UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

 

For the month of May, 2020

 

Commission File Number 1-11414

 

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

(Exact name of Registrant as specified in its Charter)

 

FOREIGN TRADE BANK OF LATIN AMERICA, INC.

(Translation of Registrant’s name into English)

 

Business Park Torre V, Ave. La Rotonda, Costa del Este

P.O. Box 0819-08730

Panama City, Republic of Panama

(Address of Registrant’s Principal Executive Offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-Fx Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes ¨ Nox

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes¨ Nox

 

 

 

 

 

 

Banco Latinoamericano de Comercio Exterior, S.A. and Subsidiaries

 

Unaudited condensed consolidated interim statement as of March 31, 2020

and for the three months ended March 31, 2020 and 2019.

 

 

 

 

Banco Latinoamericano de Comercio Exterior, S.A. and Subsidiaries

 

Contents  
   
Unaudited condensed consolidated interim statement of financial position 3
   
Unaudited condensed consolidated interim statement of profit or loss 4
   
Unaudited condensed consolidated interim statement of other comprehensive income 5
   
Unaudited condensed consolidated interim statement of changes in equity 6
   
Unaudited condensed consolidated interim statement of cash flows 7
   
Notes to the unaudited condensed consolidated interim financial statements 8

 

 2 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statement of financial position
March 31, 2020 and December 31, 2019
(In thousands of US dollars)

 

   Notes  March 31,
2020
(Unaudited)
   December 31,
2019
(Audited)
 
Assets             
              
Cash and due from banks  6,7   1,353,018    1,178,170 
              
Securities and other financial assets, net  5,6,8   86,326    88,794 
              
Loans      5,337,487    5,892,997 
Interest receivable      40,613    41,757 
Allowance for loans losses      (99,941)   (99,307)
Unearned interest and deferred fees      (11,095)   (12,114)
Loans, net  5,6,9   5,267,064    5,823,333 
              
Customers' liabilities under acceptances  5,6   66,657    115,682 
Derivative financial instruments - assets  5,6,12   17,044    11,157 
              
Equipment and leasehold improvements, net      18,110    18,752 
Intangibles, net      1,236    1,427 
Investment properties      3,494    3,494 
Other assets  13   9,574    8,857 
Total assets      6,822,523    7,249,666 
              
Liabilities and Equity             
Liabilities:             
Demand deposits      302,442    85,786 
Time deposits      2,165,154    2,802,550 
   6,14   2,467,596    2,888,336 
Interest payable      5,048    5,219 
Total deposits      2,472,644    2,893,555 
              
Securities sold under repurchase agreements  6,15   53,888    40,530 
Borrowings and debt, net  6,16   3,137,018    3,138,310 
Interest payable      10,045    10,554 
              
Customers' liabilities under acceptances  5,6   66,657    115,682 
Derivative financial instruments - liabilities  5,6,12   49,095    14,675 
Allowance for  loan commitments and financial guarantees contracts losses  5   2,443    3,044 
Other liabilities  17   12,245    17,149 
Total liabilities      5,804,035    6,233,499 
              
Equity:             
Common stock      279,980    279,980 
Treasury stock      (59,409)   (59,669)
Additional paid-in capital in excess of value assigned to common stock      120,586    120,362 
Capital reserves      95,210    95,210 
Regulatory reserves  23   136,019    136,019 
Retained earnings      448,762    446,083 
Other comprehensive income (loss)      (2,660)   (1,818)
Total equity      1,018,488    1,016,167 
Total liabilities and equity      6,822,523    7,249,666 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 3 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statements of profit or loss          
For the three months ended March 31, 2020 and 2019            
(In thousands of US dollars, except per share data and number of shares)            

 

   Notes  2020   2019 
Interest income:             
Deposits      2,459    5,357 
Securities      640    942 
Loans      55,890    67,255 
Total interest income  20   58,990    73,554 
Interest expense:             
Deposits      (11,462)   (17,694)
Borrowings and debt      (21,727)   (27,841)
Total interest expense  20   (33,189)   (45,534)
              
Net interest income      25,801    28,020 
              
Other income (expense):             
Fees and commissions, net  19,20   3,073    2,350 
Loss on financial instruments, net  11,20   (358)   756 
Other income, net      240    945 
Total other income, net  20   2,955    4,051 
              
Total revenues      28,756    32,071 
              
Impairment loss on financial instruments  5,20   89    (942)
              
Operating expenses:             
Salaries and other employee expenses      (7,007)   (6,311)
Depreciation of equipment and leasehold improvements      (735)   (691)
Amortization of intangible assets      (191)   (164)
Other expenses      (2,611)   (2,718)
Total operating expenses  20   (10,543)   (9,884)
Profit for the period      18,302    21,245 
              
Per share data:             
Basic earnings per share (in US dollars)  18   0.46    0.54 
Diluted earnings per share (in US dollars)  18   0.46    0.54 
Weighted average basic shares (in thousands of shares)  18   39,609    39,542 
Weighted average diluted shares (in thousands of shares)  18   39,609    39,542 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 4 

 

  

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statements of profit or loss and other comprehensive income
For the three months ended March 31, 2020 and 2019          
(In thousands of US dollars)          
       

 

   2020   2019 
Profit for the period   18,302    21,245 
Other comprehensive income (loss):          
Items that will not be reclassified subsequently to profit or loss:          
   Change in fair value on equity instrument at FVOCI, net of hedging   320    257 
           
Items that are or may be reclassified subsequently to profit or loss:          
Change in fair value on debt financial instruments at FVOCI, net of hedging   (1,230)   (1,781)
Reclassification of gains (losses) on financial instruments to the profit or loss   (117)   470 
Exchange difference in conversion of foreign currency operation   185    (76)
           
Other comprehensive income (loss)   (842)   (1,130)
           
Total comprehensive income for the period   17,460    20,115 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 5 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statements of changes in stockholders's equity
For the three months ended March 31, 2020 and 2019
(In thousands of US dollars)                                

 

   Common stock   Treasury stock   Additional paid-
in capital in
excess of value
assigned to
common stock
   Capital
reserves
   Regulatory
reserves
   Retained
earnings
   Other
comprehensive
income
   Total equity 
Balances at January 1, 2019   279,980    (61,076)   119,987    95,210    136,019    423,050    420    993,590 
Effect for change in accounting policy   -    -    -    -    -    (2,006)   -    (2,006)
Profit for the period   -    -    -    -    -    21,245    -    21,245 
Other comprehensive income (loss)   -    -    -    -    -    -    (1,130)   (1,130)
Compensation cost - stock options and stock units plans   -    -    460    -    -    -    -    460 
Exercised options and stock units vested   -    129    (129)   -    -    -    -    - 
Dividends declared   -    -    -    -    -    (15,225)   -    (15,225)
Balances at March 31, 2019   279,980    (60,947)   120,318    95,210    136,019    427,064    (710)   996,934 

