Hello, and welcome to the Bladex Conference Call. We now have our speakers in conference. As a reminder, today's call is being recorded. [Operator Instructions] I would now like to turn today's conference over to Pete Majeski. Mr. Majeski, please begin.

Thank you, Jeff, and good morning, everyone. Welcome to Bladex's Fourth Quarter and Full Year 2012 Conference Call on this the 8th of February, 2013. This call is for investors and analysts only. If you are a member of the media, you're invited to listen only. Joining us today are Mr. Rubens Amaral, Chief Executive Officer of Bladex; as well as Mr. Christopher Schech, Chief Financial Officer of the Bank. Their comments will be based on the earnings release issued yesterday morning. Copy of the long version is available on www.bladex.com. Any comments today from management may include forward-looking statements. These are defined by the Private Securities Litigation Reform Act of 1995. They are based on information and data that is currently available. However, actual performance may differ due to various factors, and these are cited in the company's Safe Harbor statement within the press release. And with that, I am very pleased to turn the call over to Mr. Rubens Amaral for his opening remarks. Rubens, please go ahead.

Thanks, Pete. Good morning to everyone, and thanks for taking the time for being in [ph] our call today. I will make a few quick comments and then turn to Christopher for a more detailed presentation. We are pleased to have finished the fourth quarter of 2012 on a positive trend, as we had anticipated in our previous call from the New York Stock Exchange in our last conference. We are particularly pleased to have been able to deliver another important commitment with you of reaching a final resolution to our Asset Management business. But before we elaborate about it, let me provide you with an overview of what happened in our region in 2012. More subdued growth in the world economy reduced an impact on the average GDP growth in Latin America. From a 4.5% growth in 2011, the region growth dropped 3.1%, heavily influenced by the lower-than-expected growth in Brazil, which was around 1% in 2012. The smaller global growth also produced a reduction in the world trade from 5% to 2.5% in 2012. Latin America, of course, was not immune to it and experienced a small growth in exports of 1.6 and imports of 3.9. Nevertheless, the internal markets remained strong with the support of a more extensive fiscal policy throughout the countries in the region. Against this backdrop, Bladex managed to expand its core business by posting a growth of 11% in its Commercial portfolio, a 15% growth in its loan portfolio, which propelled the growth in our profits of 12% when compared to 2011. On the other hand, the Bank continues to diversify its products offering to our clients by expanding our vendor financial capabilities and not less important, by setting the base for more successful distribution platform. We are pleased that our team has…

Thank you, Rubens. 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 and the same quarter of a year ago. And we'll do the same thing for the full year as well, of course. The fourth quarter 2012 closed with net income of $24.6 million compared to $13.2 million in the third quarter of the same year and $24.8 million the fourth quarter of 2011. The full year 2012 result was net income of $93 million compared to $83.2 million in 2011, which is an increase of 12%, as Rubens already mentioned. The results of the fourth quarter 2012 showed accelerated momentum in our core Commercial business. Margins benefited from a gradual increase in average tenors, even as we remain focused on safe high-quality business, avoiding and shedding higher risk exposures. This resulted in an improved risk profile with 0 exposures to nonperforming loans and lower generic reserve requirements, even as portfolio balances grew strongly this quarter. The Treasury division's performance suffered from lower revenues from its reduced bond portfolio and limited capital market transactions, while at the same time absorbing the increased amortization of prior-period adjustments to freestanding financial instruments. Pending imminent -- the imminent exit from asset management operations, we no longer report the asset management results as a separate business segment, but as a discontinued operation. So let's look into this quarter's result in a bit more detail. We begin our segment performance review with the Commercial division, where net income was $31.4 million in the fourth quarter compared to $23.7 million in the third quarter of 2012 and compared…

Thank you, Christopher. And gentlemen, we are ready for your questions.

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

Rubens and Christopher, I guess my question is really in terms of looking at your guidance for 2013, if you could maybe give some color on what you're expecting kind of in your main line items, like loan growth, margins and fees and expenses. And kind of following up on that, your target has been to get to like a mid-teen ROE so I just want to really kind of get the components on how you'll get there, particularly since you had a lot of provision reversals this year. So I'm not sure if that's sustainable, so I want to really get a sense of how you can get to that mid-teen ROE target.

