Good day, everyone, and welcome to the Bladex Conference Call. [Operator Instructions] As a reminder, this call is being recorded. At this time, I would like to turn the call over to Melanie Carpenter of i-advize for opening remarks and introductions. Ma'am, you may begin your conference.

Thank you, Kelly. Hello everyone, thank you for joining the Bladex Fourth Quarter and Full-Year 2011 Conference Call on this 24th of February of 2012. This call is for investors and analysts only. If you're a member of the media, you're invited to listen only. Joining us today from Panama are Mr. Jaime Rivera, Chief Executive Officer; and Mr. Christopher Schech, Chief Financial Officer, along with other members of the senior management team. Their comments will be based on the earnings release issued yesterday. A copy of the long version is available at the website of www.bladex.com. Any comments that management makes today may include forward-looking statements. These are defined by the Private Securities Litigation Reform Act of 1995. They're based on information and data that is currently available. However, the actual performance may differ due to various factors and these are cited in the Safe Harbor statement in the press release. And with that, I will turn it over to Mr. Jaime Rivera for his remarks. Please go ahead, Jaime.

Thank you very much, Melanie, and good morning, ladies and gentlemen. And welcome to our fourth quarter conference, which we get the opportunity to review the quarter a year ago and this is the part I enjoy the most, speak about the way we plan to move forward during this year. We don't want to waste any of your valuable time so Christopher Schech will dissect the numbers as he always does so well, while I will try to address some of the bigger picture type of trends driving our business. So let me start by stating the overriding principle of the bank once more. By design, by charter and by vocation, we do business in Latin America and only in Latin America. We think of ourselves as the most Latin American of banks and assure we are the most international of Latin American banks. Latin America, fortunately, is doing very, very well. The global slowdown, the distinguished politicians in Brussels and our colleagues in the European Union, notwithstanding. During 2011, we did business in the region that grew by some 4.1%, a growth rate that was skewed downward by the growth figures in Brazil, which at around 3% were less than half of what they were a year earlier as the country successfully dealt with inflation levels that were becoming worrisome. Still during 2011, we did business in 8 countries that grew more than 5% and in 17 that grew by more than 4% based on growing region. For 2012, the regional growth figure that economists are speaking about is about 3.5% but in visiting both Peru and Colombia in the last couple of weeks, I saw evidence of speaking to both clients and listening to government ministers that growth this year stands a very good chance of succeeding…

Thank you, Jaime. Hello and good morning, everyone. Thank you for joining us on the call today. In discussing our fourth quarter and full-year results, I will focus on the main aspects that have impacted our results and I will put them in context with the previous quarter, the same quarter of the year ago and of course, with the full-year 2010. But before I start, just a few words regarding the presentation of our business segment results. To reflect a more detailed, and we believe, more meaningful view of our segment performance and that we no longer allocate interest in operating expenses simply according to average portfolio balances in each segment. Instead, we allocate interest expense based on duration matched funding principles and at the risk adjustment capital determined for each of the segment. Our expenses are allocated based on actual resource usage in each segment. We have applied these changes to the full-year 2010, the fourth quarter 2010 and the third quarter 2011 segment results to allow for comparisons on the same basis. But to begin with the highlights, the results of the fourth quarter 2011 were a continuation and an acceleration of the results achieved in our core business over the previous quarters, in spite of and within an increasingly volatile capital markets environment. Therefore, towards the end of the fourth quarter, we prioritized liquidity of our loan balances growth as Jaime has already indicated to you. Even so, the Commercial division continued its earnings expansion across all client segments, driving scale and revenue growth as lending rates widened and average portfolio balances grew 3% in the quarter. Treasury division delivered another quarter with positive results, while reinforcing the bank's liquidity and funding positions in light of increased market volatility. And the Asset Management Unit had a…

Thank you very much, Christopher. Ladies and gentlemen, we'd be delighted to take up your questions, please.

[Operator Instructions] Our first question comes from Tito Labarta with Deutsche Bank.

Maybe just a couple of follow-ups. First, on the Asset Management business. You mentioned that you're working on a definitive solution. If you could maybe just give some color on the time line for that, when you think that would be in? And if there is any preference for keeping it in-house and raising third party fees or maybe selling it or just kind of any color you can give on what that solution could be. And then the second question following up on the loan growth. I understand why you kind of slowed down in the quarter. But maybe, if you can give some guidance for 2012 and what kind of loan growth we should expect for this year.

