FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of Dec. 2007

Commission File Number: 001-14554

Banco Santander Chile
Santander Chile Bank
(Translation of Registrant’s Name into English)

Bandera 140
Santiago, Chile
(Address of principal executive office)

          Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 
Form 20-F
x
 
Form 40-F
o
 

          Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 
Yes
o
 
No
x
 

          Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 
Yes
o
 
No
x
 

          Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

 
Yes
o
 
No
x
 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A 
 





Table of Contents

Item
 
 
 
 
 
1.
Material Event published on July 30, 2008 (English translation)
 
     
2.
Second Quarter Earnings Report published on July 30, 2008 (nominal terms)
 
     
3.
First Half 2008 Earnings (Spanish version, real terms)
 

2




Material Event
 
In the Board meeting held on July 29, 2008, the appointment of Vittorio Corbo Lioi as a new Board member was ratified.

In the same Board meeting, Lucía Santa Cruz was appointed as the new member of the Bank’s Audit Committee, replacing Benigno Rodríguez Rodríguez.
 



 
INDEX

SECTION
PAGE
   
SECTION 1: SUMMARY OF RESULTS AND STRATEGY
2
   
SECTION 2: VOLUME GROWTH
6
   
SECTION 3: ANALYSIS OF QUARTERLY INCOME STATEMENT
8
   
SECTION 4: SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL
16
   
SECTION 5: CREDIT RISK RATINGS
17
   
SECTION 6: SHARE PERFORMANCE
18
   
SECTION 7: INSTITUTIONAL BACKGROUND
19
   
ANNEX 1: BALANCE SHEET
20
   
ANNEX 2: YTD INCOME STATEMENT
21
   
ANNEX 3: QUARTERLY INCOME STATEMENT
22
   
ANNEX 4: QUARTERLY EVOLUTION OF MAIN RATIOS AND OTHER INFORMATION
23
   
ANNEX 5: QUARTERLY EVOLUTION OF BALANCE SHEET
24
   
ANNEX 6: QUARTERLY EVOLUTION OF INCOME STATEMENT
25
   
ANNEX 7: NEW ACCOUNTING FORMAT
26

 
Santiago, Chile
Robert Moreno
 
Tel: (562) 320-8284
Manager, Investor Relations Department
 
Fax: (562) 671-6554
Banco Santander Chile
 
Email: rmorenoh@santander.cl
Bandera 140 Piso 19,
 
Website: www.santander.cl
 
Investor Relations Department
1
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 




 
SECTION 1: SUMMARY OF RESULTS AND STRATEGY

Second Quarter 2008 Results Summary
* Core revenues: Net interest income + fee income
** Net operating income: Core revenues + provision expense + operating expenses + market related income + other operating income, net

In 2Q08, net income attributable to shareholders totaled Ch$78,440 million (Ch$0.42 per share and US$0.83/ADR) decreasing 2.5% YoY. Core revenues increased 24.3% YoY and net operating income increased 6.1% YoY. These strong operating trends in 2Q08 were offset by higher costs and a larger loss from price level restatement compared to 2Q07, both negatively impacted by rising inflation. Net income increased 3.7% QoQ with a 14.4% rise in core revenues and a 14.7% increase in net operating income. ROAE in 2Q 2008 reached 23.2% compared to 21.6% in 1Q08 and 25.8% in 2Q07. We have the highest ROE in the Chilean financial system.

Results in 2Q 2008 were in line with our strategy, which in 2Q08 was fine-tuned in order to align it with slower expected economic growth. The main strategic objectives set in 2Q08 for the next 18 months are the following:

1. Proactive management of the balance sheet.

· Selective loan growth with a focus on upper and middle income individuals and companies.

In 2Q08, total loans increased 6.3% QoQ and 19.1% YoY. Loan growth accelerated in the quarter due to the pick up in lending to companies and solid growth in the middle and upper income individual business segment. Corporate lending increased 3.2% QoQ and 14.2% YoY and lending to the middle market increased 7.4% QoQ and 17.4% YoY. Retail lending continued to expand at a steady pace in the quarter, increasing by 5.6% QoQ and 19.7% YoY with all loan growth coming from middle to upper income clients. Lending to lower income individuals decreased 15.2% QoQ and 10.3% YoY.

·
Increasing spreads.

A key part of the Bank’s strategy since 2007 has been to focus strongly on spreads in order to sustain profitability in riskier segments and to compensate for potentially higher funding costs. In 2Q08, the Bank’s average loan spread reached 5.5%, increasing 20 bp compared to 1Q08 and 30bp compared to 2Q07. The net interest margin increased 60 basis points QoQ and 40 basis points YoY, reaching 6.2% in 2Q08.
 
Investor Relations Department
2
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 


 

·
Focus on customer deposits, liquidity and maintaining strong capitalization ratios.

In 2Q08, customer funds increased 5.5% QoQ and 16.8% YoY. The average balance of non-interest bearing checking accounts increased 7.6% QoQ and 16.1% YoY. The positive performance of checking account balances reflects our strong growth in checking account holders and the Bank’s solid positioning in the cash-management business. This also reduced the negative impact of rising rates on funding costs, as the yield on checking accounts rises with rate hikes. The ratio of free funds (average equity plus average demand deposits over interest earning assets) increased from 30.8% in 1Q08 to 31.9% in 2Q08 and remained flat compared to 2Q07.

The Bank’s BIS ratio as of June 30, 2008 reached 12.9% with a Tier I ratio of 9.6%. In July 2008, the Bank issued in the local market US$117 million in subordinated bonds in the local market to further strengthens capital ratios. This bond was issued at an attractive yield of 70bp over the 30 year Chilean Central Bank rate. Following this issue, the Bank’s BIS ratio reached a solid level of 13.3%. This is the highest BIS ratio among our main competitors.
 
As a result of the proactive management of the asset and funding mix coupled with rising spreads and higher inflation, in 2Q08 net interest income was up 17.2% QoQ and 27.1% YoY.

2. Proactive management of risks to balance growth with an expected rise in risks.

As mentioned in previous releases, provisions are expected to increase due to the growth of lending to higher yielding and the expected economic slowdown foreseen for 2H 2008. In 2Q08, the Bank continued increasing spreads and tightened admission standards in the middle and lower income segments in order to contain the growth of provision expense. As a result of these measures, the growth rate of new non-performing loans has been descending, especially among individuals.
 
In 2Q08, the Bank’s net provision expense increased 15.5% QoQ and 56.7% YoY. This rise was mainly driven by the YoY loan growth in retail banking and higher charge-offs in consumer loans due to the economic slowdown. It is important to point out that despite this rise in provision expense, net interest income including provision expense increased 18.0% QoQ and 16.8% YoY, reflecting that the increase in spreads, the higher inflation rates and the improved funding mix has more than offset the rise in risk.
 