 

Balances at January 1, 2020   279,980    (59,669)   120,362    95,210    136,019    446,083    (1,818)   1,016,167 
Profit for the period   -    -    -    -    -    18,302    -    18,302 
Other comprehensive income (loss)   -    -    -    -    -    -    (1,218)   (1,218)
Transfer of fair value on equity instrument at FVOCI   -    -    -    -    -    (376)   376    - 
Compensation cost - stock options and stock units plans   -    -    484    -    -    -    -    484 
Exercised options and stock units vested   -    260    (260)   -    -    -    -    - 
Dividends declared   -    -    -    -    -    (15,247)   -    (15,247)
Balances at March 31, 2020   279,980    (59,409)   120,586    95,210    136,019    448,762    (2,660)   1,018,488 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 6 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statements of cash flows        
For the three months ended March 31, 2020 and 2019        
(In thousands of US dollars)        

 

   2020   2019 
Cash flows from operating activities          
Profit for the period   18,302    21,245 
Adjustments to reconcile profit for the year to net cash provided by (used in) operating activities:          
Depreciation of equipment and leasehold improvements   735    691 
Amortization of intangible assets   191    164 
Impairment (gain) loss on financial instruments   (89)   942 
Gain, net on sale of financial assets at fair value through OCI   -    (109)
Amortization of premium and discount related to securities at amortized cost   100    92 
Compensation cost - share-based payment   484    460 
Net changes in hedging position   (2,527)   394 
Interest income   (58,990)   (73,554)
Interest expense   33,189    45,534 
Net decrease (increase) in operating assets:          
Pledged deposits   (37,149)   6,551 
Loans   511,523    297,671 
Other assets   (723)   10,737 
Net increase (decrease) in operating liabilities:          
Due to depositors   (420,740)   (223,247)
Other liabilities   (4,986)   76 
Cash flows provided by operating activities   39,320    87,647 
Interest received   60,350    67,663 
Interest paid   (33,869)   (48,756)
Net cash provided by operating activities   65,801    106,554 
           
Cash flows from investing activities:          
Acquisition of equipment and leasehold improvements   (9)   (25)
Proceeds from the sale of securities at fair value through OCI   1,882    4,200 
Proceeds from redemption of securities at amortized cost   14,825    12,700 
Purchases of securities at amortized cost   (14,549)   (200)
Net cash provided by investing activities   2,149    16,675 
           
Cash flows from financing activities:          
Increase (decrease) in securities sold under repurchase agreements   13,357    (11,535)
Net increase (decrease) in short-term borrowings and debt   103,460    (868,016)
Proceeds from long-term borrowings and debt   50,000    470,159 
Repayments of long-term borrowings and debt   (81,631)   (633,752)
Payments of leases liabilities   (273)   (254)
Dividends paid   (15,165)   (15,383)
Net cash provided by (used in) financing activities   69,749    (1,058,781)
           
Increase (decrease) net in cash and cash equivalents   137,699    (935,552)
Cash and cash equivalents at beginning of the period   1,159,718    1,706,192 
Cash and cash equivalents at end of the period   1,297,417    770,640 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.  

 

 7 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

1.Corporate information

 

Banco Latinoamericano de Comercio Exterior, S. A. (“Bladex Head Office” and together with its subsidiaries “Bladex” or the “Bank”), headquartered in Panama City, Republic of Panama, is a specialized multinational bank established to support the financing of foreign trade and economic integration in Latin America and the Caribbean (the “Region”). The Bank was established pursuant to a May 1975 proposal presented to the Assembly of Governors of Central Banks in the Region, which recommended the creation of a multinational organization to increase the foreign trade financing capacity of the Region. The Bank was organized in 1977, incorporated in 1978 as a corporation pursuant isto the laws of the Republic of Panama, and initiated operations on January 2, 1979. Under a contract law signed in 1978 between the Republic of Panama and Bladex, the Bank was granted certain privileges by the Republic of Panama, including an exemption from payment of income taxes in Panama.

 

The Bank operates under a general banking license issued by the National Banking Commission of Panama, predecessor of the Superintendence of Banks of Panama (the “SBP”).

 

In the Republic of Panama, banks are regulated by the SBP through Executive Decree No. 52 of April 30, 2008, which adopts the unique text of Law Decree No. 9 of February 26, 1998, modified by Law Decree No. 2 of February 22, 2008. Banks are also regulated by resolutions and agreements issued by this entity. The main aspects of this law and its regulations include: the authorization of banking licenses, minimum capital and liquidity requirements, consolidated supervision, procedures for management of credit, liquidity and market risks, measures to prevent money laundering, the financing of terrorism and related illicit activities, and procedures for banking intervention and liquidation, among others.

 

Bladex Head Office’s subsidiaries are the following:

 

Bladex Holdings Inc. is a wholly owned subsidiary, incorporated under the laws of the State of Delaware, United States of America (USA), on May 30, 2000. Bladex Holdings Inc. has ownership in Bladex Representaçao Ltda.

 

Bladex Representaçao Ltda. incorporated under the laws of Brazil on January 7, 2000, acts as the Bank’s representative office in Brazil. Bladex Representaçao Ltda. is 99.999% owned by Bladex Head Office and the remaining 0.001% is owned by Bladex Holdings Inc.

 

Bladex Development Corp. was incorporated under the laws of the Republic of Panama on June 5, 2014. Bladex Development Corp. is 100% owned by Bladex Head Office.

 

BLX Soluciones, S.A. de C.V., SOFOM, E.N.R. (“BLX Soluciones”) was incorporated under the laws of Mexico on June 13, 2014. BLX Soluciones is 99.9% owned by Bladex Head Office, and Bladex Development Corp. owns the remaining 0.1%. The company specializes in offering financial leasing and other financial products such as loans and factoring.

 

Bladex Head Office has an agency in New York City, USA (the “New York Agency”), which began operations on March 27, 1989. The New York Agency is principally engaged in financing transactions related to international trade, mostly the confirmation and financing of letters of credit for customers in the Region. The New York Agency also has authorization to book transactions through an International Banking Facility (“IBF”).

