Foreign Trade Bank of Latin America Inc (BLX) 2009 Q4 法說會逐字稿

Good day everyone. Welcome to the Bladex conference call. As a reminder, today's call is being recorded. At this time, I will turn the conference over to Ms. Melanie Carpenter. Ma'am, you may begin your conference.

Thank you. Hello everyone. Thanks for joining the Bladex fourth quarter 2009 conference call on this, the 18th of February of 2010. This call is for investors and analysts only. So if you're with the media, you are invited to listen-only, but if you have questions, please follow up with us after the call.

Joining us today from Panama City are Mr. Jaime Rivera, the CEO of Bladex; and Mr. Christopher Schech, the CFO. Their comments are based on the earnings release issued yesterday. A copy of the long version is available on the website at Bladex.com.

A reminder that any comment management makes today may include forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Any comment made today by Bank management is based on information and data that is currently available. However, the actual performance may differ due to various factors, and these are in the safe-harbor statement in the press release. So please review that for guidance.

And with that I'll turn it over to Mr. Jaime Rivera for his presentation. Please go ahead, Jaime.

Thank you, Melanie. And good morning, ladies and gentlemen. Thank you very much for being with us once more.

February's call is always special for us, because not only do we get to review the results for the fourth quarter but also to talk about the year as a whole, and more importantly at this stage, to talk about the future.

So before handing things over to Christopher to provide you with an insight into the numbers for the year, allow me to make some more qualitative reflections on the year that was and about what we expect for 2010 and beyond, particularly because of the changes in the market that have taken place over the 12 months and the opportunities that we see emerging for us in this brave new world.

Now, the smoke is only beginning to clear after the financial crisis. But it's already evident, to us at least, that some things have changed in ways that were expected, some others changed in ways that were unexpected, and maybe even more importantly some others, and surprisingly, did not change at all.

As expected, economies in most Latin America contracted, they shrank, went through a recession. Although the situation changed from country to country as you know it was still -- we're still talking about a contraction of about 1.8% on average. As expected, this brought about fiscal pressures in most countries, brought about unemployment in many or in all countries.

Closer to home, closer to what we do, our competition lessened as many of our competitors had to deal with problems back in their own countries. Margins widened. Portfolio quality came under pressure. And we had to shrink our business in response to higher risk. These were all expected results of a recessionary environment.

Quite unexpected, for us at least, however, was the sheer magnitude of the impact of the financial crisis on trade flows. A 24% decrease in Latin America trade remains quite, for me at least, unimaginable. It is a contraction, or it was a contraction about 12 times as large as the contraction of the economy as a whole. The ratio between one and the other certainly was nothing that we were expecting a year ago.

It is, I believe, a tribute to many of our central banks and to organizations such as Bladex that the social impact of the blow was contained. Financially, I believe that for us to have maintained our profitability and to actually strengthen most of our financial ratios in the midst of such a huge contraction was -- it was quite a feat, it was quite something, something that we are professionally proud of.

Unexpected as well was the ability of some countries, particularly China, to sustain their economic momentum throughout the crisis. And that of course had a profound and positive impact on the demand for a host of products, including importantly some of the Latin America's most important products such as minerals and basic foods. That helped us keep the damage in the region to levels below the damage that other regions in the world sustained.

But the most unexpected thing that happened, in my view, was the reaction on the part of businesses and individuals in the region as they sought for alternatives to their traditional markets. You have probably heard me say this before, but it is this ability of great companies and great people to react to adversity that in my mind is not captured in many economic models. And it is often what makes them, these models, err on the low side.

In practical terms for us, for Bladex, as a result of great people and great companies looking for alternatives, Latin American companies are today stronger and more international than they were before the crisis. Much, much more international. And this of course plays straight into Bladex's strength.

And this is so because one of the things that did not change during the crisis was the uniqueness of our ability to serve companies regionally. There are very few companies, very few banks able to provide corporations and banks with financial support through Latin America. There were a few of them before the crisis; there are now fewer ones, and Bladex is one of them.

More broadly, some of the other things that did not change during the crisis were the role of capital and low leverage to sustain organizations, and banks in particular, through the business cycle. Nor did the need to relentlessly look for efficiencies diminish in any way, which is why we don't think that the talk about protectionism will get much beyond political referees.

