BLX

Good morning, ladies and gentlemen, and welcome to the Bladex second quarter 2026 earnings conference call. A slide presentation is accompanying today's webcast and is also available on the investor section of the company's website, www.bladex.com. There will be an opportunity for you to ask questions at the end of today's presentation. Please note today's conference call is being recorded. As a reminder, all participants will be in listen-only mode. I would now like to turn the call over to Mr. Jorge Salas, Chief Executive Officer. Sir, please go ahead.

Good morning, everyone, and thank you for joining us today to discuss Bladex's results for the second quarter of 2026. I will begin with the key highlights for the quarter. Then Annette, our CFO, will walk you through the financials in more detail. After that, I will come back and provide a quick update on our strategic execution, our view of the macro environment, and our outlook for the rest of the year. Finally, we will open the call for questions. Let me start with the headline. We are thrilled with our performance this quarter. Not only because we reached record levels across several areas of the business, more importantly, because we're starting to see the strategy we shared with you all at our Investor Day translate into tangible results.

We delivered strong commercial execution, further strengthened our funding base, and continued to broaden our revenue mix just like we anticipated. The commercial portfolio reached a record of $13 billion, up 8% from March, 20% year-over-year, and 17% since year end. Both loans and contingencies also closed at new heights. This is exactly the kind of disciplined capital deployment we had in mind when we completed the AT1 issuance last year. We're putting the capital work to support growth while maintaining a strong capital position. On the funding side, deposits reached a record of $7.9 billion, 8% sequentially and 20% since December. Funding kept pace with the expansion of the commercial portfolio. Our diversified deposit base continues to provide a solid foundation for balance sheet growth.

Turning to revenues, net interest income reached another new high, increasing 4% for the first quarter, supported by higher average loan balances and disciplined balance sheet management. At the same time, margins remained under pressure. Net interest margin declined by 10 basis points to 2.24%, mainly reflecting higher average liquidity and continued competitive pressures on spreads. This remains consistent with the environment we discussed during the first quarter call.

Non-interest income is perhaps the biggest highlight of the quarter. It is also a fundamental part of the strategy presented at the Investor Day. The focus is to diversify the bank's revenue base, which is particularly important when there's margin compression. This focus is clearly turning into visible results. Non-interest income reached a record of $25 million for the quarter, up 86% from the first quarter, and represented 26% of total revenues in the quarter.

This is meaningful progress in making our earnings less dependent on interest margins. Just a few years ago, non-interest income over total income was close to 15%. Our loan syndications team had one of the best quarters ever, the client derivative business is also starting to gain traction in line with plan. The pilot transactions continue to perform well and are primarily linked to structured transactions of our clients. Annette will take you through the composition of non-interest income and the activity in these businesses in more detail in a few minutes. Expenses, on the other hand, increased as expected as we continue to execute our strategic initiatives. Revenues, however, grew faster than costs. As a result, efficiency improved meaningfully to 24.1% for the quarter.

As we have said before, we do expect expenses to increase in the second half of the year as we continue to execute the investment plan contemplated for 2026. Provisions also increased during the quarter, mainly as a result of the strong portfolio growth and our prudent approach to risk management. Overall, asset quality remains sound. Finally, net income reached a record of $66.5 million, up 18% from the first quarter, which translates into a return on equity of 16.4%.

Our Tier 1 capital ratio closed the quarter at 16.6%, still comfortably above our target and providing capacity to continue supporting disciplined growth. This was an all-around excellent quarter. We put capital to work, broadened our revenue base, and improved profitability and efficiency despite continued pressure on margins. With that overview, let me now hand it over to Annette for a more detailed review of the financial results. Annette, your turn.

Thank you, Jorge, Good morning, everyone. The second quarter was another strong period for Bladex, with several key balance sheet and revenue metrics reaching new highs. Commercial activity and deposits continued to expand, net interest income increased, and fee generation was particularly strong, while asset quality and capital remained sound. Turning to our financial performance, net income reached $66.5 million, up 18% from the first quarter. Return on average assets was 2%, while adjusted return on equity improved to 16.4%. For the first half of the year, net income totaled $122.8 million, resulting in a return on average assets of 1.9% and an adjusted return on equity of 15.3%. Given the transactional nature of our structuring revenues, the quarterly contribution of non-interest income would naturally vary.

Even so, based on our first half's performance and expectations for the remainder of the year, we are reaffirming our full-year adjusted ROE guidance of 14%-15%. Let me now walk you through the key drivers behind these results, beginning with the commercial portfolio. The commercial portfolio ended the quarter at $13 billion, up 8% from the first quarter and 20% year-over-year. Growth was broad-based across loan and contingencies, reflecting continued execution across our core markets. Loan increased to $10.5 billion, up 8% from the first quarter and 22% year-over-year, while contingencies reached $2.3 billion, increasing 11% from the first quarter and 5% year-over-year. Importantly, average loan balances increased steadily throughout the quarter, providing the primary support for higher net interest income despite continued pressure on lending spreads. Commercial activity remained healthy across both trade finance and medium-term lending.

This quarter's strong growth was driven by strategic industries and high-quality client relationships that support sustainable net interest income generation rather than by pursuing volume for its own sake. We also continue to originate medium-term transactions with attractive risk-adjusted returns, supporting a more balanced asset mix and enhancing the quality of earnings over time. At the same time, strong trade-related activity preserved the portfolio predominantly short-dated profile, with approximately 65% of the portfolio scheduled to mature within the next 12 months. Looking ahead, we expect portfolio growth to continue at a steady and disciplined pace, consistent with our long-term strategy. Quarter-over-quarter growth was led by Panama and Argentina, with additional contribution from Dominican Republic, Peru, and Brazil. The portfolio remained well diversified across countries and industries. No single country accounted for more than 14% of total exposure.

Financial institutions represented 27% of the portfolio, while corporate exposures continue to reflect the diversity of regional trade flows. The commercial bond portfolio remained broadly stable at $226 million. Given current market conditions, we continue to prioritize lending opportunities over incremental investment purchases. This quarter demonstrates our ability to grow the portfolio while maintaining disciplined underwriting, broad diversification, and prudent capital deployment. Turning now to liquidity and the treasury investment portfolio.

At quarter end, liquidity assets total approximately $1.9 billion, representing 13.3% of total assets and remaining well within regulatory requirements and our risk appetite. Our liquidity profile remains conservative. A significant portion is held at the Federal Reserve Bank of New York, with the remainder primarily placed with high-quality financial institutions and multilateral organizations. The treasury investment portfolio totaled $1.4 billion at quarter end. It remains highly investment-grade, short in duration, and broadly diversified outside Latin America.

In addition to providing credit diversification, the portfolio serves as a source of contingent liquidity as these securities are eligible to be pledged through our New York agency at the Federal Reserve discount window. Turning now to asset quality. Overall, credit quality remains sound, supported by disciplined underwriting, broad portfolio diversification, and proactive credit risk management. At quarter end, 98.4% of total credit exposure, or $14.2 billion, remained in stage one. Stage two exposures declined to 1.1%, or $162 million, reflecting credit improvements, repayments, maturities, and the migration of our previously identified exposure to stage three. Stage three exposure increased to 0.5%, or $75 million, primarily reflecting the migration of that exposure which had been under enhanced monitoring. As part of our proactive risk management approach, we reduced the overall exposure by selling the bilateral loan component.

