Hello, everyone, and welcome to Bladex’s third quarter 2017, on today the20th of October, 2017. This call is being recorded and is for investors and analysts only. If you are a member of the media, you are invited to listen only. Bladex has prepared a PowerPoint presentation to accompany their discussion. It is available through the webcast and on the Bank’s corporate website at www.bladex.com. Joining us today are Mr. Rubens Amaral, Chief Executive Officer of Bladex, and Mr. Christopher Schech, Chief Financial Officer. Their comments will be based on the earnings release, which was issued today. A copy of the long version is available on the corporate website. Any comments made by the Executive Officers today may include forward looking statements. These are defined by the Private Securities Litigation Reform Act of 1995. They are based on information and data that is currently available. However, the actual performance may differ due to various factors, which are cited in the Safe Harbor Statement in the press release. And with that, I am pleased to turn the call over to Mr. Rubens Amaral for his presentation.

Thanks Jonathan. Good morning everyone. Thanks for joining us today. Earlier today, we reported earnings of $20.5 million for the third quarter or $0.52 per share. It is an improved result when compared to last quarter. The average balances in the loan book were at similar levels of last quarter meaning that we have been able to reverse the trend of declining balances in our portfolio. In my comments in the earnings press release this morning, I highlighted how the abundant liquidity in the U.S. dollar market to emerging markets, and particularly to Latin America, has impacted our business, pressuring asset prices, which has hindered our growth to materialize as expected. In addition to lower asset prices, margins continue under pressure due to our focus on short term trade finance, and the increase in the Libor base rates, as clients continue to push to keep all-in rates at the levels observed in the first and second quarters of this year. Looking at slide #3 in the presentation being webcasted, you can observe that new disbursements continue their growth trajectory with another strong quarterly performance posting a year-to-date growth of 26%, i.e. $2.2 billion of new transactions in the year. This significant amount confirms that trade flows are picking up, and our lending activity this year has increased substantially, but not yet unfortunately translated to increased end-of-the period balances due to the short-term nature of trade finance, and our objective to finance the companies within their production cycle. On the other hand, we had prepayments close to $100 million, and $320 million of projected new disbursements in Q3 were postponed to Q4 and Q1/2018 as per clients’ requests. So we can see that the origination efforts are paying off, and we expect to post growth for Q4. Nevertheless, we realize that…

Thank you Rubens and hello everybody and thanks for joining us in the call today. As I discuss our results for the third quarter 2017 I will try to focus on the main aspects that have impacted our results, and I will make reference to the earnings call presentation that we have uploaded to our website together with the earnings release, and it’s on webcast as we speak. So Rubens already mentioned most of the highlights of our performance for the third quarter 2017 on page 3, so let´s dive right into the numbers starting on page 4. The third quarter of 2017 closed with a profit of $20.5 million, compared to $17.5 million in the previous quarter and compared to $28.0 million in the third quarter of 2016. Year-to-date profits are $61.4 million in 2017, compared to $73.7 million in 2016. In our profit walk on page 4, you can see the main drivers of our quarterly and year-to-date business performance. Quarter on quarter, profits increased on lower provisions and expenses as average Commercial Portfolio balances remained nearly flat, while net interest margins were lower in the third quarter of 2017.3Q provisions were down from the second quarter as restructurings were concluded. This led to write-offs against existing reserves and partial reserve releases. At the same time, specific reserves were strengthened for the remaining exposures all of which have pending restructuring agreements. Expenses were down QoQ mainly due to the absence of non-recurring employee related expenses that we had in the 2Q, and due to a reduction of other expenses. Year-on-year, the third quarter profit evolution was mainly impacted by reduced net interest income on lower average portfolio balances and by lower NIM, reflecting the retrenchment in Brazil, as well as a portfolio mix— shift towards short tenor trade…

Thanks Christopher. Ladies and gentlemen we are ready for your questions.

[Operator Instructions] Our first question comes from Tito Labarta from Deutsche Bank.

My main question, in terms of loan growth, I know you mentioned you think fourth quarter should be better, GDP growth globally is improving. But I guess, what gives you confidence that you can get some good loan growth next year? Is it just with Brazil improving? We saw a decline even in Mexico and Peru this quarter that have been doing relatively better. So is Brazil improving enough to get some decent loan growth? Or what else do you need to see there? And then, I guess, on the back of that, you said you should go back to double-digit profitability. But do you think that's possible next year, given what could happen with loan growth or not, given how weak it's been? Just wanted to maybe understand a little bit more the outlook. Thank you.

