Bladex Looks to Keep Banking on Success

Silver and other precious metals production is a key component of Latin American success. Image: Bladex.

Most U.S. investors who are interested in financial stocks tend to follow the big domestic money-center banks, taking cues from some of the highest-profile investors in the business. By contrast, few Americans have ever heard of Banco Latinoamericano de Comercio Exterior (BLX 1.30%), also known as Bladex. Yet the Panama City-based bank plays a key role in financing loans and developing structured finance products for clients in Latin America and the Caribbean, and with added services to help exporters seeking to profit from the region, Bladex can help make a business transition much more comfortable. Ahead of its first-quarter financial report on Thursday, Bladex has seen its shares hit their highest levels in more than a decade as investors applaud its efficiency advantages over its banking peers. Let's take an early look at what Bladex will report this quarter and what that says about the future for the bank this year and in the years to come.

Stats on Bladex

Source: Yahoo! Finance.

Can Bladex keep up the pace?
Investors have been a little uncertain about the prospects for Bladex earnings in recent months, having cut their full-year earnings estimates by about 1%. Nevertheless, the stock has maintained its climb, gaining 15% since early January.

Much of the positive sentiment for Bladex came from its fourth-quarter earnings report back in February. Net income soared by more than 50% compared to 2013's fourth quarter as improving interest spreads and margins helped Bladex make the most of higher average loan balances to its customers. Cheaper costs of funds helped give Bladex an impressive 12% annualized return on equity for the full year -- up 2 percentage points from 2013 -- and efficiency ratios improved by 15 full percentage points to just 28%.

Chile is the world's No. 5 wine producer. Image: Bladex.

The biggest surprise is that Bladex's solid performance has come at a time when economic conditions in many of its markets are under threat. The bank has largely avoided exposure to Argentina and Venezuela, which are both seeing economic pressures that have hurt other financial institutions. Still, the company couldn't avoid the oil and gas sector, and plunging crude prices have led Bladex to cut back on its energy exposure. Impressively, credit quality hasn't deteriorated, with just 0.06% of its loans in a nonaccrual status as of the end of 2014. With credit provisions for 1.2% of its portfolio, Bladex has a wide margin of safety before any erosion in credit quality would jeopardize its earnings potential.

Bladex also remains optimistic about its future. In last quarter's conference call, CEO Rubens Amaral noted how Mexico has done a good job of managing oil-price volatility while avoiding devastating impacts on its economy, and Mexico and its neighbors in Central America should benefit from the strength of the U.S. and the opportunity to export goods northward. Meanwhile, Amaral also stressed that in more troubled areas of the region, Bladex's concentration on short-term loans leaves it better able to respond nimbly to changing conditions. Almost three-quarters of Bladex's portfolio was set to mature within a year as of the end of 2014.

In the Bladex financial report, pay close attention to further analysis that the bank provides about its exposure to the energy industry in particular and to weakened Latin American economies more generally. To the extent that falling energy prices could help emerging consumer classes in those countries, Bladex could actually see a positive benefit that could pay off through greater loan volume and more profitable business not only in its quarterly results, but for the rest of 2015 as well.