Good morning and welcome to Bladex's Second Quarter 2022 Earnings Call. A slide presentation is accompanying today's webcast and is available in the Investors section of the company's website, www.bladex.com. There’s an opportunity for you to ask questions at the end of today’s presentation. This conference call is being recorded. As a reminder, all participants will be in listen-only mode. Now, I would like to turn the line over to Mr. Carlos Raad, Investor Relations Officer. Please, go ahead, sir.

Thank you. Good morning, everyone, and thanks for joining our second quarter 2020 earnings call. Before we begin our presentation, allow me to remind you that certain statements made during the course of the discussion may constitute forward-looking statements which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to materially differ, including factors that may be beyond the company's control. For a description of these risks, please refer to our filings with the US Securities and Exchange Commission and our earnings release. Speaking on today's call is our CEO, Jorge Salas, who will provide an overview of the second quarter and our strategic priorities. Ana Mendez, our CFO, will then discuss the quarter's financial results in more detail. And after that we'll open the call for your questions. Also joining us today is Mr. Sam Canineu, our Chief Commercial Officer and the rest of the Executive Bladex's team. All will be available for the Q&A. With this, let me turn the call to Jorge. Please, go ahead.

Thanks, Carlos, and good morning, everyone, joining us today to discuss our second quarter results. Today I'll start with sharing results. I would like to take the opportunity to provide an overview on the strategy that we have been working on for the last year; a strategy with clear objectives, enhanced profitability, ensure long-term sustainability and of course, increased overall value creation for all of our stakeholders. As you all have seen during the last few quarters, we have been consistently growing our book and expanding our margins. Today, I would like to highlight that the strong results we are presenting are largely the product of the strategic plan, a plan that is already in place and gaining traction. I will discuss the strategy behind this plan in more detail soon. Before, let me give you an overview of our second quarter results. This was without a doubt a very strong quarter for Bladex. Our credit book maintained the growth momentum shown in the first quarter, reaching a historic record level of $8.7 billion. The commercial portfolio has now shown consecutive growth for eight quarters in a row, with NPLs close to zero for over two years now. Our net interest margin continued the positive trend, observed in the last five consecutive quarters. Net income basically doubled compared to last quarter, reaching $23 million. That is an increase of 63% year-on-year, resulting in a 9.1% return on equity for the quarter. Ana will talk about these results in detail later on in this presentation. The point I want to make today is that, these strong results are driven by two main factors: an internal one, the new strategic plan; and an external one, the current uncertain global macro environment. The current context of high inflation, raising interest rates and high…

Thanks Jorge and good morning to all. I will now go into more detail on the evolution of our business and results of operations during the second quarter of this year. So let's please move to slide number 7. Once again this quarter's credit disbursements of over $4 billion exceeded collective maturities that represented more than half of the commercial portfolio. These denotes the fast turnover and short-term nature of the portfolio, characteristic of our business model with 71% maturing within the next 12 months and the average remaining tenure at approximately one year. Lending spreads on new loans exceeded those maturing by 26 basis points, reinforcing the positive trend of recent quarters. In slide 8, we can see that quarterly growth continues to be evenly distributed across countries and sectors. Exposure by country remains relatively stable except for Brazil and Peru each up by two and one percentage points to 16% and 8%, respectively. In terms of sectors, financial institutions represent 41% of the portfolio down by one percentage point from the prior quarter due to strong growth in other commodity related sectors, such as oil and gas downstream, now representing 14% of total exposure. In the following slide, we present the quarterly evolution of our balance sheet structure at the end of each period. Total assets set record levels again this quarter, reaching close to $9 billion as seen in the graph to the left on the back of sustained loan growth, complemented by a credit investment portfolio, which allows us to further diversify our exposures by country, including investments in non- LatAm issuers, mainly from the US representing 51% of the total. As presented on the graph to the right this asset growth has been consistently supported by a well-diversified funding base. First, a resilient level of…

Thank you Ana. Great job. As I said before, we are very pleased with the traction we are gaining, both in the financial front and also in the operational front. As we continue to build on our capabilities we are also benefiting from the current environment and maintaining a robust asset quality, while delivering enhanced profitability. I look forward to continue to share, with you all the progress on the execution of our five-year strategy and provide you with a deeper insight on the strategy later in the year on the Investor Day that we're planning to launch in Q4. Now, I would like to open it up for the Q&A section.

