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
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.
 
 3Q2011 Earnings Release
2.
 
9M 2011 Financial Statements

 
2

 
 
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: November 4, 2011

 
3

 


BANCO SANTANDER CHILE
THIRD QUARTER 2011
EARNINGS REPORT

 
 

 

INDEX

SECTION
PAGE
   
SECTION 1: SUMMARY OF RESULTS
2
   
SECTION 2: BALANCE SHEET ANALYSIS
6
   
SECTION 3: ANALYSIS OF QUARTERLY INCOME STATEMENT
9
   
SECTION 4: CREDIT RISK RATINGS
16
   
SECTION 5: SHARE PERFORMANCE
17
   
ANNEX 1: NEW PROVISIONING MODEL FOR RESIDENTIAL MORTGAGE LOANS
18
   
ANNEX 2: BALANCE SHEET
19
   
ANNEX 3: YEAR-TO-DATE INCOME STATEMENT
20
   
ANNEX 4: QUARTERLY INCOME STATEMENTS
21
   
ANNEX 5: QUARTERLY EVOLUTION OF MAIN RATIOS AND OTHER INFORMATION
22

CONTACT INFORMATION
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

 
 

 

SECTION 1: SUMMARY OF RESULTS

3Q11: preparing for a more challenging environment

In the nine-month period ended September 30, 2011 (9M11), net income attributable to shareholders1 totaled Ch$332,963 million (Ch$1.77 per share and US$3.56/ADR2) and decreased 13.1% compared to net income in the same period of 2010.  Return on average equity reached 23.8% in 9M11, among the highest returns in the Chilean financial system. The efficiency ratio in 9M11 reached 38.4%.

In 3Q11, net income attributable to shareholders totaled Ch$75,153 million (Ch$0.40 per share and US$0.80/ADR). Compared to 2Q11 (from now on QoQ) net income decreased 46.9%. Compared to 3Q10 (from now on YoY) net income decreased 40.0%. Several non-recurring items and a cautious stance regarding risks affected these results.

Our outlook for Chile in 2012 continues to be positive, with GDP expected to expand 4.5% and inflation to be close to 3.0%. Nonetheless, the Bank focused its actions on 4 main points in the quarter in order to maintain sustainable levels of high profitability in 2012: (i) Liquidity, (ii) Capital, (iii) Selective loan growth and spreads, and (iv) Prudent risk policies. This process is very similar to the approach we carried out in the 2008-2009 period.

I.
Focus on liquidity

Core deposits grow 6.9% QoQ and 30.9% YoY

Total deposits increased 4.4% QoQ. In the quarter, the Bank continued to focus on increasing its core deposit base (non-institutional deposits). These cheaper deposits led growth and expanded 6.9% QoQ and 30.9% YoY, representing more than 70% of the Bank’s deposit base. The Bank’s loan to deposit ratio (measured as loans minus marketable securities that fund mortgage portfolio over total deposits3) improved to 94.8% as of September 2011 compared to 96.8% as of June 2011 and 100.9% in September 2010.

The Bank’s market share in total deposits has increased 36 basis points in the last 12 months to 18.7%. Throughout 2011, funding costs in the banking system have risen due to higher short-term interest rates, but the Bank’s funding costs have increased at a slower pace given the focus on core deposit growth. We currently have opened a gap of 20 basis points in average cost of funds compared to the rest of the Chilean banking system.

1 The results in this report are unaudited. 
2 Earnings per ADR was calculated using the Observed Exchange Rate of Ch$515.14 per US$ as of September 30, 2011. 
3 Mortgage loans in Chile are long-term fixed rate loans. Therefore, we consider it to be more conservative form a market risk and liquidity stand point to fund these loans with long-term fixed rate bonds and not short-term variable rate deposits.
 
Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl
 
 
2

 


Average cost of funds

Cost of funds: Interest expenses / total liabilities annualized. Competition includes all Chilean banks minus Santander. Source of data: Superintendency of Banks of Chile (SBIF)

Surplus liquidity tops US$3 billion

In the quarter, the Bank’s deposit base increased at a faster pace than its loans. This additional liquidity was temporarily invested in Chilean sovereign risk. The Bank’s surplus liquidity, defined as financial investments minus non-structural liabilities, averaged US$3.0 billion in the quarter.

II.
Focus on core capital

Core capital at 10.2%. ROAE in 9M11 at 23.8%

The Bank currently has one of the highest capitalization levels in the Chilean financial system. Voting common shareholders’ equity is the sole component of our Tier I capital. The Bank core capital ratio reached 10.2%, increasing 40 bp QoQ. The Bank implemented a series of measures to boost core capital ratios by optimizing risk-weighted assets. As a result, the BIS ratio reached 13.9% as of September 30, 2011 compared to 13.4% as of June 2011. ROAE in the nine-month period ended September 30, 2011 reached 23.8%.

III.
Focus on selective loan growth and spreads

In 3Q11, total loans increased 1.5% QoQ and 16.1% YoY. The Bank has been following a more selective approach to loan growth given the market uncertainty, while continuing to focus on retail lending activities. Higher yielding loans to individuals increased 2.1% QoQ in 3Q11. This loan growth was led by lending to middle and upper income individuals, which expanded 2.2% QoQ. Lending to Santander Banefe slowed in the quarter and grew 1.3% QoQ. Lending to SMEs led growth in retail lending and expanded 2.8% QoQ. In the middle market, loans grew 2.9% QoQ (18.1% YoY). This year the Bank is obtaining attractive returns in this segment given the positive evolution of credit risk and spreads.

Rising spreads

The Banks net interest margin in the quarter reached 4.6% compared to 5.2% in 2Q11. The Bank’s margins in the quarter were negatively affected by lower QoQ inflation rates, as the Bank has more assets than liabilities linked to inflation. Inflation in the quarter descended from 1.44% in 2Q11 to 0.56% in 3Q11. For every 100 bp decline in inflation, net interest income falls by approximately Ch$25 billion. The increase in the Bank’s surplus liquidity has also temporarily reduced the Bank’s net interest margin.