The remaining deferred payment letter of credit exposure was reclassified to stage three and remains currently reserved. Importantly, this migration was limited to a single exposure and does not reflect a broader deterioration in the portfolio. Provisioning expense totaled $8.6 million, compared with $4.7 million in the first quarter. Stage one provisioning accounted for $6.4 million, primarily reflecting continued portfolio growth. The remaining provision expense was largely associated with the specific exposure discussed earlier. As a result, cost of risk was 26 basis points compared with 14 basis points in the previous quarter. The quarter also included $8.6 million in write-off related to two fully reserved commercial loans. Because these write-offs were charged against existing allowances, they had no additional impact on second quarter results. We also recorded $1.1 million in recoveries from previously written off loans.

As a result, total reserve ended the quarter at $93.8 million, providing 1.25x coverage of impaired credits. These actions reflect our proactive approach to credit risk management, identifying potential deterioration early, actively reducing exposure when appropriate, and maintaining prudent reserve levels. Together with disciplined underwriting and a well-diversified portfolio, they continue to support a sound asset quality profile. Turning now to funding. Deposits remain one of the quarter's key strengths and continue to serve as a central pillar of our funding strategy. Deposits reached a new high of $7.9 billion at quarter end, increasing 8% from the first quarter and representing approximately 64% of total funding. Our deposit base remains well-diversified. Central bank and Class A shareholders accounted for 34% of deposits, while financial institutions represented 27%, corporations 23%, brokers 15%, and multilateral institutions 1%.

Yankee CD balances also reached a new high, ending the quarter at nearly $2 billion. Continued demand reflect the strength of our distribution platform across the America, Europe, and Asia. During the quarter, we also introduced Green Yankee CDs, with proceeds allocated to eligible green assets originated by our commercial team. This initiative further broadens our investor base while expanding our sustainable funding alternatives. Beyond deposits, we continue to selectively evaluate medium-term funding opportunities that enhance diversification, extend funding duration, and improve overall funding efficiency. Let me now turn to capital. The Basel III Tier 1 ratio ended the quarter at 16.6%, compared with 17.9% in the first quarter, and remains above our 15%-16% operating range. The regulatory capital adequacy ratio under Panama's framework stood at 14.3%, well above the regulatory minimum.

The movement in Tier 1 reflects the continued deployment of capital to support commercial portfolio growth, particularly in medium-term transactions. This is consistent with the strategy we outlined following the AT1 issuance and with our expectations that capital ratios would gradually move toward our operating range as we put the capital to work. Our capital base continued to provide ample capacity to support future growth, absorb potential volatility, and maintain the financial flexibility expected by our stakeholders.

Moving now to net interest income and margins. Net interest income increased to $73.3 million, up 4% from the first quarter. Higher average loan balances more than offset tighter lending spreads, allowing net interest income to grow despite continued pressure on margins. Net interest margin was 2.24% during the quarter, down 10 basis points from the first quarter, while net interest spread declined to 1.64%.

The decline in NIM primarily reflect higher average liquidity and continued competitive pressure on short-term lending spreads as abundant regional liquidity and strong demand for high-quality assets continue to affect pricing. Against this backdrop, we remain disciplined in our approach to short-term lending, pursuing transactions at tighter spread only where risk-adjusted returns remain attractive. These additional volumes generate incremental net interest income while preserving the flexibility to reprice the portfolio as market conditions evolve.

At the same time, medium-term origination with attractive risk-adjusted returns provided an additional earning contribution and helped partially offset the pressure on short-term lending spreads. On the funding side, continued deposit growth increased the contribution of lower cost funding to the balance sheet, partially offsetting the impact of tighter asset spreads. At this time, we are maintaining our full-year NIM guidance while continuing to monitor competitive conditions, portfolio repricing, and funding costs closely.

Let me now turn to non-interest income, one of the key highlights of the quarter and an increasingly important contributor to our financial performance. Non-interest income, excluding the impact of hedging derivative, reached $25.1 million, up 86% from the first quarter. Within this total, fees and commissions amounted to $23.3 million. Letter of credits and guarantees generated $9.5 million, supported by stronger transaction volumes and increased trade finance activity. The quarter also benefited from the distribution of a letter of credit facility originated by our trade finance team. Credit commitments contributed $5.2 million, providing a stable and recurring source of income, primarily from project finance transactions and medium-term committed facilities. Structuring and distribution generated $7.9 million in up-front structuring and syndication fees. During the quarter, the team completed seven transactions across six countries, supporting both financial institutions and corporate clients.

Year-to-date, Bladex has mobilized approximately $2.2 billion, while retaining only 26% of that volume in our balance sheet, highlighting the capital-efficient nature of this business. Client derivative generated an additional $1.3 million during the quarter. As Jorge mentioned, the pilot transactions continue to perform well and are primarily linked to structured transactions for our clients. This activity continues to progress in line with the strategy we presented at the Investor Day. As a result, non-interest income, excluding hedging derivative, represented 25.4% of total revenues, reinforcing the diversification of our earnings and underscoring its increasingly meaningful contribution to profitability. Turning now to expenses and efficiency. Operating expenses totaled $23.8 million, up 8% from the first quarter. For the first half, expenses remain aligned with our 2026 plan, while revenue growth outpaced expense growth.

This generated positive operating leverage and improved the efficiency ratio to 24.1%, from 26.5% in the prior quarter. As Jorge noted, expense execution is seasonally weighted toward the second half of the year as the strategic initiatives move into implementation. At this time, we continue to expect full-year efficiency ratio to remain within our guidance range of 27%-28%. As we invest, cost discipline remains a management priority. We are allocating resources selectively with a clear focus on operating leverage and efficiency. In closing, the second quarter demonstrated a strong and balanced execution across the franchise, reinforcing our confidence in the full-year outlook and in our ability to continue delivering disciplined, profitable growth while preserving the strength of our balance sheet. This concludes my review of the second quarter financial results. Jorge, back to you.

Thank you, Annette. Let me just close with a few comments on strategy execution, the macro environment, and our outlook for the rest of the year. On strategy, the first half of the year provides a good view of how our 2030 plan is beginning to move from design into execution. The commercial growth and revenue diversification pillars are developing in line with the direction we shared at the Investor Day.

Annette has just taken you through the financial detail, so I will focus more on the next part of the build, the transactional services pillar. Transactional services is a little different from the other two pillars. As I mentioned during our Investor Day back in March, this is a longer-term build because it's more intensive in terms of technology, controls, compliance, and general operational readiness before we're able to scale.

That said, the phase I of the new online banking platform is already in place, and we're gradually adding letters of credit clients. We're also very close to completing the onboarding of two additional corresponding banking clients. In parallel, we remain focused on end-to-end process redesign and automation. The objective here is to make sure we scale this part of the business with the right controls and operating foundations from the beginning.

Turning onto the macro environment. The global economy continues to show resilience, but uncertainty undoubtedly remains high. Geopolitical trade tensions, together with renewed inflation risks, continue to create a challenging backdrop for economic activity and financial markets. In the U.S., inflation has shown signs of renewed pressure, while the labor market remains relatively strong. The Federal Reserve has adopted a more cautious tone, with rates likely to remain stable for longer.