 

The Bank has representative offices in Buenos Aires, Argentina; in Mexico City, Mexico; and in Bogota, Colombia, and has a representative license in Lima, Peru.

 

These unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on April 8, 2020.

 

 8 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

2.Basis of preparation of the condensed consolidated interim financial statements

 

2.1          Statement of compliance

 

These unaudited condensed consolidated interim financial statements of Banco Latinoamericano de Comercio Exterior, S. A. and its subsidiaries have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) issued by the International Accounting Standards Board ("IASB"). As all the disclosures required by IFRS for annual period consolidated financial statements are not included herein, these unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2019, contained in the Bank’s annual audited consolidated financial statements. The unaudited condensed consolidated interim statements of profit or loss, other comprehensive income, changes in equity and cash flows for the periods presented are not necessarily indicative of results expected for any future period.

 

3.Changes in significant accounting policies

 

3.1New accounting policies and amendments not yet adopted

 

As of January 1, 2020, the Bank applied the Interest Rate Benchmark Reform (“the Reform”), which contains amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures Information, issued by the International Accounting Standards Board (IASB) as the Phase 1 of the Project of IBOR Reform to address the increase in the level of uncertainty of the long-term feasibility of some benchmark interest rates and the first reforms applied to such rates. Phase 1 of the amendments addresses the effects on financial information due to such uncertainties.

 

On initial designation of the hedging relationship, the Bank formally documents the relationship between the hedging instrument and hedged item, including the risk management objective and strategy in undertaking the hedge, together with the method that will be used to assess the effectiveness of the hedging relationship. The Bank makes an assessment, both on inception of the hedging relationship and on an ongoing basis, of whether the hedging instrument is expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged item during the period for which the hedge is designated. For the purpose of evaluating whether the hedging relationship is expected to be highly effective, the Bank assumes that the benchmark interest rate is not altered as a result of IBOR reform.

 

If the Bank concludes that the actual result of a hedging relationship is not effective or is outside the minimum levels determined by Risk Management as highly effective, then the Bank determines if the hedging relationship continues to qualify for hedge accounting or whether it must be discontinued. This includes, for example, determining that the hedge is expected to be highly effective prospectively and that effectiveness of the hedging relationship can be reliably measured.

 

The Bank will cease to apply the amendments to its retrospective and prospective effectiveness assessment of the hedging relationship when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the hedged item or hedging instrument, or when the hedging relationship is discontinued.

 

 9 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

4.Significant accounting policies

 

4.1.Judgments, estimates and significant accounting assumptions

 

A.Estimates and assumptions

 

The key assumptions concerning the future and other key sources of estimating uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Bank based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances beyond the control of the Bank. Such changes are reflected in the assumptions when they occur.

 

B.Going concern

 

The Bank’s management has made an assessment of its ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Therefore, the condensed consolidated financial statements continue to be prepared on a going concern basis.

 

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Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk

 

This note presents information about the Bank’s exposure to financial risks and the Bank’s management of capital.

 

A.Credit risk

 

i.Credit quality analysis

 

The following tables set out information about the credit quality of financial assets measured at amortized cost, and securities at FVOCI. Unless specifically indicated, for financial assets the amounts in the table represent gross carrying amounts. For loan commitments and financial guarantee contracts, the amounts in the table represent the amounts committed or guaranteed, respectively.

 

Loans

 

   March 31, 2020 `   
   PD Ranges   Stage 1   Stage 2   Stage 3   Total 
Grades 1 - 4   0.03 - 0.74   2,543,852   -   -   2,543,852 
Grades 5 - 6   0.75 - 3.95   2,044,471   228,209   -   2,272,680 
Grades 7 - 8   3.96 - 30.67   340,782   118,328   -   459,110 
Grades 9 - 10   30.68 - 100   -   -   61,845   61,845 
        4,929,105   346,537   61,845   5,337,487 
Loss allowance       (27,326)  (17,871)  (54,744)  (99,941)
Total       4,901,779   328,666   7,101   5,237,546 

 

   December 31, 2019     
   PD Ranges   Stage 1   Stage 2   Stage 3   Total 
Grades 1 - 4   0.03 - 0.74   2,928,401   -   -   2,928,401 
Grades 5 - 6   0.75 - 3.95   2,330,150   85,173   -   2,415,323 
Grades 7 - 8   3.96 - 30.67   343,606   143,822   -   487,428 
Grades 9 - 10   30.68 - 100   -   -   61,845   61,845 
        5,602,157   228,995   61,845   5,892,997 
Loss allowance       (28,892)  (15,842)  (54,573)  (99,307)
Total       5,573,265   213,153   7,272   5,793,690 

 

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Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

Loan commitments, financial guarantees issued and customers’ liabilities under acceptances

 

   March 31, 2020     
   12-month
PD Ranges
   Stage 1   Stage 2   Stage 3   Total 
Commitments and contingencies                     
Grades 1 - 4   0.03 - 0.74   157,231   -   -   157,231 
Grades 5 - 6   0.75 - 3.95   104,085   35,843   -   139,928 
Grades 7 - 8   3.96 - 30.67   130,441   -   -   130,441 
        391,757   35,843   -   427,600 
                      
Customers' liabilities under acceptances                     
Grades 1 - 4   0.03 - 0.74   4,983   -   -   4,983 
Grades 5 - 6   0.75 - 3.95   -   -   -   - 
Grades 7 - 8   3.96 - 30.67   61,674   -   -   61,674 
        66,657   -   -   66,657 
        458,414   35,843   -   494,257 
Loss allowance       (2,052)  (391)  -   (2,443)
Total       456,362   35,452   -   491,814 

 

   December 31, 2019     
   12-month
PD Ranges
   Stage 1   Stage 2   Stage 3   Total 
Commitments and contingencies                     
Grades 1 - 4   0.03 - 0.74   153,874   -   -   153,874 
Grades 5 - 6   0.75 - 3.95   150,631   27,446   -   178,077 
Grades 7 - 8   4.13 - 30.43   161,421   -   -   161,421 
        465,926   27,446   -   493,372 
                      
Customers' liabilities under acceptances                     
Grades 1 - 4   0.03 - 0.74   13,367   -   -   13,367 
Grades 5 - 6   0.75 - 3.95   5,491   -   -   5,491 
Grades 7 - 8   4.13 - 30.43   96,824   -   -   96,824 
        115,682   -   -   115,682 
        581,608   27,446   -   609,054 
Loss allowance       (2,683)  (361)  -   (3,044)
Total       578,925   27,085   -   606,010 