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

 
3

 


These negative effects on margins were partially offset by rising loan spreads (excluding the impacts of mismatches in inflation indexed assets and liabilities). Loan spreads in the quarter began to rise as the Bank implemented a stricter pricing policy in light of a potential deterioration of economic conditions and a potentially higher cost of capital. This should also help to sustain or improve margins in coming quarters.

Loan spreads*, %


Spread = Loan yield minus cost of funds and excluding impacts of inflation indexed asset and liability mismatches.

IV.
Prudent credit risk policies

Risk index stable despite higher provisions

On a year-to date basis net provision expense has increased 7.6% compared to a 16.1% rise in loan growth. Provision for loan losses in the quarter increased 58.9% QoQ and 75.4% YoY. This rise was mainly due to one-time provisions expenses, the expansion of our lending volumes, especially consumer lending and more prudent credit risk policies implemented in light of a possible deterioration of the macro environment. This included restricting renegotiations and, therefore, increasing charge-offs. This also resulted in a temporary rise in NPLs, but did not affect the Bank’s risk index. The Risk Index, which includes non-performing loans and additional risk parameters, remained stable QoQ at 2.94%. The Bank is required to have 100% coverage at all times of its Risk Index. The NPL ratio, which includes all loans that are more than 90 days overdue, as of September 2011 reached 2.81%. The coverage ratio of total NPLs (loan loss allowances over non-performing loans) reached 104.8% as of September 2011.

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

 
4

 


Banco Santander Chile: Summary of Quarterly Results

   
Quarter
   
Change %
 
                      3Q11 /     3Q11 /  
(Ch$ million)
 
3Q11
   
2Q11
   
3Q10
   
3Q10
   
2Q11
 
Net interest income
    232,057       247,414       235,674       (1.5 )%     (6.2 )%
Fee income
    65,991       72,050       66,436       (0.7 )%     (8.4 )%
Core revenues
    298,048       319,464       302,110       (1.3 )%     (6.7 )%
Financial transactions, net
    23,001       29,076       21,713       5.9 %     (20.9 )%
Provision expense
    (90,372 )     (56,874 )     (51,525 )     75.4 %     58.9 %
Operating expenses
    (128,356 )     (125,161 )     (113,570 )     13.0 %     2.6 %
Operating income, net of provisions and costs
    102,321       166,505       158,728       (35.5 )%     (38.5 )%
Other operating & Non-op. Income
    (27,168 )     (24,993 )     (33,372 )     (18.6 )%     8.7 %
Net income attributable to shareholders
    75,153       141,512       125,356       (40.0 )%     (46.9 )%
Net income/share (Ch$)
    0.40       0.75       0.67       (40.0 )%     (46.9 )%
Net income/ADR (US$)1
    0.80       1.66       1.42       (43.5 )%     (51.4 )%
Total loans
    17,680,356       17,422,041       15,232,019       16.1 %     1.5 %
Deposits
    13,892,003       13,306,475       11,146,945       24.6 %     4.4 %
Shareholders’ equity
    1,927,498       1,866,467       1,757,340       9.7 %     3.3 %
Net interest margin
    4.6 %     5.2 %     5.7 %                
Efficiency ratio
    41.3 %     36.5 %     37.2 %                
Return on average equity2
    15.8 %     30.5 %     29.3 %                
NPL / Total loans3
    2.8 %     2.6 %     2.7 %                
Coverage NPLs
    104.8 %     111.9 %     105.1 %                
Risk index4
    2.94 %     2.90 %     2.82 %                
PDLs/ Total loans5
    1.27 %     1.23 %     1.36 %                
Coverage PDLs
    232.45 %     235.86 %     206.64 %                
BIS ratio
    13.9 %     13.4 %     14.5 %                
Branches
    494       487       500                  
ATMs
    1,892       1,946       1,914                  
Employees
    11,706       11,516       11,049                  
1.
The change in earnings per ADR may differ from the change in earnings per share due to the exchange rate movements. Earnings per ADR was calculated using the Observed Exchange Rate Ch$515.14 per US$ as of September 30, 2011.
2.
Annualized quarterly Net income attributable to shareholders / Average equity attributable to shareholders.
3.
NPLs: Non-performing loans; full balance of loans with one installment 90 days or more overdue.
4.
Risk Index: Loan loss allowances / Total loans; measures the percentage of loans the banks must provision for given their internal models and the Superintendency of Banks guidelines.
5.
PDLs: Past due loans; all loan installments that are more than 90 days overdue.
 
Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

 
5

 


SECTION 2: BALANCE SHEET ANALYSIS

LOANS

Selective loan growth led by retail lending to middle-upper income individuals

Loans 
 
Quarter ended,
   
% Change
       
(Ch$ million)
 
Sep-11
   
Jun-11
   
Sep-10
   
Sep. 11 / 10
   
Sep. 11 / Jun.
11
 
Total loans to individuals1
    9,215,686       9,026,697       8,035,617       14.7 %     2.1 %
Consumer loans
    2,925,659       2,893,038       2,554,884       14.5 %     1.1 %
Residential mortgage loans
    5,016,419       4,909,630       4,498,799       11.5 %     2.2 %
SMEs
    2,524,836       2,455,349       2,301,536       9.7 %     2.8 %
Total retail lending
    11,740,522       11,482,046       10,337,153       13.6 %     2.3 %
Institutional lending
    351,686       372,939       340,274       3.4 %     (5.7 )%
Middle-Market & Real estate
    3,731,881       3,625,439       3,160,681       18.1 %     2.9 %
Corporate
    1,833,084       1,950,992       1,406,210       30.4 %     (6.0 )%
Total loans 2
   
17,680,356
     
17,422,041
     
15,232,019
     
16.1
%    
1.5
%
1. Includes consumer loans, residential mortgage loans and other commercial loans to individuals.
2. Total loans gross of loan loss allowances. Total loans include other non-segmented loans and excludes interbank loans.

In 3Q11, total loans increased 1.5% QoQ and 16.1% YoY. The Bank has been following a more selective approach to loan growth given the market uncertainty while continuing to focus on retail lending activities.