No country's companies can hope to be efficient if their own country turns to protectionism. Protectionism is the equivalent to economic poison in our view. So we don't think protectionism will be an obstacle as trade expands in the future.

And let me make one more point which sometimes seems to also run against conventional wisdom these days. I, for one, am not convinced that economic decoupling will prove a factor in the future either. What happens in some economies will impact the others. And for those that don't agree with me, I offer as evidence recent events in Greece and their impact on markets everywhere.

So if you share our view that the financial crisis in the major economies is easing, that the impact of this recovery would be felt throughout the world and that China will continue to demand Latin America's products and that protectionism will not prove an obstacle, and that Latin American companies are increasingly international, then you just have to believe that trade will recover very vigorously. And if you believe that trade flows will regain their strength, you must then become as confident and excited about Bladex as we are. It's a logical train of thought.

I, for one, have no doubts about the growing trade flows. Beyond the figures, and the figures show it, that beyond the figures that Christopher will tell you about in a minute, I only need to look out my window every morning. I happen to have a privileged view over the Panama Canal. And I have noticed the increasing number of ships crossing the canal everyday over the last couple of months. It's something that is happening. Trade is starting to grow again.

But admittedly, it will not happen overnight. And there will continue to be quarter-to-quarter volatility. And yes, the Doha Round will suffer probably a thousand deaths before they finally come somehow together. And we will have few problem loans that will emerge and we'll have to resolve et cetera, et cetera.

But the rapidly growing trade flows will override all of these obstacles. Our business and our balance sheet will grow, and along with them so will our returns.

So while the crisis forced us to pay a very dear cost in terms of scale in our balance sheet, it benefited us greatly, I believe, from the point of view of our competitive position which improved from just about every angle you care to look at. It's a great opportunity for us and one for which we have the resources and the skills to take advantage of.

So with this, ladies and gentlemen, I leave you with Christopher Schech for him to delve into the quantitative results and to tie them with some of what I just mentioned. Following Christopher's comments we will be glad to take up your questions and answers and then close the conference. Christopher, please.

Thank you, Jaime. Hello and good morning everyone. Thank you for joining us on the call today. My comments will focus on key aspects that have impacted our results in the fourth quarter. And just like Jaime said, I will also provide highlights concerning our performance for the year 2009 as a whole.

So as mentioned by Jamie the Bank has worked hard throughout 2009 to successfully deal with the impacts of the financial crisis and position ourselves for growth as gradually, I'd have to add, a more benign business environment takes hold. And on the back of very strong capitalization and the resilient quality of our portfolio we are ready for the kind of accelerated commercial portfolio growth that we have started to record in our market this quarter.

As for the year 2009 the Bank's net income was $54.9 million. And net income in the fourth quarter 2009 was $11.9 million.

As you may remember, the performance in the fourth quarter 2008 was heavily influenced by the immediate effects of the financial crisis and that makes the year-on-year comparison of the fourth quarter a bit difficult. But generally, compared to 2008, the $54.9 million net income result puts us very close to the net result achieved in the year 2008. And even as the results achieved for both 2008 and 2009 were quite similar they did differ greatly in terms of very different sets of business strategies and execution.

As you know, we look at our business in three distinct segments -- the Commercial Division; the Treasury Division; and the Bladex Asset Management business. And all of them delivered positive net income for the year 2009. This is also true for each individual quarter, with the exception of the Treasury Division, which recorded a small loss in the fourth quarter.

Now, let me share more details regarding the performance and the (technical difficulty) business segments before moving on to discuss more general aspects of the Bank's financial performance.

So let's start with the Commercial Division where net income was $11.8 million in the fourth quarter, representing nearly 100% of the Bank's net results. Net operating income, and by that I mean net income before provisions for loan losses, declined quarter-to-quarter, mainly from net interest income which showed a decrease even as average lending portfolio balances showed solid growth in the quarter.

So that decrease in net interest income was really the effect of the shift in the portfolio composition towards higher quality clients with lower margins, especially in the financial institutions portfolio. Commission income continued to increase this quarter as the pickup in our letters of credit business solidified.

