Bladex, Inc. 2026 Q3 Earnings Call

Sir, please go ahead. Good morning, everyone, and thank you for joining us today to discuss Bladex's results for the third quarter of 2026.

I will begin with the key highlights. Annette, our CFO, will then take the call to walk you through the financial results in more detail. After that, I will return with an update on strategy and our outlook for the rest of the year. Finally, we will open the call for questions. This was an outstanding quarter for Bladex. Our commercial portfolio and net interest income both reached new record levels. Net interest income grew significantly from a year ago, and we delivered strong earnings. We did this while maintaining strong credit quality, further improving the portfolio's risk profile as Stage 2 exposures declined, and preserved a strong capital position. It is an encouraging combination of financial KPIs as we enter the final part of the year.

Our commercial portfolio reached a record of $15 billion, up 15% from the second quarter and 38% from a year ago. The quarter included a $1 billion one-year sovereign loan to the Republic of Panama in support of the government's liability management program. This was a one-time opportunity distinct from the transactions we typically originate. It is a sovereign exposure to Panama, which S&P and Moody's rate investment grade with relatively low capital consumptions for its size and a spread well above the sovereign bond curve. This transaction clearly demonstrates our ability to execute at scale, supported by our funding flexibility. Even excluding that single Panama sovereign loan, loans grew 7% from the second quarter and 29% from a year ago. That growth included trade and working capital financing with established clients, as well as medium-term financing for acquisitions and energy projects, mostly in Colombia and Argentina.

Needless to say, we have not relaxed our underwriting standards to achieve this growth. Most of the growth this quarter came from the higher-grade segments, where we found attractive arbitrage opportunities. We know the sponsors, we understand the exposures, and we know the risks. Competition for high-quality assets continued to pressure lending spreads across the region. Latin American assets continue to attract investors' interest, supported by the region's relative distance from major conflicts and its role as a supplier of energy and other commodities. Regional sovereign risk premiums remain near historical lows. Net interest income reached a record of $79.8 million, up 9% from the second quarter, and net interest margin rose to 2.30%. It is worth mentioning, however, that this quarter's margin improvement reflected lower funding costs and a temporary benefit from loan prepayments, even as lending spreads remain under pressure. Annette will comment more on that shortly.

As planned, deposits continue to grow. Average deposits increased 6% quarter-over-quarter and 22% year-over-year, helping lower our funding costs and supporting margins while the commercial portfolio expanded. Our fee-generating businesses keep making good progress. Non-interest income reached $19.3 million, up 26% from a year ago. Letters of credit generated record quarterly income, supported by strong trade finance activity, particularly in the commodities sector. In addition, we completed four structured transactions, bringing our total to 13 for the first nine months of 2026. Our syndication and project finance teams continue to generate strong distribution fees while working closely with our client derivatives teams to provide hedges that help mitigate risk, improve cross-sell, and boost client profitability. Total revenues reached $99.1 million, nearly 20% higher than a year ago. Our efficiency ratio stood at 25.8% for the quarter.

Revenue growth is allowing us to advance our strategic initiatives while maintaining cost discipline. With budgeted planned investments underway next quarter, we expect the full-year efficiency ratio to move closer to our guidance of 27% for the year. Provision expense increased as a result of portfolio growth and additional reserve coverage on existing Stage 3 exposures. Reinforcing our conservative approach to credit risk management. Credit performance remains solid. Net income reached $63.2 million, 15% higher than a year ago, and adjusted ROE was 15%. Our Tier 1 ratio ended the quarter at 16.2%. Both our ROE and our capital ratios are at the higher end of the range of our guidance for the year. In summary, we are pleased with the profitability we delivered this quarter as the business continues to grow, and we expect a solid business pipeline for the remainder of the year.

With that overview, let me turn it over to Annette for a closer look at the financial results. Annette, over to you. Thank you, Jorge, and good morning, everyone.

