Bladex (NYSE: BLX) reported Q4 EPS of $0.52, $0.09 better than the analyst estimate of $0.43.

• Bladex reported a profit of $20.7 million in 4Q18, compared to a loss of $40.7 million in 3Q18, on quarterly improvement of top line revenues (+13% QoQ), and lower impairment losses. 4Q18 Profit increased 1% YoY, reflecting stable total revenues (-1% YoY) and improved efficiency.
• For the year, the Bank's $11.1 million profit was primarily impacted by impairment loss on financial instruments for $57.5 million, from credit provisions associated to credit impaired loans (Non-Performing Loans or "NPLs"), mainly in Brazil\'s sugar sector. The Bank also incurred a $10.0 million impairment loss on non-financial assets, related to credit restructurings and to the disposal of obsolete technology, in line with the Bank\'s objective to optimize its operating platform.
• Net Interest Income ("NII") for the 4Q18 increased 2% QoQ to $28.0 million (-1% YoY). Net Interest Margin ("NIM") decreased by 13bps to 1.61% QoQ due to higher than anticipated increases in central bank deposits at year end, resulting in significant liquidity positions of low yielding assets.
• NII for FY18 totaled $109.7 million, 8% lower YoY, mostly impacted by a 14bps decrease in NIM to 1.71%, on narrower net lending spreads from a portfolio with exposure to high quality borrowers such as systemic financial institutions, sovereign and quasi-sovereign entities, and USD generating top-tier corporate clients.
• Fees and Commissions income totaled $5.4 million in 4Q18 (+46% QoQ; -5% YoY), and $17.2 million for all of 2018 (-2% YoY). The upward trend in commissions from letters of credit was offset by lower loan structuring fees. Bladex closed seven syndicated transactions in 2018.
• Operating expenses were $12.4 million in 4Q18 (+14% QoQ; -6% YoY), and $48.9 million in FY18 (+4% YoY). The annual increase in expenses was primarily attributable to non-recurring charges from personnel restructuring and the streamlining of processes and of technological infrastructure. Efficiency Ratio stood at 36% for 4Q18 and 38% for FY18.
• NPL balances decreased to $64.7 million, or 1.12% of total Loan Portfolio balances at the end of 4Q18. This compares to $119.0 million, or 2.08%, at the end of 3Q18, and to $58.8 million, or 1.07%, at the end of 4Q17. The decrease was primarily associated with loan restructurings, collections through sales and partial write-offs against individually allocated allowances for expected credit losses.
• Allowance for credit losses on the Commercial Portfolio totaled $104.1 million at year-end 2018, or 1.65% of the portfolio from 1.47% YoY, representing a reserve coverage of 1.6 times NPL balances.
• End-of-period Commercial Portfolio balances increased by 5% YoY and remained stable QoQ at $6.3 billion. Average balances were up to $6.2 billion in 4Q18 (+3% QoQ; +6% YoY) and to $6.0 billion in FY18 (+3% YoY).
• The Bank\'s Tier 1 Basel III Capital Ratio remained solid at 18.1%, with increased level of risk-weighted assets reflecting annual Commercial Portfolio growth.

Mr. N. Gabriel Tolchinsky, Bladex's Chief Executive Officer, said, "In our third quarter 2018 conference call we mentioned that the credit quality of our portfolio, cost structure and allowances for expected credit losses, set the base to improve our earnings generation capacity. Our fourth quarter 2018 earnings are the first step in that direction.

Although still sub-par, growth rates of 2% – or slightly higher – are now possible for Latin America in 2019, we saw some recent positive news. Jair Bolsonaro\'s election hit the ground running with several market friendly announcements regarding opening the Brazilian economy and introducing fiscal adjustments reforms. The USMCA was a bright spot in an otherwise grim picture from Mexico. Argentina completed its IMF agreement, without the social unrest feared by some. Even Costa Rica, which stretched the patience of the rating agencies, managed to approve in their famous Sala IV a fiscal reform package.

That said, problem spots such as Mexico, which seems to be deviating from the macroeconomic policies established over the last 20 years, and Argentina, which is in the midst of a recession generated by restrictive IMF policies, will continue to increase volatility and dampen growth expectations.

At the same time, macroeconomic global risks are intensifying. Now we need to add the prospects of slowing economies in Europe and China (and possibly the U.S.) to a tense protectionist trade environment.

What does this all mean for Bladex? A macroeconomic context that offers no room for complacency as risks of major economies slowing and trade tensions continuing are partially counterbalanced by a somewhat better macroeconomic picture in a few key countries in Latin America.

Although our headline margins were impacted by low yielding liquidity due to higher than expected central bank deposits, Bladex continues to improve its origination. We have a better mix of medium-term to short-term loans, thereby lengthening the average life of our portfolio and increasing our origination margins.

Our NPLs declined due to asset sales, restructurings and partial write-offs. Our Tier 1 capital ratio remains strong. Our book value remains solid over $25 a share. On this basis, Bladex's Board of Directors approved to maintain our quarterly dividend.

Against this backdrop, both the management of Bladex, and its Board of Directors are cautiously optimistic for 2019 and look for an improvement in profitability throughout the year."

For earnings history and earnings-related data on Bladex (BLX) click here.