Report of Foreign Issuer (6-k)

Date : 11/08/2019 @ 9:10PM
Source : Edgar (US Regulatory)
Stock : Banco Latinoamericano de Comercio Exterior SA (BLX)
Quote : 21.42  0.0 (0.00%) @ 9:00AM

Report of Foreign Issuer (6-k)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

  

For the month of November, 2019

 

Commission File Number 1-11414

  

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

(Exact name of Registrant as specified in its Charter)

 

FOREIGN TRADE BANK OF LATIN AMERICA, INC.

(Translation of Registrant’s name into English)

 

Business Park Torre V, Ave. La Rotonda, Costa del Este

P.O. Box 0819-08730

Panama City, Republic of Panama

(Address of Registrant’s Principal Executive Offices)

  

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F x     Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes ¨ No x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes ¨ No x

 

 

  

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: November 8, 2019

  FOREIGN TRADE BANK OF LATIN AMERICA, INC.
  (Registrant)

 

  By: /s/ Ana Graciela de Méndez
  Name: Ana Graciela de Méndez
  Title: CFO

 

 

 

 

 

Banco Latinoamericano

de Comercio Exterior, S.A.

  and Subsidiaries

 

Unaudited condensed consolidated interim statement as of September 30, 2019

and for the nine months ended September 30, 2019 and 2018.

 

 

 

 

Banco Latinoamericano de Comercio Exterior, S.A.

  and Subsidiaries

 

Contents    
     
Unaudited condensed consolidated interim statement of financial position   3
     
Unaudited condensed consolidated interim statement of profit or loss   4
     
Unaudited condensed consolidated interim statement of other comprehensive income   5
     
Unaudited condensed consolidated interim statement of changes in equity   6
     
Unaudited condensed consolidated interim statement of cash flows   7
     
Notes to the unaudited condensed consolidated interim financial statements   8

 

 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statement of financial position

September 30, 2019 and December 31, 2018

(In thousands of US dollars)

 

    Notes     September 30,
2019
(Unaudited)
    December 31,
2018
(Audited)
 
Assets                      
                       
Cash and cash equivalents   4,19       981,484       1,745,652  
                       
Securities and other financial assets, net   5,19       96,958       123,598  
                       
Loans           5,554,259       5,778,424  
Interest receivable           40,031       41,144  
Allowance for loans losses           (101,425 )     (100,785 )
Unearned interest and deferred fees           (13,715 )     (16,525 )
Loans, net   6,19       5,479,150       5,702,258  
                       
Customers' liabilities under acceptances   19       86,407       9,696  
Derivative financial instruments - assets   9,19       3,730       2,688  
                       
Equipment and leasehold improvements, net   10       22,569       6,686  
Intangibles, net           1,474       1,633  
Other assets   11       9,420       16,974  
Total assets           6,681,192       7,609,185  
                       
Liabilities and Equity                      
Liabilities:                      
Demand deposits           145,530       211,381  
Time deposits           2,705,940       2,759,441  
    12,19       2,851,470       2,970,822  
Interest payable           6,813       12,154  
Total deposits           2,858,283       2,982,976  
                       
Securities sold under repurchase agreements   9,13,19       56,065       39,767  
Borrowings and debt, net   14,19       2,626,040       3,518,446  
Interest payable           13,589       13,763  
                       
Customers' liabilities under acceptances   19       86,407       9,696  
Derivative financial instruments - liabilities   9,19       13,398       34,043  
Allowance for  loan commitments and financial guarantees contracts losses   7,19       2,675       3,289  
Other liabilities           15,634       13,615  
Total liabilities           5,672,091       6,615,595  
                       
Equity:                      
Common stock           279,980       279,980  
Treasury stock           (59,669 )     (61,076 )
Additional paid-in capital in excess of value assigned to common stock           119,920       119,987  
Capital reserves   22       95,210       95,210  
Regulatory reserves   22       136,019       136,019  
Retained earnings           439,385       423,050  
Other comprehensive income (loss)   16       (1,744 )     420  
Total equity           1,009,101       993,590  
Total liabilities and equity           6,681,192       7,609,185  

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

3

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statements of profit or loss

For the three and nine months ended September 30, 2019 and 2018

(In thousands of US dollars, except per share data and number of shares)

 

          For the three months
ended September 30,
    For the nine months
ended September 30,
 
    Notes     2019     2018     2019     2018  
Interest income:                                      
Deposits           3,757       3,129       13,295       9,293  
Securities           763       749       2,494       2,021  
Loans           60,994       61,142       193,809       173,062  
Total interest income   18       65,514       65,020       209,598       184,376  
Interest expense:                                      
Deposits           (16,692 )     (16,767 )     (53,281 )     (47,160 )
Borrowings and debt           (22,164 )     (20,957 )     (73,708 )     (55,441 )
Total interest expense   18       (38,856 )     (37,724 )     (126,989 )     (102,601 )
                                       
Net interest income           26,658       27,296       82,609       81,775  
                                       
Other income (expense):                                      
Fees and commissions, net   17,18       2,815       3,692       10,293       11,783  
Gain (loss) on financial instruments, net   8,18       (169 )     (1,445 )     650       (1,262 )
Other income, net           217       564       1,674       1,209  
Total other income, net   18       2,863       2,811       12,617       11,730  
                                       
Total revenues           29,521       30,107       95,226       93,505  
                                       
Impairment loss on financial instruments   5,6,7,18       (612 )     (55,134 )     (2,365 )     (58,836 )
Gain (impairment loss) on non-financial assets   18       500       (4,841 )     500       (7,729 )
                                       
Operating expenses:                                      
Salaries and other employee expenses           (5,651 )     (5,213 )     (17,791 )     (21,390 )
Depreciation of equipment and leasehold improvements   10       (724 )     (315 )     (2,120 )     (957 )
Amortization of intangible assets           (160 )     (336 )     (515 )     (1,011 )
Other expenses           (2,434 )     (4,987 )     (8,978 )     (13,177 )
Total operating expenses   18       (8,969 )     (10,851 )     (29,404 )     (36,535 )
Profit (loss) for the period           20,440       (40,719 )     63,957       (9,595 )
                                       
Per share data:                                      
Basic earnings per share   15       0.52       (1.03 )     1.62       (0.24 )
Diluted earnings per share   15       0.52       (1.03 )     1.62       (0.24 )
Weighted average basic shares   15       39,602       39,540       39,566       39,544  
Weighted average diluted shares   15       39,602       39,540       39,566       39,544  

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

4

 

 

Banco Latinoamericano de Comercio Exterior, S. A. y Subsidiarias 

 

Unaudited condensed consolidated interim statements of profit or loss and other comprehensive income

