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. 

  

Fourth Quarter Earnings Report 

     
2.   December 2012 Financial Statements in English

 

IMPORTANT NOTICE

 

Santander-Chile is a Chilean bank and maintains its financial books and records in Chilean pesos. The consolidated interim unaudited financial statements included in this report have been prepared in accordance with Chilean accounting principles issued by the Superintendency of Banks and Financial Institutions "Chilean Bank GAAP" and the "SBIF," respectively). The accounting principles issued by the SBIF are substantially similar to IFRS but there are some exceptions. Therefore, the unaudited financial statements included in this 6K have some differences compared to the financial statements filed in our Annual Report on Form 20-F for the year ended December 31, 2011 (the "Annual Report"). For further details and a discussion on main differences between Chilean Bank GAAP and IFRS refer to "Item 5. Operating and Financial Review and Prospects. —A. Accounting Standards Applied in 2011" of our Annual Report.

 

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/ Cristian Florence
  Name: Cristian Florence
  Title: General Counsel

Date: February 13, 2012

 

 
 

 

 

 

 

BANCO SANTANDER CHILE

FOURTH QUARTER 2012

EARNINGS REPORT

 

 
 

 

INDEX

 

SECTION   PAGE
     
SECTION 1: SUMMARY OF RESULTS   2
     
SECTION 2: BALANCE SHEET ANALYSIS   5
     
SECTION 3: ANALYSIS OF QUARTERLY INCOME STATEMENT   8
     
SECTION 4: CREDIT RISK RATINGS   17
     
SECTION 5: SHARE PERFORMANCE   18
     
ANNEX 1: BALANCE SHEET   19
     
ANNEX 2: YTD INCOME STATEMENTS   20
     
ANNEX 3: QUARTERLY INCOME STATEMENTS   21
     
ANNEX 3: QUARTERLY EVOLUTION OF MAIN RATIOS AND OTHER INFORMATION   22

 

CONTACT INFORMATION   Santiago, Chile
Robert Moreno   Tel: (562) 2320-8284
Manager, Investor Relations Department   Fax: (562) 2671-6554
Banco Santander Chile   Email: rmorenoh@santander.cl
Bandera 140 Piso 19   Website: www.santander.cl

 

 
 

 

 

SECTION 1: SUMMARY OF RESULTS

 

4Q12 net income rises 124.3% QoQ and 11.0% YoY.

 

In 4Q12, Net income attributable to shareholders totaled Ch$113,402 million (Ch$0.60 per share and US$0.50/ADR). Compared to 3Q12 (from now on QoQ), net income increased 124.3%. Compared to 4Q11 (from now on YoY) net income increased 11.0%. During the quarter, the Bank saw an important QoQ improvement in profitability as loan growth accelerated, the funding mix improved, margins rose in line with higher inflation and provision expenses declined, following the non-recurring charges recognized in 3Q12.

 

ROE reaches 21.6% in 4Q12

 

ROAE in the quarter reached 21.6%. Core capital reached 10.7% as of December 31, 2012 and the Bank’s BIS ratio reached 13.7% at the same date.

 

 

Positive evolution of margins in the quarter

 

In 4Q12, Net interest income increased 18.5% QoQ. The Net interest margin (NIM) in 4Q12 reached 5.5% compared to 4.7% in 3Q12 and 5.3% in 4Q11. Inflation rebounded from -0.16% in 3Q12 to 1.11% in 4Q12 and this drove the strong QoQ rise in net interest income. Compared to 4Q12 net interest income increased 7.2% in line with loan growth.

 

 

Loan growth accelerating in segments the Bank has targeted for growth

 

In 4Q12, total loans increased 2.0% QoQ. In the quarter, loan growth continued to accelerate in the markets the Bank is targeting the most: high-income individuals, SMEs and middle market of companies. Loans in these combined markets increased 2.9% QoQ and 9.6% YoY. Loans to high-income individuals increased 2.1% QoQ. Lending to SMEs (defined as companies that sell less than Ch$1,200 million per year) expanded 3.3% QoQ, reflecting the Bank’s consistent focus on this segment. In the quarter, the Bank also focused its loan growth in the middle-market companies segment (companies with annual sales between Ch$1,200 million and Ch$10,000 million per year), which increased 3.9% QoQ.

 

Investor Relations Department 2
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

Solid growth of non-interest bearing demand deposits

 

Total deposits were flat QoQ and grew 5.6% YoY. In the quarter and throughout 2012, the Bank has focused on increasing its core deposits (demand deposits and time deposits from non-institutional sources), while reducing our dependence on institutional deposits that tend to be more expensive. As a result, at year-end 2012 total non-interest bearing demand deposits increased 8.0% QoQ and 12.6% YoY. This has improved the Bank’s funding mix, as core deposits tend to be cheaper and more stable than other sources of funding.

 

Provision expense decreases 24.3% QoQ

 

Net provision for loan losses in 4Q12 decreased 24.3% QoQ and increased 4.4% YoY. Net provision expense in consumer loans decreased 24.4% QoQ and increased 6.3% YoY. In 3Q12, the Bank recalibrated the consumer loan-provisioning model that increased the minimum provision set aside for renegotiated consumer loans. Excluding this effect, the QoQ decline in provision expense was 4.6% in 4Q12.

 

Cost growth moderates as key projects advance

 

Operating expenses in 4Q12 increased 4.0% QoQ and 7.0% YoY as the Bank continued with its projects of investing in a new Client Relationship Management system and the Transformation Initiatives aimed at enhancing productivity in retail banking. The efficiency ratio reached 40.0% in 4Q12 compared to 42.4% in 3Q12 and 38.5% in 4Q11. Operating expense growth has been decelerating in recent quarters as headcount has remained stable and the different productivity initiatives implemented since 2011 are starting to produce results.

 

In 2012, Santander Chile’s ROE reached 18.9% with an efficiency ratio of 40.0%

 

In 2012 (12M11), Net income attributable to shareholders1 totaled Ch$387,967 million (Ch$2.06 per share and US$1.72/ADR2) and decreased 10.8% compared to net income achieved in 2011. ROE reached 18.9% in 12M11, among the highest returns in the Chilean financial system. The Efficiency ratio in 12M12 reached 40.0%, one of the best in Chile.

 

 

1The results in this report are unaudited and are reported according to Chilean Bank GAAP.
2Earnings per ADR was calculated using the Observed Exchange Rate of Ch$478.6 per US$ as of December 31, 2012.

