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
 
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
¨
 
 
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
¨
 
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
¨
 
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
¨
 
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

Page
 
1.
 Important Notice
5.
 Unaudited Interim Financials for the six month period ended June 30, 2011 in English
 
 
2

 
 
Important Notice
 
Santander Chile is a Chilean bank and maintains its financial books and records in Chilean pesos. These Interim Unaudited Consolidated Financial Statements have been prepared in accordance with the Compendium of Accounting Standards issued by the Superintendency of Banks and Financial Institutions (SBIF). The SBIF is the banking industry regulator that according to article 15 of the General Banking Law, establishes the accounting principles to be used by the banking industry. For those principles not covered by the Compendium of Accounting Standards, banks can use generally accepted accounting principles issued by the Chilean Accountant’s Association AG and which coincides with International Financial Reporting Standards (IFRS) issued by the International Acocounting Standards Board (IASB). In the event that discrepancies exist between the accounting principles issued by the SBIF (Compendium of Accounting Standards) and IFRS, the Compendium of Accounting Standards will take precedence. The Notes to the consolidated financial statements contain additional information to that submitted in the Consolidated Statement of Financial Position, Consolidated Statement of Income, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows. These notes provide a narrative description of such statements in a clear, reliable and comparable manner.
 
 
3

 
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
BANCO SANTANDER-CHILE
     
 
By:
/s/
 
Name:
Juan Pedro Santa María
 
Title:
General Counsel
Date: August 18, 2011
 
4

 


 
 

 
 

 
INDEX

Consolidated Financial Statements
 
   
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
3
CONSOLIDATED INTERIM STATEMENTS OF INCOME
4
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
5
CONSOLIDATED INTERIM  STATEMENTS OF CHANGES IN EQUITY
6
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW
7
   
Notes to the Financial Statements
 
   
NOTE 01 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
9
NOTE 02 – ACCOUNTING CHANGES:
34
NOTE 03 - SIGNIFICANT EVENTS:
37
NOTE 04 - BUSINESS SEGMENTS:
39
NOTE 05 - CASH AND CASH EQUIVALENTS
45
NOTE 06 - TRADING INVESTMENTS:
46
NOTE 07 - DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING:
47
NOTE 08 - INTERBANK LOANS
53
NOTE 09 - LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS:
54
NOTE 10 - AVAILABLE FOR SALE INVESTMENTS:
59
NOTE 11 - INTANGIBLE ASSETS:
60
NOTE 12 - PROPERTY, PLANT, AND EQUIPMENT
62
NOTE 13 - CURRENT AND DEFERRED TAXES:
66
NOTE 14 - OTHER ASSETS:
69
NOTE 15 - TIME DEPOSITS AND OTHER TIME LIABILITIES:
70
NOTE 16 – ISSUED DEBT INSTRUMENTS  AND OTHER OBLIGATIONS:
71
NOTE 17 - MATURITIES OF ASSETS AND LIABILITIES:
76
NOTE 18 - OTHER LIABILITIES
78
NOTE 19 -CONTINGENCIES AND COMMITMENTS:
79
NOTE 20 - EQUITY:
81
NOTE 21 - CAPITAL REQUIREMENTS (BASEL):
84
NOTE 22 - NON CONTROLLING INTEREST
86
NOTE 23 -INTEREST INCOME AND EXPENSE:
89
NOTE 24 - FEES AND COMMISSIONS:
92
NOTE 25 - NET INCOME FROM FINANCIAL OPERATIONS:
92
NOTE 26 – NET FOREIGNS EXCHANGE PROFIT (LOSS):
92
NOTE 27 - PROVISION FOR LOAN LOSSES:
94
NOTE 28 - PERSONNEL SALARIES AND EXPENSES:
96
NOTE 29 - ADMINISTRATIVE EXPENSES:
97
NOTE 30 - DEPRECIATION AMORTIZATION AND IMPAIRMENT:
98
NOTE 31 – OTHER OPERATING INCOME AND EXPENSES:
98
NOTE 32 - TRANSACTIONS WITH RELATED PARTIES:
101
NOTE 33 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES:
106
NOTE 34 - SUBSEQUENT EVENTS
109
 