Thank you very much for the presentation. We will now move into the Q&A part of the call. Thank you. Our first question comes from Mr. Jim Marrone from Singular Research. Please go ahead, sir.

Yes. Well, thank you for taking my call. I trust that you can hear me well.

Yes Please go ahead.

Okay. Great. So a very good job. It seems – capitalizing very well from higher interest rates. So I think that's a job very well done, and I don't want to put that away from you. So if I can bring the attention to just in regards to lap some headwinds that, mainly inflation and how that's impacting clients perhaps, with regards to lower consumer spending as a result of the inflation going forward and that impact to Bladex currently as well as going forward with regards to inflation and perhaps a softening of the consumer spending with respect to the clients.

All right Jim. Thank you. This is Jorge Salas. Very good question. As I said, at the beginning of the call, we feel that the current environment is overall positive for Bladex. Having said that of course if this turns into a recession which it looks like and we in that recession prolongs itself in the region we might of course see aggregate demand diminish that will affect for sure our loan book size, and our margins. We do not foresee, however, material any material asset deterioration, especially considering after what happened during the COVID storm. I mean, we came out of the storm after a complete standstill of the whole world with a stronger asset quality that even before the storm. So, short answer is so far positive potentially challenging in terms of asset size and margins, but not necessarily in terms of asset quality. I don't know if that answers your question.

I think we have lost for a second investor. We will perhaps come back shortly once again. And in the meantime, I'll read two questions that came via the text message in the meantime. Congratulations on the very strong quarter. Two questions regarding capital allocation. Please expand on your decision not to bring the dividend back in line with pre-COVID levels in light, with significant NII growth expanding NIM and negligible nonaccruals that's number one. Number two, how do you think the BLX should trade relative to book value? Why is the company not actively buying back stock at nearly 50% of book value?

Yeah. Thank you for the question. Questions regarding capital allocation, we're clearly in a new asset size level. Bladex has not been here before. Our capital ratios have been obviously shrinking. We remain well capitalized. And I have to say that, of course, the Board is managing, all asset-capital allocation decisions to make sure that we return the best value possible to our shareholders and that involves of course our dividend policy. I don't know Ana, if you want to add anything?

Yes. That pretty much sums it up in terms of our valuation of course. We're definitely undervalued at the current level and having a book value of close to $29. You asked about, what would be the level that we aim at and of course it's way over that.

Okay. Thank you very much. Our next question comes from Mr. Pedro Escudero from DOMA Perpetual. Please go ahead sir. Your line is open.

Hi everyone. Following the prior questions, I don't think you all understand the relationship between price to book and return of equity, because if you are lending without a return of equity calculator and obviously you're lending doing that because your return on equity so far is 9%. How do you expect that you're going to return to a price to book over one? The reality is that, that is not feasible. So while you're lending to 40% of the book to financial institutions are outsourcing your credit decisions to someone else basically. That's what it is to lend unsecured to financial institutions. What are we doing here? You're expecting to increase the price to book you said that, your net value but the reality is that your return on equity is a disaster because of your lending basically a strategy. It just doesn't make any sense. Additionally, my question is, you have a massive dividend policy in terms of percentage of earnings which decreases the good value further which is a disaster as a capital return strategy to shareholders. This should be actually used to be buying back loss of the stock which actually increases book value and increases the return to shareholders. So I think the strategy is flow. It comes from the Board is flow. And actually your lending is standards by the way, your lending is standards. You claim that you have basically zero -- I would say zero percent or something like that nonperforming loans. But even if you have less than 1% of nonperforming loans you can wipe out your entire net income. So your whole strategy is being flowed for a long time. And I hope actually as a shareholder, that the Board actually starts to change all of this, but I don't think they even understand what is going on. So my question to you all is what's going on the lending side? And why are you lending to financial institutions at super basically spreads? The reality is that it creates a very low return on equity. And while you have that low return on equity, you can really create a price to book that is going to justify the price of the stock going up. So those are my questions.

Thank you, Pedro. I find it curious that, your point is the opposite of the previous caller. I would mention a couple of things. One is, as regards to lending to financial institutions, we have been decreasing that precisely the storm, on the COVID storm went by to increase our margins. And we have seen that happening in a sustainable fashion. As far as the return on equity, we don't see many wholesale banks with this strong capitalization in such a clean book that return between 9% and 10% which is where we are today. And we're planning to increase that. In short, we have different views on, how we manage this. I don't know, Sam you're in charge of lending if you want to complement.