Investor Relations Department
3
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 


 
 
3. Focus on increasing cross-selling and product usage to boost fees

Net fee income increased 4.4% QoQ and 14.5% YoY in 2Q08 base. The expansion of cross-selling and product usage, especially in retail banking is driving fee income growth. The total number cross-sold clients increased 13.4% YoY in June 2008. In the second half of 2008, the Bank is planning to continue dedicating more resources towards increasing cross-selling instead of expanding the total client base. This should also positively impact the Bank’s productivity and efficiency levels in retail banking.

4. Tight control of costs. Focus on productivity gains and control of recurring costs. Maximize profitability of new branches.

In 2Q08, the efficiency ratio continued to improve, reaching 38.8% compared to 39.1% in 2Q07 and 39.0% in 1Q08. Total operating expenses increased 14.2% QoQ and 19.4% YoY. The YoY increase in operating expenses was due to higher commercial activities, the expansion of the distribution network and the higher inflation. In light of the expected slowdown in economic growth, the Bank has begun to shift its strategic focus by limiting the opening of new branches in order to maximize the profitability of the existing network and to control costs. Since 1/3 of the Bank’s branches have been opened in the past three years, there is still ample room to sustain growth by maximizing profitability of the newly opened offices. As of June 2008, the Bank’s distribution network totaled 468 offices, increasing 0.4% QoQ and 9.3% YoY. As of June 2008, the Bank had 2,016 ATMs, representing an increase of 15.6% YoY and 1.4% QoQ.


1H 2008 Results Summary

In the first half of 2008 (1H08), net income attributable to shareholders increased 0.9% YoY and totaled Ch$154,083 million (Ch$0.82/share and US$1.63/ADR). Growth was led by a 26.2% increase in core revenues. Net interest income increased 29.8% and fee income 14.4% YoY. The net interest margin in 1H08 reached a record level of 5.9% compared to 5.4% in 1H07. The efficiency ratio reached 38.9% in the same period. Net operating income increased 9.2%. These higher operating results were offset by an 86.2% rise in non-operating losses, net which were negatively affected by higher losses from price level restatement. ROAE reached 22.5% in 1H08.
 
Investor Relations Department
4
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 


 
 
Banco Santander Chile: Summary of Results

 
Quarter
 
Change %
 
(Ch$ million)
 
2Q08
 
1Q08
 
2Q07
 
2Q08 / 2Q07
 
2Q / 1Q 2008
 
Net interest income
   
221,451
   
188,914
   
174,208
   
27.1
%
 
17.2
%
Fee income
   
55,946
   
53,584
   
48,877
   
14.5
%
 
4.4
%
Core revenues
   
277,397
   
242,498
   
223,085
   
24.3
%
 
14.4
%
Market related income
   
22,019
   
13,288
   
21,344
   
3.2
%
 
65.7
%
Other operating income
   
4,850
   
9,447
   
8,507
   
(43.0
)%
 
(48.7
)%
Total operating income
   
304,266
   
265,233
   
252,936
   
20.3
%
 
14.7
%
Operating expenses
   
(118,112
)
 
(103,405
)
 
(98,943
)
 
19.4
%
 
14.2
%
Provision expense
   
(70,374
)
 
(60,929
)
 
(44,900
)
 
56.7
%
 
15.5
%
Net operating income
   
115,780
   
100,899
   
109,093
   
6.1
%
 
14.7
%
Net income
   
79,573
   
76,522
   
80,768
   
(1.5
)%
 
4.0
%
Minority interest
   
1,133
   
879
   
281
   
303.2
%
 
28.9
%
Net income attributable to shareholders
   
78,440
   
75,643
   
80,487
   
(2.5
)%
 
3.7
%
Net income/share (Ch$)
   
0.42
   
0.40
   
0.43
   
(2.5
)%
 
3.7
%
Net income/ADR (US$)1
   
0.83
   
0.95
   
0.84
   
(1.2
)%
 
(12.5
)%
Total loans
   
13,216,808
   
12,435,062
   
11,098,130
   
19.1
%
 
6.3
%
Customer funds
   
14,619,427
   
13,851,334
   
12,512,694
   
16.8
%
 
5.5
%
Shareholders’ equity
   
1,373,197
   
1,419,268
   
1,245,938
   
10.2
%
 
(3.2
)%
Net interest margin
   
6.2
%
 
5.6
%
 
5.8
%
       
Efficiency ratio
   
38.8
%
 
39.0
%
 
39.1
%
         
Return on average equity3
   
23.2
%
 
21.6
%
 
25.8
%
         
PDL / Total loans
   
1.1
%
 
1.1
%
 
1.0
%
         
Coverage ratio of PDLs
   
173.2
%
 
180.3
%
 
199.8
%
         
Expected loss4
   
1.9
%
 
2.0
%
 
1.9
%
         
BIS ratio
   
12.9
%
 
13.3
%
 
13.0
%
         
Branches5
   
468
   
466
   
428
           
ATMs
   
2,016
   
1,989
   
1,744
           
Employees
   
9,230
   
9,177
   
8,913
           

1. The change in earnings per ADR may differ from the change in earnings per share due to the exchange rate.
2. Annualized Quarterly Earnings / Average Equity.
3. Allowance for loan losses / Total loans.
4. Includes SuperCaja and mini payment centers.
 
Investor Relations Department
5
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 


 
 
SECTION 2: VOLUME GROWTH

LOANS

Selective loan growth with a focus on upper and middle income individuals and companies

Loans
 
Quarter ended,
 
% Change
 
 
Jun-08
 
Mar-08
 
Jun-07
(reclassified)
 
June 08 / 07
 
June 08 / Mar. 08
 
Total loans to individuals1
   
6,397,456
   
6,051,080
   
5,376,224
   
19.0
%
 
5.7
%
Consumer loans
   
2,205,135
   
2,158,563
   
1,931,833
   
14.1
%
 
2.2
%
Residential mortgage loans
   
3,637,108
   
3,454,383
   
3,068,067
   
18.5
%
 
5.3
%
SMEs
   
2,314,975
   
2,200,282
   
1,905,480
   
21.5
%
 
5.2
%
Institutional lending
   
231,156
   
218,446
   
191,410
   
20.8
%
 
5.8
%
Total retail lending
   
8,943,587
   
8,469,808
   
7,473,114
   
19.7
%
 
5.6
%
Middle-Market & Real estate
   
2,703,058
   
2,516,708
   
2,302,678
   
17.4
%
 
7.4
%
Corporate
   
1,461,899
   
1,416,921
   
1,280,267
   
14.2
%
 
3.2
%
Total loans 2,3
   
13,216,808
   
12,435,062
   
11,098,130
   
19.1
%
 
6.3
%

1 A part from consumer and mortgage loans, total loans to individuals includes other loan products to individuals
2 Includes past due loans in each category.
3 Excludes allowance for loan losses, interbank loans and other non-segmented loans

In 2Q08, total loans increased 6.3% QoQ and 19.1% YoY. Loan growth accelerated in the quarter due to the pick up in high yielding loan products to companies, translation gain produced by the depreciation of the peso against the US$ dollar and higher inflation and continued growth in retail banking.

