The global macroeconomic environment is fraught with peril right now, with trade tensions weighing on many countries around the world. Even though most of the attention has focused on U.S. relations with China, Europe, and its Canadian and Mexican neighbors, even Latin America has seen the impact, and for Panamanian bank Banco Latinoamericano de Comercio Exterior (NYSE:BLX), also known as Bladex, the situation has required diligence and discipline in order to make the right financial moves.
Coming into last Wednesday's first-quarter financial report, Bladex shareholders were hoping that the bank would be able to prosper from improving economic conditions throughout much of the Latin American region. Bladex's numbers were indeed strong, and the bank has a lot of optimism about what could be coming down the road through the rest of 2019 and beyond.
How Bladex bounced back
Bladex's first-quarter results reflected a nice rebound from a tough quarter a year ago. Total revenue picked up almost 5% to $32.1 million, producing growth after a slight year-over-year contraction in Bladex's top-line numbers three months ago. Similarly, net income jumped to $21.2 million, higher by 47% from year-ago levels. That produced impressive earnings of $0.54 per share, topping the consensus forecast by $0.03 per share.
Perhaps the best news for Bladex was the reduction in its assets to more normal levels. Last quarter, the bank boosted its total assets by more than $1 billion, with much of it attributable to cash reserves. However, the size of Bladex's assets fell by roughly $1.15 billion during the past three months, and although the bank's commercial and investment portfolios both shrank slightly, the biggest contributor was the drop in liquidity that signaled more confidence in its ability to attract deposits.
Fundamentally, Bladex did well, albeit with some ups and downs. Net interest income rose more than 5% from year-ago levels to $28 million, and operating expenses were once again sharply lower, falling more than 30% over the past year. Net interest margin expanded along with return on average assets, and asset quality improved, sending the Tier 1 capital ratio as calculated under Basel III guidelines back above the 20% mark.
Credit quality concerns were mildly higher. Impaired loans rose to 1.18%, up from 1.12% a year ago, and Bladex boosted its allowance for losses by another tenth of a percent to 1.75% compared to where it had been three months earlier.
What's next for Bladex?
CEO Gabriel Tolchinsky made it clear that now is a time of transition for Bladex. "The prospect of diminishing trade volumes and other impacts from continuing trade tension," Tolchinsky said, "[along with] the weight of lower growth rates from developed markets combined with a more challenging political and economic environment in key Latin American countries, results in a macroeconomic context that offers no room for complacency."
However, the CEO went on to indicate optimism for the near future. "With more than 75% of our portfolio maturing in less than one year," Tolchinsky said, "Bladex is in a privileged position to dynamically adjust portfolio exposures."
In particular, Bladex has seen a great combination of factors contribute to its recent success, and the bank believes those conditions should remain favorable. Those factors include a credit upgrade for Panama, a solid book of existing business, new prospective customers, and new ways to cut costs and improve efficiency. If Latin America continues to thrive even with some trade issues unresolved, it could signal a new wave of growth for financial institutions like Bladex across the region.
Bladex shareholders seemed quite pleased with the rebound in net income, and the stock climbed more than 6% on Wednesday following the announcement. With so many prospects for the bank to play a more vital role in commerce across the region, Bladex has an unusual opportunity to bolster its growth in the months and years to come.