Loans to individuals, which include consumer, mortgage and commercial loans to high-income individuals, increased of 2.1% QoQ in 3Q11. This loan growth was driven by lending to middle and upper income individuals, which expanded 2.2% QoQ. Lending to Santander Banefe increased 1.3% QoQ as the bank adopted a more selective approach to loan growth in this segment.

Breakdown loans to
individuals
(Ch$ million)
 
Sep-11
   
% Change
Sep. 11 / 10
   
% Change
Sep. 11 /
Jun. 11
 
Middle-upper income
    8,420,540       14.3 %     2.2 %
Santander Banefe
    795,146       18.9 %     1.3 %
Individuals
    9,215,686       14.7 %     2.1 %

By product, consumer loans increased 1.1% QoQ and 14.5% YoY. In the quarter, the Bank focused on expanding its higher yielding credit card loan portfolio that increased 2.3% QoQ and 28.2% YoY. Installment loans were flat QoQ.  Residential mortgage loans increased 2.2% QoQ (11.5% YoY), as long-term rates remained attractive and demand for purchasing homes continued to rise.

Lending to SMEs (defined as companies that sell less than Ch$1,200 million per year) led growth in retail lending and expanded 2.8% QoQ (9.7% YoY), reflecting the Bank’s shift in focus in the quarter given market uncertainties. This segment tends to perform better in slower economic growth periods given the high level of diversification of this portfolio.

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

 
6

 


In the middle market (comprised of companies with annual sales between Ch$1,200 million and Ch$10.000 million per year), loans grew a healthy 2.9% QoQ (18.1% YoY). This year the Bank is obtaining attractive returns in this segment given the positive evolution of credit risk and spreads.

Corporate lending (companies with sale over Ch$10,000 million per year or that are part of a large foreign or local economic group) decreased 6.0% QoQ (+30.4% YoY). This fall was mainly due to 3 corporate debt obligation that were paid in full as company’s currently have strong liquidity levels. Non-lending activities with this segment continued to grow in the quarter. (See Funding and Financial transactions, net).

FUNDING

Focus on liquidity. Core deposits grow 6.9% QoQ and 30.9% YoY

Funding
 
Quarter ended,
   
% Change
 
(Ch$ million)
 
Sep-11
   
Jun-11
   
Sep-10
   
Sep. 11 / 10
   
Sep. 11 / 
Jun. 11
 
Demand deposits
    4,496,757       4,450,290       3,991,732       12.7 %     1.0 %
Time deposits
    9,395,246       8,856,185       7,155,213       31.3 %     6.1 %
Total deposits
    13,892,003       13,306,475       11,146,945       24.6 %     4.4 %
Mutual funds (off-balance sheet)
    2,852,379       3,136,413       3,305,683       (13.7 )%     (9.1 )%
Total customer funds
    16,744,382       16,442,888       14,452,628       15.9 %     1.8 %
Loans to deposits1
    94.8 %     96.8 %     100.9 %                
1. (Loans - marketable securities that fund mortgage portfolio) / (Time deposits + demand deposits).

Customer funds increased 1.8% in the quarter led by a 4.4% QoQ rise in total deposits. Demand deposits increased 1.0% in the same period and time deposits were up 6.1%. In the quarter, the Bank continued to focus on increasing its core deposit base. Core deposits (non-institutional deposits) increased 6.9% QoQ and 30.9% YoY. The Bank’s loan to deposit ratio (measured as loans minus marketable securities that fund mortgage portfolio over total deposits) improved to 94.8% as of September 2011 compared to 96.8% as of June 2011 and 100.9% in September 2010. The Bank’s market share in total deposits has increased 36 basis points in the last 12 months to 18.7%.  Mutual funds under management decreased 9.1% QoQ. This was mainly due to weak equity markets.

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

 
7

 


SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL

Core capital at 10.2%. ROAE in 9M11 at 23.8%

Shareholders' Equity
 
Quarter ended,
   
Change %
 
 
(Ch$ million)
 
Sep-11
   
Jun-11
   
Sep-10
   
Sep. 11 / 10
   
Sep. 11 /
Jun. 11
 
Capital
    891,303       891,303       1,757,340       (49.3 )%     0.0 %
Reserves
    51,538       51,538       51,539       (0.0 )%     0.0 %
Valuation adjustment
    593       (7,831 )     (13,928 )     (104.3 )%     (107.6 )%
Retained Earnings:
    984,064       931,457       828,426       18.8 %     5.6 %
Retained earnings prior periods
    750,989       750,990       560,128       34.1 %     0.0 %
Income for the period
    332,963       257,810       383,283       (13.1 )%     29.2 %
Provision for mandatory dividend
    (99,889 )     (77,343 )     (114,985 )     (13.1 )%     29.2 %
Equity attributable to shareholders
    1,927,498       1,866,467       2,623,377       (26.5 )%     3.3 %
Non-controlling interest
    32,293       31,171       29,599       9.1 %     3.6 %
Total Equity
    1,959,791       1,897,638       2,652,976       (26.1 )%     3.3 %
Quarterly ROAE
    15.8 %     30.5 %     23.0 %                

Shareholders’ equity totaled Ch$1,927,498 million (US$4.0 billion) as of September 30, 2011. ROAE in the nine-month period ended September 30, 2011 reached 23.8%. During the quarter, the Bank implemented a series of measures to boost core capital ratios by optimizing risk-weighted assets. As a result, the BIS ratio reached 13.9% as of September 30, 2011 compared to 13.4% as of June 2011 and the Bank’s core capital ratio reached 10.2% as of September 2011 compared to 9.8% as of June 2011. Voting common shareholders’ equity is the sole component of our Tier I capital.

