Foreign Trade Bank of Latin America Inc (BLX) 2017 Q4 法說會逐字稿

Hello, everyone, and welcome to Bladex' Fourth Quarter 2017 Conference Call on this 9th day of February, 2018. 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 and on the bank's corporate website at www.bladex.com.

Joining us today are the following executives of Bladex: Mr. Rubens Amaral, Chief Executive Officer; Mr. Gabriel Tolchinsky, Chief Operating Officer and incoming CEO; and Mrs. Ana Graciela de Mendez, Chief Financial Officer. Their comments will be based on the earnings release which was issued earlier today. 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.

And with that, I am pleased to turn the call over to Mr. Rubens Amaral for his presentation.

Thanks, Chantelle. Good morning, everyone. Thanks for joining us this morning. I'm very pleased today to have with me Gabby and Annie -- our Chief Operating Officer, Gabby, and incoming CEO; and Ana Graciela, our new Chief Financial Officer. We structured this call a little different this time to provide you with information about not only the bank but what's going on with the transition. Ana Graciela will provide you with the details of our performance, and then Gabby will provide you with his views of how to take the bank forward.

But let's go to the earnings result. Earlier today, we reported earnings of $20.6 million for the fourth quarter or $0.52 per share. The full year results reached $82 million, representing a return on equity of 8%, return on assets of 1.3%, a strong capitalization with a Tier 1 capital ratio at 21.1% and nonperforming loans ratio down to 1.07%. As you see in the press release, the fourth quarter results continued the positive trends of our business that we reported in the third quarter.

Let me comment on the main highlights in Q4. The credit portfolio was up by 5% at year-end, and average balance is up by 3%. This reaffirmed the more favorable environment in Latin America, which led to increased deal flow and contributed to the reversal of the trend of declining balances we observed in previous quarters. This performance was achieved as we derisked the portfolio throughout 2017.

Our credit disbursements reached almost $4 billion in Q4, bringing the total annual disbursements to $14.6 billion, a strong growth of 21.9% when compared to 2016. The reason the disbursements didn't translate into higher balances as expected was primarily due to the high levels of liquidity available to the region in 2017. To provide some color about how this liquidity impacted our performance, we experienced a higher-than-normal level of prepayments in 2017, reaching a total of $945 million for the year. I'm referring only to transactions with original maturities in 2018 and beyond.

Total income was up by [11%], led by [76%] increase in fee income and included a solid performance of our syndications platform, posting a solid growth year-on-year of [18%]. Operating expenses were up by [31%] due to nonrecurring severance costs associated with the streamlining of our operations. Ana Graciela will provide you with more details about this nonrecurring costs.

As far as NPLs are concerned, we have concluded last quarter a renegotiation with a Brazilian company, which was perfected in Q4. Because of the IFRS 9 rules, we had to reclassify this exposure from underperforming to nonperforming with a reserve impact to NPLs. We have also decided to charge off a few credits against existing specific reserves. Ana Graciela will provide you more details about the movements in NPLs, but it's important to emphasize that we don't have any, and I repeat, any new credit with problems, and we continue to work diligently to collect the charge-off transactions.

So as you can see, we did perform well during the quarter, as promised last quarter. And although the overall results for the year were below last year's net profit, the positive performance this past quarter continues the trend we saw in the third quarter and positions our bank to benefit from the more favorable economic environment worldwide and particularly in Latin America, as mentioned, again, in our previous call.

While 2017 was yet another challenging year for Bladex, I am pleased that we have been able to overcome the negative credit cycle of the last 2 years. And now with a strong and cleaner balance sheet and the more favorable economic trends in Latin America, I am convinced the bank is prepared to return to higher levels of profitability as our book of business expands.

With our board's approval, we implemented in Q4 a plan aimed at streamlining our operations. The objective is to improve efficiency and productivity throughout the organization, benefiting from investments in technology and better processes. The plan focuses on a more centralized management model, with head office providing the administrative and risk management support to the representative office -- offices, thus allowing these offices to focus primarily on origination. We believe that this action will make us more efficient and will give us greater flexibility to respond to demands of our client base.