 
 
2

 
 

BANCO SANTANDER CHILE AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
For periods ending as of

         
As of June 30,
   
As of June 30,
   
As of December
31,
 
         
2011
   
2011
   
2010
 
   
NOTE
   
ThUS$
   
MCh$
   
MCh$
 
                         
ASSETS
                       
Cash and deposits in banks
  5       2,098,669       980,813       1,762,198  
Unsettled transactions
  5       1,780,710       832,215       374,368  
Trading investments
  6       1,303,800       609,331       379,670  
Investments under resale agreements
  -       15,667       7,322       170,985  
Financial derivative contracts
  7       3,084,979       1,441,765       1,624,378  
Interbank loans, net
  8       187,564       87,658       69,672  
Loans and accounts receivables from customers, net
  9       36,195,900       16,916,154       15,175,975  
Available for sale investments
  10       5,621,853       2,627,373       1,473,980  
Held to maturity investments
  10       -       -       -  
Investments in other companies
  -       16,450       7,688       7,275  
Intangible assets
  11       154,901       72,393       77,990  
Property, plant, and equipment
  12       320,599       149,832       154,985  
Current taxes
  13       71,356       33,348       12,499  
Deferred taxes
  13       273,936       128,024       117,964  
Other assets
  14       1,660,388       775,982       640,937  
TOTAL ASSETS
          52,786,772       24,669,898       22,042,876  
                               
LIABILITIES
                             
Deposits and other demand liabilities
  15       9,522,392       4,450,290       4,236,434  
Unsettled transactions
  5       1,340,118       626,304       300,125  
Investments under repurchase agreements
  -       681,808       318,643       294,725  
Time deposits and other time liabilities
  15       18,949,791       8,856,185       7,258,757  
Financial derivative contracts
  7       2,888,407       1,349,897       1,643,979  
Interbank borrowings
  -       3,917,084       1,830,649       1,584,057  
Issued debt instruments
  16       9,703,237       4,534,808       4,190,888  
Other financial liabilities
  16       358,759       167,666       166,289  
Current taxes
  13       4,036       1,886       1,293  
Deferred taxes
  13       31,041       14,507       5,441  
Provisions
  -       323,218       151,056       235,953  
Other liabilities
  18       1,006,460       470,369       261,328  
                               
TOTAL LIABILITIES
          48,726,351       22,772,260       20,179,269  
                               
EQUITY
                             
                               
Attributable to Bank shareholders:
  -       3,993,724       1,866,467       1,831,798  
Capital
  20       1,907,142       891,303       891,303  
Reserves
  20       110,279       51,539       51,539  
Valuation adjustments
  20       (16,756 )     (7,831 )     (5,180 )
Retained Earnings
  20       1,993,059       931,456       894,136  
Retained earnings of prior years
  20       1,606,909       750,989       560,128  
Income for the period
  20       551,642       257,810       477,155  
Minus:  Provision for mandatory dividends
  20       (165,493 )     (77,343 )     (143,147 )
Non controlling interest
  22       66,697       31,171       31,809  
                               
TOTAL EQUITY
          4,060,421       1,897,638       1,863,607  
                               
TOTAL LIABILITIES AND EQUITY
          52,786,772       24,669,898       22,042,876  
 
 
 
3

 
 

BANCO SANTANDER CHILE AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF INCOME
For periods ending as of

           As of June 30,    
For the quarter ended on
June 30
     For the 6-month period ended
                 on June 30                 
 
         
2011
   
2011
   
2010
   
2011
   
2010
 
   
NOTE
   
ThUS$
   
MCh$
   
MCh$
   
MCh$
   
MCh$
 
                                     
OPERATING INCOME
                                   
                                     
Interest income
  23       1,819,940       472,132       368,919       850,549       690,157  
Interest expense
  23       (801,224 )     (224,718 )     (126,137 )     (374,452 )     (217,977 )
                                               
