Has Bladex Turned the Corner?

Bladex benefits from the industrial and natural wealth of the Latin American region. Image source: Bladex.

Panama-based Banco Latinoamericano de Comercio Exterior (BLX 2.26%), also known as Bladex, has seen its fortunes rise and fall with those of the economies that the bank serves. After taking a substantial hit during the financial crisis in 2008 and 2009, Bladex bounced back to produce impressive share-price gains that gave opportunistic investors a three-bagger. Since early last year, though, Bladex has struggled, and coming into Tuesday's second-quarter financial report, investors want to see signs that the bank has finally turned itself around and will continue to grow from here on out. Let's take a closer look at what's been happening with Bladex and how it can keep up its momentum going forward.

Stats on Bladex

Data source: Yahoo! Finance.

Will Bladex earnings finally give investors what they want?

In recent months, investors have gotten more optimistic about Bladex's earnings, raising their estimates for this quarter and next as well as for the full 2016 and 2017 years. The biggest upward movement is the nearly 9% boost to projections for 2016, and that bullishness has sent the stock higher by 12% since mid-April.

Bladex's first-quarter results showed the challenges that the bank has faced lately, although investors were generally pleased that it performed as well as it did. Operating revenue fell 12%, sending net income down by more than a fifth. Large declines on returns on equity and higher expenses hurt the bottom line, and weaker Tier 1 capital ratios and liquidity levels weighed on sentiment. Yet investors seemed happy with widening net interest margins, and Bladex CEO Rubens Amaral did say that the first quarter of the year tends to be the slowest for the bank historically.

Yet what has likely helped Bladex more than anything has been the big bounce in commodity prices. Oil in particular has rebounded sharply, and mined products like the base metals that several Latin American countries have in abundance have also shown signs of life after a long bear market. When the natural resources industry does well, it opens up opportunities for Bladex to provide financing to foster growth. The bank has pointed out that it does its best not to be too concentrated on energy, noting that too heavy of a reliance leaves it vulnerable to downturns. However, jumping back into energy at this point could be lucrative for Bladex.

How Bladex is looking to cash in

Indeed, Bladex has been extremely active in its work to close financing deals. In late May, it led a syndication that closed a $40 million three-year senior unsecured trade facility for fellow Panamanian bank MetroBank. Bladex cooperated with Citibank and Mizuho Bank to close a $135.5 million senior unsecured term loan facility for Global Bank in Panama in June, and since then, other deals include an $85 million three-year credit facility for a Costa Rican bank and a $73.5 million term loan for Mexican operating leasing specialist Unifin Financiera. The pick-up in business is encouraging for Bladex after a slow start to 2016.

In the Bladex earnings report, it will be important to see what the bank's executive team believes about the state of the economy in Panama and throughout Central and South America and the Caribbean. In the past, listening to how the bank is positioning itself to take advantage of future growth opportunities has been enlightening. Even though commodities markets seem to be rebounding, it will be vital to see whether Bladex seeks to move more aggressively into that market with its commercial lending or whether it sticks to its strategy of staying better diversified. The right move could give it a big competitive advantage over its peer banks in Panama and throughout the rest of the region. If Bladex can establish itself as moving forward, then it could mean that it has truly turned the corner and has room to run higher in the months and years ahead.