Banco Santander Chile Announces Second Quarter and First Half 2010 Earnings

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

In 2Q10, net income attributable to shareholders(1) totaled Ch$138,823 million (Ch$0.74 per share and US$1.41/ADR(2)). These results represent an increase of 29.3% compared to 2Q09 (from now on YoY) and 16.6% compared to 1Q10 (from now on QoQ).

With these results, the Bank's ROAE in the quarter reached 33.8%. The Bank currently has one of the highest ROEs and capitalization levels in the Chilean financial system. As of June 30, 2010, the Bank's BIS ratio reached 14.1% and its Tier I ratio stood at 10.3%. In April 2010, the Bank paid its annual dividend of Ch$1.37/share, 21.2% more than in 2009 and equivalent to 60% of 2009 earnings attributable to shareholders.

In 2Q10, total loans increased 3.8% QoQ and 8.8% YoY with loan growth in all products and segments. High yielding retail loans increased 3.9% QoQ and 11.4% YoY. The recent economic data for Chile show that economic growth is gaining momentum with a strong rise in investment and consumption levels. Unemployment figures have also been better than expected as well as wage growth. The negative impacts of the earthquake have also been lower than expected. The Bank's market share increased in various products, especially in consumer banking, which has increased 100 basis points since the beginning of the year.

In the quarter, the Bank also improved its funding mix. Total deposits increased 6.1% QoQ. This was led by a 7.2% QoQ and 35.2% YoY increase in demand deposits. Clients also began to increase their savings in time deposits as interest rates and inflation began to rise. In 2Q10, the Bank's foreign currency time deposits were upgraded by Moody's from A1 to Aa3 in line with the rise in the sovereign ratings of Chile. The ratio of loans to deposits(3) also improved to 99.8% as of June 2010 compared to 104.3% as of March 2010.

In 2Q10, net interest income was up 5.8% QoQ and 7.1% YoY. The Bank's net interest margin reached 6.1% in the quarter. The YoY rise in net interest income was mainly due to (a) the higher inflation rate as the Bank maintains long-term assets (mainly medium and long-term financial investments) that are indexed to the inflation rate, which are partially funded with nominal deposits, (b) loan growth and, (c) an improved funding mix.

In 2Q10, the Bank's net provision expense decreased 20.3% QoQ and 41.7% YoY. This was mainly due to an improvement in asset quality, especially among individuals. Net provision expense for consumer loans decreased 12.2% QoQ and 53.8% YoY. The NPL ratio of consumer loans decreased from 3.08% as of March 2010 to 2.99% as of June 2010. The coverage ratio of consumer NPLs in the same period increased from 247.2% to 256.6%.

Net fee income increased 4.5% QoQ and 3.2% YoY, led by brokerage related fees. Fees from insurance brokerage increased 89.9% YoY. The Bank's success in selling insurance online, coupled with an increase in premiums on behalf of insurance underwriters has driven insurance brokerage fees. Fees from the securities brokerage grew 10.1% QoQ and 18.8% YoY. These fees were driven by the Bank's new internet platform for stock trading and a greater demand for investing in the local stock market. These positive trends were partially offset by lower fees from checking accounts due to regulatory changes introduced in mid-2009 and short-term negative impact on fees in zones more affected by the February earthquake.

Operating expenses in 2Q10 increased 13.5% QoQ and 13.3% YoY. This rise was due, in part, to a Ch$3,517 million one-time charge directly related to impairment charges on fixed assets as a result of the earthquake. This is partially offset by insurance compensation recognized in other operating income. Adjusting for earthquake related effects, the efficiency ratio reached 34.4% in 2Q10. The rise in costs was also due to a rise in personnel expenses, which is directly related to the increase in commercial activity, especially in retail banking.

The positive evolution of our business volumes, in line with our strategic objectives, the better economic environment and the normalization of inflation levels has resulted in strong recurring earnings in the quarter. Gross income, net of provisions & costs, a proxy for recurring earnings, jumped 8.1% QoQ and 33.3% YoY.

In the first half of 2010 (1H10), net income attributable to shareholders totaled Ch$257,927 million (Ch$1.37/share and US$2.60/ADR). The ROAE reached 31.2% and the efficiency ratio reached 34.1% in the period. Gross income, net of provisions and costs increased 23.6% led by a 14.1% rise in net interest revenue and a 32.5% decrease in provision expense.

Institutional Background

As per the latest public records published by the Superintendency of Banks of Chile for June 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 and Aa3 by Moody's, which are the same ratings assigned to the Republic of Chile, and A+ by Fitch which pierces the sovereign ceiling. 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

(1) The results in this report are unaudited.

(2) Earnings per ADR is calculated using an exchange rate of Ch$543.09 per US$.

(3) Loans to deposits = (Loans - marketable securities that fund mortgage portfolio) / (Time deposits + demand deposits).

SOURCE Banco Santander Chile

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