Net interest income
          1,018,716       247,414       242,782       476,097       472,180  
                                               
Fee and commission income
  24       393,474       92,652       82,808       183,890       161,967  
Fee and commission expense
  24       (86,554 )     (20,602 )     (17,650 )     (40,451 )     (34,458 )
                                               
Net fee and commission income
          306,920       72,050       65,158       143,439       127,509  
                                               
Net income from financial operations (net trading income)
  25       109,986       2,027       44,922       51,402       97,014  
Foreign exchange profit (loss), net
  26       8,274       27,049       (19,881 )     3,867       (42,400 )
Other operating income
  31       12,537       3,309       19,160       5,859       24,898  
                                               
Total operating income
          1,456,433       351,849       352,141       680,664       679,201  
                                               
Provisions for loan losses
  27       (225,844 )     (56,874 )     (59,106 )     (105,548 )     (130,595 )
                                               
NET OPERATING PROFIT
          1,230,589       294,975       293,035       575,116       548,606  
                                               
Personnel salaries and expenses
  28       (285,645 )     (70,655 )     (66,002 )     (133,496 )     (121,591 )
Administrative expenses
  29       (173,397 )     (41,535 )     (35,707 )     (81,037 )     (71,760 )
Depreciation and amortization
  30       (56,241 )     (12,944 )     (12,592 )     (26,284 )     (24,933 )
Impairment
  12       (68 )     (27 )     (3,686 )     (32 )     (3,702 )
Other operating expenses
  31       (62,936 )     (8,800 )     (13,703 )     (29,413 )     (24,630 )
                                               
Total operating expenses
          (578,287 )     (133,961 )     (131,690 )     (270,262 )     (246,616 )
                                               
OPERATING INCOME
          652,302       161,014       161,345       304,854       301,990  
                                               
Income from investments in other companies
  -       2,411       552       223       1,127       343  
                                               
Income before tax
          654,713       161,566       161,568       305,981       302,333  
                                               
Income tax expense
  13       (98,250 )     (19,416 )     (24,163 )     (45,917 )     (45,923 )
                                               
NET INCOME FOR THE PERIOD
          556,463       142,150       137,405       260,064       256,410  
                                               
Attributable to:
                                             
Bank shareholders (Equity holders of the Bank)
  -       551,642       141,512       138,823       257,810       257,927  
Non controlling interest
  22       4,822       638       (1,418 )     2,254       (1,517 )
                                               
Earnings per share attributable to Bank shareholders: (expressed in Chilean pesos)
                                             
Basic earnings
  -       0,00292       0.751       0.737       1.368       1.369  
Diluted earnings
  -       0.00292       0.751       0.737       1.368       1.369  
 
 
 
4

 
 

BANCO SANTANDER CHILE AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
For periods ending as of

         
As of June 30,
   
For the quarter ended
   
For the 6-month period
       ended on June 30       
 
         
2011
   
2011
   
2010
   
2011
   
2010
 
   
NOTE
   
ThUS$
   
MCh$
   
MCh$
   
MCh$
   
MCh$
 
                                     
CONSOLIDATED INCOME FOR THE PERIOD
          1,882,099       142,150       137,405       260,064       256,410  
                                               
OTHER COMPREHENSIVE INCOME
                                             
                                               
Available for sale investments
  10       (2,300 )     6,607       142       (1,075 )     7,720  
Cash flow hedge
  7       (4,329 )     (529 )     17,518       (2,023 )     2,873  
                                               
Other comprehensive income before income tax
          (6,629 )     6,078       17,660       (3,098 )     10,593  
                                               
Income tax related to other comprehensive income
  13       1,406       (1,180 )     (3,002 )     657       (1,801 )
                                               
Total other comprehensive income
          (5,223 )     4,898       14,658       (2,441 )     8,792  
                                               