Okay. Tito, thank you very much. Thanks for attending the call and for your question. I think basically, one of the things that I haven't mentioned before in my introductory words was that we feel cautiously optimistic about the prospects for Latin America in 2013. We have seen that the worst that people expected is over. So in a sense, much less possibility of a terror risk event coming from Europe. China, which is an important market for Latin America, is again growing at expected levels. And we've seen what's going on in U.S. even today with the improvement showing in the fourth quarter in terms of the trade deficit. So all of these would have a positive effect in our region. And when that happens, we benefit quite a bit because we are prepared to do so. So we expect to be able to benefit from the growth in our corporate business. As you remember, last year, one of our important markets, Brazil, had important foreign-exchange regulations that have limited substantially the possibility of a growth in that market and impacted heavily in our loan growth portfolio in the medium term. This year, these regulations had been lifted or changed. And now we're back to what used to be our normal business in Brazil. So we're expecting the possibility of growing our portfolio in expected way in Brazil and growing our corporate portfolio in Peru and Mexico and Colombia, as we have consolidated our operations in all these different countries. So you see, in terms of growth portfolio, we have always used a proxy of growing 3x or 4x the growth of the region. The region grew around 3.1% this year, so we grew 11% in our portfolio. We're expecting the region to grow close to 4% this year.…

Yes, I think that's very helpful. Just maybe I want to follow in terms of maybe also give some guidance in terms of net interest margin. I know it has fallen recently, partially because of these amortizations. But how do you see that going forward, which impact the remaining amortizations you need to do and also your loan growth and your mix in loan growth? How do you see your margin evolving for this year?

Tito, if you don't mind, I'll take that question. Christopher here. Well, we definitely expect net interest margin to improve for the simple reason that we have no immediate plans to load up on additional medium- and long-term funding, which arguably had had a significant impact on our interest expense line last year. And we are more successful now deploying these base funds that we took on board early last year. And whatever portfolio growth will occur this year will primarily be funded with shorter tenors, which evidently are cheaper. So by sheer mix of funding and our lending portfolio, we do expect to do -- we will be able to do much better than last year. Of course, we will -- there's $2.5 million or $2.6 million that remains to be absorbed still in the first quarter or in the first half of the year. But that's not such a significant impact compared to what we had to absorb last year. So long story short, we expect to be inching ever so closely towards the 2% net interest margin hurdle, and we think we have a good shot at getting there, if not this year, then certainly early next year.

And of course, if you'll allow me Christopher, so, just to jump in. We are looking carefully what's going on in the markets. And we know that there is tremendous liquidity out there and the start of liquidity puts an additional pressure on margins. And -- but as we see the economies getting better, we are more confident in working with -- in the medium-term transactions, which seems to be materializing very rapidly this fourth quarter and will definitely help us in setting -- getting to the target that Christopher mentioned.

Our next question comes from Gary Lenhoff from Great Lakes Advisors.

You actually just answered the questions I had.

Our next question comes from Michael Holme from CQS.

Just a couple of questions. The first one is you have guided to, I believe, is a Tier 1 capital ratio of 15%. So the question I have is based on the numbers you have year end, where the capital 1 ratio was at 17.9%. If the number would be at 15%, what would that mean in terms of, call it, excess capital?

If you don't mind, I'd take that question. Christopher here again. Of course, we also expect to do a better job in terms of efficient capital deployment this year. We have discussed the 15% sort of Tier 1 target for some time, and it's not really happened up to this point. We've been able to improve our win, nonetheless, which is good news we think. But we do think that we can improve that capital efficiency a bit more. We do intend to continue on our path towards the 15%. We don't expect to drop below that because we want to pursue ratings upgrades, not stay at the levels that we are. And so that 15% or more capital -- level would certainly be helpful in that discussion with the ratings agencies. But that doesn't mean that we're not going to try to improve this capital efficiency. So you should see us make progress over the course of the year in that regard.

Sorry, but my question was very specific. As of December 31, if I were to apply a 15% capital Tier 1 ratio, what would be the equity number? Or what would be the capital to be released?