For the three and nine months ended September 30, 2019 and 2018

(In thousands of US dollars)

 

          For the three months
ended September 30
    For the nine months
ended September 30
 
          2019     2018     2019     2018  
Profit (loss) for the period             20,440       (40,719 )     63,957       (9,595 )
Other comprehensive income (loss):                                        
Items that will not be reclassified subsequently to profit and loss:                                        
Change in fair value on equity instrument at FVOCI, net of hedging     16       1,057       866       450       (1,653 )
                                         
Items that are or may be reclassified subsequently to profit and loss:                                        
Change in fair value of financial instruments, net of hedging     16       258       (2,304 )     (2,709 )     (2,221 )
Reclassification of gains (losses) on financial instruments to the profit or loss     16       (393 )     1,998       247       4,693  
Exchange difference in conversion of foreign currency operation     16       (53 )     (1,071 )     (152 )     (1,208 )
                                         
Other comprehensive income (loss)     16       869       (511 )     (2,164 )     (389 )
                                         
Total comprehensive income (loss) for the period             21,309       (41,230 )     61,793       (9,984 )

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

5

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statements of changes in stockholders's equity

For the nine months ended September 30, 2019 and 2018

(In thousands of US dollars)

 

    Common stock     Treasury stock     Additional paid-in
capital in
excess of value
assigned to
common stock
    Capital reserves     Regulatory
reserves
    Retained
earnings
    Other
comprehensive
income
    Total equity  
Balances at January 1, 2018     279,980       (63,248 )     119,941       95,210       129,254       479,712       1,963       1,042,812  
Loss for the period     -       -       -       -       -       (9,595 )     -       (9,595 )
Other comprehensive income (loss)     -       -       -       -       -       -       (389 )     (389 )
Issuance of restricted stock     -       1,259       (1,259 )     -       -       -       -       -  
Compensation cost - stock options and stock units plans     -       -       587       -       -       -       -       587  
Exercised options and stock units vested     -       3,355       254       -       -       -       -       3,609  
Repurchase of "Class B" and "Class E" common stock     -       (2,442 )     -       -       -       -       -       (2,442 )
Regulatory  reserve     -       -       -       -       (20,473 )     20,473       -       -  
Dividends declared     -       -       -       -       -       (45,631 )     -       (45,631 )
Balances at September 30, 2018     279,980       (61,076 )     119,523       95,210       108,781       444,959       1,574       988,951  
                                                                 
Balances at January 1, 2019, previously reported     279,980       (61,076 )     119,987       95,210       136,019       423,050       420       993,590  
Effect for change in accounting policy     -       -       -       -       -       (1,926 )     -       (1,926 )
Balances at January 1, 2019, adjusted     279,980       (61,076 )     119,987       95,210       136,019       421,124       420       991,664  
Profit for the period     -       -       -       -       -       63,957       -       63,957  
Other comprehensive income (loss)     -       -       -       -       -       -       (2,164 )     (2,164 )
Issuance of restricted stock     -       1,259       (1,259 )     -       -       -       -       -  
Compensation cost - stock options and stock units plans     -       -       1,340       -       -       -       -       1,340  
Exercised options and stock units vested     -       148       (148 )     -       -       -       -       -  
Dividends declared     -       -       -       -       -       (45,696 )     -       (45,696 )
Balances at September 30, 2019     279,980       (59,669 )     119,920       95,210       136,019       439,385       (1,744 )     1,009,101  

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

6

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statements of cash flows

For the nine months ended September 30, 2019 and 2018

(In thousands of US dollars)

 

    2019     2018  
             
Cash flows from operating activities                
Profit (loss) for the period     63,957       (9,595 )
Adjustments to reconcile profit for the year to net cash provided by (used in) operating activities:                
Net changes in hedging position     (18,384 )     (9,996 )
Depreciation of equipment and leasehold improvements     2,120       957  
Amortization of intangible assets     515       1,011  
Loss for disposal of equipment and leasehold improvements     -       840  
Loss for derecognition of intangible assets     -       2,705  
Impairment on investment properties at fair value through profit or loss     -       1,560  
Impairment loss on financial instruments     2,365       58,836  
(Gain) loss, net on sale of financial assets at fair value through OCI     (163 )     -  
Amortization of premium and discount related to securities at amortized cost     611       798  
Gain on sale of property and equipment     -       18  
Impairment loss on other assets     -       3,464  
Compensation cost - share-based payment     1,340       587  
Interest income     (209,598 )     (184,376 )
Interest expense     126,989       102,601  
Net decrease (increase) in operating assets:                
Pledged deposits     21,340       25,320  
Loans     224,165       (220,973 )
Other assets     7,292       (15,281 )
Net increase (decrease) in operating liabilities:                
Due to depositors     (119,352 )     (151,309 )
Other liabilities     962       13,218  
Cash flows provided by (used in) operating activities     104,160       (379,615 )
Interest received     211,683       169,881  
Interest paid     (132,504 )     (94,990 )
Net cash provided by (used in) operating activities     183,339       (304,724 )
                 
Cash flows from investing activities:                
Acquisition of equipment and leasehold improvements     (547 )     (1,131 )
Acquisition of intangible assets     (356 )     (45 )
Proceeds from the redemption of securities at fair value through OCI     8,094       3,244  
Proceeds from the sale of securities at fair value through OCI     6,000       -  
Proceeds from maturities of securities at amortized cost     23,151       6,324  
Purchases of securities at amortized cost     (15,151 )     (15,701 )
Net cash provided by (used in) investing activities     21,191       (6,039 )
                 
Cash flows from financing activities:                
Increase in securities sold under repurchase agreements     16,298       39,767  
Net increase (decrease) in short-term borrowings and debt     (826,881 )     166,485  
Proceeds from long-term borrowings and debt     245,460       532,206  
Repayments of long-term borrowings and debt     (337,596 )     (236,778 )
Payments of lease liabilities     (747 )     -  
Dividends paid     (43,892 )     (45,860 )
Exercised stock options     -       3,609  
Repurchase of common stock     -       (2,442 )
Net cash provided by (used in) financing activities     (947,358 )     456,987  
                 
Increase (decrease) net in cash and cash equivalents     (742,828 )     146,224  
Cash and cash equivalents at beginning of the period     1,706,192       618,807  
Cash and cash equivalents at end of the period     963,364       765,031  

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.    

7

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

1. Corporate information

 

Banco Latinoamericano de Comercio Exterior, S. A. (“Bladex Head Office” and together with its subsidiaries “Bladex” or the “Bank”), headquartered in Panama City, Republic of Panama, is a specialized multinational bank established to support the financing of foreign trade and economic integration 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 initiated operations on January 2, 1979. Under a contract law signed in 1978 between the Republic of Panama and Bladex, the Bank was granted certain privileges by the Republic of Panama, including an exemption from payment of income taxes in Panama.

