Banco Santander Chile : Equity Presentation May 2020

Banco Santander

Chile

1Q20 Results

May, 2020

Important information

Banco Santander Chile caution that this presentation contains forward looking statementswithin the meaning of the US Private Securities Litigation Reform Act of 1995. These forward looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance. While these forward looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: (1) general market, macro-economic, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates, and interest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. The risk factors and other key factors that we have indicated in our past and future filings and reports, including those with the Securities and Exchange Commission of the United States of America, could adversely affect our business and financial performance.

Note: the information contained in this presentation is not audited and is presented in Chilean Bank GAAP which is similar to IFRS, but there are some differences. Please refer to our 2019 20-F filed with the SEC for an explanation of the differences between Chilean Bank GAAP and IFRS. Nevertheless, the consolidated accounts are prepared on the basis of generally accepted accounting principles. All figures presented are in nominal terms. Historical figures are not adjusted by inflation. Please note that this information is provided for comparative purposes only and that this restatement may undergo further changes during the year and, therefore, historical figures, including financial ratios, presented in this report may not be entirely comparable to future figures presented by the Bank.

2 2

AGENDA

COVID19: REGULATORY UPDATE

SAN CHILE: BALANCE SHEET

SAN CHILE: BUSINESS GROWTH AND RESULTS

3 3

Macroeconomic environment

Economy affected by global uncertainty arising from Covid-19

Monthly economic activity (IMACEC)

GDP

%				YoY real growth, %
6						3.75 /
4				4.0
			Latest Central	4.75
2
				Bank's forecast
0
-2					1.0
-4
-6
abr.-18	oct.-18	abr.-19	oct.-19		-1.5 /-2.5
	Mining	Non mining	Total activity

Inflation					Central Bank interest rate
Annual change in UF inflation, %		%
2.9			2.75
2.7	2.4	2.7
		1.75

1.25

0.50

4 4

Source: Banco Central de Chile and Santander Chile estimates

Macroeconomic environment

So far mortality has been low in Chile and oil prices favor the terms of trade

Deaths on reaching 30,000 contagions

Number of deaths

(# as of May 11, 2020)

(logarithmic scale, 0= first day with 100 or more total cases)

2503	3752	100000															US: 79,526
														UK: 31,930ITA: 30,395
2378
																ESP: 26,621
2311		10000														BRA:…
1997														ECU: 2,127
1924														PER: 1,889
1795		1000										ARG: 305
1569															CL: 323
633		100
624
323586		10
256
157		1
		-5	0	5	10	15	20	25	30	35	40	45	50	55	60	65	70	75	80	85

Commodities		Terms of trade

(US$/lb and US$/bbl)							Average 2012-2019=100)
4.0				Copper		WTI Oil (rhs)		120
3.5									100
3.0
2.5									80
2.0									60
1.5									40
1.0
0.5									20
0.0									0	5
2012	2013	2014	2015	2016	2017	2018	2019	2020	5

Source: John Hopkins University, CBCh and Santander

Regulatory update

Central Bank, Government and CMF have launched different measures

to ensure companies have access to financing

Central Bank is providing	Fiscal measures including an
liquidity to banks	expanded public guarantee
	scheme for working capital

Local regulation has been

adapted to address

treatment of credit deferrals

and guarantees

6 6

Regulatory update

The Central Bank is providing liquidity to banks

• Two liquidity programs for banks during 6 months at MPR (0.5%) for up to USD 24bn in total, conditional on credit growth.
• • FCIC line: For up to 4 years. Eligible collateral: Standard collaterals, corporate bonds, and high ratings commercial loans
  • LCL line: For up to 2 years. Constraint: Banks reserves at the Central Bank
  • Banco Santander Chile has requested a total of USD 1.4 bn from the LCL at the beginning in April 2020, with the possibility to take down an additional ~USD2.4 bn from the FCIC.
• Bank bond purchase program up to USD 8 billion (USD 4.3 bn outstanding as of May 8, 2020)
• Suspension of local liquidity requirements for maturity mismatch of 30 and 90 days. LCR limit continues at 70% for 2020.

