Banco Santander Chile Announces Third Quarter 2018 Earnings

10/31/2018, 1:14 PM (Source: GlobeNewswire)

Banco Santander Chile Announces Third Quarter 2018 Earnings

Santiago, Chile, October 31, 2018. Banco Santander Chile (NYSE: BSAC; SSE: Bsantander) announced today its unaudited results[1] for the nine month period end September 30, 2018 (9M18) and third quarter 2018 (3Q18).

Net income attributable to shareholder increased 1.2% YoY. ROAE 9M18 of 19.0%

Net income attributable to shareholders accumulated up to September 2018 totaled Ch$435,258 million, increasing 1.2%, with a ROAE of 19.0% year-to-date (YTD). Net income attributable to shareholders in 3Q18 totaled Ch$129,727 million (Ch$0.69 per share and US$0.42 per ADR), decreasing 16.0% compared to 2Q18 (from now on QoQ) and decreasing 5.5% compared to 3Q17. The lower results in 3Q18 was mainly due to the one-time recognition of Ch$20,000 million of additional provisions before tax .

Loan growth accelerating to 2.5% in the quarter and 8.0% YoY

Total loans increased 8.0% YoY and 2.5% QoQ in 3Q18, driven by greater economic activity, a higher level of investment and greater business confidence. This has led to strong commercial growth with loans in SCIB[2]  increasing 4.1% QoQ and loans in the Middle-market growing 3.1% QoQ and 15.1% YoY as these companies increase their activities and need for funding. Loan growth in Retail banking also accelerated in the quarter and increased 2.1% QoQ and 6.9% YoY with growth from Loans to individuals growing 2.4% QoQ and 8.2% YoY. 

Demand deposits increase 9.8% YoY

In 3Q18, the Bank's total deposits decreased 0.2% QoQ and increased 4.5% YoY. The Bank's non-interest bearing demand deposits continued to grow strongly, reaching an increase of 9.8% YoY and a slight decrease since June 2018.  In 3Q18 time deposits grew 1.5% YoY and 0.8% QoQ, as we focused on controlling the cost of deposits in light of rising short-term interest rates.  The Bank's liquidity levels remained healthy in the quarter. Our LCR ratio reached 131.8% and the NSFR ratio reached 108.4% as of September 30, 2018.[3]

Capital ratio rises 20bp QoQ to 10.2%. New Banking Law approved by Congress

The Bank's capital ratios remained solid with the core capital ratio[4] at 10.2% and the total BIS ratio[5]  at 13.0% as of September 30, 2018.

During September 2018 the new banking law reform was approved by Congress and is now awaiting the final presidential approval. The main changes to the banking law are: i) the creation of a new regulatory body for the financial system; and ii) new capital regulation for banks in Chile in line with Basel III standards.

NIM down to 4.4% in 3Q18. NIM net of risk increased to 3.5% in the quarter

The Bank's net interest margin (NIM)[6] in 3Q18 reached 4.4% in 3Q18 compared to 4.5% in 2Q18. Loan growth continues to be driven by SCIB, Middle Market and mortgages that are generally lower yielding than consumer loans, but also less risky. As a result, the Bank's NIM net of risk (excluding one-time provision charge) increased slightly to 3.5% in 3Q18.

Asset quality stable. One-time charge of Ch$20,000 million in additional provisions.

 Anticipating future changes to our consumer expected loss model, the Bank recognized a one-time charge of Ch$20,000 million as additional provisions for consumer loans. Adjusting the provisions to exclude this one-time charge, the provisions for loan losses increased 6.1% compared to 3Q17 and decreased 4.5% compared to 2Q18 and the adjusted cost of credit[7] remained stable at 1.0% of loans. The total NPL ratio remained stable at 2.2% as of September 2018 and the impaired loan ratio decreased 45bp YoY and 18bp QoQ to 6.0%. The slight improvement in both the NPL and impaired loan ratio, along with a lower expected loss ratio, reflects the more positive economic trends in Chile in 2018 and loan growth in lower risk segments. The Total Coverage ratio (including the effect of the additional provisions) reached 124.7% in the quarter.  