Difference between -- you're asking the difference between the 15% and 17.9%?

Correct. Because I don't know what the risk-weighted assets are. So that's what I'm trying to get at.

Okay. We'll get back to you on that, Michael. But as Christopher said...

That's fine. I understood his answer. The second question I have is regarding the -- you're trying to generate the income by building up a syndicated loan business. And I saw that you did a transaction involving Alicorp, and then you've done one for the cable company in Colombia. I'm just trying to get a sense of when did you start that business? Has it broken even yet? Is it contributing to profits or not? And when could that possibly change?

Definitely that business is contributing to profits. Out of the $2.8 million of fees that we reported in this line, $2 million came from the syndication activity. And we have a small team of 3 people working on this, so definitely we are on the positive side. We're investing more in this team as we have, as I mentioned before, an important pipeline of syndicated transactions. So you could expect this to be an important contributor this year for the bottom line.

Right. And when you're doing these loans, are you retaining, I don't know, 10%, 20% of the syndicated amount? Or was that...

Normally, what we do, as you know, in any type of deals, we win the mandates by underwriting, a portion that can be between 30% to 50% to win the mandate. But our target is to hold between 15% and 20%.

Okay. And the other question I had, just for clarification purposes, I'm just looking for the number here. Your return on average equity for 2012, I believe, was 11.6. Does that number include Bladex Asset Management or not?

11.6 is total Bank plus all elements. So yes, it includes everything that has to do with the Asset Management division as well.

Okay. And do you have a sense, given that during the year you probably had on average -- at one point it was about 150 and year end it was 100. Just trying to get a sense of what your return on equity -- on average equity would have been if effectively you didn't have that business, which wasn't contributing to your bottom line?

Yes. In my comments, I mentioned something called core ROE, which includes effectively this. And we calculate core ROE for 2012 to be 10.7%.

And what's the reason why it's lower?

Well, because the return on our investment in that fund has been positive, and it has been over the last several years. I mean, if you look at ROEs associated with that asset management activity, it would be easily above 20%, 30% ROE on that investment.

Our next question comes from Jeremy Hellman from Divine Capital Markets.

I just wanted to go back to credit quality, if I could, just to make sure I understand you correctly. Obviously, with respect to your portfolio, credit qualities improved. And just to -- so I can be clear, is that a function of the loans that you guys are actually writing, moving to higher-quality credits? Or is it a function also of regional credit quality improving?

It's both. First of all, as I alluded to in my initial comments, we have improved our exposure to countries with investment grade from 75% to 80% this year. So you see as the region gets better, definitely our portfolio improves. But also with clients, we are moving towards that direction, having more clients with investment grade in our portfolio as well.

Okay. And then just one follow-up. Just with regional economic performance for last year coming at a bit below where people had thought, going back in time. How much of that would you attribute to Europe as a root cause?

I think that the European sector was not that important in our case because the region as a whole is not dependent on the trade flows with Europe. I think on overall terms, you see that the region is heavily impacted, but whatever happens in Brazil because of the size of Brazil within the region. If we take out Brazil off the region, you see the growth in the region would be very in line with last year, around the 4% mark. So I think the number is somewhat skewed towards the situation that impacted Brazil. Overall, I think Europe, as we see, was not a major factor in this slowdown.

Our next question comes from Chris Delgado from JPMorgan. Christopher Delgado - JP Morgan Chase & Co, Research Division: I know you mentioned an improvement in overall asset quality. So could you just give us a sense -- more of a specifics of kind of behind how you see provisions to average loans evolving over this year, especially since you guys pretty much released provisions for the whole of 2012?

Chris, if you don't mind, I'd take that question. This is Christopher again. Of course, the -- if you look at reserve coverage ratios, meaning the reserve levels, as a percentage of total outstanding balances, we did indeed experience a big drop, but that was primarily due to the fact that we no longer have specific reserves, which is good news. We don't expect any specific reserve requirement going forward this year either, of course. So let's focus in -- for this discussion on the generic reserves. Then, we have about a coverage of 130 basis points. But we don't really expect that coverage to drop significantly. And so -- but we also do not expect that ratio to increase either. So for modeling purposes, I guess you should stay with the similar coverage ratio that we have right now. Christopher Delgado - JP Morgan Chase & Co, Research Division: Okay, great. And then just also one other point kind of going back to margins. I know you guys mentioned that you kind of expect it to stabilize, given that you don't plan on doing anymore debt issuances. But where do you kind of see it standing at year-end 2013, just given your kind of loan growth and whatnot?