 

The Bank operates under a general banking license issued by the National Banking Commission of Panama, predecessor of the Superintendence of Banks of Panama (the “SBP”).

 

In the Republic of Panama, banks are regulated by the SBP through Executive Decree No. 52 of April 30, 2008, which adopts the unique text of Law Decree No. 9 of February 26, 1998, modified by Law Decree No. 2 of February 22, 2008. Banks are also regulated by resolutions and agreements issued by this entity. The main aspects of this law and its regulations include: the authorization of banking licenses, minimum capital and liquidity requirements, consolidated supervision, procedures for management of credit and market risks, measures to prevent money laundering, the financing of terrorism and related illicit activities, and procedures for banking intervention and liquidation, among others.

 

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. Bladex Holdings Inc. has ownership in Bladex Representaçao Ltda.

 

- Bladex Representaçao Ltda., incorporated under the laws of Brazil on January 7, 2000, acts as the Bank’s representative office in Brazil. Bladex Representaçao Ltda. is 99.999% owned by Bladex Head Office and the remaining is 0.001% owned by Bladex Holdings Inc.

 

- Bladex Development Corp. was incorporated under the laws of the Republic of Panama on June 5, 2014. Bladex Development Corp. is 100% owned by Bladex Head Office.

 

- BLX Soluciones, S.A. de C.V., SOFOM, E.N.R.(“BLX Soluciones”) was incorporated under the laws of Mexico on June 13, 2014. BLX Soluciones is 99.9% owned by Bladex Head Office, and Bladex Development Corp. owns the remaining 0.1%. The company specializes in offering financial leasing and other financial products such as loans and factoring.

 

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 in the Region. The New York Agency, also has authorization to book transactions through an International Banking Facility (“IBF”).

 

8

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

1. Corporate information (continued)

 

The Bank has representative offices in Buenos Aires, Argentina; in Mexico City, Mexico; in Lima, Peru; and in Bogota, Colombia.

 

These unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on October 8, 2019.

 

2. Basis of preparation of the condensed consolidated interim financial statements

 

2.1 Statement of compliance

 

These unaudited condensed consolidated interim financial statements of Banco Latinoamericano de Comercio Exterior, S. A. and its subsidiaries have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) issued by the International Accounting Standards Board ("IASB"). As all the disclosures required by IFRS for annual period consolidated financial statements are not included herein, these unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2018, contained in the Bank’s annual audited consolidated financial statements. The unaudited condensed consolidated interim statements of profit or loss, other comprehensive income, changes in equity and cash flows for the periods presented are not necessarily indicative of results expected for any future period.

 

2.2 Reclassification

 

Certain amounts in the consolidated financial statements of the prior year was reclassified in order to align them with the presentation of the actual period.  These reclassifications did not change total assets, liabilities, equity, nor the profit for the period.

 

3. Change in accounting policies

 

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the consolidated financial statements of the Bank at and for the year ended December 31, 2018.

 

Changes in accounting policies are also expected to be reflected in the consolidated financial statements of the Bank at and for the year ended December 31, 2019.

 

3.1 Leases

 

Accounting policy applicable from January 1, 2019:

 

Leases under IFRS 16

 

At inception of a contract, the Bank assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Bank assesses whether:

 

- The contract involves the use of an identified asset –this may be specified explicitly or implicitly; and should be physically distinct or represent substantially all of the capacity of a physically distinct asset.

 

- The Bank has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use.

 

- The Bank has the right to direct the use of the asset. The Bank has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Bank has the right to direct the use of the asset if either:

 

- The Bank has the right to operate the asset; or
- The Bank designed the asset in a way that predetermines how and for what purpose it will be used.

 

9

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

3. Change in accounting policies (continued)

 

3.1 Leases (continued)

 

This policy is applied to contracts entered into, or changed, on or after January 1, 2019.

 

At inception or on reassessment of a contract that contains lease component, the bank allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Bank has elected not to separate non-lease components and to account for the lease components as a single lease component.

 

The Bank applied IFRS 16 with a date of initial application of 1 January 2019. As a result, the Bank has changed its accounting policy for lease contracts as detailed below.

 

The Bank applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings at 1 January 2019. The details of the changes in accounting policies are disclosed below:

 

A. Definition of a lease

 

Previously, the Bank determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Bank assesses whether a contract is or contains a lease based on the definition of a lease based on the definition of a lease, as explained in Note 3.1.

 

On transition to IFRS 16, the Bank elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 January 2019.

 

B. As a lessee

 

As a lessee, the Bank previously classified leases as operating or finance leases based on its assessment of whether the leases transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Bank. Under IFRS 16, the Bank recognizes right-of-use assets and lease liabilities for most leases. These leases are on the consolidated statement of financial position.

 

Leases classified as operating leases under IAS 17

 

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Bank´s internal funding cost rate as at 1 January 2019.

 

The right-of-use assets are measured at their book value as if IFRS 16 had been applied since the commencement date, discounted using total lease payments at present value, using the Bank's internal funding cost rate, the weighted average term of the contract, adjusted for any prepayment, incremental cost, dismantling cost and depreciation that would have been recognized from the beginning of the contract until the date of implementation of the standard.

 

The Bank used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

 

- Applied for lease contracts with similar characteristics, the internal funding cost rate of the Bank, according to the average term of stay.
- Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
- Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

 

10

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

3. Change in accounting policies (continued)

 

3.1 Leases (continued)

 

C. As a lessor

 

The Bank do not require to make any adjustments on transition of IFRS 16 for its leases like a lessor, except when figure as an intermediate lessor. The Bank accounted its leases in accordance with IFRS 16 on the date of initial application.

 

Under IFRS 16, the Bank should the evaluate the classification of the sublease by reference to the right-of-use assets, and not by reference to the underlying asset. At transition, the Bank revalued the classification of a sublease contract previously classified as an operating lease under IAS 17. The Bank concluded that the sublease is an operating lease under IFRS 16.

 

The Bank applied IFRS 15 to revenue from contracts with customers to assign the consideration in the contract to each lease component and that is not a lease.

 

D. Impacts on consolidated financial statements

 

On transition to IFRS 16, the Bank recognized and additional $17.3 million of right-of-use assets and $21.0 million of lease liabilities, recognizing the difference in retained earnings. When measuring the lease liabilities, the Bank discounted the lease payments using its internal funding cost rate at 1 January 2019. The weighted average rate applied is 4.81%.