Corporate lending increased 3.2% QoQ and 14.2% YoY and lending to the middle market increased 7.4% QoQ and 17.4% YoY. The 18.5% depreciation of the peso against the US$ dollar in the quarter resulted in a translation gain in dollar denominated loans. As a result, foreign trade loans increased 34.9% QoQ. Excluding foreign trade loans, commercial loans increased 4.7% QoQ and 17.6% YoY. High yielding factoring operations increased 53.1% QoQ and 79.8% YoY. Leasing, another high spread commercial loan, increased 5.9% QoQ and 18.5% YoY. Ample local liquidity coupled with a contraction of financing abroad and higher spreads has boosted lending to companies in the quarter. This is a trend we expect to continue in the second half of 2008.
 
Investor Relations Department
6
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 


 
 

 
Retail lending continued to expand at a steady pace in the quarter, increasing by 5.6% QoQ and 19.7% YoY. Residential mortgage lending increased 5.3% QoQ and 18.5% YoY. Despite higher long-term rates, demand for residential mortgages remained healthy, especially among middle-upper income segments. Consumer loans expanded 2.2% QoQ and 14.1% YoY. All loan growth was concentrated in middle to upper income segments. In light of an expected slowdown in economic growth, the Bank is focusing on increasing its retail loan book in high income segments in the coming quarters. Lending to low income individuals decreased 15.2% QoQ and 10.3% YoY.
 
CUSTOMER FUNDS

Solid growth of customer deposits reflects a healthy liquidity scenario

Customer funds
 
Quarter
 
Change %
 
(Ch$ million)
 
Jun-08
 
Mar-08
 
Jun-07
(reclassified)
 
June 08 / 07
 
June 08 / Mar. 08
 
Non-interest bearing deposits
   
3,195,906
   
2,773,548
   
2,591,979
   
23.3
%
 
15.2
%
Time deposits
   
8,390,418
   
8,407,623
   
7,343,085
   
14.3
%
 
(0.2
)%
Total customer deposits
   
11,586,324
   
11,181,171
   
9,935,064
   
16.6
%
 
3.6
%
Mutual funds
   
3,033,103
   
2,670,163
   
2,577,630
   
17.7
%
 
13.6
%
Total customer funds
   
14,619,427
   
13,851,334
   
12,512,694
   
16.8
%
 
5.5
%
Bonds
   
2,405,006
   
2,196,889
   
1,708,506
   
40.8
%
 
9.5
%
Quarterly inflation rate
   
2.17
%
 
1.02
%
 
1.00
%
           
Avg. overnight interbank rate (nominal)
   
6.39
%
 
6.22
%
 
5.08
%
           
Avg. 10 year Central Bank yield real)
   
3.06
%
 
2.84
%
 
2.90
%
           
Avg. 10 year Central Bank yield (nominal)
   
6.98
%
 
6.46
%
 
5.94
%
           

In 2Q08, inflation continued to exceed market expectations fuelling further rises in short-term interest rates. The average overnight interbank rate went up 17 basis points in the quarter and average long-term nominal rates increased 52 basis points. Despite this, the funding mix continued to improve. In 2Q08, customer funds increased 5.5% QoQ and 16.8% YoY. Time deposits decreased 0.2% QoQ and 14.3% YoY. During the quarter, the Bank continued to issue long-term bonds in the local market in order to increase the maturity of its funding base, especially among institutional investors, in order to shield funding costs from rising short-term rates and to match the Bank’s long term mortgage portfolio.

 
Investor Relations Department
7
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 


 
 
The balance of non-interest bearing deposits increased 15.2% QoQ and 23.3% YoY. The average balance of non-interest bearing checking accounts increased 7.6% QoQ and 16.1% YoY. The positive performance of checking account balances reflects our strong growth in checking account holders and the Bank’s solid positioning in the cash-management business. This also helps to reduce the negative impact of rising rates on funding costs, as the yield on checking accounts rises with rate hikes. Translation gains on dollar denominated checking account also partially explains this rise in non-interest bearing demand deposits in the quarter.

Despite more unfavorable market conditions, assets under management in our mutual fund subsidiary increased 13.6% QoQ and 17.7% YoY. The weaker stock market hurt equity funds, but long-term fixed income funds were positively impacted by higher inflation and foreign funds were positively affected by the depreciation of the peso against the U.S. dollar in the quarter.

SECTION 3: ANALYSIS OF QUARTERLY INCOME STATEMENT

NET INTEREST INCOME

Positive evolution of NIM driven by improved asset/funding mix and higher inflation. Focus in 2H08 on spreads and funding mix.

Net Interest Income / Margin
 
Quarter
 
Change %
 
(Ch$ million)
 
2Q08
 
1Q08
 
2Q07
(reclassified)
 
2Q08 / 2Q07
 
2Q / 1Q 08
 
Net interest income
   
221,451
   
188,914
   
174,208
   
27.1
%
 
17.2
%
Average interest-earning assets
   
14,252,583
   
13,547,248
   
11,931,595
   
19.5
%
 
5.2
%
Average loans
   
12,817,994
   
12,285,523
   
11,121,879
   
15.3
%
 
4.3
%
Net interest margin (NIM)
   
6.2
%
 
5.6
%
 
5.8
%
 
Avg. equity + non-interest bearing demand deposits / Avg. interest earning assets
   
31.9
%
 
30.8
%
 
32.0
%
 
Quarterly inflation rate
   
2.17
%
 
1.02
%
 
1.00
%
 
Avg. overnight interbank rate (nominal)
   
6.39
%
 
6.22
%
 
5.08
%
 
Avg. 10 year Central Bank yield (real)
   
3.06
%
 
2.84
%
 
2.90
%
 
1. Annualized.
2. Inflation measured as the variation of the Unidad de Fomento in the quarter.

In 2Q08, net interest income was up 27.1% YoY. Average earning assets increased 19.5% YoY, while the net interest margin - NIM - increased 40 basis points in the same period. Among the reasons for this improved NIM, it is worth mentioning:
 
Investor Relations Department
8
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 


 
 
·
Focus on spreads. A key part of the Bank’s strategy since 2007 has been to focus strongly on spreads in order to sustain profitability in riskier segments and to compensate for potentially higher funding costs. In 2Q08, the Bank’s average loan spread reached 5.5%, increasing 20 bp compared to 1Q08 and 30bp compared to 2Q07.


