|
|
|
5.12
|
%
|
Loans,
net
|
|
2,211
|
|
|
93
|
|
|
4.15
|
|
|
2,697
|
|
|
163
|
|
|
5.96
|
|
|
3,366
|
|
|
222
|
|
|
6.49
|
|
Impaired
loans
|
|
106
|
|
|
9
|
|
|
8.10
|
|
|
18
|
|
|
3
|
|
|
14.77
|
|
|
0
|
|
|
0
|
|
|
n.a.
|
|
Trading
assets
|
|
0
|
|
|
0
|
|
|
n.a.
|
|
|
50
|
|
|
6
|
|
|
11.46
|
|
|
84
|
|
|
5
|
|
|
6.27
|
|
Investment
securities
|
|
181
|
|
|
10
|
|
|
5.43
|
|
|
390
|
|
|
23
|
|
|
5.76
|
|
|
345
|
|
|
21
|
|
|
5.99
|
|
Total
interest-earning assets
|
$
|
2,656
|
|
$
|
117
|
|
|
4.34
|
%
|
$
|
3,336
|
|
$
|
203
|
|
|
6.01
|
%
|
$
|
4,122
|
|
$
|
265
|
|
|
6.34
|
%
|
Non-interest-earning
assets
|
$
|
81
|
|
|
|
|
|
|
|
$
|
90
|
|
|
|
|
|
|
|
$
|
90
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
(79
|
)
|
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
Other
assets
|
|
9
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
Total
Assets
|
$
|
2,667
|
|
|
|
|
|
|
|
$
|
3,403
|
|
|
|
|
|
|
|
$
|
4,209
|
|
|
|
|
|
|
|
Interest-Bearing
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
869
|
|
$
|
30
|
|
|
3.36
|
%
|
|
1,106
|
|
$
|
57
|
|
|
5.05
|
%
|
$
|
1,321
|
|
$
|
70
|
|
|
5.26
|
%
|
Trading
liabilities
|
|
0
|
|
|
0
|
|
|
n.a.
|
|
|
35
|
|
|
5
|
|
|
13.17
|
|
|
59
|
|
|
4
|
|
|
6.98
|
|
Securities
sold under repurchase agreements
|
|
40
|
|
|
1
|
|
|
2.92
|
|
|
306
|
|
|
16
|
|
|
5.29
|
|
|
253
|
|
|
14
|
|
|
5.30
|
|
Short-term
borrowings
|
|
565
|
|
|
19
|
|
|
3.36
|
|
|
738
|
|
|
39
|
|
|
5.16
|
|
|
1,019
|
|
|
57
|
|
|
5.49
|
|
Borrowings
and long-term debts
|
|
451
|
|
|
22
|
|
|
4.72
|
|
|
500
|
|
|
28
|
|
|
5.57
|
|
|
809
|
|
|
49
|
|
|
6.02
|
|
Total
interest-bearing liabilities
|
$
|
1,925
|
|
$
|
72
|
|
|
3.67
|
%
|
$
|
2,684
|
|
$
|
145
|
|
|
5.31
|
%
|
$
|
3,462
|
|
$
|
194
|
|
|
5.54
|
%
|
Non-interest
bearing liabilities and other liabilities
|
$
|
118
|
|
|
|
|
|
|
|
$
|
137
|
|
|
|
|
|
|
|
$
|
141
|
|
|
|
|
|
|
|
Total
Liabilities
|
$
|
2,044
|
|
|
|
|
|
|
|
$
|
2,821
|
|
|
|
|
|
|
|
$
|
3,603
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
623
|
|
|
|
|
|
|
|
|
581
|
|
|
|
|
|
|
|
|
606
|
|
|
|
|
|
|
|
Total
Liabilities, Redeemable Preferred Stock and Stockholders’
Equity
|
$
|
2,667
|
|
|
|
|
|
|
|
$
|
3,403
|
|
|
|
|
|
|
|
$
|
4,209
|
|
|
|
|
|
|
|
Net
Interest Spread
|
|
|
|
|
|
|
|
0.67
|
%
|
|
|
|
|
|
|
|
0.70
|
%
|
|
|
|
|
|
|
|
0.80
|
%
|
Net
Interest Income and Net Interest Margin
|
|
|
|
$
|
45
|
|
|
1.70
|
%
|
|
|
|
$
|
59
|
|
|
1.76
|
%
|
|
|
|
$
|
71
|
|
|
1.71
|
%
|
Changes
in Net Interest Income — Volume and Rate Analysis
Net
interest income is affected by changes in volume and changes in interest rates.
Volume changes are caused by differences in the level of interest-earning assets
and interest-bearing liabilities. Rate changes result from differences in yields
earned on interest-earning assets and rates paid on interest-bearing
liabilities. The following table sets forth a summary of the changes in net
interest income of the Bank resulting from changes in average interest-earning
asset and interest-bearing liability balances (volume) and changes in average
interest rates for 2006 compared to 2005 and for 2007 compared to 2006. Volume
and rate variances have been calculated based on movements in average balances
over the period and changes in interest rates on average interest-earning assets
and average interest-bearing liabilities. Variances caused by changes in both
volume and rates have been allocated equally to volume and rate.
|
|
2006
vs. 2005
|
|
2007
vs. 2006
|
|
|
|
Volume
|
|
Rate
|
|
Net
Change
|
|
Volume
|
|
Rate
|
|
Net
Change
|
|
|
|
(in
$ thousand)
|
|
Increase
(decrease) in interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits with banks
|
|
$
|
914
|
|
$
|
2,939
|
|
$
|
3,853
|
|
$
|
7,461
|
|
$
|
566
|
|
$
|
8,027
|
|
Loans,
net
|
|
|
24,916
|
|
|
45,141
|
|
|
70,058
|
|
|
42,262
|
|
|
16,278
|
|
|
58,540
|
|
Impaired
loans
|
|
|
(10,180
|
)
|
|
4,196
|
|
|
(5,984
|
)
|
|
(1,360
|
)
|
|
(1,360
|
)
|
|
(2,721
|
)
|
Trading
assets
|
|
|
2,905
|
|
|
2,905
|
|
|
5,810
|
|
|
3,024
|
|
|
(3,518
|
)
|
|
(495
|
)
|
Investment
securities
|
|
|
11,836
|
|
|
955
|
|
|
12,791
|
|
|
(2,677
|
)
|
|
844
|
|
|
(1,832
|
)
|
Total
increase (decrease)
|
|
$
|
30,391
|
|
$
|
56,135
|
|
$
|
86,527
|
|
$
|
48,710
|
|
$
|
12,810
|
|
$
|
61,519
|
|
Increase
(decrease) in interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
10,090
|
|
|
16,961
|
|
|
27,051
|
|
|
11,275
|
|
|
2,557
|
|
|
13,832
|
|
Trading
liabilities
|
|
|
2,320
|
|
|
2,320
|
|
|
4,640
|
|
|
2,505
|
|
|
(2,948
|
)
|
|
(443
|
)
|
Securities
sold under repurchase agreements
|
|
|
11,065
|
|
|
4,167
|
|
|
15,232
|
|
|
(2,860
|
)
|
|
11
|
|
|
(2,848
|
)
|
Short-term
borrowings
|
|
|
7,460
|
|
|
11,901
|
|
|
19,361
|
|
|
15,205
|
|
|
2,939
|
|
|
18,144
|
|
Borrowings
and long term debt
|
|
|
2,540
|
|
|
4,120
|
|
|
6,660
|
|
|
18,147
|
|
|
2,954
|
|
|
21,101
|
|
Total
increase (decrease)
|
|
$
|
33,474
|
|
$
|
39,469
|
|
$
|
72,943
|
|
$
|
44,273
|
|
$
|
5,513
|
|
$
|
49,786
|
|
Increase
(decrease) in net interest income
|
|
$
|
(3,082
|
)
|
$
|
16,666
|
|
$
|
13,584
|
|
$
|
4,437
|
|
$
|
7,297
|
|
$
|
11,734
|
|
As
depicted in the table above, the main factor contributing to the $12 million
increase in net interest income during 2007 compared to 2006 was the increase
in
rates, which resulted in a $7 million increase in net interest income,
reflecting higher average lending spreads over the cost of funds for the
Bank’s
loan portfolio and higher average inter-bank market rates in the Bank’s assets
and liabilities. The $4 million increase in net interest income derived from
higher volumes during 2007 is mainly attributable to an increase in the average
loan portfolio and higher average liquidity balances (interest-bearing deposits
with banks), partly offset by an increase in the Bank’s funding through higher
average liability deposits and borrowings.
For
2006,
the $13 million increase in net interest income compared to 2005 was mainly
attributable to higher inter-bank market rates in the Bank’s assets and
liabilities, partly offset by a reduction in the average balance of the Bank’s
impaired portfolio.
Reversal
(Provision) for Loan Losses
During
2007, as the Bank reduced its impaired portfolio to zero at December 31,
2006,
there were no reversals of specific provisions for loan losses related to
the
impaired and restructured portfolio. These impaired portfolio reversals totaled
$11 million in 2006 and $61 million in 2005.
The
Bank’s $12 million provision for loan losses during 2007 was mainly due to the
net effect of:
·
an
$18
million generic provision charge, due to increased loan exposure; and
·
a
$6
million recovery on previously charged-off loans.
The
Bank’s $12 million provision for loan losses during 2006 was mainly due to the
net effect of:
·
a
$23
million generic provision charge, due to increased loan exposure;
|
·
|
a
$10 million reversal related to the collection of Argentine restructured
loans during the year; and
|
·
a
$1
million reversal related to the collection of a Brazilian restructured loan
during the year.
The
Bank’s $54 million reversal of provision for loan losses during 2005 was mainly
due to the net effect of:
|
·
|
a
$48 million reversal related to the decrease in Argentine restructured
loans, reflecting loan sales, payments and prepayments during the
year;
|
|
·
|
a
$13 million reversal related to the decrease in Brazilian restructured
loans, reflecting payments and prepayments during the
year;
|
·
a
$3
million recovery on previously charged-off loans;
·
a
$16
million generic provision charge, due to increased loan exposure;
and
·
a
$6
million reversal due to the change in the credit loss reserve methodology
during
2005.
For
detailed information, see Item 5, “Operating and Financial Review and
Prospects/Operating Results/Asset Quality and Allowance for Credit
Losses”.
Reversal
(provision) for Losses on Off-Balance Sheet Credit Risk
The
$13
million reversal of provision for losses on off-balance sheet credit risk
in
2007 was mainly due to decreased letter of credit exposure in higher risk
countries, as well as improved risk profiles in certain countries.
The
$25
million reversal of provision for losses on off-balance sheet credit risk
in
2006 was mainly due to a $15 million reduction in generic reserves driven
by
exposure reductions in certain countries and a $10 million reversal in specific
reserves resulting from the maturity of Argentine impaired contingencies.
The
$16 million provision for losses on off-balance sheet credit risk in 2005
was
mainly related to the effect of a change in the credit loss reserve methodology
during 2005.
Fees
and Commissions, net
The
Bank
generates fee and commission income primarily from originating letters of
credit
confirmation, guarantees (including commercial and country risk coverage),
loan
origination and distribution, and service activities. The following table
shows
the components of
the
Bank’s
fees and
commissions, net, for the periods indicated.
|
|
For
the Year Ended December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
|
|
(in $ thousand)
|
|
|
|
Letters
of credit
|
|
$
|
3,396
|
|
$
|
4,121
|
|
$
|
2,842
|
|
Guarantees
|
|
|
2,012
|
|
|
1,419
|
|
|
1,088
|
|
Loans
|
|
|
297
|
|
|
556
|
|
|
836
|
|
Other
(1)
|
|
|
119
|
|
|
297
|
|
|
789
|
|
Fees
and commissions, net
|
|
$
|
5,824
|
|
$
|
6,393
|
|
$
|
5,555
|
|
(1)
Net
of commission expense.
The
decrease of $838 thousand in net fees and commissions for 2007 compared to
2006
is attributable to lower letter of credit and guarantee activity during the
first part of the year, partially offset by increased loan fees and other
service activities.
The
increase of $569 thousand in net fees and commissions for 2006 compared to
2005
reflects mainly a 12% increase in the average volume of letters of
credit.
Activities
of Hedging Derivative Instruments
During
2007 and 2006, the Bank recorded losses of $989 thousand and $225 thousand,
respectively, related to hedging derivative instruments. During 2005, the
Bank
recorded income of $2 million mainly related to the unwinding of interest
rate
swaps associated with the sale of securities available-for-sale. The 2007
losses
relate mainly to the fair value at their inception of interest rate swaps
contracted for fair value hedge relationships that classify under the short-cut
method. The difference in price at inception of these derivatives is
attributable solely to differing prices within the bid-ask spread between
the
entry transaction and a hypothetical exit transaction. The Bank has the policy
of recognizing this difference in prices in the results of operations at
the
inception of a hedge relationship. For additional information, see Item 11,
“Quantitative and Qualitative Disclosure about Market Risk”.
Recoveries
on Assets, Net of Impairments
For
information, see Item 18, “Financial Statements”, notes 2(g) and 5.
Trading
gains
During
2007, the Bank achieved $24 million in trading gains compared to $879 thousand
in 2006.
Net
Gain on Sale of Securities Available for Sale
From
time
to time, the Bank purchases debt instruments as part of its Treasury activity
with the intention of selling them prior to maturity. These debt instruments
are
classified as securities available-for-sale and are included as part of the
Bank’s credit portfolio.
For
the
year 2007, the Bank’s net gains on the sale of securities available-for-sale
were $9 million. This net gain relates to the sale of securities for a nominal
amount of $509 million.
During
2006, the Bank’s net gain on the sale of securities available-for-sale was $3
million, compared to $0.2 million in 2005. The 2006 gain was related to the
sale
of securities available-for-sale for a nominal amount of $105 million.
Operating
Expenses
The
following table shows a breakdown of the components of the Bank’s total
operating expenses for the periods indicated.
|
|
For
the Year Ended December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ thousand)
|
|
Salaries
and other employee expenses
|
|
$
|
13,073
|
|
$
|
16,826
|
|
$
|
22,049
|
|
Depreciation
and amortization
|
|
|
869
|
|
|
1,406
|
|
|
2,555
|
|
Professional
services
|
|
|
3,281
|
|
|
2,671
|
|
|
3,562
|
|
Maintenance
and repairs
|
|
|
1,172
|
|
|
1,000
|
|
|
1,188
|
|
Other
operating expenses
|
|
|
6,295
|
|
|
7,026
|
|
|
7,673
|
|
Total
Operating Expenses
|
|
$
|
24,691
|
|
$
|
28,929
|
|
$
|
37,027
|
|
The
$8
million, or 28%, increase in operating expenses for 2007 compared to 2006
was
mainly due to:
|
·
|
a
$5 million increase in salaries and other employee expenses mainly
driven
by a $3 million increase in performance-based variable compensation
for
the Bank's proprietary asset management team, and the remaining
$2 million
mainly related to higher senior management’s stock compensation plan, a
one-time event accrual of employee vacation, and an increase in
performance-based variable compensation provision for business
lines other
than proprietary asset management.
|
|
·
|
a
$1 million increase in maintenance and depreciation expenses related
to
the Bank’s new technology platform;
|
|
·
|
a
$1 million increase in professional services, mainly due to legal
expenses
related to the Bank’s business; and
|
|
·
|
a
$1 million increase in expenses related to marketing and business
travel.
|
The
$4
million, or 17%, increase in operating expenses for 2006 compared to 2005
was
mainly due to higher salary expenses associated with the development of the
corporate segment and the implementation of new business initiatives, including
proprietary asset management, leasing, and digital identity, as well as
increased depreciation expenses related to the Bank’s new technology
platform.
Changes
in Financial Condition
The
following table presents components on the Bank’s balance sheet at December 31
of each year:
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ thousand)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
687
|
|
$
|
401
|
|
$
|
596
|
|
Interest-bearing
deposits in banks
|
|
|
229,200
|
|
|
331,764
|
|
|
476,983
|
|
Trading
assets
|
|
|
0
|
|
|
130,076
|
|
|
52,597
|
|
Investment
securities
|
|
|
208,570
|
|
|
471,351
|
|
|
468,360
|
|
Loans
|
|
|
2,610,019
|
|
|
2,980,772
|
|
|
3,731,838
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
|
(39,448
|
)
|
|
(51,266
|
)
|
|
(69,643
|
)
|
Unearned
income and deferred loan fees
|
|
|
(5,577
|
)
|
|
(4,425
|
)
|
|
(5,961
|
)
|
Loans,
net
|
|
|
2,564,994
|
|
|
2,925,081
|
|
|
3,656,234
|
|
Customers’
liabilities under acceptances
|
|
|
110,621
|
|
|
46,006
|
|
|
9,104
|
|
Premises
and equipment, net
|
|
|
3,253
|
|
|
11,136
|
|
|
10,176
|
|
Accrued
interest receivable
|
|
|
30,254
|
|
|
55,238
|
|
|
62,884
|
|
Derivative
instruments-used for hedging - receivable
|
|
|
357
|
|
|
541
|
|
|
122
|
|
Other
assets
|
|
|
11,295
|
|
|
6,743
|
|
|
53,476
|
|
Total
Assets
|
|
$
|
3,159,231
|
|
$
|
3,978,337
|
|
$
|
4,790,532
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,046,618
|
|
|
1,056,277
|
|
|
1,462,371
|
|
Trading
liabilities
|
|
|
0
|
|
|
54,832
|
|
|
90,765
|
|
Securities
sold under repurchase agreements
|
|
|
128,599
|
|
|
438,356
|
|
|
283,210
|
|
Short-term
borrowings
|
|
|
632,100
|
|
|
1,157,248
|
|
|
1,221,500
|
|
Borrowings
and long-term debt
|
|
|
533,860
|
|
|
558,860
|
|
|
1,010,316
|
|
Acceptances
outstanding
|
|
|
110,621
|
|
|
46,006
|
|
|
9,104
|
|
Accrued
interest payable
|
|
|
14,736
|
|
|
28,420
|
|
|
39,198
|
|
Derivative
instruments used for hedging - payable
|
|
|
297
|
|
|
2,634
|
|
|
16,899
|
|
Reserve
for losses on off-balance sheet credit risk
|
|
|
52,086
|
|
|
27,195
|
|
|
13,727
|
|
Redeemable
preferred stock
|
|
|
5,149
|
|
|
0
|
|
|
0
|
|
Other
liabilities
|
|
|
18,383
|
|
|
24,614
|
|
|
31,191
|
|
Total
Liabilities
|
|
$
|
2,542,449
|
|
$
|
3,394,442
|
|
$
|
4,178,281
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
Common
stock, no par value
|
|
|
279,979
|
|
|
279,980
|
|
|
279,980
|
|
Capital
surplus
|
|
|
134,340
|
|
|
134,945
|
|
|
135,142
|
|
Capital
reserves
|
|
|
95,210
|
|
|
95,210
|
|
|
95,210
|
|
Retained
earnings
|
|
|
212,916
|
|
|
205,200
|
|
|
245,348
|
|
Accumulated
other comprehensive income (loss)
|
|
|
619
|
|
|
3,328
|
|
|
(9,641
|
)
|
Treasury
stock
|
|
|
(106,282
|
)
|
|
(134,768
|
)
|
|
(133,788
|
)
|
Total
Stockholders’ Equity
|
|
$
|
616,782
|
|
$
|
583,895
|
|
$
|
612,251
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
3,159,231
|
|
$
|
3,978,337
|
|
$
|
4,790,532
|
|
The
$812
million increase in total assets during 2007 was mainly due to a $751 million
increase in the loan portfolio, resulting from the continued execution of
the
Bank’s strategy of diversifying its portfolio concentration specifically by
increasing its loans within the corporate segment. At December 31, 2007,
the
average maturity of the loan portfolio was 429 days, and 68% of the portfolio
was scheduled to mature within one year. 60% of the portfolio was trade related
and 40% constituted non-trade loans mainly extended to banks, sovereign or
exporting corporations. The corporate segment (which includes state-owned
exporting organizations and private corporations) represented 51% of the
loan
portfolio in 2007 compared to 48% in 2006 and, of this corporate segment,
66%
and 74% was trade related in 2007 and 2006, respectively.
The
increase in assets during 2007 was mainly financed by a $406 million increase
in
deposits from central and commercial banks of the Region, and by a $451 million
increase in medium- and long-term borrowings and debt, including a bond issuance
in Peruvian Nuevo Soles, interbank borrowings in Mexican Pesos, a five-year
international loan syndication for an amount of $150 million, and a three-year
borrowing for an additional $75 million, among other borrowings.
The
$819
million increase in assets during 2006, compared to 2005, was mainly due
to a
$371 million increase in loans which reflects the Bank’s strategy to diversify
its client base, involving principally an increase in its activity with
corporations. The corporate portfolio increased $600 million and represented
45%
of the total portfolio, as compared to one third of the portfolio in 2005.
In
addition, during 2006, the Bank increased its investment securities portfolio
-which mainly consisted of debt securities available-for-sale and
held-to-maturity with banks and sovereign borrowers-, and its trading assets,
as
the Bank initiated operations of its Asset Management Division, which acts
as
investment manager for the Fund engaged in the management of a multi-strategy
portfolio of Latin American fixed income investment securities, foreign exchange
and equity securities and derivatives.
The
increase in assets during 2006 was mainly financed by a $525 million increase
in
short-term borrowings primarily from North American and European banks, and
by a
$310 million increase in securities sold under repurchase agreements related
to
the investment securities portfolio.
Asset
Quality
The
Bank
believes that its asset quality is linked to the composition of its client
base,
the importance that governments and borrowers in the Region attach to
maintaining continued access to trade financing, its preferred creditor status,
and the Bank’s strict adherence to commercial criteria in its credit activities.
The
Bank’s management and the CPER periodically review a report of all loan
delinquencies. The Bank’s collection policies include rapid internal
notification of any delinquency and prompt initiation of collection efforts,
usually involving senior management.
Impaired
Assets and Contingencies
The
Bank’s impaired assets consist of impaired loans and impaired securities. For
more information on impaired loans, see Item 18, “Financial Statements”, notes 2
(i) and 6.
For
more
information on impaired securities, see Item 18, “Financial Statements”, notes
2
(g) and
5.
Contingencies
are identified as impaired and placed on non-accrual status when any payment
of
fees or commissions relating thereto is over 90 days past due or if the Bank’s
management determines that the item may become payable by the Bank and its
ultimate collection of principal or commission is doubtful. For more information
on contingencies, see Item 18, “Financial Statements”, note 16.
The
following table sets forth information regarding the Bank’s impaired assets and
contingencies at December 31 of each year:
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ million, except percentages)
|
|
Impaired
loans
|
|
$
|
445
|
|
$
|
256
|
|
$
|
29
|
|
$
|
0
|
|
$
|
0
|
|
Allocation
from the allowance for loan losses
|
|
|
191
|
|
|
82
|
|
|
11
|
|
|
0
|
|
|
0
|
|
Impaired
loans as a percentage of total loans, net of unearned income and
deferred
commission
|
|
|
19.6
|
%
|
|
10.5
|
%
|
|
1.1
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
Impaired
contingencies
|
|
$
|
32
|
|
$
|
32
|
|
$
|
13
|
|
$
|
0
|
|
$
|
0
|
|
Allocation
from the reserve for losses on off balance-sheet credit
risks
|
|
|
20
|
|
|
21
|
|
|
9
|
|
|
0
|
|
|
0
|
|
Impaired
contingencies as a percentage of total contingencies
|
|
|
8.8
|
%
|
|
10.5
|
%
|
|
1.7
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
Impaired
securities (par value)
|
|
$
|
10
|
|
$
|
5
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
Estimated
fair value adjustments on options and impaired securities
1
|
|
|
5
|
|
|
4
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Estimated
fair value of impaired securities
|
|
$
|
5
|
|
$
|
1
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
Impaired
securities as a percentage of total securities
2
|
|
|
6.8
|
%
|
|
0.5
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
Impaired
assets and contingencies as a percentage of total credit
portfolio
3
|
|
|
17.0
|
%
|
|
9.8
|
%
|
|
1.2
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
______________________
1
Includes
impairment losses on securities, estimated unrealized gain (loss) on impaired
securities, premiums and discounts.
2
Total
securities consist of investment securities considered part of the Bank’s credit
portfolio.
3
The
total
credit portfolio consists of loans net of unearned income, fair value of
investment securities, securities purchased under agreements to resell and
contingencies.
As
of
December 31, 2006 and 2007 the Bank did not have any impaired credits on
its
portfolio nor any credits with specific reserves.
Allowance
for Credit Losses
The
allowance for credit losses (which includes the allowance for loan losses
and
the reserve for losses on off-balance sheet credit risk) covers the credit
risk
on loans and contingencies. The allowance for credit losses includes an
asset-specific component and a formula-based component in line with Statement
of
Financial Accounting Standard (“SFAS”) No. 5 “Accounting for Contingencies”
(“SFAS No. 5”). The asset-specific component relates to a provision for losses
on credits considered impaired and measured on a case-by-case basis pursuant
to
SFAS No. 114 “Accounting by Creditors for Impairment of a Loan”. For additional
information regarding allowance for credit losses, see Item 18, “Financial
Statements”, notes 2 (j) and 7.
During
2005, Bladex implemented a new methodology for estimating generic allowances
for
credit losses. The new methodology is driven primarily by Bladex’s own
historical default and loss experience, as well as an internal country risk
classification, rather than relying exclusively on third-party data, as was
formerly the case. This change in methodology was the result of the Bank’s
decision to adopt best practices in the banking industry, and is in line
with
SFAS No.5, which calls for the use of internal historical performance data
in
estimating credit loss reserves. The Bank began compiling its eight-year
historical database in 2004 and completed this effort during 2005.
The
reserve balances for estimating generic allowances, for both on and off-balance
sheet credit exposures are calculated applying the following
formula:
Reserves
=
S
(E
x PD x
LGD)
where:
|
a)
|
Exposure
(E) = the total accounting balance (on and off-balance sheet) at
the end
of the period under review, segregated by
country.
|
|
b)
|
Probabilities
of Default (PD) = one-year probability of default applied to the
portfolio
in each country. Default rates are based on Bladex’s historical portfolio
performance per rating category during a ten-year period, complemented
by
probabilities of default data from international credit rating
agencies
for high risk cases, in view of the greater robustness of credit
rating
agencies data for such cases.
|
|
c)
|
Loss
Given Default (LGD) = a factor of 45% is utilized, based on best
practices
in the banking industry. This factor applies to all countries,
except
those classified as higher risk, in which case management applies
historical loss experience on a case-by-case basis.
|
The
effect of this new methodology for 2005 was a decrease in net income by $10
million, or $0.26 per share (resulting from a loan loss reserve provision
reversal of $6 million, and an off-balance sheet reserve provision charge
of $16
million). In addition, the adjustment to apply retroactively the new methodology
(to December 31, 2004) increased net income for 2005 by $3 million (resulting
from a loan loss reserve provision reversal of $6 million and an off-balance
sheet reserve provision charge of $3 million). See Item 18, “Financial
Statements”, notes 2 (j) and 7.
The
following table sets forth information regarding the Bank’s allowance for credit
losses with respect to total credits outstanding at December 31 of each
year:
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ million, except percentages)
|
|
Components
of the allowance for credit losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of the year
|
|
$
|
430
|
|
$
|
224
|
|
$
|
106
|
|
$
|
39
|
|
$
|
51
|
|
Provision
(reversal)
|
|
|
(70
|
)
|
|
(111
|
)
|
|
(48
|
)
|
|
12
|
|
|
12
|
|
Effect
of change in methodology
|
|
|
0
|
|
|
0
|
|
|
(6
|
)
|
|
0
|
|
|
0
|
|
Cumulative
effect on prior years (2004) of a change in credit loss reserve
methodology
|
|
|
0
|
|
|
0
|
|
|
(6
|
)
|
|
0
|
|
|
0
|
|
Recoveries
|
|
|
2
|
|
|
6
|
|
|
3
|
|
|
0
|
|
|
6
|
|
Loans
charged-off
|
|
|
(138
|
)
|
|
(13
|
)
|
|
(9
|
)
|
|
0
|
|
|
0
|
|
Balance
at the end of the year
|
|
$
|
224
|
|
$
|
106
|
|
$
|
39
|
|
$
|
51
|
|
$
|
70
|
|
Reserve
for losses on off-balance sheet credit risk:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of the year
|
|
$
|
23
|
|
$
|
34
|
|
$
|
33
|
|
$
|
52
|
|
$
|
27
|
|
Provision
(reversal)
|
|
|
11
|
|
|
(1
|
)
|
|
(0
|
)
|
|
(25
|
)
|
|
(13
|
)
|
Effect
of change in methodology
|
|
|
0
|
|
|
0
|
|
|
16
|
|
|
0
|
|
|
0
|
|
Cumulative
effect on prior years (2004) of a change in credit loss reserve
methodology
|
|
|
0
|
|
|
0
|
|
|
3
|
|
|
0
|
|
|
0
|
|
Balance
at end of the year
|
|
$
|
34
|
|
$
|
33
|
|
$
|
52
|
|
$
|
27
|
|
$
|
14
|
|
Total
allowance for credit losses
|
|
$
|
258
|
|
$
|
139
|
|
$
|
92
|
|
$
|
78
|
|
$
|
83
|
|
Allowance
for credit losses to total credit portfolio
|
|
|
9.1
|
%
|
|
4.7
|
%
|
|
2.5
|
%
|
|
2.0
|
%
|
|
1.8
|
%
|
The
following table sets forth information regarding the Bank’s allowance for credit
losses allocated by country of exposure at December 31 of each
year:
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
Total
|
|
%
|
|
Total
|
|
%
|
|
Total
|
|
%
|
|
|
|
(in
$ million, except percentages)
|
|
Argentina
|
|
$
|
21
|
|
|
23.0
|
|
$
|
25
|
|
|
32.4
|
|
$
|
32
|
|
|
38.4
|
|
Brazil
|
|
|
19
|
|
|
20.2
|
|
|
11
|
|
|
14.3
|
|
|
11
|
|
|
13.2
|
|
Colombia
|
|
|
1
|
|
|
0.5
|
|
|
2
|
|
|
2.2
|
|
|
2
|
|
|
2.7
|
|
Dominican
Republic
|
|
|
1
|
|
|
1.3
|
|
|
3
|
|
|
3.3
|
|
|
0
|
|
|
0.3
|
|
Ecuador
|
|
|
46
|
|
|
50.4
|
|
|
30
|
|
|
38.3
|
|
|
17
|
|
|
20.2
|
|
Jamaica
|
|
|
0
|
|
|
0.3
|
|
|
2
|
|
|
3.1
|
|
|
4
|
|
|
5.0
|
|
Mexico
|
|
|
0
|
|
|
0.1
|
|
|
1
|
|
|
1.6
|
|
|
3
|
|
|
3.5
|
|
Nicaragua
|
|
|
0
|
|
|
0.1
|
|
|
0
|
|
|
0.6
|
|
|
1
|
|
|
1.7
|
|
Peru
|
|
|
3
|
|
|
3.0
|
|
|
1
|
|
|
0.8
|
|
|
2
|
|
|
2.9
|
|
Venezuela
|
|
|
0
|
|
|
0.3
|
|
|
0
|
|
|
0.1
|
|
|
7
|
|
|
8.3
|
|
Other
1
|
|
|
1
|
|
|
0.9
|
|
|
3
|
|
|
3.4
|
|
|
3
|
|
|
3.7
|
|
Total
Allowance for Credit Losses
|
|
$
|
92
|
|
|
100.0
|
|
$
|
79
|
|
|
100.0
|
|
$
|
83
|
|
|
100.0
|
|
____________________
1
Other
consists of allowance for credit losses allocated to countries in which
allowance for credit losses outstanding did not exceed $1 million as of December
31, 2007.
The
following table sets forth information regarding the Bank’s allowance for credit
losses by type of borrower at December 31 of each year:
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
(in
$ million)
|
|
Private
sector commercial banks
|
|
$
|
20
|
|
$
|
15
|
|
$
|
22
|
|
State-owned
commercial banks
|
|
|
18
|
|
|
5
|
|
|
2
|
|
Central
banks
|
|
|
36
|
|
|
21
|
|
|
9
|
|
Sovereign
debt
|
|
|
1
|
|
|
1
|
|
|
1
|
|
State-owned
exporting organization
|
|
|
3
|
|
|
2
|
|
|
10
|
|
Private
corporations
|
|
|
14
|
|
|
35
|
|
|
39
|
|
Total
|
|
$
|
92
|
|
$
|
79
|
|
$
|
83
|
|
The
following table sets forth the distribution of the Bank’s loans charged-off
against the allowance for loan losses by country at December 31 of each
year:
|
|
2003
|
|
%
|
|
2004
|
|
%
|
|
2005
|
|
%
|
|
2006
|
|
%
|
|
2007
|
|
%
|
|
|
|
(in
$ million, except percentages)
|
|
Argentina
|
|
$
|
137
|
|
|
99.4
|
|
$
|
13
|
|
|
100.0
|
|
$
|
5
|
|
|
53.7
|
|
$
|
0
|
|
|
0.0
|
|
$
|
0
|
|
|
|
0.0
|
|
Brazil
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
4
|
|
|
46.3
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
|
0.0
|
|
Paraguay
|
|
|
1
|
|
|
0.6
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
|
0.0
|
|
Total
|
|
$
|
138
|
|
|
100.0
|
|
$
|
13
|
|
|
100.0
|
|
$
|
9
|
|
|
100.0
|
|
$
|
0
|
|
|
0.0
|
|
$
|
0
|
|
|
|
0.0
|
|
Reversals
of Argentine Specific Provision for Credit Losses
At
the
end of 2001 and during 2002, the Bank classified as impaired most of its
$1
billion Argentine credit exposure at the time, due to the country’s economic and
financial crisis of 2001, which caused the Bank’s Argentine obligors to face
payment difficulties. Accordingly, the Bank increased its allowance for credit
losses during 2001 and 2002 by $77 million and $279 million, respectively,
bringing the total credit reserves assigned to its Argentine portfolio to
$380
million at December 31, 2002. From 2002 to 2005, the Bank negotiated the
restructuring of its Argentine portfolio and sold at a discount most of the
positions that the Bank estimated had the lowest probability of collection.
At
the close of 2005, the Bank had restructured, sold or charged-off all of
its
non-performing exposures.
As
a
result, the Bank was able to decrease its impaired Argentine loan portfolio
to
$23 million at December 31, 2005 and to zero at December 31, 2006, resulting
in
reversals of loan loss provisions related to the portfolio for $48 million
and
$10 million for 2005 and 2006, respectively. These reversals resulted from
loan
collections and sales that exceeded their respective net book values.