Thank you, Tito. Thanks for your questions. First of all, the loan growth question that you asked, definitely, as you mentioned, Brazil, it's a very important country as far as our portfolio is concerned. We are at a level that we feel very comfortable now at 18% of the total exposure due to the current situation in Brazil. But what we have seen in the countries that the activity is picking up and with a yearin2018, that is going to be an election year, it's going to be a difficult year for Brazil, but we're seeing that the economy, nevertheless, it's improving and that in itself will be an important factor in driving growth for Bladex. We'll be very careful. You just heard Christopher saying that 82% of NPLs come from Brazil. So the reason we have been very cautious, it's because the negative credit cycle that impacted the country due to the prolonged recession experienced in the last 2 years. But definitely, as we are looking carefully to the sectors where we see very good and competitive companies, we might be able to increase our portfolio stake in Brazil, not to the levels that we have seen before, 30%, but slightly higher than 18% we see very feasible. On the other hand, Argentina, is moving towards much more stabilization, I think, Argentina, I expect again, is the beautiful lady in the market. Everybody wants to dance with Argentina. In our case, because of our prior history, we're very; careful, but we're looking positively for 2018 as Mr. Macri can consolidate his position, political position and strength in the country with a very favorable result we expect in the forthcoming elections, midterm elections in Argentina. Being that the case, Argentina is presenting very interesting opportunities for us in terms of…

Okay, thank you Rubens. Very detailed answer. I guess, maybe just one follow-up because, I guess, to get to that double-digit ROE and 12% longer term, you also need margins to expand. Do you think there is an excess liquidity in the market? But do you think your margins can increase as growth comes back? Or what else do you need to see there for your margins to improve?

No, that's a very fair question. Naturally, what we're seeing right now, it's abundant liquidity, but we have signals in the horizon that this might have some sort of adjustment when the Fed really starts selling its assets and the central banks in Europe and Japan become a little bit more contained about QE. So that, in itself, can have -- bring this risk reward equation more into balance because these days, what we have seen with margins is something that, for us, it's impossible to compete with the capital markets at the levels they are. I can tell you, we were at the IMF last week, and all the banks offering Bladex money for five years at levels that we have never seen before. So really, it's a bullish market, so margins will not pick up in this fourth quarter. Let's hope that we can really manage that in the 2018, with slightly bias towards more medium-term financing because as we see the region improving, we see opportunities for us, really, to go back and do more medium-term financing that could balance better our net interest margin. On the other hand, we are looking carefully at our funding side. You have seen that we have kept liquidity levels very high levels. As we feel very comfortable about liquidity available to us, we might be a little more aggressive in managing that liquidity, not keeping that much liquidity that we have kept in our books for such a long time. So I think of it's going to be a combination of catering to more medium-term transactions, managing better our liquidity needs and hoping that, really, all this geopolitical tensions and this QE discussions among the central banks in the developed world can help us to have better margins.

Great. Thank you very much, Rubens. That's helpful.

Our next question comes from Yuri Fernandes with J.P. Morgan.

I just would like to know a bit more color on the cost of risk. And this quarter had a very good loan loss provisions. Actually, you're back to the historical levels. So if you can comment, if you are, let's say, is the worst behind and this should be the new normal level, back into the historical, very low cost of risk or no, this was just one-off, and you still need to recognize losses here. And after that, I can make my second question. Thank you.

Yuri, allow me to take your question. This is Christopher. While, indeed, we had lower provisions this quarter, I think we should maybe highlight what we think are the drivers behind it. And I think, up and foremost, it's a fact that the speed of negotiations has picked up. Restructurings are coming to the finish line, which is a big improvement over what we've been telling you over the last several quarters that the horizons had to be extended because of extensions agreed to by the negotiating parties and the courts involved, in the case of official bankruptcy proceedings. And so the good news is that there's been quite a bit more movement in trying to bring these negotiations to a fruitful end. And we've seen the first results of that in our -- in the fact that we were able to -- we had to write off some realized losses now. That's the bad news. But we -- the good news, along with it was that we were able to release a few amounts of specific reserves that are no longer needed. And so I think, going forward, we would expect to see this space of negotiations continue to improve as the economic environment, especially in Brazil, is improving and all the parties are eager to go back to work and make some money. And so this should be underpinning our expectation that credit costs should not see spikes anymore in terms of increases of specific reserves. What we do expect is that as we start growing our book of business, of course, new business always requires new generic reserve allocation. And that is what we expect to see as a main source of credit of reserve requirements going forward. That said, we still have some negotiations pending. And so we have to wait for the outcome of those negotiations to make sure, but for the time being, we're fairly positive that we should be not seeing any additional spikes in reserve requirements outside of our organic loan growth.

Super clear Chris. And my second question is regarding your expenses. I know you had some one-offs in the last quarter, so like this kind of explains some of the decline. But still a pretty good number, and I guess, that kind of helped you affect the top line pressures. But thinking ahead, like, even for the next 2 quarters, how are you thinking about efficiency ratio? Like, should this come back to below 30% level as top line resumes? Do you have any color on how efficiency and expenses should behave going ahead?

Yes. For sure, we expect the efficiency ratio to continue to improve and not deteriorate going forward. It's clear to us, to management, to the Board of Directors that our business does not require a lot of brick-and-mortar. There is no need to assume that an efficiency ratio could not be below 29% or 30%. As so this is indeed our target. We need to get back to levels below 30% and we'd like to get back to those levels in a hurry. We've been able to reduce our expense base to some extent to accommodate the lower revenue base that we have seen over the last couple of years, but clearly it will be easier for us to continue with further efficiency ratio improvements as our revenues grow and we don't have to cut that much costs internally. Even -- but having said that, we are always looking at improving our internal workflows and processes, try to automate more and, clearly, are focused on increasing efficiency by cutting costs as well, not just waiting for revenue growth in the future.