 

 12 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

Securities at amortized cost

 

   March 31, 2020     
   12-month
PD Ranges
   Stage 1   Stage 2   Stage 3   Total 
Grades 1 - 4   0.03 - 0.74   74,200   -   -   74,200 
        74,200   -   -   74,200 
Loss allowance       (106)  -   -   (106)
Total       74,094   -   -   74,094 

 

   December 31, 2019     
   12-month
PD Ranges
   Stage 1   Stage 2   Stage 3   Total 
Grades 1 - 4   0.03 - 0.74   73,047   -   -   73,047 
Grades 5 - 6   0.75 - 3.95   -   1,500   -   1,500 
        73,047   1,500   -   74,547 
Loss allowance       (103)  (10)  -   (113)
Total       72,944   1,490   -   74,434 

 

Securities at fair value through other comprehensive income (FVOCI)

 

   March 31, 2020     
   12-month
PD Ranges
   Stage 1   Stage 2   Stage 3   Total 
Grades 1 - 4   0.03 - 0.74   5,065   -   -   5,065 
       5,065   -   -   5,065 
Loss allowance       -   -   -   - 
Total       5,065   -   -   5,065 

 

   December 31, 2019   
   12-month
PD Ranges
   Stage 1   Stage 2   Stage 3   Total 
Grades 1 - 4   0.03 - 0.74   5,094   -   -   5,094 
        5,094   -   -   5,094 
Loss allowance       -   -   -   - 
Total       5,094   -   -   5,094 

 

 13 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

The following table presents information of the current and past due balances of loans in stages 1, 2 and 3:

 

 

   March 31, 2020    
   Stage 1   Stage 2   Stage 3   Total 
Gross carrying amount                    
Current   4,929,105    346,537    43,445    5,319,087 
Past due                    
90-120 days   -    -    3,724    3,724 
151-180 days   -    -    -    - 
More than 180 days   -    -    14,676    14,676 
Total past due   -    -    18,400    18,400 
Total   4,929,105    346,537    61,845    5,337,487 

 

   December 31, 2019    
   Stage 1   Stage 2   Stage 3   Total 
Gross carrying amount                    
Current   5,602,157    228,995    47,169    5,878,321 
Past due                    
90-120 days   -    -    3,724    3,724 
151-180 days   -    -    -    - 
More than 180 days   -    -    10,952    10,952 
Total past due   -    -    14,676    14,676 
Total   5,602,157    228,995    61,845    5,892,997 

 

As of March 31, 2020 and December 31, 2019, other financial assets were no past due or impaired balances.

 

The following table presents an analysis of counterparty credit exposures arising from derivative transactions. The Bank's derivative transactions are generally fully secured by cash.

 

 

   March 31,  
   Notional
value USD
   Derivative
financial
instrument
-fair value
asset
   Derivative
financial
instrument
-fair value
liabilities
 
Interest rate swaps   470,667    3,675    (2,696)
Cross-currency swaps   401,721    2,346    (46,399)
Foreign exchange forwards   57,194    11,023    - 
Total   929,582    17,044    (49,095)

 

 14 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

   December 31, 2019 
   Notional
value USD
   Derivative
financial
instrument
- fair value
asset
   Derivative
financial
instrument
- fair value
liabilities
 
Interest rate swaps   521,333    407    (1,903)
Cross-currency swaps   369,869    10,125    (10,197)
Foreign exchange forwards   74,471    625    (2,575)
Total   965,673    11,157    (14,675)

 

ii.Collateral and other credit enhancements

 

The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are in place covering the acceptability and valuation of each type of collateral.

 

Derivatives and repurchase agreements

 

In the ordinary course of business, the Bank enters into derivative financial instrument transactions and securities sold under repurchase agreements under industry standards agreements. Depending on the collateral requirements stated in the contracts, the Bank and counterparties can receive or deliver collateral based on the fair value of the financial instruments transacted between parties. Collateral typically consists of pledged cash deposits and securities. The master netting agreements include clauses that, in the event of default, provide for close-out netting, which allows all positions with the defaulting counterparty to be terminated and net settled with a single payment amount.

 

The International Swaps and Derivatives Association master agreement (“ISDA”) and similar master netting arrangements do not meet the criteria for offsetting in the consolidated statement of financial position. This is because they create for the parties to the agreement a right of set-off of recognized amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Bank or the counterparties or following other predetermined events.

 

Such arrangements provide for single net settlement of all financial instruments covered by the agreements in the event of default on any one contract. Master netting arrangements do not normally result in an offset of balance–sheet assets and liabilities unless certain conditions for offsetting are met.

 

Although master netting arrangements may significantly reduce credit risk, it should be noted that:

 

-Credit risk is eliminated only to the extent that amounts due to the same counterparty will be settled after the assets are realized.
-The extent to which overall credit risk is reduced may change substantially within a short period because the exposure is affected by each transaction subject to the arrangement.

 

Loans

 

The main types of collateral obtained are, as follows:

 

-For commercial lending, liens on real estate property, inventory and trade receivables.

 

The Bank also obtains guarantees from parent companies for loans to their subsidiaries. Management monitors the market value of collateral and will request additional collateral in accordance with the underlying agreement. It is the Bank’s policy to dispose of repossessed property in an orderly fashion. The proceeds are used to reduce or repay the outstanding claim. In general, the Bank does not occupy repossessed property for business use.

 

 15 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

The Bank holds guarantees and other financial credit enhancements against certain exposures in the loan portfolio. As of March 31, 2020, and December 31, 2019, the coverage ratio to the carrying amount of the loan portfolio was 13% and 12% respectively.

 

iii.Implementation of forward-looking information

 

The Bank incorporates information of the economic environments on a forward-looking view, when assessing whether the credit risk of a financial instrument has significantly increased since initial recognition through customer and country rating models which include projections of the inputs under analysis.

 

Supplementary, for the expected credit loss measurement the results of the alert model can be considered, which are analyzed through a severity indicator to total risk resulting from the estimates and assumptions of several macroeconomics factors. These estimates and assumptions are supported by a base scenario associated to a probability of occurrence of 95%. Other scenarios represent optimistic and pessimistic results. The implementation and interpretation of the outcomes of the alert are based on the expert judgement of management, based on suggestions of areas such as Credit Risk, Economic Studies and Loan Recovery of the Bank.