Through all of 2009 the Commercial Division achieved net income of $34.8 million, compared to $59.1 million in 2008. This year-on-year decrease in net operating income was mainly driven by the general decline in LIBOR, our benchmark rate since the effect of lower average loan balances was largely offset by higher margins that we managed to achieve in the market and by lower expenses.

Average commercial portfolio balances, including acceptances and contingencies accelerated their growth this quarter, as did period and portfolio balances which now stand at $3.1 billion for the commercial portfolio. That is an 8% increase from the previous quarter and also slightly above the levels at the end of 2008.

Credit disbursements exceeded $1.2 billion in the fourth quarter, a substantial increase over the previous quarter as the upward trend becomes more robust.

Average lending spreads showed a decrease this quarter as the portfolio mix has shifted towards bank loans. Bank clients normally command lower margins due to their lower risk profile.

The commercial portfolio remains short term and trade-related in nature. Some 69% of the portfolio will mature within one year; 62% of the portfolio is trade finance. The portfolio composition continues to be well-diversified. Brazil, Mexico, and Colombia remain a substantial part of our portfolio, but we now have Chile and Peru joining that group of countries with a portfolio share of 5% or more.

Credit disbursements increased in other parts of the region as well in the fourth quarter. 57% of the loan portfolio is corporations and [severance] while 43% is lending to banks. Regarding our exposure to specific industry sectors, not more than 12% of the corporate portfolio is concentrated in a single industry.

Now let's talk about our -- the credit quality of our commercial portfolio, which has continued to improve in our eyes, represents $0.6 million reversal of provisions recorded during the fourth quarter with an increase in provisions of $1.2 million recorded in the previous quarter.

The mix shift in the composition of our own book loan portfolio that I just talked about contributed to a $16.1 million reversal of reserves even as loan balances grew substantially. Whereas growth in our letters of credit business required $50.5 million (sic - see Press Release) in additional reserves for our off-balance-sheet risk.

The amount of loans in non-accrual status increased to $50 million, representing 1.8% of our loan portfolio, versus 1.4% in the previous quarter. As you know that per bank policy on top of any loan with specific reserves any loan past due 90 days or more at any point in time is automatically put into non-accrual status even if [worked-out] discussions, renegotiations et cetera are well advanced.

Most of these loans are now occurring based on renegotiated terms. And as of the end of the year 2009 only 10% of those loans in non-accrual status were actually past due 90 days or more.

Our specific reserves were tweaked by $0.3 million in the quarter, while the nominal amount of the structured loans for which specific reserves have been created remain unchanged. As we look at reserves in a year-on-year comparison we have raised total reserve levels to $101 million at yearend 2009, a $15.6 million increase over the previous year. And that increase comes primarily through the liquidation of specific reserves for identifiable risks.

Now, let's move on to the Treasury Division, which contributed a loss of $0.5 million to the Bank's bottom line this quarter. Compared to the previous quarter, both net interest income and gains from trading securities were lower, primarily driven by the trading portfolio. That was as a consequence of having sold securities in the third quarter to lock in gains. The mark-to-market effect on the securities portfolio helped further reduce the unrealized losses recorded in the OCI account by $3 million from the previous quarter to now $6 million.

The securities portfolio continues to consist of high quality and liquid Latin American securities. 75% of both portfolios represent sovereign and/or state-owned risk. The Treasury Division continues to adjust its liquidity position downward as market conditions improve.

On the funding side the division followed up its first syndicated loan in Asia that was executed in the third quarter with another syndication in these highly liquid markets that was even more competitively priced, which further diversified our sources of funding and at the same time allowed us to reduce mid-term funding (technical difficulty).

For the year 2009 the Treasury Division delivered net income of $6.1 million compared to a loss of $16.3 million in 2008. It was largely driven by an accounting charge reported in the fourth quarter of that year.

Now, let's talk about the Asset Management Division, which again delivered a positive result in what was quite a volatile quarter, contributing $0.6 million of net income. Full year net income from this division reached $14.1 million, a 15% increase over the 2008 net income. Net asset value reached close to $200 million, a 5% increase over the previous quarter, driven both by the profits generated by the funds in the quarter, and as a principal driver, by the inflows of third-party funds. Third parties now own close to 18% of the funds.