 

    January 1,
2019
 
Operating lease commitments disclosed as at December 31, 2018     16,790  
Extensions and termination options that are reasonably true of being exercised     11,159  
      27,949  
         
Discounted lease liabilities using the internal funding cost rate as at January 1, 2019     20,965  

 

Accounting policy applicable until December 31, 2018:

 

Leases under NIC 17

 

The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

 

Banks as a lessee

 

Leases where the lessor does not transfer to the Bank substantially all the risks and benefits incidental to ownership of the leased items are classified as operating leases. Operating lease payments are recognized as an expense in profit or loss on a straight-line basis through the lease term. Rental payable is recognized as an expense as incurred.

 

Bank as a sub-lessor

 

Leases where the Bank does not transfer substantially all risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Rental income is recognized as revenue as earned. In the event that the contract is cancelable, they are recognized as income over the term of the lease.

 

11

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

4. Cash and cash equivalents

 

    September 30,     December 31,  
    2019     2018  
Cash and due from banks     21,934       9,644  
Interest-bearing deposits in banks     959,550       1,736,008  
Total     981,484       1,745,652  
                 
Less:                
Pledged deposits     18,120       39,460  
Total cash and cash equivalents     963,364       1,706,192  

 

The following table presents the details of interest-bearing deposits in banks and pledged deposits:

 

    September 30, 2019     December 31, 2018  
    Amount     Interest rate
range
    Amount     Interest rate
range
 
Interest-bearing deposits in banks:                                
Demand deposits (1)     959,550       1.68% to 5.67%       1,686,008       2.43% to 6.5%  
Time deposits (2)     -       -       50,000       -  
Total     959,550               1,736,008          
                                 
Pledged deposits (3)     18,120       1.83 %     39,460       2.40 %

 

The following table provides a breakdown of pledged deposits by country risk:

 

    September 30,     December 31,  
    2019     2018  
Country:                
United Kingdom     10,177       15,217  
United States of America (3)     7,379       15,009  
France     390       -  
Netherlands     174       494  
Spain     -       8,740  
Total     18,120       39,460  

 

(1) Interest-bearing demand deposits based on the daily rates determined by banks. The rate 5.67% corresponds to a deposit placed in MXN – Mexico.

 

(2) Time deposits “overnight” calculated on an average interest rate.

 

(3) Includes deposits pledged of $3.5 million at September 30, 2019 and December 31, 2018, respectively, with the New York State Banking Department under March 1994 legislation and deposits pledged to guarantee derivative financial instrument transactions.

 

12

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5. Securities and other financial assets, net

 

All securities and other financial assets as of September 30, 2019 and December 31, 2018 are presented as follows:

 

          At fair value        
At September 30, 2019   With changes in other comprehensive
income (loss)
    With        
Carring amount   Amortized cost     Recyclable to
profit and loss
    Non-recyclable to
profit and loss
    changes in
profit or loss
    Total securities and other
financial assets, net
 
Principal     76,450       8,176       2,846       8,739       96,211  
Interest receivable     817       63       -       -       880  
Reserves     (133 )     -       -       -       (133 )
      77,134       8,239       2,846       8,739       96,958  

 

          At fair value        
At December 31, 2018   With changes in other comprehensive
income (loss)
    With        
Carring amount   Amortized cost     Recyclable to
profit and loss
    Non-recyclable to
profit and loss
    changes in
profit or loss
    Total securities and other
financial assets, net
 
Principal     85,326       21,798       6,273       8,750       122,147  
Interest receivable     1,140       451       -       -       1,591  
Reserves     (140 )     -       -       -       (140 )
      86,326       22,249       6,273       8,750       123,598  

 

Securities at amortized cost

 

The amortized cost of these securities by country risk and type of debt, excluding the amounts of interest receivable and allowance for expected credit losses are as follows:

 

    September 30,     December 31,  
    2019     2018  
Corporate debt                
Brazil     1,497       1,491  
Mexico     21,590       7,264  
Panama     24,760       11,151  
      47,847       19,906  
                 
Sovereign debt                
Colombia     15,390       28,183  
Mexico     5,139       19,859  
Panama     8,074       17,378  
      28,603       65,420  
      76,450       85,326  

 

As of September 30, 2019, and December 31, 2018, the allowance for expected credit losses relating to securities at amortized cost amounted to $133 thousand and $140 thousand, respectively.

 

As of September 30, 2019, and December 31, 2018, securities at amortized cost were pledged to secure repurchase transactions accounted for as secured financings with a carrying value of $48.4 million and 35.1 million, respectively.

 

13

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5. Securities and other financial assets, net (continued)

 

Securities at amortized cost (continued)

 

Securities at amortized cost by contractual maturity are shown in the following tables:

 

    September 30,
2019
    December 31,
2018
 
Due within 1 year     30,358       28,551  
After 1 year but within 5 years     46,092       56,775  
      76,450       85,326  

 

Securities at amortized cost classified by issuer’s credit quality indicators are as follows:

 

Rating   September 30,
2019
    December 31,
2018
 
2     -       5,181  
3     31,821       44,858  
4     43,132       33,796  
5     1,497       1,491  
Total     76,450       85,326  

 

Securities at fair value through other comprehensive income (FVOCI)

 

The fair value of financial instruments at FVOCI by country risk and type of debt, excluding interest receivable, are as follows:

 

    September 30,     December 31,  
    2019     2018  
Corporate debt                
Panama     -       6,157  
      -       6,157  
Sovereign debt                
Brazil     3,060       2,887  
Chile     5,116       5,011  
Trinidad and Tobago     -       7,743  
      8,176       15,641  
      8,176       21,798  

 

As of September 30, 2019, and December 31, 2018, the allowance for expected credit losses relating to securities at fair value through other comprehensive income amounted to $142 thousand and $172 thousand, respectively.

 

As of September 30, 2019, and December 31, 2018, securities at fair value through other comprehensive income were pledged to secure repurchase transactions accounted for as secured financings with a carrying value of $4.6 million, for both periods.