Capital Adequacy
 
Quarter ended,
   
Change %
 
 
(Ch$ million)
 
Sep-11
   
Jun-11
   
Sep-10
   
Sep. 11 / 10
   
Sep. 11 /
Jun. 11
 
Tier I (Core Capital)
    1,927,498       1,866,467       1,757,340       9.7 %     3.3 %
Tier II
    715,184       669,798       672,740       6.3 %     6.8 %
Regulatory capital
    2,642,682       2,536,265       2,430,080       8.7 %     4.2 %
Risk weighted assets
    18,954,146       18,964,803       16,739,710       13.2 %     (0.1 )%
Tier I (Core capital) ratio
    10.2 %     9.8 %     10.5 %                
BIS ratio
    13.9 %     13.4 %     14.5 %                

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

 
8

 


SECTION 3: ANALYSIS OF QUARTERLY INCOME STATEMENT

NET INTEREST INCOME

Net interest margins negatively affected by lower inflation in the quarter and higher levels of liquidity. Loan spreads rising.

Net Interest Income / Margin 
 
Quarter
   
Change %
 
 
(Ch$ million)
 
3Q11
   
2Q11
   
3Q10
   
3Q11 /
3Q10
   
3Q11 /
2Q11
 
Interest income
    420,729       472,132       355,445       18.4 %     (10.9 )%
Interest expense
    (188,672 )     (224,718 )     (119,771 )     57.5 %     (16.0 )%
Net interest income
    232,057       247,414       235,674       (1.5 )%     (6.2 )%
Average interest-earning assets
    20,068,322       19,099,828       16,463,951       21.9 %     5.1 %
Average loans
    17,460,992       17,146,712       14,874,816       17.4 %     1.8 %
Interest earning asset yield1
    8.4 %     9.9 %     8.6 %                
Cost of funds2
    4.1 %     5.2 %     2.8 %                
Net interest margin (NIM)3
    4.6 %     5.2 %     5.7 %                
Avg. equity + non-interest bearing  demand deposits / Avg. interest earning assets
    31.3 %     33.6 %     34.7 %                
Quarterly inflation rate5
    0.56 %     1.44 %     0.65 %                
Central Bank reference rate
    5.25 %     5.25 %     2.50 %                
Avg. 10 year Central Bank yield (real)
    2.63 %     2.90 %     2.82 %                
1. Interest income divided by interest earning assets.
2. Interest expense divided by interest bearing liabilities + demand deposits.
3. Net interest income divided by average interest earning assets annualized.
4. Net interest income net of provision expenses divided by interest earning assets.
5. Inflation measured as the variation of the Unidad de Fomento in the quarter.

Net interest income decreased 6.2% QoQ and 1.5% YoY. The Net interest margin (NIM) in 3Q11 reached 4.6% compared to 5.2% in 2Q11. Compared to 3Q10, the decline in net interest income and NIM was mainly due to higher short-term interest rates. The Central Bank has increased short-term interest rates by 300 basis points to 5.25% in the last twelve months. The Bank’s liabilities have a shorter duration than assets and, therefore, re-price more quickly in a rising interest rate environment. This has increased funding costs as reflected in the 57.5% YoY rise in interest expense in the quarter. Interest income on the other hand has increased 18.4% slightly above the 17.4% YoY increase in average loans. To offset this, the Bank focused on increasing core deposit base. We have currently opened a gap of 20 basis points in average cost of funds compared to the rest of the Chilean banking system.

Compared to 2Q11, the decrease in the Bank’s net interest income and NIM was mainly due to: (i) the lower QoQ inflation rates, which negatively affected margins, as the Bank has more assets than liabilities linked to inflation. Inflation in the quarter descended from 1.44% in 2Q11 to 0.56% in 3Q11. For every 100 bp decline in inflation, net interest income falls by approximately Ch$25 billion. This more than offset in the quarter rising loan spreads, which are gradually incorporating the higher interest rate environment. (ii) The increase in the Bank’s surplus liquidity has also temporarily reduced the Bank’s net interest margin. The Bank deposit base has increased 24.6% YoY and 4.4% QoQ compared to a 17.4% YoY and 1.8% QoQ increase in average loans.

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

 
9

 


This additional liquidity has been temporarily invested in sovereign Chilean risk. The Bank’s surplus liquidity, defined as financial investments minus non-structural liabilities, averaged US$3.0 billion in the quarter.

Surplus liquidity (US$ million)

Surplus liquidity: Financial investments minus non-structural liabilities
 
The negative effects on margins were partially offset by rising loan spreads (excluding the impacts of mismatches in inflation indexed assets and liabilities). Loan spreads in the quarter began to rise as the Bank implemented a stricter pricing policy in light of a potential deterioration of economic conditions. This should also help to sustain or improve margins in coming quarters.

Loan spreads*, %

Spread = Loan yield minus cost of funds and excluding impacts of inflation indexed asset and liability mismatches.  Excludes corporate banking

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

 
10

 


PROVISION FOR LOAN LOSSES

Risk index stable despite higher provisions. Provision expense in 3Q11 affected by various one-time expenses

Provision for loan losses
 
Quarter
   
Change %
 
(Ch$ million)
 
3Q11
   
2Q11
   
3Q10
   
3Q11 / 3Q10
   
3Q11 /
2Q11
 
Gross provisions
    (18,628 )     1,040       (9,974 )     86.8 %     (1891.2 )%
Charge-offs
    (77,466 )     (62,577 )     (49,568 )     56.3 %     23.8 %
Gross provisions and charge-offs
    (96,094 )     (61,537 )     (59,542 )     61.4 %     56.2 %
Loan loss recoveries
    5,722       4,663       8,017       (28.6 )%     22.7 %
Net provisions for loan losses1
    (90,372 )     (56,874 )     (51,525 )     75.4 %     58.9 %
Total loans2
    17,680,355       17,422,041       15,232,019       16.1 %     1.5 %
Loan loss allowances1
    520,565       505,887       428,833       21.4 %     2.9 %
Non-performing loans3 (NPLs)
    496,786       452,150       407,831       21.8 %     9.9 %
Risk Index4
    2.94 %     2.90 %     2.82 %                
NPL / Total loans
    2.81 %     2.60 %     2.68 %                
Coverage ratio of NPLs5
    104.8 %     111.9 %     105.1 %                
1.
The Bank reclassified Ch$ 31,162 million in provision reversals for off balance sheet lines of credit recognized in 3Q10 as Other operating income to Provisions for loan losses as required by the SBIF.
2.
Excludes interbank loans.
3.
NPLs: Non-performing loans; full balance of loans with one installment 90 days or more overdue.
4.
Risk Index: Loan loss allowances / Total loans; measures the percentage of loans the banks must provision for given their internal models and the Superintendency of Banks guidelines.
5.
Loan loss allowances / NPLs.