* Excludes Corporate banking

·
Inflation. The rise in margins is also due to higher inflation rates in 2Q08. The Bank maintains long-term assets (mainly medium and long-term financial investments and mortgage loans) that are denominated in Unidades de Fomento (UFs), and inflation indexed unit, which are partially funded with nominal or non-interest bearing peso short-term deposits. As the Bank maintains a positive gap between assets and liabilities indexed to inflation, a rise in inflation has a positive effect on net interest income and margins. This is partially offset by the loss from price level restatement and higher operating costs which, to a large extent are indexed to inflation. Going forward margins could continue expand or contract depending on the evolution of inflation. For this reason, management has remained focused on increasing spreads and improving the asset and funding mix to sustain margins going forward.

·
Funding mix. During the quarter, as inflation continued to exceed market expectations, the Central Bank has continued increasing short-term interest rates. This has pressured the Bank’s NIM by increasing deposit costs. Two other factors have contributed to counterbalancing the higher short-term rates: (i) the Bank’s balance sheet has a positive sensitivity to rising short-term rates as the Bank has been issuing long-term bonds in the local market at attractive rates and (ii) as short-term rates rise, the yield obtained over non-interest bearing deposits and capital also goes up. The ratio of free funds (average equity plus average demand deposits over interest earning assets) increased from 30.8% in 1Q08 to 31.9% in 2Q08 and remained flat compared to 2Q07.

Net interest income in 2Q08 increased 17.2% QoQ and the NIM increased 60bp. This QoQ rise in margins was mainly due to the higher inflation rate and higher loan spreads in 2Q08 compared to 1Q08.
 
Investor Relations Department
9
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 

 
 
PROVISION FOR LOAN LOSSES

Net provision expense affected by lower loan loss recoveries, a rise in charge-offs in retail banking and higher provisions in the middle market.

Provision for loan losses
 
Quarter
 
Change %
 
(Ch$ million)
 
2Q08
 
1Q08
 
2Q07
(reclassified)
 
2Q08 / 2Q07
 
2Q / 1Q 08
 
Gross provisions
   
(12,824
)
 
(13,579
)
 
(11,242
)
 
14.1
%
 
(5.6
)%
Charge-offs
   
(66,250
)
 
(57,570
)
 
(47,965
)
 
38.1
%
 
15.1
%
Gross provisions and charge-offs
   
(79,074
)
 
(71,149
)
 
(59,207
)
 
33.6
%
 
11.1
%
Loan loss recoveries
   
8,700
   
10,220
   
14,307
   
(39.2
)%
 
(14.9
)%
Net provisions for loan losses
   
(70,374
)
 
(60,929
)
 
(44,900
)
 
56.7
%
 
15.5
%
Total loans
   
13,216,808
   
12,435,062
   
11,098,130
   
19.1
%
 
6.3
%
Total reserves (RLL)
   
(256,183
)
 
(243,982
)
 
(211,112
)
 
21.3
%
 
5.0
%
Past due loans* (PDL)
   
147,874
   
135,354
   
105,668
   
39.9
%
 
9.2
%
Gross provision expense / Loans
   
2.39
%
 
2.29
%
 
2.13
%
           
Cost of credit**
   
2.13
%
 
1.96
%
 
1.62
%
           
PDL / Total loans
   
1.12
%
 
1.09
%
 
0.95
%
           
Expected loss (RLL / Total loans)
   
1.94
%
 
1.96
%
 
1.90
%
           
Coverage of past due loans***
   
173.2
%
 
180.3
%
 
199.8
%
           

*  Past due loans: installments or credit lines more than 90 days overdue.
** Net provision expense / loans annualized.
***  RLL / Past due loans.
In 2Q08, the Bank’s net provision expense increased 15.5% QoQ and 56.7% YoY. This rise was mainly driven by the YoY loan growth in retail banking and higher charge-offs in consumer loans due to the economic slowdown. The increase in provision expense was also due in part to a one-time provision expense of approximately Ch$2,000 million recognized in April 2008 and directly related to a single client in the Middle-market segment.

Net provisions for loan losses by segment
 
Quarter
 
Change %
 
(Ch$ million)
 
2Q08
 
1Q08
 
2Q07
(reclassified)
 
2Q08 / 2Q07
 
2Q / 1Q 08
 
Retail banking*
   
64,068
   
61,356
   
42,758
   
49.8
%
 
4.4
%
Middle-market
   
6,308
   
(600
)
 
2,028
   
211.0
%
 
(1151.3
)%
Corporate banking
   
123
   
(27
)
 
(32
)
 
(484.4
)%
 
(555.6
)%
Total net provisions for loan losses**
   
70,499
   
60,729
   
44,754
   
57.5
%
 
16.1
%
*  Includes individuals, institutional lending and SMEs.

As mentioned in previous releases, provisions are expected to increase due to the growth of retail lending and the expected economic slowdown foreseen for 2H 2008. In 2Q08, the Bank proactively tightened admission standards in the middle and lower income segments in order to contain the growth of provision expense. Spreads have also been incremented to cover for a high risk scenario expected in the coming quarters. As a result of these measures, net interest income after net provision expense increased 18.0% QoQ and 16.8% YoY.
 
Investor Relations Department
10
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 


 

 
The increase in net provision expense was also due to the 14.9% QoQ and 39.2% YoY reduction in loan loss recoveries. The collection departments is now focused on incrementing the rate of recoverability in the first six months of non-performance as efforts to collect after this period tend to be less cost efficient. After this period, the Bank tries to sell these charged-off loans and any gain will be recognized as market related income.

The expected loan loss ratio (Loan loss allowances / Total loans), which is a ratio that measures how much of the Bank’s loan portfolio is at risk remained steady QoQ and YoY at 1.94% due to the Bank’s conservative charge-off policies. The cost of credit (Net provision expense / Total loans, annualized) reached 2.13% in 2Q08 up from 1.96% in 1Q08 and 1.62% in 2Q07. Going forward, the expected loan loss ratio and the cost of credit should rise given the expected lower economic growth.

The past due loan ratio (Past due installment >90 days / Total loans) as of June 2008 reached 1.12% compared to 1.09% in 1Q08 and 0.95% in 2Q08. Coverage of past due loans (Loan loss allowance / Past due loans) reached a healthy 173.2% as of June 2008 compared to 180.3% at March 2008 and 199.8% at June 2007. It is important to point out that the Bank has been proactively managing credit risk in order to limit future deterioration of asset quality. Total gross non-performing loans (total balance of all loans at least 90 day overdue + charge-offs - recoveries) have shown a positive evolution in 2Q08, especially among individuals. This should help to contain the expansion of past due loans and provision expense in the coming quarters.