 

14

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5. Securities and other financial assets, net (continued)

 

Securities at fair value through other comprehensive income (FVOCI) (continued)

 

The following table presents the realized gains or losses on sale of securities at fair value through other comprehensive income:

 

    Three months ended September 30th  
    2019     2018  
Realized gain on sale of securities     -       -  
Realized loss on sale of securities     -       -  
Net gain on sale of securities at FVOCI     -       -  

 

    Nine months ended September 30th  
      2019       2018  
Realized gain on sale of securities     163       -  
Realized loss on sale of securities     -       -  
Net gain on sale of securities at FVOCI     163       -  

 

Securities at FVOCI classified by issuer’s credit quality indicators are as follows:

 

    September 30,     December 31,  
Rating   2019     2018  
1     5,116       5,010  
4     -       13,901  
5     3,060       2,887  
Total     8,176       21,798  

 

The amortized cost and fair value of securities at FVOCI by contractual maturity are shown in the following tables:

 

    September 30, 2019     December 31, 2018  
    Amortized           Amortized        
    cost     Fair value     cost     Fair value  
Due within 1 year     -       -       8,386       7,743  
After 1 year but within 5 years     8,056       8,176       8,084       7,898  
After 5 years but within 10 years     -       -       5,926       6,157  
      8,056       8,176       22,396       21,798  

 

15

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5. Securities and other financial assets, net (continued)

 

Equity instrument at FVOCI, non-recyclable in profit & loss

 

The fair value of the equity instrument irrevocably measured at fair value through OCI:

 

    September 30,
2019
    December 31,
2018
 
Equity instrument     2,846       6,273  

 

Financial Instrument at fair value through profit and loss

 

The following table presents the fair value of the debt instrument at fair value with changes in profit or loss:

 

    September 30,
2019
    December 31,
2018
 
Debt instrument     8,739       8,750  

 

16

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

6. Loans

 

The following table sets forth the details of the Bank’s gross loan portfolio:

 

    September 30,     December 31,  
  2019       2018  
Corporations:            
Private     1,593,764       1,893,696  
State-owned     752,600       742,912  
Financial institutions:                
Private     2,520,867       2,458,690  
State-owned     633,905       624,100  
Sovereign     53,123       59,026  
Total     5,554,259       5,778,424  

 

The composition of the gross loan portfolio by economic activity is as follows:

 

    September 30,     December 31,  
  2019       2018  
Financial institutions     3,154,772       3,082,790  
Industrial     760,230       986,262  
Oil and petroleum derived products     645,964       634,615  
Agricultural     332,654       446,960  
Services     352,336       393,925  
Mining     37,362       20,000  
Sovereign     53,123       59,026  
Other     217,818       154,846  
Total     5,554,259       5,778,424  

 

17

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

6. Loans (continued)

 

Loans classified by borrower’s credit quality indicators are as follows:

 

September 30, 2019  
      Corporations     Financial institutions              
Rating     Private     State-owned     Private     State-owned     Sovereign     Total  
1-4       880,913       445,129       1,075,304       231,100       53,123       2,685,569  
5-6       434,465       130,762       1,191,082       351,168       -       2,107,477  
7       216,541       176,709       254,481       51,637       -       699,368  
8       -       -       -       -       -       -  
9       -       -       -       -       -       -  
10       61,845       -       -       -       -       61,845  
Total       1,593,764       752,600       2,520,867       633,905       53,123       5,554,259  

 

December 31, 2018  
      Corporations     Financial institutions              
Rating     Private     State-owned     Private     State-owned     Sovereign     Total  
1-4       975,588       388,773       797,439       54,000       -       2,215,800  
5-6       795,399       332,412       1,476,861       464,800       59,026       3,128,498  
7       58,008       21,727       184,390       105,300       -       369,425  
8       -       -       -       -       -       -  
9       64,701       -       -       -       -       64,701  
10       -       -       -       -       -       -  
Total       1,893,696       742,912       2,458,690       624,100       59,026       5,778,424  

 

18

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

6. Loans (continued)

 

The following table provides a breakdown of loans classified by country risk:

 

    September 30,     December 31,  
  2019       2018  
Country:                
Brazil     1,008,066       1,156,223  
Mexico     812,297       867,441  
Colombia     779,043       625,932  
Chile     605,700       176,976  
Guatemala     314,296       328,830  
Panama     266,250       485,546  
Argentina     262,525       604,112  
Costa Rica     259,361       370,087  
Ecuador     211,015       188,445  
Dominican Republic     196,667       301,067  
Trinidad and Tobago     189,803       144,874  
Peru     115,799       78,191  
Honduras     112,239       89,205  
Paraguay     103,500       158,685  
Singapore     68,800       38,500  
El Salvador     61,133       70,048  
France     42,160          
Jamaica     39,302       21,727  
Germany     35,500       17,500  
United States of America     25,000       -  
Luxembourg     22,099       17,664  
Hong Kong     11,800       -  
Belgium     6,904       13,278  
Bolivia     5,000       14,187  
Uruguay     -       9,906  
Total     5,554,259       5,778,424  

 

19

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

6. Loans (continued)

 

The remaining loan maturities are summarized as follows:

 

    September 30,     December 31,  
  2019       2018  
Current:                
Up to 1 month     675,779       820,184  
From 1 month to 3 months     953,180       966,210  
From 3 months to 6 months     1,313,077       1,281,615  
From 6 months to 1 year     922,780       769,280  
From 1 year to 2 years     557,668       719,564  
From 2 years to 5 years     1,008,411       1,110,489  
More than 5 years     61,519       46,381  
      5,492,414       5,713,723  
                 
Impaired     61,845       64,701  
Total     5,554,259       5,778,424  

 

As of September 30, 2019, the range of interest rates on loans fluctuates from 1.20% to 12.18%, respectively (as of December 31, 2018 the range of interest rates fluctuates from 1.20% to 12.25%).

 

The fixed and floating interest rate distribution of the loan portfolio is as follows:

 

    September 30,     December 31,  
  2019       2018  
Fixed interest rates     2,595,000       2,706,834  
Floating interest rates     2,959,259       3,071,590  
Total     5,554,259       5,778,424  

 

As of September 30, 2019, and December 31, 2018, 71% of the loan portfolio at fixed interest rates has remaining maturities of less than 180 days.

 

20

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

6. Loans (continued)

 

The following table presents an aging analysis of the loan portfolio by credit classification in stages 1, 2 and 3:

 

    September 30, 2019        
  Stage 1     Stage 2     Stage 3       Total  
Gross carrying amount                                
Current     5,220,786       271,628       50,892       5,543,306  
Past due                                
90-120 days     -       -       3,724       3,724  
151-180 days     -       -       -       -  
More than 180 days     -       -       7,229       7,229  
Total past due     -       -       10,953       10,953  
Total     5,220,786       271,628       61,845       5,554,259  

 

    December 31, 2018        
  Stage 1     Stage 2     Stage 3       Total  
Gross carrying amount                                
Current     5,340,751       372,972       57,025       5,770,748  
Past due                                
90-120 days     -       -       2,410       2,410  
151-180 days     -       -       2,857       2,857  
More than 180 days     -       -       2,409       2,409  
Total past due     -       -       7,676       7,676  
Total     5,340,751       372,972       64,701       5,778,424  

 

As of September 30, 2019 and December 31, 2018, the Bank had credit transactions in the normal course of business with 15% and 17%, respectively, of its Class “A” and “B” stockholders. All transactions were made based on arm’s-length terms and subject to prevailing commercial criteria and market rates and were subject to all of the Bank’s Corporate Governance and control procedures. As of September 30, 2019 and December 31, 2018, approximately 12% and 9%, respectively, of the outstanding loan portfolio was placed with the Bank’s Class “A” and “B” stockholders and their related parties. As of September 30, 2019, 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.

