Banco Santander Chile Announces 1Q10 Earnings

SANTIAGO, Chile, April 29/PRNewswire-Firstcall/ -- Banco Santander Chile (NYSE: SAN; SSE: Bsantander) announced today its unaudited results for the first quarter of 2010. These results are reported on a consolidated basis in accordance with Chilean GAAP in nominal Chilean pesos.

In 1Q10, net income attributable to shareholders totaled Ch$119,104 million (Ch$0.63 per share and US$1.25/ADR(1)). These results represent an increase of 55.4% compared to 1Q09 (from now on YoY) With these results, the Bank's ROAE in the quarter reached 28.6%. The Bank currently has one of the highest ROE among the banks operating in Chile. This strong profitability was achieved while having one of the highest levels of capitalization in the Chilean financial system. As of March 31, 2010, the Bank's BIS ratio reached 14.7% and its Tier I ratio stood at 10.8%.

Record dividend to be paid in April 2010. Dividend increases 21.2% YoY.  

In April 2010, the Bank will pay its annual dividend of Ch$1.37/share, 21.2% greater than the dividend paid in 2009. This is equivalent to 60% of 2009 earnings attributable to shareholders and the highest dividend ever paid by the Bank. At the record date in Chile, the dividend yield was 3.9%.

Total loans grow 2.3% QoQ in 1Q10 with loan growth in all products and segments.

In 1Q10, total loans increased 2.3% QoQ with loan growth in all products and segments. The pick up in economic growth has led to a rebound in loan volumes, especially in higher yielding retail banking activities. The Bank continued to see loan growth even after the recent earthquake in the majority of its products. The lower interest rate also continued to boost loan demand.

Loans to individuals increased 1.9% QoQ led by a 2.7% increase in consumer loans.  Lending to SMEs and the Middle Market increased 2.5% and 4.3% QoQ, respectively. These segments were positively impacted by the rebound in economic growth and the initial reconstruction efforts. Corporate lending also positive showed growth in 1Q10 after various quarters of decline, reflecting the positive evolution of investment levels in the economy.

The funding mix improves and demand deposits rise 10.1% QoQ.

In the quarter, the Bank also improved its funding mix. Total loans to deposits reached 104.3% as of March 2010 compared to 100.9% as of December 2009. Customer funds increased 1.5% QoQ. The 10.1% QoQ increase in demand deposits in the quarter was mainly due to the low interest rate environment and our strategic focus on non-lending activities also helped to boost demand deposit volumes. In the quarter, non-interest bearing deposit in the middle market increased 18.8% QoQ and 13.7% QoQ among SMEs clients.

Net interest income up 22.5% YoY in 1Q10.

In 1Q10, net interest income increased 22.5%. The Bank's net interest margin reached 5.8% in the quarter compared to 4.8% in 1Q09.  This rise in net interest income was mainly due to the higher inflation rate and an improved loan and funding mix. The Bank maintains long-term assets (mainly medium and long-term financial investments) that are denominated in Unidades de Fomento (UFs), an inflation indexed unit, which are partially funded with nominal or non-interest bearing peso short-term deposits. The UF inflation reached 0.27% in 1Q10 compared to -2.30% in 1Q09. In the same YoY period, the percentage of high yielding loans to the retail segments (individuals, SMEs and institutional) reached 63.9% compared to 60.0% in 1Q09, which helped to maintain client margins in a low interest rate environment.

(1) Earnings per ADR is calculated using an exchange rate of Ch$526.29 per US$.

Net provision expense decreases 22.8% YoY in 1Q10.

In 1Q10, the Bank's net provision expense decreased 22.8% YoY. This was mainly due to an improvement in asset quality, especially among individuals, which resulted in a 44.4% YoY decrease in total charge-offs. This was mainly due to the improvement of the economy and the Bank's strategic focus in 2009 on keeping asset quality under control by growing selectively and by augmenting the time commercial executives dedicate to asset quality issues. Non-performing consumer loans decreased 38.6% YoY and the coverage ratio of consumer NPLs reached 247% as of March 2010 compared to 121% as of March 2009.  

Fees income grows 1.2% YoY in 1Q10. Credit card fees up 19.5% YoY in 1Q10.

Net fee income increased 1.2% YoY. Fees from credit, debit and ATM cards continue to lead fee growth and increased 19.5% YoY. The rise in fees from these businesses reflects the increase in usage of the Bank's cards. Fees from asset management increased 52.8% YoY and fees from insurance brokerage increased 53.4% in the same period.  The Bank's success in selling insurance online, especially auto insurance coupled with a greater demand of fraud insurance has driven insurance brokerage fees. These positive trends were partially offset by lower fees from checking accounts due to regulatory changes introduced in mid-2009 and lower collection fees that were negatively affected by the earthquake.

The efficiency ratio reached 33.0% in 1Q10.

The Bank continued to control costs in 1Q10 and the efficiency ratio reached 33.0% in the quarter. Operating expenses increased 1.2% QoQ and 5.8% YoY mainly due to the growth of administrative expenses, which were impacted by earthquake related costs. The Bank's installations are insured, but additional expenses were incurred in order restore full functionality following the quake (rental expenses, travel, aid, donations, etc..).  98% of the Bank's branches and ATMs are open. The first business day after the quake the Bank's systems were functioning normally, including all remote channels (internet, ATMs and phone banking). This was an important achievement that contributed to a rapid return to normal daily life in those zones less affected by the temblor, such as Santiago.

Gross income net of provisions & costs increases 14.5% YoY in 1Q10.

In summary, gross income, net of provisions & costs, a proxy for recurring earnings, jumped 14.5% YoY, reflecting the high quality of results in the period. The growth of net interest income and the improvement in asset quality were the main drivers of these positive results.  

Institutional Background

As per the latest public records published by the Superintendency of Banks of Chile for March 2010, Banco Santander Chile was the largest bank in terms of loans and equity. The Bank has the highest credit ratings among all Latin American companies, with an A+ rating from Standard and Poor's, A+ by Fitch and A1 by Moody's, which are the same ratings assigned to the Republic of Chile. The stock is traded on the New York Stock Exchange (NYSE: SAN) and the Santiago Stock Exchange (SSE: Bsantander). The Bank's main shareholder is Santander, which controls 76.91% of Banco Santander Chile.  

For more information see www.santander.cl

Banco Santander (SAN.MC, STD.N) is a retail and commercial bank, based in Spain. Santander has more than 90 million customers, 13,660 branches – more than any other international bank – and 169,460 employees around the world. It is the largest financial group in Spain and Latin America, with leading positions in the United Kingdom and Portugal and a broad presence in Europe through its Santander Consumer Finance arm. In 2009, Santander registered EUR 8,943 million in net attributable profit. Banco Santander's eligible capital at the close of the third quarter came to EUR 79,704 million, with a surplus of EUR 34,769 million above the required regulatory minimum. With this capital base, the BIS ratio, using Basel II criteria, comes to 14.2%, Tier I to 10.1% and core capital 8.6%. These ratios place Santander among the most solvent banks in the world.

For more information see www.santander.com

SOURCE Banco Santander Chile