BLX Banco Latinoamericano de Comercio Exterior SA

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: May 10, 2021

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

BLADEX ANNOUNCES FIRST QUARTER 2021 PROFIT OF $12.8 MILLION, OR $0.32 PER SHARE

PANAMA CITY, REPUBLIC OF PANAMA, May 5, 2021

Banco Latinoamericano de Comercio Exterior, S.A. (NYSE: BLX, “Bladex”, or “the Bank”), a Panama-based multinational bank originally established by the central banks of 23 Latin-American and Caribbean countries to promote foreign trade and economic integration in the Region, today announced its results for the First Quarter (“1Q21”) ended March 31, 2021.

The consolidated financial information in this document has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Mr. Jorge Salas, Bladex’s Chief Executive Officer said: “We entered 2021 with a sound credit portfolio with almost zero NPLs, a robust funding structure and a comfortable liquidity position. This is our third consecutive quarter of growth without relaxing credit underwriting standards. The level of our Commercial Portfolio as of March 2021 was close to that of a year ago, but still more than $800 million below the level of December 2019. On the other hand, despite the uncertainty generated by the delayed vaccination campaigns in some of the countries in the Region, we are starting to see clear signals of recovery for the Region. Recently, the International Monetary Fund revised its 2021 growth estimates for Latin America, from 3% to 4.6% and, what is even more relevant for Bladex, the growth estimates for trade have also been revised upwards from 8.2% to 16.2%, mainly driven by higher volumes and higher commodity prices.”

Mr. Salas added: “Bladex’s first quarter results do not yet reflect this recovery, but we are confident that this will happen as the Region’s economies continue on this upward path. The Board’s decision to carry out a Stock Repurchase for up to $60 million, under an Open Market Program, is a testament to that conviction, while, at the same time, providing us with the financial flexibility to respond to both opportunities and challenges in the Region. In addition, the Board maintained the quarterly dividend at $0.25 cents per share, which also reflects Bladex’s financial strength and earnings quality.”

Mr. Salas concluded: “A year later after I joined the Bank, we have an even cleaner balance sheet, an even more committed team and the Board’s mandate to explore different avenues to grow the Bank and return more value to shareholders remains unchanged. Although the Pandemic continues to pose significant challenges for the Region, we believe that the Bank has many opportunities to grow and to increase its products and services offerings. Bladex is well-prepared to navigate 2021 and we look forward to reporting our progress to you in future quarters.”

RESULTS BY BUSINESS SEGMENT

The Bank’s activities are managed and executed through two business segments, Commercial and Treasury. Information related to each reportable segment is set out below. Business segment results are based on the Bank’s managerial accounting process, which assigns assets, liabilities, revenue and expense items to each business segment on a systemic basis.

COMMERCIAL BUSINESS SEGMENT

The Commercial Business Segment encompasses the Bank’s core business of financial intermediation and fee generation activities developed to cater to corporations, financial institutions and investors in Latin America. These activities include the origination of bilateral short-term and medium-term loans, structured and syndicated credits, loan commitments, and financial guarantee contracts such as issued and confirmed letters of credit, stand-by letters of credit, guarantees covering commercial risk, and other assets consisting of customers’ liabilities under acceptances.

Profits from the Commercial Business Segment include (i) net interest income from loans; (ii) fees and commissions from the issuance, confirmation and negotiation of letters of credit, guarantees and loan commitments, as well as through loan structuring and syndication activities; (iii) gain on sale of loans generated through loan intermediation activities, such as sales and distribution in the primary market; (iv) gain (loss) on sale of financial instruments measured at FVTPL; (v) reversal (provision) for credit losses, (vi) gain (loss) on non-financial assets; and (vii) direct and allocated operating expenses.

Bladex’s Commercial Portfolio reached $5.7 billion at the end of 1Q21, a 3% QoQ increase compared to $5.6 billion a quarter ago, and a 2% YoY decrease compared to a year ago. The 3% QoQ increase was driven by higher loan origination (+5% QoQ), with a continued emphasis on defensive sectors and under stricter credit underwriting standards. Meanwhile, during 1Q21 the Bank continues to collect virtually all loan maturities (close to 100% during 1Q21 and since the onset of Covid-19), evidencing the high quality of the Bank’s borrower base and short-term nature of its business. On an average basis, Commercial Portfolio balances reached $5.4 billion for the 1Q21 (+3% QoQ; -13% YoY), also evidencing the continuing growth during the quarter, but still trailing pre-Covid levels.

