*Panama-based Banco Latino-Americano de Comercio (BLX) reported today on its Q2 results. Profits came in at $22.3 mn, up 65% y/y but down sequentially from Q1 by 5%. More importantly, missing the consensus analyst forecast (Capital IQ) of 69 cents with EPS of 57 cents. H1 profits came in at $50.2 mn, up 15% y/y, or $1.28/sh. The Q2 culprit was provisioning for impaired and unpaid loans. The bank also boosted its earnings in the quarter when its divestiture of investment funds took place producing a modest $200,000 capital gain, while higher fees, spreads, and interest charges plus strict controls on operating expenses, cutting them 13% y/y also helped s the bum loans. Fees were up 43% y/y and a remarkable 87% sequentially, thanks to 5 loan structuring and syndications in the quarter, reported on as they happened.

Commercial lending was where the losses hit most and BLX is “rebalancing” its portfolio by cutting certain countries (like Brazil), industries (oil and gas, sugar), and clients from its roster. Iit is also making efforts to shorten the term of its exposure. In one case (I guess for a Venezuela borrower) it is trying to recover its money through the courts. As its size increases, the impact of any one bad loan goes down but that still doesn't make BLXor its shareholders happy about the losses. As a multilateral trade finance bank part owned by Latin, Caribbean, US, Canadian and European bodies like Ex-Im and central banks, it has a development role as well as a bankerly one.

Business annualized return on average equity (ROAE, a key banking metric) hit double digits for the first time in the last quarter, but its business and total efficiency ratios sank 7 basis points and 5 bp respectively, to 26% and 28% from prior /F2 . This is another key metric. Another thing Bladex did was cut performance-related compensation.

Fitch reiterated BLX's BBB+ rating,while S&P affirmed its BBB/A-2 rating, and Moody's its Baa2/P2 ratings. The former is for international and is called stable. Banco Latino has a 15.6% tier 1 Basel III capitalization ratio, the highest among the banks we own. A dividend of 38.5 cents was declared. The share fell 3.67% despite this. More banking info below.

Oil & Gas

*BP plc reported a 3^rd quarterly loss in a row, $2.25 bn, in Q2 and the stock lost over 3% in London today. The reason was more fines over the 2010 Deepwater Horizon which cost $5.2 bn pretax in the latest quarter. The total paid out now according to BP hit $61.6 bn (also pretax; about half the bite actually is paid by the taxman). CEO Bob Dudley stressed that future profits will no longer be nipped by the Macondo disaster going forward. He also announced spending on upping its output by another 800,000 bbls/ by 2020, a new move toward growth after years of paying for the disaster, which killed 11 rig workers and spilled millions of barrels of oil into the Gulf of Mexico.

Not all trouble came from Macondo, however, as the upstream profits BP had been booking to offset the lower price of its crude now also reversed. Refinery margins in Q2 hit a new low since 2010b while exploration and production continued to lose money,again, at the rate of $109 mn (before tax) in the last quarter. The average price of Brent crude, despite recovery from the start of the year, was at $46/bbl in Q2 vs $62/bbl in Q2 2015. Now CEO Dudley forecasts that oil will get to $50-60/bbl on average next year.

BP is also cutting costs and manning levels. It has cut costs $5.6 bn in the last 4 quarters and wants to take them to $7 bn under the 2014 level by the end of next year. A North Sea oil workers strike now and other impediments like new shut-in regulations there may hinder the cuts, which in any case are now mostly in place. BP is off 0.9%. Mr Dudley, an American, says he has no plan to step down because it is finally getting to be “more satisfying to work with BP” now that the company is looking beyond the disaster he was brought in after the 2010 mess and poor reactions by the former management to help BP move forward, as it now will do.