Now, let me briefly comment on the Bank's general performance in the fourth quarter in the year 2009. We continue to see strong market -- margins even as our portfolio mix has shifted more towards low-risk lending to banks over the year which leaves us well-poised for growth from strong positions in both bank and non-bank segments.

160 basis points; the net interest margin is still at an elevated level compared to earlier quarters.

Fees and commission income continues to improve while provisions decreased moderately in the fourth quarter mainly driven by portfolio mix shift. Year-on-year reserves have been strengthened, as we mentioned earlier, both for identifiable managed risks and specific risks, as well as recurring on- and off-balance-sheet risk.

Operating expenses in the fourth quarter were slightly higher due to seasonal effects. year-on-year though expenses were lower due to the cost control measures in the Commercial and Treasury divisions as well as in support functions. The efficiency ratio improved to 35% in 2009 from 42% the year before.

Now, before I hand it back to Jaime just a few comments on the Bank's book value which increased by 17% in 2009 to $18.49 per share from $15.70 a share in the prior year. The quarter-on-quarter increase of book value was $0.26 per share.

Return on assets reached 1.4% in 2009 which was up from 1.1% achieved in 2008. Return on equity hovers around 9%, fairly close to prior-year levels even as leverage declined to 5.7 times -- 6.7 times back in 2008.

Tier 1 capital stands now at 25.8%, and with that we believe that with this capital equation with the portfolio policy and diversified funding we are quite well-positioned to grow in the coming quarters along the lines mentioned by Jaime.

And with that I hand it back to Jaime for his closing remarks. Thank you.

Thank you, Christopher. Ladies and gentlemen, we'll be happy to take up your questions. Please go ahead.

(Operator Instructions) Our first question will come from Saul Martinez with JPMorgan.

Good morning, Jaime. Hey, Chris. Couple of questions. First, in terms of your return on equity, you obviously mentioned that it is depressed in part because of your capital structure and also because this year you had low rates, you had the impact of, as you mentioned, of the financial crisis, the smaller balance sheet, and some provisions. As you look out a couple years what kind of ROE do you target? How quickly can you get there?

And just also what kind of capital structure do you need? What kind of BI -- what kind of capitalization ratio do you target when you think about how you get to that return on equity?

Good morning, Saul. Yours are very interesting questions. They've been asked for us for I guess least three years. And our answers have remained the same. Our tier 1 capitalization level, our target for tier 1 capitalization is strictly dependent on the risk in the market.

If the situation in market -- in the market improves you will see us through growth and capital management bring that tier 1 level or that capitalization level down. And we will continue to do so as long as conditions in the market allow us to.

We believe one of the problems -- we humbly believe that one of the problems that our esteemed colleagues underwent was that they set themselves tier 1 ratios without -- that did not consider the general risk in the environment. So it is high now because we're coming out of one of the worst recessions since the '30s, I guess. It will improve from here on as the economic situation improves.

Our target ROE remains the mid-teens. This used to be considered low in the industry. I remember two years ago when people would ask us and we would answer mid-teens, they would tell us, well, that's low because their colleagues are generating ROEs in the low 20s.

We think that the -- we think now that the industry has changed its view and would probably settle on ROEs in the mid-teens as well. We will eventually become perfectly competitive with the rest of the industry.

How long will it take? It depends on how quickly we can leverage the balance sheet. It's as easy for you as it is for us to run the models and realize that if trade recovers very vigorously we'll be there in 18 months. If it takes its time we'll be there in 36 months.

Well, we will get there as soon as we can but we will not run undue risks. I know my answer is probably not as specific as you would want to have me phrase it, but it's truly as honest and transparent an answer as I can give you because that is the way the Company thinks.

Well, let me just expand on the question or drill down on it a little bit. It seems like some of the parameters in terms of how you're thinking about risk or improving liquidity obviously came down. Origination went up quite a bit. And what would you need to see to be more comfortable to increase your dividend and become more aggressive on capital management?

Just a continuation of currently improving trends. I'm glad you asked the question about the dividend. I hope we can increase it soon. I think that if the situation economically continuous to improve and trade -- and trade flows continue to improve, we will feel confident enough to increase that dividend again. It's a question that we take up very seriously every three months. And we'll do so next time the Board meets in April again.

I, for one, am convinced that as soon as we are relatively comfortable with the environment -- it's the environment that worries us more than the Company. We have a good hold on the Company. As we -- as soon as we feel that the economic recovery is real -- we don't even need to see a vigorous economic recovery, we just need to see some stability to it all. And as soon as we feel that trade flows are in fact continuing to increase and are likely to remain so for a while, we'll take a look at the dividend again.

I'm as interested in that as you or everybody else, I can assure you. And so is the Board by the way.

Okay. Great. That's very helpful. Thanks, Jaime.

Sure.

Okay. Our next question will come from Tito Labarta with Deutsche Bank.

Hi, good morning, Jaime and Chris. Not sure if you mentioned this earlier, but could you just give us your -- what are your expectations in terms of long growth for the year and as well as margin? We did see some margin pressure in the quarter. Is that something that you think will continue or what's your outlook for an interest margin going forward? Thank you.

Good morning, Tito.

Hi.

Here are the numbers. Historically, trade expanded or trade had been expanded -- expanding at about 19% per year in the last five years, plus or minus, that was the average.

That was about, it turns out, about four times the underlying economic growth rate of the region during that same period. And that is very consistent which was -- which -- with our answer over the last four years that we would grow the balance sheet of the Bank at a rate of about four times the underlying economic growth rate of the region.

That is still our answer going forward, with one caveat. Firstly, we're starting from a very low point and because we're starting from a very low point we should be able to grow a bit faster. And secondly, our competitive position has improved vis-a-vis to what it was a year-and-a-half ago.

So our official answer used to be, we will expand the balance sheet and the results of the Bank at 4% to 5% -- four to five times the economic growth rate of the region, which as it turns out was just about equal to the expansion in trade flows every year. I would probably say it's going to be a bit higher over the next couple of years because of the factors I just mentioned.

Okay. Great, thanks. That's very helpful. And what -- how about in terms of the margin?

Margins are -- and the reason I hesitate is because it's not a simple question to answer. The answer is really it depends.

We believe that in the corporate sector, particularly in the corporate sector that we're seeing becoming international, companies that a year ago we would not have worked with because they did not require trade finance, they were selling -- Brazilian companies selling only in Brazil. Now these Brazilian companies are selling into Panama, and by the way there are now [lots of] Brazilian companies in Panama or Peruvian companies going to Guatemala.

Margins in those companies will remain very high. They are new to the market. There are very few banks that can serve them. We will take good advantage of that segment. Margins will remain high.

In the existing corporate segment, they'll probably remain stable for the next year and then gradually diminish. And that's fine with us because once we get enough scale, we can live -- we will be able to live with somewhat smaller margins.

In the banks, in the banking sector, what I see going forward, and this is again not my vision, it's the vision of the Company as a whole, the large bank in -- particularly in some of the larger economies in Latin America, their margins will shrink again to the point where we will probably no longer work with them, which was the case a year ago. We are working with them now because margin improved. A year ago we had already stopped working with them. In fact they were a depositor of ours.

But with the smaller market banks that are emerging in the larger economies and in the smaller countries in the region, Central America, the Caribbean et cetera, bank -- the banking system will continue to be a good source of income for us at lower spreads than in the corporate sector, but it's stable and it's safe and requires little in terms of provisioning.

So its risk return will remain adequate. That's more or less how we see it going forward from a qualitative perspective.

Okay, thank you very much.

Sure, Tito.

(Operator Instructions) Our next question will come from Jeremy Hellman with Divine Capital.

Hi, good morning everybody.

Jerry, good morning.

I just wanted to dig into the spread question a little bit further. As you've noted, the spread on new disbursements went down in the quarter because you shifted the mix to banks over corporate. Can you talk to some extent about what was behind that? Is that a function of -- it sounded to me like corporate demand. Was it soft? So it was more a function of credit quality assessments, am I right in hearing it that way?

A combination. Actually, during the last, latter part of December banks had reasons -- different banks in different countries had different type of reasons to demand funding, not only from Bladex but from the market as a whole.

We saw it as good business. Again the risk return on banks is good and strong for us. The tenors tend to be short, quality is very high. Our cost of funds is down to the point where we can do good business with them. And so we were happy to see that demand on the part of bank return, which again, to me, and was referring to the case of that trade flows, are increasing.

So it was both something that was particular to a month and probably an indication hopefully of something that will continue to recover as trade flows increase and banks start needing financing on the part of foreign banks to provide trade finance to their own clients.

Okay, so it's really more a function then of just increased bank demand, not necessarily reduced corporate demand or decision-making on your part then?

Oh, no, absolutely not. I'm glad you asked because the answer there is absolutely not, no. It was a question of increased bank demand.

Right, right, that's what I was saying, yes.

And again in December, we were surprised to see, quite frankly, because in December demand tends to be very soft as it is in January. By December most companies have already bought what they need for new year, for the end of a year. So the month tends to be slow. We were happy and surprised to see banks pick up their demand towards the end of December and we're glad to furnish it.

And so thinking about where you are today, halfway through Q1, how is that looking in this quarter?

We believe that bank demand will probably be, relative to last quarter, a bit down. And corporate demand will continue along the trends it was following through December.

Okay, so all else being equal, it would appear that spread on new disbursements should be up, Q1 versus Q4?

All things -- you put me against a corner --yes. I have to answer yes, because this -- that's the way you led the discussion and it's very logical, yes.

Okay, thanks.

Okay. Our next question will come from Arthur Byrnes with Deltec.

Jaime, you have a reputation for being very cautious. And how you got through last year is evidence of the good sense that you have in running this thing. I am -- if you are lending to banks and doing trade financing, the risks in those things are de minimis, and it surprises me that you had such a big, relative to the type of business you do, non-performing issue.

Either the bank didn't pay you back, and I haven't heard of too many bank failures in the area that you work, or the trade finance which is secured, it sounds like you got swindled. Would you mind in a general way saying on the one or two biggest losses that you've had what their nature was?

In a very general sense you are correct in stating that whatever problems we had had nothing to do with banks. You've been with us for a long time, Arthur, and you know that when we've had problems with banks, it has generally involved fraud.

No such instance has arisen for a few years. We don't expect it to. Banks are not a problem. What did happen, however is that there was a recession throughout the region, and company -- cash flows came under pressure. It was the case with some of these companies that they came to us and said, look, my cash flow is under pressure, I need to renegotiate the terms of payments that we had agreed.

And we negotiated with them. And often negotiations took more than 90 days. Some of these things went into zero accrual. As Christopher mentioned, the overwhelming majority of them are now current.

We have now reached understandings with them and the overwhelming majority of them are paying us back as we expected. There are a couple of instances, just a couple of instances regarding losses. One of them was a company involved in the export of commodities. They were caught in one of the larger [countries], not only by diminishing prices for the product, but also in a currency play that went wrong.

We were given the choice of settling with them at a discount or being repaid over an extended period of time. We decided to go through the former to give us our money at a discount and we're gone.

And the second company, the second case involved a large company that is again current with us. They are negotiating with the rest of its creditors. And we're going to keep that specific provision there until the company negotiates with -- its packets with the rest of its creditors, which we think is going to happen. If it does, we'll reverse our provision. If not, it's already hit the P&L. There will be no incremental impact on our P&L.

And with that, Arthur, I've really described all losses that we took during the recession. That's it. Everything else we renegotiated and it's being paid -- (multiple speakers).

So Jamie, basically the recession is the reason for the losses?

Absolutely, yes. The companies, they experienced reduction in cash flows and although they -- in general, in Latin America, they managed them well. They were hit by not only a diminished economic activity, but also remember especially at the beginning of the year -- it seems like a million years ago -- but especially at the beginning of the year, there were a lot of foreign exchange swings?

Yes, sir.

And that brought about --

Problems, yes.

-- problems for companies that were caught on the wrong side of the currency equation.

Okay.

Those were the reasons.

Thank you very much.

Well, Arthur, great talking to you again.

Thank you.

(Operator Instructions) Our next question will come from Mike Hutchens with Brandes.

