Banco Santander Chile : Announces First Quarter 2014 Earnings

Santiago, Chile, April 29, 2014. Banco Santander Chile (NYSE: BSAC; SSE: Bsantander) announced today its unaudited results for the first quarter of 2014. These results are reported on a consolidated basis in accordance with Chilean GAAP.

Net income up 75.4% in 1Q14. ROAE reaches 23.9%

In 2013, Banco Santander Chile's Net income attributable to shareholders reached a record level for a quarter and totaled Ch$141,843 million (Ch$0.75 per share and US$0.55/ADR), increasing 75.4% compared to 1Q13. The Bank's ROAE reached 23.9% in 1Q14 compared to 15.0% in 1Q13.

Strong operating trends in 1Q14: Operating income up 21.3% QoQ and 76.5% YoY

The Bank's Operating income, reached Ch$168,052 million in 1Q14, increasing 21.3% QoQ and 76.5% YoY. In this period, the Bank saw a favorable evolution of business volumes, margins, asset quality and costs that lead to a record level of quarterly Operating income. This result was due to positive evolution of loan growth, an improved funding mix, higher inflation, lower provisions, and cost control.

Loan growth up 12.3% YoY, especially in segments with higher risk-adjusted contribution

In 1Q14, Total loans increased 2.5% QoQ and 12.3% YoY. In the quarter, the Bank continued to focus on its strategy of expanding the loan book with a focus on increasing spreads, net of provisions, in an economic environment that remains healthy, but with growth decelerating.

Loan growth was led by lending to individuals, which increased 3.7% QoQ and 11.4% YoY in 1Q14. In the quarter, the Bank focused on expanding its consumer loan portfolio in higher income segments, while remaining more selective in lower income segments. Loans in the high-income segment, which are mainly distribute through the Santander Select network, increased 4.3% QoQ and 17.4% YoY. In the lower income segments, the Bank's loan portfolio decreased 3.1% QoQ and 14.5% YoY, continuing the loan mix shift started several quarters ago.

Improving funding mix, with 13.5% YoY growth of retail deposits

Total deposits fell 0.3% QoQ and increased 8.0% YoY. Non-interest bearing demand deposits decreased 0.2% QoQ and increased 13.0% YoY. Retail deposits expanded 2.3% QoQ and 13.5% YoY. The Bank continued to focus on deposits from individuals, which increased 0.8% QoQ, and 14.9% YoY. Deposits from SME clients increased 1.5% QoQ and 13.5% YoY. In the middle-market, deposits rose 4.7% QoQ and 11.8% YoY.

Sustained growth of NIMs, net of provisions

In 1Q14, Net interest income increased 6.6% QoQ and 27.2% YoY. The Net interest margin (NIM) in 1Q14 reached 5.4% compared to 5.2% in 4Q13 and 4.7% in 1Q13. A central point of our current strategy is to achieve a higher NIM, net of provision expenses. In 1Q14, the Bank's NIM, net of provision expense reached 4.0% compared to 3.7% in 4Q13 and 2.9% in 1Q13. This in line with the Bank's focus towards a less risky loan mix, which has also minimized the negative impact of the new regulation that lowered maximum lending rates.

Provision expense decreases 12.5% in 1Q14. Coverage ratio at 107.3%

Net provision for loan losses decreased 7.7% QoQ and 12.5% YoY in 4Q13. The Cost of credit (Provision expenses annualized divided by total loans) declined to 1.5% in 1Q14 compared to 1.7% in 4Q13 and 1.9% in 1Q13. A key factor for this this decrease in provision expense was the 5.3% QoQ and the 17.6% YoY decrease in direct charge-offs during the quarter. Better collection efforts have also led to an important rise in Loan loss recoveries, which increased 36.7% YoY (the 10.9% QoQ decline is mostly seasonal).

The Bank's total NPL ratio reached 2.7% in 1Q14 compared to 2.9% in 4Q13 and 3.2% in 1Q13. Total Coverage of NPLs in 1Q14 reached 107% compared to 99.2% in 4Q13 and 91.0% in 1Q13.

Efficiency ratio improves to 35.6% in 1Q14

Operating expenses in 1Q14 increased 3.4% YoY. The efficiency ratio reached 35.6% in 1Q14 compared to 41.4% in 1Q13. This improvement in efficiency was mainly due to the rises in productivity brought forth by the Transformation Project and the increase in loan pre-approvals from our new CRM software. Productivity also continues to rise as usage of complementary channels such Internet, phone banking, POS and Automatic bill payments continues to increase. This way the Bank's business activity continues to increase with minimal variations in personnel and the branch distribution network. 

Core capital ratio reaches 10.7% in 1Q14. Dividend increases 13.8%

The Core Capital ratio reached 10.7% as of March 2014. The Bank's BIS ratio reached 13.9% at the same date. The Bank paid in Chile on April 23, 2014 its annual dividend of Ch$1.407/share, equivalent to a dividend yield of 4.1% and an increase of 13.8% compared to the dividend paid in 2013.