In Latin America, the electoral cycle was an important focus for markets during the quarter, particularly because presidential elections took place in Colombia and Peru. The electoral results eased political uncertainty and boosted market confidence, but investors still concentrate on governance, fiscal performance, and policy direction. Regional assets performed well during the quarter, supported by constructive investor sentiment and tighter credit spreads. Looking ahead, our view for the rest of the year remains broadly unchanged. We are encouraged by our execution during the first half of the year and remain on track on the key priorities we established for 2026. We are realistic about the environment. Margin pressure has been stronger than we originally expected, mainly due to tight spreads, abundant liquidity, and strong competition for high-quality assets in the region.

We are managing the pressure through disciplined portfolio growth, funding execution, a broader revenue mix, and continued cost control. Given this context, we reiterate our full-year guidance. We will continue to manage the business with discipline, maintaining our focus on risks, returns, and the quality and sustainability of our earnings. That concludes our review for the second quarter. Operator, you can now open the line for questions.

Thank you very much for the presentation. We will now begin the Q&A session for the investors and analysts. If you wish to ask a question, please click on Raise Hand. If your question has already been answered, you can leave the queue by clicking on Put Hand Down. There is also the possibility to ask your question through the Q&A icon at the bottom of the screen. You may select the icon and type your question with your name and company. Written questions that are not addressed during the earnings call will be returned by the investor relations team. Our first question comes from Ricardo Buchpiguel with BTG Pactual. Sir, your microphone is open.

Good morning, everyone, and thank you for the opportunity of making questions. I have two here on my side. You comment that the competitive environment became a little more intense on the second quarter of the year, pressuring spreads. I wanted to understand whether you continue to see this trend and if your appetite to continue growing has changed in any way for the second half of the year, particularly as your guidance now implies a sharp deceleration for the second half. Also in a way related to this, I wanted to check if you consider the opportunities that that client might bring to improve prior relationship and increase non-interest income penetration when you are deciding how much you want to grow per client. Finally, I just wanted to ask about asset quality.

The coverage ratio now closer to 120%, historically low level when you compare to the numbers since 2020. I wanted to understand if it makes sense to expect some pickup in provisions versus where we have been seeing in the last few quarters. Or perhaps only the NPL formation going downward would improve the coverage ratio in the coming quarters. Thank you.

Thank you, Ricardo. I'm going to tackle the margins questions, and then Annette will tackle the asset quality question. Yes, as you said, the margin pressure was stronger than we initially expected. There is no change in appetite. Given our business model, and given that we maintain around almost 70% of our commercial book maturing in less than a year, times like this of excess liquidity put more pressure on Bladex versus the average bank. On the other hand, the strategic plan was designed exactly to navigate this kind of environment. We've been quite successful, I think, in containing much of the compression of the short-term deals through the execution of our core strategy. More structured products such as supply chain finance, factoring, account receivable financing, commercial prepayments among others.

The proportion of such deals will keep increasing. We expect to continue growing and alleviate the periods of margin pressures like the one we have now. Same is happening with the medium-term transactions. These are syndicated in our project finance deals. They come with a pickup on spread and also with more fees. Finally, on the funding side, that's also helping us contain the NIM since we're gathering more and more deposits has grown as a percentage of the funding base.

Needless to say, as we scale the transactional deposits platform, the contribution of operational deposits to a lower cost of funds will be increasingly meaningful, as I said before, but that should come in the latter part of the plan. All in all, there is more pressure on margins than we had expected. We will not change the appetite. Again, the repricing should help when conditions change. Annette, I don't know if that answers your question Ricardo.

That's very clear. I just wanted to understand, if you're not changing the credit appetite, why not increase the portfolio guidance? Right. You're already growing around 20% this year. Not sure. I understand that the portfolio has short duration.

Yeah

I just wanted to understand the idea here.

Yeah, good point. We're retaining the guidance until we have better visibility on the second half of the year. There might be upside here, but rest assured, we will not chase volume just simply to raise the number.

Perfect. Thank you.

Our next question-

Wait a second

Our next question comes from. Okay.

We need to answer on credit quality.

Hi, Ricardo. As we mentioned in the call, credit quality remains very sound in the portfolio. Stage one still represents 98% of total exposure, with extremely healthy portfolio. In stage two, we can see our proactive credit risk management declining the stage two exposure to 1.1% of our credit portfolio. This decrease was mainly due to credit improvement that we saw in the stage, repayments and maturities. As we mentioned, we moved one single exposure from Stage two to Stage three. This exposure corresponds to a single client in the petrochemical sector in Brazil that we already mentioned in prior calls. This movement made the Stage 3 increase to 0.5% of the portfolio. As we mentioned in the call, this was only a single client, and the exposure to this client had two facilities.

One that was a bilateral loan, which was reduced during the quarter. The remainder, which was a deferred payment letter of credit, was moved to stage three and remains very well reserved. As a result, we increased provisions, $8.6 million this quarter. Most of this, around $6.4 million, was due to the growth of the portfolio. Total reserve increased to $93 million. Looking ahead, we do not expect non-performing loans to increase from the current levels. We estimate that the coverage will move from the current 1.25 to around 1.5-1.6 towards the end of the year.

Super helpful. Thank you both.

Our next question comes from Andres Soto with Santander. Sir, your microphone is open.

Good morning, Jorge, Annette. Thank you for the presentation. I have a quick question. If you guys are okay, I prefer to go one by one. The first one is on loan growth. We saw a significant acceleration in commercial loan growth despite competitive pressures. How much of this growth is reflecting structural gains from new businesses, such as trade finance, structural lending, or is increased market activity in the countries where you guys operate? As you look into second half of 2026, do you see room for this robust growth to remain for the rest of the year?

Yes. Gracias, Andres. On loan growth, I would say that it's split evenly between our typical short-term lending, some of it with structured deals. Part of it, around half, was also long-term type deals. Mainly syndications, but also some project finance deals in Panama, in Argentina, and the Dominican Republic. As I said before, there might be a upside in our guidance of loan growth, but we're not ready to say that yet.

Understood. My second question is on the fee income this quarter, which show another record level. Can you please help us distinguish how much of this performance can be considered recurring versus one-offs, which I believe were a few over the quarter?

There are three types of fee income here. The syndication deals, that we don't want to necessarily extrapolate for the rest of the year. We had some deals that were expected to close on the first quarter that turned into the second quarter. It's hard to predict on the syndication deals. On the other hand, the letters of credit has been steadily growing and progressing according to plan.

We're also starting to see, as I mentioned during the call, the derivatives, which is starting to gain traction. The short answer is. On the syndications, it's hard to predict. We have a good pipeline, but deals move around between quarters. The rest is, I would say, is more structural, steady growth. In any case, this was an exceptional quarter in terms of fees. For your projections, I do not advise to simply multiply for the rest of the year because of the syndication part.

That's pretty clear. Thank you.

Jorge, can you hear me? Can I just complement? You guys hear me?

Oh, Sam. Okay. Go ahead, Sam.

Yes. Andres, this is Samuel Canineu, the Chief Commercial Officer. I just want to complement that if you look, just to put what you asked in perspective, just one year ago when we announced second quarter of 2025, then we had the Staatsolie deal in Suriname that was, let's say, a large historical one-off. As much as we can, as Jorge referred to, not multiply the revenues, the structuring fees for syndicated deals by four, I think the fact that this year, second quarter, or if we add the first semester of this year, we are, in total fees and in structuring fees, equal or above last year without depending on one single deal.

Now this quarter, we actually had seven deals, which was a record within a quarter. I'm not saying that it's again to be multiplied, but shows a direction of a dependency on less individual transactions. Of course, there were exceptional transactions this quarter. For example, the acquisition of Banistmo in Panama, which we were one of the co-lenders, and that is a representative transaction. I think the most important in that business is the direction, is that we have, with a bigger balance sheet, with more products, closer to our clients, being ready to act fast for episodic transactions such as the acquisitions, for example, or the ones that require certainty of funds. We should be more in a better position to continue the growth that we have presenting in the last few years. Sorry, back to you.

Thank you.

No, thank you, Sam. It was very, very helpful. Congratulations to you on impressive commercial results. My last set of questions is related to the strategic plan. On transaction banking, you guys mentioned that the first phase of the online banking platform is already operational and that you're close to onboarding two additional correspondent banking clients. At what point should investors expect to see these to be reflected in terms of improved funding cost in your numbers?

Yes. Thank you for that question. It will be in the second part of the plan, Andres. We're still building capabilities. We have one correspondent bank working with us. Two will join this year. Between five and 10 will join next year. The meaningful contribution on cost of funds, you'll see in the second part of the plan. That means years four and five, you'll have meaningful contribution.

Thank you, Jorge. We are already four months after the Investor Day. Where will you say execution is running ahead of your original expectations, and where it has proven more challenging so far?

Yeah. It's been just four months. We are right on track. We're expecting to complete the treasury platform by the end of this year, the first part. The second part, first half of next year. Online banking is on track. Compliance and monitoring systems are also on track. Today, I cannot say we are ahead nor behind in any of the initiatives related to the transactional services pillar. Right on track.

Sounds good. Thank you so much, Jorge.

Thank you.

Our next question comes from Ricardo Briz with Matheson. Happy to see increased exposure to Argentina, and more recently, in El Salvador. Can you provide more color in the nature of exposure in these two countries? Is this mainly loans to banks and corporates? In a related note, should we expect to see some exposure in Venezuela in the next few quarters? Thank you, and congratulations on the continued solid performance.

Yes. Thank you for your question. Yes. Argentina was mainly oil and gas sector, and some of it is short-term imports of gas in their winter period. Salvador is mainly short-term financial sector related. Everything within our natural course of business. Regarding Venezuela, our position remains unchanged. Venezuela might represent an upside scenario over time, but it's not included anywhere in our current projections, and our exposure today is zero. We know the market. It was, at some point, relevant for Bladex, approximately 5% of our total portfolio a few years ago. We are continuing to assess the appropriate timing and risk-return conditions. If we re-enter, or when we re-enter, it will be gradual, selective, and always consistent with our credit, legal, and compliance framework.

Our next question comes from Juan Soto with Bancolombia. How sensitive is the current credit portfolio to a potential slowdown in Latin America trade activity or commodity prices? Operating expenses increased 14% year-over-year due to investment in technology, modernization, and personnel. When should investors expect these investments to translate into measurable effective gains?

I will tackle the first part of the commodities in Latin America, and, Annette, you'll tackle the expenses part. We've seen volatility in the oil commodity. That's the main commodity that represents a significant part of our portfolio. The net effect of higher oil prices is generally positive for Bladex. Our longer-term exposure is concentrated in competitive, low-cost producers, where high prices can strengthen the cash flows and reduce credit risk, while the cargo values can increase demand and short-term trade financing. It's overall positive.

There are offsets, of course. Importers may face higher working capital needs. Inflation and profitability pressure and severe volatility can tighten the financial conditions. However, many importer exposures are the strong national oil companies that are our clients and have been our clients for decades. The short-term tenor of the portfolio allows us to reprice quickly and reposition if needed.

Overall, this is more of a tailwind than a headwind, and that's the way we see it. We're not seeing any slowdown in the region. On the contrary, we're seeing more and more activity, partially because of the shift to the right of very important countries in the region. Annette, do you want to tackle the second one?

Yeah. Regarding your operating expenses questions, I think we can say that we are already seeing tangible efficiency gains from the investment that we have done since the beginning of the initial strategic plan. We have been investing in technology, we have been investing in people. As you can see, we have bigger teams in the commercial area that are able to originate more sophisticated transactions to make sure the revenue from fee income remains steadily increasing as part of our main components of profitability. Investment in technology, we are already seeing the impact in the depreciation expense of the trade platform that was implemented last year, and that is already providing additional income to the bank.

As you can see, the trade finance, the letter of credit income that we see in the balance sheet is increasing organically in a sustained manner and also allow us to pursue other type of transactions, like the one that we did this quarter, which was the structuring of a letter of credit, a facility that supported part of a project finance transactions that we closed this quarter. We are already seeing tangible gains. Our efficiency ratios are still very attractive. What we're making sure is that we keep investing in our strategic initiative and making sure that the return on these are able to come to the balance sheet in a short term.

Yeah, just point, the investment plan, it's designed throughout the plan so that the efficiency ratio is always between the 27% and 29% ratio. You're not going to see a spike in efficiency over 30% throughout the plan.

Just to add to that, as we shared in the Investor Day, we do expect efficiency ratio, as we said in this call, to be between 27% and 28% towards the half of the year. The year 2026 and 2027, during the execution of strategic plan, is going to have increasing efficiency ratio. Towards the second half of the strategic plan, as Jorge mentioned, where we're going to receive the most impact from the operating deposits, then that efficiency ratio will decrease towards 25%-26%.

Okay. Thank you very much. That's all the questions we have for today. I'll pass the line back to the Bladex team for their concluding remarks.

Yes. Thank you all. As I said, this was an excellent quarter with record results. More importantly, we are excited to keep seeing strategy turn into tangible results. Thank you all for your participation and have a good day. Goodbye now.

This concludes today's conference call. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to Bladex Q1 2026 Earnings Conference Call. A slide presentation is accompanying today's webcast and is also available on the investor section of the company's website, www.bladex.com. There will be an opportunity for you to ask questions at the end of today's presentation. Please note today's conference call is being recorded. As a reminder, all participants will be in a listen only mode. I would now like to turn the call over to Mr. Jorge Salas, Chief Executive Officer. Sir, please go ahead.

Good morning, everyone, and thank you for joining us today to discuss Bladex's results for Q1 of 2026. I will begin with a brief overview of our quarter, then Annette, our CFO, will walk you through the financials in greater detail. After that, I will come back with an update on strategy execution, some thoughts on the macro environment, and our outlook for the rest of the year. Finally, we will open the line for questions. We began 2026 with a very strong quarter in terms of balance sheet growth, while maintaining solid profitability in a highly competitive environment with very tight spreads and wide open capital markets for LatAm issuers. The main highlight of the quarter was the continued expansion of our commercial portfolio. We reached a record of $12 billion, up 8% quarter-over-quarter and 13% year-over-year.

This was fully in line with the growth path we have been discussing in previous quarters and supported by the additional capital flexibility provided by the AT1 issuance completed last year. Growth was driven mainly by medium-term transactions across Colombia, Brazil, and Guatemala. On the funding side, deposits once again reached record levels, closing the quarter at $7.3 billion, up 11% quarter-over-quarter and 25% year-over-year. This strong performance was broad-based across all depositor segments, with Yankee CDs standing out, surpassing $1.7 billion. This reflects continued client activity, the strength of our franchise, and our ability to continue growing deposits at very competitive spreads, which has also helped support margins in the current rate environment.

Turning to revenues, net interest income totaled $70 million, down slightly in the quarter as the balance sheet continues to absorb the full repricing of last year's rate cuts. Latin America has been one of the more resilient regions in a volatile global environment. That has translated into strong liquidity, tighter spreads, and increasing competition. Even in that context, we were able to maintain our net interest margin at 2.34%, supported by disciplined balance sheet management. Strong asset growth, deposit increase, and active liquidity management helped offset pressure on spreads. Fee generation in Q1 typically runs below Q4 levels in our two main fee businesses, letters of credit and syndications. This seasonal pattern is not unusual. Importantly, when compared with Q1 of last year, the underlying trend remains clearly positive.

We continue to see healthy pipeline in fees for Q2, which is consistent with how activity is evolving. Expenses also reflected the usual seasonality at the start of the year. That said, we do expect expenses to increase slightly over the coming quarters as we continue to execute the investment plan contemplated for the rest of the year. Efficiency levels for 2026 will remain within guidance at roughly 28%. Net income for the quarter reached $56.4 million. Return on equity was 14.2%, and our Tier 1 ratio closed the quarter at 17.9%, allowing us to continue supporting growth from a position of strength. Overall, this was a quarter of strong growth and solid profitability despite a more competitive revenue environment.

With that, let me now hand it over to Annette for a more detailed review of the financial results. Annette, please go ahead.

Thank you, Jorge, and good morning, everyone. Let me walk you through financial highlights for Q1 of 2026. From a financial perspective, this quarter represents a solid start of the year. We continued to grow the balance sheet with discipline while maintaining stable profitability in a lower rate environment, supported by continued strengthening of our funding mix and solid fee generation despite Q1 seasonality. Starting with earnings and returns, Bladex delivered net income of $56.4 million, up 9% year-over-year and broadly stable quarter-over-quarter, reflecting the consistency of our core earnings generation. Importantly, return on average assets remains stable at 1.8% even as we continue to grow the balance sheet. This reflects the bank's ability to expand while preserving sustainable profitability.

Return on adjusted equity stood at 14.2% in line with the previous quarter and within our 2026 guidance range, reflecting stable earnings generation. As usual, Q1 results should be assessed in context. The period is typically seasonally softer, particularly for fee income, and this quarter we operated in a lower interest rate environment, which naturally place some pressure in spreads and returns. As we will see through today's presentation, despite this backdrop, our Q1 performance reflected the benefits of disciplined balance sheet growth, stable net interest income, continued funding optimization, and higher fee generation compared to the same period last year. Let's now turn to balance sheet growth and commercial activity. The commercial portfolio reached $12 billion, increasing 13% year-over-year, with growth across both loans and contingencies.

Within this total, loan balances closed at $9.7 billion, reflecting continued execution of our commercial pipeline, while contingent exposures reached $2.1 billion. The quarter's performance was supported by the execution of a strong pipeline of medium-term transactions, including activity originated through our structuring and distribution team. At the same time, our focus remains on selective origination and efficient capital rotation, with 64% of exposures maturing in less than one year, supporting flexibility, disciplined risk management, and repricing capacity. From a composition perspective, diversification remains a key strength. Country exposures are well-distributed, with no single country representing more than 15% of total exposure. Guatemala, Brazil, Colombia, and Mexico remain among our main markets, while the overall mix reflects a balanced regional footprint. Industry diversification also remains strong.

Financial institutions represent 25% of total exposure, while corporate lending is well spread across sectors linked to regional economic activity and trade growth. Starting this quarter, our commercial exposure include a small bond position focused on LatAm issuers recorded at fair value through OCI, totaling $234 million. This represents a tactical capital deployment tool, allowing us to selectively capture opportunities within our existing credit framework while continuing to prioritize loan growth. The fair value OCI classification also provides flexibility to manage these positions over time, including adjusting exposures as credit or market conditions evolve consistent with our risk-adjusted returns objectives. With that, let me now turn to liquidity and the investment portfolio. As we continue to grow the balance sheet, maintaining a strong liquidity position remains a key part of our funding and risk management discipline.

At quarter end, liquid asset $2 billion, representing 14.5% of total assets, remaining well within regulatory requirements and providing flexibility to support commercial growth while preserving current liquidity buffers. The composition of liquidity remains highly conservative, with around 80% placed at the Federal Reserve Bank of New York, and the remainder primarily held with high quality counterparties and multilateral institutions. The Treasury investment portfolio closed the quarter at $1.44 billion, increasing 14% year-over-year. The investment book remained 96% investment grade, geographically diversified outside Latin America, and short in duration, with an average maturity of approximately 1.5 years. These characteristics make it a strong complement to our liquidity structure, providing earning support and contingent funding capacity, as the securities are eligible for access to the Federal Reserve discount window through our New York agency.

Overall, liquidity and investment continue to provide flexibility, resilience, and earning support as we grow the balance sheet. Turning to asset quality. Credit quality remains strong and stable, consistent with the bank's disciplined approach to origination, underwriting, and ongoing monitoring. At quarter end, total credit exposure reached $13.5 billion, with the vast majority remaining in stage one, representing 97.5% of total exposure. Stage two exposures representing 2.2% or approximately $300 million, while the stage three remain minimal at 0.3% or around $39 million. This continues to reflect the high quality profile of the credit book.

From a reserve perspective, total allowances reach $112 million, with a coverage ratio of 0.83%, broadly stable compared to the previous quarter. In addition, coverage of impaired credits remains strong at 2.9x, reflecting a prudent reserve position. The increase in Stage 2 during the quarter primarily reflects our proactive credit assessment of selected exposures in the context of a somewhat more challenging operating environment. Importantly, impaired credits remain stable, and no material credit events were recorded during the quarter. Asset quality therefore remains a core strength of the bank, supported by high quality exposures, prudent reserve coverage, and continued proactive risk management. Let's now move to the funding side of the balance sheet. We continue to see strong momentum in deposit growth, which remains the foundation of our funding strategy.

Deposits reached a record level of $7.3 billion, representing 63% of total funding, increasing both in scale and relevance within our liability structure. Growth was broad-based, driven by corporate deposit, financial institution, and multilateral clients, while Class A shareholder deposits continued to provide a stable and efficient anchor. In addition, Yankee CDs reached a record level of $1.7 billion, further enhancing the diversification and duration of our deposit base. As a result, deposits continue to support balance sheet growth through a more stable and cost-efficient funding structure, which remain an important driver of our ability to sustain margins within our guidance expectation. Beyond deposits, we continue to actively diversify our medium-term funding sources. During the quarter, we executed an additional tranche under our Middle Eastern syndicated loan, alongside other bilateral transactions, further expanding our investor base.

More recently, we completed another successful issuance in the Mexican market of roughly $250 million, which was swapped into U.S. dollars at a cost well within our U.S. dollar curve. This transaction reflects our continued access to diversified funding sources as well as our ability to capture attractive opportunities while optimizing our cost of funds. These quarter results show continued progress in strengthening the liability side of the balance sheet, improving the quality, diversification, and duration of our funding while reinforcing the role of deposits in supporting both margin sustainability and balance sheet growth. Let me now turn to capital. Our capital position remains strong and well above our target levels, providing ample capacity to support continued balance sheet growth. At quarter end, our Basel III Tier 1 ratio increased to 17.9% from 17.4% at year-end 2025.

While our regulatory capital adequacy ratio under Panama's banking framework stood at 14.7%, well above the regulatory minimum. It is important to note that these two ratios are based on different methodologies and therefore do not necessarily move in the same direction quarter to quarter. The Panama regulatory ratio follows a more standardized framework, while the Basel III ratio is more risk-sensitive and better capture changes in the underlying risk profile of our exposures. In Q1, the increase in the Basel III ratio was driven mainly by lower risk-weighted asset intensity, reflecting the regular revision of our internal risk parameters, incorporating the continued strong performance of the credit book. Looking ahead, we continue to expect disciplined capital deployment through 2026, in line with our broader strategic execution.

As capital is deployed, we will expect Basel III Tier 1 ratio to gradually move towards our 15%-16% Tier 1 guidance range, which remains the appropriate operating level for the bank. Our capital position remains strong and continues to provide ample capacity to support growth while preserving balance sheet resilience. Moving now to net interest margin and spreads. During the quarter, net interest margin stood at 2.34%, while net interest spread was 1.69%, reflecting resilient performance in what remains a challenging rate environment. Margins continued to be shaped by several dynamics. The rate cuts implemented since the Q4 of 2025 have had some impact on NIM, while ample market liquidity and strong competition for quality assets continued to pressure loan pricing, particularly in short-term lending.

In addition, while loan average balances remain broadly stable, supporting consistent net interest income, most of the incremental balance growth was concentrated towards the end of the quarter. Therefore, the earnings contribution from this growth was only partially captured in Q1 NII, with a fuller impact expected to be reflected in subsequent periods. At the same time, these pressures have been partially offset by the execution of medium-term transactions, which contribute to a more stable margin and support overall asset yields. On the liability side, continued deposit growth helps support balance sheet growth more efficiently, reinforcing a more stable and cost-efficient funding structure. Taken together, these factors demonstrate the resilience of our margin performance and the benefit of actively managing both sides of the balance sheet. Let me now turn to fee income.

In Q1, fees and commissions reached $13.1 million, up 24% year-over-year, despite this being a seasonally softer period for fee generation. Letters of credit and guarantee remain the main source of fees, generating $7.4 million in the quarter. This activity remains closely tied to our core trade finance business. Q1 was affected by seasonality, but we see good momentum as we move to Q2, supported by higher transaction volumes and the increasing but gradual benefits of our trade platform. Credit commitments and other commissions were another important contributor, reaching $2.7 million, more than doubling compared to the same period last year. This reflect the growing relevance of medium-term transactions and committed facilities within our client offering.

Our structuring and distribution team also continued to contribute to fee income, generating $3.1 million during the quarter, supported by two transactions closed in Costa Rica and Colombia. Importantly, this was achieved despite some transactions closings shifting from Q1 into Q2. While fee recognition in this business can vary depending on execution timing, the syndicated loan pipeline remains solid. In addition, client derivatives are a part of our strategy to further diversify non-interest income. We are seeing growing client demand, particularly in connection with transaction execution. The pipeline remains active, and while the timing of individual transactions may shift across quarters, we expect this business to begin contributing more visibly as execution builds over the upcoming quarters.

Taken together, fee income continues to show solid growth and increasing diversification, supported by trade-related activity, committed facilities, and structuring capabilities, with gradual contribution from client derivative as activity builds through the year. To close, let me turn to operating expenses and efficiency. Operating expenses for the quarter were $22 million, reflecting the usual Q1 seasonality, while also incorporating the impact of a strategic initiative that have moved into production, including higher depreciation, IT-related expenses, and the talent required to support execution. In that context, Q1 expense base reflects the operating impact of initiative already underway. The efficiency ratio for the quarter was 26.5%, remaining well aligned with our full year guidance of approximately 28% and reflecting the bank's ability to absorb a strategic investment while maintaining cost discipline.

As we move through the year, we will continue investing selectively in technology capabilities, talent, and execution capacity required to deliver on our strategic priorities while maintaining a strong focus on operating efficiency. In conclusion, Q1 reflected disciplined balance sheet growth, resilient margins, strong fee generation relative to seasonal patterns, continued funding momentum, and a solid capital position. With that, I will now turn the call back to Jorge for his closing remarks.

Thank you very much, Annette. Let me briefly touch on strategy execution and make a couple of comments on the environment we're operating in. We continue to make good progress on our letters of credit platform. Processing times have consistently come down from almost five hours to about one hour per transaction. This productivity improvement has allowed us to handle smaller tickets profitably, deepen penetration with existing clients as we start to scale the letters of credit business. As outlined in our Investor Day last month, transactional deposits are a key component in the new phase of our strategy. In that sense, we have already onboarded our first correspondent banking client, still in pilot phase, and we're currently working on the second one.

We now have the governance in place to incorporate additional correspondent banking clients during the year in a disciplined way, and we continue to see strong pipeline of interested financial institutions in the region for these services, which we see, of course, as very encouraging. Turning to the macro environment, while global geopolitical and financial conditions have clearly become more volatile, our region continues to show resilience supported by healthy fundamentals, stable trade flows, and a positive investor sentiment. The reason is clear. Latin America's direct trade exposure with the Persian Gulf is very limited, and the region as a whole is a net commodity exporter. Higher commodity prices are historically beneficial for Bladex. Obviously, net commodity importers, mainly Central American and Caribbean countries, will face some headwinds. The ultimate question, of course, is how long will this last?

In any case, our view is that this environment reinforces the importance of disciplined lending and highlights the value of our ability to actively adjust regional exposures given the short-term duration of our lending portfolio. When we look at the year as a whole, our view remains unchanged. Q1 was consistent with our expectations, and we continue to make progress on the strategic front that support the next phase of the bank. For that reason, and based on what we have seen so far in the year, we reaffirm our full year guidance. We do so with confidence while remaining realistic about the competitive environment and the external conditions. With that, please open the call for questions, operator.

Thank you very much for the presentation. We will now begin the Q&A section for investors and analysts. If you wish to ask a question, please press the button Raise Hand. If your question has already been answered, you can leave the queue by clicking on Put Hand Down. There is also the possibility to ask your question through the Q&A icon at the bottom of the screen. You may select the icon and type your question with your name and company. Written questions that are not addressed during the earnings call will be returned by the investor relations team. Our first question comes from Iñigo Vega with Jefferies.

Just a couple of comments on two areas. One, level of worry on the 70 basis points sequential increase in Stage 2 loans in the quarter. Second, why RWAs under Basel III are down 2% quarter-on-quarter when commercial portfolio is up 80% quarter-on-quarter? Only RWAs under Panama align with asset growth.

Yes, thank you, Iñigo. I'll tackle the first question on asset quality, and I'm gonna let Annette, our Chief Finance Officer, tackle the capital ratios questions. The short answer is we're not worried. Asset quality remains very strong. The stage 2 increase reflects more of a proactive risk management approach than any deteriorations. We're just being more cautious on selected exposures, basically in Brazil. We do expect normalization rather than deterioration going forward. I mean, the cost of risk is consistent with the disciplined underwriting of Laith, and that, as I always say, has not changed and will not change. Annette, you wanna talk about capital ratios?

Sure. Yeah, as we mentioned in the call, we follow two different methodologies. One is the regulatory methodology. That's a bank regulated by the Superintendency of Banks. We also, for a reference purpose, also follow Basel III Tier 1 ratio. These are different methodologies. The Panamanian local regulator ratio is based on a more standardized approach, where the exposures are assigned regulatory risk weights based on their categories. While the Basel III Tier 1 ratio is more risk sensitive, it reflects more directly the underlying risk profile of the portfolio, including the borrower quality, country risk, tenor, probability of default, and other characteristics. This is why these two ratios can move differently in a given quarter.

In Q1, our Basel III ratio improved despite the balance sheet growth because of the risk-weighted asset intensity that we had in the portfolio. This is reflected on the strong historical credit performance that we have that incorporated, this was incorporated in the regular revision of our internal risk parameters. The Ecuador country upgrade during the quarter also impacted the Basel III ratio. Obviously, the quality and the mix of the new exposures that we put in the balance sheet also affect the Basel III ratio. On the other hand, the Ecuador upgrade that was given, it is reflected in the Basel III framework, as we mentioned before, but it does not have the same impact under the Panamanian ratio.

This is one of the reasons why these two ratios behave differently from one quarter to the other. Looking ahead, however, we still expect Basel III Tier 1 ratio to gradually normalize toward our 15%-16% target range as we continue to deploy the capital while maintaining ample capacity for disciplined expansion.

Yeah, I think that's it. I mean, the main point is growth in assets does not necessarily imply, you know, higher capital consumption. It's more about quality and mix are critical.

Thank you. Our next question comes from Ricardo Buchpiguel with BTG. You can open your line.

Hi, everyone. Thank you for the opportunity of making questions. I have two here on my side. First, as you mentioned in the presentation, you saw a higher concentration of credit transactions coming out more towards the end of the quarter, which had a negative impact on NIM. It would be helpful if you could comment on what would be the NIM, like excluding this effect, just so we can think a little bit about how is the starting point for NIM in Q2, and everyone can have their own assumption in terms of rate cuts, but the baseline is also helpful.

For my second question, during the quarter we saw a strong sequential growth in credit commitments and guarantees in the balance sheet and when we've seen the revenues, we saw a 14% quarter-over-quarter reduction, right? It'd be great if Sam could walk us through in more details how the monetization cycle of this product works and how seasonality plays out throughout the year, so we can have a better color on this line. Thank you very much.

Okay. Sam, you wanna talk about the commitments, then Annette will talk about NII?

Sure. Thanks for the question, Ricardo. I'll start with your question on commitments. Then I can talk a little bit about the overall letters of credits and guarantees, also business evolution. The commitment fees that you see there is coming from committed but unfunded exposure that is indeed growing and is in line with the expansion of our project finance and infrastructure and syndicated loan businesses. For project finance and infra, for example, it's very common that part of the facility amount will be disbursed not in one go, but rather as CapEx is being deployed. On syndicated loans, those tends to be bigger facilities. It's common to give the client a couple month to fund the transaction. Also, those are commitments that will be funded in due time.

There will be loans, and the commitment period in those cases is much shorter than the tenure of the actual facilities. Most importantly, of course, it generates fees, and those tend to be 30%-40% of the low margin. I think finally, and it's very important, the commitment fees, the commitments that we have there, they're not to liquidity backstop facilities, which is a type of exposure that we don't like as they tend to be used when the underlying credit has deteriorated. Bottom line there is, yes, it's very much commitment fees should continue to grow as the project finance and the syndicated business grow. In terms of letters of credit and guarantees, yeah, the reduction in this quarter versus previous quarter is, or previous two quarters, is more in line with seasonality.

I think there are certain types of letters of credit that they are issued more towards mid, Q2 and Q3. This is a business that we continue, obviously to focus, as you know, on board new clients, and we do expect a pickup or return to normal levels as the year passes. I think that's important to mention as well.

Yeah. Hi, Ricardo. Thank you for your question. Regarding the NIM and NII during Q1, as we mentioned in the call, we've been proactively managing our balance sheet, both the asset side and the liability, which allow us to maintain a resilient NIM as we execute through the year. As we mentioned, our current NIM is affected by the rate cuts that we received towards the end of 2025, and these have an impact in this quarter NIM. It also, it is affected by the ample liquidity and competition for asset quality in the region. We are seeing that, especially in the short term of our lending exposure. Also, the fact that, as we mentioned in the call, some of this growth was towards the end of the quarter.

We are hoping, we're expecting that growth to reflect in the upcoming quarter, providing a sustainable net interest income to the bank. We were able to offset some of these negative pressures by deploying steadily the execution of the medium-term transactions on the loan side, which provides a more stable balances and also margins. was also offset by the growing participation of deposits and also the efficient liquidity management within the balance sheet. With this NIM of around 2.30%, which remains within our guidance, we feel confident that this, the guidance for 2026 will remain around 2.30%, as we have mentioned before.

More importantly, it is also important to take consideration that we are complementing our revenues with the growth of the fees, as Sam just mentioned, in order to make the bank less sensitive to rate movements and provide a more stable profitability for the bank.

Thank you. That's very clear. If I may do, like a quick follow-up on this last point. Assuming that if you get your scenario where you don't have rate cuts, not only in Q2, but throughout this year, do you believe there is upside risk to the guidance, both in NIM and ROE?

Well, as we are seeing, as we've been mentioning for the last couple of quarters, we are seeing, we see that as an upside, although we have seen a lot of pressure on margins. I think most likely, I mean, we're already seeing a benefit from the higher-for-longer rates. However, I mean, these have been offset a little bit by the pressure we have seen on the loans origination.

Great. Thank you.

For now, I would say it has remained kind of like a neutral impact.

Yeah. It's almost a wash.

Perfect. Thank you.

Our next question comes from Natalia Corfield with J.P. Morgan.

Hi, everybody. Thank you for taking my question. I am gonna go back to capitalization, just to be sure on the decline on your Panama ratio, and also wouldn't be this ratio, the Panamanian one, more relevant than the Basel III since you are, like, since your requirements are based on Panama? Those are my two questions.

Hi, Natalia. Both methodologies are important to the bank. Obviously, we're a local bank in Panama, regulated by a superintendency, and it's our priority not only to comply with the ratios, but have ample buffers versus the minimum requirements, and that has been the way the bank manages its capitalization levels. Yes, we are, and our AT1 transaction is based on our regulatory ratio, which we will follow and monitor it closely. The fact that we include our Basel III ratio in, you know, our presentations to investors, this provides a more standardized reference point for investors to be able to compare to other peers in the region. Since, as we mentioned, the methodologies are not different, and some characteristics of our balance sheet are not very well perceived by the local regulator ratio. Basically, those are the two reasons why we follow and comply with both methodologies.

With both.

Perfect. If you could go again through the reasons for the decline on the Panamanian ratio, that would be great.

This responds directly to the growth of the balance sheet that we saw between the Q4 and Q1, which was around 8%.

It's almost independent of the country risk.

Yeah.

That's why we track the other one.

Okay.

It doesn't capture the improvement some of our assets.

Yeah.

Yeah.

It is very neutral to all the exposure outside Panama, especially the corporate positions. It does not differentiate between ratings or if it's investment grade or not investment grade. Those are the characteristics that the Basel III does incorporate into the calculation.

That's-

While the Panamanian-

I get-

....ratio is more for local banks, and it's more detailed about the positions that you have locally than the positions that you have cross-border.

Yeah. It's almost designed for almost for local banks with a larger local exposure. In that sense, Bladex is, you know, a outlier in Panama. I mean, our Panama exposure, as you know, is less than 5% today.

Okay. No. Understood. I would just making a point that the Basel III one is great that you do it, but looking through Latin America, I've seen that each country has its own Basel III regulations. Like, I think it's each country adapted, and then also I know your effort to be able to display something that's comparable, but at the end of the day, I find hard to compare Basel III ratios across Latin America. Just a comment, but thank you very much for your answers.

Thank you, Natalia.

Thank you.

Our next question comes from Andres Soto with Santander.

Good morning, Jorge, Annette, Anita, and team. Thank you for the presentation. My first question is regarding your top line growth. We saw a strong performance this quarter. At the same time, you are mentioning a tougher competitive environment. At what point do you believe this competition will make a dent on your long growth expectations? You believe that the risk-adjusted returns that you are getting now are attractive, and you will continue to grow at the current pace? Is your growth driven by the new products that you are introducing in your product offering?

Thank you, Andres. I'm gonna let Samuel, our Chief Commercial talk about growth in the lending portfolio.

Thanks, Andres. I think we're very confident to meet our guidance in terms of growth for the year. As you know, our exposure is very short term, so things can, the landscape can change quarter to quarter. With that said, we have some ways to mitigate that, which is one side, build a solid, medium term, more value added pipeline, which is the case right now, in project finance infrastructure, in syndicated loans. I think so we're well, I think, prepared to continue deploying at the speed that we're deploying and according to the guidance.

We've also been working very hard to build the short-term pipeline, which is the pipeline for short-term transactions that is more, I would say even more affected by the competitive landscape. I think the way to do that is through our product strategy that we have spoke a lot about in our Investor Day, particularly structure trade and working capital solutions that also been growing at a good speed and with a, I would say promising pipeline. Last but not least, I think the increase in oil prices come as a good tailwind in that respect, right? A lot of our short-term or part of our short-term exposure is really financing cargoes, and those cargoes are bigger in size right now. That helps us as well.

I guess also, Andres, it's very important for us, you know, the quality and the durability of earnings is what is important. Not just scale. Not just scale.

That's very clear. Connecting this with my question on fees, we also saw a strong fee on a year-over-year basis, and I appreciate the explanation that Sam provided regarding these products being fee rich and providing for those upfront and then on lending down the road. Is the current pace for fee income growth sustainable given the strategy for entering to these products such as Letters of Credit, indication, et cetera, or are there any one-offs in the quarter that we should normalize going forward?

No one-offs. I mean, Q1 is typically, as Annette mentioned a minute ago, softer than most in both of our fee businesses and, you know. The point is some transactions shifted into Q2, so it's more a timing effect than a slowdown. You know, fees, as you mentioned, fees are up 24%, year on year. The momentum is good. I guess the bottom line is that fees are becoming a more, you know, structural revenue component over time. No one-offs up to now. If something comes up, of course, we'll mention it as a one-off. We're confident with the guidance on fees.

Yeah. Thank you, Jorge. My question was, actually, sort of the opposite, since, given the strong performance this quarter, I was looking for non-recurring factors explaining the 24%.

No.

... year-on-year growth on the fee income side.

Okay.

Yeah, that's on the case.

That was very clear. Thank you.

Our next question comes from Daniel Mora with Credicorp Capital.

Hi. Good morning, and thank you for the presentation. I have a couple of questions. The first one is, considering that 18% of the portfolio is related to oil and gas, did you see or do you see any tailwinds or headwinds derived from the conflict between U.S. and Iran? If there is any other sector country that should be heavily impacted by the high international oil prices? I know that you mentioned a couple of points on this matter, but if we can go deeper, it will be great. Thank you. My second question is: What will be those elements that could take the 2026 ROE closer to the 15% upper bound of the guidance, considering that loan growth has been quite strong?

NIM, despite the pressure interest rate, has been you, have been able to defend the NIM and fees even though Q1 is softer due to seasonality effects. It continued to grow by double digit, 25%. Given this strong performance, what could be even better to take the ROE to 15%? Thank you so much.

Sam, you wanna go ahead and talk about the,...

First.

... oil and gas-related, exposure?

Sure. I think it's a great question. I think on a net basis, it's much more of a tailwind rather than a headwind. The reason why is, for example, on the, let's say, exposure that is more long-term, that tends to be linked to E&P investments. You know, we're financing the lowest cost producers in the region, the most competitive fields and, of course, with the current, even though the oil prices are more on a spot basis rather than, let's say long-term forwards, but they are very positive for them. I think it reduces the risk of the portfolio.

On the other hand, as I mentioned also for the trade business that is very short term, the size of the cargoes, the typical cargo is higher, so the demand tends to be higher. I think positive in that sense. Of course, part of our business is we're taking risk on the importers of petroleum products, mostly in Central America. Yes, you could argue that that can be increase inflation in those countries and reduce profitability.

In that, those cases, we're really dealing with for the most part, the most cases, national oil companies of very solid countries, which, let's say it's more beneficial that we're financing bigger amounts than detrimental that can impact their, you know, their numbers, their credit quality. I think on a net basis, definitely positive.

I think the short-termer of a portfolio and the ability to reprice and reposition quickly is the key. I mean, the focus for Bladex is not predicting geopolitics, but managing how shocks transmit into spread trade flows and inclined risk and we have the ability to do that and we've been showing that.

Okay. Regarding the first question. Thank you.

Our next question comes.......

No, I think your second question was about.

Upside.

....upside on the ROE guidance. I guess it's a balance, you know, between higher for longer and the margin pressures. I mean, you have, you know, both playing at the same time. Let's see, you know, what ends up happening. I mean, it's hard to predict at this point.

Okay. Perfect. Thank you so much. Thank you.

Thank you, Daniel.

Okay. Our next question comes from Patrick Abraham with Bulwark Capital. Has the bank started looking at Venezuela as an opportunity for investment? What is your outlook for the country?

Yeah. That's a good question. I mean, Venezuela might represent an upside scenario for Bladex. It is not included in our projections of as today. I mean, we are very actively assessing the risks and the opportunities. Bladex used to be very active in Venezuela, in the oil and gas sector and also with FIs and LCs. I mean, Venezuela used to at some point to represent between 4% and 5% of our total portfolio. Today, our exposure is zero. We know the country well, and it's more a matter of, you know, timing on when to go back in.

Thank you. That's all the questions we have for today. I will pass the line back to the Bladex team for their concluding remarks.

Well, thank you all for your questions and your time today. We appreciate your continued interest in our bank. As the year started in line with our expectations, we remain focused on executing with discipline. Thank you again and have a good day.

This concludes today's conference call. You may now disconnect.