Santiago, Chile, April 25, 2013. Banco Santander Chile (NYSE: BSAC; SSE: Bsantander) announced today its unaudited results for the first quarter 2013. These results are reported on a consolidated basis in accordance with Chilean GAAP.
Lower inflation and a higher tax rate reduces profitability in 1Q13
In 1Q13, Net income attributable to shareholders totaled Ch$80,879 million (Ch$0.43 per share and US$0.36/ADR). Compared to 4Q12 (from now on QoQ), net income decreased 28.9% and 31.7% compared to 1Q13 (from now on YoY). During the quarter, the lower inflation temporarily reduced net interest income and profitability. The higher statutory tax rate also lowered profitability.
In 1Q13, net interest income decreased 12.9% QoQ and 7.4% YoY. The net interest margin (NIM) in 1Q13 reached 4.7% compared to 5.5% in 4Q12 and 5.3% in 1Q12. The lower net interest margin income in the quarter was mainly due to the quarterly fluctuations of inflation. In 1Q13, the variation of the Unidad de Fomento (an inflation indexed currency unit), was 0.13% compared to 1.11% in 4Q12 and 1.07% in 1Q12. 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. Therefore, the QoQ decline in inflation was an important factor that explains the reduction in net interest income and profitability in the quarter.
Loan growth accelerating in segments the Bank has targeted for growth
In 1Q13, total loans increased 1.2% QoQ and 7.4% YoY. In the quarter, loan growth continued to accelerate in the markets the Bank is currently targeting: high-income individuals, SMEs and middle market of companies. Loans in these combined markets increased 3.1% QoQ and 11.4% YoY. Loans to high-income individuals increased 2.9% QoQ. Lending to SMEs (defined as companies that sell less than Ch$1,200 million per year) expanded 1.4% QoQ and 9.8% YoY, 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 4.4% QoQ and 14.7% YoY.
Solid growth of core deposits
Customer funds (deposits + mutual funds) increased 2.6% QoQ and 5.1% YoY. Core deposits (demand and time deposits from our retail and corporate clients) expanded 12.4% YoY. Core deposits now represent 83% of the Bank's total deposit base. This should help support net interest margins in 2013.
Asset quality stabilizing in consumer loans
Net provision for loan losses in the quarter totaled Ch$92,858 million an increase of 2.7% QoQ and 18.6% YoY. Net provision expense in consumer loans, which represent 63% of total provision expense, decreased 1.0% QoQ and 3.8% YoY. This reflects the different measure carried out by the Bank to improve credit risk. This includes focus loan growth in the higher end of the consumer market, tightening admissions policies, improving the collections process and updating the consumer provisioning models (performed in 3Q12). The measures mentioned above have gradually resulting in a stabilization of asset quality in consumer lending. Consumer NPLs decreased 2.7% QoQ. The coverage of consumer NPLS reached 226.4% in 1Q13 compared to 224.0% in 4Q12. At the same time, the amount of impaired consumer loans (consumer NPLS+ renegotiated consumer loans) has evolved favorably. This is a leading indicator for the evolution of future charge-offs. The improved collection efforts have also led to an important rise in loan loss recoveries, especially in consumer lending. Total loan loss recoveries increased 113.3% YoY. In this same period, consumer loan loss recoveries increased 146.3% YoY.
Cost growth moderates as key projects advance
Operating expenses in 1Q13 decreased 3.9% QoQ and increased 7.7% YoY. The efficiency ratio reached 41.8% in 1Q13. Administrative expenses increased 9.0% YoY as the Bank continued with its Transformation Projects aimed at enhancing productivity in retail banking. Going forward, though, administrative expenses should grow at a slower pace as many of these projects are finalizing. The 3.1% YoY increase in personnel expenses in 1Q13 reflects the stable evolution of the Bank's headcount. Personnel expenses should experience moderate growth in the rest of the year as headcount levels should not grow significantly.
Core capital ratio reached 10.9%. Dividend yield of 3.8%
Shareholders' equity totaled Ch$2,194,025 million (US$4.6 billion) as of March 31, 2013. Core capital reached 10.9% and the Bank's BIS ratio reached 13.9% at the same date. The Bank's Board will also submit for shareholder approval on April 29, 2013 its annual dividend equivalent to 60% of 2012 net income (Ch$1.24/share) equivalent to a dividend yield of 3.8% on the day before the ex-dividend date in Chile. ROAE in the quarter reached 15.0%.
Manager, Investor Relations Department
Banco Santander Chile
Bandera 140 Piso 19
Tel: (562) 2320-8284
Fax: (562) 671-6554
On January 1, 2013 the Bank began to apply the modifications to IAC 19 relating to Employee Pension Benefits. This change was applied retroactively to 2012 figures which resulted in lower assets and liabilities of Ch$786 million and a higher net income of Ch$315 million all charged to 4Q12 figures in this report.