To answer your questions, first, whatever solution we structure for the Asset Management business, we'll have the generation of third-party fees as one of the driving elements. As for timing, this was treated and discussed at our last board meeting. Our responsibilities were assigned for the analysis and discussion of the different options that were presented and discussions are already ongoing. And so while I cannot promise because I am really not in the position to do that. I don't have enough information to do that. I would expect that to be resolved one way or another before the end of this quarter. Is that sufficient color for you?

Yes, that's very helpful.

Okay. Regarding loan growth, it will be certainly smaller than what it was last year, simply because the economies are supposedly are going to slow down, one. And secondly, because we will concentrate our focus on bringing out as much money as we can, our existing portfolio -- by changing the portfolio mix. In our calculations, we have come to believe that if we do that, we will generate -- that portfolio mix is [indiscernible] that we will generate much easier than simply going out and trying to continue to leverage the bank. As to an actual number to use, if you believe that Latin America is going to grow at something like 3.5% to 4%, if you go back historically, our asset base have expanded anywhere from 3 to 4x the rate of growth of Latin America as a whole. I would start with that and then by the end of the first quarter, we should have a better idea of how fast the economies are really growing and how much additional demand we are obtaining as a result and provide you with a better figure. But use that one to begin with.

All right. Just maybe one follow-up question. When you look at the middle market lending, it now runs at 8%, I think of your portfolio. Do you have any idea where you could be by the end of this year? Or what kind of growth to expect in that segment?

That -- the figures that you see actually represent 100% improvement -- 100% growth over where we started last year. Growth in that segment will slow down. It will slow down not because we don't find it interesting but under the conditions that are currently existing in the market. It turns out that the highest risk-adjusted returns are in some sectors of the corporate market. And so that's where we're going to be aiming our guns at principally.

Our next question comes from James Ellman with Ascend.

First of all, could you give us some detail as to what you're seeing in terms of European banks withdrawing from Latin American trade finance funding? And your outlook for Bladex to be able to grow its loans in that space and if margins will expand with competition pretty soon.

Certainly. I'm sorry, I did not quite get your name.

It's James Ellman at Ascend.

European bank. As it turns out, a few comments on the -- from a macro perspective. European banks have something like 50% of their foreign claims in Europe itself, 20% in the United States and the balance is distributed in different-- Asia, all of Europe and Africa. Latin America represents, from the figures that we have seen, only 4% of their foreign claims. They are in fact withdrawing and I believe that to the extent that they could withdraw their third quarter lending that they have done most of that already. The ones that have not withdrawn nor do I think will withdraw are the European banks with underground retail operations, in particular, the Spanish banks. Spanish banks are responsible for more than half of the retail claims in the region. Those was paid because -- certainly because they're making very good money, which the headquarter surely need. And secondly because the local regulations in the markets, where they operate, [indiscernible] their ability to, "to get out". The impact it has had on margins, yes, there has been some margins having to improve partly as a result of the withdrawal of some of the European banks from the trade finance business. But on the other hand, local banks are increasingly filling the void and shows that while margins have increased, they have not to the extent that you have expected, even 5 years ago. And that by the way, we think is good. We don't want to face a situation in Latin America, where clients cannot get access to financing. We believe that margins in our business will continue to widen. Cost of funds will increase, certainly. But the fact is that we have been able to more than fund that increased funding to our clients. And that alone is sufficient to -- will be sufficient, rather, to fuel our growth in net income along with the other initiatives that I just mentioned, the increased fees and increased productivity.

All right. And just in terms of many of those European banks, the non-Spanish ones, I imagine much of their trade finance were correspondent lines to local banks in the region. Would you be able to pick up some of that market share?

We already have. We already have. There's a limit as to how much we want to do with that, in that respect, however, because often the risk-adjusted returns in the corporate sector, as I just mentioned, is better. So, yes, while we have and you can see that in our press release, our financial institution segment, it grow quite significantly last year. That's probably from a large extent comes to an end and in changing the portfolio mix, we will in fact be switching some of the money that is currently being played with banks to corporations, which prove more profitable to us and where we can get fees, unlike with the bank.

Okay. And I'm sorry, just finally on this side. So would you say that there is still room for you to gain market share and grow faster than the market in 2012 as the European banks or some of the non-Spanish ones retreat from the market?