And also I just would add that we have hired a new team in Bladex for technology and processes and also operations, and this will help us in our quest to drive productivity higher. That's something that you should expect as we really can eventually shave off a little bit of costs next year by the increase of productivity that we are working very hard on.

Okay, thank you.

Our next question comes from Greg Eisen with Singular Research

I'd like to follow up on the loan book, and again you have talked about economic growth being significant across your region in 2017 and it sounds like it could be even better in 2018. Yet, although we've had decent economic growth all over the region in 2017 for the most part, we have seen the average loans outstanding fall significantly since last year's levels, so I'm just wondering, economic growth by itself didn't allow you to increase your loan book, it was a combination of -- I guess, it was, as you have talked in the past, about competition, so is competition changing now that economic growth, you think, will carry the day for you next year? Or could you comment, really, about that competitive level? And what might change to allow you to again grow your loans back to higher levels?

Greg, thanks for your question. I think one of the things that I want to remind you is that we are coming out from a negative credit cycle that impacted the region in the last two years, mainly coming from Brazil, which, you know very well, impacted the bank in a way that we had to increase specific reserves for challenging credits, mostly in that country. And as a result of that, the Bank decided, as I have alluded to before in my comments in previous calls, to a policy of back to basics, which meant going back to short-term trade finance and really strengthening the quality of the portfolio. And also, the Bank decided that it was important to diversify the risk, reducing the size of tickets, so when you put these things together, there was a, by design, policy of reducing certain exposures over time that has caused us really to reduce the size of our balance sheet. So it was not that the economic growth environment didn't help, it helped but we were very selective because we are navigating through this negative credit cycle that impacted the bank. So there was, on purpose decision, or purposeful decision, of the Bank, supported by the Board, really to streamline the exposures in a sense, diversify, reducing concentrations, being those concentrations at country level, at client level. That's why you saw us very active in reducing the size of our portfolio in Brazil because we had an important concentration in a country that was facing a very challenging credit environment and was in recession. So there was, by design, this decision that we made out of diversification. Now that we have cleaned the house, so to speak, and we see that the Region continues to exhibit a strong growth compared…

I understand. Thanks for answering that so clearly, appreciate that. If I can just follow-up related to the loan book, your exposure to the financial services industry seems to have grown significantly over the course of the last year. Could you talk about your financials exposure and is there a limit to where you want to take that? How much is too much in that industry exposure? And have you reached that point already?

That's another, by design, decision to improve the credit quality of our portfolio because you know that Bladex was created as a bank to banks. So we know this industry very well. And in year 2004, I was -- the majority of our exposure was to financial institutions. So as we really went through this process of understanding what was happening with our portfolio, we realized that there was space for us to do more business with the financial institutions. But again, this, we were able to do it because the environment, the risk environment, in Latin America deteriorated a bit, and our rating continues to be one of our strengths. So -- and this helps us to have some degree of arbitrage when working with the financial institutions. That's why you saw us also doing more business with them. As this reality goes back to normalcy, if you will, in terms of having ratings being upgraded for financial institutions and countries, depending on how countries and financial institutions perform, this, of course, impacts our ability to really continue to add value to them. So I would say that what you are seeing right now, 36% about, it's a fair number. We expect that to be the case, to continue to be the case, i.e. maybe eventually get into 40%, but that's where we think it's going to be. It's going to be hovering around 35% to 40% and we feel very comfortable. This has been our traditional client base, and we know them very well. And this is one thing that helps us also because they are very good partners in our syndication business. All the syndications we're bringing to market, it's together with our good financial institutions, clients we have throughout Latin America. So it is a combination of really keeping the credit quality of the portfolio, working with a segment that we know very well and then can complement our activity very well and we can complement their activity as well when they are working with local markets where we don't have knowledge.

Thank you. I appreciate that. And one last quick question and I'll let someone else go, but you mentioned the syndication business, you put out a couple of press releases in early October announcing certain syndications. Was the revenue from those syndications recognized in the third quarter or will that be a fourth quarter revenue item?

No, these revenues were recognized in the third quarter, but I can tell you, we have very good pipeline of new deals, and more to come in the fourth quarter as well.

Great. Thank you. I'll let someone else go. I appreciate your answering my questions.

Thank you. [Operator Instructions] Mr. Amaral, at this time I am showing no further questions.

Thanks, Jonathan. Ladies and gentlemen, thanks for your questions and attention today. We are working diligently to set the bases in Q4 for a successful 2018. I'm looking forward to talking to you again in February for the yearly review of the performance of Bladex. And since this is our last call of the year, let me make this opportunity -- let me take this opportunity to wish you and your families a happy holiday season and renew the accomplishments in 2018. Thank you again, and goodbye.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.