Provision for loan losses in the quarter increased 58.9% QoQ and 75.4% YoY.  On a year-to date basis net provision expense has increased 7.6% compared to a 16.1% rise in loan growth. The QoQ increase was mainly due to:

 
i.
Strengthening of the residential mortgage provisioning model. As announced in our 2Q11 earnings report, the Bank improved its provisioning model for residential mortgage lending. This change was done in line with our strategic objective of accompanying our loan growth in retail lending with a proactive stance regarding credit risk. This signified a one-time provision expense of approximately Ch$10,000 million in 3Q11. The Bank migrated to a model with more parameters to determine the risk level of a client with a mortgage loan. Previously, the main factor for determining the reserve level was non-performance. For more details on the new model, see Annex 1.
 
ii.
Higher provisions in the middle-market. In 3Q11, the bank set aside Ch$4,000 million in provisions for two deteriorated loan positions in the middle market. We do not expect further provisions for these cases in the future.
 
iii.
Provisions related to La Polar. The Bank set aside a further Ch$600 million in provisions for this loan position in 3Q11.
 
iv.
Translation loss of provisions in US$. In the quarter, the Chilean peso depreciated 9%. As some large commercial loan positions are denominated in US$ and, since the Bank must set aside minimum provisions for all large loans analyzed on an individual basis, this resulted in Ch$4,600 million in higher provision directly related to the depreciation of the exchange rate.

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

 
11

 


Excluding these one-time items, the adjusted provision expenses increased 38.1% QoQ and 25.1% YoY in 3Q11. This rise was mainly due to one-time provisions expenses, the expansion of our lending volumes, especially consumer lending and more prudent credit risk policies implemented in light of a possible deterioration of the macro environment. This included restricting renegotiations and, therefore, increasing charge-offs. This also resulted in a temporary rise in NPLs, but did not affect the Bank’s risk index. The Risk Index, which measures the percentage of loans the banks must provision for given their internal models and the Superintendency of Banks guidelines, remained stable QoQ at 2.94%. We are required to have 100% coverage at all times of its Risk Index.  The NPL ratio as of September 2011 reached 2.81%. The coverage ratio of total NPLs (loan loss allowances over non-performing loans) reached 104.8% as of September 2011.

Risk Index vs NPLs, %
 
NPLs: Non-performing loans; full balance of loans with one installment 90 days or more overdue.
Risk Index: Loan loss allowances / Total loans; measures the percentage of loans the banks must provision for given their internal models and the Superintendency of Banks guidelines.

NET FEE INCOME

Market conditions and the temporary slowdown in loan originations affected fee income

Fee Income
 
Quarter
   
Change %
 
(Ch$ million)
 
3Q11
   
2Q11
   
3Q10
   
3Q11 /
3Q10
   
3Q11 /
2Q11
 
Collection fees
    14,684       16,215       15,324       (4.2 )%     (9.4 )%
Credit, debit & ATM card fees
    14,383       16,079       13,518       6.4 %     (10.5 )%
Checking accounts & lines of credit
    10,020       10,025       10,604       (5.5 )%     (0.0 )%
Asset management
    8,796       10,179       10,063       (12.6 )%     (13.6 )%
Insurance brokerage
    7,955       9,574       8,683       (8.4 )%     (16.9 )%
Guarantees, pledges and other contingent operations
    6,335       5,697       5,568       13.8 %     11.2 %
Fees from brokerage and custody of securities
    2,469       2,592       2,399       2.9 %     (4.7 )%
Other Fees
    1,349       1,689       277       388.8 %     43,344.9 %
Total fees
    65,991       72,050       66,436       (0.7 )%     (8.4 )%

Net fee income was down 8.4% QoQ and 0.7% YoY in 3Q11. The main reason for this decline was the temporary slowdown in loan origination, which had a negative impact on loan related insurance premiums. At the same time, the weaker markets negatively affected our mutual fund fees and fees from securities brokerage. Credit card fees were down due to a seasonal rise in credit card expenses paid to the credit card processor. Gross fees from credit cards were up 3.0% QoQ in line with the growth of this product.

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

 
12

 


The Bank’s client base, especially cross-sold clients continues to grow at a solid pace. The amount of cross-sold clients is growing at double the pace of our total client base. Credit cards continue to be the fastest growing product, the number of which has increased 12.7% YoY.

Evolution of client base

 NET RESULTS FROM FINANCIAL TRANSACTIONS

Positive results from client treasury services

Results from Financial Transactions*
 
Quarter
   
Change %
 
(Ch$ million)
 
3Q11
   
2Q11
   
3Q10
   
3Q11 / 3Q10
   
3Q11 / 
2Q11
 
Net income from financial operations
    102,133       2,027       (45,068 )     %     4,938.6 %
Foreign exchange profit (loss), net
    (79,132 )     27,049       66,781       %     %
Net results from financial transactions
    23,001       29,076       21,713       5.9 %     (20.9 )%
*
These results mainly include the mark-to-market of the Available for sale investment portfolio, realized and unrealized gains of Financial investments held for trading, the interest revenue generated by the Held for trading portfolio, gains or losses from the sale of charged-off loans and the mark-to-market of derivatives. The results recorded as Foreign exchange profits (loss), net mainly includes the translation gains or losses of assets and a liability denominated in foreign currency.

Net results from financial transactions, which include the sum of the net income from financial operations and net foreign exchange profits, totaled a gain of Ch$23,001 million in 3Q11, a decrease of 20.9% QoQ and an increase of 5.9% YoY. In order to comprehend more clearly these line items, we present them by business area in the table below.