 

Recognition and derecognition of financial assets

 

During the periods ended September 30, 2019 and 2018, the Bank sold loans measured at amortized cost. These sales were made based on compliance with the Bank's strategy to optimize credit risk of its loan portfolio.

 

The carrying amounts and gains arising from the derecognition of these financial instruments are presented in the following table. These gains are presented within the line “Gain (loss) on financial instruments, net” in the consolidated statement of profit or loss.

 

      Assignments and
participations
   

Gains

(losses)

 
Carrying amount as of September 30, 2019       15,000       21  
Carrying amount as of September 30, 2018       71,667       (625 )

 

21

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

6. Loans (continued)

 

The allowance for expected credit losses relating to loans at amortized cost are as follows:

 

    Stage 1 (1)     Stage 2 (2)     Stage 3 (3)     Total  

Allowance for expected credit losses as of December 31, 2018

  34,957     16,389     49,439     100,785  
Transfer to lifetime expected credit losses     (2,488 )     2,488       -       -  
Transfer to credit-impaired financial instruments     -       -       -       -  
Transfer to 12-month expected credit losses     1,524       (1,524 )     -       -  
Net effect of changes in allowance for expected credit losses     (3,017 )     6,547       7,836       11,366  
Financial instruments that have been derecognized pduring the period     (25,022 )     (6,193 )     (500 )     (31,715 )
New financial assets originated or purchased     23,366       -       -       23,366  
Write-offs     -       -       (2,405 )     (2,405 )
Recoveries     -       -       28       28  

Allowance for expected credit losses as of September 30, 2019

    29,320       17,707       54,398       101,425  

 

    Stage 1 (1)     Stage 2 (2)     Stage 3 (3)     Total  

Allowance for expected credit losses as of December 31, 2017

  19,821     33,477     27,996     81,294  
Transfer to lifetime expected credit losses     (514 )     514       -       -  
Transfer to credit-impaired financial instruments     (111 )     (7,864 )     7,975       -  
Transfer to 12-month expected credit losses     4,471       (4,471 )     -       -  
Net effect of changes in reserve for expected credit losses     (4,665 )     5,823       55,153       56,311  
Financial instruments that have been derecognized during the year     (16,400 )     (11,090 )     -       (27,490 )
New financial assets originated or purchased     32,355       -       -       32,355  
Write-offs     -       -       (41,686 )     (41,686 )
Recoveries     -       -       1       1  

Allowance for expected credit losses as of December 31, 2018

    34,957       16,389       49,439       100,785  

 

(1) 12-month expected credit losses.
(2) Lifetime expected credit losses.
(3) Credit-impaired financial assets (lifetime expected credit losses).

 

22

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

7. Loan commitments and financial guarantee contracts

 

In the normal course of business, to meet the financing needs of its customers, the Bank is party to loan commitments and financial guarantee contracts. These instruments involve, to varying degrees, elements of credit and market risk in excess of the amount recognized in the consolidated statement of financial position. 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 loan commitments and financial guarantee contracts are as follows:

 

    September 30,     December 31,  
  2019       2018  
Documentary letters of credit     159,113       218,988  
Stand-by letters of credit and guarantees - commercial risk     241,998       179,756  
Credit commitments     175,500       103,143  
Total loans commitments and financial guarantee contracts     576,611       501,887  

 

The remaining maturity profile of the Bank’s outstanding loan commitments and financial guarantee contracts is as follows:

 

  September 30,     December 31,  
Maturities   2019       2018  
Up to 1 year     454,571       434,544  
From 1 to 2 years     42,040       200  
From 2 to 5 years     80,000       67,143  
Total     576,611       501,887  

 

Loan commitments and financial guarantee contracts classified by issuer’s credit quality indicators are as follows:

 

    September 30,     December 31,  
Rating   2019       2018  
1-4     247,871       94,724  
5-6     185,057       158,864  
7     143,683       248,299  
Total     576,611       501,887  

 

23

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

7. Loan commitments and financial guarantee contracts (continued)

 

The breakdown of the Bank’s loan commitments and financial guarantee contracts’ exposure by country risk is as follows:

 

    September 30,     December 31,  
  2019       2018  
Country:                
Ecuador     137,844       247,225  
Costa Rica     57,331       38,598  
Chile     50,008       -  
Brazil     50,000       50,000  
Colombia     49,770       52,000  
France     47,906       -  
Guatemala     44,852       15,293  
Luxemburgo     35,500       -  
Mexico     30,270       22,731  
Panama     21,994       29,175  
Peru     17,890       2,846  
Dominican Republic     16,500       16,500  
Switzerland     10,000       -  
El Salvador     5,539       824  
Canada     657       422  
Honduras     300       250  
Bolivia     250       293  
Uruguay     -       750  
Germany     -       18,000  
Argentina     -       6,980  
Total     576,611       501,887  

 

Letters of credit, stand-by letters of credit and guarantees

 

The Bank, on behalf of its client’s base, issues, confirms and advises letters of credit to facilitate foreign trade transactions. When issuing, confirming and advising letters of credit, the Bank adds its own unqualified assurance that the bank will pay upon presentation of complying documents as per the terms and conditions established in the letter of credit. The Bank also issues, confirms and advises stand-by letters of credit and guarantees, which are issued on behalf of institutional clients in connection with financing between its clients and third parties.  The Bank applies the same credit policies used in its lending process, and once the commitment is issued, it becomes irrevocable and remains valid until its expiration upon the presentation of complying documents on or before the expiry date.

 

Credit commitments

 

Commitments to extend credit are binding legal agreements to lend to clients. Commitments generally have fixed expiration dates or other termination clauses and require payment of a fee to the Bank. As some commitments expire without being drawn on, the total commitment amounts do not necessarily represent future cash requirements.

