Foreign Trade Bank of Latin America Inc (BLX) 2016 Q1 法說會逐字稿

Hello everyone and welcome to the Bladex First Quarter 2016 Conference Call on today, April 15, 2016. This call is being recorded and is for investors and analysts only. If you are a member of the media, you are invited to listen-only. Bladex has prepared a PowerPoint presentation to accompany their discussion. It is available through the webcast on the Bank's corporate website at www.bladex.com.

Joining us today are Mr. Rubens Amaral, Chief Executive Officer of Bladex and Mr. Christopher Schech, Chief Financial Officer. Their comments will be based on the earnings release, which was issued yesterday. A copy of the long version is available on the corporate website.

Any comments made by the Executive Officers today 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, the actual performance may differ due to various factors, which are cited in the Safe Harbor statement in the press release.

With that, I am pleased to turn over the call to Mr. Rubens Amaral. Sir, please begin.

Thank you, Katie. Good morning, everyone and thanks for attending our earnings call for the first quarter of 2016. I am pleased to report that we delivered strong business results in a quarter that traditionally has been the slowest one in our region. Our business earnings per share for the quarter was $0.72 and the business return on equity reached 11.6%, which demonstrates the Bank's ability to generate earnings on a stable basis even in a quarter when seasonality, as alluded to before, reduces the volume of business.

I do recognize that the net income has been negatively impacted this quarter because of the losses in the investment fund where Bladex was one of the anchor investors. On the bright side, it's over. These losses are now non-recurring as our commitment to remain investor expired on April 1 and we have made our final redemption accordingly.

As this is the last time we will address this particular subject, I'd like to point out that this investment has provided a full return since its inception in 2006 of over 70%, representing an important contribution to our earnings over the last 10 years.

Let me move on to briefly comment about our business performance in the first quarter. We continue to generate top revenue growth and the prospects for fee income is very good albeit the modest performance in this quarter. As you already saw in our release, our business net income, i.e. net income before the performance of the investment in the fund, has increased by 11% quarter-on-quarter and by 2% year-on-year. We have been able to achieve this result (inaudible) for 2016 as highlighted in our previous call, is very clear.

First, to be more selective on new products, focusing on our traditional business of trade finance to keep a [health] credit quality. Second, to adjust the spreads, as liquidity available to Latin America is not at their higher levels seen before as less international banks are financing the region, more liquidity still flowing to developed markets and companies are facing more limitations in their cash flow. Third, strengthen our syndication and contingency business to increase steadily our fee income. And fourth, to keep the higher levels of productivity within the organization so the costs remain controlled; improving importantly, our efficiency.

Christopher will provide you with more color about our key performance indicators later in the presentation. Let me now make some observations about the current business environment in Latin America and the possible impacts to our performance moving forward.

I'll start with our exposure to Brazil. We continue to monitor closely our book of business there and as informed in our previous call, we are adjusting down our exposure to the country which now stands at 21% of the total credit portfolio of the Bank. We do not anticipate any [limiting] deterioration in the credits in the country and the few problem loans we have are well advanced in the restructuring process and properly provisioned.

In terms of the Latin American economies, we are focusing our growth on the countries mentioned in our previous call as well. So, the countries are Mexico, Peru, Chile, the Central American region, and Argentina where the Government is delivering on its commitment towards market transparency and discipline on the management of the public finances.

Nevertheless, let me highlight that we will proceed with caution in Argentina, focusing our activity on the traditional and strong exporting companies in the country. It's important also to talk about our loan growth. Although, as we saw from the press release, average balances between quarter-on-quarter and year-on-year. Let me emphasize that it does not mean a limitation to our origination capacity. Instead, it is a direct result of our tactic of being more selective with new transactions and our focus on improving margins to improve the quality of our earnings rather than just leveraging the balance sheet of the Bank.

In a traditional slower quarter, the Bank disbursed $2.4 billion and the pipeline of new transactions moving forward is quite diversified across the region with the potential to keep the momentum with improved level of margins. I am confident we'll represent fourth quarter close [bit to aim up] at least 3% to 5% this year.

In terms of our fee income, our contingency business continues to perform well and we expect the net increase in the second quarter. In terms of the syndication platform, let me highlight that we have a solid pipeline of eight mandated transactions, which are now in process of execution. As we speak, the head of our distribution is in road show, this year two transactions. We have another eight transactions in the process of negotiation without assignment date yet, but with very good probability of getting them. And we still have a few more in our prospect list. The total amount, to give you an idea, of transactions in execution today is $1.2 billion and Bladex will hold around 20% in the books of the Bank.

I think it's important also to address some headline versus we're seeing in the markets. I understand that there might be some degree of concern about the recent information we call the Panama Papers. Let me assure you, we have no relationship whatsoever with the mentioned law office and after a thorough review of our portfolio of clients, suppliers and other stakeholders against the list (inaudible) to-date, we're pleased to inform, we've nothing to report.

Please, rest assured that as a regulated finance institution, we've a strong mechanism to conduct enhance due diligence during the on-boarding process of new clients and providers, which allow the Bank to understand and be satisfied with whom the beneficial owners are, therefore protecting the Bank to enter into any relationship with unsuitable counterparts. Lastly, the Bank does not engage in any transactions or relationship with companies owned through bearer share structures.

As I move to close my initial remarks, let me state that I remain positive about the prospects for Bladex in 2016 as we focus on our core business to continue improving the quality of our earnings. Back to basics, as we say in the Bank, without the unnecessary noise in our results coming from the performance of the investment in the fund, since we have terminated, as I already mentioned.

Lastly, as I always do, I like to highlight that the Board of Directors approved the dividend of $0.385 per share, which once again, confirms the determination of sharing our good results with our shareholders.

With that, I will now turn it over to Christopher for his comments. Christopher, please.

Thank you very much, Rubens. Hello and good morning, everyone. Thank you for joining us on the call today. In discussing our first quarter results for 2016, I will focus on the main aspects that have impacted our results and I will make reference to the earnings call presentation that we have uploaded to our website, and which is being webcast as we speak.

So, Rubens already mentioned most of the highlights of this quarter. So, let's just do a quick rundown of the key financial metrics you'll find on page 4 of the presentation. The first quarter of 2016 closed with net profit of $23.4 million compared to $23.2 million in the previous quarter and compared to $29.9 million in the first quarter of 2016.

As I will explain later in more detail, the main drivers of this quarter's performance were accelerating net interest income and margins in our core business as provisions and reserve levels increased only moderately, and that was partially offset by negative results from our participation in the investment fund. As Rubens already highlighted, these non-core items will not make any impacts on our results going forward as we have proceeded to divest our interest in its entirety, following the expiration of the contractual lockup period during which we maintain a minimum investment in these funds.

And while disappointed in the more recent results of that investment, we do acknowledge and I echo Rubens' comments as well that the overall inception to big return of this initiative goes to be highly accretive to Bladex.

That follows my usual statement I make to preface the discussion of our financial performance. As we said last time, and that is in order to accurately present performance in our recurring business activities, we focus on what we call business managed profit which is recurring net profit derived from our principal business activities of financial intermediation that's generating net interest, commission, and fee income and other income. We also refer to it as core income or income from core activities and for this business, net profit reached $28.1 million in the first quarter of 2016 compared to $25.3 million in the fourth quarter of 2015 and compared to $27.4 million in the first quarter of year ago, reflecting overall improved trends in our core business.

Asset growth in US dollar terms continue to be a challenge this quarter, mainly because of seasonal effect, as commodity shipments and fuel imports in the southern hemisphere are just getting started. Underlying commodity prices remained fairly weak and we continued with the rebalance in the country, sector and client exposures to account for the diverging risk currents that we are seeing in the region.

That said, we managed to largely contain portfolio balances decline in what is generally a fairly slow quarter providing a decent base with moderate growth over the remainder of the year, market conditions permitting. That is of course the main story for the quarter, is the strong margin trends that we are seeing in the region. We already talked about it last quarter when we saw some definitive signs of this expansion. These signs have solidified since as not only market rates are ticking up after the Fed action late last year, but more importantly, spreads are widening as well which is welcome news for all of us who have been growing so accustomed to years of high levels of US dollar market liquidity and therefore fairly compressed margins.

The evolution of fee, commission and other income was not quite as compelling, but that has to do primarily with the fact that the transaction that we have been working on in our structuring and syndications business has not yet made it over the finish line, but more on that later.

On the provision and reserve side, the main moving parts of last quarter sort of leveled off, as we are now well settled, having completed the transition last year to the International Financial Reporting Standards and rule IFRS 9 Financial Instruments in particular. The restructurings of a small number of credits are also taking hold now, stabilizing the calculation of expected losses that impact the provision and impairment lines of [G&A].

With that, business return on assets and return on equity metrics improved quarter-on-quarter and remained relatively stable year-on-year. The business efficiency ratio was 30% in the first quarter of 2016, a three point improvement over the previous year and remaining relatively stable quarter-on-quarter. The Tier 1 Basel III ratios stood at 15.9% in the end of the first quarter of 2016, down from the 16.1% in the previous quarter and down from 16.4% from the quarter of a year ago, as risk weighted assets reflected the increased risks that markets and ratings agencies perceived with regards to the region, net of our ongoing successful efforts to rebalance the proposition of our book of business and the resulting lower balance sheet gearing.

So, let's look into the numbers in a bit more detail. Moving to the next slide, page 5, it shows the evolution of net profit for 2016 compared to the same period year ago, illustrating some of the items I mentioned just a moment ago.

On page 6, we take another look at net interest income and margins. And continuing with the trend we saw last quarter, we saw evidence of accelerated growth in the first quarter 2016, something that we hope will continue in coming months and quarters. Year-on-year, net interest income was up 10% and margins grew by 22 basis points. Versus the previous quarter, net interest income grew 5% and net interest margin expanded by 16 basis points, helped, no doubt by the re-pricing of the increase of market rates driven by the Fed action in last December, but mainly benefiting from higher spreads in our loan book.

On the funding side, we continued to benefit from our counterparties preference for high quality name on the one side and the increase of average deposit balances on the other, as the increase of funding cost in the quarter remains largely in line with the increase of underlying LIBOR rates.

On page 7, we show average portfolio balances and segmentation. The majority of the net reduction of balances was in the financial institution segment, which can be mainly attributed to seasonal factors. The corporate segments remained relatively stable, establishing a good basis for modest portfolio growth going forward. Here, the key portfolio characteristics of trade versus non-trade, short versus medium and long-term business remained quite stable as well this quarter.

On page 8, we present breakdowns of our commercial portfolio balances by country on the left and by industry sector on the right. The main story here continues to be our continued trimming of our Brazil exposures to now 21% of the total portfolio, a two point drop this quarter. We continue to grow in places like Peru, Mexico and Argentina to partially offset the drop in Brazil and parts of Central America and the Caribbean. Sector wise, overall net exposures to the oil and gas sector increased by three points as we are geared up in the downstream segment for integral deliveries of refined yields in the Southern Hemisphere.

On page 9, we provide more detail on our Brazil exposures. Lending to top tier banks and producers of soft commodities remain the largest sector exposures, as we continue to reduce overall balances. A pronounced bias towards trade finance and the short-dated composition of our book of business remain in place and are the main reason we are quite comfortable with our activity in that country.

Moving on to page 10, we provide an update on our exposures in the oil and gas sector, which represent 15% of our gross portfolio and that is including investment securities on top of the commercial portfolio. The upstream segment remains our single biggest problem sector with exposures there and related reserve levels remained stable.

On page 11, the evolution of credit quality and reserve parameters show a degree of normalization as non-performing loan levels reverted as it's received on pre-payments associated with some restructured credits. Nevertheless, the reserve coverage ratio for the first quarter increased seven basis points on lower ending portfolio balances and minor adjustments to expected losses.

On page 12, we show our fee income evolution which I commented on earlier. Compared to the previous quarter where we had three closings, we did not yet bring transactions over the finish line this quarter. However and as also mentioned by Rubens, we have the best pipeline of mandated transactions yet, and we clearly expect to bring each one of these transactions through successful closing over the next months and quarters.

Demand for high quality syndicated credits remained strong as debt capital market issuances in US bank loans remained at a competitive disadvantage in this current market environment. On the contingency side of the business, we had a [singularly] slow start into what we expect to be a solid market going forward, as major deliveries of refined fuels and agri business shipments in Southern Cone are starting to pick up in the second quarter.

Moving on to page 13, a quick recap of operating expenses and efficiency levels, show that expense levels declined versus the comparison periods on cost discipline and reduced expense levels in US dollar terms in our foreign offices.

On page 14, we highlight return on average equity and capitalization trends. With business return on average equity continues to be on track as core business trends solidify and capitalization levels remain strong with the Tier 1 Basel III ratio at 15.9%, just marginally below prior period levels. Leverage remains conservative, as we continue to mainly focus on core profitability and efficiency gain to drive ROE and profitability.

And finally, on page 15, we highlight our focus on total shareholder return where we see improving valuations for our franchise. The Board of Directors continued with their consistent approach in evaluating the Bank's core performance trends and again authorized a quarterly dividend payment of $0.385 per share.

And with that, I'd like to hand it back to Rubens for the Q&A session. Thank you very much.

Thanks, Christopher. Ladies and gentleman, we are ready for the questions.

(Operator Instructions) Catalina Araya, JPMorgan.

Hi, good morning Rubens and Christopher. So my first question, you talk about reducing the exposure to 20%. I mean, you're pretty much there at 21%. So, just wanted to know if the impeachment goes through, do you see new opportunities or growth in Brazil and I just want to know how we should think about this growth under this scenario.

And then my second question, just going back to the divestiture of the investment fund. Over the last two quarters, we certainly heard the bottom line with losses, but going forward, how should we think of this result in the treasury line? I mean you guys won't be taking active positions on investments, right? It should be mostly just focused on ALM. So, I just want to see how a more normalized number would be in the next quarters. Thank you.

Carolina, good morning. Nice talking to you. First of all, on regard with the impeachment question in Brazil, we look at our business and we see what's going on in the country and our focus is to do good transactions with good credit quality clients. So, irrespective of the situation today, we continue to have an important size of business in that country, but we are adjusting to make sure that we have, in our books, the best stack of clients possible.

So naturally, if there is a change in the political scenario and perception in terms of risk change, and the new government really starts to present some meaningful progress in terms of tackling what is the important and structural reforms that country needs to go through, definitely there will be opportunities.

But we don't see any resumption in the short-term scenario for a more aggressive growth in Brazil. We'll continue, as I said before, to do good transactions with good credit quality names in the country. We are very pleased that that continues to be the case. We're very pleased also that we have been able to adjust margins up as we have highlighted several times during our initial comments.

But the impeachment, I think it's one of the first step to normalization in Brazil that will require quite a bit of time, because this year, irrespective of the impeachment, the country will still pose a recession. Two years in a row with the recession really impacts the economy and there will be need to really tackle the more structural reform so the country really can grow in the way everybody expecting them particularly myself. Being a Brazilian, I'd like to see Brazil thriving and not struggling as it is right now.

In terms of the investment in the fund that you asked, as I mentioned, the bright side of this is, it's over, okay. So no more market risk volatility in our quarterly results coming from the fund. We still have very small available-for-sale portfolio and investment securities that eventually might impact results, but it's very limited in nature and we are exiting this portfolio today. It's a very small portfolio compared to what it used to be in the past.

So, I think and we're convinced rather as Christopher and I alluded to in our initial comments that we're back to basics. And basics means doing our trade finance, okay, engaging and taking risk in Latin America where we know very well how to manage those risks. So, I would recommend you to focus on our core business trends which are very good. The pipeline for the second quarter, it's a very strong pipeline both for the traditional business and for our syndication business, quite bodes well for a very good second quarter as well.

Okay, thank you. But just to get a sense of an absolute number on the treasury line, we should think something like $0 million to $1 million a quarter like relatively flat, like relatively no income from there?

Carolina, if you allow me, I can maybe shed some more light on this. This is Christopher. Yes, the treasury division will not post huge numbers any more, that's for sure and it will be much more stable. We do expect the treasury division to deliver positive results on kind of two things, [a small] and as you've heard investment portfolio, both helps maturity and available-for-sale or fair value to OCIS, it's called in IFRS. And that should be just starting a little bit the interest income line with modest revenues there, after this one for sure.

And you mentioned also ALM, the Asset Liability Management. As you know, we run very small gaps, it's maybe -- the gap between six-month LIBOR and three-month LIBOR. So, you should not expect huge numbers there either. Hopefully, they will be positive. As you know, our portfolio re-prices very rapidly and we do expect [telling] people to do a good enough job to not be on the wrong side of these small gaps.

And so, net-net you should maybe expect anywhere from $500,000 to $1.5 million of quarterly net income thereabouts. If things go better on the -- if you are on the right side of these small gaps, then they yield a bit more, but certainly not much beyond that. So, I don't know if that helps you.

Yes, thank you.

Luis Adaime, New Foundland Capital Management.

Hi, good morning everyone. Just wanted to ask if you could give us little bit more color on that upstream exposure that you had there -- or just in general that was going through higher provisioning and just credit deterioration. Have you had write-downs in that specific sector? Are you increasing provisioning to that specific sector? And just overall for the upstream sector exposure, how you are seeing our credit quality evolving in the first quarter or throughout 2016 so far?

Good morning, Luis. Thanks for your question. We're very comfortable with our upstream exposure, as we have highlighted before, very good credit quality in terms of the clients we're dealing with. There is one particular transaction that presents a little bit more challenge. But overall, we are not that concerned because it is well provisioned and the bulk of our exposure with this one counterparty, it's basically letters of credit. So, which is basically company continues to perform, there won't be any problems with the credit.

So we don't see, moving forward, any deterioration in our upstream portfolio. We have been very careful in terms of the new transactions we engage with, it has to be with companies that are not leveraged through an extent that's not acceptable within our risk guidelines. Of course, the oil prices will play a very important role and the competitive advantages of these companies will be a key in our decision-making process in terms of whether or not increasing our exposure, but I can guarantee to you that's not our objective to increase exposure to this segment.

Thank you very much, that's very helpful. Thank you.

(Operator instructions) Ryan Rechkemmer, Drystone LLC.

Good morning, thanks for taking my question. First, I'm curious what visibility Bladex has into the sector exposures of the financial institution borrowers, specifically to the oil and gas sector? And then what details that you could possibly provide in that regard? And then I'll ask my second question later.

Okay. So let me understand, you asked about finance institutions first?

That's right, Bladex's financial institution customers.

Yes, this is Christopher again. I said in my comments that, if you look at the composition of our commercial portfolio, you did see a decline with the FIs, with financial institutions. And I mentioned that this had seasonal reasons and it does happen that routinely in Latin America that towards the end of the year, financial institutions do take more cash on its books and that is something that we -- to achieve higher degrees of demand for our money in the region.

And that have soften as the new year commences. So, this is what I alluded to in terms of the seasonal effect. I don't want to well decide our proportion, but clearly the balances that we have in place with financial institutions are more actively managed loans in terms of changes from quarter to quarter, whereas the commercial business -- whereas the corporate business, it's much more transaction based and more of a guidance towards the true nature of business activity in the region. And hence my comment based on the solidity of the balances with the corporate segment that we should be looking forward to moderate growth.

Well, we know Bladex's exposure to the oil and gas sector directly, but can we see through to what is the credit exposure of Bladex's financial institution customers in turn to the oil and gas sector?

I mean to the extent that we extend our moneys to financial institutions, in contractual language that specifies general business purposes. We actually don't have (technical difficulty) seeing exactly what they're using our funds for. That is different to a trade finance facility of course where we do have all the information that pertains to the use of our funds made by that institution. And so it's kind of hard for us to really tell you whether these funds are used by these institutions to support their oil and gas clients or not.

I can add some more color to that. I think Christopher touching on a very important point and I think your question was driving to and that point is, basically we try to focus our financing through financial institutions on the trade finance portfolio. And when you look, majority of our financing is trade finance. And one is trade finance, we know exactly well what we're doing, as Christopher has mentioned. So, we know that there is no excessive exposure in that sense to the oil and gas industry, but we have also limited non-trade transactions that we do, working capital facilities, but they are very short-term in nature which, in our view, basically doesn't go to support the type of portfolios that would be involved with the oil and gas industry.

Overall, when we look to these financial institutions, they haven't been hit, importantly, by what has happened to the oil and gas industry. In our credit reviewing process, we look carefully to see what kind of exposure they have and whether they had any type of impairment because of oil and gas and from what we had reviewed with the institutions that we deal with, we don't see that problem. I don't know whether this gives you a better picture.

Okay, that helps. Thanks. And then secondly, observing that credit disbursements to Brazil are now in the low-single digits or in single-digits in general as a percent of total disbursement and that still Brazil comprises 21% of the total commercial portfolio, presumably the longer-term credits had original terms that were meaningfully greater than a year. So my question is, are new credit disbursements in Brazil very similarly long-term in nature that Brazil actually remains such a large part of the total commercial portfolio or else will the Bank be rolling off more of that exposure in future or else increasing its volume of shorter-term credit disbursements to Brazil to maintain its exposure to Brazil? Thanks.

Thanks, Ryan. Thanks for the question about the quality of the exposure in Brazil and the nature of the exposure in Brazil. As I mentioned in my initial remarks, we're going back to basics and basics for Bladex means financing short-term trade finance. So, in Brazil particularly, as I mentioned in the first question, our focus is in good credit quality names and focus on short-term trade finance.

So, the disbursements to Brazil, as you alluded to, in this quarter were very small. The total disbursement for South American countries excluding Colombia, Peru and Chile was just 15%. Being Brazil, a very small portion of that, only $94 million in terms of the disbursement and primarily short-term trade finance.

So that's our focus and if there is any opportunity with a company that has competitive advantage, that is not highly dependent on Brazil revenues, that is diversified and that presents to us an opportunity to do medium-term finance, we might consider. But I can guarantee to you, this is not our focus. And we will continue to monitor closely the exposure to Brazil.

As I mentioned in my first call of the year, commenting about 2015, I said if conditions do not improve, we'll continue to monitor our exposures and you see how relative exposure even reducing further because the good names we have in our portfolio, they pay and that's what we saw this quarter.

We had a net reduction in Brazil of $176 million, if I'm not mistaken, in terms of total exposure of Brazil. That is [only $94 million] in disbursements. So it means that we had payments in excess of $200 million to offset that small growth that we saw in Brazil or new disbursements rather, if you will, in Brazil.

So, be assured that our focus is short-term in trade finance and we're working to reduce the average life of the loans. But in Brazil, honestly, I'm very comfortable because 72% of the portfolio is trade finance and close to 60% of the portfolio matures within a year. So, you see that, if we decide to really hit the brakes, we can hit the brakes and reduce drastically our exposure there. Hopefully, as I mentioned in the other question as well, Brazil will have a change that will steer a new direction and tackling the structural reforms that can really help the country to change this vicious cycle the country has been in for the last year.

Thank you very much.

Catalina Araya, JP Morgan.

Hi, thanks. I just wanted to follow up, talking a bit about credit exposure. I was curious if you guys have an internal goal to increase your exposure in Argentina and what would it be -- right now it is around 3%. What would be a long-term goal for credit exposure in that country? Thank you.

Okay, Catalina. As I mentioned in my initial call of the year, the way we are looking at what's going on in Argentina and monitoring closely how the government can deliver on its campaign promises of really having market discipline and better management of the public finances. And so far, it seems that they are moving in the right direction. As I mentioned to you, we are very careful, we know how things can change rapidly in terms of risk perception, but what we seeing in Argentina, it's a transformation -- important transformation and a readiness and a political support to engage into the reforms that the country needs.

So being that the case, we have decided to, very cautiously, to do more business in Argentina. The business we are doing there are no more than a trade finance up to one year, because we have a lot of strong grain and agricultural exports in Argentina. This cycle start now, so that there will be demand for that type of growth. I think what's [relative] exposure in Argentina is there is $200 million, I would say that you could see that slowing growth -- growing to $300 million over the course of the next quarters. It's not something that's going to be huge at the beginning, but as the country improves, definitely we will move towards increasing. That would be what I call and I'd like to emphasize that back to the basics of Bladex financing trade and short-term trade.

Thank you, very clear.

(Operator Instructions) Zane Keller, Barrow Hanley.

Hi, good morning and thank you for taking my call. Actually I have two questions that I think are pretty closely related. The first is, what you plan on doing with the capital that you were deemed from the hedge fund, I think it's about $50 million. Is that a candidate for a special dividend or do you think you'll be able to profitably deploy it?

And then the second question, I think is very closely related is, if you look at the leverage for the Bank, it went down, I think fairly significantly for one quarter. How do you see that evolving going forward and do you think you can achieve a low-double digit ROE if leverage remains kind of depressed as it has been? Thank you.

Thank you, Zane for your question. First of all, you know that we are a bank that operates in an emerging market, 100% of our exposure in one particular emerging market. We are based in a country that doesn't have a Central Bank because it's a dollar-based economy. Therefore, we don't have a lender of [less resort].

So, and because of these components, we still -- we are wholesaler Bank, we don't have funds from retail depositors. So, all these things combined really require that Bladex, because of the nature of this institution, Bladex had, say a better capital base, so we could really continue to attract new funding, the necessary funding for our transaction. So, there is this consideration that we always need to take into consideration in terms of our capital base. That'll be always a little bit harder than the average bank in the Street. So that's an important consideration for us.

Second, I like to leverage the balance sheet as much as possible within this prudent management of the capital of the Bank. We are below nine times in terms of leverage. So you have seen in the past, Bank leveraging between, let's say 9 and 9.5 times, this would be a very comfortable leverage for us that we can consider, but as Christopher pointed out, because of abating considerations, risk weighted assets increased. And one of the things that we need to make sure is that, we are within the [tranche] of what we [breaking issues] is also understand in terms of the minimum levels of capitalization, which is the second constraint we have in terms of the trend of capital.

So, what I can tell you is, it's our target to leverage the balance sheet of the Bank. Unfortunately, we are in a situation, in an environment, that you need to be a little more careful, but our idea is really to push to deploy this capital as soon as possible and as safe as possible.

Secondly, the Bank in the past provided its shareholders with extraordinary dividends, as you asked before even buyback programs. At this time, at this juncture, we think we have strong capital base and it is important for us to really go through this more challenging times for Latin America. And as we move out of this and we see how much we can deploy.

If we get to a point, we understand that we need to return capital, then the Board has very clear guidelines about this as well. But our objective today is to make sure we have a strong capital base to support our transitioning in this more challenging period of Latin America so we don't have any regulatory problems, we don't have any rating agencies issues, and then we deploy safely that are ready to use this capital as soon as possible.

Great. Thanks for the detail. I guess, just a follow-up on that. If you look historically, the Bank has generally increased its dividend or review the dividend in November. Is this is a, I guess, ongoing process or is this something that the Bank looks at just once a year? Can you just give me a sense of how often that the dividend would be reviewed and possibly considered for an increase?

Okay. Our dividend policies today [always] dividend. And we'll review that on a quarterly basis and that's based on the results of the Bank. Unfortunately, in the last two quarters, you have seen that we have been hit by these non-recurring losses and that the Board understood that it was advisable at this moment to keep the actual level of dividends. But as we see the progress and that has been our commitment to our shareholders, we will share increasingly the results of the Bank with yourselves. So, as we deliver and present this good results and that's what we are aiming at, we will be able to increase the dividends.

Okay. Thank you.

(Operator Instructions) At this time, I'm showing no further questions. I will now return the call back over to Mr. Amaral.

Thank you, Katie. Thank you all of you to attending our earnings call today. As I mentioned initially, we're very pleased that the trends, the core trends of our business are solid and we're providing you with good returns and we'll be working diligently to leverage the balance sheet of the Bank in a prudent and safe way and we'll be sharing with you the results of this as we have been doing always. So thank you, ladies and gentlemen. Have a good day. I'm looking forward to talking to you for the second quarter of 2016.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.