 

The external information could include economic data and projections published by governmental committees, monetary agencies (e.g., Federal Reserve Bank and from countries where the Bank operates), supranational organizations (International Monetary Fund, The World Bank, World Trade Organization), private sector, academic projections, credit rating agencies, among other.

 

Principal macroeconomies variables of the country rating model with forward-looking scenarios are:

 

Variables Description
   
GDP Growth (Var. %) % Variation in the growth of the Gross Domestic Product (GDP)
   
ComEx Growth (Var. %) % Variation in foreign trade growth (Exp. + Imp.)

 

The model uses, as main inputs, the following macroeconomic variables: the percentage variation of the gross domestic product of Latin America and the percentage of the foreign trade index growth. The main movements and changes in the variables are analyzed, in general and in particular for each country in the region. This historical and projected information over a period of five years allows Management a complementary means to estimate the macroeconomic effects in the Bank's portfolio.

 

 16 

 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

The table below lists the macroeconomic assumptions by country used in the base, optimistic and pessimistic scenarios over the five-year average forecast period.

 

      Variable 
      GDP Growth (Var.%)   ComEx Growth Index (Var.%) 
    March 31,   December 31,   March 31,    December 31, 
Country  Scenario  2020   20219   2020   2019 
   Central   2.3%   2.1%   6.2%   4.0%
Brazil  Upside   3.3%   3.1%   9.7%   7.5%
   Downside   0.9%   0.7%   2.2%   0.0%
   Central   3.5%   3.4%   7.3%   5.5%
Colombia  Upside   4.6%   4.5%   10.3%   8.5%
   Downside   2.2%   2.1%   3.8%   2.0%
   Central   1.8%   1.3%   3.8%   2.5%
Mexico  Upside   2.8%   2.3%   7.8%   6.5%
   Downside   0.6%   0.1%   -0.7%   -2.0%
  Central   2.6%   2.2%   5.6%   2.7%
Chile  Upside   3.7%   3.3%   9.1%   6.2%
   Downside   1.4%   1.0%   1.6%   -1.3%
   Central   1.8%   1.2%   4.7%   3.9%
Ecuador  Upside   2.8%   2.2%   7.7%   6.9%
   Downside   0.3%   -0.3%   1.2%   0.4%
   Central   3.4%   3.4%   5.4%   5.4%
Guatemala  Upside   4.4%   4.4%   8.4%   8.4%
   Downside   2.2%   2.2%   1.9%   1.9%
  Central   3.1%   2.8%   7.4%   5.7%
Dominican Republic  Upside   4.1%   3.8%   10.9%   9.2%
   Downside   1.8%   1.5%   3.4%   1.7%
  Central   4.8%   4.3%   5.3%   3.8%
Panama  Upside   6.3%   5.8%   8.3%   6.8%
   Downside   1.8%   0.3%   1.8%   0.3%

 

 17 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)
   
  iv. Loss allowances

 

The following tables show reconciliations from the opening to the closing balance of the loss allowance by class of financial instrument.

 

Loans

 

   Stage 1   Stage 2   Stage 3   Total 

Allowance for expected credit losses as of December 31, 2019

   28,892    15,842    54,573    99,307 
Transfer to lifetime expected credit losses   (183)   183    -    - 
Net effect of changes in allowance for expected credit losses   (383)   2,748    56    2,421 
Financial instruments that have been derecognized during the period   (8,296)   (902)   -    (9,198)
New financial assets originated or purchased   7,296    -    -    7,296 
Write-offs   -    -    -    - 
Recoveries   -    -    115    115 

Allowance for expected credit losses as of March 31, 2020

   27,326    17,871    54,744    99,941 

 

    Stage 1    Stage 2     Stage 3    Total 

Allowance for expected credit losses as of December 31, 2018

   34,957    16,389    49,439    100,785 
Transfer to lifetime expected credit losses   (2,488)   2,488    -    - 
Net effect of changes in allowance for expected credit losses   (2,154)   5,881    7,987    11,714 
Financial instruments that have been derecognized during the period   (27,118)   (8,916)   (500)   (36,534)
New financial assets originated or purchased   25,695    -    -    25,695 
Write-offs   -    -    (2,405)   (2,405)
Recoveries   -    -    52    52 

Allowance for expected credit losses as of December 31, 2019

   28,892    15,842    54,573    99,307 

 18 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

  

5.Financial risk (continued)

 

A.Credit risk (continued)

 

Loan commitments, financial guarantee contracts and customers’ liabilities under acceptances 

 

The allowance for expected credit losses on loan commitments and financial guarantee contracts reflects the Bank’s management estimate expected credit losses of customers’ liabilities under acceptances and items such as: confirmed letters of credit, stand-by letters of credit, guarantees, and credit commitments.

 

   Stage 1   Stage 2   Stage 3   Total 

Allowance for expected credit losses as of December 31, 2019

   2,683    361    -    3,044 
Net effect of changes in reserve for expected credit loss   (238)   30    -    (208)
Financial instruments that have been derecognized during the period   (1,580)   -    -    (1,580)
New instruments originated or purchased   1,187    -    -    1,187 

Allowance for expected credit losses as of March 31, 2020

   2,052    391    -    2,443 

 

   Stage 1   Stage 2   Stage 3   Total 

Allowance for expected credit losses as of December 31, 2018

   3,089    200    -    3,289 
Net effect of changes in reserve for expected credit loss   (17)   170    -    153 
Financial instruments that have been derecognized during the year   (2,497)   (9)   -    (2,506)
New instruments originated or purchased   2,108    -    -    2,108 

Allowance for expected credit losses as of December 31, 2019

   2,683    361    -    3,044 

 

 19 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

Securities at amortized cost

 

   Stage 1   Stage 2   Stage 3   Total 

Allowance for expected credit losses as of December 31, 2019

   103    10    -    113 
Net effect of changes in allowance for expected credit losses   -    -    -    - 
Financial instruments that have been derecognized during the period   (27)   (10)   -    (37)
New financial assets originated or purchased   30    -    -    30 

Allowance for expected credit losses as of March 31, 2020

   106    -    -    106 

  

   Stage 1   Stage 2   Stage 3   Total 

Allowance for expected credit losses as of December 31, 2018

   113    27    -    140 
Net effect of changes in allowance for expected credit losses   (1)   (17)   -    (18)
Financial instruments that have been derecognized during the year   (46)   -    -    (46)
New financial assets originated or purchased   37    -    -    37 