 

24

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

7. Loan commitments and financial guarantee contracts (continued)

 

The allowance for expected credit losses relating to loan commitments and financial guarantee contracts is as follows:

 

    Stage 1 (1)     Stage 2 (2)     Stage 3 (3)     Total  

Allowance for expected credit losses as of December 31, 2018

    3,089       200       -       3,289  
Transfer to lifetime expected credit losses     -       -       -       -  
Transfer to credit-impaired financial instruments     -       -       -       -  
Transfer to 12-month expected credit losses     -       -       -       -  
Net effect of changes in reserve for expected credit loss     79       (103 )     -       24  
Financial instruments that have been derecognized during the period     (2,487 )     (9 )     -       (2,496 )
New instruments originated or purchased     1,906       -       -       1,906  

Allowance for expected credit losses as of September 30, 2019

    2,587       88       -       2,675  

 

      Stage 1 (1)       Stage 2 (2)       Stage 3 (3)       Total  

Allowance for expected credit losses as of December 31, 2017

    1,358       5,487       -       6,845  
Transfer to lifetime expected credit losses     (31 )     31       -       -  
Transfer to credit-impaired financial instruments     -       -       -       -  
Transfer to 12-month expected credit losses     -       -       -       -  
Net effect of changes in reserve for expected credit loss     13       169       -       182  
Financial instruments that have been derecognized during the year     (1,179 )     (5,487 )     -       (6,666 )
New instruments originated or purchased     2,928       -       -       2,928  

Allowance for expected credit losses as of December 31, 2018

    3,089       200       -       3,289  

 

(1) 12-month expected credit losses.
(2) Lifetime expected credit losses.
(3) Credit-impaired financial assets (lifetime expected credit losses).

 

The allowance for expected credit losses on loan commitments and financial guarantee contracts reflects the Bank’s management estimate of expected credit losses items such as: confirmed letters of credit, stand-by letters of credit, guarantees and credit commitments.

 

25

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

8. Impairment loss on financial instruments, net

 

The following table sets forth the details for the loss on financial instrument recognized in the consolidated statements of profit or loss:

 

    Three months ended September 30  
    2019     2018  
Gain in derivative financial instruments and changes in foreign currency, net     20       (1,554 )
Gain (loss) in financial instruments at fair value through profit or loss     (210 )     109  
Gain realized in financial instruments at fair value with changes in other comprehensive income     -       -  
(Loss) gain on sale of loans     21       -  
      (169 )     (1,445 )

 

    Nine months ended September 30  
    2019     2018  
Gain in derivative financial instruments and changes in foreign currency, net     303       (404 )
Gain (loss) in financial instruments at fair value through profit or loss     163       (233 )
Gain realized in financial instruments at fair value with changes in other comprehensive income     163       -  
(Loss) gain on sale of loans     21       (625 )
    650       (1,262 )

 

26

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

9. Derivative financial instruments

 

Quantitative information on derivative financial instruments is as follows:

 

    September 30, 2019  
    Nominal     Carrying amount of the
hedging instrument
    Changes in fair
value used for
calculating
hedge
 
    Amount     Asset     Liability     ineffectiveness  
Fair value hedges:                                
Interest rate swaps     402,000       1,864       (400 )     9,880  
Cross-currency swaps     249,072       895       (8,642 )     7,482  
Cash flow hedges:                                
Interest rate swaps     203,000       -       (1,542 )     2,763  
Cross-currency swaps     23,025       -       (2,423 )     (1,039 )
Foreign exchange forwards     59,454       1,050       (391 )     16,560  
Net investment hedges:                                
Foreign exchange forwards     2,738       1       -       78  
Total     939,289       3,730       (13,398 )     35,724  

 

    December 31, 2018  
    Nominal     Carrying amount of the
hedging instrument
    Changes in fair
value used for
calculating
hedge
 
    Amount     Asset     Liability     ineffectiveness  
Fair value hedges:                                
Interest rate swaps     433,500       108       (6,134 )     (1,666 )
Cross-currency swaps     226,757       1,134       (15,994 )     11,676  
Cash flow hedges:                                
Interest rate swaps     460,000       513       (3,276 )     (2,462 )
Cross-currency swaps     23,025       -       (1,384 )     (2,263 )
Foreign exchange forwards     176,311       933       (7,177 )     (14,854 )
Net investment hedges:                                
Foreign exchange forwards     6,183       -       (78 )     (128 )
Total     1,325,776       2,688       (34,043 )     (9,697 )

 

The hedging instruments detailed in the tables above are presented in the consolidated statement of financial position as derivative financial instruments - assets or derivative financial instruments - liabilities.

 

27

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

9. Derivative financial instruments (continued)

 

The gains and losses resulting from activities of hedging derivative financial instruments recognized in the consolidated statements of profit or loss are presented below:

 

    Three months ended September 30, 2019  
    Gain (loss)
recognized in
OCI (effective
portion)
    Classification of gain
(loss)
  Gain (loss)
reclassified from
OCI to
profit or loss
    Gain (loss)
recognized on
derivatives
(ineffective
portion)
 
Derivatives – cash flow hedges                            
Interest rate swaps     (45 )   Gain on financial instruments, net     (63 )     -  
Cross-currency swaps     703     Gain on financial instruments, net     (9 )     -  
            Interest income – loans     (255 )               -  
Foreign exchange forwards     (3,348 )   Interest expenses – deposits     (368 )     -  
            Gain on financial instruments, net     (283 )     -  
Total     (2,690 )         (978 )     -  

 

Derivatives – net investment hedge                            
Foreign exchange forwards     64                      
Total     64                      

 

28

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

9. Derivative financial instruments (continued)

 

 

    Nine months ended September 30, 2019  
    Gain (loss)
recognized in
OCI (effective
portion)
    Classification of gain
(loss)
  Gain (loss)
reclassified from
OCI to
profit or loss
    Gain (loss)
recognized on
derivatives
(ineffective
portion)
 
Derivatives – cash flow hedges                            
Interest rate swaps     1,903     Gain on financial instruments, net     56       -  
Cross-currency swaps     870     Gain on financial instruments, net     (9 )     -  
            Interest income – loans     (1,849 )     -  
Foreign exchange forwards     (464 )   Interest expenses – deposits     (1,676 )     -  
            Gain on financial instruments, net     70                 -  
Total     2,309           (3,408 )     -  

 

Derivatives – net investment hedge                            
Foreign exchange forwards     187                      
Total     187                      

 

29

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

9. Derivative financial instruments (continued)

 

    Three months ended September 30, 2018  
    Gain (loss)
recognized in
OCI (effective
portion)
    Classification of gain
(loss)
  Gain (loss)
reclassified from
OCI to
profit or loss
    Gain (loss)
recognized on
derivatives
(ineffective
portion)
 
Derivatives – cash flow hedges                            
Interest rate swaps     42     Gain on financial instruments, net     -       (3 )
Cross-currency swaps     521     Gain on financial instruments, net     -       (11 )
            Interest income – loans     786       -  
Foreign exchange forwards     1,913     Interest expenses – deposits     1,135       -  
            Gain on financial instruments, net     (3,948 )     -  
Total     2,476           (2,027 )     (14 )

 

Derivatives – net investment hedge                            
Foreign exchange forwards     (303 )                    
Total     (303 )                    

 

30

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

9. Derivative financial instruments (continued)

 

    Nine months ended September 30, 2018  
    Gain (loss)
recognized in
OCI (effective
portion)
    Classification of gain
(loss)
 

