6-K 1 tm2026809d1_6k.htm FORM 6-K

 

 

 

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 August, 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-F  x  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   ¨  No  x

 

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   ¨  No  x

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Date:August 7, 2020 FOREIGN TRADE BANK OF LATIN AMERICA, INC.
   (Registrant)
     
     
      By: /s/ Ana Graciela de Méndez
     
      Name: Ana Graciela de Méndez
      Title: CFO

 

  

 

 

 

 

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

 

Unaudited condensed consolidated interim financial statements

as of June 30, 2020, and for the three and six ended June 30, 2020.

 

 

 

 

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

 

Contents  
   
Unaudited condensed consolidated interim statements of financial position 3
   
Unaudited condensed consolidated interim statements of profit or loss 4
   
Unaudited condensed consolidated interim statements of comprehensive income 5
   
Unaudited condensed consolidated interim statements of changes in equity 6
   
Unaudited condensed consolidated interim statements 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 statements of financial position

June 30, 2020 and December 31, 2019

(In thousands of US dollars)

 

  

   Notes  June 30,
2020
(Unaudited)
   December 31,
2019
 
Assets              
               
Cash and due from banks   7,8   2,021,365    1,178,170 
               
Securities and other financial assets, net   5,9   100,223    88,794 
               
Loans       4,485,553    5,892,997 
Interest receivable       32,401    41,757 
Allowance for loans losses       (45,434)   (99,307)
Unearned interest and deferred fees       (8,167)   (12,114)
Loans, net   5,7,10   4,464,353    5,823,333 
               
Customers' liabilities under acceptances   5,7   3,444    115,682 
Derivative financial instruments - assets   5,7,13   8,615    11,157 
               
Equipment and leasehold improvements, net       17,109    18,752 
Intangibles, net       1,050    1,427 
Investment properties       3,354    3,494 
Other assets   14   7,712    8,857 
Total assets       6,627,225    7,249,666 
               
Liabilities and Equity              
Liabilities:              
Demand deposits       281,685    85,786 
Time deposits       2,604,530    2,802,550 
    7,15   2,886,215    2,888,336 
Interest payable       3,119    5,219 
Total deposits       2,889,334    2,893,555 
               
Securities sold under repurchase agreements   7,16   10,403    40,530 
Borrowings and debt, net   7,17   2,627,216    3,138,310 
Interest payable       6,954    10,554 
               
Customers' liabilities under acceptances   5,7   3,444    115,682 
Derivative financial instruments - liabilities   5,7,13   52,193    14,675 
Allowance for  loan commitments and financial guarantees contracts losses   5   2,139    3,044 
Other liabilities   18   13,683    17,149 
Total liabilities       5,605,366    6,233,499 
               
Equity:              
Common stock       279,980    279,980 
Treasury stock       (57,866)   (59,669)
Additional paid-in capital in excess of value assigned to common stock       119,447    120,362 
Capital reserves       95,210    95,210 
Regulatory reserves   24   136,019    136,019 
Retained earnings       452,739    446,083 
Other comprehensive income (loss)       (3,670)   (1,818)
Total equity       1,021,859    1,016,167 
Total liabilities and equity       6,627,225    7,249,666 

 

The accompanying notes are an integral part of these unaudited 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 and six months ended June 30, 2020 and 2019

(In thousands of US dollars, except per share data and number of shares)

 

 

      For the three months
ended June 30,
   For the six months
ended June 30,
 
   Notes  2020   2019   2020   2019 
                    
Interest income:                        
Deposits       916    4,181    3,375    9,538 
Securities       677    789    1,317    1,731 
Loans       42,914    65,560    98,804    132,815 
Total interest income   21   44,507    70,530    103,496    144,084 
Interest expense:                        
Deposits       (5,691)   (18,896)   (17,153)   (36,589)
Borrowings and debt       (17,093)   (23,703)   (38,820)   (51,544)
Total interest expense   21   (22,784)   (42,599)   (55,973)   (88,133)
                         
Net interest income       21,723    27,931    47,523    55,951 
                         
Other income (expense):                        
Fees and commissions, net   19,21   1,940    5,128    5,013    7,478 
(Loss) gain on financial instruments, net   12,21   (3,949)   63    (4,307)   819 
Other income, net       191    512    431    1,457 
Total other income, net   21   (1,818)   5,703    1,137    9,754 
                         
Total revenues       19,905    33,634    48,660    65,705 
                         
Reversal (provision) for credit losses   5,6,7,21   2,607    (811)   2,696    (1,753)
Impairment on non-financial assets       (140)   -    (140)   - 
                         