The
following table sets forth information regarding the Bank’s reversals
(provisions) of allowance for loan losses during the years indicated:
|
|
For
the year ended December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ million)
|
|
Argentine
reversals related to sale of loans
|
|
$
|
2.9
|
|
$
|
0.0
|
|
$
|
0.0
|
|
Argentine
reversals related to credit restructurings and collections, and
changes in
expected loss levels
|
|
|
45.1
|
|
|
10.2
|
|
|
0.0
|
|
Total
Argentine Specific Reserves Reversals
|
|
$
|
47.9
|
|
$
|
10.2
|
|
$
|
0.0
|
|
Brazil
Specific Reserves Reversals (Provisions)
|
|
|
13.2
|
|
|
1.0
|
|
|
0.0
|
|
Total
Specific Reserves Reversals
|
|
$
|
61.1
|
|
$
|
11.2
|
|
$
|
0.0
|
|
Generic
Reserves Reversals (Provisions) - due to changes in credit portfolio
composition and risk levels
|
|
$
|
(15.5
|
)
|
$
|
(23.0
|
)
|
|
(18.4
|
)
|
Generic
Reserves Reversals - due to change in credit loss reserve methodology
|
|
|
6.0
|
|
|
0.0
|
|
|
0.0
|
|
Total
Generic Reserves Reversals (Provisions)
|
|
$
|
(9.6
|
)
|
$
|
(23.0
|
)
|
$
|
(18.4
|
)
|
Recoveries
- Argentine credits
|
|
|
0.3
|
|
|
0.0
|
|
|
2.0
|
|
Recoveries
- Other credits
|
|
|
2.3
|
|
|
0.0
|
|
|
4.4
|
|
Total
Recoveries
|
|
$
|
2.6
|
|
$
|
0.0
|
|
$
|
6.4
|
|
Total
Reversals (Provisions) of Allowance for Loan
Losses
|
|
$
|
54.2
|
|
$
|
(11.8
|
)
|
$
|
(12.0
|
)
|
Critical
Accounting Policies
General
The
Bank
prepares its Consolidated Financial Statements in conformity with U.S. GAAP.
As
such, the Bank is required to use methods, make estimates, judgments and
assumptions in applying its accounting policies that have a significant impact
on the results it reports in its Consolidated Financial Statements. Some
of the
Bank’s accounting policies require management to make subjective judgments,
often as a result of the need to make estimates of matters that are inherently
uncertain. The Bank’s management bases its estimates on historical experience
and on various other assumptions that it believes to be reasonable under
the
circumstances. Actual results may differ from the estimates.
The
Bank’s most critical accounting estimates include the assessment of allowance
for credit losses, impairments on the value of securities that are “other than
temporary” and the fair value of financial instruments. For information
regarding the Bank’s significant accounting policies, see Item 18, “Financial
Statements”, note 2.
Allowance
for Credit Losses
The
classification of the Bank’s credit portfolio for allowances for credit losses
under U.S. GAAP is determined through statistical modeling and estimates.
Informed judgments must be made when identifying deteriorated loans, the
probability of default, the expected loss, the value of collateral and current
economic conditions. Even though the Bank’s management considers its allowances
for credit losses to be adequate, the use of different estimates and assumptions
could produce different allowances for credit losses, and amendments to the
allowances may be required in the future due to changes in the value of
collateral, the amount of cash to be received or other economic events. See
Item
18, “Financial Statements”, note 2(j).
The
estimates of the Bank’s portfolio’s inherent risks and overall recovery vary
with changes in the economy, individual industries, and countries and individual
borrowers’ or counterparties’ ability and willingness to repay their
obligations. The degree to which any particular assumption affects the allowance
for credit losses depends on the severity of the change and its relationship
to
the other assumptions. The methods and assumptions used by management in
estimating the fair values of each type of financial instruments are described
in Item 18, “FInancial Statements”, note 20.
Fair
Value of Financial Instruments
In
calculating the fair value of the Bank’s financial instruments, the Bank’s
management uses market data available and its best judgment. However, there
are
limitations in any estimation technique. The estimated fair value amounts
have
been measured as of their respective year-ends. Fair value calculations are
only
provided for a limited portion of the Bank’s assets and liabilities. See Item
18, “Financial Statements”, note 20.
Notwithstanding
the level of subjectivity inherent in determining fair value, the Bank’s
management believes that its estimates of fair value are adequate. The use
of
different models or assumptions could lead to changes in the Bank’s reported
results.
B.
Liquidity
and Capital Resources
Liquidity
Liquidity
refers to the Bank’s ability to maintain adequate cash flows to fund operations
and meet obligations and other commitments on a timely basis. The Bank maintains
its liquid assets mainly in demand deposits, overnight funds and time deposits
with well-known international banks, as well as highly rated marketable
securities. These liquid assets are adequate to cover 24-hour deposits from
customers, which theoretically could be withdrawn on the same day. At December
31, 2007, the Bank’s 24-hour deposits from customers (overnight deposits, demand
deposit accounts and call deposits) amounted to $111 million, representing
8% of the Bank’s total deposits
.
The
liquidity requirement resulting from these maturities is met by the Bank’s
liquid assets, which at December 31, 2007, were $418 million (representing
29% of total deposits), and by daily maturities of approximately $172 million
to
$205 million.
As
established by the Bank’s liquidity policy, the Bank’s liquid assets are held in
the form of inter-bank deposits with reputable international banks that have
A1,
P1, or F1 ratings from two of the major rating agencies, and are located
outside
of the Region. These banks must have a correspondent relationship with the
Bank
and be approved by the Board on an annual basis. In addition, the Bank’s
liquidity policy allows for investing in negotiable money market instruments,
including Euro certificates of deposit, commercial paper, bankers’ acceptances
and other liquid instruments with maturities of up to three years. These
instruments must be of investment grade quality A or better and must have
a
liquid secondary market.
The
Bank
performs daily review and controls on its liquidity position, including the
application of a series of limits to restrict its overall liquidity risk.
Specific limits have been established to control cumulative maturity “gaps”
between assets and liabilities, for each maturity classification presented
in
the Bank’s internal liquidity reports, as well as to control concentrations of
deposits taken from any client or economic group maturing in one day and
total
maximum deposits maturing in one day. The Bank has also established a minimum
amount of liquidity to be maintained at the end of each day, as a percentage
of
total assets. As a precautionary measure, since the onset of the global
liquidity crisis in August 2007, Bladex has consistently maintained a cash
position substantially in excess of the minimum required.
In
2007,
Bladex updated its Contingent Liquidity Plan, which provides for regular
stress-testing of its liquidity position. The plan contemplates the regular
monitoring of several quantified internal and external reference points (such
as
deposit level, quality of assets, Emerging Markets Bonds Index Plus (“EMBI+”),
cost of funds and market interest rates), which, in moments of high volatility,
would trigger implementation of a series of precautionary measures to reinforce
the Bank's liquidity position.
The
following table shows the Bank’s liquid assets, which consist of short-term
funds deposited with other banks broken down by principal geographic area,
at
December 31 of each year:
|
|
At
December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ million)
|
|
Europe
|
|
$
|
189
|
|
$
|
224
|
|
$
|
298
|
|
United
States
|
|
|
1
|
|
|
49
|
|
|
39
|
|
Other
O.E.C.D.
|
|
|
35
|
|
|
54
|
|
|
81
|
|
Total
|
|
$
|
225
|
|
$
|
327
|
|
$
|
418
|
|
While
the
Bank’s liabilities generally mature over somewhat shorter periods than its
assets, the associated liquidity risk is diminished by the short-term nature
of
the loan portfolio, as the Bank is engaged primarily in the financing of
foreign
trade. At December 31, 2007, the average original term to maturity of the
Bank’s
short-term loan portfolio was approximately 217 days.
Medium
term assets (maturing beyond one year) totaled $1.6 billion as of December
31,
2007. Of that amount, $448 million was comprised of liquid bonds held primarily
in the Bank’s securities available-for-sale portfolio. The remaining $1.2
billion in medium-term assets represented commercial loans. These medium-term
loans are funded by medium-term borrowings (49%) and the Bank’s equity
(51%).
Funding
Sources
The
Bank’s principal sources of funds are deposits, borrowed funds and floating- and
fixed-rate placements. While these sources are expected to continue to provide
the majority of the funds needed by the Bank in the future, the exact
composition of the Bank´s funding sources, as well as the possible use of other
sources of funds, will depend upon future economic and market conditions.
The
following table shows the Bank’s funding distribution at December 31 of each
year:
|
|
At
December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
|
|
(in percentages)
|
|
|
|
Inter-bank
deposits
|
|
|
41.2
|
%
|
|
31.1
|
%
|
|
35.0
|
%
|
Securities
sold under repurchase agreements
|
|
|
5.1
|
%
|
|
12.9
|
%
|
|
6.8
|
%
|
Borrowings
and debts
|
|
|
45.9
|
%
|
|
50.6
|
%
|
|
53.4
|
%
|
Other
liabilities.
|
|
|
7.9
|
%
|
|
5.4
|
%
|
|
4.8
|
%
|
Total
liabilities
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Deposits
The
Bank
obtains deposits principally from central and commercial banks in the Region.
At
December 31, 2007, approximately 31% of the deposits held by the Bank were
deposits made by central banks of countries in the Region. Many of these
banks
deposit a portion of their dollar reserves with the Bank. The average term
remaining to maturity of deposits from central banks of countries in the
Region
at December 31, 2007 and 2006 was 36 days and 44 days, respectively. The
bulk of the Bank’s other deposits is obtained primarily from commercial banks
located in the Region. At December 31, 2007, deposits from the Bank´s five
largest depositors, of which three were central banks in the Region, represented
43% of the Bank’s total deposits.
The
following table shows the Bank’s deposits by country at December 31 of each
year:
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in $ million)
|
|
Argentina
|
|
$
|
75
|
|
$
|
91
|
|
$
|
75
|
|
Barbados
|
|
|
10
|
|
|
5
|
|
|
28
|
|
Brazil
|
|
|
424
|
|
|
400
|
|
|
322
|
|
Cayman
Island
|
|
|
0
|
|
|
27
|
|
|
33
|
|
Colombia
|
|
|
44
|
|
|
47
|
|
|
154
|
|
Costa
Rica
|
|
|
2
|
|
|
7
|
|
|
10
|
|
Dominican
Republic
|
|
|
22
|
|
|
27
|
|
|
21
|
|
Ecuador
|
|
|
182
|
|
|
99
|
|
|
70
|
|
El
Salvador
|
|
|
32
|
|
|
27
|
|
|
26
|
|
Finland
|
|
|
0
|
|
|
10
|
|
|
10
|
|
Guatemala
|
|
|
0
|
|
|
1
|
|
|
0
|
|
Haiti
|
|
|
2
|
|
|
3
|
|
|
3
|
|
Honduras
|
|
|
10
|
|
|
14
|
|
|
27
|
|
Jamaica
|
|
|
2
|
|
|
2
|
|
|
2
|
|
Mexico
|
|
|
128
|
|
|
35
|
|
|
332
|
|
The
Netherlands
|
|
|
17
|
|
|
18
|
|
|
21
|
|
Nicaragua
|
|
|
0
|
|
|
2
|
|
|
11
|
|
Panama
|
|
|
15
|
|
|
48
|
|
|
80
|
|
Peru
|
|
|
5
|
|
|
43
|
|
|
41
|
|
Trinidad
and Tobago
|
|
|
11
|
|
|
10
|
|
|
20
|
|
United
Kingdom
|
|
|
0
|
|
|
0
|
|
|
40
|
|
United
States
|
|
|
0
|
|
|
19
|
|
|
20
|
|
Venezuela
|
|
|
65
|
|
|
121
|
|
|
117
|
|
Total
|
|
$
|
1,047
|
|
$
|
1,056
|
|
$
|
1,462
|
|
Short-Term
Borrowings and Securities Sold Under Repurchase Agreements
The
Bank’s short-term borrowings consist of borrowings from banks that have
maturities of up to 365 days. These borrowings are made available to the
Bank on
an uncommitted basis for the financing of trade-related loans. Approximately
35
European and North American banks provide these short-term borrowings to
the
Bank.
As
of
December 31, 2007, short-term borrowings amounted to $1,222 million, an increase
of $64 million from the amount as of December 31, 2006. The increase in
short-term borrowings was due to funding, liquidity and asset/liability
management needs.
The
average term remaining to maturity of short-term borrowings at December 31,
2007
was approximately 104 days. See Item 18, “Financial Statements”, note
10.
The
Bank
also enters into repurchase agreements (“repos”) with international banks,
utilizing its investment securities portfolio as collateral to secure
cost-effective funding. As of December 31, 2007, repos amounted to $283 million,
a decrease of $155 million from the amount as of December 31, 2006, reflecting
an increase of borrowings as a funding strategy.
The
following table presents information regarding the amounts outstanding, and
interest rates on, the Bank’s short-term borrowings and securities sold under
repurchase agreements at the dates and during the periods
indicated.
|
|
At
and for the Year Ended December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in $
million, except percentages)
|
|
Short-term
borrowings and securities sold under repurchase
agreements
|
|
|
|
|
|
|
|
|
|
|
Advances
from banks
|
|
$
|
608
|
|
$
|
1,147
|
|
$
|
1,222
|
|
Discounted
acceptances
|
|
|
24
|
|
|
10
|
|
|
0
|
|
Securities
sold under repurchase agreements
|
|
|
129
|
|
|
438
|
|
|
283
|
|
Total
short-term borrowings and securities sold under repurchase
agreements
|
|
$
|
761
|
|
$
|
1,596
|
|
$
|
1,505
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
amount outstanding at any month-end
|
|
$
|
761
|
|
$
|
1,634
|
|
$
|
1,505
|
|
Amount
outstanding at year-end
|
|
$
|
761
|
|
$
|
1,596
|
|
$
|
1,505
|
|
Average
amount outstanding
|
|
$
|
601
|
|
$
|
1,044
|
|
$
|
1,272
|
|
Weighted
average interest rate on average amount outstanding
|
|
|
3.39
|
%
|
|
5.20
|
%
|
|
5.45
|
%
|
Weighted
average interest rate on amount outstanding at year end
|
|
|
4.73
|
%
|
|
5.51
|
%
|
|
5.34
|
%
|
Borrowings
and Long-Term Debt
The
interest rates on long-term borrowings are adjusted semi-annually based on
short-term LIBOR rates plus a credit spread (which is based on several factors,
including credit ratings, risk perception, and the remaining term to maturity).
The Bank uses these funds to finance its medium-term and long-term loan
portfolio. At December 31, 2007 the average term remaining to maturity of
the
Bank’s medium and long-term debt was two years.
The
Bank’s EMTN Program has a maximum aggregate limit of $2.3 billion. Notes issued
under the EMTN Program are placed in the Euro (Regulation S), or 144A markets
and are general obligations of the Bank. The EMTN Program may be used to
issue
notes with maturities ranging from 90 days up to a maximum of 30 years, at
fixed
or floating interest rates and in various currencies. As of December 31,
2007,
the total amount outstanding under the EMTN Program with medium-term maturities
was $25 million.
During
the third quarter of 2007, the Bank established a program for bond issuances
in
Peru. The program has a maximum aggregate limit of the equivalent of $300
million. Bonds issued under the program are denominated in Peruvian Nuevo
Soles
(PEN), may be issued in several series with different maturities and interest
rate structures, will be offered exclusively to institutional investors
domiciled in the Republic of Peru, and will rank pari-passu with other debt
obligations of the Bank. The funds raised from the program will be used to
finance the Bank’s credit portfolio and to cover its general long-term financial
needs. The first placement of bonds under the program consisted of bonds
with a
maturity of seven years and a fixed rate of interest, and was subsequently
swapped into U.S. dollars through a cross-currency swap. As of December 31,
2007, the total amount outstanding under the program was PEN 123,000,000
(equivalent to $41.0 million).
As
part
of its interest rate and currency risk management, the Bank may from time
to
time, enter into foreign exchange forwards, cross-currency contracts and
interest rate swaps to hedge the risk associated with a portion of the notes
issued under its various programs. See Item 18, “Financial Statements”, note 11,
and Item 11, “Quantitative and Qualitative Disclosure About Market Risk”.
Cost
and Maturity Profile of Borrowed Funds and Floating- and Fixed-Rate
Placements
The
following table sets forth certain information regarding the weighted average
cost and the remaining maturities of the Bank’s borrowed funds and floating- and
fixed-rate placements at December 31, 2007:
|
|
Amount
|
|
Weighted
Average Cost
|
|
|
|
(in $
million)
|
|
|
|
Short-term
borrowings at fixed interest rate
|
|
|
|
|
|
|
|
Due
in 0 to 30 days
|
|
$
|
250
|
|
|
5.47
|
%
|
Due
in 31 to 90 days
|
|
|
403
|
|
|
5.45
|
%
|
Due
in 91 to 180 days
|
|
|
255
|
|
|
5.30
|
%
|
Due
in 181 to 365 days
|
|
|
298
|
|
|
5.01
|
%
|
Total
|
|
$
|
1,207
|
|
|
5.31
|
%
|
Short-term
borrowings at floating interest rate
|
|
|
|
|
|
|
|
Due
in 0 to 30 days
|
|
$
|
283
|
|
|
5.49
|
%
|
Due
in 181 to 365 days
|
|
|
15
|
|
|
5.17
|
%
|
Total
|
|
$
|
298
|
|
|
5.48
|
%
|
Medium
and long-term borrowings at fixed interest rate
|
|
|
|
|
|
|
|
Due
in 0 to 30 days
|
|
$
|
3
|
|
|
8.31
|
%
1
|
Due
in 31 to 90 days
|
|
|
5
|
|
|
8.31
|
%
1
|
Due
in 91 to 180 days
|
|
|
18
|
|
|
6.83
|
%
1
|
Due
in 181 to 365 days
|
|
|
78
|
|
|
5.74
|
%
1
|
Due
in 1 through 6 years
|
|
|
132
|
|
|
6.85
|
%
1
|
Total
|
|
$
|
236
|
|
|
6.53
|
%
|
Medium
and long-term borrowings at floating interest rate
|
|
|
|
|
|
|
|
Due
in 91 to 180 days
|
|
$
|
25
|
|
|
5.08
|
%
|
Due
in 181 to 365 days
|
|
|
270
|
|
|
5.57
|
%
|
Due
in 1 through 6 years
|
|
|
414
|
|
|
5.41
|
%
|
Total
|
|
$
|
709
|
|
|
5.46
|
%
|
Medium
and long-term at fixed-rate placements
|
|
|
|
|
|
|
|
Due
in 7 through 12 years
|
|
$
|
41
|
|
|
6.50
|
%
|
Total
|
|
$
|
41
|
|
|
6.50
|
%
|
Medium
and long-term floating-rate placements
|
|
|
|
|
|
|
|
Due
in 0 to 30 days
|
|
$
|
10
|
|
|
6.19
|
%
|
Due
in 91 to 180 days
|
|
|
10
|
|
|
5.33
|
%
|
Due
in 1 through 6 years
|
|
|
5
|
|
|
5.65
|
%
|
Total
|
|
$
|
25
|
|
|
5.74
|
%
|
1
Represent
fixed-rate interest-bearing liabilities booked in local currency to fund
fixed-rate interest-earning assets in the same local currency.
Asset/Liability
Management
The
Bank
seeks to manage its assets and liabilities to reduce the potential adverse
impact on net interest income that could result from interest rate changes.
The
Bank controls interest rate risk through systematic monitoring of maturity
mismatches. The Bank’s investment decision-making takes into account not only
the rates of return and the respective underlying degrees of risk, but also
liquidity requirements, including minimum cash reserves, withdrawal and maturity
of deposits and additional demand for funds. For any given period, a matched
pricing structure exists when an equal amount of assets and liabilities are
repriced. An excess of assets or liabilities over these matched items results
in
a “gap” or “mismatch”, as shown in the table under “Interest Rate Sensitivity”
below. A negative gap denotes liability sensitivity and normally means that
a
decline in interest rates would have a positive effect on net interest income,
while an increase in interest rates would have a negative effect on net interest
income. Substantially all of the Bank’s assets and liabilities are denominated
in dollars and, therefore, the Bank has no material foreign exchange
risk.
Interest
Rate Sensitivity
The
following table presents the projected maturities and interest rate adjustment
periods of the Bank’s assets, liabilities and stockholders’ equity based upon
the contractual maturities and adjustment dates at December 31, 2007. The
Bank’s
interest-earning assets and interest-bearing liabilities and the related
interest rate sensitivity gap shown in the following table may not reflect
positions in subsequent periods.
|
|
Total
|
|
0-30 Days
|
|
31-90 Days
|
|
91-180 Days
|
|
181-365 Days
|
|
More than
365 Days
|
|
Non-Interest
Sensitive
|
|
|
|
(in
$ million, except percentages)
|
|
Interest-earning
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
72
|
|
$
|
72
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
Interest-bearing
deposits with banks
|
|
|
405
|
|
|
405
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
assets
|
|
|
53
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
16
|
|
|
36
|
|
Securities
available for sale
|
|
|
468
|
|
|
148
|
|
|
190
|
|
|
84
|
|
|
0
|
|
|
47
|
|
|
0
|
|
Loans,
net
|
|
|
3,656
|
|
|
992
|
|
|
1,310
|
|
|
985
|
|
|
210
|
|
|
234
|
|
|
(76
|
)
|
Total
interest-earning assets
|
|
|
4,655
|
|
|
1,617
|
|
|
1,500
|
|
|
1,069
|
|
|
210
|
|
|
298
|
|
|
(39
|
)
|
Non-interest
earning assets
|
|
|
133
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
133
|
|
Other
assets
|
|
|
2
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2
|
|
Total
assets
|
|
$
|
4,791
|
|
$
|
1,617
|
|
$
|
1,500
|
|
$
|
1,069
|
|
$
|
210
|
|
$
|
298
|
|
$
|
97
|
|
Interest-bearing
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
$
|
111
|
|
$
|
111
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
Time
|
|
|
1,351
|
|
|
1,061
|
|
|
207
|
|
|
73
|
|
|
10
|
|
|
0
|
|
|
0
|
|
Trading
liabilities
|
|
|
91
|
|
|
1
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
32
|
|
|
58
|
|
Securities
sold under repurchase agreements
|
|
|
283
|
|
|
283
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Short-term
borrowings
(1)
|
|
|
1,287
|
|
|
250
|
|
|
408
|
|
|
280
|
|
|
350
|
|
|
0
|
|
|
0
|
|
Borrowings
and long-term debt
(1)
|
|
|
945
|
|
|
376
|
|
|
232
|
|
|
101
|
|
|
20
|
|
|
216
|
|
|
0
|
|
Total
interest-bearing liabilities
|
|
|
4,068
|
|
|
2,083
|
|
|
847
|
|
|
453
|
|
|
380
|
|
|
248
|
|
|
58
|
|
Non-interest-bearing
liabilities
|
|
|
110
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
110
|
|
Total
liabilities
|
|
|
4,178
|
|
|
2,083
|
|
|
847
|
|
|
453
|
|
|
380
|
|
|
248
|
|
|
168
|
|
Stockholders’
equity
|
|
|
612
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
612
|
|
Total
liabilities and stockholders’ equity
|
|
|
4,791
|
|
|
2,083
|
|
|
847
|
|
|
453
|
|
|
380
|
|
|
248
|
|
|
780
|
|
Interest
rate sensitivity gap
|
|
|
|
|
|
(466
|
)
|
|
653
|
|
|
616
|
|
|
(170
|
)
|
|
51
|
|
|
(684
|
)
|
Cumulative
interest rate sensitivity gap
|
|
|
|
|
|
(466
|
)
|
|
187
|
|
|
803
|
|
|
633
|
|
|
684
|
|
|
|
|
Cumulative
gap as a % of total interest-earning assets
|
|
|
|
|
|
-10
|
%
|
|
4
|
%
|
|
17
|
%
|
|
14
|
%
|
|
15
|
%
|
|
|
|
(1)
The sum of totals of Short-term borrowings and Borrowings and long-term debt
are
equal as the sum of these same accounts presented on Balance Sheet of financial
statements.
The
Bank’s interest rate risk is the exposure of earnings (current and potential)
and capital to adverse changes in interest rates and is managed by attempting
to
match the term and repricing characteristics of the Bank’s interest rate
sensitive assets and liabilities. The Bank’s interest rate risk arises from the
Bank’s liability sensitive short-term position, which means that the Bank’s
interest-bearing liabilities reprice more quickly than the Bank’s
interest-earning assets. As a result, there is a potential adverse impact
on the
Bank’s net interest income from interest rate increases. The Bank’s policy with
respect to interest rate risk provides that the Bank establishes limits with
regards to: (i) changes in net interest income due to a potential impact
given
certain movements in interest rates, (ii) changes in the amount of available
equity funds of the Bank (given a one basis point movement in interest rates)
and (iii) changes in value-at-risk (“VaR”) of the Bank’s portfolio (based on
statistical analysis of the historical volatility of the Bank’s portfolio). The
Bank also has used interest rate swaps as part of its interest rate risk
management. Interest rate swaps are made either in a single currency or
cross-currency for a prescribed period to exchange a series of interest rate
flows, which involve fixed- for floating-rate interest payments or vice
versa.
Stockholders’
Equity
The
following table presents information concerning the Bank’s capital position at
the dates indicated.
|
|
At
December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
(in
$ thousand)
|
|
Common
stock
|
|
$
|
279,978
|
|
$
|
279,980
|
|
$
|
279,980
|
|
Capital
surplus
|
|
|
134,340
|
|
|
134,945
|
|
|
135,142
|
|
Capital
reserves
|
|
|
95,210
|
|
|
95,210
|
|
|
95,210
|
|
Retained
earnings
|
|
|
212,916
|
|
|
205,200
|
|
|
245,348
|
|
Accumulated
other comprehensive income (loss)
|
|
|
619
|
|
|
3,328
|
|
|
(9,641
|
)
|
Treasury
stock
|
|
|
(106,282
|
)
|
|
(134,768
|
)
|
|
(133,788
|
)
|
Total
stockholders’ equity
|
|
$
|
616,782
|
|
$
|
583,895
|
|
$
|
612,252
|
|
The
$28
million increase in stockholders’ equity during 2007 was mainly due to the
following factors:
|
·
|
Increased
retained earnings due to the Bank’s net income of $72 million, partially
offset by a total of $32 million in dividends paid to common stockholders;
offset by
|
|
·
|
Decreased
accumulated other comprehensive income related to derivative hedging
instruments, due to the lowering of interest rates by the Federal
Reserve
Board during the credit crisis. This loss was not offset by the
investment
securities portfolio, which is covered by interest rate swaps,
due to an
increase in credit spreads as a result of the liquidity shortage
in the
market.
|
The
net
decrease in stockholders’ equity during 2006 was mainly due to the following
factors:
|
·
|
Dividends
paid to common stockholders of $66 million ($27 million paid in
quarterly
dividends and $38 million paid in special dividends);
and
|
|
·
|
The
repurchase of $29 million Class E shares pursuant to the Bank’s stock
repurchase program.
|
|
·
|
These
factors were offset by net income of $58 million and higher accumulated
other comprehensive income related to the available-for-sale
portfolio.
|
The
Bank
completed its $50 million stock repurchase program at December 31, 2006,
which
was commenced in August 2004. See Item 10, “Additional Information/Dividends”
and Item 16E, “Purchases of Equity Securities by the Issuer and Affiliated
Purchasers”.
Capital
reserves are established by the Bank from retained earnings and are a form
of
retained earnings required by Panamanian banking regulations. Capital reserves
are intended to strengthen the Bank’s capital position. Reductions of these
reserves, for example to pay dividends, require approval of the Board of
the
Bank and Panamanian banking authorities. Panamanian banking regulations do
not
require the Bank to maintain any particular level of capital reserves.
At
December 31, 2007, the capital ratio of total stockholders’ equity to total
assets was 12.8%. Although the Bank is not subject to the capital adequacy
requirements of the United States Board of Governors of the Federal Reserve
System (the “Federal Reserve Board”), if the Federal Reserve Board’s fully
phased-in risk-based capital guidelines applied to the Bank, the Bank's ratios
would have exceeded all applicable capital adequacy requirements. At December
31, 2007, the Bank’s Tier 1 and total capital ratios calculated according to
these guidelines were 21% and 22%, respectively. The Banking Law (as defined
under Item 4, “Information on the Company/Business Overview/Regulation”) in
Panama, which became effective on June 12, 1998, requires the Bank to maintain
a
minimum total capital to risk-weighted asset ratio of 8% (each, as defined
in
the Banking Law). At December 31, 2007, the Bank’s total capital to
risk-weighted asset ratio, calculated according to the guidelines of the
Banking
Law, was 14.12%. See Item 4, “Information on the Company/Business
Overview/Regulation/Panamanian Law”.
C.
Research
and Development, Patents and Licenses, etc.
Not
applicable.
D.
Trend
Information
The
following are the most important trends, uncertainties and events that are
reasonably likely to materially affect the Bank or that would cause the
financial information disclosed herein not to be indicative of the Bank’s future
operating results or financial condition:
|
·
|
The
effect of changes in global economic conditions, including oil
and other
commodities prices, the U.S. dollar exchange rate, interest rates,
and
slower economic growth in developed countries and trading partners,
and
the effect that these changes may
have on the economic condition of countries in the Region, including
the
Region´s foreign trade growth, and hence on the Bank’s capacity to grow
its trade financing business.
|
|
·
|
The
effect that an economic slowdown or political events in large Latin
American countries may have on the Bank’s asset quality, results of
operations and growth prospects.
|
|
·
|
Continued
improvement in risk perception in the Bank’s markets, increased
competition and U.S. dollar liquidity which could affect spreads
over the
cost of funds on the Bank’s loan portfolio, and in turn, reduce the Bank’s
net interest spreads.
|
|
·
|
A
downturn in the capital markets or a downturn in investor confidence
which
could affect the Bank’s access to funding or increase its costs of
funding.
|
In
addition, see Item 3, “Key Information/Risk Factors” for a discussion of the
risks the Bank faces, which could affect the Bank’s business, results of
operations or financial condition.
E.
Off-Balance
Sheet Arrangements
In
the
ordinary course of business, in order to meet the financing needs of its
customers, the Bank enters into arrangements that are not recognized on its
balance sheet. At December 31, 2007, the Bank’s off-balance sheet arrangements
included stand-by letters of credit, guarantees (commercial risk and country
risk), credit default swaps and credit commitments (including unused commitments
and other commitments). See Item 18, “Financial Statements”, note 16. These
arrangements are kept off-balance sheet as long as the Bank does not incur
an
obligation from them or itself become entitled to an asset. A reserve for
losses
on off-balance sheet credit risk is recognized on the balance sheet, with
the
resulting loss recorded in the income statement.
For
2007,
fees and commission income from off-balance sheet arrangements amounted to
$6
million. For additional information, see Item 5, “Operating and Financial Review
and Prospects/Operating Results/Fees and Commissions, net”. In 2007, the Bank
was committed to invest $1.5 million, ($1.9 million in 2006) in a private
investment fund whose main objective is to generate capital appreciation
in the
long-term through the purchase of equity securities and convertible debt
mainly
from Mexican manufacturing corporations or foreign corporations looking to
establish or expand their operations in Mexico.
No
obligations have arisen from variable interest entities as defined in Financial
Interpretation (“FIN”) 46R “Consolidation of Variable Interest Entities -
Revised” (“FIN 46R”), including indemnification agreements with its executive
officers and directors, and provides indemnity insurance pursuant to which
directors and officers are indemnified or insured against liability or loss
under certain circumstances, including liabilities or related losses arising
under the Securities Act and the Exchange Act.
F.
Contractual
Obligations and Commercial Commitments
The
following tables set forth information regarding the Bank’s contractual
obligations and commercial commitments as of December 31, 2007.
|
|
Payments
Due by Period
|
|
Contractual
Obligations
|
|
Total
|
|
Less than 1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than 5 years
|
|
|
|
(in $
million)
|
|
Deposits
|
|
$
|
1,462
|
|
$
|
1,462
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
Trading
liabilities
|
|
|
91
|
|
|
91
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Securities
sold under repurchase agreement
|
|
|
283
|
|
|
283
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Short-term
borrowings
|
|
|
1,222
|
|
|
1,222
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Borrowings
and long-term debt
1
|
|
|
1,010
|
|
|
357
|
|
|
352
|
|
|
260
|
|
|
41
|
|
Accrued
Interest Payable
|
|
|
39
|
|
|
33
|
|
|
5
|
|
|
1
|
|
|
0
|
|
Service
agreements
|
|
|
3
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
0
|
|
Leasehold
obligations
|
|
|
4
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Total
contractual obligations
|
|
$
|
4,114
|
|
$
|
3,450
|
|
$
|
359
|
|
$
|
263
|
|
$
|
42
|
|
|
|
Amount
of Commitment Expiration by Period
|
|
Other
Commercial Commitments
|
|
Total
|
|
Less than 1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than 5 years
|
|
|
|
(in
$ million)
|
|
Letters
of credit
|
|
|
97
|
|
|
97
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Stand-by
letters of credit
|
|
|
152
|
|
|
152
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Guarantees
|
|
|
159
|
|
|
111
|
|
|
48
|
|
|
0
|
|
|
0
|
|
Credit
default swaps
|
|
|
3
|
|
|
0
|
|
|
3
|
|
|
0
|
|
|
0
|
|
Other
commercial commitments
|
|
|
129
|
|
|
67
|
|
|
61
|
|
|
0
|
|
|
2
2
|
|
Total
Commercial Commitments
|
|
$
|
541
|
|
$
|
427
|
|
$
|
112
|
|
$
|
0
|
|
$
|
2
|
|
______________________
1
Certain
debt obligations are subject to covenants that could accelerate the payment
of
these obligations.
2
This
amount is without maturity.
Purchase
Agreements
The
Bank
has signed service agreements with certain vendors that provide services
that
are necessary for the ongoing operations of its business and are mainly related
to the maintenance of a new technology platform and telecommunications services.
The terms of these agreements are up to eight years and some of them can
be
re-negotiated for annual or semi-annual price adjustments after the fifth
year.
Under the terms of these agreements, the Bank has committed to contractually
specified minimum payments over the contractual periods. See Item 18, “Financial
Statements”, note 17.
Item
6.
Directors,
Executive Officers and Employees
A.
Directors
and
Executive
Officers
Directors
The
following table sets forth certain information concerning the Directors of
the
Bank as of the date of this Annual Report.