Gain (loss)
reclassified from
OCI to
profit or loss

    Gain (loss)
recognized on
derivatives
(ineffective
portion)
 
Derivatives – cash flow hedges                            
Interest rate swaps     (1,969 )   Gain on financial instruments, net     -       (3 )
Cross-currency swaps     1,561     Gain (loss) on financial instruments, net     -       (7 )
            Interest income – loans     1,204       -  
Foreign exchange forwards     9,212     Interest expenses – deposits     3,362       -  
            Gain on financial instruments, net     (6,124 )     -  
Total     8,804           (1,559 )     (10 )

 

Derivatives – net investment hedge                            
Foreign exchange forwards     (1,222 )                    
Total     (1,222 )                    

 

31

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

9. Derivative financial instruments (continued)

 

For the agreements qualifying as fair value hedge, the Bank recognized the gain or loss on the derivative financial instruments and the gain or loss of the hedged asset or liability in profit or loss as follows:

 

    Three months ended September 30, 2019
    Classification in consolidated
statement of profit or loss
  Gain (loss) on
derivatives
    Gain (loss) on
hedged item
    Net gain (loss)  
Derivatives – fair value hedge                            
Interest rate swaps   Interest income – securities FVOCI     11       83       94  
    Interest income – loans     (12 )     642       630  
    Interest expenses – borrowings and debt     (761 )     (3,171 )     (3,932 )
    Gain on financial instruments, net     (1,538 )     1,709       171  
Cross-currency swaps   Interest income – loans     (118 )     279       161  
    Interest expenses – borrowings and debt     (876 )     (687 )     (1,563 )
    Gain on financial instruments, net     7,269       (4,740 )     2,529  
Total         3,975       (5,885 )     (1,910 )

 

    Nine months ended September 30, 2019
    Classification in consolidated
statement of profit or loss
  Gain (loss) on
derivatives
    Gain (loss) on
hedged item
    Net gain (loss)  
Derivatives – fair value hedge                            
Interest rate swaps   Interest income – securities FVOCI     34       291       325  
    Interest income – loans     (21 )     2,345       2,324  
    Interest expenses – borrowings and debt     (2,698 )     (9,325 )     (12,023 )
    Gain on financial instruments, net     (1,973 )     1,992       19  
Cross-currency swaps   Interest income – loans     (369 )     887       518  
    Interest expenses – borrowings and debt     (1,835 )     (3,951 )     (5,786 )
    Gain on financial instruments, net     2,266       3,200       5,466  
Total         (4,596 )     (4,561 )     (9,157 )

 

32

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

9. Derivative financial instruments (continued)

 

    Three months ended September 30, 2018
    Classification in consolidated
statement of profit or loss
  Gain (loss) on
derivatives
    Gain (loss) on
hedged item
    Net gain (loss)  
Derivatives – fair value hedge                            
Interest rate swaps   Interest income – securities FVOCI     5       97       102  
    Interest income – loans     (65 )     870       805  
    Interest expenses – borrowings and debt     (755 )     (3,051 )     (3,806 )
    Gain on financial instruments, net     (3,732 )     3,835       103  
Cross-currency swaps   Interest income – loans     (151 )     345       194  
    Interest expenses – borrowings and debt     (107 )     (2,658 )     (2,765 )
    Gain on financial instruments, net     (13,728 )     10,850       (2,878 )
Total         (18,533 )     10,288       8,245  

 

    Nine months ended September 30, 2018
    Classification in consolidated
statement of profit or loss
  Gain (loss) on
derivatives
    Gain (loss) on
hedge item
    Net gain (loss)  
Derivatives – fair value hedge                            
Interest rate swaps   Interest income – securities FVOCI     (16 )     291       275  
    Interest income – loans     (79 )     1,030       951  
    Interest expenses – borrowings and debt     (1,310 )     (9,150 )     (10,460 )
    Gain on financial instruments, net     (7,157 )     7,097       (60 )
Cross-currency swaps   Interest income – loans     (639 )     1,281       642  
    Interest expenses – borrowings and debt     (9 )     (7,193 )     (7,202 )
    Gain in financial instruments, net     (14,900 )     13,162       (1,738 )
Total         (24,110 )     6,518       (17,592 )

 

33

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

9. Derivative financial instruments (continued)

 

Derivatives financial position and performance

 

The following tables detail the changes of fair value of the underlying item in the consolidated statement of financial position related to fair value hedges:

 

    September 30, 2019
Fair value hedges   Carrying
amount
    Accumulated
fair value
adjustments
    Line item in the consolidated statement of
financial position
Interest rate risk                    
Securities at FVOCI     8,176       119     Securities and other financial instruments, net
Loans     16,193       193     Loans
Issuances     (379,308 )     692     Borrowings and debt, net
                     
Foreign exchange rate risk and interest rate risk:                    
Loans     15,010       24     Loans
Issuances     (229,248 )     (4,968 )   Borrowings and debt, net

 

    December 31, 2018
Fair value hedges   Carrying
amount
    Accumulated
fair value
adjustments
    Line item in the consolidated statement of
financial position
Interest rate risk                    
Securities at FVOCI     12,221       (527 )   Securities and other financial instruments, net
Loans     66,091       97     Loans
Issuances     349,428       5,266     Borrowings and debt, net
                     
Foreign exchange rate risk and interest rate risk:                    
Loans     10,581       (1,097 )   Loans
Issuances     199,356       15,024     Borrowings and debt, net

 

34

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

9. Derivative financial instruments (continued)

 

Derivatives financial position and performance (continued)

 

The following tables detail the maturity profile of the timing of the nominal amounts of the hedging instruments, by type of risk covered:

 

    September 30, 2019  
Risk type   Foreign
exchange risk
    Interest rate
risk
    Foreign exchange
and interest
rate risks
    Total  
Up to 1 month     30,008       -       -       30,008  
31 to 60 days     21,330       30,000       -       51,330  
61 to 90 days     -       50,000       -       50,000  
91 to 180 days     5,692       50,000       -       55,692  
181 to 365 days     5,162       363,000       -       368,162  
1 to 2 years     -       89,000       23,025       112,025  
2 to 5 years     -       23,000       249,072       272,072  
More than 5 years     -       -       -       -  
Total     62,192       605,000       272,097       939,289  

 

    December 31, 2018  
Risk type   Foreign
exchange risk
    Interest rate
risk
    Foreign exchange
and interest
rate risks
    Total  
Up to 1 month     27,458       -       -       27,458  
31 to 60 days     16,977       115,000       -       131,977  
61 to 90 days     6,908       50,000       -       56,908  
91 to 180 days     27,177       17,000       146,505       190,682  
181 to 365 days     98,813