Can Bladex Bounce Back in 2016?

Image: Bladex.

Economies in Latin America face extremely tough conditions from sagging commodity prices and currency pressures, and the overall weakness has pressured shares of the Panama-based Banco Latinoamericano de Comercio Exterior (BLX +0.27%), or Bladex. In particular, Brazil's economy has caused turmoil for Banco Bradesco (BBD 3.55%) and other Brazilian banks, and it has also had an impact felt across the region. Coming into Bladex's fourth-quarter financial report on Thursday, investors want to see if the bank can finally start to mount a rebound, despite continuing drops in prices for oil and other key commodities. Let's take a closer look at how Bladex has fared recently and whether investors are right to think that the bank could bounce back in 2016.

Stats on Bladex

Source: Yahoo! Finance.

What's next for Bladex earnings?
Investors have been gloomy in recent months about the prospects for Bladex's earnings, cutting their fourth-quarter projections by a nickel per share and pushing down their 2016 estimates more modestly. The stock has continued to struggle, falling another 23% since early November.

Bladex's third-quarter results had actually given investors hope that the bank had already seen the worst of the damage from the economic downturn in Latin America. Operating revenue climbed 14%, and Bladex boosted its bottom line by more than 25% to deliver a $0.16 per share earnings beat compared to the consensus forecast. The bank saw returns on equity and assets soar, and despite net interest margin pressure and a shrinking commercial loan portfolio, Bladex demonstrated an ability to be prudent yet opportunistic in finding financing deals that would provide the bank with the best chances of success.

Since then, Bladex has announced a couple of major transactions that indicate that even some of the smaller economies in Central America and the Caribbean still have investment opportunities with pursuing. In early December, Bladex led a $250 million syndication for a bridge loan for the Dominican Republic subsidiaries of utility company AES, working alongside fellow financial institution Banco Popular Dominicano. Bladex executives said that demand for the deal was so strong that the size of the transaction was increased from its original $200 million.

Later in the month, Bladex acted as sole lead arranger for a $50 million unsecured term loan for Banco Internacional de Costa Rica, working with several financial institutions from the U.S. and throughout the Caribbean, Central America, and South America to put together a syndicated loan facility. The transaction was the second time Bladex has worked with the joint venture of two major Costa Rican banks, and the proceeds will go toward building up its business.

Bladex will have to find ways to overcome horrible conditions in some key markets. Banco Bradesco saw revenues and earnings plunge in 2015, and in its most recent financial report, it said that it had boosted its provisions for bad loans by 27% in 2015 and predicted further increases for 2016. Banco Bradesco also expects lending volume growth to remain muted this year, and it chose to cancel a planned share offering because of the steep declines that the Brazilian stock market has suffered.

In the Bladex earnings report, investors should focus on whether the bank's geographical exposure can avoid the problematic areas where Banco Bradesco and other peers have struggled. If not, then Bladex might have to wait for whenever a rebound in the regional economy comes to boost the amount and quality of business it can do.