Operating expenses:                        
Salaries and other employee expenses       (4,172)   (5,829)   (11,178)   (12,140)
Depreciation of equipment and leasehold improvements       (854)   (705)   (1,589)   (1,396)
Amortization of intangible assets       (186)   (191)   (377)   (355)
Other expenses       (3,054)   (3,826)   (5,664)   (6,544)
Total operating expenses   21   (8,266)   (10,551)   (18,808)   (20,435)
Profit for the period       14,106    22,272    32,408    43,517 
                         
Per share data:                        
Basic earnings per share (in US dollars)   19   0.36    0.56    0.82    1.10 
Diluted earnings per share (in US dollars)   19   0.36    0.56    0.82    1.10 
Weighted average basic shares (in thousands of shares)   19   39,654    39,553    39,632    39,548 
Weighted average diluted shares (in thousands of shares)   19   39,654    39,553    39,632    39,548 

 

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

 

 4 

 

 

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

 

Unaudited condensed consolidated interim statements of comprehensive income

For the three and six months ended June 30, 2020 and 2019

(In thousands of US dollars)

 

 

   For the three months
ended June 30
   For the six months
ended June 30
 
   2020   2019   2020   2019 
                 
Profit for the period   14,106    22,272    32,408    43,517 
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   226    (864)   546    (608)
                     
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   (152)   (743)   (1,382)   (2,664)
Reclassification of gains (losses) on financial instruments to the profit or loss   (228)   (274)   (345)   338 
Exchange difference in conversion of foreign currency operation   (856)   (23)   (671)   (99)
                     
Other comprehensive income (loss)   (1,010)   (1,904)   (1,852)   (3,033)
                     
Total comprehensive income for the period   13,096    20,368    30,556    40,484 

 

The accompanying notes are an integral part of these unaudited 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 six months ended June 30, 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, previously reported   279,980    (61,076)   119,987    95,210    136,019    423,050    420    993,590 
Effect for change in accounting policy   -    -    -    -    -    (1,926)   -    (1,926)
Balances at January 1, 2019, adjusted   279,980    (61,076)   119,987    95,210    136,019    421,124    420    991,664 
Profit for the period   -    -    -    -    -    43,517    -    43,517 
Other comprehensive income (loss)   -    -    -    -    -    -    (3,033)   (3,033)
Issuance of restricted stock   -    380    (1,259)   -    -    -    -    (879)
Compensation cost - stock options and stock units plans   -    -    897    -    -    -    -    897 
Exercised options and stock units vested   -    1,027    (148)   -    -    -    -    879 
Dividends declared   -    -    -    -    -    (30,449)   -    (30,449)
Balances at June 30, 2019   279,980    (59,669)   119,477    95,210    136,019    434,192    (2,613)   1,002,596 
                                         
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   -    -    -    -    -    32,408    -    32,408 
Other comprehensive income (loss)   -    -    -    -    -    -    (2,454)   (2,454)
Transfer of fair value on equity instrument at FVOCI                            (602)   602    - 
Issuance of restricted stock   -    1,523    (1,523)   -    -    -    -    - 
Compensation cost - stock options and stock units plans   -    -    888    -    -    -    -    888 
Exercised options and stock units vested   -    280    (280)   -    -    -    -    - 
Dividends declared   -    -    -    -    -    (25,150)   -    (25,150)
Balances at June 30, 2020   279,980    (57,866)   119,447    95,210    136,019    452,739    (3,670)   1,021,859 

 

The accompanying notes are an integral part of these unaudited 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 six months ended June 30, 2020 and 2019

(In thousands of US dollars)

 

 

   2020   2019 
         
Cash flows from operating activities          
Profit for the period   32,408    43,517 
Adjustments to reconcile profit for the year to net cash provided by (used in) operating activities:          
Depreciation of equipment and leasehold improvements   1,589    1,396 
Amortization of intangible assets   377    355 
Impairment on non-financial assets   140    - 
(Reversal) provision for credit losses   (2,696)   1,753 
Unrealized loss on financial instruments at fair value through profit or loss   2,827    11 
Realized gain on financial instruments at fair value through profit or loss   (405)   (384)
Impairment (gain), net on sale of financial assets at fair value through OCI   -    (163)
Amortization of premium and discount related to securities at amortized cost   (671)   453 
Compensation cost - share-based payment   888    897 
Net changes in hedging position and foreign currency   5,909    (108)
Interest income   (103,496)   (144,084)
Interest expense   55,973    88,133 
Net decrease (increase) in operating assets:          
Pledged deposits   (44,399)   12,566 
Loans   1,313,231    207,850 
Other assets   3,101    8,630 
Net increase (decrease) in operating liabilities:          
Due to depositors   (2,120)   43,666 
Other liabilities   (4,731)   (612)
Cash flows provided by operating activities   1,257,925    263,876 
Interest received   113,141    140,831 
Interest paid   (61,460)   (96,024)
Net cash provided by operating activities   1,309,606    308,683 
           