As already announced last December, we put in motion our CEO succession plan. After a lengthy process of selecting candidates, Mr. Tolchinsky, our current Chief Operating Officer, was selected as the new CEO and will take over as CEO of Bladex this coming April. Gabby has extensive experience in international capital markets, particularly in Latin America, and has been associated with Bladex for the last 2.5 years, working initially as a full-time consultant and, since April 2017, as our Chief Operating Officer. Gabby knows the organization well, and I am certain that he will continue to strengthen our business model, diversify the revenue stream and contribute to higher returns to our shareholders.

We're experiencing a seamless transition process, and we are organizing road shows to the West and East Coasts to meet with shareholders. We'll be attending the meetings of the Inter-American Development Bank in Argentina to meet with our clients and funding providers. I normally talk about the prospects for the year, but as alluded to in my initial remarks, I have asked Gabby to do so this time.

Let me also say that I'm very, very pleased to have Ana Graciela taking the leadership as our Chief Financial Officer. She has been with the bank for over 25 years and knows very well the organization, our numbers and accounting functions very well. Annie has been a star in our organization and has well deserved her promotion. And in a more personal note, it gives me great satisfaction to see her ascending to this very important and key position in our organization. Lastly, the Board of Directors has maintained a dividend of $0.385 for the fourth quarter of 2017, again highlighting their confidence on our business model and our capacity to maintain and increase profitability.

Before I turn the call over to Ana Graciela, I want to say that I have great confidence in our future. We have good momentum behind us. We left -- we have good momentum ahead of us, I'm sorry, which will be -- I believe, will continue. Also, we have an outstanding staff of professionals who work hard every day on behalf of our customers and shareholders. I'm sure that with this combination, we will be able to return to higher levels of productivity and, thus, profitability.

With that, I will now turn it over to your maiden voyage, Ana Graciela. Annie, please?

Thank you very much, Rubens, and good morning, everyone. I am honored to speak to you this first time as CFO on our bank's results for the fourth quarter and year 2017 and certainly look forward to continue on an open and transparent format of communication going forward. Now I will go over the most relevant aspects driving our quarterly and annual results, making reference to the webcast presentation that had been uploaded in our website and to the earnings report released earlier today.

Now please refer to the bank's financial performance overview on Page 5 of the presentation. The bank achieved a solid quarter-on-quarter commercial portfolio growth of 5%, supported by increased origination of 9%, reversing a 2-year downward quarterly trend. Credit demand strengthened toward the end of the year, and we saw economic outlook improve for the region. Net interest income and financial margins were positively impacted by improved earning asset yield and a more favorable mix towards higher average loan volumes during the quarter. Nonetheless, we continued to experience pressure on lending spreads for shorter tenors, combined with high levels of U.S. dollar liquidity in key markets.

Our funding remains solid and diversified across geographies and tenors. We continue to experience inflows of low-cost deposits, along with overall low average spreads paid on borrowings. A narrow interest rate gap structure enable us to pass along increases in our base funding rates, that is LIBOR, to our asset-based rates. In general, our asset liability structure tends to benefit net interest income in a rising interest rate environment.

Fee income showed strong quarter-on-quarter and annual growth. Our restructuring and syndications desk continues to put forth a solid pipeline and delivered 2 closings during the fourth quarter for a total of 7 closed deals in 2017. Fees also benefited from increased letters of credit activity. The bank continues to diversify its LC client base, congruent with the focus of deepening our participation in the trade value chain.

The net effect of the items listed before was higher net revenues by [11%] quarter-on-quarter, reversing the downward trend experienced in prior quarters. The bank's credit quality improved, with NPL levels reduced to 1.07% of total loans at year-end from 1.20% at the end of the third quarter. Provision charges on expected credit losses were substantially lower both in the fourth quarter and full year 2017 with respect to the year before, reflecting the combination of some restructuring negotiations and a better overall credit environment.

We remain committed to our focus on cost reduction and high productivity throughout the organization, as reflected in lower non-salary-related operating expenses during the year. Our personnel costs were mainly impacted by nonrecurring severance-related expenses as we rightsized our organizational structure to gain efficiency and reduce costs.

Profit totaled $20.6 million with an ROE of 7.9% in the fourth quarter 2017, relatively stable quarter-on-quarter and substantially higher than a year ago, mainly on lower credit provision charges. Profits for the year 2017 reached $82 million, a 6% reduction year-on-year. 2017 results were positively impacted by lower credit provision charges and by the absence of noncore trading losses on the bank's former participation in investment funds. These positive effects were mainly offset by lower net interest income from reduced average loan balances and narrower lending spreads. Subdued loan origination and tighter spreads in 2017 were driven by an effort to reduce unwanted exposures to certain countries, industries and clients, along with the focus toward short-term lending. ROE reached 8.0% in 2017, with strong capitalization levels of 21.1% Tier 1 capital ratio, according to Basel III methodology.

Moving on to Page 6. We present the net interest income and margin trends on a quarterly and annual basis. As you can appreciate, downward trends throughout 2017 showed a reversal in the last quarter of the year. Net interest income and net interest margin reached $28.1 million and 1.78% in 4Q '17, respectively, a 1% and 2 [basis] points quarter-on-quarter increase and a 25% and 27 basis points decrease year-on-year, respectively. For the year 2017, net interest income totaled $119.8 million and net interest margins stood at 1.85%, a 23% and 23 basis points year-on-year decrease, respectively. As we noted in the lower left graph, for the year 2017, lower net interest income was mostly attributable to lower balances and tighter net lending spreads. As mentioned before, LIBOR rate's upward repricing impacted both the earning asset side and financial liability side, having a net positive effect on net interest income year-on-year.

Now on Page 7, we present fees and other income, which total $6.6 million in 4Q '17, representing a strong 76% and 40% quarter-on-quarter and year-on-year increase, respectively. Fees and other income totaled $19.4 million for the year 2017, an 18% increase year-on-year. Fees from letters of credit and contingencies, which represented 56% of total fee and other income in 2017, increased by 28% year-on-year while loan structuring and syndications continued its upward trend in fee generation with a 14% increase year-on-year.

In the next slide, on Page 8, we present Commercial portfolio composition, denoting relatively stable country exposure participation, except mainly for Colombia and Peru. Colombia's exposure increased from 11% to 15% of total portfolio, reflecting the onboarding of new clients and the closing of some relevant transactions towards the end of the year. Peru, on the other side, decreased from 8% to 4% of total portfolio as the bank privileged risk-based pricing over volumes. Portfolio tenor was reduced during 2017, with 81% of total exposure maturing within the next year at December 31, 2017, compared to 77% a year ago. Industry exposures remain well diversified across regions, with a predominant exposure in the financial institution sector, representing 49% of total commercial portfolio adherence in 2017; followed by an overall oil and gas sector that is integrated upstream and downstream combined, which represented 14% of total exposure.

On Page 9, evolution of credit quality indicators is presented, depicting a decrease in NPL levels at year-end 2017, with a balance of $58.8 million, a 10% year-on-year decrease, representing 1.07% of total loans with ample reserve coverage of 1.5x. This reduction was attributable to a successful collection of the reminder (sic) [remainder] of an NPL exposure in Panama, together with write-off of certain exposures against existing individually allocated reserves as a result of finalized renegotiation agreement and a migration of one exposure in Brazil from underperforming with existing individually allocated specific reserves under IFRS, Stage 2, to NPLs, Stage 3, also resulting from finalized restructuring agreements. Allowances for expected credit losses were reduced by 21% to $88.1 million, representing 1.47% of total commercial portfolio, mainly as a result of lower NPL balances during 2017.

On Page 10, we present the composition of the bank's funding sources, denoting a well-diversified geographic exposure throughout the world with a stable base of deposits representing 59% of total funding, the majority of which comes from our Central Banks Class A shareholders.

Finally, on Page 11, you can see our stock price evolution up to December 31 as compared to our book value, which stood close to 1x at year-end. In January of this year, as Rubens mentioned, the board maintained the same level of quarterly dividend, representing a [74%] payout ratio for 2017 earnings, signaling a reassurance of the bank's solid business model and future earnings growth potential.

I will now turn the call over to Gabriel for his comments. Thank you.

Thank you, Annie. Good morning. It's a pleasure to address you in this conference call. This is my first earnings call since having been nominated to take on the CEO position, and let me say from the outset I'm truly honored by the nomination and look forward to many more opportunities to talk about the results that Bladex delivers to shareholders.

The challenge of leading an organization like Bladex, I believe, is to be both mindful of its story, the crucial role that Bladex played as a conduit between the international capital markets and the financing of Latin American trade, particularly during years in which capital was not flowing to the region, and of the need to develop growth strategies that will enable us to more consistently deliver double-digit return on equities to our shareholders. In my opinion, these goals are not mutually exclusive. In fact, strengthening the legacy aspect of our bank, ensuring the continuity that our clients and our shareholders expect is consistent with what is and will continue to be Bladex' secret sauce: strong client relationships and regional scope for valuing Latin American credit risk.

As I mentioned before, I'm proud to be part of such a storied and prestigious institution. Bladex' mission and vision statement have somewhat evolved over the almost 40 years the bank has been operating, but they've always been centered around the financing of Latin American trade transactions and regional integration. We have under our belt 40 years of operating in more than 19 jurisdictions in Latin America and the Caribbean, in just about every industry sector during very diverse economic cycles. Turning portfolio of loans over more than once a year gives us a wealth of data for valuing what we call the Latin American risk matrix. Bladex is originating trade and trade-related loans every day, contributing to Latin American growth and development, and we will continue to do so in the future.

We expect good things in terms of economic growth for Latin America in 2018. As Rubens noted, both the World Bank and the IMF have revised upward their projections for economic growth in Latin America for 2018, and we are positive about our capacity to participate in that growth and deliver value for our shareholders. But the supply chain has evolved, and Bladex needs to evolve with it. In 2018, we intend to strengthen our operating platform to enable us to do more with our clients and to enhance our value proposition to get new ones. We have strengthened our operations and technology areas with key hires, and we are currently working on improving our work processes to more efficiently serve clients and process transactions. We will continue our drive to generate fee income through letters of credit, syndicated transaction and structured trade financings. That said, our goal is to offer our clients comprehensive solutions to the financing of the trade value chain and be able to implement programs such as discount portfolios of international invoices, portfolios that can be eventually securitized to generate additional fee income.

As CEO, I intend to introduce productivity parameters to our origination force and the rest of the organization. A culture of continued improvement require measurement sticks that analyze what works and what doesn't, where we should be deploying more capital and which lines of business we should be exiting. Control of our cost structure will continue to be an integral part of our effort to deliver shareholder value, but it's also the only way Bladex will be able to compete with the onslaught of lower-cost financial service providers.

One of the crown jewels of Bladex is our credit underwriting standards. But in today's environment, risks have several dimensions: compliance, operational, cyber. Operating within the context of a risk-based framework is a discipline of controls that Bladex takes to heart and will continue to be a focus for improvement during my tenure. In short, we have big plans for the bank. Many of the seeds that we will be -- that we believe will grow in the next few quarters and years have been planted under the leadership of Rubens Amaral. I've had the privilege of working closely with Rubens over the past 2 years. He has not only groomed me for the CEO job. He has also helped me understand the drivers of success for our bank and the areas for potential improvement. Recent changes implemented at the bank reflect our combined view of the future. Bladex today has an efficient operating structure and excellent team of professionals leading it.

Let me finish by thanking Rubens for his leadership during these last 6 years, and thank you all for continuing to support Bladex. Back to you, Rubens.

Thanks, Gabby. Thanks, ladies and gentlemen, for your patience today with a little more information from our side. But we are now ready for your questions, and hopefully, we can have the answers.

(Operator Instructions) Our first question will come from Tito Labarta, Deutsche Bank.

A couple of questions. You saw some decent pickup in loan growth in the quarter. I just want to -- given the global economy improving, what kind of growth can we expect this year in loans? And kind of along those lines, you have a very high capital ratio today. I know, in the past, you've talked about increasing dividends only when your core results improve. But given the high capital base and relatively low ROE today, does it make sense to pay some additional dividends to reduce that capital base, particularly if you're not going to grow significantly? So I just want to understand those dynamics. And then also a second question in terms of your asset quality. You mentioned -- no real concerns, you mentioned. But how quickly can asset quality improve as things get better? And what does that mean for your provision levels this year?

Okay. Tito, thanks for your question. I will give you an overview. And then as far as what we plan for 2018, I will defer to Gabby so he can answer that part of the question. Definitely, we have a more favorable environment in Latin America. That bodes well for Bladex. We have seen that picking up in the fourth quarter. In fact, if you remember well, in all our calls this past year, Tito, I alluded to the fact that disbursements were increasing quite rapidly, but unfortunately, we had a lot of prepayments. If you combine -- just to give you a sense of what it means. If we combine what I said in my initial remarks, the prepayments of maturities in 2018 and beyond to the prepayment that we had within the year, it's in excess of $1.5 billion. So it is really important to that take -- to take that in consideration because if that was not the case, our balances would be reflecting a much different story at the end of 2017. So that's why, at the end of the day, we end up with a much stronger capitalization than we would have liked at the end of 2017 of 21.1%. So having said that, everything that we are planning is to put that capital to good use. You know this bank, and you know that we have been in this process of derisking the portfolio for the last 2 years, very focused on short-term trade finance and renegotiating all of the problematic credits we had in the last 2 years. So our focus was much more in cleaning and strengthening the balance sheet so we could grow. We have the basis now to grow. We have a favorable environment to grow. So I'm pretty sure what Gabby has in his hands is a tremendous opportunity to make it happen. So having said that, I will ask Gabby to comment on his views in terms of growth and his views in terms of what we're going to do with the capital.

Thank you, Rubens. Well, let me start by saying I believe that overall growth expectations for Latin America are around 1.9%, somewhere around there. I think that, for all the reasons that Rubens alluded to, we are in a very good place to be able to not only participate in that growth but maybe also apply a multiplier. I don't know if we're going to be able to -- although, certainly, we will try to stay within our standard 3 to 4x multiplier effect as it relates to GDP growth, but we definitely are in a very good position from a balance sheet strength perspective to be able to start growing very nicely as credit demand in the region starts picking up again. I think we see positive things happening in major economies like in Brazil, but we also have a few warning -- potential warning areas that we should be mindful of. We have an election in Mexico coming up, things that we should be quite mindful of. And one thing that we definitely intend to continue is a very prudent risk management approach and very solid overall risk underwriting methodology. So as such, we're going to grow with overall increase in overall demand, but we're going to do that in a very prudent way. Now as far as capital base, we definitely have a challenge in front of us to be able to deploy more of our capital. We intend to do so. And I think, if I may, to get a little bit of a honeymoon as far as plans to return capital, let me first try to see if we can actually deploy it successfully in the next couple of years so that, by then, we'll be able to see if, indeed, we have too much capital and we need to return some to investors or we are able -- we've been able to grow our book of business to reflect our capital level today and what will be our capital level in the future, which, hopefully, will grow with retained earnings.

And just adding, Tito, to that. If you add what Gabby just commented to my comments about the prepayments, then we see that, eventually, depending on what happens in the more developed world in terms of tapering of the fiscal stimulus in different parts of the world, this liquidity should be less. And if this liquidity is less, then we shouldn't experience the same high level of prepayments, which can really help us in deploying this capital.

Great. And the second question regarding asset quality and provisions, how do you see that evolving this year?

Yes. Okay. So -- I'm sorry, I forgot that point, Tito. Thanks for reminding me. We -- in my comments and in press release, we're talking about a cleaner balance sheet, and we are very pleased with all the restructuring that we engaged in. And we see the credits really now in the process of undertaking the collection that will happen over time. And sometimes, these negotiations, they have grace periods that we need to wait, but overall, they are moving quite well. Ana Graciela mentioned that we finalized one important credit recovery in Panama. That was very good for us. So that was real recuperation of a credit. And we see a few other actions being taken in other countries where we could get back some of the exposure we had in these countries because of the guarantees we have been able to get and eventually use these guarantees to recover portion of this credit. So I think as far as the restructuring process and collection process goes, you can expect 2018 to provide us with positive or good surprises. As far as the traditional provisioning, you know that our provisions will vary according to the loan growth. And we are in the coverage ratio of what we call the generic reserves for the portfolio of around 1%. That reflects quite well our probability of default. But eventually, because of this negative cycle, we need to continue to reinforce that. So we will continue to adjust provisions according to our growth with a bias towards really strengthening the cushion we have in provisions so if something happens, we are well covered. So it is the function of the growth, and hopefully, we're going to have good growth this year. And then you're going to see healthy provisions being generated, not the kind of provisions that we -- you don't like and we, even less, that is specific reserves for problematic credits.

Our next question will come from Yuri Fernandes, JPMorgan.

Just a follow-up on Tito's question on loan growth. I heard Gabriel mentioning a 3 to 4x multiplier. That's based on the real GDP, right, for like the region? That's the first question. The second question is about the margins. If you can provide some outlook for 2018, if you can see the NIMs coming back from the current 1.8% back to the 2% level or something like this as the outlook seems to be more favorable. That's the second question. And third, on expenses, I get confused on your speech on G&A. On one hand, I understand that you are focused on cost control, and this has been the case for 2017. But you also see some investments on a better operating platform. That, I totally understand. I think that's super important for the company. So with those 2 things in consideration, can you provide some guidance on your G&A, how you see efficiency? Because my view here is that, as your top line recovers, we should see efficiency coming back to the 30 -- low 30% level or maybe high 20% level. So just if you can comment if that rationale makes sense and how you're seeing expenses evolving.

Thank you, Yuri. Let me tell you, first of all, in terms of growth, what Gabby alluded to was that normally trade flows grow a multiple of the underlying GDP growth of 3 to 4x. So we were talking about the trade flows growth of 8%. And then normally, it's a good proxy for you when you look to the growth of the bank. And moving forward, the bank will really benefit from the more favorable environment and will put its workforce to really work on origination, as I mentioned in my remarks. That's why we did this restructuring within the bank, so we could really leave the people at the offices to do the origination and to get to that level of growth that we all expect the bank to have moving forward. So in terms of margins, I think we are forecasting for the year very stable margins because, at the end of the day, when you do, as we did in the last 2 years, a more focused approach on short-term trade finance, your margins naturally come under pressure. But as the scenario improves, the environment is more favorable, and we really can look at the regional integration and work more with the companies and their medium-term needs that is important for the margins and then can really help us to have some adjustment up in the margins. In terms of funding, we have a very stable funding base. Our cost is very stable. You saw that we have increased our deposits. That is very important in terms of the cost structure. We have, coming from the funding then, just impacts of the base rate that are -- because of the way our assets and liabilities are structured, they are really absorbed immediately and then, as Ana Graciela has mentioned before, impacts well. So we see a combination: a growth, a stable margin and NIMs picking up a little bit. It's going to take, I think, some time for us to go back to the 2% level that you asked. So let's see how we perform in the following quarters. But that is our objective because our business model will work with this NIM of 2%, ideal target. As far as expenses are concerned, we had this specific nonrecurring item, as you mentioned, and you're totally right in your line of thinking. We are focused on increasing our top revenues and then make sure that we go back to the levels that we have seen before. But I think, since this is all forward-looking, I want Gabby to complement and give his own personal views, how we're going to accomplish growth, margins and expenses.

Thank you, Rubens. Yuri, I would say, in answer to your question, yes, the -- what I was referring to, the potential for a multiplier, that would be on real GDP growth, not nominal, of course. And Rubens explained that well as far as the relationship between GDP growth and overall growth in trade flows and how that often becomes a proxy for the development of our loan book. So I think our expectation is margins could continue to be somewhat under pressure, but it's sometimes very difficult to tell in an environment where the pie grows overall. We all know that when the pie is not growing and the market has significant liquidity, then it becomes a very hypercompetitive, almost, environment, in which everyone is trying to put their balance sheet to work. Needless to say that once we get going in terms of economic growth, that should relieve somewhat the pressure then that we've seen on overall lending spreads. Have we seen that materialize yet? Not to the full extent. We've seen some of that in the fourth quarter. But needless to say, we'd like to see more of it. In terms of overall expenses and our focus on cost control, the bank has made quite significant investments in technology over the past few years. And I think the angle that we're bringing to the equation is efficiencies through a workflow -- through workflow processes and procedures that better enable us to use some of the technology that we've acquired over the past few years. So we don't expect expenses to be impacted by the acquisition of new technology platforms. We just want to work better and really put a lot of emphasis on the way we work to better take advantage of the technology we have in front of us. So in terms of expectations for efficiency levels, it is definitely our goal to bring down efficiencies below the 30% level, and that's something that we're very keen on seeing again.

Super clear, gentlemen. If I may, a last one, and I guess, this is an easy one. On ROEs, I get that the one you are putting here is for a better 2018, and I guess, macro will help. But looking to ROEs, do you think it's the year that the ROEs will go back to the double-digit levels, like close to 10%, something like this?

We will definitely do our best. It is our goal to deliver double-digit ROEs for our investors and for our shareholders. And it is -- it becomes very much a function of being able to deploy our capital efficiently. We are seeing the green shoots as it relates to overall growth in the economy, and that gets us very positive. And we believe that we are in a very good position to take advantage of that growth. So it is our expectations that we should be able to start delivering double-digit ROEs. Again, I hope that becomes sooner rather than later.

Our next question will come from Greg Eisen, Singular Research.

I want to focus on the expenses from this past quarter. The salaries line and the other expenses line were on the high side versus what you've averaged. Could you tell us how much of those 2 categories were nonrecurring items in terms of how we should look at the future, I mean? And then I have a follow-up on that.

Okay. I'll take that, Greg. In terms of salary, you could consider most of the increase as part of the nonrecurring line. And with respect to other operating expenses, we usually have a seasonally higher fourth quarter, which then translate into somewhat lower quarterly expenses in the third quarter and first quarter of the year. And that's basically due to an increased invoice coming into the bank towards the end of the year. It's really seasonal. If you see the behavior -- the historical behavior, that's usually the case, and that pretty much explains why there was an increase in other expenses with respect to third quarter, which was particularly low. So when you look at the annual basis, that's what you should be looking at. We don't expect, overall, to increase both in neither one of those line items going forward. But you do see some seasonality when it comes to quarter-on-quarter analysis. Overall, for the year, if you take out the $3.2 million that we put aside on this restructuring that we went through in 2017, you actually see a 4% decline in overall expenses year-on-year, and that is a trend that we are actually looking for, at least to maintain the same level or even be able to reduce the level of expenses going forward.

Okay. So the total restructuring cost then were $3.2 million, if I look at it versus -- for the whole year?

For the whole year, correct.

Right. And as a follow-up to that, do you, right now, anticipate any nonrecurring salary costs to be booked in the first quarter of 2018 as a result of the changes that you've made internally?

No. The -- actually, we already -- all these changes that we have made were -- the expenses related to that, we took those on the last quarter of last year. So we don't anticipate for the first quarter to have any additional restructuring charges on that.

Rubens was kind enough to leave me the savings and take the hit in 2017.

Very good, very good. Turning to the credit losses. You have multiple line items in the whole credit provision section. One of the line items is provision for losses on off-balance-sheet financial instruments. That number this quarter was $2.01 million. Could you explain what that was -- what was behind that this quarter? That was far greater than the normal -- just the loan loss provision, which was a reversal.

Right. Yes, we usually -- we actually usually analyze both those line items together, and we see that as overall commercial portfolio reserve. But you're right, the off-balance-sheet really relates to letters of credit, and we did see some upward trend in the LC balances towards the end of the year. So it's a natural shift from one quarter to the other. In terms of the growth that we experienced this particular quarter in certain countries, that -- by nature, the countries that do use the LC business are usually high risk. So any growth would probably have an impact on reserves, and that's basically the reason why we increased those reserves. Overall, when we look at the reserves of the portfolio, they remain relatively stable.

Okay. So that part of the provision was not a specific loss provision but rather an unallocated provision, if I read you correctly, based upon the growth in the LC balances?

That is correct. That is correct.

Good.

Yes. That's part of the general -- what we call Stage 1 under IFRS 9, normal provisional requirement. It related to, as Rubens alluded to, the normal growth of the portfolio.

(Operator Instructions) Speakers, at this time, we have no questions in the queue.

Okay, Chantelle. So ladies and gentlemen, thank you. Thanks for your attention today. And as I bid farewell to this organization, Bladex, dear to my heart, I would like to thank you for your support and confidence throughout the last 6 years and express my gratitude to the Board of Directors and a special thanks to the talented people that make Bladex a leading financial institution in Latin America. Thank you very much. Have a great day.

Ladies and gentlemen, at this time, this conference has now concluded. You may disconnect your phone lines, and have a great weekend.