7 7

Regulatory update

Fiscal measures

• Expenditure increase:
• • Health's budget increased by USD 1.5bn (2% GDP)
  • Cash transfers (USD 230) per family for the poorest segments, and allowance per family (USD 300) during three months for those without formal jobs
• Tax cuts and liquidity measures:
• • Transitory reduction of the stamp tax
  • Corporate tax provision, VAT and local taxes delayed 3 months
• Job protection
• • Injection of USD 2 bn to the unemployment insurance fund. Salaries paid for by the unemployment insurance for those companies that retain workers.
  • New unemployment insurance for those with independent formal jobs (fiscal cost: USD 300 mn).
• Capitalization of Banco Estado (USD 0.5 bn) and FOGAPE (USD 3 bn)

Necessary measures to help households and firms

8 8

Source: Min Hacienda and Santander

Regulatory update

State guarantees for working capital lines

• COVID-19guarantee line: State guarantees for 60-85% of working capital loans to companies with annual sales of up to UF 1 mn (USD 35 mn). This is an extension of the current FOGAPE scheme.1
• • FOGAPE´s capital increase by USD3 bn should allow up to USD 24 bn in loans
  • Maximum loan amount = 3 months of sales
  • To be paid in 24 -48 months with 6 month grace period
  • For clients not more than 30 days overdue as of March 2020 or for SMEs as of October 2019
  • Amortizations of existing loans with the same bank will be postponed for 6 months
  • Working capital line cannot be used to increase investments or pay other debts or dividends

99.8% of companies in Chile would be eligible to receive guarantees.

40,000 operations already approved and 300,000 forecasted by the end of June.

9 9

1. FOGAPE: State guarantee for funding for small companies

Regulatory update

CMF announcements to support loan growth during this period

• Possibility of deferring payments without being considered a renegotiation
• • Mortgages and commercial loans: up to 6 months
  • Consumer: up to 3 months
• Phase in of Basel III postponed to December 2021
• Allows 15% of FOGAPE guarantees to be treated as voluntary provision for TIER II calculations
• Other initiatives:
• • Mortgage guarantee surpluses can be used to guarantee loans to SMEs
  • Modification to the treatment of derivatives (capital charge reduction)

So far 800,000 requests to defer payments have been made to the banking

system

10 10

Source: CMF and Santander

AGENDA

COVID19: REGULATORY UPDATE

SAN CHILE: BALANCE SHEET

SAN CHILE: BUSINESS GROWTH AND RESULTS

11 11

Balance sheet

Positive evolution of funding mix

Total Deposits

Ch$bn
			+17.7%			+7.5%
21,462	22,032	22,868	23,490	25,258

Mar-19Jun-19Sep-19Dec-19Mar-20

CLP Time Deposit Cost Evolution5

3.2%

2.9%	2.3%
2.8%
2.2%
2.50%
1.9%
	0.50%

Santander		Chile		BCI	Central Bank Rate

Ch$ bnS	3M20	YoY	QoQ
Demand deposits	11,048	29.6%	7.3%
Time deposits	14,210	9.9%	7.7%
Total Deposits	25,258	17.7%	7.5%
Mutual funds1	6,979	20.0%	7.0%
Loans/Deposits2	91.5%
LCR3	205%
NSFR4	109%

Demand deposits by segment

Ch$ bn	3M20	YoY	QoQ
Individuals	3,951	31.0%	8.3%
SMEs	1,794	22.2%	5.7%
Retail	5,745	28.1%	7.5%
Middle Market	3,098	20.6%	3.9%
Corporate (SCIB)	2,040	64.7%	24.3%
Total6	11,048	29.6%	7.3%
		12	12

1. Banco Santander Chile is the exclusive broker of mutual funds managed by Santander Asset Management, a subsidiary of SAM Investment Holdings Limited. 2. (Net Loans - portion of mortgages funded with long-term bonds) / (Time deposits + demand deposits). 3. LCR calculated following the new local Chilean models 4. Internal methodology and not the local Chilean regulator's guidelines still under discussion. 5. Source: CMF. Quarterly Calculation is based on time deposit in CLP average and interest paid on time deposits in pesos. August rate considers the last 3 months 6. Includes non-segmented deposits