Cash flows from investing activities:          
Acquisition of equipment and leasehold improvements   (49)   (65)
Acquisition of intangible assets   -    (125)
Proceeds from the sale of securities at fair value through OCI   1,882    6,000 
Proceeds from redemption of securities at amortized cost   21,176    15,979 
Purchases of securities at amortized cost   (36,799)   (3,479)
Net cash (used in) provided by investing activities   (13,790)   18,310 
           
Cash flows from financing activities:          
Increase (decrease) in securities sold under repurchase agreements   (30,127)   (11,536)
Net increase (decrease) in short-term borrowings and debt   (325,742)   (897,407)
Proceeds from long-term borrowings and debt   149,799    83,636 
Repayments of long-term borrowings and debt   (265,343)   (334,885)
Payments of leases liabilities   (530)   (512)
Dividends paid   (25,077)   (30,754)
Exercised stock options   -    879 
Net cash used in financing activities   (497,020)   (1,190,579)
           
Increase (decrease) net in cash and cash equivalents   798,796    (863,586)
Cash and cash equivalents at beginning of the period   1,159,718    1,706,192 
Cash and cash equivalents at end of the period   1,958,514    842,606 

 

The accompanying notes are an integral part of these unaudited 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 is to 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 July 21, 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

 

2.1Statement of compliance

 

These 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 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 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 adopted

 

The Bank has initially adopted Interest Rate Benchmark Reform (Amendments to IFRS 9, and IFRS 7) from January 1, 2020. This change in accounting policy is also expected to be reflected in the Bank’s consolidated financial statements as at and for the year ending December 31, 2020. The Bank has applied the interest rate benchmark reform amendments to hedging relationships that existed at January 1, 2020 or were designated thereafter and that are directly affected by interest rate benchmark reform. These amendments also apply to the gain or loss recognized in OCI that existed at January 1, 2020.

 

Managing interest rate benchmark reform and any risks arising due to reform

 

A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). Due to the nature of its business, the Bank portfolio is predominantly made up of short-term fixed rate assets and liabilities. However, the Bank has exposures to IBORs (USD Libor only) on its financial instruments that will be replaced or reformed as part of these market-wide initiatives. There is uncertainty over the timing and the methods of transition. The Bank anticipates that IBOR reform will impact its risk management and hedge accounting.

 

The Libor Transition Steering Committee (LTSC) monitors and manages the transition to alternative rates. The committee evaluates the extent to which contracts reference IBOR cash flows, whether such contracts will need to be amended as a result of IBOR reform and how to manage communication about IBOR reform with counterparties. The committee reports to the Board of directors and collaborates with other business functions as needed. It provides periodic reports to management of interest rate risk and risks arising from IBOR reform.

 

Derivatives held for risk management purposes and hedge accounting

 

Derivatives

 

The Bank holds interest rate swaps for risk management purposes, which are designated in cash flow hedging relationships. The interest rate swaps have floating legs that are indexed to USD Libor. The Bank’s derivative instruments are governed by the International Swaps and Derivatives Association (ISDA)’s Master Agreement.

 

ISDA is currently reviewing its standardized contracts in the light of IBOR reform. When ISDA has completed its review, the Bank expects to negotiate the inclusion of new fallback clauses with its derivative counterparties. No derivative instruments have been modified as at June 30, 2020.

 

 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)

 

3.Changes in significant accounting policies (continued)

 

3.1New accounting policies and amendments adopted (continued)

 

Hedge accounting

 

The Bank evaluated the extent to which its cash flow hedging relationships are subject to uncertainty driven by IBOR reform as of June 30, 2020. The Bank’s hedged items and hedging instruments continue to be indexed to IBOR benchmark rates, i.e. USD Libor. IBOR benchmark rates are quoted each day and IBOR cash flows are exchanged with its counterparties as usual. However, the Bank’s cash flow hedging relationships extend beyond the anticipated cessation date for USD LIBOR. The Bank expects that USD LIBOR will be discontinued after the end of 2021. The preferred alternative reference rate is Secured Overnight Financing Rate (SOFR). However, there is uncertainty as to when and how replacement may occur with respect to the relevant hedged item and hedging instrument. Such uncertainty may impact the hedging relationship and its effectiveness assessment. The Bank applies the amendments to IFRS 9 issued in September 2019 to those hedging relationships directly affected by IBOR reform.