CONSOLIDATED COMPREHENSIVE INCOME FOR THE PERIOD
          1,876,876       147,048       152,063       257,623       265,202  
                                               
Attributable to:
                                             
Bank shareholders (Equity holders of the Bank)
  22       545,970       146,377       153,250       255,159       266,538  
Non controlling interest
  -       5,272       671       (1,187 )     2,464       (1,336 )
 
 
 
5

 
 

BANCO SANTANDER CHILE AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
For periods ending as of

         
RESERVES
   
VALUATION ADJUSTMENTS
   
RETAINED EARNINGS
                   
   
Capital
   
Reserves
and other
retained
earnings
   
Merger of
companies
under
common
control
   
Available for
sale
investments
   
Cash flow
hedge
   
 
Income
tax 
Income
tax
   
Retained
earnings of
prior years
   
Income
for the
period
   
Provision
for
mandatory
dividends
   
Total
attributable
to
shareholders
   
Non
controlling
interest
   
Total Equity
 
   
MCh$
   
MCh$
   
MCh$
   
MCh$
   
MCh$
   
MCh$
   
MCh$
   
MCh$
   
MCh$
   
MCh$
   
MCh$
   
MCh$
 
                                                                         
Balances as of December 31, 2009
    891,303       53,763       (2,224 )     (29,132 )     (3,162 )     5,490       440,401       431,253       (129,376 )     1,658,316       29,799       1,688,115  
Distribution of income from previous period
    -       -       -       -       -       -       431,253       (431,253 )     -       -       -       -  
First Enforcement of Chapter B3
    -       -       -       -       -       -       (52,662 )     -       -       (52,662 )     -       (52,662 )
Opening balances as of January 1, 2010
    891,303       53,763       (2,224 )     (29,132 )     (3,162 )     5,490       818,992       -       (129,376 )     1,605,654       29,799       1,635,453  
Increase or decrease of capital and reserves
    -       -       -       -       -       -       -       -       -       -       -       -  
Dividends distributions / Withdrawals made
    -       -       -       -       -       -       (258,752 )     -       129,376       (129,376 )     -       (129,376 )
Other changes in equity
    -       -       -       -       -       -       (112 )     -       -       (112 )     (3 )     (115 )
Provisions for mandatory dividends
    -       -       -       -       -       -       -       -       (77,378 )     (77,378 )     -       (77,378 )
Subtotals
    -       -       -       -       -       -       (258,864 )     -       51,998       (206,866 )     (3 )     (206,869 )
Other comprehensive income
    -       -       -       7,502       2,873       (1,764 )     -       -       -       8,611       181       8,792  
Income for the period
    -       -       -       -       -       -       -       257,927       -       257,927       (1,517 )     256,410  
Subtotals
    -       -       -       7,502       2,873       (1,764 )     -       257,927       -       266,538       (1,336 )     265,202  
Opening balances as of June 30, 2010
    891,303       53,763       (2,224 )     (21,630 )     (289 )     3,726       560,128       257,927       (77,378 )     1,665,326       28,460       1,693,786  
                                                                                                 
Balances as of December 31, 2010
    891,303       53,763       (2,224 )     (18,341 )     11,958       1,203       560,128       477,155       (143,147 )     1,831,798       31,809       1,863,607  
Distribution of income from previous period
    -       -       -       -       -       -       477,155       (477,155 )     -       -       -       -  
Balances as of January 1, 2011
    891,303       53,763       (2,224 )     (18,341 )     11,958       1,203       1,037,283       -       (143,147 )     1,831,798       31,809       1,863,607  
Increase or decrease of capital and reserves
    -       -       -       -       -       -       -       -       -       -       -       -  
Dividends distributions / Withdrawals made
    -       -       -       -       -       -       (286,294 )     -       143,147       (143,147 )     (3,122 )     (146,269 )
Other changes in equity
    -       -       -       -       -       -       -       -       -       -       20       20  
Provision for mandatory dividends
    -       -       -       -       -       -       -       -       (77,343 )     (77,343 )     -       (77,343 )
Subtotals
    -       -       -       -       -       -       (286,294 )     -       65,804       (220,490 )     (3,102 )     (223,592 )
Other comprehensive income
    -       -       -       (1,328 )     (2,023 )     700       -       -       -       (2,651 )     210       (2,441 )
Income for the period
    -       -       -       -       -       -       -       257,810       -       257,810       2,254       260,064  
Subtotals
    -       -       -       (1,328 )     (2,023 )     700       -       257,810       -       255,159       2,464       257,623  
                                                                                                 