 

Investor Relations Department 3
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

Banco Santander Chile: Summary of Quarterly Results

 

   Quarter   Change % 
(Ch$ million)  4Q12   3Q12   4Q11   4Q12 /
4Q11		   4Q12 /
3Q12		 
Net interest income   282,991    238,731    264,146    7.1%   18.5%
Fee income   66,837    67,037    68,406    (2.3)%   (0.3)%
Core revenues   349,828    305,768    332,552    5.2%   14.4%
Financial transactions, net   18,134    19,222    15,927    13.9%   (5.7)%
Provision expense   (90,387)   (119,459)   (86,607)   4.4%   (24.3)%
Operating expenses   (141,059)   (135,665)   (131,815)   7.0%   4.0%
Operating income, net of provisions and costs   136,516    69,866    130,057    5.0%   95.4%
Other operating & Non-op. Income   (23,114)   (19,303)   (27,936)   (17.3)%   19.7%
Net income attributable to shareholders   113,402    50,563    102,121    11.0%   124.3%
Net income/share (Ch$)   0.60    0.27    0.54    11.0%   124.3%
Net income/ADR (US$)1   0.50    0.23    0.42    21.0%   120.5%
Total loans   18,876,079    18,503,174    17,347,094    8.8%   2.0%
Deposits   14,082,232    14,088,770    13,334,929    5.6%   (0.0)%
Shareholders’ equity   2,135,660    2,058,231    2,001,222    6.7%   3.8%
Net interest margin   5.5%   4.7%   5.3%          
Efficiency ratio   40.0%   42.4%   38.5%          
Return on average equity2   21.6%   9.9%   20.8%          
NPL / Total loans3   3.17%   3.04%   2.95%          
Coverage NPLs   92.0%   98.3%   102.4%          
Risk index4   2.91%   2.98%   3.02%          
Cost of credit5   1.92%   2.58%   2.00%          
Core capital ratio   10.7%   10.6%   11.0%          
BIS ratio   13.7%   13.9%   14.7%          
Branches   503    496    499           
ATMs   2,001    1,966    1,920           
Employees   11,713    11,692    11,566           

1.The change in earnings per ADR may differ from the change in earnings per share due to exchange rate movements. Earnings per ADR was calculated using the Observed Exchange Rate Ch$478.6 per US$ as of Dec. 31, 2012.
2.Annualized Quarterly net income attributable to shareholders / Average equity attributable to shareholders in the quarter.

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.Cost of credit: Provision expenses annualized divided by total loans.

 

Investor Relations Department 4
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

SECTION 2: BALANCE SHEET ANALYSIS

 

LOANS

 

Loan growth accelerating in the markets the Bank has targeted for growth

 

Loans  Quarter ended,   % Change 
(Ch$ million)  Dec-12   Sep-12   Dec-11   Dec. 12 /
Dec. 11		   Dec. 12 /
Sept. 12		 
Total loans to individuals1   9,723,801    9,613,857    9,289,345    4.7%   1.1%
Consumer loans   3,115,477    3,039,998    2,943,846    5.8%   2.5%
Residential mortgage loans   5,271,581    5,208,217    5,115,663    3.0%   1.2%
SMEs   2,836,695    2,745,928    2,560,736    10.8%   3.3%
Total retail lending   12,560,496    12,359,785    11,850,081    6.0%   1.6%
Institutional lending   356,465    355,119    355,199    0.4%   0.4%
Middle-Market & Real estate   4,072,191    3,918,324    3,650,709    11.5%   3.9%
Corporate   1,858,116    1,874,749    1,494,752    24.3%   (0.9)%
Total loans 2   18,876,079    18,503,174    17,347,094    8.8%   2.0%

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 4Q12, total loans increased 2.0% QoQ and 8.8% YoY. In the quarter, loan growth continued to accelerate in the markets the Bank is targeting the most: high-income individuals, SMEs and middle market of companies. Loans in these combined markets increased 2.9% QoQ and 9.6% YoY. This is in line with the Bank’s strategy for 2013 of expanding loan volumes with a clear focus on spreads, net of provisions.

 

Loans to individuals, which include consumer, mortgage and commercial loans to individuals, increased of 1.1% QoQ in 3Q12 and 4.7% YoY. In the quarter, the Bank focused on expanding its loan portfolio in higher income segments, while remaining more selective in the mass consumer market. Loans to high-income individuals increased 2.1% QoQ in comparison to a decrease of 1.3% QoQ in the low-income segment. In the middle-income segment, loans decreased 0.7% QoQ. By products, total consumer loans increased 2.5% QoQ (5.8% YoY) and residential mortgage loans expanded 1.2% QoQ (3.0% YoY). The Bank has reduced the growth rate of this product due to profitability concerns by implementing stricter admissions policies since 2Q12 such as limiting loan to value levels at origination. Lending to SMEs (defined as companies that sell less than Ch$1,200 million per year) expanded 3.3% QoQ (10.8% YoY), reflecting the Bank’s consistent focus on this segment.

 

 

Investor Relations Department 5
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

In 4Q12, the Bank also focused its loan growth in the middle-market segment (companies with annual sales between Ch$1,200 million and Ch$10,000 million per year), which increased 3.9% QoQ and 11.5% YoY. This segment continues to show healthy loan demand given the high level of investment in the Chilean economy, which is expected to reach approximately 26% of GDP in 2012 and 2013. This segment is also generating more and more business volumes in other areas such as cash management and treasury services.

 

In the large corporate segment (companies with sale over Ch$10,000 million per year or that are part of a large foreign or local economic group), loans decreased 0.9% QoQ. The sharp turn-around in the cost of external funding for companies throughout the second half of 2012 resulted in lower local loan demand from these clients and pre-payment of some large corporate loans. The Bank’s non-lending business with these clients, especially cash management services continues to thrive.

 

FUNDING

 

Non-interest bearing deposits grow 8.0% QoQ, reflecting the Bank’s focus on core deposits

 

Funding  Quarter ended,   % Change 
(Ch$ million)  Dec-12   Sep-12   Dec-11   Dec. 12 /
Dec. 11		   Dec. 12 /
Sept. 12		 
Demand deposits   4,970,019    4,601,160    4,413,815    12.6%   8.0%
Time deposits   9,112,213    9,487,610    8,921,114    2.1%   (4.0)%
Total deposits   14,082,232    14,088,770    13,334,929    5.6%   (0.0)%
Mutual funds (off-balance sheet)   2,713,776    3,080,130    2,941,773    (7.8)%   (11.9)%
Total customer funds   16,796,008    17,168,900    16,276,702    3.2%   (2.2)%
Loans to deposits1   101.6%   98.7%   95.4%          

1. (Loans - marketable securities that fund mortgage loans) / (Time deposits + demand deposits).