Hello Jaime, hello Chris.

Mike, how are you? Good morning.

Good morning. Quick question regarding funding strategy for next year. What is the strategy and to what extent, if at all, is funding a constraint on balance sheet growth?

The second part of your question is easy to answer. It is not a constraint. The first part of your question goes along the lines that we just mentioned both in the press release and in my opening statement. There are a lot of Latin American companies that have become international and that are needing trade finance in the region to operate in the region.

We face very little competition along that segment, and we are intent on exploiting that window of opportunity. That is why -- one of the -- the principal reason why the Board approved of opening up the offices in Monterrey and in Porto Alegre. Many of these companies are located in those two regions.

So we believe that by capturing the intraregional trade that is going to originate from these companies and by capturing our share of the growth of extra-regional trade, basically the return of business as usual, that will provide us with enough fuel to grow the balance sheet quite nicely, depending on, again how quickly the underlying economies in the region grow.

If Latin America grows at 1% in 2010, it will make a big difference. On the other hand if it grows at 4%, you can imagine our growth would be significantly higher. To an extent we depend -- it's difficult for us to do better than the economy as a whole without taking undue risks.

And Jaime, as far as funding the growth, be it through syndicated loans or repo transactions, deposits from correspondents or central banks, what is the most attractive funding currently? And assuming we get balance sheet growth of 10% to 20% next year, I guess, where would you expect the funding to come from?

Attractiveness is a relative term. I guess from the perspective of cost, clearly the deposit that we hold are the most attractive ones. They tend to be depositors from -- deposits from central banks, from governments, for which we pay very little. But we do this because the tenors are short; they expose us to liquidity risk, tenor risk.

Our major source of funding so far has come from the inter-bank market. That continues to be our bread and butter, particularly now that Asia has opened up. It's amazing but the country with -- the one country in the world where most of our correspondent resides today is Taiwan. I would not have believed this two years ago.

That market is still open for us, but we're also looking at issuance of bonds of Latin American countries. We've already done one in Peru, you might remember.

Right.

There's now opportunity for us to do in other countries such as Chile, maybe Colombia, and we are reactivating one of the -- we are reactivating our EMTN program precisely for that reason. Our EMTN program had been laying at rest for three years. We're bringing it back because we think there will be opportunities in multiple markets for us.

That's -- we're concentrating on -- (technical difficulty).

Hello?

Again, ladies and gentlemen, please continue to hold, the conference will begin (multiple speakers).

Starting, Mr. Rivera.

Yes, Michael, are you there?

I am, yes.

I guess you missed the part about the $2 billion demand deposits that we're getting.

No, so -- and that's -- again, funding is not an issue, it's going to come from multiple sources. What we're trying to do is balance cost versus liquidity risk. As you know we try to keep a matched book, relatively matched book. It's not an issue for us, funding at the moment. It hasn't been for the last three months.

Okay, thank you.

You're welcome.

(Operator Instructions) Okay, sir, I'm not showing any further questions in the queue, so I'll turn it back to Mr. Rivera for closing remarks.

Well, thank you. Well, ladies and gentlemen, thank you very much for being with us again. Let me just close with two brief comments. Firstly, for those of you that have been with us for a while, you know we like to run the Company based on things as they are, rather than as we wish they were or really even as they should be.

And based on this realistic approach we are convinced that the underpinning of our business, trade flows, is going to grow. We have already seen that beginning to happen and we think that it's going to expand into the future. It might not be constant, there will be volatility, whatever, but our business, along with trade flows, will grow.

The second comment I'd like to leave you with refers to a special case in Latin America. I would like to close with a few words to our friends and our shareholders in Haiti, a dear country and a dear people that are suffering greatly as a result of the earthquake that destroyed that beautiful country recently.

We wish them all the best; Haiti is a founding shareholder of Bladex and we have many friends in the country. They have always been very supportive of our organization. We wish them the best and we pledge to continue contributing to the reconstruction of their beautiful country through the international aid agencies the way we have been doing so far.

So with that, ladies and gentlemen, I wish you all the best for next quarter. All the best for next -- this year in fact, and we'll see you in three months. Thank you very much.

This concludes today's teleconference. You may now disconnect your lines.