Name
|
|
Country of
Citizenship
|
|
Position Held
with
The Bank
|
|
Year
Term Expires
|
|
Director
Since
|
|
Age
|
|
CLASS
A
|
|
|
|
|
|
|
|
|
|
|
|
Guillermo
Güémez García
Deputy
Governor
Banco
de Mexico, Mexico
|
|
|
Mexico
|
|
|
Director
|
|
|
2011
|
|
|
1997
|
|
|
67
|
|
José
Maria Rabelo
Vice-President
of International Wholesale Business
Banco
do Brasil, Brazil
|
|
|
Brazil
|
|
|
Director
|
|
|
2010
|
|
|
2007
|
|
|
52
|
|
Roberto
Feletti
Vice-President
Banco
de la Nación Argentina
|
|
|
Argentina
|
|
|
Director
|
|
|
2011
|
|
|
2008
|
|
|
49
|
|
CLASS
E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mario
Covo
Chief
Executive Officer
Finaccess
International, Inc., U.S.A.
|
|
|
U.S.A
|
|
|
Director
|
|
|
2011
|
|
|
1999
|
|
|
50
|
|
Will
C. Wood
Principal
Kentwood
Associates, U.S.A.
|
|
|
U.S.A.
|
|
|
Director
|
|
|
2009
|
|
|
1999
|
|
|
68
|
|
Herminio
Blanco
Chief
Executive Officer
Soluciones
Estratégicas Consultoría, Mexico
|
|
|
Mexico
|
|
|
Director
|
|
|
2010
|
|
|
2004
|
|
|
57
|
|
William
D. Hayes
President
Wellstone
Global Finance, LLC, U.S.A.
|
|
|
U.S.A.
|
|
|
Director
|
|
|
2010
|
|
|
2004
|
|
|
64
|
|
Maria
da Graça França
Brazil
|
|
|
Brazil
|
|
|
Director
|
|
|
2010
|
|
|
2004
|
|
|
59
|
|
ALL
CLASSES OF COMMON STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gonzalo
Menéndez Duque
Director
Banco
de Chile, Chile
|
|
|
Chile
|
|
|
Chairman
of the
Board
of Directors
|
|
|
2009
|
|
|
1990
|
|
|
59
|
|
Jaime
Rivera
Chief
Executive Officer
Bladex,
Panama
|
|
|
Guatemala
|
|
|
Director
|
|
|
2009
|
|
|
2004
|
|
|
55
|
|
Guillermo
Güémez García
has
served as Deputy Governor of Banco de Mexico since 1995 and served as a Board
Member of the National Insurance Commission and Casa de Moneda de Mexico
since
1995. He served as President of the Executive Committee in Grupo Azucarero
Mexico and Vice Chairman of Grupo de Embotelladoras Unidas, S.A. de C. V.
from
1993 to 1994. Mr. Güémez
served
as
Co-Chairman of the North American Committee, Board Member of Home Mart, S.A.
de
C.V. and Vice Chairman of the Board of Grupo Embotelladoras Unidas, S.A.
de C.V.
from 1986 to 1994. Mr. Güémez served on the Mexican Business Coordinating
Council for the North American Free Trade Agreement (“NAFTA”) in the capacity of
Executive Director from 1991 to 1993. He was employed by Banco Nacional de
Mexico (Banamex) in various capacities from 1974 to 1991, including Manager
for
Foreign Currency Funding and International Credits from 1974 to 1978,
Representative in London from 1979 to 1981, Executive Vice President of
International Treasury and Foreign Exchange, Exchange Controls and Ficorca
from
1982 to 1986, and Executive Vice President for International Products. He
also
was the founder and President of Euromex Casa de Cambio and Euroamerican
Capital
Corporation from 1986 to 1990. He has also served as a Board Member of the
Institute of International Finance and Board Member and Chairman of the
Executive Committee of the International Mexican Bank Ltd. Prior to that
he was
employed by Bank of America in Mexico as Assistant Representative.
José
Maria Rabelo
has
served as Vice President of International and Wholesale Business of Banco
do
Brasil, since July 2005. He has been employed by Banco do Brasil in various
capacities since 1996, holding the positions of Director of Foreign Trade
from
2004 to 2005, General Manager of the Operational Assets Restructuring Unit
from
2003 to 2004, Executive Superintendent of the Credit Unit from 1999 to 2000,
Executive Superintendent of the Sao Paulo Business Unit from 1998 to 1999,
Executive Manager of the Credit Function Unit in 1997, Executive Manager
of the
Distribution Unit from 1996 to 1997, and Superintendent of the Rio Grande
do
Norte State Unit in 1996. Mr. Rabelo was Commercial Director of Aliança do
Brasil Insurance Company from 2000 to 2002.
Roberto
Feletti
has
served as Vice President of Banco de la Nación Argentina, Argentina since 2006,
President of Nación Fideicomisos since March 2008, Member of the Administrative
Council of Economic and Finance Center Foundation for Argentina’s Development
since April 2007, Technical Representative for the Third Meeting of the
Strategic Commission of Reflection on South American Integration Process
held in
September and October 2006 and March 2007. He also served as Secretary of
Infrastructure and Planning of Government of the City of Buenos Aires from
2003
to 2006. Mr. Feletti served as President of Banco de la Ciudad de Buenos
Aires,
Argentina from 2001 to 2003 and Director from 1998 to 2000. He also served
as
Director of Red Link from 2002 to 2003 and Chairman of the Board from 2001
to
2002. Mr. Feletti was Coordinator of Economic Studies Area of the Institute
of
Studies on State and Participation of State Workers’Association, Argentina from
1991 to 1997. Mr. Feletti was employed by Banco Central de la Republica
Argentina from 1981 to 1991 in various capacities in the Supervising Equipments
of Banking and Financial Institutions division. Mr. Feletti was a fiscal
audit
assistant for General Tax Administration, Argentina from 1980 to 1981 and
a cost
analyst for La Vascongada in Argentina from 1978 to 1979.
Mario
Covo
is a
founding partner of Finaccess International, Inc. and has been Managing Partner
of Helios Advisors in New York since 2000. He also is one of the founders
of
Columbus Advisors, where he worked from 1995 to 1999. Mr. Covo
was previously at Merrill Lynch, where he was Head of Emerging
Markets-Capital Markets from 1989 to 1995. Prior to working at Merrill
Lynch, he was employed by Bankers Trust Company of New York as Vice
President in the Latin American Merchant
Banking Group from 1985 to 1989, focusing on
corporate finance and debt-for-equity swaps.
Prior to that Mr. Covo was employed as an
International Economist for Chase Econometrics from 1984 to 1985, focusing
primarily on Venezuela and Colombia.
Will
C. Wood
has
served as the founding principal of Kentwood Associates of Menlo Park,
California since 1993. He is a trustee of the Dodge & Cox mutual funds.
He was employed by Wells Fargo in the International Banking Group and served
as
an Executive Vice President from 1986 to 1989. While at Wells Fargo, Mr.
Wood
also was a Director of the Bankers’ Association for Foreign Trade and PEFCO, a
privately owned export finance company. He was employed by Crocker Bank and
served as Executive Vice President in charge of the International Division
and
Manager of the Latin America Area from 1975 to 1986. Mr. Wood previously
worked
for Citibank in La Paz, Bolivia, Lima, Peru and Rio de Janeiro and Sao Paulo,
Brazil, and began his career with Citibank’s Overseas Division in New York
in 1964.
Herminio
A. Blanco
has
served as Chief Executive Officer of Soluciones Estrategicas Consultoria,
Mexico
City, since 2002, business consultant to some of the leading corporations
in the
world, advisor to the Inter-American Development Bank, advisor to national
governments on trade negotiations, member of the International Advisory
Committee of Mitsubishi Corporation and member of the Trilateral Commission
since 2000. He was Secretary of Trade and Industry of Mexico, Chairman of
the
National Council for Deregulation of Mexico, Chairman of the Advisory Council
for Trade Negotiations of Mexico, Chairman of the Board of Exportadora de
Sal,
S.A., Chairman of the Board of Fideicomiso de Fomento Minero and Vice Chairman
of the Board of Banco Nacional de Comercio Exterior, in Mexico from 1994
to
2000. Mr. Blanco was Under Secretary for International Trade and Negotiations
of
the Ministry of Trade and Industry of Mexico from 1993 to 1994 and from 1988
to
1990. From 1990 to 1993, he was Mexico’s Chief Negotiator of NAFTA. Mr. Blanco
was one of the three members of the Council of Economic Advisors to the
President of Mexico from 1985 to 1988. He was Assistant Professor of Economics
at Rice University, Houston, Texas from 1980 to 1985. Mr. Blanco was senior
advisor to the Finance Minister of Mexico from 1978 to 1980.
William
D. Hayes
has
served as President of Whaleco, Inc., New York, President of Wellstone Global
Finance, LLC, San Francisco, California and Connecticut, and Managing Director
and charter member of the Board of Directors and the Investment Committee
of
WestLB-Tricon Forfaiting Fund Limited, Bermudas since 1999. He served as
Managing Director-Emerging Markets and in various other capacities for West
Merchant Bank and Chartered WestLB from 1987 to 1999. Mr. Hayes served as
Senior
Vice President- Trading for Libra Bank Limited, New York Agency from 1986
to
1987, Principal of W.D. Hayes and Associates, California from 1984 to 1986,
and
in various capacities for Wells Fargo Bank, N.A., San Francisco, California
from
1969 to 1984.
Maria
da Graça França
served
as Director of Internal Control of Banco do Brasil from 2006 to 2007. She
also
has been employed by Banco do Brasil in various other capacities since 1971,
including Head of North America and General Manager of Banco do Brasil, New
York
branch from 2004 to 2005, Executive General Manager of the International
Division in Brasilia, Brazil from 2002 to 2003, Regional Manager for the
operations of the Bank in South America based in Argentina in 2002, General
Manager of Banco do Brasil, Paris branch from 1999 to 2002, Deputy General
Manager of Banco do Brasil, Miami branch from 1993 to 1999, General Manager
of
the department responsible for Banco do Brasil’s foreign network from 1992 to
1993, Deputy General Manager for foreign exchange from 1989 to 1992, Assistant
Manager within the Risk Management Area from 1988 to 1989, Assistant Manager
for
foreign exchange internal controls from 1984 to 1987 and employee in the
Foreign
Exchange Department from 1971 to 1984.
Gonzalo
Menéndez Duque
is a
senior director of the Luksic companies in Chile and serves as a director
of the
following Luksic group holding companies: Banco de Chile since 2001, Holdings
Quiñenco since 1996, and Antofagasta PLC since 1985. In addition, he serves as
President of the following Luksic group companies: Banchile Corredores de
Bolsa,
S.A. since 2007 and Inversiones Vita since 2000. Previously, Mr. Menéndez Duque
served as a director and President of several companies related to Grupo
Luksic
since 1985, including the following: Banco de A. Edwards and related companies,
Banco Santiago, Empresas Lucchetti, S.A., Banco O’Higgins, Antofagasta Group,
and Banchile Administradora General de Fondos.
Jaime
Rivera
has
served as a director of the Bank since 2004, when he was appointed Chief
Executive Officer. He joined the Bank in 2002 as Chief Operating Officer.
Previously, Mr. Rivera served in various capacities for Bank of America
Corporation beginning in 1978, including Managing Director of the Latin America
Financial Institutions Group in Miami and the Latin America Corporate Finance
team in New York, as General Manager in Brazil, Argentina, Uruguay and
Guatemala, as Marketing Manager in Chile, and as Manager of Latin America
Information Systems in Venezuela. He has held Board positions with the Council
of the Americas, the Florida International Bankers’ Association, and the Latin
American Agribusiness Development Corporation. Mr. Rivera is a member of
the
International Advisory Committee (IAC) to the Board of Directors of the New
York
Stock Exchange.
He
has an
MBA degree from Cornell University, a Master of Science degree from Northwestern
University and a Bachelor of Science degree from Northrop
University.
Executive
Officers
The
following table and information sets forth the names of the executive officers
of the Bank and their respective positions as of the date hereof and positions
held by them with the Bank and other entities in prior years:
Name
|
|
Position Held with The Bank
|
|
Country of Citizenship
|
|
Age
|
|
|
|
|
|
|
|
Jaime
Rivera
|
|
Chief
Executive Officer
|
|
Guatemala
|
|
55
|
Rubens
V. Amaral Jr.
|
|
Executive
Vice President - Chief Commercial Officer
|
|
Brazil
|
|
49
|
Gregory
D. Testerman
|
|
Executive
Vice President - Senior Managing Director, Treasury & Capital
Markets
|
|
U.S.A.
|
|
45
|
Miguel
Moreno
|
|
Executive
Vice President, Chief Operating Officer
|
|
Colombia
|
|
55
|
Miguel
A. Kerbes
|
|
Senior
Vice President, Chief Risk Officer
|
|
Uruguay
|
|
48
|
Bismark
E. Rodriguez
|
|
Senior
Vice President, Controller
|
|
Venezuela
|
|
40
|
Jaime
Celorio
|
|
Senior
Vice President, Chief Financial Officer
|
|
Mexico
|
|
36
|
Ana
Maria de Arias
|
|
Senior
Vice President, Human Resources and Administration
|
|
Panama
|
|
44
|
Manuel
Mejía-Aoun
|
|
Head
of Asset Management Division
(Bladex
Asset Management)
|
|
Panama
|
|
49
|
Jaime
Rivera
has
served as a director of the Bank since 2004, when he was appointed Chief
Executive Officer. He joined the Bank in 2002 as Chief Operating Officer.
Previously, Mr. Rivera served in various capacities for Bank of America
Corporation beginning in 1978, including Managing Director of the Latin America
Financial Institutions Group in Miami and the Latin America Corporate Finance
team in New York, as General Manager in Brazil, Argentina, Uruguay and
Guatemala, as Marketing Manager in Chile, and as Manager of Latin America
Information Systems in Venezuela. He has held Board positions with the Council
of the Americas, the Florida International Bankers’ Association, and the Latin
American Agribusiness Development Corporation. Mr. Rivera is a member of
the
International Advisory Committee (IAC) to the Board of Directors of the New
York
Stock Exchange. He has an MBA degree from Cornell University, a Master of
Science degree from Northwestern University and a Bachelor of Science degree
from Northrop University.
Rubens
V. Amaral Jr.
became
Executive Vice President, Chief Commercial Officer of the Bank in March 2004.
He
previously served as General Manager and Managing Director for North America
of
Banco do Brasil, New York Branch, since 2000. Mr. Amaral served in various
capacities with Banco do Brasil since 1975, holding the positions of Managing
Director of the International Division and alternate member of the board
of
directors in 1998, Executive General Manager of the International Division
in
Sao Paulo from 1998 to 2000, Deputy General Manager in the New York Branch
in
charge of the Trade Finance and Correspondent Banking Department from 1994
to
1998, Head of Staff of the International Division from 1993 to 1994 and Advisor,
Head of Department and General Manager in the Trade Finance Area at the
International Department Division - Head Office from 1989 to 1993. Mr. Amaral
also served as a representative in banking supervision for the Central Bank
of
Brazil from 1982 to 1988.
Gregory
D. Testerman
has
served as Executive Vice President - Senior Managing Director, Treasury and
Capital Markets of the Bank since 2007. Mr. Testerman previously served as
Senior Vice President, Treasury of the Bank from 2005 to 2006. Mr. Testerman
served in various capacities with Banco Santander Central Hispano, S.A. from
1986 to 2003, including General Manager, Miami Agency, from 1999 to 2003,
General Manager, Tokyo Branch and Country Manager in Japan from 1995 to 1999,
Vice President, Head of Financial Control, Benelux and Asia Pacific, from
1991
to 1995, Second Vice President, Special Credit Valuation Assignment, London
Branch, in 1991, Second Vice President, Treasury Operations Manager, Belgium,
from 1989 to 1991, and Second Vice President, Management Reporting, Belgium,
from 1986 to 1989. Mr. Testerman began his career with The Chase Manhattan
Bank,
N.A. as Assistant Treasurer in Belgium in 1986 and as part of the Corporate
Controllers Development Program in New York from 1984 to 1986.
Miguel
Moreno
became
Executive Vice President, Chief Operating Officer in July 2007 after the
replacement of Mr. Ernesto Bruggia. He previously served as Senior Vice
President and Controller of the Bank since September 2001. He was a Management
Consulting Partner for Price Waterhouse, Bogotá, Colombia from 1988 to 2001, and
served as Vice President of Information Technology and Operations for Banco
de
Crédito, Bogotá, Colombia from 1987 to 1988. Mr. Moreno served as Chief
Executive Officer of TM Ingeniería, Bogotá, Colombia, from 1983 to 1987, and as
Head of Industrial Engineering Department, Los Andes University, Colombia,
from
1982 to 1984. Mr. Moreno was employed by SENA as Chief of the Organization
and
Systems Office, Colombia from 1977 to 1981, and served as Advisor to the
Minister for the Finance and Public Credit Ministry of Colombia from 1976
to
1977.
Miguel
A. Kerbes
has
served as Senior Vice President, Chief Risk Officer for the Bank since July
2002. Mr. Kerbes previously served as Vice President, Risk Management from
2000
to 2002. He served as the Risk Officer, Southern Cone Area for Banco Santander,
with domicile in Chile, from 1995 to 2000, overseeing the Country Risk Managers
for the area. From 1992 to 1995, he served with Bank of Boston, Chile as
the
Risk Director for credit and treasury risks and as Senior Risk Officer. From
1989 to 1992, Mr. Kerbes participated in the start-up of ING Bank in Chile,
continuing as its Risk Officer, with domicile in Chile. He had previously
served
with ING Bank in Uruguay and participated in the start-up of ING Bank in
Argentina from 1982 to 1992.
Bismark
E. Rodríguez
became
the Bank’s Controller on July 2007 after being appointed by the Bank in
replacement of Mr. Miguel Moreno. Previously Mr. Rodriguez served as the
Bank’s
Vice President of the Internal Audit Department since 2004. Mr. Rodriguez
also
served as Senior Manager at PricewaterhouseCoopers in various capacities
and
countries from 1991 to 2003. Mr. Rodriguez is a Certified Internal Auditor
(CIA), a Certified Financial Services Auditor (CFSA), and a Certified Control
Self-Assessment Specialist (CCSA), which are all designations granted by
The
Institute of Internal Auditors (IIA).
Jaime
Celorio
was
appointed Senior Vice President, Chief Financial Officer of the Bank, after
the
retirement of Mr. Carlos Yap in February 2008. Mr. Celorio previously served
as
Chief Financial Officer and Chief Administrative Officer for Merrill Lynch
México, S.A. de C.V., Casa de Bolsa, Mexico from 2002 to 2007. Mr. Celorio
served as Controller Associate of Emerging Markets in New York from 1998
to
2001, and served as a Controller Associate in Mexico from 1995 to 1998, both
for
the Goldman Sachs Group. Mr. Celorio also served in various capacities in
PricewaterhouseCoopers, Mexico, from 1991 to 1994, as a Senior Auditor in
the
Audit Division, and as Supervisor in Financial Advisory Services.
Ana
Maria de Arias
has
served as Senior Vice President of Human Resources and Administration since
July
2007. Ms. Arias previously served as Senior Vice President of Human Resources
and Corporate Operations of the Bank from 2004 to 2007. Prior to her employment
with the Bank, she served as Vice President of Human Resources of Banco General,
S.A., Panama from 2000 to 2004 and as Assistant Vice President of Human
Resources from 1999 to 2000. She served in various capacities with the Panama
Canal Commission, Panama from 1990 to 1999.
Manuel
Mejía-Aoun
,
has
served as Head of Asset Management Division (Bladex Asset Management) since
November 2005. Mr. Mejía-Aoun has over 19 years of investment experience in
emerging markets. Prior to joining the Bank, he was Chief Executive Officer
of
Maxblue, Deutsche Bank’s first personal financial consultancy business, focusing
on high net worth investors in Latin America. Prior to that, he headed the
Latin
American Foreign Exchange and Local Money Markets Sales and Trading Group
at
Deutsche Bank. In 1995, Mr. Mejía-Aoun served as Chief Emerging Markets
Strategist at Merrill Lynch covering fixed income securities in Latin America,
Eastern Europe, Africa and Asia. From 1987 to 1995, he established and headed
the Emerging Markets Trading Group at Merrill Lynch.
B.
Compensation
Cash
and Stock-Based Compensation
Executive
Officers Compensation
The
aggregate amount of cash compensation paid by the Bank during the year ended
December 31, 2007 to the executive officers employed in the Bank’s Head Office
as a group for services in all capacities was $2,587,413. During the fiscal
year
ended December 31, 2007, the Bank accrued, and in February 12, 2008 paid
performance-based bonuses to the Bank’s executive officers in the aggregate
amount of $1,585,000. At December 31, 2007, the total amount set aside or
accrued by the Bank to provide pension, retirement or similar benefits for
executive officers was approximately $651,389.
In
addition, the aggregate amount of cash compensation paid by the Bank during
the
year ended December 31, 2007 to the executive and non-executive employees
of
Bladex Asset Management, as a group for services in all capacities was $730,579.
During the fiscal year ended December 31, 2007, the Bank accrued, and on
February 12, 2008 paid performance-based bonuses to this group of executives
in
the aggregate amount of $3,225,000.
The
aggregate number of stock options awarded during the year ended December
31,
2007 to executive officers and other non-executive employees of the Bank
as a
group under the Bank’s 2006 Stock Option Plan was 188,634, representing a total
compensation cost of $889,956, of which $281,022 was charged against income
in
2007, and $635,223 will be charged to income over a period of 3.12 years.
The
options granted have a vesting period of four years and are based on the
level
of achievement by the Bank’s executive officers measured against established
corporate financial performance goals. The 2006 Stock Option Plan was
discontinued by the Board on February of 2008. Options granted under this
plan
have an exercise price of $16.34 and will expire on February 13, 2014.
The
Bank
sponsors a defined contribution plan for its expatriate officers. The Bank’s
contributions are determined as a percentage of the eligible officer’s annual
salary, with each officer contributing an additional amount withheld from
his
salary and deposited in a savings account with the Bank, earning interest
at
market rates until March 2007, when the Bank transferred all contributions
to a
trust administered by an independent third party. During the year 2007, the
Bank
charged to salaries expense $175,466 with respect to this plan. As of December
31, 2007, the accumulated liability payable under this contribution plan
amounted to $381,760.
2007
Chief Executive Officer Compensation
The
2007
compensation of the Bank's Chief Executive Officer included a base salary
of
$300,000, a performance-based cash bonus of $286,000, a performance-based
stock
option grant with a value of $250,000, a retirement plan that included a
contribution from the Bank of $21,310 during 2007, and other benefits amounting
to $8,570. During the fiscal year ended December 31, 2007, the Bank accrued,
and
in February 2008 paid a performance-based bonus to the Bank’s Chief Executive
Officer in the aggregate amount of $350,000. At December 31, 2007, the total
amount set aside or accrued by the Bank to provide pension, retirement or
similar benefits for the Chief Executive Officer was approximately $249,623.
In
addition, the Chief Executive Officer has a contractual severance payment
in
case of termination without cause of $300,000.
Board
of Directors Compensation
In
July
2007, the Board adopted a new compensation policy for non-employee directors.
Each non-employee director of the Bank receives an annual cash retainer of
$40,000 for his services as a director and the Chairman of the Board receives
an
annual cash retainer in the amount of $85,000. This annual retainer covers
seven
Board and/or shareholders meetings. When the Board has met more than seven
times, the Bank will pay each director an attendance fee of $1,500 for each
additional Board and/or stockholders meeting. The Chairman of the Board is
eligible to receive an additional 50% for each such additional Board,
stockholders or Committee meeting attended. The aggregate amount of cash
compensation paid by the Bank during the year ended December 31, 2007 to
the
directors of the Bank as a group for their services as directors was
$738,000.
In
July
2007, the Board amended the Bank’s restricted stock plan (the “Board Restricted
Stock Plan”). Under the amended terms of the Board Restricted Stock Plan, each
non-employee director of the Bank is awarded annually a number of shares
of
Class E common stock equal to the number that results from dividing $50,000
($75,000 in the case of the Chairman of the Board) by the market price of
a
Class E share on the date the award is made.
The
aggregate number of shares of restricted stock awarded during the year ended
December 31, 2007 to non-employee directors of the Bank as a group under
the
Board Restricted Stock Plan was 22,240 Class E shares and the compensation
expense charged against income in 2007 relating to such issuances was $42,929
and $431,895 will be charged to income over a period of 4.55 years.
In
addition, the aggregate number of options awarded during the year ended December
31, 2007 to non-employee directors under the Bank’s 2006 Stock Option Plan was
20,131, representing a total compensation cost of $94,976, of which $20,947
was
charged against income in 2007, and $74,029 will be charged to income over
a
period of 3.12 years.
For
a
detailed description of the Board Restricted Stock Plan and other discontinued
stock based compensation plans, see Item 18, “Financial Statements”,
note 14.
2008
Stock Incentive Plan
On
February 12, 2008, the Board of Directors approved the 2008 Stock Incentive
Plan
(the “2008 Plan”). The 2008 Plan replaces the 2006 Stock Option Plan and the
Board Restricted Stock Plan. The 2008 Plan covers non-executive directors,
executive officers and other employees of the Bank and gives the Board greater
flexibility to grant stock options, restricted stock units, restricted stock
grants, dividend equivalent rights and stock appreciation rights, under terms
and conditions to be determined from time to time by the Board and specified
in
the award agreements.
On
February 12, 2008, the Bank awarded an aggregate number of 39,239 restricted
stock units and 172,106 stock options to executive officers of the Bank.
An
additional aggregate number of 13,743 restricted stock units and 60,297 stock
options were granted to other non-executive employees of the Bank on February
12, 2008.
The
stock options granted have an exercise price of $15.43 and will expire on
February 12, 2015. The restricted stock units have a four-year cliff vesting
period.
No
grants
have been made to directors of the Bank under the 2008 Plan to this date.
On
April
14, 2008, the Board of Directors modified stock option grants made under
the
2004 Indexed Option Plan, the 2006 Stock Option Plan, and the 2008 Stock
Incentive Plan, converting part of the grants to restricted stock
units.
Beneficial
Ownership
As
of
December 31, 2007, the Bank’s executive officers and directors, as a group,
owned an aggregate of 59,246 Class E shares, which was approximately 0.2%
of all
issued and outstanding Class E shares.
The
following table sets forth information regarding the number of shares, stock
options, deferred equity units, and indexed stock options owned by the Bank’s
executive officers as of December 31, 2007, as well as the restricted stock
units and stock options granted in February 2008 under the 2008 Plan.
Name
and Position of
Executive Officer
|
|
Number of
Shares
Beneficially
Owned as of
Dec. 31, 2007
|
|
Number of
Shares that
may be
Acquired
within 60 days
of Dec. 31, 2007
|
|
Stock
Options
(1)
|
|
Deferred
Equity
Units
(2)
|
|
Indexed
Stock
Options
(3)
|
|
2008 Stock
Plan
Restricted
Stock Units
(4)
|
|
2008
Stock
Plan
Options
(4)
|
|
Jaime Rivera
Chief
Executive Officer
|
|
|
1,400
|
|
|
0
|
|
|
52,989
|
|
|
770
|
|
|
155,709
|
|
|
9,721
|
|
|
42,636
|
|
Rubens
V. Amaral Jr.
Executive
Vice President
Chief
Commercial Officer
|
|
|
0
|
|
|
0
|
|
|
26,494
|
|
|
0
|
|
|
102,638
|
|
|
8,101
|
|
|
35,530
|
|
Gregory
D. Testerman
Executive
Vice President
Senior
Managing Director,
Treasury
& Capital Markets
|
|
|
0
|
|
|
0
|
|
|
21,195
|
|
|
0
|
|
|
20,998
|
|
|
9,397
|
|
|
41,215
|
|
Miguel
Moreno
Executive
Vice President,
Chief
Operating Officer
|
|
|
2,000
|
|
|
0
|
|
|
10,597
|
|
|
597
|
|
|
35,757
|
|
|
5,184
|
|
|
22,739
|
|
Miguel
A. Kerbes
Senior
Vice President,
Chief
Risk Officer
|
|
|
0
|
|
|
0
|
|
|
19,646
|
|
|
621
|
|
|
29,830
|
|
|
3,240
|
|
|
14,212
|
|
Bismark
E. Rodriguez L.
Senior
Vice President
Controller
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,296
|
|
|
5,684
|
|
Carlos
Yap S.
(5)
Senior
Vice President,
Chief
Financial Officer
|
|
|
0
|
|
|
0
|
|
|
21,163
|
|
|
545
|
|
|
26,574
|
|
|
0
|
|
|
0
|
|
Jaime
Celorio
Senior
Vice President,
Chief
Financial Officer
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
437
|
|
|
1,918
|
|
Ana
Maria de Arias
Senior
Vice President,
Human
Resources and Administration
|
|
|
590
|
|
|
0
|
|
|
10,597
|
|
|
0
|
|
|
21,176
|
|
|
1,863
|
|
|
8,172
|
|
Total
(6)
|
|
|
3,990
|
|
|
0
|
|
|
162,681
|
|
|
2,533
|
|
|
392,682
|
|
|
39,239
|
|
|
172,106
|
|
______________________
(1)
|
Includes
137,768 stock options granted to executive officers on February
13, 2007
under the 2006 Stock Option Plan and 24,913 stock options granted
under
the Bank's 1995 and 1999 Stock Option Plans. In addition, an aggregate
amount of 34,970 stock options were granted to other non-executive
employees and 15,896 were granted to Mr. Ernesto Bruggia, who resigned
as
the Bank’s Chief Operations Officer in July 2007, under the 2006 Stock
Option Plan. Vested options under the 1995 and 1999 Stock Option
Plans and
options expected to vest under the 2006 Stock Option Plan have
no
intrinsic value as of December 31, 2007 because the options’ exercise
price was greater than the quoted market price of the Bank’s common stock
at that date.
|
(2)
|
Deferred
equity units granted under the Bank's Deferred Compensation Plan
(the “DC
Plan”). In addition, as of the date hereof, there are 1,894 outstanding
units that were granted to former executive officers of the Bank
under the
DC Plan.
|
(3)
|
An
aggregate amount of 23,549 stock options were granted to other
non-executive employees and 37,992 stock options were granted to
Mr.
Ernesto Bruggia, under the Bank’s 2004 Indexed Stock Option Plan. Options
expected to vest under this plan have no intrinsic value as of
December
31, 2007 because the options’ strike price was greater than the quoted
market price of the Bank’s common stock at that date.
|
(4)
|
In
addition, an aggregate amount of 60,297 stock options and 13,743
restricted stock units were granted to other employees of the Bank
(other
than the named executive officers) on February 12, 2008.
|
(5)
|
Mr.
Carlos Yap, who resigned as the Bank’s Chief Financial Officer on February
22, 2008, is eligible to exercise 15,163 stock options, granted
under the
Bank’s 1995 and 1999 Stock Option Plans, by May 22, 2008. 6,000 stock
options granted to Mr. Yap under these same plans were forfeited
on
February 6, 2008. In addition, Mr. Yap is eligible to exercise
10,498
indexed stock options by June 1, 2008. 16,076 indexed stock options
granted to Mr. Yap under this plan were forfeited on February 22,
2008.
|
(6)
|
The
executive and non-executive employees of Bladex Asset Management,
Inc. are
not eligible to receive grants under the 2008 Plan.
|
The
following table sets forth information regarding ownership of the Bank’s shares
by members of its Board, including restricted shares, indexed stock options,
and
stock options,
held
as
of December 31, 2007.
Name
of
Director
|
|
Number of
Shares
Beneficially
Owned as of
Dec. 31, 2007
(
1)
|
|
Number of
Shares that may
be Acquired
within 60 days
of Dec. 31, 2007
|
|
Stock Options
|
|
Restricted
Shares
(
2)
|
|
Indexed Stock
Options
|
|
Guillermo
Güémez García
(3)
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Santiago
Perdomo Maldonado
(4)
|
|
|
5,191
|
|
|
0
|
|
|
2,119
|
|
|
5,191
|
|
|
5,960
|
|
José
Maria Rabelo
(5)
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Will
C. Wood
|
|
|
7,191
|
|
|
0
|
|
|
2,119
|
|
|
5,191
|
|
|
5,960
|
|
Mario
Covo
|
|
|
5,191
|
|
|
0
|
|
|
2,119
|
|
|
5,191
|
|
|
5,960
|
|
Herminio
Blanco
|
|
|
4,186
|
|
|
0
|
|
|
2,119
|
|
|
4,186
|
|
|
5,960
|
|
William
Hayes
|
|
|
12,986
|
|
|
0
|
|
|
2,119
|
|
|
4,186
|
|
|
5,960
|
|
Maria
da Graça França
|
|
|
2,341
|
|
|
0
|
|
|
0
|
|
|
2,341
|
|
|
0
|
|
Gonzalo
Menéndez Duque
|
|
|
7,788
|
|
|
0
|
|
|
3,179
|
|
|
7,788
|
|
|
8,942
|
|
Total
|
|
|
44,874
|
|
|
0
|
|
|
13,774
|
|
|
34,074
|
|
|
38,742
|
|
______________________
(1)
|
Includes
Class E shares held under the Board Restricted Stock Plan.
|
(2)
|
Under
the Board Restricted Stock Plan, directors receiving restricted
shares
will have all the rights of stockholders of the Bank, except that
all such
shares will be subject to restrictions on transferability, which
will
lapse on the fifth anniversary of the award date.
|
(3)
|
5,191
Class E shares corresponding to Mr. Güémez’s entitlement under the Board
Restricted Stock Plan have been issued to his employer, Banco de
Mexico.
In addition, an aggregate number of 2,119 stock options to which
Mr.
Güémez was entitled under the 2006 Stock Option Plan have been granted
to
Banco de Mexico.
|
(4)
|
Mr.
Santiago Perdomo served as a director until April 14, 2008.
|
(5)
|
2,341
Class E shares corresponding to Mr. Rabelo’s entitlement under the Board
Restricted Stock Plan have been issued to his employer, Banco do
Brasil.
|
For
additional information regarding stock options granted to executive officers
and
directors, see Item 18, “Financial Statements”, note 14.
C.
Board
Practices
Corporate
Governance
The
Board
has decided not to constitute a corporate governance committee. Given the
importance that corporate governance has for the Bank, the Board decided
to
address all matters related to corporate governance at the Board level and
the
Audit and Compliance Committee is responsible for promoting continued
improvement in the Bank’s corporate governance and to verify compliance with all
applicable policies.
The
Bank
has included the information regarding its corporate governance practices
necessary to comply with Section 303A of the Listed Company
Manual/Corporate Governance Rules of the New York Stock Exchange (the “NYSE”) on
its website (www.bladex.com/InvestorsCenter/Corporate Governance). Additionally,
the Bank’s website (under “Corporate Governance”) provides a summary of the
significant differences between corporate governance practices commonly used
by
the Bank and other public companies in Panama and the NYSE Standards for
U.S.
domestic companies.
Shareholders,
employees of the Bank, and other interested parties may communicate directly
with the Board by corresponding to the address below. Relevant correspondence
will be discussed at the next scheduled meeting of the Board, or as indicated
by
the urgency of the matter.
Attn:
Board of Directors of Banco Latinoamericano de Exportaciones, S.A.
c/o
Mr.
Gonzalo Menéndez Duque
Director
& Chairman of the Board of Directors
Calle
50
and Aquilino de la Guardia
P.O.
Box
0819-08730
Panama
City, Republic of Panama
In
addition, Bladex has selected EthicsPoint, an on-line reporting system, to
provide stockholders, employees of the Bank, and other interested parties
with
an alternative channel to report anonymously actual or possible violations
of
the Bank’s Code of Ethics, as well as other work-related situations or irregular
or suspicious transactions, accounting matters, internal audit or accounting
controls. In order to file a report, a link is provided in the Bank’s website
(www.bladex.com/Investors Center/Corporate Governance) under “Corporate
Governance - Private Filing of Reports”.
Information
as to Non-Executive Officers of the Board (“Dignatarios”)
The
following table sets forth the names, countries of citizenship, and ages
of the
Bank’s non-executive officers (“
Dignatarios”)
,
and
their current office or position with other institutions.
Dignatarios
are
elected annually by the members of the Board.
Dignatarios
attend
meetings of the Board, participate in discussions and offer advice and counsel
to the Board, but do not have the power to vote (unless they also are directors
of the Bank).
Name
|
|
Country
of Citizenship
|
|
Position
held by
Dignatario
with
the Bank
|
|
Age
|
Gonzalo
Menéndez Duque
1
Director
Banco
de Chile, Chile
|
|
Chile
|
|
Chairman
of the Board
|
|
59
|
Maria
da Graça França
|
|
Brazil
|
|
Treasurer
|
|
59
|
Ricardo
Manuel Arango
Partner
Arias,
Fábrega & Fábrega
|
|
Panama
|
|
Secretary
|
|
47
|
______________________
1
Mr.
Gonzalo Menéndez Duque was re-elected Chairman in April 2008 by the
Board.
Committees
of the Board of Directors
The
Board
conducts its business through meetings of the Board and through its committees.