Well I think Tito had a similar question. We do expect the net margin expansion towards the 2% level. And that will be certainly a function of us not making major attempts to bring more medium- to long-term funding on our balance sheet because we have plenty. We will be using that, of course. And so we will deploy, as Rubens mentioned, in an environment that is increasingly benign for medium-term exposures. We intend to deploy that funding in those tenors and get a better return, of course. And so we do believe that our target needs to be the 2% level, in terms of NIM.

[Operator Instructions] Our next question comes from William Jones from Singular Research.

And I think most of my questions have been answered. But you mentioned you expect net interest income margin to improve. You gave some good guidance on return on equity. We're at 11.6% this year, and you're looking to move towards mid-teens ROE and the leverage ratio about -- targeting 15%. So I guess in terms of -- that's a Tier 1 capital ratio near 15%. So will we expect the leverage ratio to trend then towards 10%, I would imagine?

The leverage should approach 10x but not more than that. I think based on our calculations, we're looking at something between 9x and 9.5x. That would get us to a range of 15% Tier 1, a risk-weighted asset base of $6.5 billion -- $5.5 billion, which is $1 billion more than we have now, in answering Michael's previous questions, which I didn't get entirely. So I think -- I hope I answered his question as well. And so that -- those are sort of the numbers that we're looking at.

Our next question comes from Michael Bunyaner [ph] TLS Capital.

I apologize if you've answered that question because I got on your call just a little bit late. But in terms of the Asset Management business, you've announced that you are selling it. Have you discussed what type of price you may have already negotiated it? And/or how much in excess capital will this produce for you?

Thank you, Michael. This is again Christopher. Since we're not selling tangible assets to speak of when discussing the Asset Management Unit, you shouldn't be -- you shouldn't expect a rich purchase price with -- being a modest one. The focus is really on the profit share going forward, where we're doing -- we expect to be able to participate on what we believe is a great future for this team. And so you should not expect a onetime gain pop as a result of the sale but not a loss either. So -- and in regards to the capital release that would be a result of it, from an economic capital standpoint, we have allocated to an average and maybe let's say $120 million, we have allocated somewhere about $30 million to $35 million in terms of economic capital. So the release that we're looking at is not that significant. And so that is not really part of our considerations in terms of why we would like to divest this business. It had much more to do with the volatility of earnings, coming -- even though earnings, as we discussed earlier, were quite good. But they were just not stable enough for us to really be able to build on. And so...

Yes. And I think just complementing what Christopher said, naturally, we'll be able to provide you with further details very soon, we hope, because we're just finalizing documentation and getting all the regulatory approvals, as we mentioned. Then we expect to have information very soon. And you see that we're going to be also reducing our investment in the fund, which will provide also a reduction in our exposure to market risk, which are then the days what we're expecting, having someone that teams up with us and helps develop the fee income that we couldn't and also reducing the exposure to market risk within the organization. But the capital will be released. And if your concern is about the Tier 1 and how that would impact our capacity of leverage the Bank, of course, we are counting on that capital to be used to leverage the Bank and getting to the target of 15%, as we mentioned before.

Rubens, just to clarify, you will both reduce your total asset commitment to this business but you will retain a significant enough percentage of profit share on an ongoing basis. Is that correct?

That's the idea, yes.

Terrific. And one other follow-up. Chris, did I hear you correctly that the risk-weighted assets, which were at year end $4.6 billion with a 15% Tier 1 will be $5.5 billion. Is that correct?

We're thereabouts, yes. We did a quick calculation. And I don't -- I will not vouch for the 100% accuracy, but it should be in the ballpark.

That's close enough. And it wasn't clear when I was listening, did you say that your return on average equity over time, the goal is 18% or 15%?