Balance sheet

Solid levels of liquidity in the system

Liquidity coverage ratio1

205%

152%			150%
125%			141%
107%	107%	Average

70%

Regulatory

minimum

Chile

Scotiabank

13

13

1. LCR calculated following the new local Chilean models Source: public quarterly liquidity reports provided by each company

Balance sheet

Loan growth driven by Corporate and Middle-market

Total Loans

Ch$bn		+12.3%
					+5.0%
30,600	31,095	31,905	32,732	34,355

Mar-19Jun-19Sep-19Dec-19Mar-20

Ch$ bn	3M20	YoY	QoQ
Individuals1	19,262	12.3%	2.3%
Consumer	5,451	10.8%	(1.6%)
Mortgages	11,664	12.9%	3.6%
SMEs	4,129	7.7%	1.1%
Retail	23,390	11.5%	2.1%
Middle Market	8,789	11.5%	8.6%
Corporate (SCIB)	2,173	36.6%	30.0%
Total2	34,355	12.3%	5.0%

14 14

1. Includes other commercial loans to individuals. 2. Includes other non-segmented loans and interbank loans

Balance sheet

Improving our cost of risk compared to the system

Total loans: NPLs, coverage and cost of risk

Feb 2010 Earthquake in

Maule Chile- 8.8Mw

and destructive Tsunami

118%

Economic Crisis

US and Europe

71%
2.7%	2.8%
	2.4%
2.4%

148%

2014: Changes to
provisioning
models: Consumer		2016: Standard
and Commercial
	provisioning model
87%			for mortgages (B1).
		Higher provisioning
			for LTV > 90%
3.1%	Sept 2015:Earthquake in
	Coquimbo, Chile - 8.3Mw
2.6%		2.4%	2.2%

Caso La Polar

Borronazo DICOM

134%

Oct. 2019: Start of social unrest

July 2019: Standard provisioning model for SMEs (B1)

1.9%

1.2%

Jan-09Apr-09Jul-09Oct-09Jan-10Apr-10Jul-10Oct-10Jan-11Apr-11Jul-11Oct-11Jan-12	Apr-12Jul-12Oct-12Jan-13Apr-13Jul-13Oct-13Jan-14Apr-14	Jul-14Oct-14Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17	Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19Apr-19Jul-19Oct-19Jan-20
		NPL (1)			Cost of Risk (3)	System Cost of Risk (4)			Coverage (2)

15 15

1. Loans with 90 days or more overdue. 2. Stock of provisions divided by NPLs. 3. Quarterly cost of risk = quarterly provision expense/ quarterly average loans. 4. Quarterly cost of risk for the banking system. Source: CMF

Balance sheet

A better client mix through derisking

Composition of loans to individuals

				66.4%	69.2%	72.0%	74.9%
			64.2%
		61.2%
	59.4%
55.1%
37.3%	33.6%	32.5%
	30.6%	29.3%	27.8%
			26.2%	23.9%
7.6%	7.1%	6.5%	5.4%	4.3%	3.1%	1.9%
		1.2%

High income		Middle income		Mass income

16 16

Balance sheet

Better performance of evolution of consumer NPLs

Consumer NPLs1

% of loans; base = 100 as of Dec. 2015

Santander

Chile

BCI

167

147

58

Dec-15Jun-16Dec-16Jun-17Dec-17Jun-18Dec-18Jun-19Dec-19

Consumer Impaired loans 2

• of loans; base = 100 as of Dec. 2015
  Santander Chile BCI

110

91

63

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

17 17

1. 90 days or more NPLs. 2.Impaired NPLs + restructured loans. Source: CMF

Balance sheet

Healthy capital ratios

Core capital								BIS Ratio
	Core capital			Exchange rate effect	12.9%	12.7%
															2.6%
																		2.8%
10.1%					~67bp								2.4%
								9.7%
															10.2%				9.7%

Dec-19	Mar-20	Dec-19		Mar-20
				Tier 1		Tier 2

Proposed payout lowered to 30% to face uncertainty and facilitate potential volume growth from Covid-19 measures. US$200Mn in sub-bonds issued in 1Q20