During the fiscal year ended December 31, 2007, the Board held eleven meetings.
Each director attended an average of 98% of the total number of Board meetings
held during the fiscal year ended December 31, 2007. Each director also attended
the prior year’s annual meeting.
The
following table sets forth the five committees established by the Board,
the
current number of members of each committee and the total number of meetings
held by each committee during the fiscal year ended December 31,
2007:
Committee
|
|
Number of members
|
|
Total number of meetings held
|
|
Audit and
Compliance Committee
|
|
|
4
|
|
|
10
|
|
Credit
Policy and Risk Assessment Committee
|
|
|
5
|
|
|
5
|
|
Assets
and Liabilities Committee
|
|
|
5
|
|
|
12
|
|
Nomination
and Compensation Committee
|
|
|
4
|
|
|
5
|
|
Business
Committee
1
|
|
|
5
|
|
|
0
|
|
______________________
1
Established in February of 2008.
The
Bank
has included the charters of its four committees established by the Board
on its
website at www.bladex.com/Investors Center/Corporate Governance/Committees
of
the Board of Directors-Charters.
Audit
and Compliance Committee
The
Audit
and Compliance Committee is a standing committee of the Board. According
to its
Charter, the Audit and Compliance Committee must be comprised of at least three
independent directors. As of April 15, 2008 the current members of the Audit
and
Compliance Committee are Will C. Wood (Chairman of the Committee), Gonzalo
Menéndez Duque, Maria da Graça França and Roberto Feletti.
The
Board
has determined that all members of the Audit and Compliance Committee are
independent directors, as defined under the terms defined by applicable laws
and
regulations, including rules promulgated by the SEC under the Sarbanes-Oxley
Act
of 2002, Section 303A of the rules of the NYSE, and Agreement No. 04-2001
of the
Superintendency of Banks. In addition, at least one of the members of the
committee is a “financial expert,” as defined in the rules enacted by the SEC
under the Sarbanes-Oxley Act of 2002. The Audit and Compliance Committee’s
financial expert is Gonzalo Menéndez Duque.
The
purpose of the Audit and Compliance Committee is to provide assistance to
the
Board in fulfilling its oversight responsibilities regarding the processing
of
the Bank’s financial information, the integrity of the Bank’s financial
statements, the Bank’s system of internal controls over financial reporting, the
process of internal and external audit, the Bank’s corporate governance,
compliance with legal and regulatory requirements and the Bank’s Code of
Ethics.
The
Audit
and Compliance Committee meets at least six times a year, as required by the
Superintendency of Banks, or more often if the circumstances so require. During
the fiscal year ended December 31, 2007, the Audit and Compliance Committee
met
ten times.
The
Audit
and Compliance Committee, in its capacity as a committee of the Board, is
directly responsible for the appointment, compensation, and oversight of the
Bank’s independent auditors, including the resolution of disagreements regarding
financial reporting between the Bank’s management and such independent auditors.
The Bank’s independent auditors are required to report directly to the Audit and
Compliance Committee.
The
Audit
and Compliance Committee pre-approves all audit and non-audit services. The
Charter of the Audit and Compliance Committee requires an annual self-evaluation
of the committee’s performance. The Audit and Compliance Committee’s Charter may
be found on the Bank’s website at
www.bladex.com
/Investors
Center/Corporate Governance/Committees of the Board of
Directors-Charters.
See
Item
16A, “Audit and Compliance Committee Financial Expert” and Item 16C, “Principal
Accountant Fees and Services”.
Credit
Policy and Risk Assessment Committee (“CPER”)
The
CPER
is a standing committee of the Board. No member of the CPER can be an employee
of the Bank. The Board has determined that all members of the CPER are
independent. The current members of the CPER are Guillermo Güémez García
(Chairman), Gonzalo Menéndez Duque, Will C. Wood, Herminio Blanco, and José
Maria Rabelo.
The
CPER
is in charge of reviewing and recommending to the Board all credit policies
and
procedures related to the management of the Bank’s risks. It also reviews the
quality and profile of the Bank’s credit facilities, and the risk levels that
the Bank is willing to assume. The CPER’s responsibilities also include, among
others, the review of operational and legal risks, the presentation for Board
approval of country limits and limits exceeding delegated authority, and the
approval of exemptions to credit policies.
The
CPER
performs its duties through the review of periodic reports from Risk Management,
and by way of its interaction with the Chief Risk Officer and other members
of
the Bank’s management team. The CPER meets at least four times per year. During
the fiscal period ended December 31, 2007, the CPER held five meetings.
The
Credit Policy and Risk Assessment Committee’s Charter may be found on the Bank’s
website at
www.bladex.com
/Investors
Center/Corporate Governance/Committees of the Board of
Directors-Charters.
Assets
and Liabilities Committee
The
Assets and Liabilities Committee is a standing committee of the Board. No member
of the Assets and Liabilities Committee can be an employee of the Bank. The
Board has determined that all members of the Assets and Liabilities Committee
are independent directors. The current members of the Assets and Liabilities
Committee are Mario Covo (Chairman), Herminio Blanco, Guillermo Güémez García,
William Hayes, and José Maria Rabelo.
The
Assets and Liabilities Committee is responsible for reviewing and recommending
to the Board all policies and procedures related to the Bank’s management of
assets and liabilities to meet profitability, liquidity, and market risk control
objectives. As part of its responsibilities, the committee reviews and
recommends to the Board, among others, policies related to the Bank’s funding,
interest rate and liquidity gaps, investment of liquidity, derivative positions,
funding strategies, and market risk.
The
Assets and Liabilities Committee carries out its duties by reviewing periodic
reports that it receives from management, and by way of its interaction with
the
Executive Vice President-Senior Managing Director, Treasury & Capital
Markets and other members of the Bank’s management team. The committee meets at
least four times per year. During the fiscal year ended December 31, 2007,
the committee held twelve meetings.
The
Assets and Liabilities Committee’s Charter may be found on the Bank’s website at
www.bladex.com
/Investors
Center/Corporate Governance/Committees of the Board of Directors-Charters.
Nomination
and Compensation Committee
The
Nomination and Compensation Committee is a standing committee of the Board.
No
member of the Nomination and Compensation Committee can be an employee of the
Bank. The Board has determined that all members of the Nomination and
Compensation Committee are independent, under the terms defined by applicable
laws and regulations, including rules promulgated by the SEC under the
Sarbanes-Oxley Act of 2002, Section 303A of the rules of the NYSE, and Agreement
No.04-2001 of the Superintendency of Banks. As of April 15, 2008, the current
members of the Nomination and Compensation Committee are Maria da Graça França
(Chairman), Mario Covo, William Hayes, and Roberto Feletti.
The
Nomination and Compensation Committee meets at least four times per year. During
the fiscal year ended December 31, 2007, the committee held five
meetings.
The
Nomination and Compensation Committee’s primary responsibilities are to assist
the Board by identifying candidates to become Board members, and recommending
nominees for the annual meetings of stockholders; by making recommendations
to
the Board concerning candidates for Chief Executive Officer and other executive
officers and counseling on succession planning for executive officers; by
recommending compensation for Board members and committee members, including
cash and equity compensation; by recommending compensation for executive
officers and employees of the Bank, including cash and equity compensation,
and
policies for senior management and employee benefit programs and plans; and
by
reviewing and recommending changes to the Bank’s Code of Ethics; and by advising
executive officers on issues related to the Bank’s personnel.
The
Nomination and Compensation Committee will consider qualified director
candidates recommended by stockholders. All director candidates will be
evaluated in the same manner regardless of how they are recommended, including
recommendations by stockholders. For director nominees, the committee considers
candidate qualifications and other factors, including, but not limited to,
diversity in background and experience, industry knowledge, educational level
and the needs of the Bank. Stockholders can mail any such recommendations and
an
explanation of the qualifications of such candidates to the Secretary of the
Bank at Calle 50 and Aquilino de la Guardia, P.O. Box 0819-08730, Panama City,
Republic of Panama.
The
Charter of the Nomination and Compensation Committee requires an annual
self-evaluation of the committee’s performance.
The
Nomination and Compensation Committee’s Charter may be found on the Bank’s
website
at
www.bladex.com
/Investors
Center/Corporate Governance/Committees of the Board of
Directors-Charters.
Mr.
Rivera is the only executive officer that serves as a member of the Board.
None
of the Bank’s executive officers serves as a director or a member of the
Nomination and Compensation Committee, or any other committee serving an
equivalent function, of any other entity that has one or more of its executive
officers serving as a member of the Board or the Nomination and Compensation
Committee. None of the members of the Nomination and Compensation Committee
has
ever been an employee of the Bank.
Business
Committee
The
Business Committee is a standing committee of the Board that was established
in
February 2008. The Board has determined that all members of the Business
Committee are independent directors. The current members of the Business
Committee are William Hayes (Chairman), Gonzalo Menéndez Duque, Mario Covo,
Herminio Blanco and José Maria Rabelo.
The
Business Committee is primarily responsible for reviewing commercial and
treasury business development and providing strategic guidance.
The
Business Committee carries out its duties by supporting the business divisions
in the achievement of their business objectives, following up on business
strategies articulated by the Board of Directors, evaluating new business ideas
and their profitability and focusing on continued improvement in business
efficiency through adequate management of capital and resources. The committee
will meet at least four times per year.
The
Business Committee’s Charter, once approved in its final form by the Board, will
be found on the Bank’s website
at
www.bladex.com
/Investors
Center/Corporate Governance/Committees of the Board of Directors-Charters.
Advisory
Council
The
Advisory Council was created by the Board in April 2000 pursuant to the powers
granted to the Board under the Bank’s Articles of Incorporation. The duties of
Advisory Council members consist primarily of providing advice to the Board
with
respect to the business of the Bank in their areas of expertise. Each member
of
the Advisory Council receives $5,000 for each Advisory Council meeting attended.
The aggregate amount of fees for services rendered by the Advisory Council
during 2007 amounted to $15,000. During the fiscal year ended December 31,
2007,
the Advisory Council met once. The Advisory Council meets when convened by
the
Board.
The
following table sets forth the names, positions, countries of citizenship and
ages of the members of the Advisory Council of the Bank
.
Name
|
|
Position
|
|
Country of Citizenship
|
|
Age
|
|
Roberto
Teixeira da Costa
|
|
|
Board
Member
Sul
America, S.A.
|
|
|
Brazil
|
|
|
73
|
|
Carlos
Martabit
|
|
|
General
Manager, Finance Division
Banco
del Estado de Chile
|
|
|
Chile
|
|
|
54
|
|
Alberto
Motta, Jr
|
|
|
President
Inversiones
Bahía Ltd.
|
|
|
Panama
|
|
|
61
|
|
Enrique
Cornejo
|
|
|
Secretary
Ministry
of Housing, Construction and Sanitation, Peru
|
|
|
Peru
|
|
|
51
|
|
Santiago
Perdomo
(1)
|
|
|
President
Banco
Colpatria - Red Multibanca Colpatria
|
|
|
Colombia
|
|
|
50
|
|
(1)
As of
April 15, 2008, Mr. Perdomo was included as part of the Advisory
Council.
D.
Employees
As
of
December 31, 2007, the total number of permanent employees was 188, which were
geographically distributed as follows: Head Office in Panama: 157; New York
Agency: 8; Bladex Asset Management: 3; Representative Office in Argentina:
3;
Representative Office in Brazil: 10; Representative Office in Mexico: 4; and
an
International Administrative Office in Miami: 3.
E.
Share
Ownership
See
Item
6, “Directors, Senior Management and Employees/Compensation/Beneficial
Ownership”.
Item
7.
Major
Shareholders and Related Party Transactions
A.
Major
Shareholders
As
of
December 31, 2007, the Bank was not directly or indirectly owned or controlled
by another corporation or any foreign government, and no person was the
registered owner of more than 10% of the total outstanding shares of voting
capital stock of the Bank
.
The
following table sets forth information regarding the Bank’s stockholders that
are the beneficial owners of 5% or more of any one class of the Bank’s voting
stock at December 31, 2007
:
|
|
At December 31, 2007
|
|
|
|
Number of Shares
|
|
% of Class
|
|
% of Total
|
|
Class A
|
|
|
|
|
|
|
|
Banco
de la Nación Argentina
Bartolomé
Mitre 326
1036
Buenos Aires, Argentina
|
|
|
1,045,348.00
|
|
|
16.5
|
|
|
2.9
|
|
Banco
do Brasil
1
SBS
Cuadra 1-Bloco A
CEP
70.0070-100
Brasilia,
Brazil
|
|
|
974,551.00
|
|
|
15.4
|
|
|
2.7
|
|
Banco
de Comercio Exterior de Colombia
Edif.
Centro de Comercio Internacional
Calle
28 No. 13A-15
Bogotá,
Colombia
|
|
|
488,547.00
|
|
|
7.7
|
|
|
1.3
|
|
Banco
de la Nación (Perú)
Ave.
Republica de Panamá 3664
San
Isidro, Lima, Perú
|
|
|
446,556.00
|
|
|
7.0
|
|
|
1.2
|
|
Banco
Central del Paraguay
Federación
Rusa y Sargento Marecos
Asunción,
Paraguay
|
|
|
434,658.00
|
|
|
6.9
|
|
|
1.2
|
|
Banco
Central del Ecuador
Ave.
Amazonas entre Juan Pablo Sanz y Atahualpa
Quito,
Ecuado
r
|
|
|
431,217.00
|
|
|
6.8
|
|
|
1.2
|
|
Banco
del Estado de Chile
Ave.
Libertador Bernardo O’Higgins 1111
Santiago,
Chile
|
|
|
323,412.75
|
|
|
5.1
|
|
|
0.9
|
|
Sub-total
shares of Class A Common Stock
|
|
|
4,144,289.75
|
|
|
65.4
|
%
|
|
11.4
|
%
|
Total
Shares of Class A Common Stock
|
|
|
6,342,189.16
|
|
|
100.0
|
%
|
|
17.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Class
B
|
|
|
Number of Shares
|
|
|
% of Class
|
|
|
% of Total
|
|
Banco de
la Provincia de Buenos Aires.
San
Martin 137
C1004AAC
Buenos Aires, Argentina
|
|
|
884,460.98
|
|
|
33.2
|
|
|
2.4
|
|
Banco
de la Nación Argentina
Bartolomé
Mitre 326
1036
Buenos Aires, Argentina
|
|
|
295,944.50
|
|
|
11.1
|
|
|
0.8
|
|
The
Korea Exchange Bank
181,
Euljiro 2GA
Jengu,
Seoul, Korea
|
|
|
147,172.50
|
|
|
5.5
|
|
|
0.4
|
|
Sub-total
shares of Class B Common Stock
|
|
|
1,327,577.98
|
|
|
49.8
|
%
|
|
3.6
|
%
|
Total
Shares of Class B Common Stock
|
|
|
2,660,846.63
|
|
|
100.0
|
%
|
|
7.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Class
E
2
|
|
|
Number of Shares
|
|
|
% of Class
|
|
|
% of Total
|
|
Oppenheimer
Funds Inc
6803
South Tucson Way
Centennial,
Colorado 80112-3924
|
|
|
3,588,615.00
|
|
|
13.1
|
|
|
9.9
|
|
Brandes
Investment Partners, LP
11988
El Camino Real, Suite 500
San
Diego, California 92130
|
|
|
3,403,361.00
|
|
|
12.4
|
|
|
9.4
|
|
Arnhold
and S. Bleichroeder Advisers, LLC
1345
Avenue of the Americas
New
York, New York 10105-4300
|
|
|
2,480,070.00
|
|
|
9.1
|
|
|
6.8
|
|
Mondrian
Investment Partners Ltd
5
th
Floor, 10 Gresham Street
London,
EC2V 7JD
|
|
|
1,862,300.00
|
|
|
6.8
|
|
|
5.1
|
|
Sub-total
shares of Class E Common Stock
|
|
|
11,334,346.00
|
|
|
41.4
|
%
|
|
31.2
|
%
|
Total
Shares of Class E Common Stock
|
|
|
27,367,113.00
|
|
|
100.0
|
%
|
|
75.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
Shares of Common Stock
|
|
|
36,370,148.79
|
|
|
|
|
|
100.0
|
%
|
1
Does
not
include an aggregate of 2,341 Class E shares corresponding to Mr. José Maria
Rabelo’s entitlement under the Board Restricted Stock Plan issued to his
employer, Banco do Brasil.
2
Source:
Schedule 13F filings with the SEC dated December 31, 2007.
All
common shares have the same rights and privileges regardless of their class,
except that:
|
·
|
The
affirmative vote of three-quarters (3/4) of the issued and outstanding
Class A shares is required (1) to dissolve and liquidate the Bank,
(2) to
amend certain material provisions of the Amended and Restated Articles
of
Incorporation, (3) to merge or consolidate the Bank with another
entity
and (4) to authorize the Bank to engage in activities other than
those
described in its Amended and Restated Articles of Incorporation;
|
|
·
|
The
Class E shares are freely transferable, while the Class A shares
and Class
B shares can only be transferred to qualified holders;
|
|
·
|
The
Class B shares may be converted into Class E shares;
|
|
·
|
The
holders of Class A shares and Class B shares benefit from pre-emptive
rights, but the holders of Class E shares do not;
and
|
|
·
|
All classes vote separately for their respective
Directors.
|
B.
Related
Party Transactions
Certain
directors of the Bank are executive officers and/or directors of banks and/or
other financial institutions located in Latin America, the Caribbean and
elsewhere. Some of these banks and/or other financial institutions own shares
of
the Bank’s common stock and have entered into loan transactions with the Bank in
the ordinary course of business. The terms and conditions of such loan
transactions, including interest rates and collateral requirements, are
substantially the same as the terms and conditions of comparable loan
transactions entered into with other persons under similar market conditions.
As
a matter of policy, directors of the Bank do not participate in the approval
process for credit facilities extended to institutions of which they are
executive officers or directors nor do they participate with respect to
decisions regarding country exposure limits in countries in which such
institutions are domiciled.
At
December 31, 2007, the Bank did not have any outstanding credit facility with
related parties as defined by the Superintendency of Banks.
C.
Interests
of Experts and Counsel
Not
required in this Annual Report.
Item
8.
Financial
Information
A.
Consolidated
Statements and Other Financial Information
The
information included in Item 18 of this Annual Report is referred to and
incorporated by reference into this Item 8.A.
Dividends
The
Board’s policy is to declare and distribute quarterly cash dividends on the
Bank’s common stock, and, from time to time has declared special dividends to
its stockholders. Dividends are declared at the Board’s discretion.
The
following table shows information about common dividends paid on the dates
indicated.
Payment date
|
|
Record date
|
|
Dividend per share
|
|
January 18, 2007
|
|
|
January 8, 2007
|
|
$
|
0.19
|
|
April 10, 2007
|
|
|
March 30, 2007
|
|
$
|
0.22
|
|
July 6, 2007
|
|
|
June 26, 2007
|
|
$
|
0.22
|
|
October 5, 2007
|
|
|
September 25, 2007
|
|
$
|
0.22
|
|
January 17, 2008
|
|
|
January 7, 2008
|
|
$
|
0.22
|
|
April 4, 2008
|
|
|
March 25, 2008
|
|
$
|
0.22
|
|
On
February 2007, the Board declared an increase in the quarterly dividend from
$0.1875 per share to $0.22 per share.
The
following table shows information about preferred dividends paid on the dates
indicated.
Payment date
|
|
Record date
|
|
Dividend per share
|
|
May 17, 2004
|
|
|
April 30, 2004
|
|
$
|
0.40
|
|
November 15, 2004
|
|
|
November 8, 2004
|
|
$
|
1.90
|
|
May 16, 2005
|
|
|
April 29, 2005
|
|
$
|
2.15
|
|
November 15, 2005
|
|
|
October 31, 2005
|
|
$
|
2.18
|
|
May 15, 2006
|
|
|
April 28, 2006
|
|
$
|
2.22
|
|
B.
Significant Changes
Not applicable
Item 9.
The Offer and Listing
A.
Offer
and Listing Details
The
Bank’s
Class E
shares are listed on the NYSE under the symbol “BLX”. The following table shows
the high and low sales prices of the Class E shares on the NYSE for the periods
indicated.
|
|
Price per Class E Share (in $)
|
|
|
|
High
|
|
Low
|
|
2003
|
|
|
19.95
|
|
|
4.01
|
|
2004
|
|
|
20.00
|
|
|
14.00
|
|
2005
|
|
|
25.50
|
|
|
15.34
|
|
2006
|
|
|
18.70
|
|
|
14.59
|
|
2007
|
|
|
23.17
|
|
|
15.52
|
|
|
|
|
|
|
|
|
|
2006:
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
18.70
|
|
|
15.65
|
|
Second
Quarter
|
|
|
17.44
|
|
|
14.59
|
|
Third
Quarter
|
|
|
16.90
|
|
|
15.38
|
|
Fourth
Quarter
|
|
|
17.05
|
|
|
15.10
|
|
2007:
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
17.12
|
|
|
15.52
|
|
Second
Quarter
|
|
|
21.60
|
|
|
16.50
|
|
Third
Quarter
|
|
|
23.17
|
|
|
16.53
|
|
Fourth
Quarter
|
|
|
21.29
|
|
|
15.81
|
|
2008:
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
16.53
|
|
|
13.33
|
|
2007:
|
|
|
|
|
|
|
|
December
|
|
|
18.76
|
|
|
15.81
|
|
2008:
|
|
|
|
|
|
|
|
March
|
|
|
16.53
|
|
|
14.33
|
|
February
|
|
|
16.34
|
|
|
13.44
|
|
March
|
|
|
15.94
|
|
|
13.33
|
|
April
|
|
|
19.46
|
|
|
15.50
|
|
May
|
|
|
19.14
|
|
|
16.39
|
|
B.
Plan
of Distribution
Not
required in this Annual Report.
C.
Markets
The
Bank’s Class A shares and Class B shares were sold in private placements or sold
in connection with the Bank’s 2003 rights offering, are not listed on any
exchange and are not publicly traded. The Bank’s Class E shares, which
constitute the only class of shares publicly traded (on the NYSE), represent
approximately 75% of the total shares of the Bank’s common stock issued and
outstanding at December 31, 2007. The Bank’s Class B shares are convertible into
Class E shares on a one to one basis.
D.
Selling
Shareholders
Not
required in this Annual Report.
E.
Dilution
Not
required in this Annual Report.
F.
Expenses
of the Issue
Not
required in this Annual Report.
Item
10.
Additional
Information
A.
Share
Capital
Not
required in this Annual Report.
B.
Memorandum
and Articles of Association
The
Amended and Restated Articles of Incorporation, filed as an exhibit to the
Form
20-F for the fiscal year ended December 31, 2002 filed with the SEC on February
24, 2003, and Item 10.B of the Form 20-F for the fiscal year ended December
31,
2004 filed with the SEC on June 23, 2005 are referred to and incorporated by
reference into this Item 10.B.
C.
Material
Contracts
The
Bank
has not entered into any material contract outside the ordinary course of
business during the two-year period immediately preceding the date of this
Annual Report. See Item 18, “Financial Statements”, note 17.
D.
Exchange
Controls
Currently,
there are no Panamanian restrictions on the export or import of capital,
including foreign exchange controls, and no restrictions on the payment of
dividends or interest, nor are there limitations on the rights of foreign
stockholders to hold or vote stock.
E.
Taxation
The
following is a summary of certain U.S. federal and Panamanian tax matters that
may be relevant with respect to the acquisition, ownership and disposition
of
Class E shares. Prospective purchasers of Class E shares should consult their
own tax advisors as to the United States, Panamanian or other tax consequences
of the acquisition, ownership and disposition of Class E shares.
This
summary does not address the consequences of the acquisition, ownership or
disposition of Class A or Class B shares.
United
States Taxes
This
summary describes the principal U.S. federal income tax consequences of the
ownership and disposition of the Class E shares, but does not purport to be
a
comprehensive description of all of the tax considerations that may be relevant
to holders of Class E shares. This summary applies only to current holders
that
hold Class E shares as capital assets and does not address classes of holders
that are subject to special treatment under the United States Internal Revenue
Code of 1986, as amended (the “Code”), such as dealers in securities or
currencies, financial institutions, tax-exempt entities, regulated investment
companies, insurance companies, securities traders that elect mark-to-market
tax
accounting, persons subject to the alternative minimum tax, certain U.S.
expatriates, persons holding Class E shares as part of a hedging, constructive
ownership or conversion transaction or a straddle, holders whose functional
currency is not the U.S. dollar, or a holder that owns 10% or more (directly,
indirectly or constructively) of the voting shares of the Bank.
This
summary is based upon the Code, existing, temporary and proposed regulations
promulgated there under, judicial decisions and administrative pronouncements,
as all in effect on the date of this Annual Report and which are subject to
change (possibly on a retroactive basis) and to differing interpretations.
Purchasers or holders of Class E shares should consult their own tax advisors
as
to the U.S. federal, state and local, and foreign tax consequences of the
ownership and disposition of Class E shares in their particular
circumstances.
As
used
herein, a “U.S. Holder” refers to a beneficial holder of Class E shares that is,
for U.S. federal income tax purposes, (1) an individual citizen or resident
of
the United States, (2) a corporation, or an entity treated as a corporation,
organized or created in or under the laws of the U.S. or any political
subdivision thereof, (3) an estate the income of which is subject to U.S.
federal income taxation without regard to the source of its income, (4) a trust,
if both (A) a court within the United States is able to exercise primary
supervision over the administration of the trust and (B) one or more U.S.
persons (as defined in the Code) have the authority to control all substantial
decisions of the trust, or a trust that has made a valid election under U.S.
Treasury Regulations to be treated as a domestic trust, and (5) any holder
otherwise subject to U.S. federal income taxation on a net income basis with
respect to Class E shares (including a non-resident alien individual or foreign
corporation that holds, or is deemed to hold, any Class E share in connection
with the conduct of a U.S. trade or business). If a partnership (including
for
this purpose any entity treated as a partnership for U.S. federal income tax
purposes) is a beneficial owner of Class E shares, the U.S. federal income
tax
consequences to a partner in the partnership will generally depend on the status
of the partner and the activities of the partnership. A holder of Class E shares
that is a partnership and the partners in such partnership should consult their
own tax advisors regarding the U.S. federal income tax consequences of the
ownership and disposition of Class E shares.
Taxation
of Distributions
Subject
to the “Passive Foreign Investment Company Status” discussion below, to the
extent paid out of current or accumulated earnings and profits of the Bank
as
determined under U.S. federal income tax principles (“earnings and profits”),
distributions made with respect to Class E shares (other than certain pro rata
distributions of capital stock of the Bank or rights to subscribe for shares
of
capital stock of the Bank) will be includable in income of a U.S. Holder as
ordinary dividend income in accordance with the U.S. Holder’s regular method of
accounting for U.S. federal income tax purposes whether paid in cash or Class
E
shares. To the extent that a distribution exceeds the Bank’s earnings and
profits, such distribution will be treated, first, as a nontaxable return of
capital to the extent of the U.S. Holder’s tax basis in the Class E shares and
will reduce the U.S. Holder’s tax basis in such shares, and thereafter as a
capital gain from the sale or disposition of Class E shares. See Item 10,
“Additional Information/Taxation/United States Taxes-Taxation of Capital Gains”.
The amount of the distribution will equal the gross amount of the distribution
received by the U.S. Holder, including any Panamanian taxes withheld from such
distribution.
Distributions
made with respect to Class E shares out of earnings and profits generally will
be treated as dividend income from sources outside the United States. U.S.
Holders that are corporations will not be entitled to the “dividends received
deduction” under Section 243 of the Code with respect to such dividends.
Dividends may be eligible for the special 15% rate applicable to “qualified
dividend income” received by an individual, provided, that (1) the Bank is not a
“passive foreign investment company” in the year in which the dividend is paid
nor in the immediately preceding year, (2) the class of stock with respect
to
which the dividend is paid is readily tradable on an established securities
market in the U.S., and (3) the U.S. Holder held his shares for more than 60
days during the 121-day period beginning 60 days prior to the ex-dividend date
and meets other holding period requirements. Subject to certain conditions
and
limitations, Panamanian tax withheld from dividends will be treated as a foreign
income tax eligible for deduction from taxable income or as a credit against
a
U.S. Holder’s U.S. federal income tax liability. Distributions of dividend
income made with respect to Class E shares generally will be treated as
“passive” income or, in the case of certain U.S. Holders, “general category
income,” for purposes of computing a U.S. Holder’s U.S. foreign tax
credit.
Less
than
25 percent of the Bank’s gross income is effectively connected with the conduct
of a trade or business in the United States, and the Bank expects this to remain
true. If this remains the case, a holder of Class E shares that is not a U.S.
Holder (a “non-U.S. Holder”) generally will not be subject to U.S. federal
income tax or withholding tax on distributions received on Class E shares that
are treated as dividend income for U.S. federal income tax purposes. Special
rules may apply in the case of non-U.S. Holders (1) that are engaged in a U.S.
trade or business, (2) that are former citizens or long-term residents of the
United States, “controlled foreign corporations,” corporations that accumulate
earnings to avoid U.S. federal income tax, and certain foreign charitable
organizations, each within the meaning of the Code, or (3) certain non-resident
alien individuals who are present in the United States for 183 days or more
during a taxable year. Such persons should consult their own tax advisors as
to
the U.S. federal income or other tax consequences of the ownership and
disposition of Class E shares.
Taxation
of Capital Gains
Subject
to the “Passive Foreign Investment Company Status” discussion below, gain or
loss realized by a U.S. Holder on the sale or other disposition of Class E
shares will generally be subject to U.S. federal income tax as capital gain
or
loss in an amount equal to the difference between the U.S. Holder’s tax basis in
the Class E shares and the amount realized on the disposition. Such gain will
be
treated as long-term capital gain if the Class E shares are held by the U.S.
Holder for more than one year at the time of the sale or other disposition.
Otherwise, the gain will be treated as a short-term capital gain. Gain realized
by a U.S. Holder on the sale or other disposition of Class E shares generally
will be treated as U.S. source income for U.S. foreign tax credit purposes,
unless the gain is attributable to an office or fixed place of business
maintained by the U.S. Holder outside the United States or is recognized by
an
individual whose tax home is outside the United States, and certain other
conditions are met. For U.S. federal income tax purposes, capital losses are
subject to limitations on deductibility. As a general rule, U.S. Holders that
are corporations can use capital losses for a taxable year only to offset
capital gains in that year. A corporation may be entitled to carry back unused
capital losses to the three preceding tax years and to carry over losses to
the
five following tax years. In the case of non-corporate U.S. Holders, capital
losses in a taxable year are deductible to the extent of any capital gains
plus
ordinary income of up to $3,000. Unused capital losses of non-corporate U.S.
Holders may be carried over indefinitely.
A
non-U.S. Holder of Class E shares will generally not be subject to U.S. federal
income tax or withholding tax on gain realized on the sale or other disposition
of Class E shares. However, special rules may apply in the case of non-U.S.
Holders (1) that are engaged in a U.S. trade or business, (2) that are former
citizens or long-term residents of the United States, “controlled foreign
corporations,” corporations which accumulate earnings to avoid U.S. federal
income tax, and certain foreign charitable organizations, each within the
meaning of the Code, or (3) certain non-resident alien individuals who are
present in the United States for 183 days or more during a taxable year. Such
persons should consult their own tax advisors as to the United States or other
tax consequences of the purchase, ownership and disposition of the Class E
shares.
Passive
Foreign Investment Company Status
Under
the
Code, certain rules apply to an entity classified as a “passive foreign
investment company” (“PFIC”). A PFIC is defined as any foreign (i.e., non-U.S.)
corporation if either (1) 75% or more of its gross income for the taxable year
is passive income (generally including, among other types of income, dividends,
interest and gains from the sale of stock and securities) or (2) 50% or more
of
its assets (by value) produce, or are held for the production of, passive
income. The Code provides an exception for foreign institutions in the active
conduct of a banking business, provided the institution is licensed to do
business in the United States. Under proposed regulations, the exception is
extended to a foreign corporation that is not licensed to do business as a
bank
in the United States so long as such foreign corporation is an “active foreign
bank.” Based on its current and intended method of operations as described
herein, the Bank believes that it is not a PFIC under current U.S. federal
income tax law because it is eligible for the exception available to active
foreign banks in the Code and the proposed regulations. The Bank intends to
continue to operate in a manner that will entitle the Bank to rely upon that
exception to avoid classification as a PFIC.
If
the
Bank were to become a PFIC for purposes of the Code, unless a U.S. Holder makes
the election described below, a U.S. Holder generally will be subject to a
special tax charge with respect to (a) any gain realized on the sale or other
disposition of Class E shares and (b) any “excess distribution” by the Bank to
the U.S. Holder (generally, any distributions including return of capital
distributions, received by the U.S. Holder on the Class E shares in a taxable
year that are greater than 125 percent of the average annual distributions
received by the U.S. Holder in the three preceding taxable years, or, if
shorter, the U.S. Holder’s holding period). Under these rules (1) the gain or
excess distribution would be allocated ratably over the U.S. Holder’s holding
period for the Class E shares, (2) the amount allocated to the current taxable
year would be treated as ordinary income, (3) the amount allocated to each
prior year would be subject to tax at the highest rate in effect for that year;
and (4) an interest charge at the rate generally applicable to
underpayments of tax would be imposed with respect to the resulting tax
attributable to each such prior year. For purposes of the foregoing rules,
a
U.S. Holder of Class E shares that uses such stock as security for a loan will
be treated as having disposed of such stock.
If
the
Bank were a PFIC, U.S. Holders of interests in a holder of Class E shares may
be
treated as indirect holders of their proportionate share of the Class E shares
and may be taxed on their proportionate share of any excess distributions or
gain attributable to the Class E shares. An indirect holder also must treat
an
appropriate portion of its gain on the sale or disposition of its interest
in
the actual holder as gain on the sale of Class E shares.
If
the
Bank were to become a PFIC, a U.S. Holder could make an election, provided
the
Bank complies with certain reporting requirements, to have the Bank treated,
with respect to such U.S. Holder, as a “qualified electing fund” (hereinafter
referred to as a “QEF election”), in which case, the electing U.S. Holder would
be required to include annually in gross income the U.S. Holder’s proportionate
share of the Bank’s ordinary earnings and net capital gains, whether or not such
amounts are actually distributed. If the Bank were to become a PFIC, the Bank
intends to so notify each U.S. Holder and to comply with all reporting
requirements necessary for a U.S. Holder to make a QEF election and will provide
to record U.S. Holders of Class E shares such information as may be required
to
make such QEF election.
If
the
Bank is a PFIC in any year, a U.S. Holder that beneficially owns Class E shares
during such year must make an annual return on Internal Revenue Service Form
8621, which describes the income received (or deemed to be received if a QEF
election is in effect) from the Bank. The Bank will, if applicable, provide
all
information necessary for a U.S. Holder of record to make an annual return
on
Form 8621.
A
U.S.
Holder that owns certain “marketable stock” in a PFIC may elect to
mark-to-market such stock and, subject to certain exceptions, include in income
any gain (increases in market value) or loss (decreases in market value to
the
extent of prior gains recognized) realized as ordinary income or loss to avoid
the adverse consequences described above. U.S. Holders of Class E shares are
urged to consult their own tax advisors as to the consequences of owning stock
in a PFIC and whether such U.S. Holder would be eligible to make either of
the
aforementioned elections to mitigate the adverse effects of such
consequences.