Opening balances as of June 30, 2011
    891,303       53,763       (2,224 )     (19,669 )     9,935       1,903       750,989       257,810       (77,343 )     1,866,467       31,171       1,897,638  
 
Period
 
Total attributable to
shareholders
   
Allocated to reserves or
retained earnings
   
Allocated to
Dividends
   
Percentage 
distributed
   
Number of 
Shares
   
Dividend per share
(in pesos)
 
   
MCh$
   
MCh$
   
MCh$
   
%
             
                                     
Year 2010 (Shareholders Meeting April 2011)
    477,155       190,861       286,294       60 %     188,446,126,794       1.519  
                                                 
Year 2009 (Shareholders Meeting April 2010)
    431,253       172,501       258,752       60 %     188,446,126,794       1.373  
 
 
 
6

 
 

BANCO SANTANDER CHILE AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW
For periods ending as of

         
As of June 30
 
         
2011
   
2011
   
2010
 
   
NOTE
   
ThUS$
   
MCh$
   
MCh$
 
                         
A – CASH FLOWS FROM OPERATING ACTIVITIES
                       
CONSOLIDATED INCOME BEFORE TAX
          654,715       305,981       302,333  
Debits (credits) to income that do not represent cash flows
          1,060,602       (495,673 )     (494,376 )
Depreciation and amortization
  30       56,241       26,284       24,933  
Impairment of property, plant, and equipment
  12       68       32       3,702  
Provision for loan losses
  27       247,876       115,845       146,134  
Mark to market of trading investments
  -       (4,534 )     (2,119 )     (29,926 )
Income from investments in other companies
  -       (2,411 )     (1,127 )     (343 )
Net gain on sale of assets received in lieu of payment
  31       (8,268 )     (3,864 )     (1,698 )
Provisions for assets received in lieu of payment
  31       2,732       1,277       2,300  
Net gain on sale of investments in other companies
  -       -       -       -  
Net gain on sale of property, plant and equipment
  31       (1,731 )     (809 )     (13,195 )
Charge off of assets received in lieu of payment
  31       11,407       5,331       1,548  
Net interest income
  23       (1,018,716 )     (476,097 )     (472,180 )
Net fee and commission income
  24       (306,920 )     (143,439 )     (127,509 )
Debits (credits) to income that do not represent cash flows
  -       (36,350 )     16,988       (5,207 )
Changes in assets and liabilities due to deferred taxes
  13       4       2       (22,935 )
Increase/decrease in operating assets and liabilities
          (388,808 )     (181,709 )     (166,363 )
Decrease (increase) of loans and accounts receivables from customers, net
  -       (3,554,343 )     (1,661,122 )     (871,161 )
Decrease (increase) of financial investments
  -       (3,064,750 )     (1,432,311 )     536,934  
Decrease (increase) due to resale agreements (assets)
  -       357,278       166,974       5,000  
Decrease (increase) of interbank loans
  -       (38,485 )     (17,986 )     (18,067 )
Decrease of assets received or awarded in lieu of payment
  -       45,508       21,268       10,348  
Increase of debits in checking accounts
  -       150,037       70,120       512,518  
Increase (decrease) of time deposits and other time liabilities
  -       3,304,404       1,544,313       49,681  
Increase (decrease) of obligations with domestic banks
  -       115,545       54,000       18,067  
Increase of other demand liabilities or time obligations
  -       179,388       83,837       66,371  
Increase (decrease) of obligations with foreign banks
  -       412,806       192,925       78,088  
Decrease of obligations with Central Bank of Chile
  -       (674 )     (315 )     (342 )
Increase (decrease) due to resale agreements (liabilities)
  -       51,178       23,918       (991,494 )
Increase (decrease) of other short-term liabilities
  -       3,381       1,580       (2,583 )
Net increase of other assets and liabilities
  -       115,573       54,014       (143,848 )
Redemption of letters of credit
  -       (81,132 )     (37,917 )     (71,721 )
Senior bond issuances
  -       684,468       319,886       426,794  
Redemption of senior bonds and payments of interest
  -       (290,887 )     (135,946 )     (156,273 )
Interest received
  -       1,814,920       848,203       481,545  
Interest paid
  -       (803,182 )     (375,367 )     (178,760 )
Dividends received from investments in other companies
  -       1,489       696       954  
Fees and commissions received
  24       393,474       183,890       161,967  
Fees and commissions paid
  24       (86,554 )     (40,451 )     (34,458 )
Income tax paid
  13       (98,250 )     (45,917 )     (45,923 )
Net cash from (used in) operating activities
          (794,695 )     (371,400 )     (358,406 )
 