As of March 31, 2021, 77% of the Commercial Portfolio was scheduled to mature within a year, up 2 pp compared from a quarter and 8 pp from a year ago. Trade finance transactions represented 57% of the short-term origination, stable compared to a quarter ago and up 2 pp compared to a year ago.

The following graphs illustrate the geographic distribution of the Bank’s Commercial Portfolio, highlighting the portfolio´s risk diversification by country and across industry segments:

As of March 31, 2021, Bladex’s credit quality remains sound, with a well-diversifed exposure across countries, having 57% of the Commercial Portfolio geographically distributed in investment grade countries, down 2 pp from the previous quarter and up 1 pp from a year ago. On a country-risk basis, Brazil represented the largest country-risk exposure at 20% of the total Commercial Portfolio, of which 90% was with financial institutions. Other relevant country-risk exposures were to investment grade countries such as Colombia at 12%, Chile at 11% Mexico at 10%, and top-rated countries outside of Latin America (which relates to transactions carried out in Latin America) at 7% of the total portfolio. The Bank also continues adjusting its exposure towards lower-risk countries, evidenced by a $63 million, or 185% increase in Uruguay, now representing 2% of total Commercial Portfolio, while continuing to decrease exposure in Argentina, down 18% QoQ, representing 2% of the total Commercial Portfolio.

The Commercial Portfolio by industries also remained well-diversified and focused on high quality borrowers, as exposure to the Bank’s traditional client base of financial institutions increased $31 million QoQ, or 1%, now representing 53% of the total Commercial Portfolio, down 1 pp QoQ, while exposure to sovereign and state-owned corporations increased 2 pp QoQ to reach 18% of the total portfolio at the end of 1Q21. The remainder remains with top tier corporates throughout the Region. Across corporate sectors, most industries represented 5% or less of the total Commercial Portfolio, except for certain sectors that the Bank considers as defensive under the current context, such as Oil & Gas (Downstream) at 10% of the Commercial Portfolio at the end of 1Q21. In addition, Bladex continues with the downsize of exposures to higher risk sectors since the onset of Covid-19, such as sugar (-46%) and airline (-67%) industries, now representing 1% and 0.8%, respectively, of the total portfolio at the end of 1Q21.

Refer to Exhibit VII for additional information related to the Bank’s Commercial Portfolio distribution by country, and Exhibit IX for the Bank’s distribution of loan disbursements by country.

"n.m." means not meaningful.

The Commercial Business Segment’s Profit was $14.9 million for 1Q21 (-13% QoQ; -29% YoY). The QoQ 13% and the YoY 29% decrease was mostly attributable to lower Net Interest Income, as the Commercial Business Segment’s 11% NII QoQ decrease was mainly driven by lower net lending spreads, returning to pre-Covid levels at 150 bps, partially offset by higher average lending volume, and the 24% NII YoY decrease was mainly impacted by lower Libor-based rates and average lending volumes, still below pre-Covid balances.

TREASURY BUSINESS SEGMENT

The Treasury Business Segment focuses on managing the Bank’s investment portfolio and the overall structure of its assets and liabilities to achieve more efficient funding and liquidity positions for the Bank, mitigating the traditional financial risks associated with the balance sheet, such as interest rate, liquidity, price and currency risks. Interest-earning assets managed by the Treasury Business Segment include liquidity positions in cash and cash equivalents, as well as highly liquid corporate debt securities rated above ‘A-‘, and financial instruments related to the investment management activities, consisting of securities at fair value through other comprehensive income (“FVOCI”) and securities at amortized cost (the “Investment Portfolio”). The Treasury Business Segment also manages the Bank’s interest-bearing liabilities, which constitute its funding sources, mainly deposits, short- and long-term borrowings and debt.

Profits from the Treasury Business Segment include net interest income derived from the above-mentioned treasury assets and liabilities, and related net other income (net results from derivative financial instruments and foreign currency exchange, gain (loss) per financial instruments at fair value through profit or loss (“FVTPL”), gain (loss) on sale of securities at FVOCI, and other income), recovery or impairment loss on financial instruments, and direct and allocated operating expenses.

