What: Shares of Banco Latinoamericano de Comercio Exterior (BLX +0.94%), better known as Bladex, fell 12% Wednesday after the Panama-based bank released its second-quarter financial results this morning.
So what: Bladex cited poor economic conditions within several key markets throughout Central and South America, with CEO Rubens Amaral noting that GDP growth has been even weaker so far in 2015 even than last year's figures. Operating revenues fell unexpectedly by 2%, and Bladex's earnings of $0.52 per share not only were down $0.02 from last year's second quarter but also missed investors' expectations for $0.67 per share. Investors responded negatively to the implications of the disappearance of Bladex's top-line and bottom-line growth, which in past years has been impressive.
Now what: Despite today's drop, Bladex believes that it should see greater levels of activity during the remainder of 2015, based on its current slate of pending deals. Even if conditions in Latin America don't improve, Bladex has the opportunity to provide contingent financing for liquidity-hungry customers, and that could give the bank a chance to boost its margins over time. Moreover, Bladex isn't compromising on its mission to take only high-quality business, and although some measures of credit quality have worsened slightly, the bank is in no immediate danger of any substantial difficulties.
Looking forward, Bladex's fortunes will remain closely linked to the fortunes of the emerging markets it serves, and until conditions improve, some investors will be reluctant to count on the bank's future success. Nevertheless, the steps that Bladex has taken are encouraging, and an eventual recovery in Latin America -- whenever it comes -- could make today's drop look like a bargain-hunting opportunity.