Sure, Jorge. This is Samuel Canineu, the Chief Commercial Officer. I would say you have to look here at the trajectory, right? This is -- I think there is -- I agree that there is definite space or upside for us to improve the profitability on our lending. But at the same time, you don't change this from one quarter to the other you establish a direction because we are still very committed to our credit underwriting discipline. And if you analyze the previous quarter, you do see that upward trajectory on margin you see that downward trajectory in terms of lending to financial institutions which is that there's nothing wrong, but there is we can place our capital with more profitable and not necessarily riskier sector which is what we're doing. And that's the direction that we're going. I believe there is still a space to continue with that shift without materially changing our credit standards and challenging our NPLs. So, I agree that there is upside and we're executing on it, but of course responsibly.

Thank you very much. Our next question comes from Mr. Tom McGuire , Private Investor. Please go ahead, sir. Your line is open.

Good morning and thanks for taking my question. You explained well how inflation is currently helping your business in terms of short-term loans and accelerated repricing plus commodity prices are high. But if it continues it could lead to a recession. And my question is what does that do for business? Do you have a recession playbook? And would you be increasing reserves in a poor economy or do you just put in reserves as new loans are originated?

Thank you, Tom, for your question. For answer is yes, as we do foresee a recession scenario in the near future that will of course affect aggregate demand and we closely monitor all countries and sectors and we will anticipate potential downgrade and some of our countries and perhaps clients. And we do foresee if that is sustainable that we will increase provisions accordingly.

Okay. Now one other question on the new Manager and Investor Relations and the Analyst Day that you're going to have will that Analyst Day be in New York or will it be in Panama?

A good question. We're still deciding. We are reading plans to be in New York, but we're also continuing to do it virtually. We'll let everybody know when the time comes.

Okay. Good. And then secondly, would you guys consider hiring an outside IR firm to schedule meetings with investors either virtually or in person? Because I do think your story is worth telling and it's not well known.

Carlos Raad, our new IRO handles that and we do have an external adviser that will help us set up calls and meetings if necessary.

Okay, good. Thank you very much.

Thank you.

Our next question comes from Mr. Adam Hegarty , Private Investor as well. Please go ahead, sir. Your line is open.

Thank you. Hello gentlemen. Congratulations on the quarter that showed a lot of growth and I'm excited as a long-term shareholder to hear your plans for the company and the future. I would like just to make a quick comment and then ask my question. I also had a little bit less harsh terms than some of your previous callers. I would love to see some share buybacks continuing as well. You guys reduced your share count by almost 10%. And you could see the effect on the share price and they realize there's a different environment then. But at this book value level, I would love to see that. And then second my question for you is, can you speak more to the roughly $1 billion in debt that you have on your balance sheet not the debt that you've issued? But there were some comments made last quarter about how you're going to use it to balance the loan book. And I just had some concerns there with some of the lower credit quality issuers that the BB and single B they own as well as the rising interest rate environment and the effect that had on that portfolio value? Thank you.

Thank you for your questions. Regarding the investment portfolio that we have in a hold to maturity to complement our loan book, I'm going to pass the word to our Head of Treasury and Capital Markets, Ed Vivone here with me. Ed?

Hello. Good morning. In the case of the investment portfolio, I mean, this is a portfolio that as Jorge explained has been constructed with two main objectives. One is to complement the loan portfolio and the other one is to provide diversification. I mean, half of our portfolio roughly is invested in to Latin-American names and the other half is invested outside the region predominantly with US names. Around 50% of the portfolio is investment grade. What happens is that many of the good Latin American issues have the countries selling of their respective countries, for example, the case of Brazil or Colombia, so that inhibits the possibility of achieving a higher investment, high grade for these investments even though the issuers may be pretty strong and very reputable corporate and financial firms. But in a nutshell, we aim to maintain a very good rated bond portfolio with a short duration taking into consideration the expectation of the evolution of interest rates. And all these are liquid blob relationships that also have very, very fast access added to a bond of the repo market. And in nutshell this is a complement to our loan portfolio and is designed to both generate incremental income and provide geographic diversification inside the region to balance our overall credit exposures. I don't know if you have any further questions, and I hope I have answered your question.

Thank you very much. It looks like we have no further questions at this point. I will pass the line back to the Bladex management team for their concluding remarks.

Yes, thank you operator, and thank you everybody for your questions, and look forward to share with you the progress of our strategic plan. Thank you everybody and stay safe. Bye.

Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you and have a good day. Goodbye.