The Bank’s liquid assets, mostly consisting of cash and due from banks, as well as highly rated corporate debt securities (above ‘A-‘), totaled $992 million at the end of 1Q21, down from $1,048 million a quarter ago and $1,297 million a year ago, as the Bank gradually adjusted its liquidity position considering a more stable market environment and the Bank’s ample access to diversified funding sources. As of March 31, 2021, $685 million, or 69% of total liquid assets represented deposits placed with the Federal Reserve Bank of New York, while $201 million, or 20% of total liquid assets represented corporate debt securities classified as high quality liquid assets (“HQLA”) in accordance with the specifications of the Basel Committee. As of the end of 1Q21, 4Q20, and 1Q20, liquidity balances to total assets represented 16%, 17% and 19%, respectively, while the liquidity balances to total deposits ratio was 31%, 33% and 53%, respectively.

In addition, the credit investment portfolio related to the Treasury’s investment management activities remained stable at $188 million at the end of 1Q21, compared to $193 million a quarter ago and $79 million a year ago. Consequently, the total Investment Portfolio balances amounted to $389 million as of March 31, 2021, down 2% from $395 million a quarter ago, and up 392% from $79 million a year ago. Overall, the Investment Portfolio mostly consisted of readily-quoted Latin American and Multilateral securities, out of which 61% represented sovereign or state-owned risk at the end of the 1Q21, compared to 62% a quarter ago and 68% a year ago (refer to Exhibit VIII for a per-country risk distribution of the Investment Portfolio).

On the funding side, deposit balances increased to $3.2 billion at the end of 1Q21, up 1% QoQ and 29% YoY. The continued growth in the Bank’s deposit base denotes the growth of its Yankee CD program which complements the short-term funding structure, and the steady support from the Bank’s Class A shareholders (i.e.: central banks and their designees), which represented 46% of total deposits at the end of 1Q21, compared to 50% and 48% of total deposits a quarter and year ago, respectively. As of March 31, 2021, total deposits represented 61% of total funding sources, same as the previous quarter and up from 44% a year ago. Funding through securities sold under repurchase agreements (“Repos”) increased to $157 million at the end of 1Q21, compared to $11 million a quarter ago and $54 million a year ago. In turn, short- and medium-term borrowings and debt totaled $1.9 billion at the end of 1Q21 (-6% QoQ and -40% YoY). Weighted average funding costs improved to 1.10% in 1Q21 (-1 bps QoQ; -131 bps YoY), benefiting from the impact of lower market rates on its narrow, liability-sensitive interest rate gap position.

The Treasury Business Segment’s results were a $2.1 million loss for 1Q21 mainly impacted by lower Net Interest Income driven by reduced liquidity levels, slightly offset by the Bank’s liability sensitive interest rate gap in a declining interest rate environment and the performance of the Treasury’s bond portfolio driving higher yields than liquidity; coupled with lower seasonal allocated operating expenses.

NII and NIM were $18.9 million and 1.24% for 1Q21, respectively. Compared to the previous quarter, lower net lending spreads returning to pre-Covid levels at 150 bps, partially offset by Credit Portfolio growth and lower liquidity levels, resulted in a NII decrease of 15% QoQ. On a YoY comparison, NII and NIM were mainly impacted by lower Libor-based market rates and average lending volumes still below pre-Covid levels, partly compensated by improved average funding costs.

FEES AND COMMISSIONS

Fees and Commissions, net, includes the fee income associated with letters of credit and the fee income derived from loan structuring and syndication activities, together with loan intermediation and distribution activities in the primary market, and other commissions, mostly from other contingent credits, such as guarantees and credit commitments, net of fee expenses.

Fees and Commissions income totaled $3.0 million for 1Q21, relatively stable on absolute terms, on steady fees from the Bank’s letters of credit business. The 9% QoQ increase was mostly driven by stable fees from the Bank’s letters of credit business and higher credit commitment fees. Fees from loan syndication business have been impacted since the onset of the Covid-19 pandemic, but this transaction-based business is starting to pick up, as evidenced by the recent execution of a $300 million loan transaction in April of 2021, where Bladex acted as Joint Lead Arranger.

As of March 31, 20201, the total allowance for credit losses totaled $44.6 million, representing a coverage ratio to the Credit Portfolio of 73 bps. The total allowance for credit losses remained stable QoQ compared to $44.6 million, or 75 bps, at the end of 4Q20. The YoY decrease compared to $102.5 million, or 173 bps, at the end of 1Q20, was mostly associated to the sale of a former credit-impaired loan and watchlist loan, totaling $56.5 million in write-offs against previously constituted reserves, coupled with the Bank’s improved mix of its Credit Portfolio exposure.