No. That -- we are going to gain -- continue, by the way, continue gaining market share even if the European banks have never withdrawn from the market. We would have gained market share simply as a result of the positioning we currently enjoy in the market. We now have a network of 10 offices, which places us in a unique position to address the inter-regional trade. It's growing very rapidly and the internationalization of Latin American companies that are increasingly doing business across borders in Latin America and which require the assistance of a bank both at their home headquarters and at that the site of their new operations. We have, what we believe, is the best network to address that very rapidly growing segment of the business.

[Operator Instructions] Our next question comes from Jeremy Hellman with Divine Capital Markets.

First question for me. It sounds like you're back to expanding the loan portfolio. Do you have an ability to either give a definitive dollar value as of January 31 for the size of the portfolio? Or maybe just some relative basis versus where the balance was at year end?

Jeremy, let me just put it this way. January was an especially strong month for bank. Everything worked out extremely well in January. And one of the strongest Januaries we've had. February has slowed down as it generally does, Carnivàle in much of the region, particularly in some of our largest market. So, no, we're -- we are back to normal growth. We'll see how March goes. February is in the bag already. Basically, it's going to be a decent month. Nothing extraordinary. The quarter will be determined by March and we see no reason why normal growth should not resume. Remember that the first quarter is generally weak from all perspectives. But we have reason to believe that it might not be as weak as it generally is. That's probably all I want to say on this subject at the moment.

Okay. Next going back a few quarters. We used to be talking about factoring in possible acquisition in Brazil. Haven't heard any commentary about that in recent memory. Is it safe to presume that's not on the table anymore?

Two comments on that. No, the factoring in Brazil -- the purchase of the factoring company in Brazil is not on the table anymore. But B, as you noticed in our press release, we did have a Plan B in case the factoring purchase did not work out. We started discounting receivables on a wholesale basis and we did something like $2.3 billion last year of what is in essence wholesale factoring between Latin America and mostly Europe. It's mostly oil business. That business is growing very rapidly, that is another business that we are putting resources and focusing our attention. And that is probably how our factoring operation will evolve. Wholesale business, large tickets, client in Latin America and in Europe that we grow, extremely efficient. We discounted those $2.3 billion worth of receivables with only 2 people. So we had a Plan B and fortunately, Plan B worked very well.

Okay. And then 2 last ones for me. And more on the qualitative side. I always appreciate your qualitative opinion on things. I caught a piece on Bloomberg TV this morning. They had a commercial realtor from New York, talking about Mexico as being, in his view, the next Brazil. And I'm curious for your take on that sort of opinion. And then secondly, you mentioned that the growth of the regional middle-class. Looking long-term, do you think you might entertain listing your shares publicly on any of the [indiscernible] in the Latin America region so that growing middle-class might have an increased ability to invest in the bank?

Your second question first. It's easier to answer. Not only are we likely to consider listing ourselves in the local markets in the future, we have given very serious consideration to that in very recent times. For one reason or another, we haven't done so. But we have concluded that it wasn't the right time. But it's a question we periodically look at. The minute we think it's convenient from the point of view of volumes, et cetera, we will do so. I don't know the "problem" with many of the existing markets -- local markets in Latin America is that they're highly concentrated. A very few names make up a fairly large percentage of the traded volume. And so that's what stopped us from actually going through with the plan to the extent that, that is changing as some of these markets consolidate and actually form single markets. We will probably do so, yes. We're a Latin American bank, we should be in some or in various Latin American markets, for that sake. So we will do that at some time. The question on Mexico is a complicated one. The -- my -- off the top of my mind answer is, to a very large extent of Mexico, the future of Mexico in regards to economic growth will depend or continue to depend because that is the way Mexico structured itself within NASDAQ. On how things go in the United States, things in the United States are already picking up, slowly but they are. And we've already noticed that, in fact, in our business in Mexico. That's -- I think the NASDAQ will, to a large extent, determine how quickly and how fast Mexico develops. The other factor that will be -- will have an impact on how Mexico does is the level of investment in the country. And that, in my opinion, we primarily have to do with how successful Mexico is in eventually controlling the violence that is being brought up about and upon the country by the drug trade. My hope in this regard arises out of seeing what Columbia did. They were very successful. It was difficult and costly. But Columbia demonstrated that it is very possible to control violence and the drug trade. Mexico is just starting along that line. They've done great strides, great sacrifices. In fact, in the ultimate sense of the word, a lot of very courageous Mexican men and women have died, literally, in the fight against the drug trade. My belief is that with persistency, time and resources, that war will be won as well. In fact, if the U.S. does well, and Mexico succeeds in controlling violence, there's a great future for the country.

Our next question comes from David Ross of Chevy Chase Trust.