 

Customer funds (deposits + mutual funds) decreased 2.2% QoQ and increased 3.2% YoY. Total deposits were flat QoQ and grew 5.6% YoY. In the quarter and throughout 2012, the Bank has focused on increasing its core deposits (demand deposits and time deposits from non-institutional sources), while reducing dependence on institutional deposits that tend to be more expensive. As a result, at year-end 2012 total non-interest bearing demand deposits increased 8.0% QoQ and 12.6% YoY. This has improved the Bank’s funding mix, as non-institutional deposits tend to be cheaper and more stable than other sources of funding.

 

Assets under management decreased 11.9% mainly because of QoQ decline in money market funds in the month of December due to inflation volatility in the local market. We expect this business to continue to be volatile in line with general market trends.

 

Investor Relations Department 6
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL

 

Core capital ratio at 10.7% and ROAE reached 21.6% in the quarter

 

Shareholders' Equity  Quarter ended,   Change % 
(Ch$ million)  Dec-12   Sep-12   Dec-11   Dec. 12 /
Dec. 11		   Dec. 12 /
Sept. 12		 
Capital   891,303    891,303    891,303    0.0%   0.0%
Reserves   976,561    976,561    51,539    1794.8%   0.0%
Valuation adjustment   (3,781)   (1,828)   2,832    —%   —%
Retained Earnings:   271,577    192,195    1,055,548    (74.3)%   41.3%
Retained earnings prior periods   0    0    750,989    —%   —%
Income for the period   387,967    274,565    435,084    (10.8)%   41.3%
Provision for mandatory dividend   (116,390)   (82,370)   (130,525)   (10.8)%   41.3%
Equity attributable to shareholders   2,135,660    2,058,231    2,001,222    6.7%   3.8%
Non-controlling interest   34,265    33,485    33,801    1.4%   2.3%
Total Equity   2,169,925    2,091,716    2,035,023    6.6%   3.7%
Quarterly ROAE   21.6%   9.9%   20.8%          

 

Shareholders’ equity totaled Ch$2,153,660 million (US$4.5 billion) as of December 31, 2012. Core capital reached 10.7% as of December 31, 2012 and the Bank’s BIS ratio reached 13.7% at the same date. ROAE in the quarter reached 21.6% and 18.9% for the whole 2012. Voting common shareholders’ equity is the sole component of our Tier I capital. Tier II declined in the quarter as some subordinated bonds came due in the quarter.

 

Capital Adequacy  Quarter ended,   Change % 

 

(Ch$ million)

  Dec-12   Sep-12   Dec-11   Dec. 12 /
Dec. 11		   Dec. 12 /
Sept. 12		 
Tier I (Core Capital)   2,135,660    2,058,231    2,001,222    6.7%   3.8%
Tier II   599,656    642,650    686,171    (12.6)%   (6.7)%
Regulatory capital   2,735,316    2,700,881    2,687,393    1.8%   1.3%
Risk weighted assets   19,940,397    19,479,092    18,243,142    9.3%   2.4%
Tier I (Core capital) ratio   10.7%   10.6%   11.0%          
BIS ratio   13.7%   13.9%   14.7%          

 

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

 

 
 

 

 

SECTION 3: ANALYSIS OF QUARTERLY INCOME STATEMENT

 

NET INTEREST INCOME

 

Client margins remain stable. Higher inflation and the improved funding mix drives NIMs

 

Net Interest Income / Margin  Quarter   Change % 
(Ch$ million)  4Q12   3Q12   4Q11   4Q12 /
4Q11		   4Q12 /
3Q12		 
Client net interest income1   273,022    274,076    261,348    4.5%   (0.4)%
Non-client net interest income2   9,969    (35,345)   2,798    256.2%   (128.2)%
Net interest income   282,991    238,731    264,146    7.1%   18.5%
Average interest-earning assets   20,762,771    20,410,407    19,836,214    4.7%   1.7%
Average loans   18,666,166    18,546,119    17,494,801    6.7%   0.6%
Interest earning asset yield3   10.1%   8.0%   10.0%          
Cost of funds4   4.7%   3.3%   4.8%          
Client net interest margin5   5.9%   5.9%   6.0%          
Net interest margin (NIM)6   5.5%   4.7%   5.3%          
Avg. equity + non-interest bearing demand deposits / Avg. interest earning assets   32.8%   32.5%   32.0%          
Quarterly inflation rate7   1.11%   (0.16)%   1.28%          
Central Bank reference rate   5.00%   5.00%   5.25%          
Avg. 10 year Central Bank yield (real)   2.45%   2.42%   2.61%          

1. Client net interest income is mainly net interest income from the from all client activities such as loans and deposits minus the internal transfer rate. See footnote 3 at the end of this page.

2. Non-client interest income is net interest income mainly from the Bank’s ALCO positions and treasury. See footnote 3 at the end of this page.

3. Interest income divided by interest earning assets.

4. Interest expense divided by interest bearing liabilities + demand deposits.

5. Client net interest income annualized divided by average loans

6. Net interest income divided by average interest earning assets annualized.

7. Inflation measured as the variation of the Unidad de Fomento in the quarter.

 

In 4Q12, Net interest income increased 18.5% QoQ and 7.1% YoY. The Net interest margin (NIM) in 4Q12 reached 5.5% compared to 4.7% in 3Q12 and 5.3% in 4Q11. In order to improve the explanation of margins, we have divided the analysis of net interest income between client interest income3 and non-client net interest income.

 

 

3 In order to explain better the evolution of net interest income, we have divided net interest income between client net interest income and non-client net interest income. Client net interest income is net interest income from all client activities such as loans and deposits minus the internal transfer rate. Non-client interest income is net interest income from Bank’s inflation gap, the financial cost of hedging, the financial cost of the Bank’s structural liquidity position, net interest income from treasury positions and the interest expense of the Bank’s financial investments classified as trading, since interest income from this portfolio is recognized as financial transactions net.

 

Investor Relations Department 8
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

Client net interest income. In 4Q12 client net interest income was flat QoQ and increased 4.5% YoY. Average loans increased 0.6% QoQ and 6.7% YoY. Client net interest margin (defined as client net interest income divided by average loans) reached 5.9% in 4Q12 compared to 5.9% in 3Q12 and 6.0% in 4Q11. The improved funding mix and stable pricing policies has kept client margins relatively unchanged since the second half of 2011.

 

 

Non-client net interest income. The volatility of our total net interest margin and income is mainly due to the quarterly fluctuations of inflation. In 4Q12, the variation of the Unidad de Fomento (an inflation indexed currency unit), was 1.11% compared to deflation of 0.16% in 3Q12 and inflation of 1.28% in 4Q11. It is important to point out that the Bank has more assets than liabilities linked to inflation and, as a result, margins have a positive sensitivity to variations in inflation. The gap between assets and liabilities indexed to the UF averaged approximately US$7 billion in 4Q12. Therefore, the QoQ rise in inflation explains the sharp rise in non-client net interest income in 4Q12 compared to 3Q12. Despite lower inflation in 4Q12 compared to 4Q11, the Bank’s non-client margins increased due to the improved funding mix and lower negative carry from our structural liquidity position, which has reached more normalized levels, following the sharp rise in structural liquidity at year-end 2011.

 

For 2013, the evolution of margins should reflect various factors. Client margins should remain relatively stable as the Bank continues to focus on retail lending. Inflation in 2013 is expected to reach 3.0%, which is positive for margins, but inflation in 1Q13 should be considerably lower than in 4Q12 and 1Q12. In 2013, the negative effects of possible regulations regarding maximum rates may have a negative impact on margins. The final law regulating this change is still being discussed in Congress and there is no clarity as to when it will be approved. To counterbalance this we expect: (1) healthier loan growth both in terms of volumes and in terms of margins, post provision expense and, (2) an improved funding mix via healthy growth of core deposits.

 

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 AND ASSET QUALITY

 

Net provision expense normalizing following non-recurring charge in 3Q12

 

Provision for loan losses  Quarter   Change % 
(Ch$ million)  4Q12   3Q12   4Q11   4Q12 /
4Q11		   4Q12 /
3Q12		 
Gross provisions   1,720    (32,952)   (9,548)   (118.0)%   (105.2)%
Charge-offs   (102,882)   (96,256)   (96,866)   6.2%   6.9%
Gross provisions and charge-offs   (101,162)   (129,208)   (106,414)   (4.9)%   (21.7)%
Loan loss recoveries   10,775    9,749    19,807    (45.6)%   10.5%
Net provisions for loan losses   (90,387)   (119,459)   (86,607)   4.4%   (24.3)%
Total loans1   18,876,079    18,503,174    17,347,094    8.8%   2.0%
Total reserves (RLL)   550,122    552,138    523,687    5.0%   (0.4)%
Non-performing loans2 (NPLs)   597,767    561,730    511,357    16.9%   6.4%
NPLs commercial loans   320,461    307,658    251,881    27.2%   4.2%
NPLs residential mortgage loans   159,802    149,936    152,911    4.5%   6.6%
NPLs consumer loans   117,504    104,136    106,565    10.3%   12.8%
Cost of credit3   1.94%   2.58%   1.98%          
Risk index4 (RLL / Total loans)   2.91%   2.98%   3.02%          
NPL / Total loans   3.17%   3.04%   2.95%          
NPL / Commercial loans   3.06%   3.00%   2.71%          
NPL / Residential mortgage loans   3.03%   2.88%   2.99%          
NPL / consumer loans   3.77%   3.43%   3.62%          
Coverage of NPLs5   92.0%   98.3%   102.4%          
Coverage of NPLs ex-mortgage6   117.4%   125.2%   136.2%          
Coverage of commercial NPLs   78.3%   80.0%   97.3%          
Coverage of residential mortgage NPLs   22.5%   24.5%   23.3%          
Coverage of consumer NPLs   224.0%   258.6%   228.1%          

1.Excludes interbank loans.
2.NPLs: Non-performing loans: full balance of loans with one installment 90 days or more overdue.
3.Cost of credit: Quarterly provision expense annualized divided by average loans
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.
6.Loan loss reserves of commercial + consumer loans divided by NPLs of commercial and consumer loans

 

Investor Relations Department 10
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

Net provision for loan losses in the quarter totaled Ch$90,387 million a decrease of 24.3% QoQ and an increase of 4.4% YoY. The net provision expense by loan product was as follows:

 

Net provisions for loan losses
by segment		  Quarter   Change % 
(Ch$ million)  4Q12   3Q12   4Q11   4Q12 /
4Q11		   4Q12 /
3Q12		 
Commercial loans   (19,000)   (30,791)   (34,428)   (44.8)%   (38.3)%
Residential mortgage loans   (7,777)   (4,488)   7,685    —%   73.3%
Consumer loans   (63,610)   (84,180)   (59,864)   6.3%   (24.4)%
Net provisions for loan losses   (90,387)   (119,459)   (86,607)   4.4%   (24.3)%

 

Net provision expense in consumer loans decreased 24.3% QoQ and increased 6.3% YoY. In 3Q12, the Bank recalibrated the consumer loan-provisioning model that increased the minimum provision set aside for renegotiated consumer loans. As a result, gross provision expenses in 3Q12 includes a non-recurring provision expense of Ch$24,753 million. Excluding this charge, the QoQ decline in provision expense was 4.6%.

 

In 2012, the Bank implemented a series of measures to stabilize provision expense and the cost of credit. The most important changes were:

 

(i)Tightening of admission and approval policies in consumer lending. This mainly consisted of incrementing minimum debt servicing levels for loan approvals and restricting growth with clients with no history of positive credit bureau information. This has resulted in a positive evolution of the consumer loan vintage rates. Despite the rise in NPLs in consumer loans in 4Q compared to 3Q, the credit quality of the loans originated under the stricter admissions policies is beginning to have a positive impact on asset quality.

 

(ii)Restricting renegotiation policies and strengthening our collection efforts. This, on the one hand, resulted in an increase in charge-offs and NPLs, but at the same time a rise in consumer loan loss recoveries. These increased 6.1% QoQ and 140.4% YoY in 4Q12.

 

 

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

 

 
 

 

 

Provision expense for mortgage residential loans increased 73.3% QoQ. Mortgage loan NPLs reached 3.0% in 4Q12 compared to 2.9% in 3Q12. Including collateral, the coverage of residential mortgage NPLs reached 112.5%. In 4Q11, the Bank recognized an extraordinary recovery of Ch$15bn from the mortgage portfolio and this explains the difference in provision expenses in this product between 4Q12 and 4Q11. The Bank, since the end of the first half of 2012, has been enforcing stricter loan to value requisites at origination as a precautionary measure.

 

Provision expense in commercial loans decreased 38.3% QoQ as some problem loans in the middle-market were paid. As a reminder, in 4Q11, the Bank upgraded its provisioning model for loans to SMEs (See Annex 1 of the 4Q11 Earnings Report). This signified a one-time charge of Ch$16.6 billion in 4Q11 and this explains the 44.8% decrease in commercial provision expenses between 4Q12 and 4Q11. Commercial loan NPLs reached 3.1% in 4Q12 compared to 3.0% in 3Q12. The rise in NPLs in commercial loans is mainly due to an increase in NPLs in SMEs, which has been the fastest growing segment. The Bank experienced a rise in NPLs mainly among SME loans granted through the government’s guarantee program designed to aid the entrance of SME to the banking market. Therefore, the rise in NPLs does not necessarily imply a rise in losses as these loans are guaranteed by the state. For this reason, coverage ratio of commercial loan NPLs has fallen to 76.5% in the quarter while the Bank’s risk index has remained stable at 2.9% We expect a similar trend in 2013 in SME NPLs, risk index and coverage ratios.

 

Coverage of total NPLs in 4Q12 reached 92.0% compared to 98.3% in 3Q12 and 102.4% in 4Q11. Excluding residential mortgage loans that have a lower coverage ratio due to the value of residential property collateral, the coverage ratio reached a 117%.

 

 

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

 

 
 

 

 

NET FEE INCOME

 

Lower business activity in retail banking lowers fee income

 

Fee Income  Quarter   Change % 
(Ch$ million)  4Q12   3Q12   4Q11   4Q12 /
4Q11		   4Q12 /
3Q12		 
Credit, debit & ATM card fees   12,174    13,104    14,274    (14.7)%   (7.1)%
Collection fees   9,402    14,819    15,417    (39.0)%   (36.6)%
Insurance brokerage   8,160    8,138    7,722    5.7%   0.3%
Asset management   8,047    8,270    7,690    4.6%   (2.7)%
Guarantees, pledges and other contingent operations   7,457    7,222    6,540    14.0%   3.2%
Checking accounts   7,024    7,143    7,365    (4.6)%   (1.7)%
Lines of credit   2,201    2,228    2,738    (19.6)%   (1.1)%
Fees from brokerage and custody of securities   1,947    2,353    2,194    (11.3)%   (17.3)%
Other Fees   10,425    3,760    4,466    133.4%   177.4%
Total fees   66,837    67,037    68,406    (2.3)%   (0.3)%

 

Net fee income decreased 0.3% QoQ and 2.3% YoY. The Bank continued to increase its client base and cross-selling indicators, especially in the middle-upper income segments while limiting client growth in the mass consumer segment. This was partially offset by positive fee growth from our corporate banking unit.

 

The Bank’s total client base has increased 4.1% in the past twelve-months and the amount of cross-sold clients in all segments, excluding Banefe, has risen 5.2% YoY. This was offset by a decline in Banefe clients, as the Bank reduced its exposure to clients with unhealthy financial behavior. This also had a short-term impact on certain fess in the quarter, specifically credit card, checking account and line of credit fees. The fall in collection fees was mainly due to lower growth in mortgage loans. Collection fees for residential mortgage loan insurance are recognized in this line item. In January 2013, the new fee structure for residential mortgage loan insurance becomes effective, which should lower collection fees from mortgage insurance in 2013.

 

 

Cross-sold: For clients in Banefe cross-sold clients are clients with at least two products, one of which is a loan product plus direct deposit. In the Bank, excluding Banefe, a cross-sold client uses at least 4 products.

 

The Bank’s Transformation Plan continues to be implemented which should help bolster fees in 2013. This is the largest overhaul and reorganization of the Bank’s middle and lower income business segments in the last decade. The installation of the new CRM, a corner-piece of this initiative, is starting to improve the Bank’s client service indicators and productivity.

 

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

 

 
 

 

 

NET RESULTS FROM FINANCIAL TRANSACTIONS

 

Positive quarter in Corporate Banking

 

Financial Transactions*  Quarter   Change % 
(Ch$ million)  4Q12   3Q12   4Q11   4Q12 /
4Q11		   4Q12 /
3Q12		 
Net income from financial operations   (31,138)   (19,161)   17,322    —%   62.5%
Foreign exchange profit (loss), net   49,272    38,383    (1,395)   —%   28.4%
Net results from financial transactions   18,134    19,222    15,927    13.9%   (5.7)%

* 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 totaled a gain of Ch$18,134 million in 4Q12, a 5.7% QoQ decrease and a 13.9% YoY increase. In order to understand more clearly these line items, we present them by business area in the table below.

 

Financial Transactions  Quarter   Change % 
(Ch$ million)  4Q12   3Q12   4Q11   4Q12 /
4Q11		   4Q12 /
3Q12		 
Santander Global Connect1    14,051    9,467    15,281    (8.0)%   48.4%
Market-making   7,592    8,659    5,931    28.0%   (12.3)%
Client treasury services   21,643    18,126    21,212    2.0%   19.4%
Non-client treasury income   (3,509)   1,096    (5,286)   (33.6)%   —%
Net results from financial transactions   18,134    19,222    15,927    13.9%   (5.7)%

1. Santander Global Connect is the Bank’s commercial platform for selling treasury products to our clients.

 

Client treasury services totaled Ch$21,643 million in 4Q12 and increased 19.4% QoQ and 2.0% YoY. 4Q12 was a positive quarter for our Corporate banking unit in general with good core deposit growth, positive fee generation and a good quarter in client treasury services, reflecting the general positive business environment in Chile. Non-client treasury services recorded a loss of Ch$3,509 million, mainly reflecting the rise in long-term interest rates as inflation rebounded. This had a negative mark-to-mark impact on the Bank’s liquidity portfolio comprised mainly of Central Bank instruments.

 

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

 

 
 

 

 

OPERATING EXPENSES AND EFFICIENCY

 

Cost growth moderates as key project begin to have an impact on efficiency

 

Operating Expenses  Quarter   Change % 
(Ch$ million)  4Q12   3Q12   4Q11   4Q12 /
4Q11		   4Q12 /
3Q12		 
Personnel expenses   (76,882)   (75,561)   (73,233)   5.0%   1.7%
Administrative expenses   (48,127)   (46,053)   (44,747)   7.6%   4.5%
Depreciation, amortization and impairment   (16,050)   (14,051)   (13,835)   16.0%   14.2%
Operating expenses   (141,059)   (135,665)   (131,815)   7.0%   4.0%
Branches   503    496    499    0.8%   1.4%
ATMS   2,001    1,966    1,920    4.2%   1.8%
Employees   11,713    11,692    11,566    1.3%   0.2%
Efficiency ratio1   40.0%   42.4%   38.5%          

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 4Q12 increased 4.0% QoQ and 7.0% YoY. The efficiency ratio reached 40.0% in 4Q12 compared to 42.4% in 3Q12 and 38.5% in 4Q11. The 1.7% QoQ increase in personnel expenses reflects lower variable incentives paid to personnel. At the same time, headcount was flat QoQ. The 5.0% YoY increase in personnel expenses in 4Q12 reflects the 1.3% rise in headcount plus the rise in salaries in the year due to inflation plus higher severance payments. As of December 2012, headcount totaled 11,713 employees. Going forward personnel expense should grow at a slower pace than those observed in previous quarters as headcount remain stable and the new IT systems should increase employee productivity.

 

 

Administrative expenses increased 4.5% QoQ and 7.6% YoY in 3Q12, as the Bank continued with its projects of investing in a new Client Relationship Management system and the Transformation Initiatives aimed at enhancing productivity in retail banking. In the quarter, the Bank also opened 7 branches and installed 35 new ATMs. Rent expenses have also been rising since the Bank has sold most of its branches and now rents them. Branches are risk weighted at 100% and, therefore, from a capital perspective, it is more efficient to rent them than to own them.

 

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

 

 
 

 

 

OTHER INCOME AND EXPENSES

 

Other Income and Expenses  Quarter   Change % 
(Ch$ million)  4Q12   3Q12   4Q11   4Q12 / 4Q11   4Q12 /
3Q12		 
Other operating income   4,630    8,074    19,047    (75.7)%   (42.7)%
Other operating expenses   (20,268)   (13,008)   (24,989)   (18.9)%   55.8%
Other operating income, net   (15,638)   (4,934)   (5,942)   163.2%   216.9%
Income from investments in other companies   (983)   143    467    (310.5)%   (787.4)%
Income tax expense   (5,711)   (12,276)   (20,907)   (72.7)%   (53.5)%
Income tax rate   4.8%   18.9%   16.8%          

 

Other operating income, net, totaled Ch$ -15,638 million in 4Q12. The higher loss compared to 3Q12 was mainly due to a Ch$5,591 million gain from the sale of 11 branches in the previous quarter. The higher loss compared to 4Q11 was mainly due to Ch$11.1 billion gain recognized from the sale of 8 branches in 4Q11.

 

The lower income tax rate in 4Q12 was mainly due to the recognition of higher deferred tax assets. Congress approved a law that raised the statutory corporate tax rate to 20% next year and this new rate was applied to deferred taxes, increasing this asset and temporarily lowering the effective tax rate. For the whole of 2012, the Bank paid an effective tax rate of 11.5% and this rate should rise to approximately 18% in 2013. Additionally, for tax purposes, the Bank must revaluate its capital by the consumer price index. Since CPI inflation is expected to rise in 2013, this will result in a tax loss that lowers the Bank’s effective tax rate compared to the statutory rate.

 

Investor Relations Department 16
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

SECTION 4: CREDIT RISK RATINGS

 

International ratings

 

The Bank has credit ratings from three leading international agencies. In 4Q12, Standard &Poor’s upgraded the sovereign rating of Chile to AA- and Santander Chile’s rating of A was switched from Outlook negative to Outlook stable.

 

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

 

Standard and Poor’s (Outlook stable)   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+

 

Local ratings:

 

Our local ratings, the highest in Chile, are the following:

 

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

 

Investor Relations Department 17
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

SECTION 5: SHARE PERFORMANCE

As of December 2012

 

 

 

ADR price4 (US$) 12M12    
12/31/12:   28.49 
Maximum (12M12):   33.96 
Minimum (12M12):   26.10 

 

Market Capitalization:  US$13,422 million 
P/E 12 month trailing*:   16.38 
P/BV (12/31/12)**:   2.98 
Dividend yield***:   3.5%

 

*Price as of Dec. 31, 2012 / 12mth. earnings
**Price as of Dec. 31, 2012 / Book value as of 12/31/12
***Based on closing price on record date of last dividend payment.

 

Local share price (Ch$) 12M12    
12/31/12:   33.72 
Maximum (12M12):   41.00 
Minimum (12M12):   31.40 

 

Dividends:        
Year paid  Ch$/share   % of previous year
earnings		 
2008:   1.06    65%
2009:   1.13    65%
2010:   1.37    60%
2011:   1.52    60%
2012:   1.39    60%

 

 

4 On Oct. 22, 2012, the ratio of common share per ADR was changed from 1,039 shares per ADR to 400 shares per ADR.

 

Investor Relations Department 18
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

ANNEX 1: BALANCE SHEET

 

Unaudited Balance Sheet  Dec-12   Dec-12   Dec-11   Dec. 12 / Dec. 11 
   US$ths   Ch$ million   % Chg. 
Assets                    
Cash and balances from Central Bank   2,611,285    1,250,414    2,793,701    (55.2)%
Funds to be cleared   1,086,493    520,267    276,454    88.2%
Financial assets held for trading   706,457    338,287    409,763    (17.4)%
Investment collateral under agreements to repurchase   14,604    6,993    12,928    (45.9)%
Derivatives   2,700,662    1,293,212    1,612,869    (19.8)%
Interbank loans   189,051    90,527    87,541    3.4%
Loans, net of loan loss allowances   38,270,767    18,325,957    16,823,407    8.9%
Available-for-sale financial assets   3,813,633    1,826,158    1,661,311    9.9%
Held-to-maturity investments   -    -    -    —%
Investments in other companies   15,901    7,614    8,728    (12.8)%
Intangible assets   182,410    87,347    80,739    8.2%
Fixed assets   338,757    162,214    153,059    6.0%
Current tax assets   21,357    10,227    37,253    (72.5)%
Deferred tax assets   388,869    186,210    147,754    26.0%
Other assets   1,370,367    656,200    546,470    20.1%
Total Assets   51,710,613    24,761,627    24,651,977    0.4%
                     
Liabilities and Equity                    
Demand deposits   10,379,073    4,970,019    4,413,815    12.6%
Funds to be cleared   595,078    284,953    89,486    218.4%
Investments sold under agreements to repurchase   635,099    304,117    544,381    (44.1)%
Time deposits and savings accounts   19,029,368    9,112,213    8,921,114    2.1%
Derivatives   2,393,570    1,146,161    1,292,148    (11.3)%
Deposits from credit institutions   3,003,034    1,438,003    1,920,092    (25.1)%
Marketable debt securities   9,546,390    4,571,289    4,623,239    (1.1)%
Other obligations   402,237    192,611    176,599    9.1%
Current tax liabilities   1,096    525    1,498    (65.0)%
Deferred tax liability   19,931    9,544    5,315    79.6%
Provisions   461,508    220,993    230,290    (4.0)%
Other liabilities   712,695    341,274    398,977    (14.5)%
Total Liabilities   47,179,079    22,591,702    22,616,954    -0.1%
                     
Equity                    
Capital   1,861,341    891,303    891,303    0.0%
Reserves   2,039,388    976,561    51,539    1794.8%
Unrealized gain (loss) Available-for-sale financial assets   (7,896)   (3,781)   2,832    (233.5)%
Retained Earnings:   567,144    271,577    1,055,548    (74.3)%
Retained earnings previous periods   -    -    750,989    —%
Net income   810,206    387,967    435,084    (10.8)%
Provision for mandatory dividend   (243,062)   (116,390)   (130,525)   (10.8)%
Total Shareholders' Equity   4,459,977    2,135,660    2,001,222    6.7%
Minority Interest   71,557    34,265    33,801    1.4%
Total Equity   4,531,534    2,169,925    2,035,023    6.6%
Total Liabilities and Equity   51,710,613    24,761,627    24,651,977    0.4%

 

Figures in US$ have been translated at the exchange rate of Ch$478.85

 

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

 

 
 

 

 

ANNEX 2: YEAR-TO-DATE INCOME STATEMENTS

 

YTD Income Statement Unaudited  Dec-12   Dec-12   Dec-11   Dec. 12 / Dec. 11 
   US$ths.   Ch$ million   % Chg. 
                 
Interest income   3,948,946    1,890,953    1,768,735    6.9%
Interest expense   (1,771,367)   (848,219)   (796,435)   6.5%
Net interest income   2,177,580    1,042,734    972,300    7.2%
Fee and commission income   752,693    360,427    363,041    (0.7)%
Fee and commission expense   (187,647)   (89,855)   (85,205)   5.5%
Net fee and commission income   565,045    270,572    277,836    (2.6)%
Net income from financial operations   (133,819)   (64,079)   170,857    —%
Foreign exchange profit (loss), net   305,687    146,378    (76,660)   —%
Total financial transactions, net   171,868    82,299    94,197    (12.6)%
Other operating income   41,261    19,758    27,100    (27.1)%
Net operating profit before loan losses   2,955,754    1,415,363    1,371,433    3.2%
Provision for loan losses   (765,797)   (366,702)   (282,527)   29.8%
Net operating profit   2,189,957    1,048,661    1,088,906    (3.7)%
Personnel salaries and expenses   (627,123)   (300,298)   (280,613)   7.0%
Administrative expenses   (382,957)   (183,379)   (166,825)   9.9%
Depreciation and amortization   (117,717)   (56,369)   (53,466)   5.4%
Impairment   (188)   (90)   (116)   (22.4)%
Operating expenses   (1,127,986)   (540,136)   (501,020)   7.8%
Other operating expenses   (135,961)   (65,105)   (66,558)   (2.2)%
Total operating expenses   (1,263,947)   (605,241)   (567,578)   6.6%
Operating income   926,010    443,420    521,328    (14.9)%
Income from investments in other companies   558    267    2,140    (87.5)%
Income before taxes   926,568    443,687    523,468    (15.2)%
Income tax expense   (106,704)   (51,095)   (83,453)   (38.8)%
Net income from ordinary activities   819,864    392,592    440,015    (10.8)%
Net income discontinued operations   -    -    -    —%
Net income attributable to:                    
Minority interest   9,659    4,625    4,931    (6.2)%
Net income attributable to shareholders   810,206    387,967    435,084    (10.8)%

 

Figures in US$ have been translated at the exchange rate of Ch$478.85.

 

Investor Relations Department 20
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

ANNEX 3: QUARTERLY INCOME STATEMENTS

 

Unaudited Quarterly Income Statement  4Q12   4Q12   3Q12   4Q11   4Q12 / 4Q11   4Q12 / 3Q12 
   US$ths.   Ch$mn   % Chg. 
Interest income   1,096,205    524,918    407,222    497,457    5.5%   28.9%
Interest expense   (505,225)   (241,927)   (168,491)   (233,311)   3.7%   43.6%
Net interest income   590,980    282,991    238,731    264,146    7.1%   18.5%
Fee and commission income   187,397    89,735    88,817    91,500    (1.9)%   1.0%
Fee and commission expense   (47,819)   (22,898)   (21,780)   (23,094)   (0.8)%   5.1%
Net fee and commission income   139,578    66,837    67,037    68,406    (2.3)%   (0.3)%
Net income from financial operations   (65,027)   (31,138)   (19,161)   17,322    —%   62.5%
Foreign exchange profit (loss), net   102,897    49,272    38,383    (1,395)   —%   28.4%
Total financial transactions, net   37,870    18,134    19,222    15,927    13.9%   (5.7)%
Other operating income   9,669    4,630    8,074    19,047    (75.7)%   (42.7)%
Net operating profit before loan losses   778,098    372,592    333,064    367,526    1.4%   11.9%
Provision for loan losses   (188,758)   (90,387)   (119,459)   (86,607)   4.4%   (24.3)%
Net operating profit   589,339    282,205    213,605    280,919    0.5%   32.1%
Personnel salaries and expenses   (160,555)   (76,882)   (75,561)   (73,233)   5.0%   1.7%
Administrative expenses   (100,505)   (48,127)   (46,053)   (44,747)   7.6%   4.5%
Depreciation and amortization   (33,514)   (16,048)   (14,051)   (13,828)   16.1%   14.2%
Impairment   (4)   (2)   0    (7)   (71.4)%   —%
Operating expenses   (294,579)   (141,059)   (135,665)   (131,815)   7.0%   4.0%
Other operating expenses   (42,326)   (20,268)   (13,008)   (24,989)   (18.9)%   55.8%
Total operating expenses   (336,905)   (161,327)   (148,673)   (156,804)   2.9%   8.5%
Operating income   252,434    120,878    64,932    124,115    (2.6)%   86.2%
Income from investments in other companies   (2,053)   (983)   143    467    —%   —%
Income before taxes   250,381    119,895    65,075    124,582    (3.8)%   84.2%
Income tax expense   (11,926)   (5,711)   (12,276)   (20,907)   (72.7)%   (53.5)%
Net income from ordinary activities   238,455    114,184    52,799    103,675    10.1%   116.3%
Net income discontinued operations   -    -    -    -    —%   —%
Net income attributable to:                              
Minority interest   1,633    782    2,236    1,554    (49.7)%   (65.0)%
Net income attributable to shareholders   236,822    113,402    50,563    102,121    11.0%   124.3%

 

Figures in US$ have been translated at the exchange rate of Ch$478.85

 