Our target is mid-teens, 15% return on equity. And as I mentioned before, it's our objective to achieve that level in a couple of years.

And one last one, just dividend payout ratio. Have you decided what you would like that ratio to be?

We -- the board -- the policy of the board is to pay dividends and increasing dividends. As we had mentioned before in previous calls when asked the same question is that we look to something that is between 40% to 50% of the total core income of the Bank, but we prefer not to provide a specific guidance in that. But to tell you, it's going to be always in that range. And as the business of the Bank grows definitely -- and the results come, definitely the board will continue to increase the dividend, as the board has been doing the last years.

[Operator Instructions] Our next question is a follow-up from Michael Holme from CQS.

Just a question on Peru. I know that your lending there has gone up very significantly, probably about 100%, say, over the last year. I'm just kind of curious if you can give us some color on what kind of companies are you lending to there. Is that mining related or not?

Okay, Michael. We -- mining is not one of the sectors we are heavily involved, although we have some exposure to the mining sector there. We're looking also at the fish industry that has improved quite a bit in Peru. But manufacturing, it's an important part of what we do in Peru and the banking sector as well.

[Operator Instructions] Our next question comes from Gary Lenhoff from Great Lakes Advisors.

Actually, I did have one question I neglected to ask related. It looks like your lending activities in Mexico increased rather dramatically Q4 over Q3. Can you just provide us some color there as well?

Yes. As you have seen, and thanks for the question, Mexico has been improving quite a bit, much more competitive than it used to be in the past. We have diversified also their partners, although still very dependent on the U.S. But U.S. is showing signs of recuperation. That definitely helps Mexico. And we have a new team in Mexico. We finished setting up our team in late -- the third quarter. So we could benefit of our new team capacity in the fourth quarter. So we're anticipating more growth coming from Mexico in this year as the Mexican economy is doing very well and tremendous flows of investments going to Mexico with the new government that is committed to more integration. I have been to Mexico 2 times. And the news that I got from the old -- the government that left and the government that came is that they are totally committed to regional integration. They want to be more involved in Latin America, and this is all good signs for us. The transaction that we just did, the syndication, was from a Mexican company buying a Colombian company. So definitely, Peru, as we mentioned in our question before, and Mexico are countries where we have important priorities to grow this year.

And just related to that, I don't recall a time in the recent past where your total Commercial portfolio exposure to Argentina was as small as at year end. Is that just an issue of timing? Or are you also taking a bit more cautious view towards that country?

Well, Argentina is an important country in the region. And you know that we look carefully as we can grow our portfolio. We tend to focus on the short term of the curve in Argentina and doing trade finance. And these, the main traders of -- the soya, beans for instance, they are clients. And the activity, as you saw, really was reduced quite a bit in Argentina. We had a lot of lettuce credit business there that was just paid, and they didn't materialize again. So that one was one of the main reasons for this reduction. But we remain confident that this -- the sector, exporters in Argentina is a very strong one. And you might see resumption of growth in that segment, but always we'll be very careful by -- with the growth in the country as we continue to focus and follow up carefully what's going on in the economy. But economy grew last year. It's supposed to grow this year. And the government has the means to serve their debt. So you might see a little more activity there but focused on the short-term trade finance.

[Operator Instructions] And everyone, there are no further questions in the queue. I would like to turn the call back over to Mr. Amaral.

Thank you very much, Geoffrey. Thank you, all, for attending our call today. It's a pleasure to be talking to you from our newly headquarters. And I hope that we have answered all your questions and we remain totally open to continue to talk to you on a frequent basis. I know that Christopher has been always talking to you. And we are very happy that we have been able to deliver on a few promises we have made before. The first one, to find a solution for the asset management, which we did. Second one, to get to a sustainable double-digit ROE that we did. Third one, to continue to improve the credit quality of our portfolio, which we did. To improve the fee income, which we are in the process of doing, and I think we have demonstrated to you that we have the capacity of doing. And definitely, to improve the efficiency of the Bank, which we're doing as well. And least -- last but not least, to provide you with superior returns and an adequate dividend recognition to our shareholders, which we will continue to do. So thank you very much, and I'm looking forward to talking to you next quarter. Have a great day.