The question I have is the relative importance of Mexico and Venezuela seems to have declined over the last couple of years. I was wondering if you could provide some thoughts on what's going on there?

I'll address Mexico first. We decided to change course in Mexico about 3 years ago. And while our strategy was right, the staffing was not. It took us about 1.5 years to realize that the people that we had in charge of operation were very good people but not the type of -- they didn't have the type of skills that we needed to implement our strategy in the country. That delayed us for about 1.5 years. We now have a very strong team in Mexico and as a result, I expect we will see the importance of Mexico within our business grow. In Venezuela, on the other hand, the answer is quite simple. Strictly, the rich [ph] can uncertainly relate. Venezuela as a shareholder, we've followed it on the business, in the country, they follow [ph] it as well. But there comes a point where political risk and uncertainty makes it difficult for us to assess and therefore brave [ph] the risk. And as a result, we've purposely kept our exposure to the country small.

[Operator Instructions] Our next question comes from James Ellman with Ascend.

You mentioned that you had pulled back on the higher -- up normally high number of liquidity that you're holding as of the end of the year. Can you give us a bit of color in terms of the size of how much you're dropping that liquidity cushion? And what its impact might be on margins as we look into the first and second quarter of the year?

We used to run liquidity levels somewhere to $300 million to $400 million. We're not there yet but we're moving in that direction. I think you can assume, for purposes of your projection, a higher than usual but diminishing cost of liquidity through mid-year, by mid-year -- and midyear only because from what we know about Europe, it is the first and second quarter that are going to be critical in that region. If the market makes it through June 30, we expect to be able to grow from what we called a yellow liquidity scenario to the green liquidity scenario and go back to quote unquote, "historical" liquidity level the second half of the year. In the first half of the year, however, we will hold a liquidity level that while smaller than what we had at the end of the year, will be larger than what we historically carry. We think that's a prudent thing to do until things return to some sort of normalcy.

All right. And then just in terms of when you highlighted that you see significant opportunities for growth right now. Are you at all constrained by the amount of capital that you have? In other words, would you potentially need additional equity capital later this year as you grow?

Absolutely, absolutely, absolutely not. Our problem is just the opposite. We have in the past -- I've been asked a question as to what our right capital level should be and back when [indiscernible] levels were lower than they were today, we said that we're aiming at a 15% tier 1 ratio. We're currently at 18%, which is why we -- one of the things we're going to be working on this year is capital management. We need to deploy that capital and use it. And there's 2 ways we're going to do that. We're going to leverage the bank and to the extent that it will continue growing the net income, we're going to look at growing the dividends again and that's how -- those are the options and the combination of both leverage and increased dividends is probably will bring the capital back into -- in line.

All right. And in terms of the growth outlook you see right now, do you think you can get to that 15% level in the first half of this year?

Not in the first half, no, no. It would be unrealistic to think in terms of that. To begin with, this level such that we rather grow as we currently have been doing slowly. And secondly, we're going to be concentrating on doing the first half of the year. Yes, we're going to grow but more than grow, what we're going to be doing is doing a lot of portfolio shift in the mix, taking money from low-yielding assets to higher-yielding ones. So no, I think it would be unrealistic to think in terms of us going down to 15% in 6 months now.

Very good. And last question just to follow up on that, in terms of the low-yielding to higher-yielding. Can you give us just an idea in terms of what you're letting roll-off in terms of the low-yielding assets? And what sort of yields you're getting on the average higher-yielding assets right now? What sort of delta is there?

The delta is quite significant. On a nominal basis, it can be as much as 150 basis points to 250 basis points. When you look at it all on an aggregate level, the impact is less apparent, especially during the first year because of inter-established reserves, higher yields that generally mean higher risk and therefore, the need for higher or generic provisions. But that's the type of difference that we're talking about.

[Operator Instructions] Our next question comes from Arthur Byrnes from Delta.

Let me just ask you. Let me ask you a question. In getting to your 15% tier 1 capital, you're still not very leveraged compared to other banks and I understand why. But how has funding been for you?