Investor Relations Department
 11
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 
 

 
 
NET FEE INCOME

Focus on cross-selling

Fee Income
 
Quarter
 
Change %
 
(Ch$ million)
 
2Q08
 
1Q08
 
2Q07
(reclassified)
 
2Q08 / 2Q07
 
2Q / 1Q 08
 
Checking accounts & lines of credit
   
15,468
   
15,593
   
14,826
   
4.3
%
 
(0.8
)%
Credit, debit & ATM card fees
   
10,524
   
11,245
   
8,153
   
29.1
%
 
(6.4
)%
Collection fees
   
10,265
   
8,744
   
9,364
   
9.6
%
 
17.4
%
Asset management
   
7,592
   
7,153
   
7,208
   
5.3
%
 
6.1
%
Insurance brokerage
   
4,286
   
3,500
   
3,176
   
34.9
%
 
22.5
%
Guarantees, pledges and other contingent operations
   
3,960
   
3,812
   
3,533
   
12.1
%
 
3.9
%
Fees from brokerage and custody of securities
   
2,115
   
1,493
   
1,723
   
22.7
%
 
41.6
%
Other Fees
   
1,736
   
2,043
   
894
   
94.2
%
 
(15.0
)%
Total fees
   
55,946
   
53,584
   
48,877
   
14.5
%
 
4.4
%

Net fee income increased 4.4% QoQ and 14.5% YoY in 2Q08. The expansion of cross-selling and product usage, especially in retail banking is driving fee income growth. Santander Chile has the largest client base (excluding the state owned bank). The total number of clients increased 11.6% YoY to 2.95 million in 2Q08 and the amount of cross-sold clients increased 13.4% YoY in June 2008. Despite this improvement, only 30% of our clients have 2 or more products, reflecting the high cross-selling potential of the Bank’s client base.
 
Fees from checking accounts and lines of credit decreased 0.8% QoQ and increased 4.3% YoY. Going forward and, especially in 2009, fee income from lines of credit may be hampered by regulatory changes that will limit amounts charged for un-authorized overdrafts. This reduction in checking account fees, which are in general flat fees, was offset by an increase in usage related fees in line with the Bank’s strategy for fee growth in 2008.

Fees from credit, debit and ATM cards increased 29.1% YoY. The usage of electronic means of payments continues to steadily grow in Chile as bank penetration and cross-selling ratios improve. According to information published by Transbank, the industry’s credit card processor, as of June 2008, Santander Chile’s market share in bank credit cards reached 36.0%, reflecting an increase of 10.7% YoY in the Bank’s number of credit card accounts. Purchases with Santander credit cards in monetary terms grew more than 20% YoY as of June 2008. Market share in terms of purchases reached 35.9% as of June 2008 compared to 35.4% as of June 2007. Including department stores, we estimate our market share in the credit card business at 14.6% of total purchases. Fees from credit, debit and ATM cards decreased 6.4% QoQ due to seasonal factors as the month of March is a high expenditure month following summer holidays.

Collection fees increased 17.4% QoQ and 9.6% YoY. The main driver of fee growth in this line item is the collection of loan insurance policies on behalf of third parties which evolves with overall commercial activity. Other collection services have been decreasing in importance as clients use on-line banking, which is more cost efficient for the Bank and the client. Seasonal factors also impact the QoQ evolution of fees in this item.

Investor Relations Department
 12
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 
 

 

 
Asset management fees increased 6.1% QoQ and 5.3% YoY led by the rise in assets under management (See Customer Funds).

Fees from guarantees, pledges and other contingent operations increased 3.9% QoQ and 12.1% YoY, in line with higher commercial activity in corporate segments. These activities do not consume capital and generate fee income. The corporate segments main focus is on non-lending activities that generates 60% of net operating profits.

Insurance brokerage fees increased 22.5% QoQ and 34.9% YoY in 2Q08. The continued strength in distributing insurance products has continued to fuel insurance related fees. The Bank’s strength in cross-selling the client base by offering attractive insurance products through the Internet has been a key driver in this line item.

Fees securities brokerage and custody increased 41.6% QoQ and 22.7% YoY due to an increase in cross-selling of brokerage services to retail clients, an increase in traded volumes with institutional investors and more foreign investment activity in our local stock brokerage.

OPERATING EXPENSES AND EFFICIENCY

The efficiency ratio continues to improve. The Bank to tighten cost control and maximize profitability of new branch network

 
Quarter
 
Change %
 
(Ch$ million)
 
2Q08
 
1Q08
 
2Q07
(reclassified)
 
2Q08 / 2Q07
 
2Q / 1Q 08
 
Personnel expenses
   
(51,800
)
 
(44,339
)
 
(42,742
)
 
21.2
%
 
16.8
%
Administrative expenses
   
(41,969
)
 
(38,698
)
 
(37,275
)
 
12.6
%
 
8.5
%
Depreciation and amortization
   
(13,078
)
 
(11,474
)
 
(10,013
)
 
30.6
%
 
14.0
%
Other operating expenses
   
(11,265
)
 
(8,894
)
 
(8,913
)
 
26.4
%
 
26.7
%
Operating expenses
   
(118,112
)
 
(103,405
)
 
(98,943
)
 
19.4
%
 
14.2
%
Efficiency ratio*
   
38.8
%
 
39.0
%
 
39.1
%
           

*
Operating expenses / Operating income. Operating income = Net interest income + Net fee income+ Market related income + Other operating income.

In 2Q08, the efficiency ratio reached 38.8% improving from 39.1% in 2Q07 and 39.0% in 1Q08. Total operating expenses increased 14.2% QoQ and 19.4% YoY. Personnel expenses increased 16.8% QoQ and 21.2% YoY. The QoQ increase in personal expenses was due in part to seasonal factors. The YoY and QoQ rise in personnel expenses was also due to the annual increase in wages by CPI in April. The wage increase was 4% for all employees following a 4% rise in September of 2007 and 3% in April 2007. The Bank’s average headcount increased 5.5% YoY.

The 8.5% QoQ and 12.6% YoY increase in administrative expenses was directly linked to the higher commercial activities, the larger distribution network and the higher inflation. In light of the expected slowdown in economic growth, the Bank has begun to shift its strategic focus by limiting the opening of new branches in order to maximize the profitability of the existing network and to control costs. As of June 2008, the Bank’s distribution network totaled 468 offices, increasing 0.4% QoQ and 9.3% YoY. As of June 2008, the Bank had 2,016 ATMs, representing an increase of 15.6% YoY and 1.4% QoQ. Since 1/3 of the Bank’s branches have been opened in the past three years, there is still ample room to sustain growth by maximizing profitability of the newly opened offices.

Investor Relations Department
 13
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 
 

 

 
The 26.4% YoY rise in depreciation and amortization expenses is also directly related to the growth of the Bank’s distribution network.

Other operating expenses are mainly expense primarily relating to the Bank’s call center, credit card related expenses and expenses related to repossessed assets. The increase in other operating expenses was mainly driven by higher insurance expenses linked to greater credit card usage.

GAINS (LOSSES) ON FINANCIAL TRANSACTIONS

Positive results from client related activities despite sharp rise in rates and inflation

In 2Q08, the gains from market related income totaled Ch$22,019 million. The 65.7% QoQ and 3.2% YoY increase in market related income was mainly due to a positive evolution of the market-making business and the sale of treasury products through Santander Global Connect to corporate and middle market clients.

