Santiago, Chile, July 31, 2013. Banco Santander Chile (NYSE: BSAC; SSE: Bsantander) announced today its unaudited results for the second quarter 2013. These results are reported on a consolidated basis in accordance with Chilean GAAP.
Net income 2Q13: Solid commercial activity offset by lower inflation / higher tax rate
In 2Q13, Net income attributable to shareholders totaled Ch$85,892 million (Ch$0.46 per share and US$0.36/ADR) income increasing 6.2% compared to 1Q13 (from now on QoQ) and declining 18.7% compared to 2Q13 (from now on YoY). Negative inflation rates, which lowered net interest margins and the higher statutory tax rate lowered profitability YoY. Compared to 1Q13, the stronger client margins, improved asset quality and higher mark-to-market gains boosted operating income and more than compensated negative inflation and higher taxes. The Bank's ROE in the quarter reached 16%.
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Loan growth accelerating in the segments the Bank has targeted for growth
In 2Q13, total loans increased 3.5% QoQ (an annualized rate of 14%) and 7.6% 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 4.9% QoQ (20% annualized rate) and 13.4% YoY. Loans to mid-high income individuals increased 3.7% QoQ and 10.8% YoY. Notable was the growth of 3.2% QoQ of consumer loans in the mid-high income segment. Lending to SMEs, one of the Bank's most profitable business segments, expanded 7.2% QoQ (15.4% YoY), reflecting the Bank's consistent focus on this segment despite the higher credit risk. In 2Q13, the Bank also focused loan growth in the middle-market segment, which increased 4.9% QoQ and 15.5% YoY. This segment continues to show healthy loan demand given the high level of investment in the Chilean economy.
Solid growth of core deposits
Total deposits grew 3.5% QoQ and grew 0.5% YoY. In the quarter, the Bank's funding strategy continued to be focused on increasing core deposits, while lowering deposits from more expensive institutional sources. Core deposits (demand and time deposits from our retail and corporate clients) expanded 2.2% QoQ and 16.4% YoY. Core deposits represent 83% of the Bank's total deposit base.
Client margins stable. Total NIMs lower due to negative inflation in the quarter
In 2Q13, Net interest income increased 0.9% QoQ and decreased 2.5% YoY. The Net interest margin (NIM) in 2Q13 reached 4.7% compared to 4.7% in 1Q13 and 5.0% in 2Q12, mainly as a result of the lower inflation rate. On the other hand, client net interest income increased 3.2% QoQ and 2.3% YoY and was driven by loan growth. The higher growth in consumer loans and a stable pricing policy has kept client margins relatively unchanged since 4Q12. The funding mix has also been a key factor for supporting client margins in the quarter.
Asset quality improving in consumer loans
Net provision for loan losses in the quarter totaled Ch$86,655 million a decrease of 6.7% QoQ and an increase of 10.3% YoY. Net provision expense in consumer loans, which represented 54% of total provision expense, decreased 19.5% QoQ and 14.6% YoY. As explained in previous quarters, the Bank has been carrying out a series of actions to improve credit risk in the consumer loan book. This has gradually resulted in a stabilization of asset quality in consumer lending. Consumer NPLs decreased 14.3% QoQ and 23.8% YoY. The coverage of consumer NPLs reached 294.2% in 2Q13 compared to 226.4% in 1Q13 and 242.4% in 2Q12. The improved collection efforts have also led to an important rise in loan loss recoveries, especially in consumer lending. Total loan loss recoveries increased 90.3% YoY. In this same period, consumer loan loss recoveries increased 44.6% QoQ and 102.7% YoY. As a result, total provision expense has evolved favorably, since the 4Q12.
Cost growth decelerates. The Bank launches its Santander Select brand
Operating expenses in 2Q13 increased 6.8% QoQ and 4.9% YoY. The stable headcount has reduced personnel expense growth. Administrative expenses increased 9.2% YoY. In the quarter, the Bank continued with its Transformation Projects aimed at enhancing productivity and client service in retail banking. The Bank also launched its new Santander Select business model for the mid-high income client segment. Previously, the Bank had three brands (Premiere, Prime, Nobel) for this client segment. These units were merged as one single segment.
Core capital ratio reached 10.2%. Dividend yield of 3.7%
Core capital reached 10.2% as of June 30, 2013. The Bank's BIS ratio reached 12.9% at the same date. In April 2013, the Bank paid its annual dividend, which this year was equal to 60% of 2012 earnings or Ch$1.24/share an equal to a dividend yield of 3.7% as of April 24, 2013, the day before the ex-dividend date in the local stock market.
Net income 1H13: Solid commercial activity offset by lower inflation / higher tax rate
In the first half of 2013, Net income attributable to shareholders totaled Ch$166,771 million (Ch$0.88 per share and US$0.70/ADR) decreasing 25.5% YoY. The Bank's ROE in the first half of 2013 reached 15.6% with an efficiency ratio of 42.4%.
CONTACT INFORMATION
Robert Moreno
Manager, Investor Relations Department
Banco Santander Chile
Bandera 140 Piso 19
Santiago, Chile
Tel: (562) 2320-8284
Fax: (562) 671-6554
Email: rmorenoh@santander.cl
Website: www.santander.cl