Results from Financial Transactions
 
Quarter
   
Change %
 
(Ch$ million)
 
3Q11
   
2Q11
   
3Q10
   
3Q11 / 3Q10
   
3Q11 / 
2Q11
 
Santander Global Connect1
    16,259       15,045       11,628       39.8 %     8.1 %
Market-making
    4,958       6,012       8,451       (41.3 )%     (17.5 )%
Client treasury services
    21,217       21,058       20,079       5.7 %     0.8 %
Non-client treasury services
    1,784       8,018       1,635       9.2 %     (77.7 )%
Net results from financial transactions
    23,001       29,076       21,713       5.9 %     (20.9 )%
1.  
Santander Global Connect is the Bank’s commercial platform for selling treasury products to our clients.
 
Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

 
13

 


The quarterly results were mainly driven by Client treasury services, which totaled Ch$21,217 million in 3Q11 – more than 90% of this line item – that increased 0.8% QoQ and 5.7% YoY. The higher market volatility, especially in the foreign exchange market led to a greater number of clients to hedge exposures resulting in a high gain from Santander Global Connect.

Non-client treasury services fell in the quarter as the Bank maintained high levels of liquidity and avoided taking any major prop-trading positions or gaps, lowering trading results.

OPERATING EXPENSES AND EFFICIENCY

Operating expenses flat QoQ

Operating Expenses
 
Quarter
   
Change %
 
(Ch$ million)
 
3Q11
   
2Q11
   
3Q10
   
3Q11 / 3Q10
   
3Q11 /
2Q11
 
Personnel salaries and expenses
    (73,884 )     (70,655 )     (63,330 )     16.7 %     4.6 %
Administrative expenses
    (41,041 )     (41,535 )     (37,983 )     8.1 %     (1.2 )%
Depreciation and amortization
    (13,354 )     (12,944 )     (11,294 )     18.2 %     3.2 %
Impairment
    (77 )     (27 )     (963 )     (92.0 )%     185.2 %
Operating expenses
    (128,356 )     (125,161 )     (113,570 )     13.0 %     2.6 %
Efficiency ratio1
    41.3 %     36.5 %     37.2 %                
1.
Operating expenses / Operating income. Operating income = Net interest income + Net fee income+ Net results from Financial transactions + Other operating income and expenses.

Operating expenses in 3Q11 increased 2.6% QoQ and 13.0% YoY. The efficiency ratio reached 41.3% in 3Q11. The 4.6% QoQ increase in personnel expenses was mainly due to the increase in headcount and a rise in severance payments. Headcount increased 5.9% YoY and 1.6% QoQ. Of the 190 persons hired in 3Q11, 160 were collection agents. As of June 30, 2011 headcount totaled 11,706 employees.

Administrative expenses fell 1.2% QoQ as the Bank commenced to implement a stricter stance regarding costs. At the same time, the Bank continues with its projects of in investing in technology and alternative distribution channels to enhance productivity in future periods.  The Bank is currently investment in a new Client Relationship Management system and other IT projects. These projects should drive stronger revenue growth while increasing productivity. The Bank also opened 7 branches in the quarter, 4 of which were Banca Prime branches for upper income individuals.

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

 
14

 


OTHER INCOME AND EXPENSES

Other Income and Expenses
 
Quarter
   
Change %
 
(Ch$ million)
 
3Q11
   
2Q11
   
3Q10
   
3Q11 / 3Q10
   
3Q11 /
2Q11
 
Other operating income
    2,194       3,309       2,656       (17.4 )%     (33.7 )%
Other operating expenses
    (12,156 )     (8,800 )     (21,333 )     (43.0 )%     38.1 %
Other operating income, net
    (9,962 )     (5,491 )     (18,677 )     (46.7 )%     81.4 %
Income from investments in other companies
    546       552       832       (34.4 )%     (1.1 )%
Income tax expense
    (16,629 )     (19,416 )     (14,109 )     17.9 %     (14.4 )%
Income tax rate
    17.9 %     12.0 %     10.0 %                

Other operating income, net, totaled Ch$-9,962 million in 3Q11. The lower loss compared to 3Q10 was mainly due to lower charge-off of repossessed assets. Compared to 2Q11 the higher loss from other operating income, net was mainly due to an increase in charge-off of fixed assets mainly related to vandalized ATMs.

The 14.4% QoQ decrease in income tax expense was mainly due to lower net income before taxes. In addition, in 2Q11, the Bank recognized a one-time tax benefit from real estate taxes (contribuciones) paid over assets it has leased to clients. Compared to 3Q10, the rise in the effective tax rate was due the rise of the statutory tax rate to 20% from 17% last year.  In 3Q10, the Bank’s effective income tax rate also benefitted from the application of the new corporate tax rates over deferred taxes, which resulted in a higher net asset position in differed taxes and therefore a lower effective tax rate in said quarter.

In 2012, the statutory corporate tax rate should decline to 18.5% and 17% in 2013.

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

 
15

 


SECTION 4: CREDIT RISK RATINGS

International ratings

The Bank has credit ratings from three leading international agencies. In the quarter, Fitch lowered the Bank ratings from AA- to A+. Standard and Poor’s modified its outlook to negative and there was no change regarding our ratings from Moody’s. These rating changes were driven by a reduction in ratings of our controlling shareholder.

Moody’s (Outlook stable)
 
Rating
Foreign currency bank deposits
 
Aa3
Senior bonds
 
Aa3
Subordinated debt
 
A1
Bank Deposits in Local Currency
 
Aa3
Bank financial strength
 
B-
Short-term deposits
 
P-1

Standard and Poor’s (Outlook negative)
 
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

Fitch (Outlook negative)
 
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
Viability rating
 
a+
Individual rating
 
B
 
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: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

 
16

 
 

SECTION 5: SHARE PERFORMANCE
As of September 2011

Ownership Structure:
 


ADR price (US$) 9M11
   
09/30/11:
 
73.48
Maximum (1H11):
 
96.44
Minimum (1H11):
 
70.64

Market Capitalization:
  US$13,329 million
     
P/E 12 month trailing*:
 
16.5
P/BV (06/30/11)**:
 
3.66
Dividend yield***:
 
3.7%

Price as of Sept. 30, 2011 / 12mth. earnings
** 
Price as of Sept. 30, 2011 / Book value as of 09/30/11
***
Based on closing price on record date of last dividend payment.
 