 
 
7

 
 

BANCO SANTANDER CHILE AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW
For periods ending as of

         
As of June 30,
 
         
2011
   
2011
   
2010
 
   
NOTE
   
ThUS$
   
MCh$
   
MCh$
 
                         
B – CASH FLOWS FROM INVESTMENT ACTIVITIES:
                       
Purchases of property, plant, and equipment
  12       (10,365 )     (4,844 )     (4,122 )
Sales of property, plant, and equipment
  -       12,545       5,863       14,197  
Purchases of investments in other companies
  -       -       -       -  
Sales of investments in other companies
  -       -       -       -  
Purchases of intangibles assets
  11       (23,314 )     (10,896 )     (8,033 )
Net cash used in investment activities
          (21,134 )     (9,877 )     2,042  
                               
C – CASH FLOW FROM FINANCING ACTIVITIES:
                             
From shareholders’ financing activities
  -       (489,973 )     (228,989 )     (263,210 )
Increase of other obligations
  -       -       -       -  
Issuance of subordinated bonds
  -       143,060       66,859       12,682  
Redemption of subordinated bonds and payments of interest
  -       (20,443 )     (9,554 )     (17,140 )
Dividends paid
  -       (612,590 )     (286,294 )     (258,752 )
From non controlling interest financing activities
  -       -       -       -  
Increases of capital
  -       -       -       -  
Dividends and/or withdrawals paid
  -       -       -       -  
Net cash used in financing activities
          (489,973 )     (228,989 )     (263,210 )
                               
D – VARIATION OF CASH AND CASH EQUIVALENTS DURING THE PERIOD
  -       (1,305,802 )     (610,266 )     (619,574 )
                               
E – EFFECTS OF FOREIGN EXCHANGE RATE VARIATIONS
  -       (84,414 )     (39,451 )     (33,956 )
                               
F – INITIAL BALANCE OF CASH AND CASH EQUIVALENTS
  -       3,929,477       1,836,441       2,236,118  
                               
FINAL BALANCE OF CASH AND CASH EQUIVALENTS
  5       2,539,261       1,186,724       1,582,588  
 
   
As of June 30
 
Reconciliation of provisions for Consolidated Statements of Cash Flow
 
2011
   
2010
 
   
MCh$
   
MCh$
 
             
Provisions for loan losses for cash flow
    115,845       146,134  
Recovery of loans previously charged off
    (10,297 )     (15,539 )
Expenses on provisions for loan losses
    105,548       130,595  
 
 
 
8

 

 
BANCO SANTANDER CHILE AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM STATEMENTS OF INCOME
As of June 30, 2011 and 2010, and December 31, 2010

NOTE 01 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Corporate Information
 
Banco Santander Chile (formerly Banco Santiago) is a corporation (sociedad anónima bancaria) organized under the laws of the Republic of Chile, headquartered at 140 Bandera St., Santiago, that provides a broad range of general banking services to its customers, from individuals to major corporations. Banco Santander Chile and its affiliates (collectively referred to herein as the “Bank” or “Banco Santander Chile”) offer commercial and consumer banking services, besides other services, including factoring, collection, leasing, securities and insurance brokerage, mutual and investment fund management, and investment banking.
 