Allowance for expected credit losses as of December 31, 2019

   103    10    -    113 

 

Securities at fair value through other comprehensive income (FVOCI)

 

    Stage 1    Stage 2    Stage 3    Total 

Allowance for expected credit losses as of December 31, 2019

   -    -    -    - 
Financial instruments that have been derecognized during the period   -    -    -    - 

Allowance for expected credit losses as of March 31, 2020

   -    -    -    - 

 

 20 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

   Stage 1   Stage 2   Stage 3   Total 
Allowance for expected credit losses as of December 31, 2018   33    140    -    173 
Financial instruments that have been derecognized during the year   (33)   (140)   -    (173)
Allowance for expected credit losses as of December 31, 2019   -    -    -    - 

 

The following table provides a reconciliation between:

 

-Amounts shown in the previous tables reconciling opening and closing balances of loss allowance per class of financial instrument; and

 

-The ‘impairment losses on financial instruments’ line item in the condensed consolidated interim statement of profit or loss and other comprehensive income.

 

           Securities     
March 31, 2020  Loans   Loan commitments
and financial
guarantee contracts
   At amortized cost   FVOCI   Total 
Net effect of changes in allowance for expected credit losses   2,421    (208)   -    -    2,213 
Financial instruments that have been derecognized during the year   (9,198)   (1,580)   -    (37)   (10,815)
New financial assets originated or purchased   7,296    1,187    -    30    8,513 
Total   519    (601)            -    (7)   (89)

 

           Securities     
March 31, 2019  Loans   Loan commitments
and financial
guarantee contracts
   At amortized cost   FVOCI   Total 
Net effect of changes in allowance for expected credit losses   9,360    (266)         (8)   (7)   9,079 
Financial instruments that have been derecognized during the year   (15,569)   (1,802)   -    (10)   (17,381)
New financial assets originated or purchased   7,763    1,481    -    -    9,244 
Total   1,554    (587)   (8)   (17)   942 

 

 21 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)
   
  v. Credit-impaired financial assets

 

Credit-impaired loans and advances are graded 8 to 10 in the Bank’s internal credit risk grading system.

 

The following table sets out a reconciliation of changes in the net carrying amount of credit-impaired loans .

 

   March 31,
2020
   December 31,
2019
 
Credit-impaired loans and advances at beginning of period   54,573    49,439 
Classified as credit-impaired during the period   -    - 
Change in expected credit losses allowance   (115)   7,664 
Release for asset sale   -    (500)
Recoveries of amounts previously written off   115    52 
Interest income   171    323 
Write-offs   -    (2,405)
Credit-impaired loans and advances at end of period   54,744    54,573 

 

vi.Concentrations of credit risk

 

The Bank monitors concentrations of credit risk by sector, industry and by country. An analysis of concentrations of credit risk from loans, loan commitments, financial guarantees and investment securities is as follows.

 

 22 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

Concentration by sector and industry

  

           Securities         
   Loans   At amortized cost   FVOCI  

Loan commitments and

financial guarantee contracts

 
   March 31,   December 31,   March 31,   December 31,   March 31,   December 31,   March 31,   December 31, 
   2020   2019   2020   2019   2020   2019   2020   2019 
Carrying amount - principal   5,337,487    5,892,997    74,200    74,547    5,065    5,094    66,657    115,682 
Amount committed/guaranteed   -    -    -    -    -    -    427,600    493,372 
                                         
Concentration by sector                                        
Corporations:                                        
Private   1,611,790    1,782,808    6,998    2,998    -    -    160,810    213,161 
State-owned   757,042    780,491    28,809    23,792    -    -    69,718    69,822 
Financial institutions:                                        
Private   2,522,994    2,692,787    18,000    19,276    -    -    77,521    75,130 
State-owned   398,440    589,690    -    -    -    -    186,208    250,941 
Sovereign  47,221   47,221   20,393   28,481   5,065   5,094   -   - 
Total   5,337,486    5,892,997    74,200    74,547    5,065    5,094    494,257    609,054 
                                         
Concentration by industry                                        
Financial institutions   2,921,434    3,282,477    18,000    19,276    -    -    263,729    326,071 
Industrial   875,826    925,375    30,706    21,658    -    -    127,381    143,560 
Oil and petroleum derived products   530,687    561,068    5,101    5,132    -    -    46,492    71,571 
Agricultural   265,337    327,288    -    -    -    -    -    - 
Services   431,478    370,753    -    -    -    -    5,224    20,497 
Mining   102,366    162,364    -    -    -    -    -    - 
Sovereign   47,221    47,221    20,393    28,481    5,065    5,094    -    - 
Other   163,138    216,451    -    -    -    -    51,431    47,355 
Total   5,337,486    5,892,997    74,200    74,547    5,065    5,094    494,257    609,054 

  

 23 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

Risk rating and concentration by country

 

        Securities         
   Loans     At amortized cost    FVOCI   Loan commitments and financial guarantee contracts
   March 31,
2020
    December 31,
2019
    March 31,
2020
   December 31,
2019
    March 31,
2020
   December 31,
2019
   March 31,
2020
   December 31,
2019
 
Carrying amount - principal  5,337,487    5,892,997    74,200   74,547    5,065   5,094   66,657   115,682 
Amount committed/guaranteed  -    -    -   -    -   -   427,600   493,372 
                                    
Rating                                   
 1-4  2,543,852    2,928,401    74,200   73,047    5,065   5,094   162,214   167,241 
 5-6  2,272,680    2,415,323    -   1,500    -   -   139,928   183,568 
 7-8  459,110    487,428    -   -    -   -   192,115   258,245 
 10  61,845    61,845    -   -    -   -   -   - 
Total5,337,487   5,892,997   74,200  74,547   5,065  5,094 494,257  609,053 
                                    