 

Local share price (Ch$) 9M11
09/30/11:
 
37.46
Maximum (9M11):
 
43.64
Minimum (9M11):
 
35.63

Dividends:
Year paid
 
Ch$/share
   
% of previous year
earnings
 
2007:
    0.99       65 %
2008:
    1.06       65 %
2009:
    1.13       65 %
2010:
    1.37       60 %
2011:
    1.52       60 %

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

 
17

 


ANNEX 1: NEW PROVISIONING MODEL FOR RESIDENTIAL MORTGAGE LOANS

Prior to June 2011, residential mortgage loans were assigned an allowance level based on credit risk profiles which were determined utilizing a statistical model that considered a borrower’s credit history, including any defaults on obligations to other creditors, as well as the overdue periods on the loans borrowed from us. Once the rating of the client was determined, the allowance for a mortgage loan was calculated using a risk category, which was directly related to days overdue. The following table sets forth the allowance to loan ratios previously used by the Bank. The ratios represent the percentage of required allowance amount to the aggregate amount of the principal and accrued but unpaid interest on the loan.

Previous model
Residential mortgage loans
 
Overdue days
 
     
1-30
   
31-60
   
61-120
   
121-180
   
181-360
   
361- 720
   
>720
 
Mortgage
Profile 1
    0.3 %     0.5 %     1.2 %     2.4 %     6.8 %     14.1 %     28.3 %
 
Profile 2
    1.5 %     1.6 %     2.5 %     4.4 %     6.8 %     14.1 %     28.3 %
 
As of June 2011, residential mortgage loans are assigned an allowance level based on credit risk profiles, which were determined utilizing a statistical model that considers: (i) a borrower’s credit history, (ii) if a client is a new client or an existing client, (iii) if the client is a Bank client or a Banefe client and (iv) if this client has been renegotiated in the system.

As of June 2011, the model for determining provisions for residential mortgage loans is as follows. The ratios represent the percentage of required allowance amount to the aggregate amount of the principal and accrued but unpaid interest on the loan.

New model
Residential mortgage loans
 
 
Performing
   
Overdue days
 
           
1-29
   
30-59
   
60-89
   
>90 days
 
Mortgage
(Bank client)
New client
    0.20 %     2.7 %     3.6 %     4.63 %     11.0 %
 
Existing client
    0.29 %     1.49 %     2.97 %     3.7 %     11.0 %
 
Renegotiated client
    1.75 %     1.75 %     1.75 %     1.75 %     11.0 %
Mortgage
(Banefe client)
New or existing client
    0.35 %     2.19 %     3.64 %     4.72 %     11.0 %
 
Renegotiated client
    1.75 %     1.75 %     1.75 %     1.75 %     11.0 %

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

 
18

 
 
 
ANNEX 2: BALANCE SHEET
 
Unaudited Balance Sheet
 
Sep-11
   
Sep-11
   
Dec-10
   
Sept. 11 / Dec. 10
 
   
US$ths
   
Ch$ million
   
% Chg.
 
Assets
                       
Cash and balances from Central Bank
    3,488,473       1,812,785       1,762,198       2.9 %
Funds to be cleared
    1,571,444       816,601       374,368       118.1 %
Financial assets held for trading
    969,524       503,813       379,670       32.7 %
Investment collateral under agreements to repurchase
    23,395       12,157       170,985       (92.9 )%
Derivatives
    3,871,038       2,011,585       1,624,378       23.8 %
Interbank loans
    169,141       87,894       69,672       26.2 %
Loans, net of loan loss allowances
    33,021,822       17,159,790       15,175,975       13.1 %
Available-for-sale financial assets
    4,050,118       2,104,644       1,473,980       42.8 %
Held-to-maturity investments
    0       0       0       %
Investments in other companies
    15,841       8,232       7,275       13.2 %
Intangible assets
    148,617       77,229       77,990       (1.0 )%
Fixed assets
    294,652       153,116       154,985       (1.2 )%
Current tax assets
    53,394       27,746       12,499       122.0 %
Deferred tax assets
    276,028       143,438       117,964       21.6 %
Other assets
    1,354,999       704,125       640,937       9.9 %
Total Assets
    49,308,486       25,623,155       22,042,876       16.2 %
                                 
Liabilities and Equity
                               
Demand deposits
    8,653,434       4,496,757       4,236,434       6.1 %
Funds to be cleared
    896,879       466,063       300,125       55.3 %
Investments sold under agreements to repurchase
    436,915       227,043       294,725       (23.0 )%
Time deposits and savings accounts
    18,079,950       9,395,246       7,258,757       29.4 %
Derivatives
    3,127,632       1,625,274       1,643,979       (1.1 )%
Deposits from credit institutions
    3,896,961       2,025,056       1,584,057       27.8 %
Marketable debt securities
    8,684,511       4,512,906       4,190,888       7.7 %
Other obligations
    321,357       166,993       166,289       0.4 %
Current tax liabilities
    4,426       2,300       1,293       77.9 %
Deferred tax liability
    22,284       11,580       5,441       112.8 %
Provisions
    329,299       171,120       235,953       (27.5 )%
Other liabilities
    1,083,472       563,026       261,328       115.4 %
Total Liabilities
    45,537,119       23,663,364       20,179,269       17.3 %
                                 
Equity
                               
Capital
    1,715,199       891,303       891,303       0.0 %
Reserves
    99,178       51,538       51,539       (0.0 )%
Unrealized gain (loss) Available-for-sale financial assets
    1,143       594       (5,180 )     %
Retained Earnings:
    1,893,703       984,063       894,136       10.1 %
Retained earnings previous periods
    1,445,182       750,989       560,128       34.1 %
Net income
    640,745       332,963       477,155       (30.2 )%
Provision for mandatory dividend
    (192,224 )     (99,889 )     (143,147 )     (30.2 )%
Total Shareholders' Equity
    3,709,224       1,927,498       1,831,798       5.2 %
Minority Interest
    62,144       32,293       31,809       1.5 %
Total Equity
    3,771,367       1,959,791       1,863,607       5.2 %
Total Liabilities and Equity
    49,308,486       25,623,155       22,042,876       16.2 %
 
Figures in US$ have been translated at the exchange rate of Ch$519.65
 
Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl
 
 
19

 
 
 
ANNEX 3: YEAR-TO-DATE INCOME STATEMENTS
 
YTD Income Statement Unaudited
 
Sep-11
   
Sep-11
   
Sep-10
   
Sept. 11 / Sept. 10
 
   
US$ths.
   