Investor Relations Department 21
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

ANNEX 4: QUARTERLY EVOLUTION OF MAIN RATIOS AND OTHER INFORMATION

 

   Dec-11   Mar-12   Jun-12   Sep-12   Dec-12 
(Ch$ millions)                    
Loans                         
Consumer loans   2,943,846    2,963,104    2,987,880    3,039,998    3,115,479 
Residential mortgage loans   5,115,663    5,162,473    5,221,914    5,208,217    5,271,580 
Commercial loans   9,287,585    9,666,504    10,164,678    10,254,959    10,489,019 
Total loans   17,347,094    17,792,081    18,374,472    18,503,174    18,876,079 
Allowance for loan losses   (523,687)   (522,728)   (518,331)   (552,138)   (550,152)
Total loans, net of allowances   16,823,407    17,269,353    17,856,141    17,951,034    18,325,960 
                          
Loans by segment                         
Individuals   9,289,345    9,376,934    9,534,018    9,613,857    9,723,801 
SMEs   2,560,736    2,604,565    2,658,077    2,745,928    2,836,695 
Total retail lending   11,850,081    11,981,499    12,192,095    12,359,785    12,560,496 
Institutional lending   355,199    347,818    366,862    355,119    356,465 
Middle-Market & Real estate   3,650,709    3,692,576    3,848,479    3,918,324    4,072,191 
Corporate   1,494,752    1,881,429    2,006,270    1,874,749    1,858,116 
                          
Customer funds                         
Demand deposits   4,413,815    4,566,890    4,624,570    4,601,160    4,970,019 
Time deposits   8,921,114    8,825,599    9,913,093    9,487,610    9,112,213 
Total deposits   13,334,929    13,392,489    14,537,663    14,088,770    14,082,232 
Mutual funds (Off balance sheet)   2,941,773    2,995,292    2,944,482    3,080,130    2,713,776 
Total customer funds   16,276,702    16,387,781    17,482,145    17,168,900    16,796,008 
Loans / Deposits1   95.4%   98.4%   96.5%   98.7%   101.6%
                          
Average balances                         
Avg. interest earning assets   19,836,214    20,119,312    20,362,279    20,410,407    20,762,771 
Avg. loans   17,494,801    17,537,743    18,127,164    18,546,119    18,666,166 
Avg. assets   25,245,472    24,918,317    24,957,219    25,106,995    24,995,661 
Avg. demand deposits   4,374,397    4,527,917    4,749,885    4,598,283    4,716,789 
Avg equity   1,964,850    2,035,332    2,014,260    2,042,929    2,102,070 
Avg. free funds   6,339,246    6,563,249    6,764,145    6,641,212    6,818,859 
                          
Capitalization                         
Risk weighted assets   18,243,142    18,509,191    19,572,225    19,479,092    19,940,397 
Tier I (Shareholders' equity)   2,001,222    2,065,994    2,028,612    2,058,231    2,135,660 
Tier II   686,171    673,110    659,788    642,650    599,656 
Regulatory capital   2,687,393    2,739,104    2,688,401    2,700,881    2,735,316 
Tier I ratio   11.0%   11.2%   10.4%   10.6%   10.7%
BIS ratio   14.7%   14.8%   13.7%   13.9%   13.7%
                          
Profitability & Efficiency                         
Net interest margin   5.3%   5.3%   5.0%   4.7%   5.5%
Efficiency ratio   38.5%   36.8%   41.0%   42.4%   40.0%
Avg. Free funds / interest earning assets   32.0%   32.6%   33.2%   32.5%   32.8%
Return on avg. equity   20.8%   23.3%   21.0%   9.9%   21.6%
Return on avg. assets   1.6%   1.9%   1.7%   0.8%   1.8%

 

Investor Relations Department 22
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl  

 

 
 

 

 

   Dec-11   Mar-12   Jun-12   Sep-12   Dec-12 
Asset quality                         
Non-performing loans (NPLs)2   511,357    519,283    529,869    561,730    597,767 
Past due loans3   237,573    255,417    284,716    301,250    323,133 
Loan loss reserves4   523,687    522,728    518,331    552,138    550,152 
NPLs / total loans   2.95%   2.92%   2.88%   3.04%   3.17%
PDL / total loans   1.37%   1.44%   1.55%   1.63%   1.71%
Coverage of NPLs (Loan loss allowance / NPLs)   102.41%   100.66%   97.82%   98.29%   92.03%
Coverage of PDLs (Loan loss allowance / PDLs)   220.4%   204.7%   182.1%   183.3%   170.3%
Risk index (Loan loss allowances / Loans)4   3.02%   2.94%   2.82%   2.98%   2.91%
Cost of credit (prov. expense / loans)   2.00%   1.76%   1.71%   2.58%   1.92%
                          
Network                         
Branches   499    499    499    496    503 
ATMs   1,920    1,949    1,966    1,966    2,001 
Employees   11,566    11,572    11,621    11,692    11,713 
                          
Market information (period-end)                         
Net income per share (Ch$)   0.54    0.63    0.56    0.27    0.60 
Net income per ADR (US$)   0.42    0.51    0.44    0.23    0.50 
Stock price   37.4    40.54    37.34    33.55    33.72 
ADR price   29.1    33.14    29.83    28.2    28.49 
Market capitalization (US$mn)   13,728    15,613    14,053    13,285    13,422 
Shares outstanding   188,446.1    188,446.1    188,446.1    188,446.1    188,446.1 
ADRs (1 ADR = 400 shares)   471.1    471.1    471.1    471.1    471.1 
                          
Other Data                         
Quarterly inflation rate5   1.28%   1.07%   0.42%   -0.16%   1.11%
Central Bank monetary policy reference rate (nominal)   5.25%   5.00%   5.00%   5.00%   5.00%
Avg. 10 year Central Bank yield (real)   2.61%   2.45%   2.49%   2.42%   2.45%
Avg. 10 year Central Bank yield (nominal)   5.21%   5.40%   5.58%   5.31%   5.48%
Observed Exchange rate (Ch$/US$) (period-end)   521.46    489.76    509.73    470.48    478.6 

 

1 Ratio = Loans - marketable securities / Time deposits + demand deposits

2 Capital + future interest of all loans with one installment 90 days or more overdue.

3 Total installments plus lines of credit more than 90 days overdue

4 Based on internal credit models and SBIF guidelines. Banks must have a 100% coverage of risk index

5 Calculated using the variation of the Unidad de Fomento (UF) in the period

 

Investor Relations Department 23
Bandera 140 19th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,  
email: rmorenoh@santander.cl