18 18

AGENDA

COVID19: REGULATORY UPDATE

SAN CHILE: BALANCE SHEET

SAN CHILE: BUSINESS GROWTH AND RESULTS

19 19

Business growth and results

Clients: moving forward in our innovations

Challenge

Offer transactional products with access to digital economy

Increase SME access to banks

and to digital economy

Enter the car loan market, creating synergies with other bank products, creating synergies with other bank products

Reactivate loan growth within

mass segment

Continue expanding cross- selling with our clients with better products

Offer differentiated and specialized service to gain loyalty

Approach

Acquiring

Wealth management

Progess

More than 26,000 clients, with official launch in April 2020

Agreement with Evertec. First operation in Dec. 2019. Operations begin 1H20

Transaction complete. Acquired in November 2019

Over 136,800 new clients, including 58,000 through Life

Launch of the first Insurtech company in Chile in April 2020

New private banking model to be launched 1H20

We have announced an investment plan of US$380 million for the period of 2019-2021 in

technology, branch upgrading and new products and services.

20 20

Business growth and results

Despite the Covid-19 crisis, the Bank is open for business

Open for business

Branches

Over 80% open 9am - 2pm

Contact center: 80% open

(including home office)

Tele-working

+6,500 employees

95% of our central offices

Supported by digital	Digital clients
banking1

N° of transactions		+22.2%
In branches: -13.2%					1,316,452
Online: +7.4%	1,076,937
+22.2%
N° of digital clients
+8.7%
N° of purchases	Mar-19	Jun-19	Sep-19	Dec-19	Mar-20
online

We will be investing more rapidly in automatization and digitalization of loan approvals for

SMEs given the strong demand expected

21 21

1. 1Q20 vs. 1Q19

Business growth and results

Record account openings in the quarter

Quarterly new gross accounts

+115%

		+18%
84,447		87,842
74,617

42,312 40,703 47,128

Dec-18		Mar-19	Jun-19		Sep-19		Dec-19	Mar-20
		New Current accounts		Cuenta Life		Superdigital

During the 1Q20 we opened 115% more accounts than in 1Q19 despite the social conflict and coronavirus, reflecting the strength of our brand and digital channels

22%	Current account openings 12M192

Market share of		27.4%		New current accounts	Market share
100.0
current accounts2	90.0	95.0					25.00%
	80.0	14.2%	13.1%	16.2%		20.00%
	70.0		11.0%
27%	60.0			9.8%	15.00%
50.0			4.5%	56.1
40.0				10.00%
Market share of	30.0		49.4	45.6	38.3	5.00%
20.0			34.1
current account				15.7			0.00%
10.0
openings2	0.0						-5.00%
					22	22

1. Include current accounts, Life and Superdigital. First quarter of 2020 is data from January and February 2020 quartered. 2. Market share with information published by the CMF

Business growth and results

Reaching Top 1 in Net Promoter Score

Net Promoter Score (NPS)

Joint Top 1

40	39	41	39	34
				33
						23	23	23		18
									10		9
Santander	Competitor 1	Competitor 2	Competitor 3	Competitor 4	Competitor 5
2019	2020	2019	2020	2019	2020	2019	2020	2019	2020	2019	2020

23 23 Source: Study by Activa for Santander with a scope of 60,000 surveys to our own clients and over 1,200 surveys to each competitor's clients in the six month period ended March 31, 2020 and

December 31, 2019. Measures the Net Global Satisfaction and Net Promoter Score in three main aspects: service quality, product quality, and brand image. % of clients that value with grade 6 and 7 subtracted by clients that value with grade 1 through 4. Audited by an external provider.

Business growth and results

Higher inflation and lower cost of funds drives recovery in NIMs

NIM1 & Inflation

4.9%		4.4%			6.50%
4.4%			4.2%	4.2%
3.9%	4.0%
		5.50%
3.9%	3.00%
2.75%				4.50%
2.9%		2.50%			3.50%
			2.00% 1.75%	2.50%
1.9%
					1.0%1.50%

Net interest income

Ch$ bn	3M20	YoY	QoQ
Net interest income	388	20.3%	3.3%
Average interest-earning assets	36,920	11.6%	3.1%
Average loans	33,575	10.2%	7.0%
Interest earning asset yield3	6.9%	+137bp	-6bp
Cost of interest bearing	2.7%	+99bp	-9bp
liabilities4

0.9%		1.2%			NIM YTD	4.2% +31bp
			0.9%	0.50%
0.8%	0.0%		0.5%		0.50%
-0.1%
			-0.50%
4Q18	1Q19	2Q19	3Q19	4Q19	1Q20

NIM (1) MPR (2) UF

24 24

1. Annualized Net interest income divided by average interest earning assets. 2. MPR: Monetary Policy Rate. 3.Annualized gross interest income divided by average interest earning assets. 4. Annualized interest expense divided by sum of average interest bearing liabilities and demand deposits.