Net Result from Financial Transactions
 
Quarter
 
Change %
 
(Ch$ million)
 
2Q08
 
1Q08
 
2Q07
(reclassified)
 
2Q08 / 2Q07
 
2Q / 1Q 08
 
Net gains from mark-to-market and trading
   
163,192
   
(88,693
)
 
33,339
   
389.5
%
 
%
Exchange differences, net
   
(141,173
)
 
101,981
   
(11,995
)
 
1,076.9
%
 
%
Net result from financial transactions
   
22,019
   
13,288
   
21,344
   
3.2
%
 
65.7
%

*
For analysis purposes only, we have created the line item: Net results form financial transactions. This is the sum of the net gain (loss) from trading, the mark-to-market of financial investment and derivatives and exchange differences. The results recorded as exchange differences, net mainly includes the translation gains or losses of assets and a liability denominated in foreign currency, but does not include the mark-to-market of FX derivatives. As Santander Chile limits its foreign exchange gap, the results recorded in foreign exchange transactions are, for the most part, offset by the mark-to-market of foreign currency forwards. For this reason they are added to the net gains (loss) from trading and mark-to-market, which includes the mark-to-market of FX forwards.
**
Quarterly variation of the Unidad de Fomento (UF).

These gains were partially offset by lower results from proprietary trading, which were negatively affected by rising rates and inflation as can be observed in the graphs.
 

Source: Bloomberg

Investor Relations Department
 14
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 
 

 

 
OTHER OPERATING INCOME AND NON-OPERATING ITEMS

Other Income and Expenses
 
Quarter
 
Change %
 
(Ch$ million)
 
2Q08
 
1Q08
 
2Q07
(reclassified)
 
2Q08 / 2Q07
 
2Q / 1Q 08
 
Other operating income
   
4,850
   
9,447
   
8,507
   
(43.0
%)
 
(48.7
)%
Income attributable to investments in other companies
   
1,180
   
(262
)
 
(728
)
 
%
 
%
Price level restatement
   
(22,546
)
 
(8,873
)
 
(13,633
)
 
65.4
%
 
154.1
%
Income tax
   
(14,841
)
 
(15,242
)
 
(13,964
)
 
6.3
%
 
(2.6
)%

Other operating income, which mainly includes the results from the sale and maintenance of repossessed assets and other results, totaled Ch$4,850 million in 2Q08, decreasing 48.7% QoQ and 43.0% YoY. The QoQ decline was mainly due to the one-time gain of Ch$3,274 million from the sale of shares held in Visa and a Ch$974 million gain from the sale of a share in the Santiago Stock Exchange recorded in 1Q08. The YoY decline was mainly due to higher non-credit provision for legal contingencies recognized in 2Q08.

Price level restatement in the quarter totaled a loss of Ch$22,546 million. The difference in inflation rates explains the variation in price level restatement. The Bank must adjust its capital and fixed assets for the variations in price levels. When inflation is positive, the Bank records a loss from price restatement, since the Bank's capital is larger than fixed assets. The inflation rate was 2.17% in 2Q08 compared to 1.02% in 1Q08 and 1.0% in 2Q07.

Investor Relations Department
 15
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
 
email: rmorenoh@santander.cl
 
 

 
 
SECTION 4: SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL

Solid capitalization ratios

Shareholders' Equity
 
Quarter
 
Change %
 
(Ch$ million)
 
Jun-08
 
Mar-08
 
Jun-07
(reclassified)
 
June 08 / 07
 
June 08 / 
Mar. 08
 
   
818,535
   
818,535
   
761,853
   
7.4
%
 
0.0
%
Reserves
   
89,057
   
58,797
   
65,096
   
36.8
%
 
51.5
%
Unrealized gain (loss) Available-for-sale financial assets
   
(45,900
)
 
(21,155
)
 
(4,445
)
 
932.6
%
 
117.0
%
Retained Earnings:
                     
Retained earnings previous periods
   
381,030
   
581,651
   
252,872
   
50.7
%
 
(34.5
)%
Net income
   
154,083
   
75,643
   
152,675
   
0.9
%
 
103.7
%
Provision for mandatory dividend
   
(46,225
)
 
(115,288
)
 
0
             
Minority Interest
   
22,616
   
21,085
   
17,887
   
26.4
%
 
7.3
%
Total Equity
   
1,373,196
   
1,419,268
   
1,245,938
   
10.2
%
 
(3.2
)%

* Equivalent to 30% of earnings. By law banks must payout at least 30% of earnings and the Bank must now provision for this minimum mandatory dividend.

Shareholders’ equity totaled Ch$1,373,197 million (US$2.6 billion) as of June 30, 2008. ROAE in 2Q08 reached 23.2% compared to 21.6% in 1Q08 and 25.8% in 2Q07. During 2Q08, the Bank paid its annual dividend, which this year totaled Ch$1.0646 per share, corresponding to 65% of 2007 net income and 8.1% higher than the dividend paid in 2007. In US dollars, the dividend was approximately US$2.37 per ADR and 21.4% higher than the last yearly dividend paid. This corresponded to a dividend yield of 4.5% based on local share price on the record date.

The Bank’s BIS ratio as of June 30, 2008 reached 12.9% with a Tier I ratio of 9.6%. In July 2008, the Bank issued in the local market US$117 million in subordinated bonds in the local market to further strengthen capital ratios. This bond was issued at an attractive yield of 70bp over the 30 year Chilean Central Bank rate. Following this issue, the Bank’s BIS ratio reached a solid 13.3%. This is in line with our strategic objectives for 2H08 to focus on liquidity, funding and capital.

Capital Adequacy
 
Quarter ended
 
Change %
 
(Ch$ million)
 
Jun-08
 
Mar-08
 
Jun-07
(reclassified)
 
June 08 / 07
 
June 08 / 
Mar. 08
 
Tier I*
   
1,350,580
   
1,398,183
   
1,075,377
   
25.6
%
 
(3.4
)%
Tier II
   
461,436
   
415,905
   
467,469
   
(1.3
%)
 
10.9
%
Regulatory capital
   
1,812,015
   
1,814,088
   
1,542,846
   
17.4
%
 
(0.1
)%
Risk weighted assets
   
14,066,367
   
13,593,098
   
11,851,230
   
18.7
%
 
3.5
%
Tier I ratio
   
9.6
%
 
10.3
%
 
9.1
%
           
BIS ratio
   
12.9
%
 
13.3
%
 
13.0
%
           
 
* Tier I includes year-to-date net income in 2008

Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: ###-##-####, fax: 562-671-6554,
email: rmorenoh@santander.cl
16


 

SECTION 5: CREDIT RISK RATINGS

International ratings:

The Bank has credit ratings from three leading international agencies. We have the highest risk rating in Latin America.