Positive fee growth from business segments offset by lower collection fees

In 3Q18, fee income increased 1.5% compared to 3Q17 and decreased 12.3% compared to 2Q18. The QoQ decrease was mainly due to lower collection of mortgage related fees. On the other hand, Fees in Retail banking increased 7.2% compared to 3Q17 and 1.7% compared to 2Q18. Client loyalty continues to rise in retail banking with loyal individual customers (clients with >4 products plus minimum usage and profitability levels) in the High-income segment grew 6.7% YoY and loyal Mid-income earners grew 7.5% YoY. Fees in the Middle-market increased 2.8% compared to 3Q17 and 1.5% compared to 2Q18. Customer loyalty has also been expanding with Loyal Middle-market and SME clients growing 5.6% YoY. Fees in SCIB increased 62.5% compared to 2Q18 and 10.7% compared to 2Q18. In the quarter, the Bank saw important fee income from various financial advisory projects, as well as a positive quarter in cash management services.

 Results from financial transactions, net recovering in the quarter

In 3Q18, the results from total financial transactions, net was a gain of Ch$27,531 million in 3Q18, an increase of 48.3% compared to 2Q18. The improved QoQ results in 3Q18 was mainly driven by a 65.1% increase in Non-client treasury income in the quarter, as local medium and long-term rates were more stable, resulting in higher result from our ALM liquidity portfolio.

 Low cost growth driven by improvements in productivity and digitalization

 In 3Q18, Operating expenses, excluding Impairment and Other operating expenses decreased 2.4% QoQ and increased 1.5% YoY.  The efficiency ratio[8] in 3Q18 reached 40.8%. In 9M18, the Bank's efficiency ratio reached 40.0% compared to 40.2% in the same period of last year. The improvement of the efficiency ratio is mainly due to the various initiatives that the Bank has been implementing to improve productivity and efficiency through digitalization.

 

About Banco Santander

Banco Santander Chile is the largest Bank in the Chilean market in terms of assets, loans and equity. As of September 30, 2018, we had total assets of Ch$38,026 billion (U.S.$57.9 billion), outstanding loans net of allowances for loan losses of Ch$29,153 billion (U.S.$44.4 billion), total deposits of Ch$20,762 billion (U.S.$ 31,613 billion) and equity of Ch$3,129 billion (U.S.$4.8 billion). We have 377 branches, 769 ATMs, and 11,439 employees. Our BIS ratio up to September 30, 2018 was 13.0%, with a core capital ratio of 10.2%. Our long-term credit risk rating are A1 by Moody's, A Fitch and A Standard & Poor's.

 



[1] The information contained in this report is unaudited and is presented in accordance with Chilean Bank GAAP as defined by the Superintendency of Banks of Chile (SBIF).

[2].Santander Corporate and Investment Banking formerly GBM.

[3].LCR= Liquidity Coverage Ratio under ECB rules. These are not the Chilean models.  NSFR= Net Stable Funding Ratio according to internal methodology.

[4]. Core Capital ratio = Shareholders' equity divided by Risk-weighted Assets (RWA) according to SBIF BIS I definitions.

[5]. BIS ratio: Regulatory capital divided by RWA.

[6]. NIM = net interest margin or net interest income divided by average interest earning assets.

[7]. Adjusted cost of credit = Annualized provision for loan losses (adjusted to exclude the additional provision of Ch$20,000 million in 3Q18) / YTD average total loans. Averages are calculated using monthly figures.

[8] Efficiency ratio= =(Net interest income+ net fee and commission income +financial transactions net + Other operating income +other operating expenses) divided by (Personnel expenses + administrative expenses + depreciation). Excludes impairment charges





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Source: Banco Santander-Chile via Globenewswire

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