 

Hedging relationships impacted by IBOR reform may experience ineffectiveness attributable to market participants’ expectations of when the shift from the existing IBOR benchmark rate to an alternative benchmark interest rate will occur. This transition may occur at different times for the hedged item and hedging instrument, which may lead to hedge ineffectiveness. The Bank has measured its hedging instrument indexed to USD LIBOR using available quoted market rates for LIBOR-based instruments of the same tenor and similar maturity and has measured the cumulative change in present value of hedged cash flows on a similar basis

 

The Bank’s exposure to USD LIBOR designated in a hedging relationship is US$20million nominal amount at June 30, 2020 attributable to the interest rate swap hedging USD LIBOR cash flows on the same principal amount of the Bank’s USD-denominated bond issuances maturing in 2023.

 

For the purpose of evaluating whether there is an economic relationship between the hedged item(s) and the hedging instrument(s), the Bank assumes that the benchmark interest rate is not altered as a result of IBOR reform.

 

The Bank will cease to apply the amendments to its assessment of the economic relationship between the hedged item and the hedging instrument when the uncertainty arising from IBOR 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. For its highly probable assessment of the hedged item, the Bank will no longer apply the amendments when the uncertainty arising from IBOR reform about the timing and amount of the interest rate benchmark-based future cash flows of the hedged item is no longer present, or when the hedging relationship is discontinued.

 

3.2New accounting policies and amendments not yet adopted

 

In May 2020, the IASB (International Accounting Standards Board) published the document “Rental Lease concessions related to COVID-19", which contains amendments to IFRS 16 Leases effective as of June 1, 2020, in order to provide relief to the lessee with respect to the rental concessions granted as a result of the events of COVID-19, where in the existing event the lessee must re-measure the responsibility of the lease using a revised discount rate.

 

At the reporting date, the Bank has not modified nor received concessions in the lease agreements signed with third parties.

 

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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)

 

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.

 

 11 

 

 

 

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 the outstanding balances. For loan commitments and financial guarantee contracts, the amounts in the table represent the amounts committed or guaranteed, respectively.

 

The Bank’s Management has not made any adjustment to the methodology and key inputs used to determine the PD and LGD parameters produced by the model.

 

Loans

 

   June 30, 2020     
   PD Ranges   Stage 1   Stage 2   Stage 3   Total 
Grades 1 - 4   0.03 - 0.74   2,001,033   -   -   2,001,033 
Grades 5 - 6   0.75 - 3.95   1,718,245   290,621   -   2,008,866 
Grades 7 - 8   3.96 - 30.67   303,030   172,624   -   475,654 
Grades 9 - 10   30.68 - 100   -   -   -   - 
        4,022,308   463,245   -   4,485,553 
Loss allowance       (22,265)  (23,169)  -   (45,434)
Total       4,000,043   440,076   -   4,440,119 

 

   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 

 

 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)

 

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

 

   June 30, 2020     
   12-month PD
Ranges
   Stage 1   Stage 2   Stage 3   Total 
Commitments and contingencies                         
Grades 1 - 4   0.03 - 0.74    198,556    -    -    198,556 
Grades 5 - 6   0.75 - 3.95    86,445    49,836    -    136,281 
Grades 7 - 8   3.96 - 30.67    91,228    -    -    91,228 
         376,229    49,836    -    426,065 
                          
Customers' liabilities under acceptances                         
Grades 1 - 4   0.03 - 0.74    3,392    -    -    3,392 
Grades 5 - 6   0.75 - 3.95    52    -    -    52 
Grades 7 - 8   3.96 - 30.67    -    -    -    - 
         3,444    -    -    3,444 
         379,673    49,836    -    429,509 
Loss allowance        (1,345)   (794)   -    (2,139)
Total        378,328    49,042    -    427,370 

 

   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 

 

 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)

 

Securities at amortized cost

 

   June 30, 2020     
   12-month PD
Ranges
   Stage 1   Stage 2   Stage 3   Total 
Grades 1 - 4   0.03 - 0.74    77,124    -    -    77,124 
Grades 5 - 6   0.75 - 3.95    8,658    5,000    -    13,658 
         85,782    5,000    -    90,782 
Loss allowance        (170)   (33)   -    (203)
Total        85,612    4,967    -    90,579 