Business growth and results

Positive evolution of asset quality post social unrest

Cost of risk1

%

		1.9%
		1.5%
1.0%	1.0%	1.7%
1.2%
		1.1%

1Q19	2Q19	3Q19	4Q19	1Q20
	Cost of risk		Adjusted cost of risk 2

Provision for loan losses

Ch$ bn	3M20	YoY	QoQ
Gross provisions and	(124,956)	28.0%	(26.8%)
write-offs
Recoveries	22,086	3.6%	18.7%
Provision for loan	(102,870)	34.9%	(32.3%)
losses
Cost of risk(YTD)1	1.23%

No material impact for Covid-19 yet

25 25

1. Provision expense annualized divided by average interest earning assets. 2. Adjusted cost of risk for the change in the provisioning model for SMEs for Ch$ 31 billion in 3Q19 and Ch$16 billion in additional provisions for consumer in 4Q19.

Business growth and results

Non-interest income: Client driven

Fees & financial transaction

Ch$bn

-11.2%

109.5

117.0

136.4

131.1

97.3

38.8 49.0 64.7 54.4 22.8

70.7 68.0 71.7 76.7 74.4

1Q19

2Q19

3Q19

4Q19

1Q20

Net fee income		Financial trx

Fees

Ch$ bn	3M20	YoY	QoQ
Retail	58.3	2.0%	(3.5%)
Middle Market	10.7	8.0%	4.2%
Corporate	6.4	(15.3%)	(22.9%)
Subtotal	75.5	1.1%	(4.5%)
Others	(1.1)	(73.4%)	(54.7%)
Total	74.4	5.3%	(3.0%)

Financial transactions, net

Ch$ bn	3M20	YoY	QoQ
Client	30.4	0.5%	(13.3%)
Non-Client	(7.6)	(188.1%)	(139.1%)
Total	22.8	(41.2%)	(58.0%)

26 26

Business growth and results

Investing to improve productivity and efficiency

Operating expenses

Ch$bn

300

250

+1.1%

	Ch$ bn	3M20	YoY	QoQ
60.0%
	Personnel expenses	99.8	5.6%	(5.7%)
	Administrative
55.0%	63.6	7.2%	14.5%
	expenses

200	180	192	189	189	191

150 42.5%

40.3%	39.3%	40.6%
100	38.3%

50

0

1Q19	2Q19	3Q19	4Q19	1Q20
			Expenses		Efficiency

50Depreciation.0%	27.7	5.9%	0.2%
	Operational	191.2	6.2%	1.1%
45expenses.0%	1
	Efficiency ratio2	40.6%	-195bp	+234bp
40.0%		1.4%	-42.5bp	-12bp
	Costs/assets
35.0%
30.0%

27 27

1. Operational expenses exclude impairment and other operating expenses. 2. Efficiency ratio: operating expenses excluding impairment / financial margin + fees+ financial transactions and net other operating income

Conclusions

1Q20 results reflect strong core banking franchise

• The Central Bank and CMF have launched a series of initiatives that will help to maintain liquidity and capital levels. Measures are also coming to give people relief, which will help asset quality
• Strong deposit growth in the quarter. High liquidity levels.
• Capital ratios are healthy. Payout lowered to 30% to assure good core capital levels and to support loan growth
• Loan growth centered on medium and larger corporates with renegotiation program for individuals and SMEs
• Client growth has remained strong through digital channels driving fees and client treasury income
• Solid efficiency levels in the quarter

28 28

Thank you.

Our purpose is to help people and business prosper.

Our culture is based on believing that everything we do should be: