Bladex Points to Risky Lending Conditions as Profits Fall

The hardest thing for banks to do is make smart loans when asset prices are soaring. When economic conditions are strong, lenders are tempted to stretch their credit quality guidelines, sometimes leading to problems like the financial crisis in 2008. Banco Latinoamericano de Comercio Exterior (NYSE: BLX), also known as Bladex, doesn't want to fall prey to an asset bubble in Central and South America, but being reluctant to lend on marginal projects has made it increasingly difficult for the Panamanian bank to find promising opportunities in which to invest its assets.

Coming into the bank's third-quarter financial report, Bladex shareholders were expecting some declines in revenue and profits, but the extent of those drops was somewhat greater than most had anticipated. Nevertheless, Bladex seems optimistic about its future, and investors appear to accept that the greater safety from maintaining high credit quality is worth accepting weaker internal returns within the bank's operations.

Image source: Bladex.

Source: Fool.com