Information
Reporting and Backup Withholding
Each
U.S.
payor making payments in respect of Class E shares will generally be required
to
provide the Internal Revenue Service (the “IRS”) with certain information,
including the name, address and taxpayer identification number of the beneficial
owner of Class E shares, and the aggregate amount of dividends paid to such
beneficial owner during the calendar year. Under the backup withholding rules,
a
holder may be subject to backup withholding at a current rate of 28% with
respect to proceeds received on the sale or exchange of Class E shares within
the United States by non-corporate U.S. Holders and to dividends paid, unless
such holder (1) is a corporation or comes within certain other exempt categories
(including securities broker-dealers, other financial institutions, tax-exempt
organizations, qualified pension and profit sharing trusts and individual
retirement accounts), and, when required, demonstrates this fact or (2) provides
a taxpayer identification number, certifies as to no loss of exemption and
otherwise complies with the applicable requirements of the backup withholding
rules. Non-U.S. Holders are generally exempt from information reporting and
backup withholding, but may be required to provide a properly completed Form
W-8BEN (or other similar form) or otherwise comply with applicable certification
and identification procedures in order to prove their exemption. This backup
withholding tax is not an additional tax and any amounts withheld from a payment
to a holder of Class E shares will be refunded (or credited against such
holder’s U.S. federal income tax liability, if any) provided that the required
information is furnished to the IRS.
There
is
no income tax treaty between Panama and the United States.
Panamanian
Taxes
The
following is a summary of the principal Panamanian tax consequences arising
in
connection with the ownership and disposition of the Bank’s Class E shares. This
summary is based upon the laws and regulations of Panama, as well as court
precedents and interpretative rulings, in effect as of the date of this Annual
Report, all of which are subject to prospective and retroactive
change.
General
Principle
The
Bank
is exempt from income tax in Panama under a special exemption granted to the
Bank pursuant to Law 38 of July 25, 1978. In addition, under general rules
of
income tax in Panama, only income that is deemed to be Panama source income
is
subject to taxation in Panama. Accordingly, since the Bank’s income is derived
primarily from sources outside of Panama and is not deemed to be Panama source
income, even in the absence of such a special exemption, the Bank would have
limited income tax liability in Panama.
Taxation
of Distributions
Dividends
whether cash or in kind, paid by the Bank in respect of its shares are also
exempt from dividend tax or other withholding under the aforementioned special
legislation. If such special legislation did not exist, Panama would impose
a
10% withholding tax on dividends or distributions paid in respect of the Bank’s
registered shares to the extent such dividends are paid from income derived
by
the Bank from Panamanian sources.
Taxation
of Capital Gains
Inasmuch
as the Bank’s Class E shares are listed on the NYSE, any capital gains realized
by an individual or a corporation, regardless of its nationality or residency,
on the sale or other disposition outside of Panama, would be exempted from
capital gains taxes or any other taxes in Panama.
F.
Dividends
and Paying Agents
Not
required in this Annual Report.
G.
Statement
by Experts
Not
required in this Annual Report.
H.
Documents
on Display
Upon
written or oral request, the Bank will provide without charge to each person
to
whom this Annual Report is delivered, a copy of any or all of the documents
listed as exhibits to this Annual Report (other than exhibits to those
documents, unless the exhibits are specifically incorporated by reference in
the
documents). Written requests for copies should be directed to the attention
of
Mr. Jaime Celorio, Chief Financial Officer, Bladex, as follows: (i) if by
regular mail, to P.O. Box 0819-08730, Panama City, Republic of Panama, and
(ii)
if by courier, to Calle 50 y Aquilino de la Guardia, Panama City, Republic
of
Panama. Telephone requests may be directed to Mr. Celorio at 011-507-210-8563.
Written requests may also be faxed to Mr. Celorio at 011-507-269-6333 or sent
via e-mail to jcelorio@bladex.com. Information is also available on the Bank’s
website at: www.bladex.com.
I.
Subsidiary
Information
Not
applicable
Item
11.
Quantitative
and Qualitative Disclosure About Market Risk
The
Bank’s risk management policies, as approved by the Board from time to time, are
designed to identify and control the Bank’s credit and market risks by
establishing and monitoring appropriate limits on the Bank’s credit and market
exposures. Certain members of the Board constitute the Assets and Liabilities
Committee, which meets on a regular basis and monitors and controls the risks
in
each specific area. At the management level, the Bank has a Risk Management
Department that measures and controls the credit and market exposure of the
Bank.
The
Bank’s businesses are subject to market risk. The components of market risk are
interest rate risk inherent in the Bank’s balance sheet, price risk in the
Bank’s principal investment portfolio and market value risk in the Bank’s
trading portfolios. For quantitative information relating to the Bank’s interest
rate risk and information relating to the Bank’s management of interest rate
risk, see Item 5, “Operating and Financial Review and Prospects/Liquidity and
Capital Resources” and Item 18, “Financial Statements”, notes 2 (q) and
18.
For
information regarding derivative financial instruments see Item 18, “Financial
Statements”, notes 2 (q) and 18. For information regarding investment
securities, see Item 4, “Information on the Company/Business Overview/Investment
Securities”, and Item 18, “Financial Statements”, note 5.
The
table
below lists for each of the years 2008 to 2012 the notional amounts and weighted
interest rates, as of December 31, 2007, for derivative financial instruments
and other financial instruments that are sensitive to changes in interest rates:
the Bank’s investment securities, loans, borrowings and placements, interest
rate swaps, cross currency swaps, forward currency exchange agreements, and
trading assets and liabilities.
Expected maturity dates
|
|
|
2008
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
There-
after
|
|
|
Without
Maturity
|
|
|
Total
2007
|
|
|
Fair Value
2007
|
|
|
|
($ Equivalent in thousand)
|
|
NON-TRADING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
15,000
|
|
24,000
|
|
|
40,000
|
|
|
33,296
|
|
|
30,000
|
|
|
245,700
|
|
|
|
|
|
387,996
|
|
|
437,038
|
|
Average
fixed rate
|
|
4.38
|
%
|
8.69
|
%
|
|
7.63
|
%
|
|
9.24
|
%
|
|
9.79
|
%
|
|
9.18
|
%
|
|
|
|
|
8.86
|
%
|
|
|
|
Variable
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
5,000
|
|
|
|
|
11,000
|
|
|
|
|
|
5,000
|
|
|
10,000
|
|
|
|
|
|
31,000
|
|
|
31,322
|
|
Average
variable rate
|
|
5.82
|
%
|
|
|
|
6.29
|
%
|
|
|
|
|
5.72
|
%
|
|
6.68
|
%
|
|
|
|
|
6.25
|
%
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
1,661,392
|
|
1,949
|
|
|
34,245
|
|
|
21,886
|
|
|
20,806
|
|
|
1,966
|
|
|
|
|
|
1,742,244
|
|
|
1,708,544
|
|
Average
fixed rate
|
|
6.05
|
%
|
7.06
|
%
|
|
7.42
|
%
|
|
7.07
|
%
|
|
6.29
|
%
|
|
7.03
|
%
|
|
|
|
|
6.09
|
%
|
|
|
|
Mexican
Peso
|
|
30,334
|
|
33,564
|
|
|
37,143
|
|
|
12,255
|
|
|
|
|
|
|
|
|
|
|
|
113,296
|
|
|
125,160
|
|
Average
fixed rate
|
|
10.15
|
%
|
10.17
|
%
|
|
10.18
|
%
|
|
9.32
|
%
|
|
|
|
|
|
|
|
|
|
|
10.08
|
%
|
|
|
|
Variable
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
813,945
|
|
362,788
|
|
|
195,486
|
|
|
200,230
|
|
|
205,084
|
|
|
75,347
|
|
|
|
|
|
1,852,880
|
|
|
1,819,231
|
|
Average
variable rate
|
|
6.16
|
%
|
6.44
|
%
|
|
6.64
|
%
|
|
6.31
|
%
|
|
6.37
|
%
|
|
6.97
|
%
|
|
|
|
|
6.34
|
%
|
|
|
|
Mexican
Peso
|
|
18,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,322
|
|
|
16,984
|
|
Average
variable rate
|
|
9.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.89
|
%
|
|
|
|
Euro
|
|
1,091
|
|
1,354
|
|
|
1,648
|
|
|
820
|
|
|
183
|
|
|
|
|
|
|
|
|
5,096
|
|
|
5,059
|
|
Average
variable rate
|
|
4.89
|
%
|
5.01
|
%
|
|
4.91
|
%
|
|
5.12
|
%
|
|
5.58
|
%
|
|
|
|
|
|
|
|
4.99
|
%
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
and Placements
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
1,267,300
|
|
35,000
|
|
|
30,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,332,503
|
|
|
1,333,315
|
|
Average
fixed rate
|
|
5.31
|
%
|
5.03
|
%
|
|
4.52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.28
|
%
|
|
|
|
Mexican
Peso
|
|
32,783
|
|
32,783
|
|
|
32,782
|
|
|
11,227
|
|
|
|
|
|
|
|
|
|
|
|
109,575
|
|
|
122,157
|
|
Average
fixed rate
|
|
8.31
|
%
|
8.31
|
%
|
|
8.31
|
%
|
|
8.23
|
%
|
|
|
|
|
|
|
|
|
|
|
8.30
|
%
|
|
|
|
Peruvian
Soles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,048
|
|
|
|
|
|
41,048
|
|
|
40,442
|
|
Average
fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.50
|
%
|
|
|
|
|
6.50
|
%
|
|
|
|
Variable
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
594,710
|
|
103,000
|
|
|
184,190
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
1,031,900
|
|
|
1,032,209
|
|
Average
variable rate
|
|
5.52
|
%
|
5.41
|
%
|
|
5.47
|
%
|
|
|
|
|
5.32
|
%
|
|
|
|
|
|
|
|
5.47
|
%
|
|
|
|
DERIVATIVES
INSTRUMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate Swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars variable to fixed
|
|
|
|
24,000
|
|
|
40,000
|
|
|
33,296
|
|
|
50,000
|
|
|
245,700
|
|
|
|
|
|
392,996
|
|
|
(14,415
|
)
|
Average
pay rate
|
|
|
|
8.69
|
%
|
|
7.63
|
%
|
|
9.24
|
%
|
|
8.25
|
%
|
|
9.18
|
%
|
|
|
|
|
8.88
|
%
|
|
|
|
Average
receive rate
|
|
|
|
8.62
|
%
|
|
7.58
|
%
|
|
9.5
|
%
|
|
8.64
|
%
|
|
9.24
|
%
|
|
|
|
|
8.98
|
%
|
|
|
|
Cross
Currency Swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive
US Dollars
|
|
1,016
|
|
1,109
|
|
|
1,432
|
|
|
716
|
|
|
162
|
|
|
|
|
|
|
|
|
4,435
|
|
|
(622
|
)
|
US
Dollars fixed rate
|
|
6.43
|
%
|
6.45
|
%
|
|
6.45
|
%
|
|
6.45
|
%
|
|
6.47
|
%
|
|
|
|
|
|
|
|
6.45
|
%
|
|
|
|
Pay
US Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,020
|
|
|
|
|
|
41,020
|
|
|
(857
|
)
|
US
Dollars fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.35
|
%
|
|
|
|
|
5.35
|
%
|
|
|
|
Pay
EUR
|
|
1,016
|
|
1,109
|
|
|
1,432
|
|
|
716
|
|
|
162
|
|
|
|
|
|
|
|
|
4,435
|
|
|
|
|
EUR
fixed rate
|
|
5.46
|
%
|
5.49
|
%
|
|
5.48
|
%
|
|
5.51
|
%
|
|
5.58
|
%
|
|
|
|
|
|
|
|
5.49
|
%
|
|
|
|
Received
Peruvian Soles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,020
|
|
|
|
|
|
41,020
|
|
|
|
|
Peruvian
Soles fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.50
|
%
|
|
|
|
|
6.50
|
%
|
|
|
|
Expected maturity dates
|
|
|
2008
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
There-
after
|
|
|
Without
Maturity
|
|
|
Total
2007
|
|
|
Fair Value
2007
|
|
Forward Currency Exchange Agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive
US Dollars/Pay Mexican Pesos
|
|
19,196
|
|
2,235
|
|
|
4,749
|
|
|
982
|
|
|
|
|
|
|
|
|
|
|
|
27,162
|
|
|
(885
|
)
|
Average
exchange rate
|
|
11.08
|
|
11.79
|
|
|
11.83
|
|
|
11.94
|
|
|
|
|
|
|
|
|
|
|
|
11.30
|
|
|
|
|
Pay
US Dollars/Receive Mexican Pesos
|
|
853
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
880
|
|
|
2
|
|
Average
exchange rate
|
|
11.03
|
|
11.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.04
|
|
|
|
|
TRADING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
in securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
15,000
|
|
|
16,097
|
|
Average
fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.54
|
%
|
|
|
|
|
5.54
|
%
|
|
|
|
Equities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,315
|
|
|
36,315
|
|
|
36,315
|
|
Credit
default swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
20
|
|
Average
fixed rate
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8
|
%
|
|
|
|
US
Dollars
|
|
(10,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,000
|
)
|
|
10
|
|
Average
fixed rate
|
|
1.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.4
|
%
|
|
|
|
Interest
rate swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brasilian
Real fixed to floating
|
|
|
|
|
|
|
|
|
|
|
|
|
50,837
|
|
|
|
|
|
|
|
|
50,837
|
|
|
155
|
|
Average
paying rate
|
|
|
|
|
|
|
|
|
|
|
|
|
12.8
|
%
|
|
|
|
|
|
|
|
12.8
|
%
|
|
|
|
Average
receiving rate
|
|
|
|
|
|
|
|
|
|
|
|
|
11.1
|
%
|
|
|
|
|
|
|
|
11.1
|
%
|
|
|
|
Trading
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
sold short
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,860
|
|
|
|
|
|
31,860
|
|
|
31,734
|
|
Average
fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.48
|
%
|
|
|
|
|
8.48
|
%
|
|
|
|
Equities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,863
|
|
|
57,863
|
|
|
57,863
|
|
Forward
currency exchange agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive
US Dollars/Pay Brazilian Reales
|
|
(171,173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(171,173
|
)
|
|
788
|
|
Average
exchange rate
|
|
1.794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.794
|
|
|
|
|
Pay
US Dollars/Receive Brazilian Reales
|
|
171,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171,173
|
|
|
|
|
Average
exchange rate
|
|
1.793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.793
|
|
|
|
|
Receive
US Dollars/Pay Mexican Pesos
|
|
(20,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,000
|
)
|
|
-
|
|
Average
exchange rate
|
|
10.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.93
|
|
|
|
|
Pay
US Dollars/Receive Mexican Pesos
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
-
|
|
Average
exchange rate
|
|
10.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.93
|
|
|
|
|
Receive
US Dollars/Pay Colombian Pesos
|
|
(89,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(89,849
|
)
|
|
326
|
|
Average
exchange rate
|
|
2,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,042
|
|
|
|
|
Pay
US Dollars/Receive Colombian Pesos
|
|
89,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,849
|
|
|
|
|
Average
exchange rate
|
|
2,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,034
|
|
|
|
|
Receive
US Dollars/Pay Chilean Pesos
|
|
(10,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,000
|
)
|
|
41
|
|
Average
exchange rate
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
Pay
US Dollars/Receive Chilean Pesos
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
Average
exchange rate
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
Credit
default swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
13
|
|
Average
fixed rate
|
|
|
|
|
|
|
0.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.50
|
%
|
|
|
|
(1)
Borrowings
and placements include securities sold under repurchase agreements, and short
and long-term borrowings and debt.
Although
certain assets and liabilities may have similar maturities or periods of
re-pricing, they may be impacted in varying degrees to changes in market
interest rates. The maturity of certain types of assets and liabilities may
fluctuate in advance of changes in market rates, while the maturity of other
types of assets and liabilities may lag behind changes in market rates. In
the
event of a change in interest rates, prepayment and early withdrawal levels
could deviate significantly from the maturities assumed in calculating the
table
above.
For
information regarding the fair value disclosure of financial instruments, see
Item 18, “Financial Statements”, note 20.
Foreign
Exchange Risk Management and Sensitivity
The
Bank
accepts deposits and raises funds principally in U.S. dollars, and makes loans
mostly in U.S. dollars. Currency exchange risk arises when the Bank accepts
deposits or raises funds in one currency and lends or invests the proceeds
in
another. Whenever possible, foreign currency-denominated assets are funded
with
liability instruments denominated in the same currency. In those cases where
assets were funded in different currencies, forward foreign exchange or
cross-currency swap contracts were used to fully hedge the risk resulting from
this cross currency funding. During 2007, the Bank did not hold significant
open
foreign exchange positions, except for trading purposes. The Fund invests in
securities denominated in foreign currency as well as in forward foreign
currency exchange contracts, for trading purposes. At December 31, 2007, the
Bank had an equivalent of $288 million of non-dollar financial liabilities,
which matched funded asset transactions in the same currency.
Item
12.
Description
of Securities Other than Equity Securities
Not
applicable.
PART
II
Item
13.
Defaults,
Dividend Arrearages and Delinquencies
None.
Item
14.
Material
Modifications to the Rights of Security Holders and Use of
Proceeds
None.
Item
15.
Controls
and Procedures
a)
Disclosure Controls and Procedures
The
Bank
maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports it files under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the Commission’s rules and forms. Such controls include those
designed to ensure that information for disclosure is accumulated and
communicated to the members of the Board and management, including the Chief
Executive Officer (the “CEO”), as appropriate to allow timely decisions
regarding required disclosure.
The
CEO
and the Chief Financial Officer (the "CFO"), with the participation of
management, evaluated the effectiveness of the Bank’s disclosure controls and
procedures as of December 31, 2007. Based on such evaluation,
the
CEO
and the CFO have concluded that, as of the end of such period, the Bank's
disclosure controls and procedures are effective.
b)
Management’s Annual Report on Internal Control Over Financial
Reporting
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as such term is defined in Exchange Act Rule 13a-15(f)
or
15d-15(f). With the participation and supervision of the Bank´s CEO and CFO, its
management has assessed the effectiveness of its internal control over financial
reporting as of December 31, 2007.
The
assessment includes the documentation and understanding of the Bank’s internal
control over financial reporting. Management evaluated the design effectiveness
and tested the operational effectiveness of internal controls over financial
reporting to form its conclusion.
Management’s
evaluation was based on criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework.
Internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. Bank´s internal control over financial reporting
includes those policies and procedures that:
(1)
pertain to the maintenance of records that, in reasonable detail, accurately
and
fairly reflect the Bank´s transactions and dispositions of its assets;
(2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that the Bank´s receipts and expenditures are being
made only in accordance with authorizations of the Bank´s management and the
Board; and
(3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Bank’s assets that could
have a material effect on its financial statements.
Because
of its inherent limitations, internal control over financial reporting
determined to be effective can provide only reasonable assurance with respect
to
financial statement preparation and may not prevent or detect all misstatements.
Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes
in
conditions, or that the degree of compliance with the policies or procedures
may
deteriorate.
Based
on
the COSO criteria and the Bank´s management’s evaluation, the Bank’s management
has concluded that its internal control over financial reporting was effective
as of December 31, 2007.
c)
Attestation Report of the Registered Public Accounting
Firm
The
Company's independent registered public accounting firm, Deloitte Inc, has
issued an attestation report on the effectiveness of the Bank's internal control
over financial reporting, which is included in Item 18, “Financial Statements”,
for reference.
d)
Changes in Internal Controls
There
has
been no change in the Bank´s internal control over financial reporting
during
the fiscal year ended December 31, 2007 that has materially affected, or is
reasonably likely to materially affect, its internal control over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act.
Item
16.
Reserved
Item
16A.
Audit
and Compliance Committee Financial Expert
The
Bank’s Board of Directors has determined that at least one member of the Audit
and Compliance Committee is a “financial expert,” as defined in the rules
enacted by the SEC under the Sarbanes-Oxley Act of 2002. The Audit and
Compliance Committee’s financial expert is Mr. Gonzalo Menéndez
Duque.
Item
16B.
Code
of Ethics
The
Bank
has adopted a code of ethics that applies to the Bank’s principal executive
officers and principal financial and accounting officers. The Bank includes
the
information regarding its corporate governance practices necessary to comply
with Section 303A of the NYSE's Listed Company Manual/Corporate Governance
Rules. A current copy of this code of ethics is file as Exhibit 14.1 to this
Form 20-F.
Shareholders
may request a hard copy of Bladex’s code of ethics, free of charge, from the
following contact:
Mr.
Jaime
Celorio
Chief
Financial Officer
Banco
Latinoamericano de Exportaciones, S.A. (Bladex)
Tel.:
(507) 210-8563
Fax:
(507) 269-6333
e-mail:
jcelorio@bladex.com
Item
16C.
Principal
Accountant Fees and Services
At
the
Bank’s Annual Shareholders’ Meeting held on April 18, 2007, in Panama City,
Panama, stockholders appointed Deloitte Inc. as the Bank’s new independent
auditors for the fiscal year ending December 31, 2007. The change was approved
and recommended to stockholders by the Audit and Compliance Committee of the
Bank’s Board of Directors. The recommendation was based on cost efficiency
reasons.
Deloitte
Inc. is a registered public accounting firm. In the year ended December 31,
2006, and prior to the appointment on April 18, 2007, the Bank did not engage
Deloitte Inc. on any matters. The Bank has been advised by Deloitte Inc. that
neither that firm nor any of its affiliates has any relationship with the Bank
or its subsidiaries, other than the relationship that typically exists between
independent auditors and their clients.
The
reports of Deloitte Inc., the Bank’s independent auditor from April 19, 2007
through December 31, 2007, on the Bank’s consolidated financial statements for
the year ended December 31, 2007 contained no adverse opinion or disclaimer
of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
The
reports of KPMG, the Bank’s independent auditor through April 18, 2007, on the
Bank’s consolidated financial statements for the year ended December 31, 2006
contained no adverse opinion or disclaimer of opinion and were not qualified
or
modified as to uncertainty, audit scope or accounting principle. In addition,
there have been no reportable events, as defined in Item 304 (a) (1) (v) of
Regulation S-K. The following table sets forth the aggregate fees billed for
each of the fiscal years ended December 31, 2006 for professional services
rendered by the Bank’s former independent auditors, KPMG, and for the
professional services rendered by the Bank’s current independent auditors,
Deloitte Inc.:
|
|
Year 2006
|
|
Year 2007
|
|
|
|
KPMG
|
|
Deloitte Inc.
|
|
|
|
|
|
|
|
Audit Fees
|
|
$
|
471,693
|
|
$
|
426,495
|
|
Tax
Fees
|
|
|
37,500
|
|
|
0
|
|
All
Other Fees
|
|
|
22,485
|
|
$
|
39,509
|
|
Total
|
|
$
|
531,678
|
|
$
|
466,004
|
|
The
following is a description of the type of services included within the
categories listed above:
|
·
|
Audit
fees include aggregate fees billed for professional services rendered
by
Deloitte Inc.
in
2007 and KPMG in 2006,
for
the audit of the Bank’s annual financial statements or services that are
normally provided in connection with statutory and regulatory filings
or
engagements for those fiscal years. During 2007 and 2006, no audit-related
fees (which relate to the assurance and services related to the
performance of the audit or review of the Bank’s financial statements)
were paid by the Bank.
|
|
·
|
Tax
fees include aggregate fees billed for professional services rendered
by
Deloitte Inc. in 2007 and KPMG in 2006 for tax compliance, tax advice
and
tax planning. For the year 2007, the Bank hired PricewaterhouseCoopers
to
prepare and sign as a preparer the Bank’s U.S. Federal, New York State and
New York City, and Florida, and corporate income/franchise tax returns,
as
well as calculate quarterly estimated tax payments and prepare required
estimated tax payment forms.
|
|
·
|
All
other fees include aggregate fees billed for products and services
provided by Deloitte Inc. in 2007 and KPMG in 2006 to the Bank, other
than
the services reported in the three preceding paragraphs.
|
Audit
and Compliance Committee Pre-Approval Policies and
Procedures
The
Audit
and Compliance Committee pre-approves all audit and non-audit services to be
provided to the Bank by the Bank’s independent auditors.
Item
16D.
Exemptions
from the Listing Standards for Audit Committees
Not
applicable.
Item
16E.
Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
On
August
5, 2004, the Bank established a $50 million three-year open market stock
repurchase program under which it could, from time to time, repurchase its
Class
E shares of common stock on the open market at the then prevailing market price.
Repurchases under the program were made in accordance with applicable law and
subject to all required regulatory approvals. The repurchases were made using
Bladex’s cash resources, and the program could have been suspended or discounted
at any time without prior notice.
On
July
17, 2006, the Bank completed the $50 million repurchase program with 3,042,618
shares repurchased. The following table shows information regarding shares
repurchased by the Bank in the open market.
Period
|
|
Total Number of Shares
Purchased
|
|
Average Price Paid per
Share
|
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
|
|
Maximum Number of
Shares That May Yet Be
Purchased Under the
Plans or Programs
|
|
September 2004 (9.10.04 – 9.22.04)
|
|
|
231,200
|
|
$
|
16.41
|
|
|
231,200
|
|
|
2,814,811
|
|
October
2004 (10.5.04 – 10.20.04)
|
|
|
230,700
|
|
$
|
16.18
|
|
|
230,700
|
|
|
2,625,136
|
|
March
2005 (03.17.05)
|
|
|
10,000
|
|
$
|
21.93
|
|
|
10,000
|
|
|
1,926,724
|
|
May
2005 (05.13.05 – 05.26.05)
|
|
|
297,500
|
|
$
|
17.08
|
|
|
297,500
|
|
|
2,175,838
|
|
August
2005 (08.11.05 – 08.31.05)
|
|
|
121,500
|
|
$
|
17.06
|
|
|
121,500
|
|
|
2,057,247
|
|
September
2005 (09.1.05 – 09.30.05)
|
|
|
376,000
|
|
$
|
17.09
|
|
|
376,000
|
|
|
1,677,895
|
|
November
2005 (11.18.05 – 11.18.05)
|
|
|
900
|
|
$
|
17.07
|
|
|
900
|
|
|
1,678,808
|
|
February
2006 (02.23.06 – 02.23.06)
|
|
|
3,200
|
|
$
|
17.80
|
|
|
3,200
|
|
|
1,606,478
|
|
March
2006 (03.7.06 – 03.31.06)
|
|
|
278,700
|
|
$
|
17.10
|
|
|
278,700
|
|
|
1,393,462
|
|
April
2006 (04.3.06 – 04.13.06)
|
|
|
102,700
|
|
$
|
17.28
|
|
|
102,700
|
|
|
1,276,706
|
|
May
2006 (05.11.06 – 05.31.06)
|
|
|
188,500
|
|
$
|
16.63
|
|
|
188,500
|
|
|
1,137,953
|
|
June
2006 (06.1.06 – 06.30.06)
|
|
|
992,200
|
|
$
|
15.70
|
|
|
992,200
|
|
|
213,097
|
|
July
2006 (07.3.06 – 07.17.06)
|
|
|
209,518
|
|
$
|
15.97
|
|
|
209,518
|
|
|
0
|
|
Total
|
|
|
3,042,618
|
|
$
|
16.43
|
|
|
3,042,618
|
|
|
|
|
PART
III
Item
17.
Financial
Statements
The
Bank
is providing the financial statements and related information specified in
Item
18.
Item
18.
Financial
Statements
List
of Consolidated Financial Statements
|
|
|
Reports
of Independent Registered Public Accounting Firms
|
|
F-3
|
Consolidated
Balance Sheets at December 31, 2007 and 2006
|
|
F-8
|
Consolidated
Statements of Income for the Years Ended December 31, 2007, 2006
and
2005
|
|
F-9
|
Consolidated
Statements of Changes in Stockholders’ Equity for the Years Ended December
31, 2007,
2006
and 2005
|
|
F-10
|
Consolidated
Statements of Comprehensive Income for the Years Ended December 31,
2007,
2006 and 2005
|
|
F-11
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2007, 2006
and
2005
|
|
F-12
|
Notes
to Consolidated Financial Statements
|
|
F-13
|
Item
19.
Exhibits
Exhibit
1.1.
|
|
Amended
and Restated Articles of Incorporation*
|
Exhibit
1.2.
|
|
By-Laws*
|
Exhibit
4.1.
|
|
Mandate
Letter*
|
Exhibit
12.1.
|
|
Rule
13a-14(a) Certification of Principal Executive Officer
|
Exhibit
12.2.
|
|
Rule
13a-14(a) Certification of Principal Financial Officer
|
Exhibit
13.1.
|
|
Rule
13a-14(b) Certification of Principal Executive Officer
|
Exhibit
13.2.
|
|
Rule
13a-14(b) Certification of Principal Financial Officer
|
Exhibit
14.1.
|
|
Code
of Ethics
|
*
Filed
as an exhibit to the Form 20-F for the fiscal year ended December 31, 2002
filed
with the SEC on February 24, 2003.
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing
on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
BANCO
LATINOAMERICANO DE EXPORTACIONES, S.A.
|
|
/s/
JAIME RIVERA
|
|
Jaime
Rivera
|
Chief
Executive Officer
|
|
June
19, 2008
|
Banco
Latinoamericano
de
Exportaciones, S. A.
and
Subsidiaries
With
Report of Independent Registered Public
Accounting
Firm
Consolidated
financial statements
Years
ended December 31, 2007 and 2006
Deloitte-Panamá
Banco
Latinoamericano de Exportaciones, S. A.
and
subsidiaries
Independent
Auditors’ Report and
Consolidated
Financial Statements 2007 and 2006
Contents
|
Pages
|
|
|
Report
of Independent Registered Public Accounting Firms
|
F-3
|
|
|
Consolidated
balance sheet
|
F-8
|
|
|
Consolidated
statement of income
|
F-9
|
|
|
Consolidated
statement of changes in stockholders’ equity
|
F-10
|
|
|
Consolidated
statements of comprehensive income
|
F-11
|
|
|
Consolidated
statement of cash flows
|
F-12
|
|
|
Notes
to consolidated financial statements
|
F-13
|
Banco
Latinoamericano de Exportaciones, S. A.
and
subsidiaries
Consolidated
balance sheets
|
December
31, 2007 and 2006
|
(in
US$ thousand, except per share
amounts)
|
|
|
Notes
|
|
2007
|
|
2006
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
3,20
|
|
|
596
|
|
|
401
|
|
Interest-bearing
deposits in banks (including pledged deposits of $59,308 in 2007
and
$33,470 in 2006)
|
|
|
3,20
|
|
|
476,983
|
|
|
331,764
|
|
Trading
assets
|
|
|
4,20
|
|
|
52,597
|
|
|
130,076
|
|
Securities
available for sale
|
|
|
5,20
|
|
|
468,360
|
|
|
346,194
|
|
Securities
held to maturity (market value of $125,118 in 2006)
|
|
|
5,20
|
|
|
-
|
|
|
125,157
|
|
Loans
|
|
|
6,20
|
|
|
3,731,838
|
|
|
2,980,772
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
|
7,20
|
|
|
69,643
|
|
|
51,266
|
|
Unearned
income and deferred fees
|
|
|
|
|
|
5,961
|
|
|
4,425
|
|
Loans,
net
|
|
|
|
|
|
3,656,234
|
|
|
2,925,081
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers'
liabilities under acceptances
|
|
|
20
|
|
|
9,104
|
|
|
46,006
|
|
Premises
and equipment (net of accumulated depreciation and amortization
of $9,704
in 2007 and $8,043 in 2006)
|
|
|
|
|
|
10,176
|
|
|
11,136
|
|
Accrued
interest receivable
|
|
|
20
|
|
|
62,884
|
|
|
55,238
|
|
Derivative
instruments used for hedging - receivable
|
|
|
18,20
|
|
|
122
|
|
|
541
|
|
Brokerage
receivable
|
|
|
20
|
|
|
44,289
|
|
|
-
|
|
Other
assets
|
|
|
8
|
|
|
9,187
|
|
|
6,743
|
|
Total
assets
|
|
|
|
|
|
4,790,532
|
|
|
3,978,337
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
9,20
|
|
|
|
|
|
|
|
Noninterest-bearing
- Demand
|
|
|
|
|
|
890
|
|
|
1,620
|
|
Interest-bearing
- Demand
|
|
|
|
|
|
110,606
|
|
|
130,510
|
|
Time
|
|
|
|
|
|
1,350,875
|
|
|
924,147
|
|
Total
deposits
|
|
|
|
|
|
1,462,371
|
|
|
1,056,277
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
liabilities
|
|
|
4,20
|
|
|
90,765
|
|
|
54,832
|
|
Securities
sold under repurchase agreements
|
|
|
5,20
|
|
|
283,210
|
|
|
438,356
|
|
Short-term
borrowings
|
|
|
10,20
|
|
|
1,221,500
|
|
|
1,157,248
|
|
Borrowings
and long-term debt
|
|
|
11,20
|
|
|
1,010,316
|
|
|
558,860
|
|
Acceptances
outstanding
|
|
|
20
|
|
|
9,104
|
|
|
46,006
|
|
Accrued
interest payable
|
|
|
20
|
|
|
39,198
|
|
|
28,420
|
|
Derivative
instruments used for hedging - payable
|
|
|
18,20
|
|
|
16,899
|
|
|
2,634
|
|
Reserve
for losses on off-balance sheet credit risk
|
|
|
7
|
|
|
13,727
|
|
|
27,195
|
|
Other
liabilities
|
|
|
12
|
|
|
31,191
|
|
|
24,614
|
|
Total
liabilities
|
|
|
|
|
|
4,178,281
|
|
|
3,394,442
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
13,14,15,19
|
|
|
|
|
|
|
|
Class
"A" common stock, no par value, assigned value of $6.67 (Authorized
40,000,000; outstanding 6,342,189)
|
|
|
|
|
|
44,407
|
|
|
44,407
|
|
Class
"B" common stock, no par value, assigned value of $6.67 (Authorized
40,000,000; outstanding 2,660,847 in 2007 and 2,725,390 in
2006)
|
|
|
|
|
|
21,528
|
|
|
21,959
|
|
Class
"E" common stock, no par value, assigned value of $6.67 (Authorized
100,000,000; outstanding 27,367,113 in 2007 and 27,261,495 in
2006)
|
|
|
|
|
|
214,045
|
|
|
213,614
|
|
Additional
paid-in capital in excess of assigned value to common
stock
|
|
|
|
|
|
135,142
|
|
|
134,945
|
|
Capital
reserves
|
|
|
|
|
|
95,210
|
|
|
95,210
|
|
Retained
earnings
|
|
|
|
|
|
245,348
|
|
|
205,200
|
|
Accumulated
other comprehensive income (loss)
|
|
|
5,19
|
|
|
(9,641
|
)
|
|
3,328
|
|
Treasury
stock
|
|
|
13
|
|
|
(133,788
|
)
|
|
(134,768
|
)
|
Total
stockholders' equity
|
|
|
|
|
|
612,251
|
|
|
583,895
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingent liabilities
|
|
|
8,16,17,18,21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
|
|
|
|
4,790,532
|
|
|
3,978,337
|
|
The
accompanying notes are part of these consolidated financial
statements.
Banco
Latinoamericano de Exportaciones, S. A.
and
subsidiaries
Consolidated
statements of income
|
Years
ended december 31, 2007, 2006 and 2005
|
(in
US$ thousand, except per share
amounts)
|
|
|
Notes
|
|
2007
|
|
2006
|
|
2005
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
with banks
|
|
|
|
|
|
17,001
|
|
|
8,973
|
|
|
5,121
|
|
Trading
assets
|
|
|
|
|
|
5,315
|
|
|
5,810
|
|
|
-
|
|
Investment
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
for sale
|
|
|
|
|
|
19,595
|
|
|
16,780
|
|
|
7,755
|
|
Held
to maturity
|
|
|
|
|
|
1,337
|
|
|
5,985
|
|
|
2,219
|
|
Loans
|
|
|
|
|
|
221,621
|
|
|
165,802
|
|
|
101,728
|
|
Total
interest income
|
|
|
|
|
|
264,869
|
|
|
203,350
|
|
|
116,823
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
70,443
|
|
|
56,611
|
|
|
29,559
|
|
Trading
liabilities
|
|
|
|
|
|
4,197
|
|
|
4,639
|
|
|
-
|
|
Short-term
borrowings
|
|
|
|
|
|
70,244
|
|
|
55,000
|
|
|
20,408
|
|
Borrowings
and long-term debt
|
|
|
|
|
|
49,415
|
|
|
28,263
|
|
|
21,603
|
|
Total
interest expense
|
|
|
|
|
|
194,299
|
|
|
144,513
|
|
|
71,570
|
|
Net
interest income
|
|
|
|
|
|
70,570
|
|
|
58,837
|
|
|
45,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal
(provision) for loan losses
|
|
|
7
|
|
|
(11,994
|
)
|
|
(11,846
|
)
|
|
54,155
|
|
Net
interest income, after reversal of provision for loan losses
|
|
|
|
|
|
58,576
|
|
|
46,991
|
|
|
99,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal
(provision) for losses on off-balance sheet credit risk
|
|
|
7
|
|
|
13,468
|
|
|
24,891
|
|
|
(15,781
|
)
|
Fees
and commissions, net
|
|
|
|
|
|
5,555
|
|
|
6,393
|
|
|
5,824
|
|
Activities
of hedging derivative instruments
|
|
|
18
|
|
|
(989
|
)
|
|
(225
|
)
|
|
2,338
|
|
Recoveries
on assets, net of impairments
|
|
|
5,8
|
|
|
(500
|
)
|
|
5,551
|
|
|
10,206
|
|
Trading
gains
|
|
|
|
|
|
23,866
|
|
|
879
|
|
|
-
|
|
Net
gain on sale of securities available for sale
|
|
|
5
|
|
|
9,119
|
|
|
2,568
|
|
|
206
|
|
Gain
(loss) on foreign currency exchange
|
|
|
|
|
|
115
|
|
|
(253
|
)
|
|
3
|
|
Other
income (expense), net
|
|
|
|
|
|
(6
|
)
|
|
36
|
|
|
5
|
|
Net
other income
|
|
|
|
|
|
50,628
|
|
|
39,840
|
|
|
2,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and other employee expenses
|
|
|
|
|
|
22,049
|
|
|
16,826
|
|
|
13,073
|
|
Depreciation
and amortization of premises and equipment
|
|
|
|
|
|
2,555
|
|
|
1,406
|
|
|
869
|
|
Professional
services
|
|
|
|
|
|
3,562
|
|
|
2,671
|
|
|
3,281
|
|
Maintenance
and repairs
|
|
|
|
|
|
1,188
|
|
|
1,000
|
|
|
1,172
|
|
Other
operating expenses
|
|
|
|
|
|
7,673
|
|
|
7,026
|
|
|
6,296
|
|
Total
operating expenses
|
|
|
|
|
|
37,027
|
|
|
28,929
|
|
|
24,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before cumulative effect of changes in accounting
principles
|
|
|
|
|
|
72,177
|
|
|
57,902
|
|
|
77,518
|
|
Cumulative
effect on prior years (to December 31, 2004) of a change in the
credit
loss reserve methodology
|
|
|
7,15
|
|
|
-
|
|
|
-
|
|
|
2,733
|
|
Cumulative
effect on prior year (to December 31, 2004) of an early adoption
of the
fair-value-based method of accounting stock-based employee compensation
plan
|
|
|
14,15
|
|
|
-
|
|
|
-
|
|
|
(150
|
)
|
Net
income
|
|
|
|
|
|
72,177
|
|
|
57,902
|
|
|
80,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share:
|
|
|
7,14,15
|
|
|
|
|
|
|
|
|
|
|
Income
before cumulative effect of changes in accounting
principles
|
|
|
|
|
|
1.99
|
|
|
1.56
|
|
|
2.01
|
|
Cumulative
effect of changes in accounting principles
|
|
|
|
|
|
0.00
|
|
|
0.00
|
|
|
0.07
|
|
Net
income per share
|
|
|
|
|
|
1.99
|
|
|
1.56
|
|
|
2.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
7,14,15
|
|
|
|
|
|
|
|
|
|
|
Income
before cumulative effect of changes in accounting
principles
|
|
|
|
|
|
1.98
|
|
|
1.54
|
|
|
1.99
|
|
Cumulative
effect of changes in accounting principles
|
|
|
|
|
|
0.00
|
|
|
0.00
|
|
|
0.07
|
|
Net
income per share
|
|
|
|
|
|
1.98
|
|
|
1.54
|
|
|
2.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
|
|
|
|
1.99
|
|
|
1.56
|
|
|
2.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
|
|
|
|
1.98
|
|
|
1.54
|
|
|
1.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
basic shares
|
|
|
|
|
|
36,349
|
|
|
37,065
|
|
|
38,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
diluted shares
|
|
|
|
|
|
36,414
|
|
|
37,572
|
|
|
38,860
|
|
The
accompanying notes are part of these consolidated financial
statements.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Consolidated
statements of changes in stockholders' equity
|
Years
ended december 31, 2007, 2006 and 2005
|
(in
US$ thousand)
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
other
|
|
|
|
Total
|
|
|
|
Common
|
|
paid-in
|
|
Capital
|
|
Retained
|
|
comprehensive
|
|
Treasury
|
|
stockholders’
|
|
|
|
stock
|
|
capital
|
|
reserves
|
|
earnings
|
|
income (loss)
|
|
stock
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at January 1, 2005
|
|
|
279,978
|
|
|
133,786
|
|
|
95,210
|
|
|
233,701
|
|
|
6,082
|
|
|
(92,627
|
)
|
|
656,130
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
80,101
|
|
|
-
|
|
|
-
|
|
|
80,101
|
|
Other
comprehensive income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,463
|
)
|
|
-
|
|
|
(5,463
|
)
|
Compensation
cost - indexed stock options plan
|
|
|
-
|
|
|
555
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
555
|
|
Issuance
of restricted stocks
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(57
|
)
|
|
-
|
|
|
152
|
|
|
95
|
|
Exercised
stock options pursuant to compensation plan
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4
|
)
|
|
-
|
|
|
8
|
|
|
4
|
|
Repurchase
of Class "E" common stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(13,815
|
)
|
|
(13,815
|
)
|
Difference
in fractional shares in conversion of common stocks
|
|
|
1
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Dividends
declared
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(100,825
|
)
|
|
-
|
|
|
-
|
|
|
(100,825
|
)
|
Balances
at December 31, 2005
|
|
|
279,979
|
|
|
134,340
|
|
|
95,210
|
|
|
212,916
|
|
|
619
|
|
|
(106,282
|
)
|
|
616,782
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
57,902
|
|
|
-
|
|
|
-
|
|
|
57,902
|
|
Comprehensive
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,709
|
|
|
-
|
|
|
2,709
|
|
Compensation
cost - indexed stock options plan
|
|
|
-
|
|
|
606
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
606
|
|
Issuance
of restricted stocks
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(49
|
)
|
|
-
|
|
|
144
|
|
|
95
|
|
Exercised
stock options pursuant to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
plan
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(14
|
)
|
|
-
|
|
|
27
|
|
|
13
|
|
Repurchase
of Class "E" common stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(28,657
|
)
|
|
(28,657
|
)
|
Difference
in fractional shares in conversion of common stocks
|
|
|
1
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Dividends
declared
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(65,555
|
)
|
|
-
|
|
|
-
|
|
|
(65,555
|
)
|
Balances
at December 31, 2006
|
|
|
279,980
|
|
|
134,945
|
|
|
95,210
|
|
|
205,200
|
|
|
3,328
|
|
|
(134,768
|
)
|
|
583,895
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
72,177
|
|
|
-
|
|
|
-
|
|
|
72,177
|
|
Comprehensive
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(12,969
|
)
|
|
-
|
|
|
(12,969
|
)
|
Compensation
cost - stock options plan
|
|
|
-
|
|
|
1,130
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,130
|
|
Issuance
of restricted stocks
|
|
|
-
|
|
|
(644
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
531
|
|
|
(113
|
)
|
Exercised
stock options pursuant to compensation plan
|
|
|
-
|
|
|
(289
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
449
|
|
|
160
|
|
Dividends
declared
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(32,029
|
)
|
|
-
|
|
|
-
|
|
|
(32,029
|
)
|
Balances
at December 31, 2007
|
|
|
279,980
|
|
|
135,142
|
|
|
95,210
|
|
|
245,348
|
|
|
(9,641
|
)
|
|
(133,788
|
)
|
|
612,251
|
|
The
accompanying notes are part of these consolidated financial
statements.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Consolidated
statements of comprehensive income
|
Years
ended december 31, 2007, 2006 and 2005
|
(in
US$ thousand)
|
|
|
Notes
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Net
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before cumulative effect of changes in accounting
principles
|
|
|
|
|
|
72,177
|
|
|
57,902
|
|
|
77,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
effect on prior years (to December 31, 2004) of a change in the
credit
loss reserve methodology
|
|
|
7
|
|
|
-
|
|
|
-
|
|
|
2,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
effect on prior year (to December 31, 2004) of an early adoption
of the
fair value-based method of accounting stock-based employee compensation
plan
|
|
|
14,15
|
|
|
-
|
|
|
-
|
|
|
(150
|
)
|
Net
income
|
|
|
|
|
|
72,177
|
|
|
57,902
|
|
|
80,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains (losses) on securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains (losses) arising from the year
|
|
|
19
|
|
|
(1,912
|
)
|
|
5,349
|
|
|
(5,257
|
)
|
Less:
Reclassification adjustments for gains included in net
income
|
|
|
5,19
|
|
|
(9,119
|
)
|
|
(2,568
|
)
|
|
(206
|
)
|
Net
change in unrealized gains (losses) on securities available for
sale
|
|
|
|
|
|
(11,031
|
)
|
|
2,781
|
|
|
(5,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
losses on derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
losses arising from the year
|
|
|
19
|
|
|
(2,081
|
)
|
|
(72
|
)
|
|
-
|
|
Less:
Reclassification adjustments for net losses included in net
income
|
|
|
19
|
|
|
143
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in unrealized losses on derivative financial
instruments
|
|
|
|
|
|
(1,938
|
)
|
|
(72
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
|
|
|
|
(12,969
|
)
|
|
2,709
|
|
|
(5,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
|
|
|
59,208
|
|
|
60,611
|
|
|
74,638
|
|
The
accompanying notes are part of these consolidated financial
statements.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Consolidated
Statements of Cash Flows
|
Years
Ended December 31, 2007, 2006 and 2005
|
(in
US$ thousand)
|
|
|
2007
|
|
2006
|
|
2005
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Income
before cumulative effect of changes in accounting
principles
|
|
|
72,177
|
|
|
57,902
|
|
|
77,518
|
|
Cumulative
effect on prior years (to December 31, 2004) of a change in the
credit
loss reserve methodology
|
|
|
-
|
|
|
-
|
|
|
2,733
|
|
Cumulative
effect on prior year (to December 31, 2004) of an early adoption
of the
fair-value based method of accounting stock-based employee compensation
plan
|
|
|
-
|
|
|
-
|
|
|
(150
|
)
|
Net
income
|
|
|
72,177
|
|
|
57,902
|
|
|
80,101
|
|
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Activities
of hedging derivative instruments
|
|
|
1,258
|
|
|
312
|
|
|
(85
|
)
|
Depreciation
and amortization of premises and equipment
|
|
|
2,555
|
|
|
1,406
|
|
|
869
|
|
Provision
(reversal) for loan losses
|
|
|
11,994
|
|
|
11,846
|
|
|
(54,155
|
)
|
Provision
(reversal) for losses on off-balance sheet credit risk
|
|
|
(13,468
|
)
|
|
(24,891
|
)
|
|
15,781
|
|
Impairment
loss on assets
|
|
|
500
|
|
|
-
|
|
|
469
|
|
Net
gain on sale of securities available for sale
|
|
|
(9,119
|
)
|
|
(2,568
|
)
|
|
(206
|
)
|
Compensation
cost - stock options plans
|
|
|
1,130
|
|
|
606
|
|
|
555
|
|
Issuance
of restricted stock
|
|
|
(113
|
)
|
|
95
|
|
|
95
|
|
Deferred
compensation awards
|
|
|
-
|
|
|
13
|
|
|
3
|
|
Amortization
of premiums and discounts on investments
|
|
|
6,268
|
|
|
4,748
|
|
|
2,343
|
|
Net
decrease (increase) in operating assets:
|
|
|
|
|
|
|
|
|
|
|
Trading
assets
|
|
|
77,479
|
|
|
(130,076
|
)
|
|
-
|
|
Accrued
interest receivable
|
|
|
(7,646
|
)
|
|
(24,984
|
)
|
|
(14,806
|
)
|
Derivative
financial instruments
|
|
|
-
|
|
|
-
|
|
|
25
|
|
Brokerage
receivable
|
|
|
(44,289
|
)
|
|
-
|
|
|
-
|
|
Other
assets
|
|
|
(2,944
|
)
|
|
4,552
|
|
|
(5,804
|
)
|
Net
increase (decrease) in operating liabilities:
|
|
|
|
|
|
|
|
|
|
|
Trading
liabilities
|
|
|
35,933
|
|
|
54,832
|
|
|
-
|
|
Accrued
interest payable
|
|
|
10,778
|
|
|
13,684
|
|
|
8,259
|
|
Other
liabilities
|
|
|
4,261
|
|
|
2,108
|
|
|
(5,958
|
)
|
Net
cash provided by (used in) operating activities
|
|
|
146,754
|
|
|
(30,415
|
)
|
|
27,486
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Net
increase in pledged interest bearing deposits
|
|
|
(25,838
|
)
|
|
(28,470
|
)
|
|
(800
|
)
|
Net
increase in loans
|
|
|
(864,971
|
)
|
|
(384,433
|
)
|
|
(179,315
|
)
|
Proceeds
from the sale of loans
|
|
|
121,824
|
|
|
12,500
|
|
|
-
|
|
Net
acquisition of premises and equipment
|
|
|
(1,595
|
)
|
|
(9,289
|
)
|
|
(614
|
)
|
Proceeds
from the redemption of securities available for sale
|
|
|
19,074
|
|
|
20,000
|
|
|
26,000
|
|
Proceeds
from the maturity of securities held to maturity
|
|
|
125,000
|
|
|
9,000
|
|
|
-
|
|
Proceeds
from the sale of securities available for sale
|
|
|
578,697
|
|
|
129,731
|
|
|
276,524
|
|
Purchases
of investment securities
|
|
|
(716,472
|
)
|
|
(419,143
|
)
|
|
(326,307
|
)
|
Net
cash used in investing activities
|
|
|
(764,281
|
)
|
|
(670,104
|
)
|
|
(204,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Net
increase in due to depositors
|
|
|
406,094
|
|
|
9,659
|
|
|
182,458
|
|
Net
(decrease) increase in short-term borrowings and securities sold
under
repurchase agreements
|
|
|
(90,894
|
)
|
|
834,905
|
|
|
55,981
|
|
Proceeds
from borrowings and long-term debt
|
|
|
613,126
|
|
|
133,680
|
|
|
309,962
|
|
Repayments
of borrowings and long-term debt
|
|
|
(161,670
|
)
|
|
(108,680
|
)
|
|
(179,723
|
)
|
Dividends
paid
|
|
|
(29,713
|
)
|
|
(63,364
|
)
|
|
(100,825
|
)
|
Redemption
of redeemable preferred stock
|
|
|
-
|
|
|
(3,216
|
)
|
|
(2,711
|
)
|
Exercised
stock options
|
|
|
160
|
|
|
-
|
|
|
-
|
|
Repurchase
of common stock
|
|
|
-
|
|
|
(28,657
|
)
|
|
(13,815
|
)
|
Net
cash provided by financing activities
|
|
|
737,103
|
|
|
774,327
|
|
|
251,327
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
119,576
|
|
|
73,808
|
|
|
74,301
|
|
Cash
and cash equivalents at beginning of the year
|
|
|
298,695
|
|
|
224,887
|
|
|
150,586
|
|
Cash
and cash equivalents at end of the year
|
|
|
418,271
|
|
|
298,695
|
|
|
224,887
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for interest
|
|
|
183,521
|
|
|
130,829
|
|
|
63,298
|
|
The
accompanying notes are part of these consolidated financial
statements.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
|
Banco
Latinoamericano de Exportaciones, S. A. (“Bladex Head Office” and together
with its subsidiaries “Bladex” or the “Bank”), headquartered in Panama
City, Republic of Panama, is a specialized supranational bank established
to finance trade in Latin America and the Caribbean (the “Region”). The
Bank was established pursuant to a May, 1975 proposal presented
to the
Assembly of Governors of Central Banks in the Region, which recommended
the creation of a multinational organization to increase the foreign
trade
financing capacity of the Region. The Bank was organized in 1977,
incorporated in 1978 as a corporation pursuant to the laws of the
Republic
of Panama, and officially initiated operations on January 2,
1979.
|
The
Bank
operates under a general banking license issued by the National Banking
Commission of Panama, predecessor of the Superintendency of Banks of Panama
(the
“SBP”), and is subject to its supervision and inspection. Bladex Head Office’s
subsidiaries are the following:
Bladex
Holdings Inc., is a wholly owned subsidiary, incorporated under the laws
of the
State of Delaware, United States of America (USA), on May 30, 2000. Its wholly
owned subsidiaries are:
|
·
|
Bladex
Asset Management, Inc., incorporated on May 24, 2006, under the
laws of
the State of Delaware, USA, serves as investment manager for Bladex
Offshore Feeder Fund (the “Feeder”) and Bladex Capital Growth Fund (the
“Fund”).
|
|
·
|
Clavex
LLC, incorporated on June 15, 2006, under the laws of the State
of
Delaware, USA, ceased operations in February 2007.
|
The
Feeder is a wholly owned subsidiary, incorporated on February 21, 2006 under
the
laws of Cayman Islands, and in turn is the sole owner of the Fund, which
was
also incorporated under the laws of Cayman Islands on February 21, 2006.
Both
companies are investment funds that started operations in April 2006 and
share
the same investment objectives. The Feeder invests substantially all of its
assets in the Fund. The objective of the Fund is to achieve capital appreciation
by investing in Latin American debt securities, indexed funds, currencies,
and
trading derivative instruments.
Bladex
Representacao Ltda., incorporated under the laws of Brazil on January 7,
2000,
acts as the Bank’s representative office in Brazil. Bladex Representacao Ltda.
is 99.999% owned by Bladex Head Office and 0.001% owned by Bladex Holdings
Inc.
Clavex,
S.A., is a wholly owned subsidiary, incorporated on May 18, 2006, under the
laws
of the Republic of Panama, to mainly provide specialized training.
Bladex
Head Office has an agency in New York City, USA (the "New York Agency"),
which
began operations on March 27, 1989. The New York Agency is principally engaged
in financing transactions related to international trade, mostly the
confirmation and financing of letters of credit for customers of the Region.
The
New York Agency is also licensed by the State of New York Banking Department,
USA, to operate an International Banking Facility (“IBF”). The Bank also has
representative offices in Buenos Aires, Argentina, and in Mexico City, D.F.,
Mexico, and an international administrative office in Miami, Florida,
USA.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
In
addition, Banco Latinoamericano de Exportaciones Limited, a wholly owned
subsidiary incorporated under the laws of the Cayman Islands ceased its banking
operations on November 30, 2004 and was dissolved in 2005. All financial
assets
and liabilities were transferred to Bladex Head Office and recorded at their
carrying amount on the date of the transfer.
2.
Summary
of significant accounting policies
These
consolidated financial statements have been prepared under accounting principles
generally accepted in the United States of America (“U.S. GAAP”). All amounts
presented in the consolidated financial statements and notes are expressed
in
dollars of the United Stated of America (“US$”), which is the Bank’s functional
currency. The accompanying consolidated financial statements have been
translated from Spanish version to English version for users outside of the
Republic of Panama.
|
b)
|
Principles
of consolidation
|
The
consolidated financial statements include the accounts of Bladex Head Office,
its agencies and subsidiaries. All intercompany balances and transactions
have
been eliminated for consolidation purposes.
The
preparation of the consolidated financial statements requires management
to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Material estimates that are particularly
susceptible to significant changes relate to the determination of the allowances
for credit losses, impairment losses on assets, impairment of securities
available for sale and held to maturity, and the fair value of financial
instruments. Actual results could differ from those estimates. Management
believes these estimates are adequate.
Cash
equivalents consist of due from banks and interest-bearing deposits in banks
with original maturities of three months or less, except deposits pledged.
Repurchase
agreements represent collateralized financing transactions used to increase
liquidity and are carried at the amounts at which the securities will be
subsequently reacquired including accrued interest, as specified in the
respective agreements. The Bank’s policy is to relinquish possession of the
securities sold under agreements to repurchase. The market value of securities
to be repurchased is permanently monitored, and additional collateral is
provided where appropriate, to protect against credit exposure.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
|
f)
|
Trading
assets and
liabilities
|
Trading
assets include mainly debt instruments and shares in indexed funds that have
been bought and held principally for the purpose of selling them in the near
term. Trading liabilities include debt instruments that the Bank has sold
to
other parties but does not own (“short” positions). The Bank is obliged to
purchase securities at a future date to cover short positions. Included in
trading assets and liabilities are the reported receivables (unrealized gains)
and payables (unrealized losses) related to derivative instruments. These
amounts include the derivative assets and liabilities net of cash received
or
paid, respectively, under legally enforceable master netting agreements.
Trading
assets and liabilities are carried at fair value, which is determined based
upon
quoted prices when available, or if quoted market prices are not available,
on
discounted expected cash flows using market rates commensurate with the credit
quality and maturity of the security. Unrealized and realized gains and losses
on trading assets and liabilities are recorded in earnings as trading gains
(losses).
Transactions
traded not yet settled at the consolidated balance sheet date are recorded
as
brokerage receivables and payables.
Securities
are classified at the date of purchase based on the ability and intent to
sell
or hold them as investments. These securities consist of debt securities
such
as: negotiable commercial paper, bonds and floating rate notes.
Securities
available for sale
These
securities consist of debt instruments that the Bank buys with the intention
of
selling them prior to maturity and are subject to the same approval criteria
as
the rest of the credit portfolio. These securities are carried at fair value,
based on quoted market prices when available, or if quoted market prices
are not
available, on discounted expected cash flows using market rates commensurate
with the credit quality and maturity of the security. Unrealized gains and
losses are reported as net increase or decreases to accumulated other
comprehensive income (loss) in equity until they are realized.
Securities
held to maturity
Securities
classified as held to maturity represent securities that the Bank has the
ability and the intent to hold until maturity. These securities are carried
at
amortized cost and are subject to the same approval criteria as the rest
of the
credit portfolio.
Interest
on securities is recognized based on the interest method. Amortization of
premiums and accretion of discounts are included in interest income as an
adjustment to the yield. Realized gains and losses from the sales of securities
which are included in realized gain (loss) from investment securities, are
determined using the specific identification method.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
Impairment
of investments is evaluated considering numerous factors, and their relative
significance varies case by case. Factors considered include the length
of time
and extent to which the market value has been less than cost, the financial
condition and near-term prospects of the issuer and the intent and ability
of
the Bank to retain the security in order to allow for an anticipated
recovery in
market value. If, based on the analysis, it is determined that the impairment
is
other-than-temporary, the security is written down to its fair value,
and a loss
is recognized through earnings as impairment loss on assets. Accrual
of income
is suspended on fixed maturities that are in default, or on which it
is likely
that future interest payments will not be received as
scheduled.
Other
investments, that mainly consist of unlisted stock, are recorded at cost
and are
included in other assets. The Bank determined that it is not practicable
to
obtain the market value of these investments, as these shares are not traded
in
a secondary market. Impairment of these investments is evaluated periodically
and declines that are determined to be other than temporary are charged to
earnings as impairment on assets.
Loans
are
reported at their principal amounts outstanding net of unearned income, deferred
fees and allowance for loan losses. Interest income is recognized using the
interest method. The amortization of net unearned income and deferred fees
are
recognized as an adjustment to the related loan yield using the interest
method.
Purchased
loans are recorded at acquisition cost. The difference between the principal
and
the acquisition cost of loans, the premiums and discounts, is amortized over
the
life of the loan as an adjustment to the yield. All other costs related to
acquisition of loans are expensed when incurred.
Loans
are
identified as impaired and placed on a cash (non-accrual) basis when interest
or
principal is past due for 90 days or more, or before if the Bank's management
determines that the ultimate collection of principal or interest is doubtful.
Factors considered by the Bank’s management in determining impairment include
collection status, collateral value, the probability of collecting scheduled
principal and interest payments when due, and economic conditions in the
borrower’s country of residence. Any interest receivable is reversed and
charged-off against earnings. Interest on non-accruing loans is only recorded
as
earned when collected. Non-accruing loans are returned to an accrual status
when
(1) all contractual principal and interest amounts are current (2) there
is a
sustained period of repayment performance in accordance with the contractual
terms of at least six months; and (3) if in the Bank management’s opinion the
loan is fully collectible. When current events or available information confirm
that specific impaired loans or portions thereof are uncollectible, such
impaired loans are charged-off against the allowance for loan losses.
A
loan is
classified as a troubled debt restructuring if a significant concession in
amount, maturity or interest rate is granted to the borrower due to the
deterioration in its financial condition. Marketable securities received
in
exchange for loan under debt restructurings are initially recorded at fair
value, with any gain or loss recorded as recovery or charge to the allowance,
and are subsequently accounted for as securities available for
sale.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
Transfers
of financial assets, primarily loans, are accounted for as sales when control
over the assets has been surrendered. Control over transferred assets is
deemed
to be surrendered when: (1) the assets have been isolated from the Bank;
(2) the
transferee obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets; and
(3)
the Bank does not maintain effective control over the transferred assets
through
an agreement to repurchase them before their maturity. Upon completion of
a
transfer of assets that satisfies the conditions described above to be accounted
for as a sale, the Bank recognizes the assets as sold and records in earnings
any gain or loss on the sale. The Bank may retain interest in loans sold
in the
form of servicing rights. Service rights are only recognized when the benefits
of the service exceeds the costs associated with the responsibility of that
service.
|
j)
|
Allowance
for credit losses
|
The
allowance for credit losses is provided for losses derived from the credit
extension process, inherent in the loan portfolio and off-balance sheet
financial instruments, using the reserve method of providing for credit losses.
Additions to the allowance for credit losses are made by charges to earnings.
Credit losses are deducted from the allowance, and subsequent recoveries
are
added. The allowance is also decreased by reversals of the allowance back
to
earnings. The allowance attributable to loans is reported as a deduction
of
loans and the allowance for off-balance sheet credit risk, such as: letters
of
credit and guarantees, is reported as a liability.
The
allowance for possible credit losses includes an asset-specific component
and a
formula-based component. The asset-specific component relates to provision
for
losses on credits considered impaired and measured on a case-by-case basis.
An
allowance is established when the discounted cash flows (or collateral value
of
observable market price) of the credit is lower than the carrying value of
that
credit. The formula-based component covers the Bank’s performing credit
portfolio and is established based in a process that estimates the probable
loss
inherent in the portfolio, based on statistical analysis and management’s
qualitative judgment. The statistical calculation is a product of internal
risk
classifications, probabilities of default and loss given default. The
probability of default is supported by Bladex’s historical portfolio performance
complemented by probabilities of default provided by external sources for
higher
risk cases, in view of the greater robustness of this external data for such
cases. The loss given default is based on Bladex’s historical losses experience
and best practices.
|
k)
|
Fair
value of guarantees including indirect indebtedness of
others
|
The
Bank
recognizes a liability for the fair value of obligations undertaken such
as
stand-by letters of credit and guarantees. Fair value is calculated based
on the
present value of the premium to be received or a specific allowance for
off-balance sheet credit contingencies, whichever is greater.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
Loan
origination fees, net of direct loan origination costs, are deferred, and
the
net amount is recognized as revenue over the contractual term of the loans
as an
adjustment to the yield. These net fees are not recognized as revenue during
periods in which interest income on loans is suspended because of concerns
about
the realization of loan principal or interest. Underwriting fees are recognized
as revenue when the Bank has rendered all services to the issuer and is entitled
to collect the fee from the issuer, when there are no contingencies related
to
the fee. Underwriting fees are recognized net of syndicate expenses. In
addition, the Bank recognizes credit arrangement and syndication fees as
revenue
after satisfying certain retention, timing and yield criteria. Fees received
in
connection with a modification of terms of a troubled debt restructuring
are
applied as a reduction of the recorded investment in the loan. Fees earned
on
letters of credit, guarantees and other commitments are amortized using the
straight-line method over the life of such instruments.
|
m)
|
Premises
and equipment
|
Premises
and equipment, including the electronic data processing equipment, are carried
at cost less accumulated depreciation and amortization, except land, which
is
carried at cost. Depreciation and amortization are charged to operations
using
the straight-line method, over the estimated useful life of the related asset.
The estimated original useful life for building is 40 years and for furniture
and equipment is 3 to 5 years.
The
Bank
defers the cost of internal-use software that has a useful life in excess
of one
year in accordance with SOP 98-1, “Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use”. These costs consist of payments made to
third parties related to the use of licenses and installation of both, software
and hardware. Subsequent additions, modifications or upgrades to internal-use
software are capitalized only to the extent that they allow the software
to
perform a task it previously did not perform. Software maintenance and training
costs are expensed in the period in which they are incurred. Capitalized
internal use software costs will be amortized using the straight-line method
over their estimated useful lives, generally consisting of 5 years.
Capital
reserves are established as a segregation of retained earnings and are, as
such,
a form of retained earnings. Even though their constitution is not required
by
the SBP, reductions of these capital reserves require the approval of the
Bank’s
Board of Directors and the SBP.
|
o)
|
Cash
and stock-based compensation
plan
|
In
year
2005, the Bank chose to early adopt Statement of Financial Accounting Standards
(“SFAS”) No.123(R), “Share-Based Payment”, which established the use of the
fair-value-based method of accounting for stock-based compensation to key
employees and directors. The Bank elected to use the “modified prospective
application” for new and previously granted awards that are not fully vested on
the effective date. Compensation cost is based on the fair value of the awards
granted and is recognized over the requisite service period of the award.
The
fair value of each option is estimated at the grant date using the Black-Scholes
option-pricing model. The Bank has the policy of re-issuing shares from treasury
shares, when options are exercised.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
|
p)
|
Redeemable
preferred stock
|
The
Bank
accounts for as liabilities all financial instruments that embody an obligation
to the Bank. The accrual of interest payable is charged to interest
expense.
|
q)
|
Derivative
financial instruments and hedge
accounting
|
The
Bank
makes use of derivative financial instruments for its management of interest
rate and foreign exchange risks, which represent the majority of the Bank’s
derivatives, as well as for trading purposes. The accounting for changes
in
value of a derivative depends on whether the contract is for trading purposes
or
has been designated and qualifies for hedge accounting.
Derivatives
held for trading purposes include interest rate swaps, forward foreign exchange
contracts and credit default swaps, as part of the Fund’s trading activity, and
those used for risk management purposes that do not qualify for hedge
accounting. The fair value of trading derivatives is reported as trading
assets
and trading liabilities, as applicable. Changes in realized and unrealized
gains
and losses and interest flows from these trading instruments are included
in
trading gains (losses).
Derivatives
for hedging purposes primarily include interest rate swaps and forward foreign
exchange contracts. Derivative contracts designated and qualifying as fair
value
hedge are reported as other assets and other liabilities and hedge accounting
is
applied. In order to qualify for hedge accounting, a derivative must be
considered highly effective at reducing the risk associated with the exposure
being hedged. Each derivative must be designated as a hedge, with documentation
of the risk management objective and strategy, including identification of
the
hedging instrument, the hedged item and the risk exposure, as well as how
effectiveness will be assessed prospectively and retrospectively. The extent
to
which a hedging instrument is effective at achieving offsetting changes in
fair
value or cash flows must be assessed at least quarterly. Any ineffectiveness
must be reported in current-period earnings. The Bank discontinues hedge
accounting prospectively in the following situations:
|
1.
|
It
is determined that the derivative is no longer effective in offsetting
changes in the fair value or cash flows of a hedged
item.
|
|
2.
|
The
derivative expires or is sold, terminated or
exercised.
|
|
3.
|
The
Bank otherwise determines that designation of the derivative as
a hedging
instrument is no longer
appropriate.
|
The
Bank
carries all derivatives in the consolidated balance sheet at fair value.
For
qualifying fair value hedges, all changes in the fair value of the derivative
and the fair value of the item for the risk being hedged are recognized in
earnings. If the hedge relationship is terminated, then the fair value
adjustment to the hedge item continues to be reported as part of the basis
of
the item and is amortized to earnings as a yield adjustment. For qualifying
cash
flow hedges, the effective portion of the change in the fair value of the
derivative is recorded in other comprehensive income and recognized in the
income statement when the hedged cash flows affect earnings. Ineffective
portion
is recognized in the income statement as activities of hedging derivative
instruments. If the cash flow hedge relationship is terminated, related amounts
in other comprehensive income are reclassified into earnings when hedged
cash
flows occur.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
|
r)
|
Foreign
currency transactions
|
|
|
Assets
and liabilities denominated in foreign currencies are translated
into U.S.
dollar equivalents using period-end spot foreign exchange rates.
The
effects of re-measuring assets and liabilities into the U.S. dollar
as the
functional currency are included in
earnings.
|
|
·
|
Bladex
Head Office is exempted from payment of income taxes in Panama
in
accordance to its Constitutive Law that granted special benefits,
including the total exemption of income tax
payment.
|
|
·
|
The
Feeder and the Fund are not subject to income taxes in accordance
to Laws
of the Caiman Islands.
|
|
·
|
Clavex,
S.A. is subject to income taxes in Panama on profits from local
operations.
|
|
·
|
Bladex
Representacao Ltd. is subject to income taxes in Brazil.
|
|
·
|
The
New York Agency and Bladex’s subsidiaries incorporated in the USA are
subject to USA federal and local taxation based on the portion
of income
that is effectively connected with its operations in that country.
|
Such
amounts of income taxes have been immaterial to date.
Basic
earnings per share is computed by dividing income available to common
stockholders (the numerator) by the weighted average number of common shares
outstanding (the denominator) during the year. Diluted earning per share
measures performance incorporating the effect that potential common shares,
such
as stock options outstanding during the same period, would have on earning
per
share. The computation is similar to the computation of earning per share,
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the diluted potential common
shares had been issued.
|
u)
|
Recently
Issued Accounting
Standards
|
SFAS
No. 157: Fair Value Measurement
SFAS
No.
157 defines fair value, establishes a framework for measuring fair value
under
U.S. GAAP, and enhances disclosures about fair value measurements. This Standard
applies when other accounting pronouncements require fair value measurements.
This Standard is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those years.
The
Bank does not anticipate any significant effect on its consolidated financial
position, operations and cash flows with the adoption of SFAS
No.157.
SFAS
No. 159: The Fair Value Option for Financial Assets and Financial
Liabilities.
SFAS
No.
159 will allow the Bank to report at fair value many of its financial
instruments and certain other items that are not currently required to be
reported at fair value. The valuation of a financial instrument at fair value
is
irrevocable once adopted. All changes in fair value are reported in earnings.
This standard is effective for years beginning after November 15, 2007. The
Bank
is currently evaluating the potential impact on its consolidated financial
statements of adopting this standard.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
3.
|
Cash
and cash equivalents
|
|
Cash
and cash equivalents are as follows:
|
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
(In
thousand of US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
596
|
|
|
401
|
|
Interest
bearing deposits in banks
|
|
|
476,983
|
|
|
331,764
|
|
Total
|
|
|
477,579
|
|
|
332,165
|
|
Less:
|
|
|
|
|
|
|
|
Pledged
deposits
|
|
|
59,308
|
|
|
33,470
|
|
|
|
|
418,271
|
|
|
298,695
|
|
At
December 31, 2007 and 2006 pledged deposits in banks include $53.8 million
and
$28 million, respectively, of collateral advanced on trading liabilities.
On
December 31, 2007 and 2006, the Agency of New York had pledged certificates
of
deposit with a carrying value of $5.5 million, with the State of New York
Banking Department, as required by law since March 1994.
4.
|
Trading
assets and liabilities
|
The
fair
value of trading assets and liabilities is as follows:
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
(In
thousand of US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
assets:
|
|
|
|
|
|
|
|
Government
bonds
|
|
|
10,891
|
|
|
81,077
|
|
Corporate
bonds
|
|
|
5,206
|
|
|
48,655
|
|
Shares
in indexed funds
|
|
|
36,315
|
|
|
-
|
|
Derivative
instruments
|
|
|
185
|
|
|
344
|
|
Total
|
|
|
52,597
|
|
|
130,076
|
|
|
|
|
|
|
|
|
|
Trading
liabilities:
|
|
|
|
|
|
|
|
Government
bonds sold short
|
|
|
31,734
|
|
|
54,039
|
|
Shares
in indexed funds sold short
|
|
|
57,863
|
|
|
-
|
|
Derivative
instruments
|
|
|
1,168
|
|
|
793
|
|
Total
|
|
|
90,765
|
|
|
54,832
|
|
Trading
assets secure all short sale transactions.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
Securities
available for sale
The
amortized cost, related unrealized gross gain (loss) and fair value of
securities available for sale, are as follows:
|
|
December
31, 2007
|
|
(In
thousand of US$)
|
|
Amortized
Cost
|
|
Unrealized
Gross Gain
|
|
Unrealized
Gross Loss
|
|
Fair
Value
|
|
|
|
|
Corporate
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil
|
|
|
67,971
|
|
|
78
|
|
|
660
|
|
|
67,389
|
|
Chile
|
|
|
42,849
|
|
|
-
|
|
|
549
|
|
|
42,300
|
|
Panama
|
|
|
20,019
|
|
|
669
|
|
|
-
|
|
|
20,688
|
|
|
|
|
130,839
|
|
|
747
|
|
|
1,209
|
|
|
130,377
|
|
Government
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Argentina
|
|
|
19,546
|
|
|
22
|
|
|
28
|
|
|
19,540
|
|
Brazil
|
|
|
59,464
|
|
|
1,897
|
|
|
18
|
|
|
61,343
|
|
Colombia
|
|
|
123,084
|
|
|
2,797
|
|
|
206
|
|
|
125,675
|
|
Dominican
Republic
|
|
|
13,093
|
|
|
-
|
|
|
182
|
|
|
12,911
|
|
El
Salvador
|
|
|
10,984
|
|
|
-
|
|
|
84
|
|
|
10,900
|
|
Mexico
|
|
|
27,045
|
|
|
-
|
|
|
89
|
|
|
26,956
|
|
Panama
|
|
|
50,008
|
|
|
1,462
|
|
|
112
|
|
|
51,358
|
|
Peru
|
|
|
29,291
|
|
|
24
|
|
|
15
|
|
|
29,300
|
|
|
|
|
332,515
|
|
|
6,202
|
|
|
734
|
|
|
337,983
|
|
Total
|
|
|
463,354
|
|
|
6,949
|
|
|
1,943
|
|
|
468,360
|
|
|
|
December
31, 2006
|
|
(In
thousand of US$)
|
|
Amortized
Cost
|
|
Unrealized
Gross Gain
|
|
Unrealized
Gross Loss
|
|
Fair
Value
|
|
Corporate
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil
|
|
|
16,985
|
|
|
69
|
|
|
129
|
|
|
16,925
|
|
Chile
|
|
|
16,086
|
|
|
-
|
|
|
144
|
|
|
15,942
|
|
Panama
|
|
|
20,026
|
|
|
-
|
|
|
254
|
|
|
19,772
|
|
|
|
|
53,097
|
|
|
69
|
|
|
527
|
|
|
52,639
|
|
Government
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Argentina
|
|
|
9,421
|
|
|
69
|
|
|
6
|
|
|
9,484
|
|
Brazil
|
|
|
112,370
|
|
|
3,315
|
|
|
61
|
|
|
115,624
|
|
Colombia
|
|
|
97,335
|
|
|
776
|
|
|
16
|
|
|
98,095
|
|
Chile
|
|
|
16,091
|
|
|
-
|
|
|
444
|
|
|
15,647
|
|
El
Salvador
|
|
|
4,981
|
|
|
19
|
|
|
-
|
|
|
5,000
|
|
Mexico
|
|
|
48,350
|
|
|
1,516
|
|
|
161
|
|
|
49,705
|
|
|
|
|
288,548
|
|
|
5,695
|
|
|
688
|
|
|
293,555
|
|
Total
|
|
|
341,645
|
|
|
5,764
|
|
|
1,215
|
|
|
346,194
|
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
At
December 31, 2007 and 2006, securities available for sale with a carrying
value
of $323 million each year, were pledged to secure repurchase agreements.
The
following table discloses those securities that have had unrealized losses
for
less than 12 months or for 12 months or longer:
|
|
December
31, 2007
|
|
(In
thousand of US$)
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|
|
|
Fair
Value
|
|
Unrealized
Gross
Losses
|
|
Fair
Value
|
|
Unrealized
Gross
Losses
|
|
Fair
Value
|
|
Unrealized
Gross
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
debt
|
|
|
68,244
|
|
|
1,107
|
|
|
30,495
|
|
|
102
|
|
|
98,739
|
|
|
1,209
|
|
Government
debt
|
|
|
113,093
|
|
|
706
|
|
|
15,962
|
|
|
28
|
|
|
129,055
|
|
|
734
|
|
|
|
|
181,337
|
|
|
1,813
|
|
|
46,457
|
|
|
130
|
|
|
227,794
|
|
|
1,943
|
|
|
|
December
31, 2006
|
|
(In
thousand of US$)
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|
|
|
Fair
Value
|
|
Unrealized
Gross
Losses
|
|
Fair
Value
|
|
Unrealized
Gross
Losses
|
|
Fair
Value
|
|
Unrealized
Gross
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
debt
|
|
|
19,772
|
|
|
254
|
|
|
30,791
|
|
|
273
|
|
|
50,563
|
|
|
527
|
|
Government
debt
|
|
|
6,187
|
|
|
16
|
|
|
36,004
|
|
|
672
|
|
|
42,191
|
|
|
688
|
|
|
|
|
25,959
|
|
|
270
|
|
|
66,795
|
|
|
945
|
|
|
92,754
|
|
|
1,215
|
|
Gross
unrealized losses are related mainly to an overall increase in market interest
rates and market credit spreads and not due to underlying credit concerns
about
the issuers. At December 31, 2007, the Bank believes that none of the securities
in its investment portfolio are other-than-temporarily impaired.
During
2006 and 2005, the Bank collected Argentine impaired securities for $5.6
million
and $10.7 million, respectively, which had been written-off and charged to
earnings in prior years. These recoveries were recorded in earnings as
recoveries on assets. During the year 2005, an impaired security with a net
carrying value of $0.5 million was written-off and charged to earnings as
a
decrease to recoveries on assets.
The
following table presents the realized gains and losses on securities available
for sale:
(In
thousand of US$)
|
|
Year
ended December 31,
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
Gains
|
|
|
9,550
|
|
|
2,568
|
|
|
253
|
|
Losses
|
|
|
(431
|
)
|
|
-
|
|
|
(47
|
)
|
Net
|
|
|
9,119
|
|
|
2,568
|
|
|
206
|
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
The
amortized cost and fair value of securities available for sale distributed
by
contractual maturity at December 31, 2007, are shown in the following table:
(In
thousand of US$)
|
|
Amortized
Cost
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
Due
within 1 year
|
|
|
19,998
|
|
|
19,953
|
|
After
1 year but within 5 years
|
|
|
153,382
|
|
|
153,628
|
|
After
5 years but within 10 years
|
|
|
289,974
|
|
|
294,779
|
|
|
|
|
463,354
|
|
|
468,360
|
|
Securities
held to maturity
The
amortized cost, related unrealized gross gain (loss) and fair value of
securities held to maturity are as follows:
|
|
December
31, 2006
|
|
(In
thousand of US$)
|
|
Amortized
Cost
|
|
Unrealized
Gross Gain
|
|
Unrealized
Gross Loss
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
|
40,044
|
|
|
-
|
|
|
10
|
|
|
40,034
|
|
United
States of America
|
|
|
60,048
|
|
|
-
|
|
|
27
|
|
|
60,021
|
|
|
|
|
100,092
|
|
|
-
|
|
|
37
|
|
|
100,055
|
|
Government
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
|
25,065
|
|
|
-
|
|
|
2
|
|
|
25,063
|
|
Total
|
|
|
125,157
|
|
|
-
|
|
|
39
|
|
|
125,118
|
|
At
December 31, 2006, the contractual maturity of the securities held to maturity
was within one year and none of the securities in this portfolio was considered
other-than-temporarily impaired since such securities did not maintain
significant gross unrealized losses for more then 12 months.
At
December 31, 2006, securities held to maturity with a carrying value of $125.2
million were pledged to secure repurchase agreements. All held to maturity
investments matured during the first semester of 2007.
The
following table set forth details of the Bank’s loan portfolio:
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
1,886,580
|
|
|
1,417,777
|
|
Banks:
|
|
|
|
|
|
|
|
Private
|
|
|
1,485,313
|
|
|
1,130,490
|
|
State-owned
|
|
|
241,322
|
|
|
273,090
|
|
Other
|
|
|
118,623
|
|
|
159,415
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,731,838
|
|
|
2,980,772
|
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
The
remaining loan maturities are summarized as follows:
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Maturities:
|
|
|
|
|
|
|
|
Up
to 1 month
|
|
|
667,612
|
|
|
297,920
|
|
From
1 month to 3 months
|
|
|
667,393
|
|
|
719,966
|
|
From
3 months to 6 months
|
|
|
572,597
|
|
|
649,147
|
|
From
6 months to 1 year
|
|
|
617,482
|
|
|
456,528
|
|
From
1 year to 2 years
|
|
|
399,655
|
|
|
375,954
|
|
From
2 years to 5 years
|
|
|
729,786
|
|
|
412,565
|
|
More
than 5 years
|
|
|
77,313
|
|
|
68,692
|
|
|
|
|
3,731,838
|
|
|
2,980,772
|
|
The
following table provides a breakdown of loans by country risk:
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Country:
|
|
|
|
|
|
|
|
Argentina
|
|
|
263,814
|
|
|
203,015
|
|
Bolivia
|
|
|
5,000
|
|
|
5,000
|
|
Brazil
|
|
|
1,379,394
|
|
|
1,316,650
|
|
Chile
|
|
|
10,000
|
|
|
175,147
|
|
Colombia
|
|
|
400,458
|
|
|
163,132
|
|
Costa
Rica
|
|
|
76,506
|
|
|
85,028
|
|
Dominican
Republic
|
|
|
28,770
|
|
|
8,805
|
|
Ecuador
|
|
|
60,529
|
|
|
42,926
|
|
El
Salvador
|
|
|
46,563
|
|
|
82,250
|
|
Guatemala
|
|
|
95,902
|
|
|
88,573
|
|
Honduras
|
|
|
48,631
|
|
|
36,466
|
|
Jamaica
|
|
|
77,401
|
|
|
48,904
|
|
Mexico
|
|
|
410,164
|
|
|
167,808
|
|
Nicaragua
|
|
|
12,616
|
|
|
10,121
|
|
Panama
|
|
|
139,720
|
|
|
180,511
|
|
Peru
|
|
|
454,226
|
|
|
261,617
|
|
Trinidad
and Tobago
|
|
|
87,565
|
|
|
103,513
|
|
Venezuela
|
|
|
134,579
|
|
|
1,306
|
|
|
|
|
3,731,838
|
|
|
2,980,772
|
|
The
fixed
and floating interest rate distribution of the loan portfolio is as
follows:
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Fixed
interest rates
|
|
|
1,855,540
|
|
|
1,498,338
|
|
Floating
interest rates
|
|
|
1,876,298
|
|
|
1,482,434
|
|
|
|
|
3,731,838
|
|
|
2,980,772
|
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
At
December 31, 2007 and 2006, 84% and 89%, respectively, of the loan portfolio
at
fixed interest rates has remaining maturities of less than 180
days.
The
following is a summary of information on non-accruing loans, and interest
amounts on non-accruing loans:
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
on non-accrual status
|
|
|
-
|
|
|
-
|
|
|
28,822
|
|
Interest
which would had been recorded if the loans
had
not been on a non-accrual status
|
|
|
-
|
|
|
-
|
|
|
7,004
|
|
Interest
income collected on non-accruing loans
|
|
|
-
|
|
|
2,721
|
|
|
7,670
|
|
Foregone
interest revenue
|
|
|
-
|
|
|
-
|
|
|
-
|
|
The
following is a summary of information pertaining to impaired loans:
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans with specific allowance for credit losses
|
|
|
-
|
|
|
-
|
|
|
28,822
|
|
|
|
|
|
|
|
|
|
|
|
|
Specific
allowance for impaired loans (under SFAS 114)
|
|
|
-
|
|
|
-
|
|
|
11,184
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
balance of impaired loans during the year
|
|
|
-
|
|
|
18,168
|
|
|
105,964
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income collected on impaired loans
|
|
|
-
|
|
|
2,721
|
|
|
7,670
|
|
At
December 31, 2007 and 2006, the Bank has credit transactions in the normal
course of business with 18% and 22%, respectively, of its Class “A” and “B”
stockholders (see Note 13). All transactions are made based on arm’s-length
terms and subject to prevailing commercial criteria and market rates and
are
subject to all of the Bank’s corporate governance and control procedures. At
December 31, 2007 and 2006, approximately 22% and 27%, respectively, of the
outstanding loan portfolio is placed with the Bank’s Class “A” and “B”
stockholders and their related parties. At December 31, 2007, the Bank was
not
directly or indirectly owned or controlled by another corporation or any
foreign
government, and no Class “A” or “B” shareholder was the registered owner of more
than 3.5% of the total outstanding shares of the voting capital stock of
the
Bank.
During
the year 2007, the Bank sold loans with a book value of $121.8 million, with
a
net gain of $271 thousand.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
7.
|
Allowance
for credit losses
|
The
allowance for credit losses is available to absorb estimated probable credit
losses existing in the credit portfolio at the date of the consolidated balance
sheets. During 2005, Bladex implemented a new methodology for estimating
generic
allowances for credit losses. The new methodology incorporates statistical
data
on Bladex’s historical loss performance to calculate the expected loss and loss
given default ratios, replacing the use of general probability of default
information from rating agencies used in the former model. The Bank believes
that this new methodology represents a change in determining an adequate
level
of allowance for credit losses. The effect of the change in methodology for
periods ending before December 31, 2005 is included into the 2005 earnings
and
represented a net reversal of provisions for $2.7 million (reversal of $5.9
million in provision for loan losses and increase of $3.2 million in provision
for off-balance sheet risk). The net effect of the change for the year ended
December 31, 2005 was a decrease of $10 million in net income ($0.26 per
share).
The
Bank
classifies the allowance for credit losses into two components:
|
a)
|
Allowance
for loan losses:
|
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of the year
|
|
|
51,266
|
|
|
39,448
|
|
|
106,352
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
(reversal) for loan losses:
|
|
|
|
|
|
|
|
|
|
|
Current
year allocation
|
|
|
11,994
|
|
|
11,846
|
|
|
(48,180
|
)
|
Effect
of a change in the credit loss reserve methodology - 2005
|
|
|
-
|
|
|
-
|
|
|
(5,975
|
)
|
|
|
|
11,994
|
|
|
11,846
|
|
|
(54,155
|
)
|
Cumulative
effect on prior years (to December 31, 2004) of a change in the
credit
loss reserve methodology
|
|
|
-
|
|
|
-
|
|
|
(5,937
|
)
|
Loan
recoveries
|
|
|
6,434
|
|
|
3
|
|
|
2,612
|
|
Loans
written-off against the allowance for loan losses
|
|
|
(51
|
)
|
|
(31
|
)
|
|
(9,424
|
)
|
Balance
at end of the year
|
|
|
69,643
|
|
|
51,266
|
|
|
39,448
|
|
|
Reversal
of provision for credit losses are mostly related to reserves assigned
and
recovery of the Bank’s Argentine non-accruing portfolio, which was
collected during the last three
years.
|
b)
Reserve
for losses on off-balance sheet credit risk:
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of the year
|
|
|
27,195
|
|
|
52,086
|
|
|
33,101
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
(reversal) for losses on off-balance sheet credit risk:
|
|
|
|
|
|
|
|
|
|
|
Current
year allocation
|
|
|
(13,468
|
)
|
|
(24,891
|
)
|
|
(210
|
)
|
Effect
of a change in the credit loss reserve methodology - 2005
|
|
|
-
|
|
|
-
|
|
|
15,991
|
|
|
|
|
(13,468
|
)
|
|
(24,891
|
)
|
|
15,781
|
|
Cumulative
effect on prior years (to December 31, 2004) of a change in the
credit
loss reserve methodology
|
|
|
-
|
|
|
-
|
|
|
3,204
|
|
Balance
at end of the year
|
|
|
13,727
|
|
|
27,195
|
|
|
52,086
|
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
The
reserve for losses on off-balance sheet credit risk reflects the Bank’s
management estimate of probable losses on off-balance sheet credit risk items
such as: confirmed letters of credit, stand-by letters of credit, guarantees
and
credit commitments (see Note 16).
At
December 31, 2007 and 2006, other assets include an equity investment in
a
private investment fund for
$2.4
million and $3.1 million, respectively. Its main objective is to generate
capital gains in the long term through the purchase of shares and convertible
debt, mainly from Mexican manufacturing corporations or foreign corporations
looking for establishing or expanding its operations in Mexico. During 2007,
the
Bank invested $0.4 million in the fund, and received a total of $1.1 million
of
capital distribution that generated a net loss of $106 thousand. During 2006
the
Bank invested $0.9 million.
At
December 31, 2007 the Bank is committed to invest $1.5 million in this fund.
At
December 31, 2007 and 2006, the Bank has not identified any events or changes
in
their financial condition that may have had a significant adverse effect
on the
carrying value of this investment. The Bank does not consider this investment
to
be other-than-temporary impaired.
At
December 31, 2006, other assets also included an equity investment of $500
thousand in a company specialized in digital solutions. During the first
semester of 2007, this investment was written off and charged to earnings
as its
impairment was considered other than temporary.
|
The
maturity profile of the Bank’s deposits is as
follows:
|
(In
thousand of US$)
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Demand
|
|
|
111,496
|
|
|
132,130
|
|
Up
to 1 month
|
|
|
1,060,706
|
|
|
578,220
|
|
From
1 month to 3 months
|
|
|
206,889
|
|
|
317,153
|
|
From
3 months to 6 months
|
|
|
73,280
|
|
|
28,774
|
|
From
6 months to 1 year
|
|
|
10,000
|
|
|
-
|
|
|
|
|
1,462,371
|
|
|
1,056,277
|
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
The
following table presents additional information about deposits:
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Aggregate
amounts of time deposits of $100,000 or more
|
|
|
1,350,875
|
|
|
924,147
|
|
Aggregate
amounts of deposits in offices outside Panama
|
|
|
290,501
|
|
|
422,359
|
|
Interest
expense paid to deposits in offices outside Panama
|
|
|
22,636
|
|
|
19,963
|
|
10.
|
Short-term
borrowings
|
The
breakdown of short-term borrowings due to banks and other creditors is as
follows:
(In
thousand of US$)
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
At
fixed interest rates:
|
|
|
|
|
|
Advances
from corporations
|
|
|
25,000
|
|
|
-
|
|
Advances
from banks
|
|
|
1,181,500
|
|
|
1,147,248
|
|
Discounted
acceptances
|
|
|
-
|
|
|
10,000
|
|
|
|
|
1,206,500
|
|
|
1,157,248
|
|
At
floating interest rates:
|
|
|
|
|
|
|
|
Advances
from banks
|
|
|
15,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
short-term borrowings
|
|
|
1,221,500
|
|
|
1,157,248
|
|
|
|
|
|
|
|
|
|
Average
outstanding balance during the year
|
|
|
1,272,986
|
|
|
497,830
|
|
|
|
|
|
|
|
|
|
Maximum
balance at any month-end
|
|
|
1,221,500
|
|
|
1,208,348
|
|
|
|
|
|
|
|
|
|
Weighted
average interest rate at end of the year
|
|
|
5.31
|
%
|
|
5.56
|
%
|
|
|
|
|
|
|
|
|
Weighted
average interest rate during the year
|
|
|
5.48
|
%
|
|
5.50
|
%
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
11.
|
Borrowings
and long-term debt
|
Borrowings
consist of long-term and syndicated loans obtained from international banks.
Debt instruments consist of Euro-Notes and other issuances in Latin America.
The
breakdown of borrowings and long-term debt (original maturity of more than
one
year) is as follows:
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Borrowings:
|
|
|
|
|
|
At
fixed interest rates with due dates from June 2008 to July
2011
|
|
|
235,578
|
|
|
105,180
|
|
At
floating interest rates with due dates from January 2008 to March
2012
|
|
|
708,690
|
|
|
428,680
|
|
Total
borrowings
|
|
|
944,268
|
|
|
533,860
|
|
Debt:
|
|
|
|
|
|
|
|
At
fixed interest rates with due dates in November 2014
|
|
|
41,048
|
|
|
-
|
|
At
floating interest rates with due dates from January 2008 until
October
2010
|
|
|
25,000
|
|
|
25,000
|
|
Total
debt
|
|
|
66,048
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
Total
borrowings and long-term debt outstanding
|
|
|
1,010,316
|
|
|
558,860
|
|
|
|
|
|
|
|
|
|
Average
outstanding balance during the year
|
|
|
808,890
|
|
|
497,830
|
|
|
|
|
|
|
|
|
|
Maximum
outstanding balance at any month-end
|
|
|
1,059,224
|
|
|
558,860
|
|
|
|
|
|
|
|
|
|
Weighted
average interest rate at the end of the year
|
|
|
5.75
|
%
|
|
5.82
|
%
|
Weighted
average interest rate during the year
|
|
|
5.94
|
%
|
|
5.50
|
%
|
The
Bank's funding activities include a Euro-Note program, which may be used
to
issue notes for up to $2.3 billion, with maturities from 90 days up to a
maximum
of 30 years, at fixed or floating interest rates, or at discount, and in
various
currencies.
During
2007 the Bank issued long-term debt for a total of 123 million Peruvian Soles
with maturity in November 2014. This issuance is hedged with cross-currency
swaps at fixed interest rate.
The
notes
are generally sold in bearer or registered form through one or more authorized
financial institutions.
Some
borrowing agreements include various events of default and covenants related
to
minimum capital adequacy ratios, incurrence of additional liens, and asset
sales, as well as other customary covenants, representations and warranties.
At
December 31, 2007, the Bank was in compliance with all
covenants.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
The
future maturities of long-term debt and borrowings outstanding at December
31,
2007, are as follows:
(In
thousand of US$)
|
|
|
|
Due
in:
|
|
Outstanding
|
|
|
|
|
|
2008
|
|
|
357,300
|
|
2009
|
|
|
138,000
|
|
2010
|
|
|
214,393
|
|
2011
|
|
|
109,575
|
|
2012
|
|
|
150,000
|
|
2013
|
|
|
-
|
|
2014
|
|
|
41,048
|
|
|
|
|
1,010,316
|
|
Redeemed
Preferred Stock:
On
May
15, 2006, the Bank redeemed all non-voting preferred shares outstanding.
In case
of a liquidation of the Bank, the preferred stockholders were entitled to
receive a liquidation preference of $10 per share, plus accrued and unpaid
dividends. The Bank redeemed preferred stock at its par value by 20% of the
aggregate par value of the preferred stock outstanding as of March 15, 2002,
and
on March 15 of each of the subsequent years up to 2006. At December 31, 2007
and
2006, the Bank had $1.3 million and $1.9 million, respectively, representing
126,448 and 193,623 preferred shares, respectively, redeemed but not claimed
by
preferred shareholders, which are recorded in other liabilities. Preferred
stockholders had the right to receive an interest equivalent to the same
percentage as the common stockholders (excluding from the calculation any
common
stock issued as stock dividend).
|
The
Bank’s common stock is divided into three
categories:
|
|
1)
|
Class
“A”; shares may only be issued to Latin American Central Banks or
banks in
which the state or other government agency is the majority shareholder.
|
|
2)
|
Class
“B”; shares may only be issued to banks or financial
institutions.
|
|
3)
|
Class
“E”; shares may be issued to any person whether a natural person or
a
legal entity.
|
The
holders of Class “B” shares have the right to convert or exchange their Class
“B” shares, at any time, and without restriction, for Class “E” shares, at a
rate of one to one. On August 3, 2004, the Board of Directors authorized
a
three-year stock repurchase program under which Bladex may, from time to
time,
repurchase up to an aggregate of $50 million of its Class E shares of common
stock, in the open market at the prevailing market price. In July 2006, this
stock repurchase program was completed at an average price of $16.43 per
share.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
The
following table provides detailed information on the Bank’s common stock
activity per class for each of the years in the three-year period ended December
31, 2007:
(Share
units)
|
|
Class
“A”
|
|
Class
“B”
|
|
Class
“E”
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Authorized
|
|
|
40,000,000
|
|
|
40,000,000
|
|
|
100,000,000
|
|
|
180,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2004
|
|
|
6,342,189
|
|
|
3,271,269
|
|
|
29,283,621
|
|
|
38,897,079
|
|
Conversions
|
|
|
-
|
|
|
(56,925
|
)
|
|
56,925
|
|
|
-
|
|
Restricted
stock issued
|
|
|
-
|
|
|
-
|
|
|
5,320
|
|
|
5,320
|
|
Repurchased
stock
|
|
|
-
|
|
|
-
|
|
|
(805,900
|
)
|
|
(805,900
|
)
|
Exercised
stock options - compensation plan
|
|
|
-
|
|
|
-
|
|
|
276
|
|
|
276
|
|
Outstanding
at December 31, 2005
|
|
|
6,342,189
|
|
|
3,214,344
|
|
|
28,540,242
|
|
|
38,096,775
|
|
Conversions
|
|
|
-
|
|
|
(488,954
|
)
|
|
488,954
|
|
|
-
|
|
Restricted
stock issued
|
|
|
-
|
|
|
-
|
|
|
5,967
|
|
|
5,967
|
|
Repurchased
stock
|
|
|
-
|
|
|
-
|
|
|
(1,774,818
|
)
|
|
(1,774,818
|
)
|
Exercised
stock options - compensation plan
|
|
|
-
|
|
|
-
|
|
|
1,150
|
|
|
1,150
|
|
Outstanding
at December 31, 2006
|
|
|
6,342,189
|
|
|
2,725,390
|
|
|
27,261,495
|
|
|
36,329,074
|
|
Conversions
|
|
|
-
|
|
|
(64,540
|
)
|
|
64,540
|
|
|
-
|
|
Accumulated
difference in fraccional shares in coversion of common
stocks
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
(3
|
)
|
Restricted
stock issued
|
|
|
-
|
|
|
-
|
|
|
22,240
|
|
|
22,240
|
|
Exercised
stock options - compensation plan
|
|
|
-
|
|
|
-
|
|
|
18,838
|
|
|
18,838
|
|
Outstanding
at December 31, 2007
|
|
|
6,342,189
|
|
|
2,660,847
|
|
|
27,367,113
|
|
|
36,370,149
|
|
The
following table presents information regarding shares repurchased but not
retired by the Bank and accordingly classified as treasury stock:
(In
thousand, except for share data)
|
|
Class
“A”
|
|
Class
“B”
|
|
Class
“E”
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2004
|
|
|
318,140
|
|
|
10,708
|
|
|
568,010
|
|
|
15,655
|
|
|
2,196,616
|
|
|
66,264
|
|
|
3,082,766
|
|
|
92,627
|
|
Repurchased
during 2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
805,900
|
|
|
13,815
|
|
|
805,900
|
|
|
13,815
|
|
Restricted
stock
issued
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,320
|
)
|
|
(152
|
)
|
|
(5,320
|
)
|
|
(152
|
)
|
Exercised
stock options - compensation plan
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(276
|
)
|
|
(8
|
)
|
|
(276
|
)
|
|
(8
|
)
|
Outstanding
at December 31, 2005
|
|
|
318,140
|
|
|
10,708
|
|
|
568,010
|
|
|
15,655
|
|
|
2,996,920
|
|
|
79,919
|
|
|
3,883,070
|
|
|
106,282
|
|
Repurchased
during 2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,774,818
|
|
|
28,657
|
|
|
1,774,818
|
|
|
28,657
|
|
Restricted
stock issued
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,967
|
)
|
|
(144
|
)
|
|
(5,967
|
)
|
|
(144
|
)
|
Exercised
stock options - compensation plan
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,150
|
)
|
|
(27
|
)
|
|
(1,150
|
)
|
|
(27
|
)
|
Outstanding
at December 31, 2006
|
|
|
318,140
|
|
|
10,708
|
|
|
568,010
|
|
|
15,655
|
|
|
4,764,621
|
|
|
108,405
|
|
|
5,650,771
|
|
|
134,768
|
|
Restricted
stock issued
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(22,240
|
)
|
|
(531
|
)
|
|
(22,240
|
)
|
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
stock options - compensation plan
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(18,838
|
)
|
|
(449
|
)
|
|
(18,838
|
)
|
|
(449
|
)
|
Outstanding
at December 31, 2007
|
|
|
318,140
|
|
|
10,708
|
|
|
568,010
|
|
|
15,655
|
|
|
4,723,543
|
|
|
107,425
|
|
|
5,609,693
|
|
|
133,788
|
|
14.
|
Cash
and stock-based compensation plans
|
|
The
Bank established equity compensation plans under which it administers
restricted stock and stock option plans to attract, retain and
motivate
Directors, and key employees and compensate them for their contributions
to the growth and profitability of the Bank.
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
During
2005 the Bank adopted SFAS No. 123(R) “Share-Based Payment”. As a result of the
early adoption of this rule, compensation cost of $555 thousand was recorded
in
2005. The adjustment of $150 thousand to retroactively apply the new method
was
charged to income of 2005.
Restricted
Stock - Directors
During
2003, the Board of Directors approved a restricted stock award plan for
Directors of the Bank that was amended during 2007. These Class “E” stocks may
be sourced from treasury stock, or authorized unissued shares. Until 2006,
the
plan allowed Directors to receive Class “E” shares for each Director on an
annual basis worth $10 thousand, and to the Chairman of the Board worth $15
thousand. Following the amendment of this award plan, starting in 2007, annually
the Board may grant Class “E” shares for each Director worth $50 thousand, and
to the Chairman of the Board worth $75 thousand, all based on Bladex’s closing
price in the New York Stock Exchange (“NYSE”) at the trading date of the grant.
The restricted stocks have a cliff vesting period of five years after the
grant
date. During 2007, 2006, and 2005, the Bank issued under this plan 22,240,
5,967, and 5,320 Class “E” common shares, respectively. Costs of restricted
stock issued under this plan for $475 thousand in 2007, and $95 thousand
in 2006
and 2005, are amortized during the cliff vesting period. Related costs charged
against income totaled $118 thousand, $65 thousand and $46 thousand in 2007,
2006 and 2005, respectively. At December 31, 2007 remaining compensation
cost
for $587 thousand will be amortized over 3.06 years.
Stock
Option Plan 2006 - Directors and Key Employees
On
December 12, 2006, the Bank’s Board of Directors adopted the 2006 Stock Option
Plan. The maximum aggregate number of shares which may be issued under the
2006
Stock Option Plan is two million Class E common shares. However, if there
are
any modifications to the number of shares representing the outstanding common
stock of the Bank, as a result of a stock dividend, combination of stock
or
change in the corporate structure, the number of shares that may be issued
under
the 2006 Stock Option Plan will be revised. Under the 2006 Stock Option Plan,
the Bank’s Board of Directors, with the recommendation and advice of the
Nomination and Compensation Committee, may authorize the grant of options
to any
one or more key employees or directors of the Bank, as well as determine
or
impose conditions upon the grant or exercise of Options under the Plan. The
Options expire seven years after the grant date and, except otherwise provided
in the award agreement, shall be exercisable beginning on the fourth anniversary
of the date of grant.
During
2007, the Board of Directors granted $95 thousand in stock options to members
of
the Board of Directors and $890 thousand in stock options to key employees
of
the Bank. At December 31, 2007, related cost charged against income was $302
thousand. Remaining compensation cost for $709 thousand will be amortized
over
3.12 years. The fair value of each option granted is estimated at the grant
date
using the Black-Scholes option-pricing model, based on the following
factors:
|
|
December
31
,
2007
|
|
|
|
|
|
Weighted
average fair value option
|
|
$
|
4.72
|
|
Weighted
average expected terms, in years
|
|
|
5.50
|
|
Expected
volatility
|
|
|
36
|
%
|
Risk-free
rate
|
|
|
4.81
|
%
|
Expected
dividend
|
|
|
3.54
|
%
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
A
summary
of the status of the share options granted to Directors and key employees
is
presented below:
|
|
2007
|
|
|
|
Options
|
|
Weighted
Average Option Price
Exercisable
|
|
Outstanding,
beginning of year
|
|
|
-
|
|
|
-
|
|
Granted
|
|
|
208,765
|
|
$
|
16.34
|
|
Forfeited
|
|
|
-
|
|
|
-
|
|
Outstanding,
end of year
|
|
|
208,765
|
|
$
|
16.34
|
|
Indexed
Stock Option Plan
During
2003, the Board of Directors approved an indexed stock option plan for Directors
and key employees of the Bank, which was subsequently terminated in April
2006.
