Hello everyone, and welcome to Bladex Third Quarter 2018 Conference Call on this 25th day of October 2018. This call is being recorded and is for investors and analysts only. If you're a member of the media, you're invited to listen-only. Bladex has prepared a PowerPoint presentation to accompany their discussion. It is available through the webcast and is on the bank's corporate website at www.bladex.com. Joining us today are Mr. Gabriel Tolchinsky, Chief Executive Officer; and Ms. Ana Graciela de Mendez, Chief Financial Officer. Their comments will be based on the earnings release, which was issued earlier today and is available on the corporate website. The following statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. In these communications, we may make certain statements that are forward-looking such as statements regarding Bladex future results, plans and anticipated trends and the market's effect in its results and financial condition. These forward-looking statements are Bladex's expectations on the day of the initial broadcast of this conference call. And Bladex does not undertake to update these expectations based on subsequent events or knowledge. Various risks, uncertainties and assumptions are detailed in our press releases and filings of the Securities and Exchange Commission. Should one or more of these risk or certainties materialize or should any of our underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in this communication. And with that, I am pleased to turn the call over to Mr. Tolchinsky for his presentation.

Thanks, Jonathan. Good morning everyone. Thank you for joining us today. Before Ana Graciela delves into key aspects of our earnings results for the third quarter, I would like to discuss with you the economic and business environment in Latin America, important developments that took place during the quarter and the impact of these recent developments on our perception of risk and financial results. First, let's understand the context. During our last quarter conference call, we identified key events that were impacting emerging markets, Latin America and commodity related industries such as sugar. First, was the effect of higher U.S. interest rates and stronger U.S. dollar, often a negative backdrop for emerging markets assets. Second, was the protectionist rhetoric from the U.S. regarding world trade, along with a negative impact of tariffs. Third, was the political and macroeconomic uncertainty and overall lower growth prospects or outright recession for some key countries in Latin America. These trends came to a head in the third quarter. Specifically, a further deterioration in sugar fundamentals during the quarter with prices trading significantly below the marginal cost of production became too much for some – for many Brazilian producers to bear, even some top quartile low cost producers. This included one of our credits which entered into a restructuring process during the quarter. With continued weakness in soft commodity prices and in the Brazilian economy, we lowered our recovery assumptions for this Brazilian sugar producer and for other NPLs, 98% of which are in Brazil, impacting our financial results for the quarter. Our view is that we will continue to see macroeconomic uncertainty. Argentina currently depends on the IMF and needs to follow its program to honor its debt obligations now running north of 70% debt to GDP. This will likely lead to a recession…

Thank you, Gabby. Good morning and thank you all for joining us in this call. I will now dig into the quarterly result referring to the presentation uploaded in our website. On page four, we summarize and highlight the main drivers for the quarterly result which I will go over in more detail throughout the presentation. So moving on to page five, let me first elaborate on the evolution of NPL and its impact on credit provisions for the quarter. A $62 million loan in the sugar sector of Brazil significantly deteriorated during the third quarter of 2018 and was classified as NPL. This loan accounted for most of the increase in the allocated reserve for expected loan losses categorized as Stage 3 under IFRS 9. This exposure was a medium term loan originated in 2014 in which the bank participated as part of its syndication. Even though this client is the fifth largest sugar producer in Brazil and among the most efficient in the industry, its capacity to repay its financial obligations which exceed $1 billion has been increasingly affected by a strong deterioration in sugar, International prices which has accelerated in the third quarter as Gabriel mentioned. This led the company to engage in a negotiation process to restructure its obligations during the third quarter. Given the prospects for continued low prices in the international sugar futures market and the risk involved in this recent restructuring process, the bank estimates that the probability of collection was significantly diminished during the third quarter as reflected in our increased level of individually allocated allowances for expected loan losses. Total NPLs amounted to $119 million at September 30, 2018 representing 2.08% of total loan portfolio with reserve coverage of 1.2 times. 98% of the bank's NPLs are in Brazil as Gabriel…

Thank you, Annie. Jonathan, I guess we – it’s time to open it for Q&A.

Thank you. [Operator Instructions] We’ll take our first question from Yuri Fernandes with JPMorgan.

Thank you, Ana Graciela and Gabriel for the opportunity of making questions. I have a follow-up on the asset quality. I guess that was an issue this quarter. And I would like to have your views going on especially for the fourth Q. Looking to the breakdown of the sugar industry, there may be still some exposure assuming other clients also began that loss. So what if you think about that? And also regarding other countries your term was optimistic with Argentina. But what about other Central America countries. How are you seeing Costa Rica and Honduras? Do you think those can be – can add some pressures for your cost of risk in the coming quarters? Thank you.

Thank you, Yuri. Thank you for your question. Let me start by addressing our exposure to the sugar industry. Obviously, one needs to make decisions based on the information we have available up to the date. And based on what we see and the credit in within the sugar exposure part of the portfolio. We believe that we are very well provisioned on a go forward basis, and really have very small exposure to overall international prices for sugar. Many of the companies in which we have lent money to, our companies that are not exposed to international prices, they sell within their designated market at already established prices, have lower levels of overall leverage. There are – in other words, in very good financial and credit shape. Based on that, we believe we're very well-provisioned for continued volatility. And in fact, if you see the level of provisioning that we have for our NPL, our recent addition to NPL in which we are covered based on only at 25% recovery assumption. It already bakes in a significant amount of volatility for the industry. And we are really in a position where we can say that even if sugar prices were to decline from the levels they are today and continuing to the volatility that they have been exhibiting that we feel comfortable with the remaining exposure that we have. Now moving on to the other question was with respect to our exposure to other Central American countries. We are, as Ana Graciela described, very comfortable with our exposure in Costa Rica to financial institutions, dollar generators and top-tier multi-Latinas in Honduras, where 81% of our portfolio matures within a year. We also are very well positioned 72% in top-tier financial institutions. So it's from our perspective a solid credit picture in terms of our portfolio on a go-forward basis.

Okay. Thank you. I have a second question on capital and dividends. Your Q1 is super solid, I don't think it's an issue. But assuming the ROEs does not improve as much as your pace of loan growth you are growing, as you said 10%, your commercial book, so this is well above the level of ROEs we have been seeing in the last years. And with this level of dividends, you will continue consuming capital. So my point is what is your comfortable level for Tier 1 and how you see the dividend policy evolving in the coming years?

Okay. Let me just answer by saying that I don't completely agree with the assessment of the bank continuing to deplete capital without any continued growth in our origination. We believe that at our current dividend rate even without growth assumption, we will continue to accumulate retained earnings and our capital base will improve. I think that the scenario by which our capital goes down is let's call it the good scenario. The good scenario meaning growth and increase in our overall risk weighted asset. And needless to say we are very comfortable with our credit underwriting process and intend to continue to grow in credits and in industries where we feel comfortable with the underlying risks. So it should be commensurate with our capacity to generate further earnings, any decline that you will see in Tier 1 capital ratio. So I don't know if this fully answers your question but I would say that given our business model, a 15% Tier 1 capital ratio under a growth scenario for a portfolio – our portfolio is something we would feel very comfortable with.

Okay. So 50% is a number you feel comfortable for Tier 1? I guess it is like even if your ROE – even if your ROE improves, let’s say, to 10% if you have like a 70% dividend payout, that implies that your equity will be growing like 3%, but your risk weighted assets are going – probably to grow in line with your loans, so like 10%. So we are going to give leverage. That, as I said, is a good problem like if you are able to deliver those level of ROEs, level of loan growth, that’s a good problem. But my point was more to understand how do you see the payout versus the capital growth.

Annie, would you like to address that?

Yes. I mean in terms of the payout, the payout, it’s related precisely to our ability to deploy our leverage to balance sheet. We think that with the current payout level or what – I mean what the board has done is to maintain the dividend independently from the payout ratio because obviously we have increased it substantially. But going forward what we see in our model is that even with a 50% payout ratio, which has been pretty much the guideline in the past and a continued growth to leverage the balance sheet with the 15% – it should give us around 15% Tier 1 ratio and we should be able to deliver it, two digit ROEs with that model.

Great, great. Congrats Ana and Gabriel. Thanks for the question – for the answers.

Sure. Thank you, Yuri.

Thank you. [Operator Instructions]. We’ll take our next question from [indiscernible] with – he’s Individual.

Good morning, guys. I’ve been a shareholder of Bladex in the past. I have a number of questions, so I’ll just put them out there and you can address them as you see fit. The first question I had was I thought that in 2018 as LIBOR would go up that your spreads would also increase and that has not happened. I like to understand why maybe I was wrong. Second, you have a number of severance one-off expenses, when do you think those will come to an end? The third question I’m interested to know if you think that an ROE above 10% is achievable for next year, if that’s realistic or not, but I’m curious to know if you think that you can do an ROE above 10% next year. And then the last question is, you’ve kept your dividend at the same level. I like to understand why you think the dividend is sustainable? Thank you.

Sure. Thank you, Michael. Those are four very relevant and good questions. Let me start with the spreads and I think that what’s been happening in 2018 in an increasing interest rate environment, U.S. interest rate environment, is that economic activity for Latin America and consequently, demand for credit has been pretty stagnant in the region. And as such, banks which are still with quite a bit of liquidity, banks that operate in the region both international banks and local banks, basically compete to deploy that liquidity in an environment, in which demand for credit is essentially going nowhere. So, of course, I’m painting everything with a very broad brush, but that essentially has been the situation. That tends to end at some point, because U.S. – higher US interest rates tend to create a capital withdrawal from emerging markets in general, and Latin America in particular. And then it leads to an environment in which liquidity subsides and it becomes a more interesting environment for us to be able to make loans at better levels and focus on the type of credits we’d like to focus on. So that is the very big picture story on spreads. As far as the severance, we’ve announced a restructuring in 2000 – in the first quarter of 2018 and we believe that the bulk of that is behind us. We are very much in the mindset of optimizing the business and making it efficient, that means that obsolete resources whether it’s of the human kind or whether are we’re talking about our technology or the operating infrastructure, we will continue to see points and areas in which we can lower costs. And sometimes in order to lower cost and get a lower pay, you need to spend some money. We don't want…

Okay, thank you very much. Appreciate the commentary.

Thank you, Michael.

Thank you. [Operator Instructions] At this time, I'm showing no further questions in the queue. I would like to turn the call back over to Gabriel Tolchinsky for closing remarks.

Thank you, Jonathan, and thanks everybody once again for joining us. We look forward to talking to you guys again at the end of the fourth quarter for our fourth quarter results and yearly results. And with that in mind, as you know, both Ana Graciela's office and mine are open to talk to you and communicate with any questions, any follow up questions you may have. Thank you very much for joining us, and everybody have a good day. Thank you.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.