It was, in December, in particular, it was difficult. Capital markets as you know, basically, stopped functioning for a couple of weeks. We're fortunate, however, that in over the last few years, we've done a couple of fees that turned out to be very appropriate and right. As you know, we make our fair share of mistakes but when it comes to strategic decisions, our record is quite solid. Firstly, we developed the funding markets in Asia. The funding markets in Asia have not been impacted by what's going on in the European Union and in the U.S. From an interbank perspective, both in terms of amount and number of respondents, our main sources of funding are China and Taiwan. And those markets have remained steady and we have been able to continuously source money from them. The next on tap and widely available source that we have are the capital markets in Latin America. We didn't tap them last year because we found other options which were more favorable, less expensive, either in the interbank market in Europe, even and the United States. But right now, because Latin America is doing so well, the capital markets in several countries are added for safer or risk of equality that Bladex represents. And so you will probably see us very shortly, starting to source funding through issues in a couple of Latin American countries at the least. And fortunately, the funding is available and the amounts are sufficient to provide us with what we need to fund our growth.

Your funding so far is all in U.S. dollars, isn't it?

It is and we will continue being in U.S. dollars. The most of the funding that we will raise we'll swap into dollars. We're just not ready to take currency risk. And we're more efficient providing dollar financing than we are providing our local currency financing. We know how to do dollars much better than local currency.

Second and last question. The return on your cash balances is -- it looks to me to be quite high. You do quite well there. Are you sure you're not taking too much risk with liquidity?

No. I'll make a couple of comments. The first comment is that the majority, not to say 100% of our liquidity, is placed with a certain central bank that is the only one in the world authorized to print dollars. So the risk there is relatively mild. Secondly, the reason why we're making money or so much money on our cash balances, is that we're telling our depositors, central banks, and the majority who want to keep money with us that the price for keeping their money safe with us is, well we pay them very little and as a result in intermediate, we've taken money from them, placed it with a central bank I just mentioned and we make relatively good money.

[Operator Instructions] Our next question comes from Jordan Hymowitz of Philadelphia Financial.

Follow-up with Mr. Ellman's question. If you took the cash portfolio down to cost $500 million over time, what would the margin then move up to? You said there's 150 to 250 basis point change?

If we took $300 million, just to speak of a theoretical figure, and we placed it out in the market in the form of loans, the difference would be substantial, anywhere from 150 to 250 basis points, straight off the bat. Remember how we're -- that we would have to establish our generic provisions against that. But, yes, carrying that liquidity is costing us some money, which is why we will bring it down as soon as we think it's a prudent thing to do.

What would the margin move to? Probably what, 15 to 20 basis points higher?

Oh, yes, absolutely.

I mean, have you run those numbers? I mean, I'm trying to run it as we speak. But have you run like if you had $300 million less cash and $300 million more loans where the margin would be? Because the provision doesn't affect the margins below the line.

Yes, we've run those numbers all the time and I -- because in addition to that's part of managing our liquidity, how much do we need and how much it's costing us.

And will you share or you don't want to share those numbers?

Well, yes, I can share you the number. Let me get hold of the latest calculations. The numbers would probably -- the net -- the difference would probably amount to somewhere around 15 to 20 basis points.

Okay. That's exactly what I thought. Okay, all right. And second question is if we're talking running a tier 1 capital of close to 15% versus the 18% now, and then you returned a 15% on equity. It seems like your normalized earnings could get up to about $200 -- $2.70 as we stand here today. Is that a reasonable thought? I mean, it's not going to be there tomorrow, but is that a reasonable, methodical thought process?

Can you repeat your question again? 15% tier 1 and?

And a 15% ROE.

And a 15% ROE, and therefore?

You get to about $2.75 of earnings.

That's a net income of about $100 million?

That's exactly right.

That's a conservative estimate. But yes, you're right.

There are no further questions at this time. So I'll turn the call back to Mr. Rivera for closing remarks.

Well, thank you. Thank you very much, ladies and gentlemen. In closing, let me again thank you for your interest and make a single and I think important point. We have a bank currently operating in a sweet point, probably the best position that we have enjoyed, literally, in the last decade and certainly in the 8 years since I have to prove it so far for being named to my current position. We're extremely optimistic about what we see ahead for the bank -- we are objectively optimistic. We have a capital. We have liquidity. Our credit quality is pristine, just that, pristine. We have very strong [indiscernible] of a growing market. Everything that you saw in the fourth quarter is sustainable. There's nothing there that is extraordinary. The fundamentals remain strong. We're going to continue growing and particularly focusing on net income. And that will increase the ROE, which will increase the price and will increase our ability to provide shareholders with even higher dividends. That is the opportunity for current shareholders and that is the opportunity for those considering investing in Bladex. And with that, I want to again thank you for your interest, for your confidence and hope you -- wish you success during the next quarter. And I look forward to talking in 3 months. Thank you very much, everyone.

This concludes our teleconference. You may now disconnect your lines.