Concentration by country                                   
Argentina  194,526    226,481    -   -    -   -   -   - 
Belgium  14,105    13,742    -   -    -   -   -   - 
Bolivia  5,000    7,000    -   -    -   -   3,079   400 
Brazil  959,464    1,015,316    -   1,500    -   -   -   50,000 
Canada  -    -    -   -    -   -   657   657 
Chile  578,710    683,132    -   -    5,065   5,094   8,388   8 
Colombia  834,401    906,091    15,282   15,338    -   -   37,000   50,610 
Costa Rica  221,288    220,380    -   -    -   -   59,752   59,161 
Dominican Republic  104,139    289,853    -   -    -   -   16,500   16,500 
Ecuador  169,761    174,267    -   -    -   -   185,253   252,391 
El Salvador  64,900    54,232    -   -    -   -   5,596   5,555 
France  149,144    152,530    -   -    -   -   47,906   47,906 
Germany  33,725    34,613    -   -    -   -   -   - 
Guatemala  295,270    278,557    -   -    -   -   44,808   44,200 
Honduras  126,441    128,937    -   -    -   -   1,265   300 
Hong Kong  -    10,400    -   -    -   -   -   - 
Jamaica  31,603    38,312    -   -    -   -   -   - 
Luxembourg  58,225    59,813    -   -    -   -   -   - 
Mexico  485,150    754,465    21,416   21,505    -   -   30,000   27,377 
Panama  379,455    268,355    37,502   36,204    -   -   26,659   25,304 
Paraguay  120,348    127,970    -   -    -   -   10,652   10,652 
Peru  196,976    150,301    -   -    -   -   6,742   8,033 
Singapore  50,259    90,955    -   -    -   -   -   - 
Switzerland  -    -    -   -    -   -   10,000   10,000 
Trinidad and Tobago  181,676    181,676    -   -    -   -   -   - 
United States of America  25,000    25,000    -   -    -   -   -   - 
Uruguay  57,921    619    -   -    -   -   -   - 
Total 5,337,487   5,892,997   74,200  74,547   5,065 5,094  494,257 609,054 

 

 24 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

vii.Offsetting financial assets and liabilities

 

The following tables include financial assets and liabilities that are offset in the condensed consolidated interim financial statement or subject to an enforceable master netting arrangement:

 

a)Derivative financial instruments – assets

 

March 31, 2020 
         Gross amounts
offset in the
consolidated 
    Net amount of
assets presented
in the
consolidated 
    Gross amounts not offset in the
consolidated statement of
financial position
 
Description   Gross amounts of
assets
    statement of
financial position
    statement of
financial position
    Financial
instruments
    Cash collateral
received
    Net Amount   
Derivative financial instruments used for hedging   17,044    -    17,044    -    (12,006)   5,038 
Total   17,044    -    17,044    -    (12,006)   5,038 

 

December 31, 2019 
         Gross amounts
offset in the
consolidated 
    Net amount of
assets presented
in the
consolidated 
    Gross amounts not offset in the
consolidated statement of
financial position
 
Description   Gross amounts of
assets
    statement of
financial position
   statement of
financial position
    Financial
instruments
    Cash collateral
received
    Net Amount  
Derivative financial instruments used for hedging   11,157    -    11,157    -    (9,350)   1,807 
Total   11,157    -    11,157    -    (9,350)   1,807 

 

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Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

A.Credit risk (continued)

 

b)Securities sold under repurchase and derivative financial instruments – liabilities

 

March 31, 2020 
   Gross   Gross
amounts
offset in the
consolidated
   Net amount
of liabilities
presented
in the
consolidated
   Gross amounts not offset
in the consolidated
statement of financial
position
     
Description  amounts
of
liabilities
   statement of
financial
position
   statement of
financial
position
   Financial
instruments
   Cash
collateral
pledged
   Net
Amount
 
Securities sold under repurchase agreements   (53,888)           -    (53,888)   56,265    2,685    5,062 
Derivative financial instruments used for hedging   (49,095)   -    (49,095)   -    47,916    (1,179)
Total   (102,983)   -    (102,983)   56,265    50,601    3,883 

 

December 31, 2019  
    Gross     Gross
amounts
offset in the
consolidated
    Net amount
of liabilities
presented
in the
consolidated
   

 

Gross amounts not offset
in the consolidated
statement of financial
position

       
Description   amounts
of
liabilities
    statement of
financial
position
    statement of
financial
position
    Financial
instruments
    Cash
collateral
pledged
    Net
Amount 
 
Securities sold under repurchase agreements     (40,530 )           -       (40,530 )     41,937       320       1,727  
Derivative financial instruments used for hedging     (14,675 )                -       (14,675 )     -       14,632       (43 )
Total     (55,205 )     -       (55,205 )     41,937       14,952       1,684  

 

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Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

B.Liquidity risk

 

i.Exposure to liquidity risk

 

The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to deposits from customers and short-term funding. For this purpose, ‘net liquid assets’ includes cash and cash equivalents which consist of deposits from banks, customers, debt securities issued, other borrowings and commitments maturing within the next month.

 

The following table details the Bank's liquidity ratios, described in the previous paragraph, as of March 31, 2020 and December 31, 2019, respectively, along with average information for the period:

 

   March 31,
2020
   December 31,
2019
 
At the end of the period   121.05%     52.48%
Period average   90.58%   37.82%
Maximum of the period   185.50%   53.38%
Minimum of the period   53.26%   23.23%

  

The following table include the Bank’s liquid assets by geographical location:

 

(in millions of USD dollars)  March 31,
2020
   December 31,
2019
 
United State of America   1,293      1,132 
Other O.E.C.D countries   -    4 
Latin America   9    4 
Other countries   -    20 
Total   1,302    1,160 

 

The following table includes the Bank’s demand deposits from customers and its ratio to total deposits from customers:

 

(in millions of USD dollars)  March 31,
2020
   December 31,
2019
 
Demand liabilities and "overnight"   596    86 
% Demand liabilities and "overnight" of total deposits   24.12%   2.97%

 

The liquidity requirements resulting from the Bank’s demand deposits from customers is satisfied by the Bank’s liquid assets as follows:

 

(in millions of USD dollars)  March 31,
2020
   December 31,
2019
 
Total liquid assets   1,302      1,160 
% Total assets of total liabilities   52.66%   40.15%
% Total liquid assets in the U.S. Federal Reserve   99.31%   97.37%

 

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Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

B.Liquidity risk (continued)

 

The remaining liquid assets were composed of short-term deposits in other banks.

 

While the Bank's liabilities generally expire in shorter periods than their assets, the associated liquidity risk is diminished by the short-term nature of the loan portfolio, because the Bank is primarily engaged in financing foreign trade.