 

   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)

 

   June 30, 2020     
   12-month PD
Ranges
   Stage 1   Stage 2   Stage 3   Total 
Grades 1 - 4   0.03 - 0.74    5,153    -    -    5,153 
         5,153    -    -    5,153 
Loss allowance        -    -    -    - 
Total        5,153    -    -    5,153 

 

   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 

 

 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)

 

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

 

   June 30, 2020     
   Stage 1   Stage 2   Stage 3   Total 
Current   4,022,308    463,245    -    4,485,553 

 

   December 31, 2019     
   Stage 1   Stage 2   Stage 3   Total 
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 June 30, 2020 and December 31, 2019, other financial assets were no past due or impaired balances.

 

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

 

   June 30, 2020 
   Notional value
USD
   Derivative
financial
instrument - fair
value asset
   Derivative
financial
instrument - fair
value liabilities
 
Interest rate swaps   182,000    1,343    (2,545)
Cross-currency swaps   620,420    4,028    (49,597)
Foreign exchange forwards   93,900    3,244    (51)
Total   896,320    8,615    (52,193)

 

   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.

 

 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)

 

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.

 

The Bank holds guarantees and other financial credit enhancements against certain exposures in the loan portfolio. As of June 30, 2020, and December 31, 2019, the coverage ratio to the carrying amount of the loan portfolio was 16% 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.

 

 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)

 

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.

 

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

 

      Variable 
      GDP Growth (Var.%)   ComEx Growth Index (Var.%) 
Country  Scenario   June 30,
2020
    December 31,
2019
    June 30,
2020
    December 31,
2019
 
   Central   0.3%   2.0%   3.6%   4.1%
Brazil  Upside   1.3%   3.0%   7.1%   7.6%
   Downside   -1.1%   0.6%   -0.4%   0.1%
   Central   1.7%   3.4%   2.8%   6.6%
Colombia  Upside   2.8%   4.5%   5.8%   9.6%
   Downside   0.4%   2.1%   -0.7%   3.1%
   Central   -0.1%   1.5%   0.6%   2.2%
Mexico  Upside   0.9%   2.5%   4.6%   6.2%
   Downside   -1.3%   0.3%   -3.9%   -2.3%
   Central   1.8%   2.2%   3.9%   3.1%
Chile  Upside   2.9%   3.3%   7.4%   6.6%
   Downside   0.6%   1.0%   -0.1%   -0.9%
   Central   0.6%   1.3%   0.3%   4.6%
Ecuador  Upside   1.6%   2.3%   3.3%   7.6%
   Downside   -0.9%   -0.2%   -3.2%   1.1%
   Central   1.9%   3.5%   3.9%   4.1%
Guatemala  Upside   2.9%   4.5%   6.9%   7.1%
   Downside   0.7%   2.3%   0.4%   0.6%
   Central   1.8%   5.0%   5.0%   5.8%
Dominican Republic  Upside   2.8%   6.2%   8.5%   9.3%
   Downside   0.5%   3.7%   1.0%   1.8%
   Central   3.8%   4.6%   3.2%   3.0%
Panama  Upside   5.3%   6.1%   6.2%   6.0%
   Downside   2.4%   3.2%   -0.3%   -0.5%

 

 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)

 

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   (967)   967    -    - 
Net effect of changes in allowance for expected credit losses   473    7,425    (2,581)   5,317 
Financial instruments that have been derecognized during the period   (13,725)   (1,065)   -    (14,790)
New financial assets originated or purchased   7,592    -    -    7,592 
Write-offs   -    -    (52,106)   (52,106)
Recoveries   -    -    114    114 
Allowance for expected credit losses as of June 30, 2020   22,265    23,169    -    45,434 

 

   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 year   (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 

 

 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)

 

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 
Transfer to lifetime expected credit losses   (108)   108    -    - 
Net effect of changes in reserve for expected credit loss   20    338    -    358 
Financial instruments that have been derecognized during the period   (1,920)   (13)   -    (1,933)
New instruments originated or purchased   670    -    -    670 

Allowance for expected credit losses as of June 30, 2020

   1,345    794    -    2,139 

 

   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 

 

 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)

 

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   22    32    -    54 
Financial instruments that have been derecognized during the period   (40)   (9)   -    (49)
New financial assets originated or purchased   85    -    -    85 

Allowance for expected credit losses as of June 30, 2020

   170    33    -    203 

 

   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, 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

   -    -    -    - 

 

 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)

 

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 ‘reversal (provision) for credit losses’ line item in the condensed consolidated interim statement of profit or loss and other comprehensive income.