Moody’s
 
Rating
 
Long-term bank deposits
   
A2
 
Senior bonds
   
Aa3
 
Subordinated debt
   
Aa3
 
Bank Deposits in Local Currency
   
Aa2
 
Bank financial strength
   
B-
 
Short-term deposits
   
P-1
 
Outlook
   
Stable
 

Standard and Poor’s
 
Rating
 
Long-term Foreign Issuer Credit
   
A+
 
Long-term Local Issuer Credit
   
A+
 
Short-term Foreign Issuer Credit
   
A-1
 
Short-term Local Issuer Credit
   
A-1
 
Outlook
   
Stable
 

Fitch
 
Rating
 
Foreign Currency Long-term Debt
   
A+
 
Local Currency Long-term Debt
   
A+
 
Foreign Currency Short-term Debt
   
F1
 
Local Currency Short-term Debt
   
F1
 
Individual rating
   
B
 
Outlook
   
Stable
 
 
Local ratings:
 
Our local ratings, the highest in Chile, are the following:

Local ratings
 
Fitch Ratings
 
Feller Rate
 
Shares
   
Level 2
   
1CN1
 
Short-term deposits
   
N1+
   
Level 1+
 
Long-term deposits
   
AAA
   
AAA
 
Mortgage finance bonds
   
AAA
   
AAA
 
Senior bonds
   
AAA
   
AAA
 
Subordinated bonds
   
AA+
   
AA+
 
Outlook
   
Stable
   
Stable
 
 

Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: ###-##-####, fax: 562-671-6554,
email: rmorenoh@santander.cl
17


 

SECTION 6: SHARE PERFORMANCE
June 2008

Ownership Structure:


ADR Price Evolution
Santander ADR vs. Global 1200 Financial Index (Base 100 = 12/31/2003)


ADR price (US$) 2008
     
Year-end 2007:
   
50.99
 
Maximum (2008):
   
54.60
 
Minimum (2008):
   
41.78
 
Close (3/31/08):
   
43.01
 

Market Capitalization: US$7,802 million

P/E 12 month trailing:
   
13.0
 
P/BV:
   
2.94
 
Dividend yield*:
   
4.5
%

* Based on closing price on record date of last dividend payment.

Daily traded volumes 2Q 2008

 
Local Share Price Evolution
Santander vs IPSA Index
(Base 100 = 12/31/2003)
 

Local share price (Ch$) 2008
     
Year-end 2007:
   
24.49
 
Maximum (2008):
   
24.86
 
Minimum (2008):
   
20.00
 
Close (3/31/08):
   
21.41
 

Dividends:
Year paid
 
Ch$/share
 
% of previous year 
earnings
 
2005:
   
1.05
   
100
%
2006:
   
0.83
   
65
%
2007:
   
0.99
   
65
%
2008:
   
1.06
   
65
%

Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: ###-##-####, fax: 562-671-6554,
email: rmorenoh@santander.cl
18


 
 
SECTION 7: INSTITUTIONAL BACKGROUND

As per latest public records published by the Superintendency of Banks of Chile for June 2008, Banco Santander Chile was the largest bank in terms of loans and deposits. The Bank has the highest credit ratings among all Latin American companies, with an A+ rating from Standard and Poor’s, A+ by Fitch and A2 by Moody’s, which are the same ratings assigned to the Republic of Chile. The stock is traded on the New York Stock Exchange (NYSE: SAN) and the Santiago Stock Exchange (SSE: Bsantander). The Bank’s main shareholder is Santander, which controls 76.91% of Banco Santander Chile.

Santander (SAN.MC, STD.N) is the largest bank in the euro zone by market capitalization and fifth in the world by profit. Founded in 1857, Santander has EUR 912,915 million in assets and EUR 1,063,892 million in managed funds, 65 million customers, 11,178 branches and a presence in 40 countries. It is the largest financial group in Spain and Latin America, and is the sixth largest bank in the United Kingdom, through its Abbey subsidiary, and is the third largest banking group in Portugal. Through Santander Consumer Finance, it also operates a leading consumer finance company in 12 European countries (Germany, Italy and Spain, among others) and the United States. In 2007, Santander registered €9,060 million in net attributable profits, an increase of 19% from the previous year.
 
 In Latin America, Santander manages over US$200 billion in business volume (loans, deposits, mutual funds, pension funds and managed funds) through 4,498 offices. In 2007, Santander reported $3,648 million in net attributable income in Latin America, 27% higher than the previous year.

Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: ###-##-####, fax: 562-671-6554,
email: rmorenoh@santander.cl
19


 
 
ANNEX 1: BALANCE SHEET


 
Jun-08
 
Jun-08
 
Mar-08
 
Jun-07
 
June 2008 /
2007
 
June /
March 2008 
 
Assets
 
US$ths
 
Ch$ million nominal
 
% Chg.
 
 
 
 
 
 
 
 
 
(Reclassified)
 
 
 
 
 