 

The following table includes the carrying amount for the Bank’s loans and securities short-term portfolio with maturity within one year based on their original contractual term together with its average remaining term:

 

(in millions of USD dollars)  March 31,
2020
   December 31,
2019
 
Loan portfolio and investment portfolio less than/equal to 1 year according to its original term   2,981      3,485 
Average term (days)   282    189 

 

The following table includes the carrying amount for the Bank’s loans and securities medium term portfolio with maturity based over one year based on their original contractual term together with its average remaining term:

 

(in millions of USD dollars)  March 31,
2020
   December 31,
2019
 
Loan portfolio and investment portfolio greater than/equal to 1 year according to its original term   2,442      2,497 
Average term (days)   1,980    1,185 

 

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Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

B.Liquidity risk (continued)

 

ii.Maturity analysis for financial liabilities and financial assets

 

The following table details the future undiscounted cash flows of assets and liabilities grouped by their remaining maturity with respect to the contractual maturity:

 

   March 31, 2020 
Description 

Up to 3

months

   3 to 6 months  

6 months to 1

year

   1 to 5 years  

More than 5

years

   Gross Inflow (outflow)  

Carrying

amount

 
Assets                            
Cash and due from banks  1,353,018   -   -   -   -   1,353,018   1,353,018 
Securities and other financial assets, net   11,457    9,233    12,971    60,947    -    94,608    86,326 
Loans, net   1,390,815    909,647    1,319,462    1,768,660    156,134    5,544,718    5,267,064 
Derivative financial instruments - assets   10,661    3,879    -    2,504    -    17,044    17,115 
Total   2,765,951    922,759    1,332,433    1,832,111    156,134    7,009,388    6,723,523 
                                    
Liabilities                                   
Deposits   (2,231,628)   (123,534)   (121,910)   -    -    (2,477,072)   (2,472,644)
Securities sold under repurchase agreements   (49,344)   (4,732)   -    -    -    (54,076)   (53,888)
Borrowings and debt, net   (1,237,027)   (734,905)   (316,380)   (914,777)   (13,006)   (3,216,095)   (3,137,018)
Derivative financial instruments - liabilities   (128)   -    (4,620)   (44,347)   -    (49,095)   (49,095)
Total   (3,518,127)   (863,171)   (442,910)   (959,124)   (13,006)   (5,796,338)   (5,712,645)
                                    
Contingencies                                   
Confirmed lettes of credit   117,252    10,426    9,802    -    -    137,480    137,480 
Stand-by letters of credit and guaranteed   90,465    65,491    94,032    10,132    -    260,120    260,120 
Credit commitments   -    -    -    30,000    -    30,000    30,000 
Total   207,717    75,917    103,834    40,132    -    427,600    427,600 
Net position   (959,893)   (16,329)   785,689    832,855    143,128    785,450    583,278 

  

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Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

B.Liquidity risk (continued)

 

   December 31, 2019 
Description 

Up to 3

months

   3 to 6 months  

6 months to

1 year

   1 to 5 years  

More than

5 years

   Gross Inflow (outflow)  

Carrying

amount

 
Assets                            
Cash and due from banks   1,178,288    -    -    -    -    1,178,288    1,178,170 
Securities and other financial assets, net  16,684   6,457   7,293   54,544   6,492   91,470   88,794 
Loans, net   1,960,381    967,594    1,207,469    1,822,519    150,742    6,108,705    5,823,333 
Derivative financial instruments - assets   -    625    -    10,532    -    11,157    11,157 
Total   3,155,353    974,676    1,214,762    1,887,595    157,234    7,389,620    7,101,454 
                                    
Liabilities                                   
Deposits   (2,574,180)   (198,786)   (122,680)   -    -    (2,895,646)   (2,893,555)
Securities sold under repurchase agreements   (40,691)   -    -    -    -    (40,691)   (40,530)
Borrowings and debt, net   (1,407,612)   (451,736)   (230,776)   (1,147,699)   (13,422)   (3,251,245)   (3,148,864)
Derivative financial instruments - liabilities   (2,425)   (775)   (1,711)   (12,014)   -    (16,925)   (14,675)
Total   (4,024,908)   (651,297)   (355,167)   (1,159,713)   (13,422)   (6,204,507)   (6,097,624)
                                    
Contingencies                                   
Confirmed lettes of credit   84,235    77,493    7,592    -    -    169,320    169,320 
Stand-by letters of credit and guaranteed   35,906    95,440    114,078    10,057    -    255,481    255,481 
Credit commitments   -    -    -    68,571    -    68,571    68,571 
Total   120,141    172,933    121,670    78,628    -    493,372    493,372 
Net position   (989,696)   150,446    737,925    649,254    143,812    691,741    510,458 

  

The amounts in the table above have been compiled as follows:

 

Type of financial instrument Basis on which amounts are compiled
Financial assets and liabilities Undiscounted cash flows, which include estimated interest payments.
Issued financial guarantee contracts, and loan commitments Earliest possible contractual maturity. For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.
Derivative financial liabilities and financial assets Contractual undiscounted cash flows. The amounts shown are the gross nominal inflows and outflows for derivatives that have simultaneous gross and the net amounts for derivatives that are net settled.

 

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Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

B.Liquidity risk (continued)

 

iii.Liquidity reserves

 

As part of management of liquidity risk arising from financial liabilities, the Bank holds liquid assets comprising cash and cash equivalents, which can be readily sold to meet liquidity requirements.

 

The following table sets out the components of the Banks’s liquidity reserves:

 

   March 31,   December 31, 
   2020   2019 
   Amount   Fair Value   Amount   Fair Value 
Balance with Central Banks   1,267,730    1,267,730    1,129,016    1,129,016 
Cash and balances with other bank  85,288   85,288   49,154   49,154 
Total Liquidity reserves   1,353,018    1,353,018    1,178,170    1,178,170 

  

iv.Financial assets available to support future funding

 

The following table sets out the Bank’s financial assets available to support future funding:

 

March 31, 2020 
   Guaranteed   Available as collateral 
Cash and due from banks   55,333    1,297,685 
Notional of investment securities   55,300    23,000 
Loan portfolio  -   5,337,487 
Total assets   110,633    6,658,172 

  

December 31, 2019 
   Guaranteed   Available as collateral 
Cash and due from banks   18,452    1,159,718 
Notional of investment securities   40,531    38,045 
Loan portfolio   -    5,823,333 
Total assets   58,983    7,021,096 

 

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Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial risk (continued)

 

C.Market risk

 

The Bank manages market risk by considering the consolidated financial situation of the Bank.

 

i.Interest rate risk

 

The following is a summary of the Bank’s interest rate gap position for the financial assets and liabilities based on their next repricing date:

 

   March 31, 2020 
Description  Up to
3 months
   3 to
6 months
   6 months to
1 year
   1 to 5 years   More than
5 years
   Non interest
rate risk
   Total 
Assets