 

           Securities     
June 30, 2020  Loans   Loan commitments and financial guarantee contracts   At amortized
cost
   FVOCI   Total 
Net effect of changes in allowance for expected  credit losses   5,317    358    54    -    5,729 
Financial instruments that have been derecognized during the year   (14,790)   (1,933)   (49)   -    (16,772)
New financial assets originated or purchased   7,592    670    85    -    8,347 
Total   (1,882)   (905)   90    -    (2,696)

 

           Securities     
June 30, 2019  Loans   Loan commitments and financial guarantee contracts   At amortized
cost
   FVOCI   Total 
Net effect of changes in allowance for expected  credit losses   9,493    252    (8)   40    9,777 
Financial instruments that have been derecognized during the year   (26,063)   (2,471)   (17)   (14)   (28,565)
New financial assets originated or purchased   19,049    1,484    8    -    20,541 
Total   2,479    (735)   (17)   26    1,753 

 

 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)

 

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.

 

   June 30,
2020
   December 31,
2019
 
Credit-impaired loans and advances at beginning of period   54,573    49,439 
Change in expected credit losses allowance   (2,856)   7,164 
Recoveries of amounts previously written off   114    52 
Interest income   275    323 
Write-offs   (52,106)   (2,405)
Credit-impaired loans and advances at end of period   -    54,573 

 

During the period ended June 30, 2020, the sale of the outstanding credit-impaired loan in Stage 3, classified at amortized cost, was made at $11.6 million. This sale resulted in a write off against the credit loss allowance of $ 52.1 million.

 

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.

 

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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)

 

Concentration by sector and industry

 

                   Securities 
   Loans   Loan commitments and
financial guarantee contracts
   At amortized cost   FVOCI 
   June 30,
2020
   December 31,
2019
   June 30,
2020
   December 31,
2019
   June 30,
2020
   December 31,
2019
   June 30,
2020
   December 31,
2019
 
Carrying amount - principal   4,485,553    5,892,997    3,444    115,682    90,782    74,547    5,153    5,094 
Amount committed/guaranteed   -    -    426,065    493,372    -    -    -    - 
                                         
Concentration by sector                                        
Corporations:                                        
Private   1,349,230    1,782,808    205,172    213,161    7,312    2,998    -    - 
State-owned   732,879    780,491    51,283    69,822    42,839    23,792    -    - 
Financial institutions:                                        
Private   2,061,131    2,692,787    64,690    75,130    11,649    19,276    -    - 
State-owned   300,995    589,690    108,364    250,941    8,658    -    -    - 
Sovereign   41,318    47,221    -    -    20,324    28,481    5,153    5,094 
Total   4,485,553    5,892,997    429,509    609,054    90,782    74,547    5,153    5,094 
                                         
Concentration by industry                                        
Financial institutions   2,362,126    3,282,477    173,055    326,071    20,307    19,276    -    - 
Industrial   830,322    925,375    130,686    143,560    30,954    21,658    -    - 
Oil and petroleum derived products   505,915    561,068    34,057    71,571    19,197    5,132    -    - 
Agricultural   231,317    327,288    -    -    -    -    -    - 
Services   310,957    370,753    50,224    20,497    -    -    -    - 
Mining   82,367    162,364    -    -    -    -    -    - 
Sovereign   41,318    47,221    -    -    20,324    28,481    5,153    5,094 
Other   121,231    216,451    41,487    47,355    -    -    -    - 
Total   4,485,553    5,892,997    429,509    609,054    90,782    74,547    5,153    5,094 

 

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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)

 

Risk rating and concentration by country

 

                   Securities 
   Loans   Loan commitments and
financial guarantee contracts
   At amortized cost   FVOCI 
   June 30,
2020
   December 31,
2019
   June 30,
2020
   December 31,
2019
   June 30,
2020
   December 31,
2019
   June 30,
2020
   December 31,
2019
 
Carrying amount - principal   4,485,553    5,892,997    3,444    115,682    90,782    74,547    5,153    5,094 
Amount committed/guaranteed   -    -    426,065    493,372    -    -    -    - 
                                         