A Special Meeting of Shareholders of Banco Santiago was held on July 18, 2002, the minutes of which were notarized as a public deed on July 19, 2002 at the Notarial Office of Santiago before Notary Nancy de la Fuente Hernández, and there it was agreed to merge Banco Santander Chile with Banco Santiago by merging the former into the latter, which acquired the former’s assets and liabilities. It was likewise agreed to dissolve Banco Santander Chile in advance and change the name from Banco Santiago to Banco Santander Chile.  This change was authorized by Resolution No.79 of the Superintendence of Banks and Financial Institutions, adopted on July 26, 2002, published in the Official Journal on August 1, 2002 and registered on page 19,992 under number 16,346 for the year 2002 in the Registry of Commerce of the Curator of Real Estate of Santiago.

In addition to the amendments to the bylaws discussed above, the bylaws have been amended on multiple occasions, the last time at the Special Shareholders Meeting of April 24, 2007, the minutes of which were notarized as a public deed on May 24, 2007 at the Notarial Office of Nancy de la Fuente Hernández.  This amendment was approved pursuant to Resolution No.61 of June 6, 2007 of the Superintendence of Banks and Financial Institutions.  An extract thereof and the resolution were published in the Official Journal of June 23, 2007 and registered in the Registry of Commerce for 2007 on page 24,064 under number 17,563 of the aforementioned Curator.

By means of this last amendment, Banco Santander Chile, pursuant to its bylaws and as approved by the Superintendence of Banks and Financial Institutions, may also use the names Banco Santander Santiago or Santander Santiago or Banco Santander or Santander.

Banco Santander Spain controls Banco Santander-Chile through its share in Teatinos Siglo XXI Inversiones Ltda. and Santander-Chile Holding S.A., which are subsidiaries controlled by Banco Santander Spain. As of June 30, 2011 Banco Santander Spain owns or controls directly and indirectly 99.5% of the Santander-Chile Holding S.A. and 100% of Teatinos Siglo XXI Inversiones Ltda. This grants Banco Santander Spain control over 75% of the Bank’s shares.

a) 
Basis of preparation

These Consolidated Financial Statements have been prepared in accordance with the Compendium of Accounting Standards issued by the Superintendency of Banks and Financial Institutions (SBIF), a regulatory agency. Article 15 of the General Banking Law states that, in accordance with the laws, banks must use the accounting criteria issued by the Superintendence and that, in any situation not provided for therein, provided it is not contrary to its instructions, must abide by the generally accepted accounting principles, which correspond with the technical standards issued by the Colegio de Contadores de Chile AG (Association of Chilean Accountants), which coincide with the International Financial Reporting Standards(IFRS) adopted by the International Accounting Standard Board (IASB). In the event of discrepancies between the accounting principles and the accounting criteria issued by the SBIF (Compendium of Accounting Standard), the latter will prevail.

b) 
Basis of preparation for the Consolidated Interim Financial Statements

The Consolidated Interim Financial Statements include the preparation of separate (individual) financial statements of the Bank and the companies that participate in the consolidation of June 30, 2011 and 2010, and include the adjustments and reclassifications needed to comply with the policies and valuation criteria established by the Compendium of Accounting Standards issued by the SBIF.

Subsidiaries

“Subsidiaries” are defined as entities over which the Bank has the ability to exercise control, which is generally but not exclusively reflected by the direct or indirect ownership of at least 50% of the investee’s voting rights, or even if this percentage is lower or zero when the Bank is granted control pursuant to agreements with the investee’s shareholders.  Control is understood as the power to significantly influence the investee’s financial and operating policies, so as to profit from its activities.

The Interim financial statements of subsidiaries are consolidated with those of the Bank. According to this, all balances and transactions between consolidated corporations will be eliminated through the consolidation process.

In addition, third parties’ shares in the Consolidated Bank’s equity are presented as “Non controlling interests” in the Interim Consolidated Statement of Financial Position.  Their shares in the year’s income are presented under “Non controlling interests” in the Interim Consolidated Statement of Income.
 
 
 
9

 
 
 
BANCO SANTANDER CHILE AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM STATEMENTS OF INCOME
As of June 30, 2011 and 2010, and December 31, 2010

NOTE 01 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

The following companies are considered “Subsidiaries” in which the Bank holds equity and accounts for it through the equity method:

   
Percentage share
 
   
As of June 30
   
As of December 31
   
As of June 30
 
Subsidiaries
 
2011
   
2010
   
2010
 
   
Direct
%
   
Indirect
%
   
Total
%
   
Direct
%
   
Indirect
%
   
Total
%
   
Direct
%
   
Indirect
%
   
Total
%
 
                                                       
Santander Corredora de Seguros Limitada
    99.75       0.01       99.76       99.75       0.01       99.76       99.75       0.01       99.76  
Santander S.A. Corredores de Bolsa
    50.59       0.41       51.00       50.59       0.41       51.00       50.59       0.41       51.00  
Santander Asset Management S.A. Administradora General de Fondos
    99.96       0.02       99.98       99.96       0.02       99.98       99.96       0.02       99.98  
Santander Agente de Valores Limitada (former Santander S.A. Agente de Valores)
    99.03       -       99.03       99.03       -       99.03       99.03       -       99.03  
Santander S.A. Sociedad Securitizadora
    99.64       -       99.64       99.64       -       99.64       99.64       -       99.64  
Santander Servicios de Recaudación y Pagos Limitada
    99.90       0.10       100.00       99.90       0.10       100.00       99.90       0.10       100.00  
 
Special Purpose Entities

According to IFRS, the Bank must continuously analyze its perimeter of consolidation. The key criterion for such analysis is the degree of control held by the Bank over a given entity, not the percentage of ownership interest in such entity’s equity.

In particular, as set forth by International Accounting Standard 27 “Consolidated and Separate Financial Statements” (IAS 27) and by the Standard Interpretations Committee 12 “Consolidation – Special Purpose Entities” (SIC 12), issued by the IASB, the Bank must determine the existence of Special Purpose Entities (SPEs), which must be included in its perimeter of consolidation. The following are its main characteristics:

·
The SPEs’ activities have essentially been conducted on behalf of the company that presents the Interim Consolidated Financial Statements and in response to its specific business needs.
·
The necessary decision making authority is held to obtain most of the benefits from these entities’ activities, as well as the rights to obtain most of the benefits or other advantages from such entities.
·
The entity essentially retains most of the risks inherent to the ownership or residuals of the SPEs or its assets, for the purpose of obtaining the benefits from its activities.

This assessment is based on methods and procedures which consider the risks and profits retained by the Bank, for which all the relevant factors, including the guarantees furnished or the losses associated with collection of the related assets retained by the Bank, are taken into account.  As a consequence of this assessment, the Bank concluded that it exercised control over the following entities, which therefore are part of the consolidation perimeter:

-
Santander Gestión de Recaudación y Cobranza Limitada.
-
Multinegocios S.A.
-
Servicios Administrativos y Financieros Limitada.
-
Fiscalex Limitada.
-
Multiservicios de Negocios Limitada.
-
Bansa Santander S.A.

Associates

Associates are those entities over which the Bank may exercise significant influence but not control or joint control, usually this capacity is manifested by holding 20% or more of the entity’s voting power. Investments in associated entities are accounted for pursuant to the “equity method.”