As Jorge highlighted, the third quarter was another strong quarter for Bladex, demonstrating the strength of our balance sheet and our ability to execute at scale. Turning to our financial performance, net income reached $63.2 million, up 15% year-over-year. Compared with the second quarter, net income was 5% lower, mainly reflecting the normalization of transaction-driven fee income, higher operating expenses, and increased provisions, partially offset by higher net interest income. Return on average assets was 1.8%, and adjusted return on equity was 15%, in line with our full year guidance. For the first nine months of the year, net income totaled $186 million, up 9% year-over-year, with a return on average assets of 1.9% and an adjusted return on equity of 15.2%.

Let me now walk you through the key financial drivers behind these results, beginning with the commercial portfolio. The commercial portfolio reached a record $15 billion at quarter end, up 15% from the second quarter and 38% year-over-year. Two factors explain this growth. A landmark sovereign transaction and continued expansion with established top-tier clients in markets and sectors we know well. The Panama sovereign transactions accounted for around half of our commercial portfolio growth during the quarter and includes flexibility for early repayment. I want to highlight this transaction because it demonstrates five strengths of our business model. First, execution capacity, our ability to underwrite and execute large transactions, capturing significant market opportunities. Second, asset quality, a short-term exposure to an investment-grade sovereign consistent with our risk appetite. Third, capital efficiency. Relatively low capital consumption under Basel III, generating a very attractive RAROC.

Fourth, funding flexibility, our ability to mobilize funding quickly through our correspondent banking network, aligned with the tenor of the transaction. Fifth, earnings, a positive contribution to absolute NII, despite temporarily diluting reported NIM. Beyond this transaction, the growth was broad-based across our loan portfolio. Total loans reached $12.3 billion, up 18% quarter-over-quarter and 41% year-over-year. Growth was concentrated primarily in short-term lending, including increased financing requirements associated with higher oil prices and regional trade flows. Medium-term lending also contributed, supported by acquisition financing and energy sector transactions with attractive risk-adjusted returns. Contingencies reached $2.5 billion, up 5% quarter-over-quarter and 16% year-over-year, supported by letter of credits and commitments, the latter related mainly to project finance and infrastructure. From a geographic perspective, Panama became our largest country exposure at 17%.

Excluding the sovereign transaction, Panama would have represented nearly 10%, broadly in line with other major markets such as Colombia and Brazil. Importantly, this growth has not come at the expense of credit quality. Our portfolio remains focused on financial institutions, top-tier corporations, and sovereign exposures, with 68% scheduled to mature within one year, preserving flexibility to reprice and redeploy capital. Looking ahead, excluding the Panama transaction, we expect our full-year commercial portfolio growth to be around 25%. Turning now to asset quality. Credit quality remains strong despite the significant expansion of our portfolio, reflecting our disciplined underwriting standards and proactive credit risk management. At quarter end, 99% of total credit exposure, or $16.4 billion, was classified as Stage 1, compared with 98.4% in the prior quarter.

Stage 2 exposure declined to $82 million, or just 0.5% of the portfolio, from $162 million in the second quarter, reflecting the sale of one exposure, the scheduled amortizations, and credit rating improvements. Importantly, exposures requiring closer monitoring continue to decline even as our portfolio expands, with no new exposure migrating to impaired status during the quarter. Additionally, Stage 3 exposure remains stable at $75 million, while their share of the credit portfolio declined to 0.4% as the portfolio expanded. Credit provisions for the quarter totaled $10.4 million, compared with $8.6 million in the prior quarter. The additional provisions primarily reflect increased reserve coverage on existing Stage 3 exposures rather than new credit deterioration, together with provisions associated with the portfolio growth. This is consistent with our proactive credit oversight and prudent provisioning approach.

As a result, total reserve coverage of impaired credits increased to 1.4 times, compared with 1.25 times in the prior quarter. Overall, these results reinforce the strength of our credit portfolio and our proactive and prudent approach to credit risk management, even as we continue to grow our business. Turning now to funding. This quarter clearly demonstrates the strength and flexibility of our funding platform. We expanded our balance sheet by $2 billion, supported by a diversified deposit franchise, broad access to international capital markets, and a deep network of longstanding correspondent banking relationships. Deposits remain a central pillar of our funding strategy. Average deposits grew 6% quarter-over-quarter and 22% year-over-year, supporting an improved funding mix and more competitive funding spreads. At quarter end, deposits stood at $7.9 billion, up 16% year-over-year. Our deposit base remains well-diversified.