Ch$ million
   
% Chg.
 
                         
Interest income
    2,446,412       1,271,278       1,045,602       21.6 %
Interest expense
    (1,083,660 )     (563,124 )     (337,748 )     66.7 %
Net interest income
    1,362,752       708,154       707,854       0.0 %
Fee and commission income
    522,546       271,541       247,346       9.8 %
Fee and commission expense
    (119,525 )     (62,111 )     (53,401 )     16.3 %
Net fee and commission income
    403,021       209,430       193,945       8.0 %
Net income from financial operations
    295,458       153,535       51,946       195.6 %
Foreign exchange profit (loss), net
    (144,838 )     (75,265 )     24,381       %
Total financial transactions, net
    150,621       78,270       76,327       2.5 %
Other operating income
    15,497       8,053       27,554       (70.8 )%
Net operating profit before loan losses
    1,931,891       1,003,907       1,005,680       (0.2 )%
Provision for loan losses
    (377,023 )     (195,920 )     (182,120 )     7.6 %
Net operating profit
    1,554,868       807,987       823,560       (1.9 )%
Personnel salaries and expenses
    (399,076 )     (207,380 )     (184,921 )     12.1 %
Administrative expenses
    (234,924 )     (122,078 )     (109,743 )     11.2 %
Depreciation and amortization
    (76,278 )     (39,638 )     (36,227 )     9.4 %
Impairment
    (210 )     (109 )     (4,665 )     (97.7 )%
Operating expenses
    (710,488 )     (369,205 )     (335,556 )     10.0 %
Other operating expenses
    (79,994 )     (41,569 )     (45,963 )     (9.6 )%
Total operating expenses
    (790,482 )     (410,774 )     (381,519 )     7.7 %
Operating income
    764,386       397,213       442,041       (10.1 )%
Income from investments in other companies
    3,219       1,673       1,175       42.4 %
Income before taxes
    767,605       398,886       443,216       (10.0 )%
Income tax expense
    (120,362 )     (62,546 )     (60,032 )     4.2 %
Net income from ordinary activities
    647,243       336,340       383,184       (12.2 )%
Net income discontinued operations
    0       0       0       %
Net income attributable to:
                               
Minority interest
    6,499       3,377       (99 )     %
Net income attributable to shareholders
    640,745       332,963       383,283       (13.1 )%
 
Figures in US$ have been translated at the exchange rate of Ch$519.65
 
Investor Relations Department
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl
 
 
20

 
 
 
ANNEX 4: QUARTERLY INCOME STATEMENTS
 
Unaudited Quarterly Income Statement
  3Q11     3Q11     2Q11     3Q10     3Q11 / 3Q10     3Q11 / 2Q11  
   
US$ths.
   
Ch$mn
   
% Chg.
 
Interest income
    809,639       420,729       472,132       355,445       18.4 %     (10.9 )%
Interest expense
    (363,075 )     (188,672 )     (224,718 )     (119,771 )     57.5 %     (16.0 )%
Net interest income
    446,564       232,057       247,414       235,674       (1.5 )%     (6.2 )%
Fee and commission income
    168,673       87,651       92,652       85,379       2.7 %     (5.4 )%
Fee and commission expense
    (41,682 )     (21,660 )     (20,602 )     (18,943 )     14.3 %     5.1 %
Net fee and commission income
    126,991       65,991       72,050       66,436       (0.7 )%     (8.4 )%
Net income from financial operations
    196,542       102,133       2,027       (45,068 )     %     4938.6 %
Foreign exchange profit (loss), net
    (152,279 )     (79,132 )     27,049       66,781       %     %
Total financial transactions, net
    44,262       23,001       29,076       21,713       5.9 %     (20.9 )%
Other operating income
    4,222       2,194       3,309       2,656       (17.4 )%     (33.7 )%
Net operating profit before loan losses
    622,040       323,243       351,849       326,479       (1.0 )%     (8.1 )%
Provision for loan losses
    (173,909 )     (90,372 )     (56,874 )     (51,525 )     75.4 %     58.9 %
Net operating profit
    448,130       232,871       294,975       274,954       (15.3 )%     (21.1 )%
Personnel salaries and expenses
    (142,180 )     (73,884 )     (70,655 )     (63,330 )     16.7 %     4.6 %
Administrative expenses
    132,041       (41,041 )     (41,535 )     (37,983 )     8.1 %     (1.2 )%
Depreciation and amortization
    (25,698 )     (13,354 )     (12,944 )     (11,294 )     18.2 %     3.2 %
Impairment
    (148 )     (77 )     (27 )     (963 )     (92.0 )%     185.2 %
Operating expenses
    (247,005 )     (128,356 )     (125,161 )     (113,570 )     13.0 %     2.6 %
Other operating expenses
    (23,393 )     (12,156 )     (8,800 )     (21,333 )     (43.0 )%     38.1 %
Total operating expenses
    (270,397 )     (140,512 )     (133,961 )     (134,903 )     4.2 %     4.9 %
Operating income
    177,733       92,359       161,014       140,051       (34.1 )%     (42.6 )%
Income from investments in other companies
    1,051       546       552       832       (34.4 )%     (1.1 )%
                                                 
Income before taxes
    178,784       92,905       161,566       140,883       (34.1 )%     (42.5 )%
Income tax expense
    (32,000 )     (16,629 )