Rating                                        
1-4   2,001,033    2,928,401    201,948    167,241    77,124    73,047    5,153    5,094 
5-6   2,008,866    2,415,323    136,333    183,568    13,658    1,500    -    - 
7-8   475,654    487,428    91,228    258,245    -    -    -    - 
10   -    61,845    -    -    -    -    -    - 
Total   4,485,553    5,892,997    429,509    609,054    90,782    74,547    5,153    5,094 
                                         
Concentration by country                                        
Argentina   180,057    226,481    -    -    -    -    -    - 
Belgium   14,105    13,742    -    -    -    -    -    - 
Bolivia   5,000    7,000    2,950    400    -    -    -    - 
Brazil   800,086    1,015,316    -    50,000    8,658    1,500    -    - 
Canada   -    -    -    657    -    -    -    - 
Chile   473,143    683,132    661    8    -    -    5,153    5,094 
Colombia   732,450    906,092    43,000    50,610    29,355    15,338    -    - 
Costa Rica   162,479    220,380    58,665    59,161    -    -    -    - 
Dominican Republic   120,719    289,853    16,500    16,500    -    -    -    - 
Ecuador   106,058    174,267    85,348    252,391    -    -    -    - 
El Salvador   56,900    54,233    5,555    5,555    -    -    -    - 
France   98,370    152,530    69,567    47,906    -    -    -    - 
Germany   32,837    34,613    -    -    -    -    -    - 
Guatemala   259,123    278,557    44,808    44,200    -    -    -    - 
Honduras   107,976    128,937    325    300    -    -    -    - 
Hong Kong   4,000    10,400    -    -    -    -    -    - 
Jamaica   11,492    38,312    -    -    -    -    -    - 
Luxembourg   51,554    59,813    -    -    -    -    -    - 
Mexico   444,449    754,465    17,708    27,377    21,639    21,505    -    - 
Nicaragua   -    -    -    -    -    -    -    - 
Panama   300,978    268,356    68,322    25,304    31,130    36,204    -    - 
Paraguay   86,418    127,970    10,000    10,652    -    -    -    - 
Peru   171,402    150,301    6,100    8,033    -    -    -    - 
Singapore   32,000    90,955    -    -    -    -    -    - 
Switzerland   -    -    -    10,000    -    -    -    - 
Trinidad and Tobago   178,548    181,676    -    -    -    -    -    - 
United States of America   45,000    25,000    -    -    -    -    -    - 
United Kingdom   10,409    -    -    -    -    -    -    - 
Uruguay   -    619    -    -    -    -    -    - 
Total   4,485,553    5,892,997    429,509    609,054    90,782    74,547    5,153    5,094 

 

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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)

 

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

 

June 30, 2020
   Gross   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  amounts of
assets
   statement of
financial position
   statement of
financial position
   Financial
instruments
   Cash collateral
received
   Net Amount 
Derivative financial instruments used for hedging   8,615    -    8,615    -    (3,536)   5,079 
Total   8,615    -    8,615    -    (3,536)   5,079 

 

December 31, 2019
   Gross   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  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

  

June 30, 2020
      Gross amounts
offset in the
   Net amount of
liabilities
presented
in the
   Gross amounts not offset in
the consolidated statement of
financial position
    
Description  Gross
amounts of
liabilities
   consolidated
statement of
financial position
   consolidated
statement of
financial position
   Financial
instruments
   Cash
collateral
pledged
   Net
Amount
 
Securities sold under repurchase agreements   (10,403)   -    (10,403)   11,229    2,685    3,511 
Derivative financial instruments used for hedging   (52,193)   -    (52,193)   -    55,166    2,973 
Total   (62,596)   -    (62,596)   11,229    57,851    6,484 

 

December 31, 2019
      Gross amounts
offset in the
   Net amount of
liabilities
presented
in the
   Gross amounts not offset in
the consolidated statement of
financial position
    
Description  Gross
amounts of
liabilities
   consolidated
statement of
financial position
   consolidated
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, for the six months period ended on June 30, 2020 and for the year ended December 31, 2019, respectively:

 

   June 30,
2020
   December 31,
2019
 
At the end of the period   179.98%   52.48%
Period average   118.66%   37.82%
Maximum of the period   234.38%   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)  June 30,
2020
   December 31,
2019
 
United State of America   1,849    1,132 
Other O.E.C.D countries   100    4 
Latin America   10    4 
Other countries   -    20 
Total   1,959    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)  June 30,
2020
   December 31,
2019
 
Demand liabilities and "overnight"   933    86 
% Demand liabilities and "overnight" of total deposits   32.32%   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)  June 30,
2020
   December 31,
2019
 
Total liquid assets   1,964    1,160 
% Total assets of total liabilities   35.55%   40.15%
% Total liquid assets in the U.S. Federal Reserve   90.30%   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.