As of March 31, 2021, asset quality remained sound, with credit-impaired loans (“NPL”) totaling $11 million, unchanged from the previous quarter, representing 0.21% of the total Loan Portfolio at the end of 1Q21, compared to 0.22% in the previous quarter and to 1.16% of the total Loan Portfolio a year ago.

The Bank’s 1Q21 operating expenses totaled $9.1 million (-10% QoQ; -13% YoY). The 10% QoQ decrease was due to the usual seasonally lower levels of the first quarter of the year. Year-on-year, expenses were down by 13%, mainly on lower personnel expenses related to decreased performance-based variable compensation provision. 1Q21 Efficiency Ratio stood at 41.6%, on lower income generation.

The Bank’s equity consists entirely of issued and fully paid ordinary common stock, with 39.7 million common shares outstanding as of March 31, 2021. At the same date, the Bank’s ratio of total assets to total equity stood at 6.1 times, and the Bank’s Tier 1 Basel III Capital Ratio stood at 26.3%, in which risk-weighted assets are calculated under the advanced internal ratings-based approach (IRB) for credit risk.

In addition, the Bank’s Capital Adequacy Ratio, as defined by Panama’s banking regulator, was 19.4% as of March 31, 2021, well above the required minimum of 8%. Under this methodology, credit risk-weighted assets are calculated under Basel’s standardized approach.

RECENT EVENTS

Notes:

Footnotes:

SAFE HARBOR STATEMENT

This press release contains forward-looking statements of expected future developments within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by words such as: “anticipate”, “intend”, “plan”, “goal”, “seek”, “believe”, “project”, “estimate”, “expect”, “strategy”, “future”, “likely”, “may”, “should”, “will” and similar references to future periods. The forward-looking statements in this press release include the Bank’s financial position, asset quality and profitability, among others. These forward-looking statements reflect the expectations of the Bank’s management and are based on currently available data; however, actual performance and results are subject to future events and uncertainties, which could materially impact the Bank’s expectations. Among the factors that can cause actual performance and results to differ materially are as follows: the coronavirus (COVID-19) pandemic and government actions intended to limit its spread; the anticipated changes in the Bank’s credit portfolio; the continuation of the Bank’s preferred creditor status; the impact of increasing/decreasing interest rates and of the 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 adequacy of the Bank’s allowance for expected credit losses; the need for additional allowance for expected credit losses; the Bank’s ability to achieve future growth, to reduce its liquidity levels and increase its leverage; 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; potential trading losses; the possibility of fraud; and the adequacy of the Bank’s sources of liquidity to replace deposit withdrawals. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

ABOUT BLADEX

Bladex, a multinational bank originally established by the central banks of Latin-American and Caribbean countries, began operations in 1979 to promote foreign trade and economic integration in the Region. The Bank, headquartered in Panama, also has offices in Argentina, Brazil, Colombia, Mexico, and the United States of America, and a Representative License in Peru, supporting the regional expansion and servicing its customer base, which includes financial institutions and corporations.

Bladex is listed on the NYSE in the United States of America (NYSE: BLX), since 1992, and its shareholders include: central banks and state-owned banks and entities representing 23 Latin American countries; commercial banks and financial institutions; and institutional and retail investors through its public listing.

CONFERENCE CALL INFORMATION

There will be a conference call to discuss the Bank’s quarterly results on Wednesday, May 5, 2021 at 11:00 a.m. New York City time (Eastern Time). For those interested in participating, please dial 1-877-271-1828 in the United States or, if outside the United States, 1-334-323-9871. Participants should use conference passcode 68251167, and dial in five minutes before the call is set to begin. There will also be a live audio webcast of the conference at http://www.bladex.com. The webcast presentation will be available for viewing and downloads on http://www.bladex.com.

The conference call will become available for review on Conference Replay one hour after its conclusion and will remain available for 60 days. Please dial (877) 919-4059 or (334) 323-0140 and follow the instructions. The replay passcode is: 37768534.

For more information, please access http://www.bladex.com or contact:

Mrs. Ana Graciela de Méndez

Chief Financial Officer

Tel: +507 210-8563

E-mail address: amendez@bladex.com