Cash and balances from Central Bank
   
2,461,524
   
1,280,337
   
647,473
   
861,227
   
48.7
%
 
97.7
%
Funds to be cleared
   
937,423
   
487,591
   
626,731
   
361,098
   
35.0
%
 
(22.2
)%
Financial assets held for trading
   
1,718,649
   
893,938
   
715,729
   
764,369
   
17.0
%
 
24.9
%
Investment collateral under agreements to repurchase
   
22,488
   
11,697
   
4,655
   
31,112
   
(62.4
)%
 
151.3
%
Derivatives
   
2,371,596
   
1,233,562
   
1,427,176
   
419,417
   
194.1
%
 
(13.6
)%
Interbank loans
   
289,164
   
150,406
   
116,991
   
350,393
   
(57.1
)%
 
28.6
%
Loans, net of reserves for loan losses
   
24,917,572
   
12,960,626
   
12,191,080
   
10,887,018
   
19.0
%
 
6.3
%
Available-for-sale financial assets
   
2,076,779
   
1,080,216
   
1,457,900
   
673,992
   
60.3
%
 
(25.9
)%
Held-to-maturity investments
   
-
   
-
   
-
   
-
             
Investments in other companies
   
13,198
   
6,865
   
6,181
   
5,707
   
20.3
%
 
11.1
%
Intangible assets
   
118,157
   
61,458
   
58,071
   
49,856
   
23.3
%
 
5.8
%
Fixed assets
   
478,537
   
248,906
   
247,348
   
228,351
   
9.0
%
 
0.6
%
Current tax assets
   
34,268
   
17,824
   
4,229
   
878
   
1930.1
%
 
321.5
%
Deferred tax assets
   
120,585
   
62,721
   
57,386
   
46,808
   
34.0
%
 
9.3
%
Other assets
   
1,140,649
   
593,297
   
656,982
   
416,592
   
42.4
%
 
(9.7
)%
Total Assets
   
36,700,588
   
19,089,444
   
18,217,932
   
15,096,818
   
26.4
%
 
4.8
%
 
                                     
Liabilities and Equity
                                     
Total non-interest bearing deposits
   
6,144,319
   
3,195,906
   
2,773,548
   
2,591,979
   
23.3
%
 
15.2
%
Funds to be cleared
   
572,175
   
297,611
   
381,921
   
202,897
   
46.7
%
 
(22.1
)%
Investments sold under agreements to repurchase
   
568,105
   
295,494
   
92,583
   
261,046
   
13.2
%
 
219.2
%
Time deposits and savings accounts
   
16,131,076
   
8,390,418
   
8,407,623
   
7,343,085
   
14.3
%
 
(0.2
)%
Derivatives
   
2,079,794
   
1,081,784
   
1,540,408
   
365,167
   
196.2
%
 
(29.8
)%
Deposits from credit institutions
   
2,893,790
   
1,505,176
   
1,013,573
   
1,168,506
   
28.8
%
 
48.5
%
Marketable debt securities
   
4,623,767
   
2,405,006
   
2,196,889
   
1,708,506
   
40.8
%
 
9.5
%
Other obligations
   
265,669
   
138,185
   
86,697
   
52,409
   
163.7
%
 
59.4
%
Current tax liabilities
   
1,532
   
797
   
3,247
   
21,834
   
(96.3
)%
 
(75.5
)%
Deferred tax liability
   
45,274
   
23,549
   
14,321
   
476
   
4847.3
%
 
64.4
%
Provisions
   
171,052
   
88,971
   
151,109
   
38,359
   
131.9
%
 
(41.1
)%
Other liabilities
   
563,985
   
293,351
   
136,745
   
96,616
   
203.6
%
 
114.5
%
Total Liabilities
   
34,060,538
   
17,716,248
   
16,798,664
   
13,850,880
   
27.9
%
 
5.5
%
 
                                     
Equity
                                           
Capital
   
1,573,682
   
818,535
   
818,535
   
761,853
   
7.4
%
 
0.0
%
Reserves
   
171,217
   
89,057
   
58,797
   
65,096
   
36.8
%
 
51.5
%
Unrealized gain (loss) Available-for-sale financial assets
   
(88,245
)
 
(45,900
)
 
(21,155
)
 
(4,445
)
 
932.6
%
 
117.0
%
Retained Earnings:
   
-
   
0
   
-
   
-
             
Retained earnings previous periods
   
732,553
   
381,030
   
581,651
   
252,872
   
50.7
%
 
(34.5
)%
Net income
   
296,234
   
154,083
   
75,643
   
152,675
   
0.9
%
 
103.7
%
Provision for mandatory dividend
   
(88,870
)
 
(46,225
)
 
(115,288
)
 
0
             
Minority Interest
   
43,481
   
22,616
   
21,085
   
17,887
   
26.4
%
 
7.3
%
Total Equity
   
2,640,051
   
1,373,196
   
1,419,268
   
1,245,938
   
10.2
%
 
(3.2
)%
Total Liabilities and Equity
   
36,700,588
   
19,089,444
   
18,217,932
   
15,096,818
   
26.4
%
 
4.8
%



2007 figures have been re-categorized under the new format in order to make them more comparable, but the modification regarding minimum dividends has not been made to historical shareholders’ equity. See Annex 7 of this report for an explanation of the main changes introduced.
Please note that this information is provided for comparative purposes only and that this re-categorization of line items may undergo further changes during the year and, therefore, historical figures, including financial ratios, presented in this report may not be entirely comparable to future figures presented by the Bank. Re-classified historical figures have not been audited.
 
Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: ###-##-####, fax: 562-671-6554,
email: rmorenoh@santander.cl
20


 
 
ANNEX 2 : YTD INCOME STATEMENT

 
Jun-08
 
Jun-08
 
Jun-07
 
June 2008 / 2007
 
 
 
US$ths.
 
Ch$ million nominal
 
% Chg.
 
 
 
 
 
 
 
(reclassified)
 
 
 
Interest revenue
   
1,723,588
   
896,507
   
638,400
   
40.4
%
Interest expense
   
(934,637
)
 
(486,142
)
 
(322,271
)
 
50.8
%
Net interest revenue
   
788,951
   
410,365
   
316,129
   
29.8
%
Fee income
   
258,360
   
134,384
   
116,537
   
15.3
%
Fee expense
   
(47,783
)
 
(24,854
)
 
(20,820
)
 
19.4
%
Net fee income
   
210,577
   
109,530
   
95,717
   
14.4
%
Net gains from mark-to-market and trading
   
143,227
   
74,498
   
56,119
   
32.8
%
Exchange differences, net
   
(75,347
)
 
(39,191
)
 
11,682
   
(435.5
)%
Total market related income
   
67,880
   
35,307
   
67,801
   
(47.9
)%
Other operating income
   
27,487
   
14,297
   
12,732
   
12.3
%
Total operating income
   
1,094,895
   
569,499
   
492,379
   
15.7
%
Personnel expenses
   
(184,833
)
 
(96,139
)
 
(80,260
)
 
19.8
%
Administrative expenses
   
(155,088
)
 
(80,667
)
 
(72,196
)
 
11.7
%
Depreciation and amortization
   
(47,203
)
 
(24,552
)
 
(19,406
)
 
26.5
%
Other operating expenses
   
(38,757
)
 
(20,159
)
 
(17,771
)
 
13.4
%
Total operating expenses
   
(425,879
)
 
(221,517
)
 
(189,633
)
 
16.8
%
Provision expense
   
(252,438
)
 
(131,303
)
 
(104,340
)
 
25.8
%
Net operating income
   
416,577
   
216,679
   
198,406
   
9.2
%
Income attributable to investments in other companies
   
1,765
   
918
   
(595
)
 
(254.3
)%
Price level restatement
   
(60,405
)
 
(31,419
)
 
(15,782
)
 
99.1
%
Net income before taxes
   
357,937
   
186,178
   
182,030
   
2.3
%
Income tax
   
(57,836
)
 
(30,083
)
 
(28,533
)
 
5.4
%
Net income from ordinary activities
   
300,101
   
156,095
   
153,497
   
1.7
%
Net income discontinued operations
   
0
   
0
   
0
       
Net income attributable to:
                             
Minority interest
   
3,868
   
2,012
   
822
   
144.9
%
Net income attributable to shareholders
   
296,233
   
154,083
   
152,675
   
0.9
%



2007 figures have been re-categorized under the new format in order to make them more comparable, but the modification regarding minimum dividends has not been made to historical shareholders’ equity. See Annex 7 of this report for an explanation of the main changes introduced.
Please note that this information is provided for comparative purposes only and that this re-categorization of line items may undergo further changes during the year and, therefore, historical figures, including financial ratios, presented in this report may not be entirely comparable to future figures presented by the Bank. Re-classified historical figures have not been audited.

Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: ###-##-####, fax: 562-671-6554,
email: rmorenoh@santander.cl
21


 
 
 
ANNEX 3 : QUARTERLY INCOME STATEMENT


Unaudited Quarterly Income Statement