 

Even though the average term of the Bank's assets exceeds the average term of its liabilities, the associated liquidity risk is diminished by the short-term nature of a significant portion of the loan portfolio, since 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)  June 30,
2020
   December 31,
2019
 
Loan portfolio and investment portfolio less than/equal to 1 year according to its original term   2,389    3,485 
Average term (days)   203    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)  June 30,
2020
   December 31,
2019
 
Loan portfolio and investment portfolio greater than/equal to 1 year according to its original term   2,196    2,497 
Average term (days)   2,223    1,185 

 

 29 

 

 

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:

 

   June 30, 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   2,021,461    -    -    -    -    2,021,461    2,021,365 
Securities and other financial assets, net   9,197    3,040    19,200    70,059    3,500    104,996    100,223 
Loans, net   1,182,545    976,561    923,783    1,469,204    122,049    4,674,142    4,464,353 
Derivative financial instruments - assets   4,488    1,476    889    1,762    -    8,615    8,615 
Total   3,217,691    981,077    943,872    1,541,025    125,549    6,809,214    6,594,556 
                                    
Liabilities                                   
Deposits   (2,703,511)   (209,989)   (12,000)   -    -    (2,925,500)   (2,889,335)
Securities sold under repurchase agreements   (4,703)   -    (5,764)   -    -    (10,467)   (10,403)
Borrowings and debt, net   (672,671)   (164,835)   (680,529)   (1,227,935)   (12,616)   (2,739,224)   (2,627,216)
Derivative financial instruments - liabilities   (19)   (2,305)   (1,118)   (48,751)   -    (52,193)   (52,193)
Total   (3,380,904)   (377,129)   (699,411)   (1,276,686)   (12,616)   (5,727,384)   (5,579,147)
                                    
Contingencies                                   
Confirmed lettes of credit   68,712    44,298    1,285    -    -    114,295    114,295 
Stand-by letters of credit and guaranteed   44,791    23,113    150,309    29,700    -    247,913    247,913 
Credit commitments   51,000    -    -    12,857    -    63,857    - 
Total   164,503    67,411    151,594    42,557    -    426,065    362,208 
Net position   (327,716)   536,537    92,867    221,782    112,933    655,765    653,201 

 

 30 

 

 

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.

 

 31 

 

 

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 the management of liquidity risk arising from financial liabilities, the Bank holds liquid assets comprising cash and cash equivalents.

 

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

 

   June 30,   December 31, 
   2020   2018 
   Amount   Fair Value   Amount   Fair Value 
Balance with Central Banks   1,773,029    1,773,029    1,129,016    1,129,016 
Cash and balances with other bank   248,336    248,336    49,154    49,154 
Total Liquidity reserves   2,021,365    2,021,365    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:

 

June 30, 2020
   Guaranteed   Available as
collateral
 
Cash and due from banks   57,851    1,963,514 
Notional of investment securities   10,950    83,249 
Loan portfolio   -    4,485,553 
Total assets   68,801    6,532,316 

 

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 

 

 32 

 

 

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:

 

   June 30, 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                                   
Demand deposits and time deposits   2,005,998    -    -    -    -    -    2,005,998 
Securities and other financial assets   9,100    3,000    18,549    65,286    -    3,500    99,435 
Loans   2,911,658    884,425    541,985    136,892    10,593    -    4,485,553 
Total assets   4,926,756    887,425    560,534    202,178    10,593    3,500    6,590,986 
                                    
Liabilities                                   
Demand deposits and time deposits   (2,665,526)   (208,690)   (12,000)   -    -    -    (2,886,216)
Securities sold repurchase agreements   (4,675)   -    (5,728)   -    -    -    (10,403)
Borrowings and debt   (2,005,873)   (119,016)   (125,000)   (357,965)   -    (19,362)   (2,627,216)
Total liabilities   (4,676,074)   (327,706)   (142,728)   (357,965)   -    (19,362)   (5,523,835)
Net effect of derivative financial instruments held for interest risk management   4,468    (829)   (229)   (46,988)   -    -    (43,578)
Total interest rate sensitivity   255,150    558,890    417,577    (202,775)   10,593    (15,862)   1,023,573 

 

  

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   Non interest rate risk   Total 
Assets                                   
Demand deposits and time deposits   1,170,092    -