Banco Santander Chile Announces First Quarter 2012 Earnings

SANTIAGO, Chile, May 2, 2012 /PRNewswire/ -- Banco Santander Chile (NYSE: BSAC; SSE: Bsantander) announced today its unaudited results for the first quarter 2012. These results are reported on a consolidated basis in accordance with Chilean GAAP in nominal Chilean pesos.

1Q12: Net income increases 15.8% QoQ and 1.7% YoY driven by solid operating trends

In 1Q12, Net income attributable to shareholders totaled Ch$118,307 million (Ch$0.63 per share and US$1.33/ADR). Compared to 4Q11 (from now on QoQ), net income increased 15.8%. Compared to 1Q11 (from now on YoY) net income increased 1.7%. During the quarter, the Bank saw an important QoQ improvement in revenue generation, efficiency and profitability. Gross income net of provisions and costs, a proxy for recurrent earnings growth, increased 15.4% QoQ.

ROAE in the quarter reached 23.3% with Core capital at 11.2%

ROAE in 1Q12 reached 23.3%. Shareholders' equity totaled Ch$2,065,994 million (US$4.2 billion) as of March 31, 2012. The BIS ratio reached 14.8% as of March 2012 compared to 14.7% as of December 2011 and 14.1% as of March 2011. The Bank's core capital ratio reached 11.2% as of March 2012. Voting common shareholders' equity is the sole component of our Tier I capital. The Bank also paid on April 25, 2012 its annual dividend equivalent to 60% of 2011 net income (Ch$1.39/share and US$2.95(1)ADR) equivalent to a dividend yield of 3.5% on the dividend record date in Chile. The prudent management of the Bank's capital ratios and high profitability has permitted the Bank to continue paying attractive dividends without issuing new shares since 2002.

Net interest margin reaches 5.3%

The Bank's Net interest margin reached 5.3% in 1Q12 and net interest income increased 16.3% YoY and 0.7% QoQ. The positive evolution of margins was mainly due to a better funding mix, higher lending volumes and loan spreads and a higher quarterly inflation rate. Finally, as international financial markets showed greater stability in the quarter, the Bank partially reduced its excess liquidity cushion by paying liabilities that are more expensive and shifting money towards higher yielding assets.

Loan growth accelerating

In 1Q12, total loans increased 2.6% QoQ and 6.1% YoY. Loan growth in the quarter was driven by the favorable evolution of the Chilean economy. Loans to individuals increased 0.9% QoQ in 1Q12 and 8.4% YoY. Lending to SMEs led growth in the loan book and expanded 1.7% QoQ (5.5% YoY), reflecting the Bank's consistent focus on this expanding segment. Corporate lending increased 25.9% QoQ. As international financial markets showed greater stability in the quarter, the Bank took the decision reduce part of the surplus liquidity accumulated in 2S11 by shifting assets from short-term Central Bank deposits into large corporate loans that are a lower risk, higher yielding alternative.

Solid growth of core deposits

Customer funds (deposits + mutual funds) decreased 0.7% QoQ and increased 3.3% in the year. The Bank pre-paid in the quarter relatively more expensive institutional funding and correspondent bank lines, while continuing to focus on increasing its cheaper core deposit base (deposits from non- institutional investors). As a consequence, Core deposits (demand deposits + time deposits from non-institutional investors) grew 5.5% QoQ improving the Bank's funding mix as these deposits tend to be cheaper and more stable than other sources.

Asset quality indicators remain stable QoQ

Provision for loan losses in the quarter decreased 9.6% QoQ and increased 60.8% YoY. The QoQ decrease was mainly due to a reduction in gross provisions and charge-offs. Total charge-offs decreased 12.9% QoQ with commercial loan charge-offs decreasing 28.7% and consumer loan charge-offs falling 5.7% QoQ.

Compared to 1Q11, net provision expense increased 60.8%. This was mainly due to the 55.8% YoY rise in charge-offs led by a rise in charge-offs in consumer lending. Since 3Q11, the Bank has been restricting renegotiations and, therefore, increasing charge-offs in the mass market.

The Bank's Non-performing loans ratio (NPL) decreased from 2.95% in 4Q11 to 2.92% in 1Q12 and increased from 2.47% in 1Q11. The Coverage ratio of total NPLs (loan loss allowances over non-performing loans) reached 100.7% as of March 31, 2012. The Risk Index, which measures the percentage of loans for which the Bank must set aside loan loss allowances, based on our internal models and Superintendency of Banks guidelines, remained stable at 2.94% in 1Q12 compared to 3.0% in 4Q11 and 2.92% in 1Q11.

Fee income slowly recovering

Net fee income was up 0.4% QoQ while falling 3.8% YoY in 1Q12. The main reason for the QoQ increase was the rebound in business activity in the quarter, especially our asset management business. Asset management fees increased 12.0% QoQ driven by the recovery of equity markets that drove the growth of our variable income asset management business. The Bank's client base, especially cross-sold clients also continued to grow at a solid pace.

Efficiency reaches 36.8%

Operating expenses in 1Q12 decreased 4.7% QoQ and increased 8.6% YoY. The efficiency ratio improved in the quarter to 36.8%. The QoQ decrease in operating expenses is mainly seasonal. Personnel expenses increased 10.5% YoY as headcount increased 4.1% YoY and variable compensation rose driven by greater business activity. Administrative expenses increased 11.6% YoY as the Bank continued with its projects of investing in a new Client Relationship Management system and other IT projects to enhance productivity.  

Institutional Background

As per the latest public records published by the Superintendency of Banks of Chile for March 2012, Banco Santander Chile was the largest bank in terms of loans and equity. The Bank has among the highest credit ratings among all Latin American companies, with an A+ rating from Fitch, A from Standard and Poor's and Aa3 by Moody's. The stock is traded on the New York Stock Exchange (NYSE: BSAC) and the Santiago Stock Exchange (SSE: Bsantander). The Bank's main shareholder is Santander, which controls 67% of Banco Santander Chile.  

For more information see www.santander.cl

(1) Dividend per ADR calculated based on the observed exchange rate of Ch$487.15 / US$ as of April 25, 2012, which was the dividend pay date in Chile.