BLADEX, INC. (Banco Latinoamericano de Comercio Exterior, S.A.) — FY 2021 Form 20-F
Business context and reporting period. This is Bladex’s annual report for the fiscal year ended December 31, 2021, filed April 28, 2022. Bladex is a Panama-based, U.S.-dollar-focused multinational bank financing trade and regional integration in Latin America and the Caribbean. It reports under IFRS as issued by the IASB. The financial statements received an unqualified audit opinion from KPMG.
Key financial metrics
| Metric | FY 2021 / December 31, 2021 | Comparison |
|---|---|---|
| Total revenue | $104.2 million | Up 5% from $99.2 million in 2020; below $126.7 million in 2019 |
| Net interest income | $86.8 million | Down 6% from $92.5 million in 2020 |
| Profit for the year | $62.7 million; $1.62 per share | Down 1% from $63.6 million; $1.60 per share in 2020 |
| Net interest margin / spread | 1.32% / 1.15% | Margin was 1.41% / spread 1.13% in 2020 |
| Return on average equity / assets | 6.10% / 0.93% | 6.19% / 0.96% in 2020 |
| Operating expenses; efficiency ratio | $39.9 million; 38.3% | Expenses up 7%; efficiency ratio was 37.6% in 2020 |
| Total assets / total equity | $8.04 billion / $991.8 million | Assets up 28%; equity down 4% year over year |
| Credit / commercial / loan portfolios | $7.365 billion / $6.540 billion / $5.735 billion | Credit portfolio up 24%; commercial portfolio up 18%; loans up 17% |
| Expected-credit-loss allowance | $47.1 million, or 0.64% of credit portfolio | $44.6 million, or 0.75%, in 2020 |
| Credit-impaired loans | $11 million, or 0.18% of loan portfolio | $11 million, or 0.22%, in 2020 |
| Cash and liquid assets | $1.253 billion cash and due from banks; $1.405 billion liquid assets | Liquid assets were $1.048 billion in 2020 |
| Deposits / borrowings and debt / repos | $3.037 billion / $3.322 billion / $427.5 million | Deposits down 3%; borrowings and debt up 67%; repos were $10.7 million in 2020 |
| Regulatory liquidity coverage ratio | 199% | 249% in 2020; 2021 minimum requirement was 80% |
| Capital ratios | Tier 1 (Basel III IRB) 19.1%; regulatory capital adequacy 15.57%; leverage 10.83% | 26.0%, 20.21%, and 14.08%, respectively, in 2020 |
| Cash flows | $871.7 million used in operations; $446.1 million used in investing; $1.683 billion provided by financing | Operating cash flow was $1.247 billion provided in 2020 |
Material changes versus prior periods
- Profit was broadly stable versus 2020 as higher lending volumes and a 76% increase in fees and commissions largely offset lower net interest income, higher credit-loss provisions, and rising expenses.
- Net interest income declined because lower LIBOR-based rates reduced interest income more than funding costs. The rate effect reduced net interest income by $23.7 million, partly offset by a positive $18.0 million volume effect.
- Fee and commission income rose to $18.3 million from $10.4 million, supported by four structured transactions totaling $629 million, compared with two transactions totaling $200 million in 2020, and higher letter-of-credit activity.
- Credit portfolio growth followed 2020’s defensive liquidity-focused lending approach. The investment portfolio increased to $825 million from $395 million, including $618 million of securities-at-amortized-cost purchases during 2021.
- Funding composition shifted: short-term borrowings and debt rose to $1.582 billion from $381 million, while deposits declined modestly. Year-end deposits were concentrated: 49% came from central banks or their designees; the five largest depositors represented 38% of deposits. Deposits are uninsured.
- Equity fell following $60 million of share repurchases—3.56 million Class E shares at a weighted-average $16.86 per share—and $38.9 million of dividends declared. The annual dividend declared was $1.00 per share.
- Other comprehensive income was negative $11.8 million, largely reflecting fair-value changes on debt instruments, contributing to the lower reported equity balance.
Outlook, management commentary, and risks
- Management plans to grow the portfolio in 2022, targeting top-tier regional bank and corporate clients, defensive sectors, trade flows, and client and product diversification. It also intends to improve operating efficiency and technology-enabled service delivery. No specific earnings, revenue, or portfolio-growth guidance is provided.
- Management described liquidity and funding access as adequate, reported that the Bank regained its pre-pandemic LCR level, and said the LCR remained above regulatory minimums. The Bank reported compliance with borrowing covenants and Panamanian lending limits.
- Management reported no direct exposure to Russia, Belarus, or Ukraine, while assessing clients’ indirect exposure. The war, sanctions, commodity-price movements, and supply-chain disruption may affect regional clients and trade flows.
- Key risks include regional and borrower concentration, inflation and higher interest rates, currency devaluation and foreign-exchange controls affecting dollar borrowers, commodity exposure, deposit concentration, liquidity and funding costs, and possible deterioration in credit quality.
- The Bank’s portfolio remains concentrated in Latin America: Brazil, Colombia, Mexico, Chile, and Guatemala accounted for 56% of credit portfolio exposure. Oil and gas and agribusiness represented 19% and 5% of the loan portfolio, respectively.
- LIBOR transition creates contract, operational, hedge-accounting, and pricing risks. At year-end, $2.293 billion of loans, $392.5 million of borrowings, and $13.3 million of commitments remained exposed to USD LIBOR. The Bank had completed modifications to most borrowing and debt model agreements and planned to finish the transition before cessation dates.
- Panama’s inclusion on international AML and tax-related monitoring lists could increase compliance costs or affect reputation and access to counterparties. The Bank disclosed that it was responding to supervisory comments following an examination, which management characterized as routine; it stated its policies were materially compliant.
- Unusual items included a $0.742 million gain from renegotiating the head-office lease and a $2.328 million net provision for credit losses, versus a $1.464 million reversal in 2020. KPMG identified the allowance for loan losses as a critical audit matter because it depends on judgmental credit ratings, forecasts, and expected-loss assumptions.
Important facts for investors to verify
- Reconcile the decline in Tier 1 and regulatory capital ratios with portfolio growth, share repurchases, dividends, and the increase in risk-weighted assets.
- Assess whether the 199% LCR and $1.405 billion of liquid assets remain sufficient given deposit concentration, uninsured funding, and increased short-term borrowings and repos.
- Review credit-quality trends and the assumptions underlying the $47.1 million allowance, including the single $11 million impaired loan, $73.1 million of potential problem loans, and country and sector concentrations.
- Check the pace and terms of LIBOR-to-SOFR contract remediation, including remaining customer contracts and alignment of derivative hedges.
- Monitor the sustainability of portfolio growth, fee income, and net interest income as rates, regional inflation, trade volumes, commodity prices, and geopolitical conditions change.
- Confirm subsequent funding developments noted in the filing: a $50 million syndicated-loan tranche was prepaid in January 2022, and a $300 million syndicated loan closed in March 2022.