On an annual basis, the plan allowed Directors to receive options to purchase
Class “E” shares from treasury shares already held, for an equivalent amount of
$10 thousand, and for the Chairman of the Board, an equivalent amount of
$15
thousand. The number of options granted for key employees was determined
by the
Board of Directors based on the target of each eligible position and the
value
of the option at grant date. The indexed stock options expire in seven years
with a cliff-vesting period of four years. The exercise price is adjusted
based
on the change in a customized Latin America general market index. As of December
31, 2007, the Bank had an unrecognized compensation cost of $689 thousand
related to non-vested options granted under the indexed stock option plan,
which
will be recognized over a period of 1.70 years. Related costs charged against
income amounted to $828 thousand in 2007, $635 thousand in 2006, and $385
thousand in 2005. The fair value of each option granted is estimated at the
grant date using the Black-Scholes option-pricing model, based on the following
factors:
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
Weighted
average fair value option
|
|
$
|
6.02
|
|
$
|
4.5
|
|
$
|
5.3
|
|
Weighted
average expected term, in years
|
|
|
4.11
|
|
|
6.1
|
|
|
6.2
|
|
Expected
volatility
|
|
|
51.4
|
%
|
|
51.4
|
%
|
|
51.4
|
%
|
Risk-free
rate
|
|
|
3
|
%
|
|
3
|
%
|
|
3
|
%
|
Expected
dividend
|
|
|
6.7
|
%
|
|
6.7
|
%
|
|
6.7
|
%
|
A
summary
of the status of the share options granted under the indexed stock option
plans
is presented below:
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
beginning of year
|
|
|
523,723
|
|
$
|
14.53
|
|
|
307,013
|
|
$
|
12.42
|
|
|
184,836
|
|
$
|
18.53
|
|
Granted
|
|
|
-
|
|
$
|
-
|
|
|
216,710
|
|
$
|
16.00
|
|
|
152,084
|
|
$
|
17.30
|
|
Forfeited
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
(29,907
|
)
|
$
|
17.30
|
|
Exercised
|
|
|
(18,838
|
)
|
$
|
8.50
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
Outstanding,
end of year
|
|
|
504,885
|
|
$
|
14.47
|
|
|
523,723
|
|
$
|
13.90
|
|
|
307,013
|
|
$
|
17.30
|
|
Weighted
average fair value of options granted during the year
|
|
|
|
|
$
|
-
|
|
|
|
|
$
|
4.48
|
|
|
|
|
$
|
5.18
|
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
|
|
December
31, 2007
|
|
Range
of Exercise Prices
|
|
Number
Outstanding
|
|
Weighted
Average
Exercise Price
|
|
Weighted Average
Contractual Life
Remaining
(in years)
|
|
|
|
|
|
|
|
|
|
$10.00
- 20.00
|
|
|
504,885
|
|
$
|
14.47
|
|
|
4.11
|
|
Stock
Option Plan - Discontinued
During
2000, the Board of Directors approved a stock option plan for Directors and
employees of the Bank. The exercise price of each option must equal 100%
of the
market value of the stock at the grant date and becomes 100% exercisable
one
year after the grant date and expires on the fifth year after the grant date.
In
addition, during 1995 and 1999, the Board of Directors approved two stock
option
plans for employees. Under these stock option plans, stock options were granted
at a purchase price equal to the average market value of the common stock
at the
grant date. One third of the options may be exercised on each successive
year
after the grant date and expire on the tenth anniversary after the grant
date.
On July 19, 2003, the Board of Directors approved discontinuing these plans
therefore, no additional stock options have been granted.
A
summary
of the status of the stock options granted to Directors and employees is
presented below:
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding,
beginning of year
|
|
|
49,613
|
|
$
|
34.84
|
|
|
56,093
|
|
$
|
34.34
|
|
|
102,012
|
|
$
|
36.12
|
|
Forfeited
|
|
|
(2,850
|
)
|
$
|
30.95
|
|
|
(4,200
|
)
|
$
|
34.47
|
|
|
(37,483
|
)
|
$
|
35.35
|
|
Expired
|
|
|
(8,600
|
)
|
$
|
51.19
|
|
|
(2,280
|
)
|
$
|
32.88
|
|
|
(8,436
|
)
|
$
|
37.88
|
|
Outstanding,
end of year
|
|
|
38,163
|
|
$
|
31.46
|
|
|
49,613
|
|
$
|
34.84
|
|
|
56,093
|
|
$
|
34.34
|
|
Exercisable
at year end
|
|
|
38,163
|
|
$
|
31.46
|
|
|
49,613
|
|
$
|
34.84
|
|
|
56,093
|
|
$
|
34.34
|
|
|
|
December
31, 2007
|
|
|
|
Outstanding
Options
|
|
Exercisable
Options
|
|
Range
of Exercise Prices
|
|
Number
Outstanding
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Contractual
Life
Remaining
|
|
Number
Outstanding
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$20.00
- 30.00
|
|
|
14,143
|
|
$
|
23.12
|
|
|
2
years
|
|
|
14,143
|
|
$
|
23.12
|
|
$30.01
- 40.00
|
|
|
15,370
|
|
$
|
32.88
|
|
|
4
years
|
|
|
15,370
|
|
$
|
32.88
|
|
$40.01
- 50.00
|
|
|
8,650
|
|
$
|
42.56
|
|
|
1
year
|
|
|
8,650
|
|
$
|
42.56
|
|
Total
|
|
|
38,163
|
|
$
|
31.46
|
|
|
|
|
|
38,163
|
|
$
|
31.46
|
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
Other
employee plans
Expatriate
Officer Plan:
The
Bank
sponsors a defined contribution plan for its expatriate top executives. The
Bank’s contributions are determined as a percentage of the eligible officers’
annual salaries, with each officer contributing an additional amount withheld
from his salary. Contributions from officers were deposited in a saving account
with the Bank at market interest rates until March 2007, when the Bank
transferred the balance of contributions from both, the Bank and the officers,
to a trust that is managed by a fund manager. Officers are entitled to the
contributions from the Bank once they have worked with the Bank for at least
three years. During the years 2007, 2006 and 2005, the Bank charged to salaries
expense, $175 thousand, $261 thousand and $165 thousand, respectively. As
of
December 31, 2007, 2006 and 2005, the accumulated liability payable amounted
to
$382 thousand, $745 thousand and $484 thousand, respectively.
Deferred
Equity Unit Plan (the “DEU Plan”):
In
1999,
the Board of Directors approved the adoption of the DEU Plan, which was
subsequently terminated in July 2003. This plan expired in February 2006
and
employees exercised their rights in cash or shares.
Deferred
Compensation Plan (the “DC Plan”):
In
1999,
the Board of Directors approved the adoption of the DC Plan, which was
subsequently terminated in July 2003. The DC Plan has two separate features.
Under the first component, the Bank could grant to each eligible employee
a
number of DEU equal to an amount equivalent to a percentage, not to exceed
3%,
of the employee’s compensation, divided by the market value of a Class “E”
share. Eligible employees would vest the DEU after three years of service.
Distributions were made in respect of DEU on the later of (i) the date the
vested DEU were credited to an employee’s account and (ii) ten years after the
employee was first credited with DEU under the DC Plan. Participating employees
receive dividends, with respect to their unvested deferred equity units.
The
second component allowed employees who are not citizens or residents of the
United States of America to defer a percentage of their compensation, and
receive discretionary matching cash contribution. In no event could the value
of
(i) the discretionary matching cash contribution made on behalf of an employee
and (ii) the grant of deferred equity units made to such employees exceed
6% of
the employee’s annual base compensation. A summary of the status of the DC Plan
is presented bellow:
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
Outstanding,
beginning of year
|
|
|
23,779
|
|
|
27,953
|
|
|
28,351
|
|
Exercised
|
|
|
(1,597
|
)
|
|
(4,174
|
)
|
|
(398
|
)
|
Outstanding,
end of year
|
|
|
22,182
|
|
|
23,779
|
|
|
27,953
|
|
As
of
December 31, 2007, 2006, and 2005, expenses recorded were $20 thousand, $48
thousand, and $67 thousand, respectively.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
|
The
following is a reconciliation of the income and share data used
in the
basic and diluted earnings per share (“EPS”) computations for the dates
indicated:
|
(In
thousand of US$, except per share amounts)
|
|
Year
ended December 31,
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
Income
before cumulative effect of changes in accounting
principles:
|
|
|
72,177
|
|
|
57,902
|
|
|
77,518
|
|
Cumulative
effect on prior years (to December 31, 2004) of a change in the
credit
loss reserve methodology
|
|
|
-
|
|
|
-
|
|
|
2,733
|
|
Cumulative
effect on prior year (to December 31, 2004) of an early adoption
of the
fair-value-based method of accounting stock-based employee
compensation
|
|
|
-
|
|
|
-
|
|
|
(150
|
)
|
Net
income available to common stockholders for both, basic and diluted
EPS
|
|
|
72,177
|
|
|
57,902
|
|
|
80,101
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding - applicable to basic
EPS
|
|
|
36,349
|
|
|
37,065
|
|
|
38,550
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Income
before cumulative effect of changes in accounting
principles
|
|
|
1.99
|
|
|
1.56
|
|
|
2.01
|
|
Cumulative
effect on prior years of accounting changes
|
|
|
0.00
|
|
|
0.00
|
|
|
0.07
|
|
Net
income per share
|
|
|
1.99
|
|
|
1.56
|
|
|
2.08
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
applicable
to diluted EPS
|
|
|
36,349
|
|
|
37,065
|
|
|
38,550
|
|
Effect
of dilutive securities (1):
|
|
|
|
|
|
|
|
|
|
|
Indexed
stock option plans
|
|
|
65
|
|
|
507
|
|
|
310
|
|
Adjusted
weighted average common shares outstanding
Applicable
to diluted EPS
|
|
|
36,414
|
|
|
37,572
|
|
|
38,860
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Income
before cumulative effect of changes in accounting
principles
|
|
|
1.98
|
|
|
1.54
|
|
|
1.99
|
|
Cumulative
effect on prior years of accounting changes
|
|
|
0.00
|
|
|
0.00
|
|
|
0.07
|
|
Net
income per share
|
|
|
1.98
|
|
|
1.54
|
|
|
2.06
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earning per share
|
|
|
1.99
|
|
|
1.56
|
|
|
2.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earning per share
|
|
|
1.98
|
|
|
1.54
|
|
|
1.99
|
|
(1)
At
December 31, 2007, 2006, 2005, weighted average options for 38,467, 53,177
and
98,806, respectively, were excluded from the computation of diluted earning
per
share because the option’s exercise price was greater than the average quoted
market price of the Bank’s common stock.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
16.
|
Financial
instruments with off-balance sheet credit
risk
|
In
the
normal course of business, to meet the financing needs of its customers,
the
Bank is party to financial instruments with off-balance sheet credit risk.
These
financial instruments involve, to varying degrees, elements of credit and
market
risk in excess of the amount recognized in the consolidated balance sheets.
Credit risk represents the possibility of loss resulting from the failure
of a
customer to perform in accordance with the terms of a contract.
The
Bank’s outstanding financial instruments with off-balance sheet credit risk were
as follows:
(In
thousand of US$)
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Confirmed
letters of credit
|
|
|
97,211
|
|
|
109,102
|
|
Stand-by
letters of credit and guarantees:
|
|
|
|
|
|
|
|
Country
risk
|
|
|
113,924
|
|
|
123,924
|
|
Commercial
risk
|
|
|
197,528
|
|
|
168,295
|
|
Other
|
|
|
-
|
|
|
20,000
|
|
Credit
derivatives
|
|
|
3,000
|
|
|
-
|
|
|
|
|
314,452
|
|
|
312,219
|
|
|
|
|
|
|
|
|
|
Credit
commitments
|
|
|
129,378
|
|
|
200,191
|
|
Reimbursement
undertaking
|
|
|
-
|
|
|
2,687
|
|
|
|
|
541,041
|
|
|
624,199
|
|
As
of
December 31, 2007, the maturity profile of the Bank’s outstanding financial
instruments with off-balance sheet credit risk is as follows:
(In
thousand of US$)
|
|
|
|
Maturities
|
|
Amount
|
|
|
|
|
|
Within
1 year
|
|
|
427,146
|
|
From
1 to 2 years
|
|
|
70,502
|
|
From
2 to 5 years
|
|
|
41,807
|
|
After
5 years
|
|
|
1,586
|
|
|
|
|
541,041
|
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
|
As
of December 31, 2007 and 2006 the breakdown of the Bank’s off-balance
sheet exposure by country risk is as follows:
|
(In
thousand of US$)
|
|
|
|
|
|
2007
|
|
2006
|
|
Country:
|
|
|
|
|
|
|
|
Argentina
|
|
|
4,057
|
|
|
1,055
|
|
Brazil
|
|
|
220,281
|
|
|
213,956
|
|
Chile
|
|
|
590
|
|
|
461
|
|
Colombia
|
|
|
4,225
|
|
|
67,830
|
|
Costa
Rica
|
|
|
71,871
|
|
|
11,553
|
|
Dominican
Republic
|
|
|
60,601
|
|
|
112,234
|
|
Ecuador
|
|
|
81,379
|
|
|
80,570
|
|
El
Salvador
|
|
|
1,675
|
|
|
1,175
|
|
Guatemala
|
|
|
6,293
|
|
|
5,980
|
|
Honduras
|
|
|
400
|
|
|
-
|
|
Jamaica
|
|
|
15,615
|
|
|
-
|
|
Mexico
|
|
|
11,750
|
|
|
37,526
|
|
Panama
|
|
|
10,565
|
|
|
40,152
|
|
Peru
|
|
|
10
|
|
|
18,743
|
|
Trinidad
and Tobago
|
|
|
5,000
|
|
|
-
|
|
United
States
|
|
|
18,616
|
|
|
-
|
|
Venezuela
|
|
|
27,963
|
|
|
32,782
|
|
Other
|
|
|
150
|
|
|
182
|
|
|
|
|
541,041
|
|
|
624,199
|
|
Letters
of credit and guarantees
The
Bank,
on behalf of its client base, advises and confirms letters of credit to
facilitate foreign trade transactions. When confirming letters of credit,
the
Bank adds its own unqualified assurance that the issuing bank will pay and
that
if the issuing bank does not honor drafts drawn on the credit, the Bank will.
The Bank provides stand-by letters of credit and guarantees, including country
risk guarantees, which are issued on behalf of institutional customers in
connection with financing between its customers and third parties. The Bank
applies the same credit policies used in its lending process, and once issued
the commitment is irrevocable and remains valid until its expiration. Credit
risk arises from the Bank's obligation to make payment in the event of a
customer’s contractual default to a third party. Risks associated with stand-by
letters of credit and guarantees are included in the evaluation of the Bank’s
overall credit risk. The Bank issues stand-by letters and guarantees to provide
coverage for country risk arising from the risk of convertibility and
transferability of local currency of countries in the Region into hard currency,
and to provide coverage for country risk arising from political risks, such
as
expropriation, nationalization, war and/or civil disturbances.
Credit
commitments
Commitments
to extend credit are a combination of either non-binding or legal agreements
to
lend to a customer. Commitments generally have fixed expiration dates or
other
termination clauses and may require payment of a fee to the Bank. As some
commitments expire without being drawn down, the total commitment amounts
do not
necessarily represent future cash requirements.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
17.
|
Leasehold
and other commitments
|
Leasehold
commitments
At
December 31, 2007, a summary of leasehold commitment is as follows:
|
|
(In thousand of
US$)
|
|
Year
|
|
Future
Rental
Commitments
|
|
|
|
|
|
2008
|
|
|
654
|
|
2009
|
|
|
660
|
|
2010
|
|
|
667
|
|
2011
|
|
|
618
|
|
2012
|
|
|
417
|
|
Thereafter
|
|
|
1,122
|
|
|
|
|
4,138
|
|
Occupancy
expense for years ended December 31, 2007, 2006 and 2005, amounted to $593
thousand, $637 thousand, and $447 thousand, respectively.
Other
commitments
Purchase
Agreements
The
Bank
has signed service agreements with certain vendors that provide services
that
are necessary for the ongoing operations of its business and mainly related
to
the maintenance of a new technology platform and telecommunications services.
The terms of these agreements are up to 8 years and some of them can be
renegotiated for annual or semiannual price adjustments, after the fifth
year.
Under
the
terms of these agreements, the Bank has committed to contractually specified
minimums payments over the contractual periods as follows:
The
contractual minimum payments are:
(In
thousand of US$)
|
|
|
|
Due
in:
|
|
Amount
|
|
|
|
|
|
2008
|
|
|
577
|
|
2009
|
|
|
530
|
|
2010
|
|
|
519
|
|
2011
|
|
|
311
|
|
2012
|
|
|
323
|
|
Thereafter
|
|
|
336
|
|
|
|
|
2,596
|
|
To
the
extent that the Bank does not fulfill the contractual minimum amount of
services, the Bank must pay the shortfall to the vendors. The Bank believes
that
it will meet the contractual minimums payments through the normal course
of
business.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
18.
|
Derivative
financial instruments
|
At
December 31, 2007 and 2006, quantitative information on derivative financial
instruments held for hedging purposes is as follows:
|
|
2007
|
|
2006
|
|
(In
thousand of US$)
|
|
Nominal
|
|
Fair
Value
|
|
Nominal
|
|
Fair
Value
|
|
|
|
Amount
|
|
Asset
|
|
Liability
|
|
Amount
|
|
Asset
|
|
Liability
|
|
Fair
value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps
|
|
|
372,996
|
|
|
122
|
|
|
13,408
|
|
|
249,338
|
|
|
541
|
|
|
2,196
|
|
Forward
foreign exchange
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
13,146
|
|
|
-
|
|
|
201
|
|
Cross-currency
interest rate swaps
|
|
|
45,455
|
|
|
-
|
|
|
1,479
|
|
|
3,600
|
|
|
-
|
|
|
164
|
|
Cash
flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps
|
|
|
20,000
|
|
|
-
|
|
|
1,129
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Forward
foreign exchange
|
|
|
26,282
|
|
|
-
|
|
|
883
|
|
|
5,022
|
|
|
-
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
464,733
|
|
|
122
|
|
|
16,899
|
|
|
271,106
|
|
|
541
|
|
|
2,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss on the ineffective portion of hedging activities
|
|
|
(989
|
)
|
|
|
|
|
|
|
|
(225
|
)
|
|
|
|
|
|
|
For
control purposes, derivative instruments are recorded at their nominal amount
("notional amount") in memorandum accounts. Interest rate swaps are made
either
in a single currency or cross currency for a prescribed period to exchange
a
series of interest rate flows, which involve fixed for floating interest
payments. The Bank also engages in some foreign exchange trades to serve
customers’ transaction needs and to manage the foreign currency risk. All such
positions are hedged with an offsetting contract for the same currency. The
Bank
manages and controls the risks on these foreign exchange trades by establishing
counter party credit limits by customer and by adopting policies that do
not
allow for open positions in the credit and investment portfolio. Derivative
and
foreign exchange instruments negotiated by the Bank are executed mainly
over-the-counter (OTC). These contracts are executed between two counter
parties
that negotiate specific agreement terms, including notional amount, exercise
price and maturity. During 2005, the Bank settled, prior to maturity, certain
hedge relationships accounted for as fair value hedges and recorded $2.1
million
in other income under derivative and hedging activities. These interest rate
swaps were considered highly effective at reducing the interest rate risk
associated with available for sale securities.
The
Bank
estimates that approximately $127 thousand of gains reported in other
comprehensive income (loss) at December 31, 2007, related to forward foreign
exchange contracts were expected to be reclassified into interest expense
as an
adjustment to yield adjustment of hedged liabilities during the twelve-month
period ending December 31, 2008.
The
Bank
estimates that approximately $183 thousand of losses reported in other
comprehensive income (loss) at December 31, 2007 related to forward foreign
exchange contracts were expected to be reclassified into interest income
as an
adjustment to yield of hedged loans during the twelve-month period ending
December 31, 2008.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
Types
of Derivative and Foreign Exchange Instruments
Interest
rate swaps are contracts in which a series of interest rate flows in a single
currency are exchanged over a prescribed period. The Bank has designated
a
portion of these derivative instruments as fair value hedges. Cross currency
swaps
are
contracts that generally involve the exchange of both interest and principal
amounts in two different currencies. The Bank has designated a portion of
these
derivative instruments as fair value hedges. Forward foreign exchange contracts
represent an agreement to purchase or sell foreign currency on a future date
at
agreed upon term. The Bank has designated a portion of these derivative
instruments as fair value and cash flow hedges.
19.
|
Accumulated
other comprehensive income
(loss)
|
|
As
of December 31, 2007, 2006 and 2005 the breakdown of accumulated
other
comprehensive income (loss) related to investment securities available
for
sale and derivatives is as follows:
|
(In
thousand of US$)
|
|
Investment
Securities
|
|
Derivative
Financial
Instruments
|
|
Total
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2004
|
|
|
6,082
|
|
|
-
|
|
|
6,082
|
|
Net
unrealized losses arising from the year
|
|
|
(5,257
|
)
|
|
-
|
|
|
(5,257
|
)
|
Reclassification
adjustment for gains included in net income
(1)
|
|
|
(206
|
)
|
|
-
|
|
|
(206
|
)
|
Balance
as of December 31, 2005
|
|
|
619
|
|
|
-
|
|
|
619
|
|
Net
unrealized gains (losses) arising from the year
|
|
|
5,349
|
|
|
(72
|
)
|
|
5,277
|
|
Reclassification
adjustment for gains included in net income
(1)
|
|
|
(2,568
|
)
|
|
-
|
|
|
(2,568
|
)
|
Balance
as of December 31, 2006
|
|
|
3,400
|
|
|
(72
|
)
|
|
3,328
|
|
Net
unrealized gains (losses) arising from the year
|
|
|
(1,912
|
)
|
|
(2,081
|
)
|
|
(3,993
|
)
|
Reclassification
adjustment for gains included in net income
(1)
|
|
|
(9,119
|
)
|
|
143
|
|
|
(8,976
|
)
|
Balance
as of December 31, 2007
|
|
|
(7,631
|
)
|
|
(2,010
|
)
|
|
(9,641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Reclassification adjustments include amounts recognized in net income during
the
current year that had been part of other comprehensive income in this and
previous years.
20.
|
Fair
value of financial
instruments
|
|
Bank’s
management uses its best judgment in estimating the fair value
of the
Bank’s financial instruments; however, there are limitations in any
estimation technique. Therefore, for substantially all financial
instruments, the fair value estimates herein are not necessarily
an
indicative of the amounts the Bank could have realized in a sale
transaction on the dates indicated. The estimated fair value amounts
have
been measured as of their respective year-ends, and have not been
re-expressed or updated subsequent to the dates of these consolidated
financial statements. As such, the estimated fair values of these
financial instruments subsequent to the respective reporting dates
may be
different than the amounts reported at each
year-end.
|
|
The
following information should not be interpreted as an estimate
of the fair
value of the Bank. Fair value calculations are only provided for
a limited
portion of the Bank’s assets and liabilities. Due to a wide range of
valuation techniques and the degree of subjectivity used in making
the
estimates, comparison of fair value information of the Bank and
other
companies may not be meaningful for comparative analysis. The following
methods and assumptions were used by management in estimating the
fair
values of each type of financial
instruments:
|
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
Financial
instruments with carrying value equal to fair value
The
carrying value of certain financial assets, including cash and due from banks,
interest-bearing deposits in banks, accrued interest receivable, customers’
liabilities under acceptances and certain financial liabilities including,
customer’s demand and time deposits, short-term borrowings and securities sold
under repurchase agreement, accrued interest payable, and acceptances
outstanding, as a result of their short-term nature, are considered to be
equal
to fair value.
Trading
assets, trading liabilities and investment securities
The
fair
value of investment securities has been based upon current market quotations,
where available. If quoted market prices are not available, fair value has
been
estimated based upon quoted price of similar instruments, or where these
are not
available, on discounted expected cash flows using market rates commensurate
with the credit quality and maturity of the security.
Loans
The
fair
value of the performing loan portfolio has been determined principally based
upon a discounted analysis of anticipated cash flows adjusted for expected
credit losses. The loans have been grouped to the extent possible, into
homogeneous pools, segregated by maturity and the weighted average maturity
of
the loans within each pool. Depending upon the type of loan involved, maturity
assumptions have been based on either contractual or expected maturity. Credit
risk has been factored into the present value analysis of cash flows associated
with each loan type, by allocating allowances for loan losses. The allocated
portion of the allowance, adjusted by a present value factor based upon the
timing of expected losses, has been deducted from the gross cash flows prior
to
calculating the present value. The fair value of the non-performing loans
has
been determined net of the related allowance for loan losses.
Borrowings
and long
-term
debt
The
fair
value of long-term debt and borrowings is estimated using discounted cash
flow
analysis based on the current incremental borrowing rates for similar types
of
borrowing arrangements.
Derivative
financial instruments
All
derivative instruments are recognized in the consolidated balance sheet at
fair
value. Fair value is based on dealer quotes, pricing models, discounted cash
flow analysis or quoted prices for instruments with similar characteristics.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
The
following table provides information on the carrying value and fair value
of the
Bank’s financial instruments:
|
|
December
31,
|
|
(In
thousand of US$)
|
|
2007
|
|
2006
|
|
|
|
Carrying
|
|
Fair
|
|
Carrying
|
|
Fair
|
|
|
|
Value
|
|
Value
|
|
Value
|
|
Value
|
|
Financial
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruments
with carrying value equal to fair value
|
|
|
593,856
|
|
|
593,856
|
|
|
433,409
|
|
|
433,409
|
|
Trading
assets
|
|
|
52,597
|
|
|
52,597
|
|
|
130,076
|
|
|
130,076
|
|
Securities
available for sale
|
|
|
468,360
|
|
|
468,360
|
|
|
346,194
|
|
|
346,194
|
|
Securities
held to maturity
|
|
|
-
|
|
|
-
|
|
|
125,157
|
|
|
125,118
|
|
Loans,
net of allowance
|
|
|
3,656,234
|
|
|
3,674,978
|
|
|
2,925,081
|
|
|
2,940,941
|
|
Derivative
financial instruments - assets
|
|
|
122
|
|
|
122
|
|
|
541
|
|
|
541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruments
with carrying value equal to fair value
|
|
|
3,015,383
|
|
|
3,015,383
|
|
|
2,726,307
|
|
|
2,726,307
|
|
Borrowings
and long-term debt
|
|
|
1,010,316
|
|
|
1,023,413
|
|
|
558,860
|
|
|
563,183
|
|
Trading
liabilities
|
|
|
90,765
|
|
|
90,765
|
|
|
54,832
|
|
|
54,832
|
|
Derivative
financial instruments - liabilities
|
|
|
16,899
|
|
|
16,899
|
|
|
2,634
|
|
|
2,634
|
|
|
Bladex
is not engaged in any litigation that is material to the Bank’s business
or, to the best of the knowledge of the Bank’s management, that is likely
to have an adverse effect on its business, financial condition
or results
of operations.
|
22.
|
Business
segment information
|
The
Bank’s activities are operated and managed by three segments, Commercial,
Treasury and Asset Management. The segment information reflects this operational
and management structure, in a manner consistent with the requirements outlined
in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related
Information”. The segment results are determined based on the Bank’s management
accounting process, which assigns consolidated balance sheets, revenue and
expense items to each reportable division on a systematic basis.
In
2007
the Bank segregated the Asset Management activities from the Treasury Segment.
Business segment information reported in the financial statements for the
years
ended December 31, 2006 and 2005 has been restated to segregate the new Asset
Management Segment.
Commercial
incorporates all of the Bank’s financial intermediation and fee generation
activities. Operating income from the Commercial Segment includes net interest
income from loans, fee income and allocated operating expenses.
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
Treasury
incorporates deposits in banks and all of the Bank’s securities available for
sale and held to maturity. Operating income from the Treasury Segment includes
net interest income from deposits and securities available for sale and held
to
maturity, derivative and hedging activities, gain and losses on sale of
securities available for sale, gain and losses on foreign exchange, and
allocated operating expenses.
Asset
Management incorporates all of the Fund’s deposits and trading assets. Operating
income from the Asset Management Segment includes net interest income from
deposits with brokers, trading assets, derivative instruments for trading,
gains
and losses on trading, and allocated operating expenses.
The
following table provides certain information regarding the Bank’s continuing
operations by segment:
Business
Segment Analysis
(1)
(In
millions of US$)
|
|
2007
|
|
2006
|
|
2005
|
|
COMMERCIAL
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
221.6
|
|
|
165.8
|
|
|
101.7
|
|
Interest
expense
|
|
|
(157.5
|
)
|
|
(114.9
|
)
|
|
(62.3
|
)
|
Net
interest income
|
|
|
64.1
|
|
|
50.9
|
|
|
39.4
|
|
Net
other income
(2)
|
|
|
5.3
|
|
|
6.4
|
|
|
5.8
|
|
Operating
expenses
|
|
|
(27.2
|
)
|
|
(23.7
|
)
|
|
(21.7
|
)
|
Net
operating income
(3)
|
|
|
42.3
|
|
|
33.6
|
|
|
23.5
|
|
Reversals
for loans and off-balance sheet credit losses
|
|
|
1.5
|
|
|
13.0
|
|
|
38.4
|
|
Impairment
on assets
|
|
|
(0.5
|
)
|
|
0.0
|
|
|
0.0
|
|
Net
income, before cumulative effect of accounting change
|
|
|
43.2
|
|
|
46.6
|
|
|
61.9
|
|
Cumulative
effect on prior years (to December 31, 2004) of a change in the
credit
loss reserve methodology
|
|
|
0.0
|
|
|
0.0
|
|
|
2.7
|
|
Cumulative
effect on prior years (to December 31, 2004) of an early adoption
of the
fair value-based method of accounting stock-based employee compensation
plan
|
|
|
0.0
|
|
|
0.0
|
|
|
(0.2
|
)
|
Net
income
|
|
|
43.2
|
|
|
46.6
|
|
|
64.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Assets and Contingencies (end of period balances):
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets
(4)
|
|
|
3,725.9
|
|
|
2,976.3
|
|
|
2,604.4
|
|
Other
assets and contingencies
(5)
|
|
|
549.5
|
|
|
653.7
|
|
|
796.9
|
|
Total
Interest-Earning Assets, Other Assets and Contingencies
|
|
|
4,275.4
|
|
|
3,630.0
|
|
|
3,401.4
|
|
TREASURY
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
33.7
|
|
|
28.8
|
|
|
15.1
|
|
Interest
expense
|
|
|
(27.5
|
)
|
|
(21.9
|
)
|
|
(9.2
|
)
|
Net
interest income
|
|
|
6.2
|
|
|
6.9
|
|
|
5.9
|
|
Net
other income
(2)
|
|
|
8.5
|
|
|
2.1
|
|
|
2.5
|
|
Operating
expenses
|
|
|
(4.3
|
)
|
|
(3.5
|
)
|
|
(2.7
|
)
|
Net
operating income
(3)
|
|
|
10.3
|
|
|
5.6
|
|
|
5.8
|
|
Recoveries
on assets
|
|
|
0.0
|
|
|
5.6
|
|
|
10.2
|
|
Net
income
|
|
|
10.3
|
|
|
11.1
|
|
|
16.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
assets and contingencies (end of period of balances):
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets
(6)
|
|
|
819.6
|
|
|
775.2
|
|
|
438.5
|
|
Total
Interest-earning assets, other assets and contingencies
|
|
|
819.6
|
|
|
775.2
|
|
|
438.5
|
|
ASSET
MANAGEMENT
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
9.6
|
|
|
8.7
|
|
|
0.0
|
|
Interest
expense
|
|
|
(9.4
|
)
|
|
(7.7
|
)
|
|
(0.0
|
)
|
Net
interest income
|
|
|
0.2
|
|
|
1.0
|
|
|
0.0
|
|
Net
other income
(2)
|
|
|
23.9
|
|
|
0.9
|
|
|
0.0
|
|
Operating
expenses
|
|
|
(5.5
|
)
|
|
(1.9
|
)
|
|
(0.3
|
)
|
Net
operating income
(3)
|
|
|
18.6
|
|
|
0.0
|
|
|
(0.3
|
)
|
Net
income
|
|
|
18.6
|
|
|
0.0
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Fund’s
Assets and Contingencies (end of period of balances):
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets
(6)
|
|
|
178.9
|
|
|
158.4
|
|
|
0
|
|
Total
interest-earning assets, other assets and contingencies
|
|
|
178.9
|
|
|
158.4
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continues)
Banco
Latinoamericano de Exportaciones, S. A.
and
Subsidiaries
Notes
to consolidated financial statements
(In
US$ million)
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
264.9
|
|
|
203.3
|
|
|
116.8
|
|
Interest
expense
|
|
|
(194.3
|
)
|
|
(144.5
|
)
|
|
(71.5
|
)
|
Net
interest income
|
|
|
70.6
|
|
|
58.8
|
|
|
45.3
|
|
Net
other income
(2)
|
|
|
37.7
|
|
|
9.4
|
|
|
8.4
|
|
Operating
expenses
|
|
|
(37.0
|
)
|
|
(28.9
|
)
|
|
(24.7
|
)
|
Net
operating income
(3)
|
|
|
71.2
|
|
|
39.3
|
|
|
28.9
|
|
Reversals
for loans and off-balance sheet credit losses
|
|
|
1.5
|
|
|
13.0
|
|
|
38.4
|
|
Recoveries
(impairment) on assets
|
|
|
(0.5
|
)
|
|
5.6
|
|
|
10.2
|
|
Net
income, before cumulative effect of accounting change
|
|
|
72.2
|
|
|
57.9
|
|
|
77.5
|
|
Cumulative
effect on prior years (to December 31, 2004) of a change in the
credit
loss reserve methodology
|
|
|
0.0
|
|
|
0.0
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
effect on prior years (to December 31, 2004) of an early adoption
of the
fair value-based method of accounting stock-based employee compensation
plan
|
|
|
0.0
|
|
|
0.0
|
|
|
(0.2
|
)
|
Net
income
|
|
|
72.2
|
|
|
57.9
|
|
|
80.1
|
|
Total
Assets and Contingencies (end of period balances):
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets
(4 & 6)
|
|
|
4,724.4
|
|
|
3,909.9
|
|
|
3,042.9
|
|
Other
assets and contingencies
(5)
|
|
|
552.5
|
|
|
653.7
|
|
|
796.9
|
|
Total
Interest-Earning Assets, Other Assets and Contingencies
|
|
|
5,276.9
|
|
|
4,563.6
|
|
|
3,839.8
|
|
(1)
|
The
numbers set out in these tables have been rounded and accordingly
may not
total exactly.
|
(2)
|
Net
other income excludes reversals (provisions) for loans and off-balance
sheet credit losses, and recoveries on assets.
|
(3)
|
Net
operating income refers to net income excluding reversals (provisions)
for
loans and off-balance sheet credit losses, recoveries on assets,
and
cumulative effect on prior years of changes in accounting
principles.
|
(4)
|
Includes
loans, net of unearned income and deferred loan fees.
|
(5)
|
Includes
customers’ liabilities under acceptances, letters of credit and guarantees
covering commercial and country risk, and credit commitments
and equity
investments recorded as other assets.
|
(6)
|
Includes
cash and due from banks, interest-bearing deposits in banks,
securities
available for sale and held to maturity and trading
securities.
|
E
XHIBIT
INDEX
Exhibit
Exhibit 12.1.
|
|
Rule
13a-14(a) Certification of Principal Executive Officer
|
Exhibit 12.2.
|
|
Rule
13a-14(a) Certification of Principal Financial Officer
|
Exhibit 13.1.
|
|
Rule
13a-14(b) Certification of Principal Executive Officer
|
Exhibit 13.2.
|
|
Rule
13a-14(b) Certification of Principal Financial Officer
|
Exhibit 14.1.
|
|
Code
of Ethics
|
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