Banco
Santander
Chile
4Q19 & 12M19 Results
January 29, 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 2018 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
Macro-economic environment
Strategy update
Results
Outlook
3 3
Macroeconomic environment
GDP growth in 2020 driven by export sector | |||
GDP | Investment / Export growth | ||
YoY real growth, % | YoY real growth of fixed capital formation and | ||
contribution of exports to GDP, % |
4.0 | |||||||
2.5 | |||||||
1.5 | 1.1 | 1.0 | |||||
2017 | 2018 2019 (e) 2020(e) 2021(e) |
Inflation
Annual change in UF inflation, %
2.9 2.7 2.7 3.0
1.7
2017 | 2018 | 2019 2020 (e) 2021 (e) |
4.7 | 5.0 | 3.1 | 3.0 | 3.3 | |||
2.1 | |||||||
-1.1 | -1.6 | -4.0 | |||||
-2.7 | |||||||
2017 | 2018 | 2019 (e) 2020 (e) 2021 (e) | |||||
Investments | Exports | ||||||
Central Bank ST Reference Rate
%
2.50 2.75
1.75 1.75 1.75
2017 | 2018 | 2019 2020 (e) 2021 (e) |
4 4
Source: Banco Central de Chile and estimates Santander Chile
Macroeconomic environment
Road map to a constitutional change
Political agreement
Law to launch constitutional change
October 25, 2020 | ||||
Not approved | Approved | |||
Current constitution | Referendum | Constitutional convention or | ||
remains | Mixed convention | |||
April 26, 2020
New constitutional text
March 2022 | Exit | |
NO | referendum | |
YES | ||
New constitution |
5 5
General reforms that could affect us
Pension reform
- Increase pension contribution from 10% to 16%, charged to the employer
- Increase competitiveness for pension funds
- Implementation will take 12 years
Tax modernization | Labor reform & |
minimum wage | |
• Reform for total | • Reduce working week |
reintegration eliminated | from 45 to 41 hours |
• Increase of property | • Increase flexibility |
taxes, and new tax bracket | |
for the wealthy | • Current minimum wage is |
Ch$301,000 monthly | |
• Pro-SME initiatives and | (~US$4,600 yearly). |
simplified accounting for | |
individuals with | • In March 2020 a new level |
companies | will be debated |
Seeks to collect an additional US$2.2 billion in taxes
6 6
Banking reforms that could affect us
Credit line payment
-
Credit lines are now automatically paid off with the positive balance in the checking account
In force as of Jan. 1, 2020
Fraud compensation
- Limit the responsibility of clients in case of loss, theft or fraud of debit and credit cards
- Banks will be liable for all frauds that affect users
- In the case the Bank believes the user committed fraud, the Bank must go to court of law to prove this
Capital requirements
- CMF has already published for consultation systemic banks, operational risk-weighted assets, regulatory capital, and credit risk-weighted assets
Implementation will begin Dec. 1, 2020 and should be fully implemented by 2024.
Consolidated debt
- Create a consolidated positive credit bureau
- Reduce over indebtedness
-
Improve credit conditions
Currently banks can only see information within banking system
Portability
- Decrease paperwork and costs
- Increase competition in the finance industry
7 7
Agenda
Macro-economic environment
Strategy update
Results
Outlook
8 8
Strategy update
2019 was a landmark year in 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
Reactivate loan growth within
mass segment
Continue expanding cross- selling with our clients with better products
Offer a differentiated and
specialized service to gain their
loyalty
Approach
Acquiring
Wealth management
Progress
More than 18,000 clients. First launch 1H20
Agreement with Evertec. First operation performed in 12/19. Operations to start in 1H20
Transaction complete. Acquired in Nov. 2019
Over 136,800 customers, including 58,000 Cuenta Life clients
Approval received for the first digital open platform for selling insurance. Launching soon in 1H20.
New private banking model to be launched in 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.
9 9
Strategy update
Advancing with our acquiring business and new online insurance platform, Klare
• Subsidiary created in 4Q19
• Open insurance market
• Digital distribution model
• Alliance with Zurich and other insurance companies
• Open and flexible platform
• Recommended offer in just four steps
• 100% customized offer by customer (amount, coverage, other assistance)
- Acquiring:
- Will use brand name Getnet
• | Dec. 27, 2019: First transaction made with | The first 100% |
our POS. | digital | |
• Moving to interchange fee / 4 part model: | insurance | |
• | 1Q20: all issuers must adopt the 4-part | broker in Chile |
payment system where transactions are |
priced through the brand (Visa, Mastercard, Amex) rather than the acquirer and issuer.
- 20% of cards in the market already use this new transaction model.
10 10
Strategy update
Strong increase in new clients
Quarterly gross new accounts1
+66%
70,277
33,23042,312
1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
During 4Q19 we opened 66% more accounts than in 4Q18 despite social unrest, reflecting the strength of our brand and digital channels
22% | Net increase in current accounts 10M192 |
Total market share
of checking
accounts2
26%
Total market share
of new checking
account openings2
26.0% | New current accounts | Market share | |
90.0 | ||||||
80.0 | 25.00% | |||||
70.0 | 79.3 | 14.0% | 14.8% | 16.3% | 20.00% | |
60.0 | 10.2% | |||||
9.2% | ||||||
50.0 | 6.0% | 15.00% | ||||
40.0 | 45.0 | 49.8 | 10.00% | |||
42.5 | ||||||
30.0 | 31.1 | 5.00% | ||||
20.0 | 28.0 | |||||
18.2 | 0.00% | |||||
10.0 | ||||||
0.0 | -5.00% |
11 11
1. Includes checking accounts, Life, and Superdigital 2. Market share with information published by the CMF as of Oct. 2019, latest available information
Strategy update
Increasing client loyalty and digital clients
+6.9%157,284
LOYAL HIGH INCOME
INDIVIDUALS1
147,187
Dec-18 | Mar-19 | Jun-19 | Sep-19 | Dec-19 | ||
+5.3% | 60,678 | |||||
LOYAL SME & | ||||||
MIDDLE MARKET | 57,626 | |||||
CLIENTS1 | ||||||
Dec-18 | Mar-19 | Jun-19 | Sep-19 | Dec-19 | ||
+13.2% | 1,216,360 | |||||
DIGITAL CLIENTS2 | 1,074,552 |
Dec-18Mar-19Jun-19Sep-19Dec-19
12 12
1. Clients with >4 plus min usage and profitability standards.3. Clients who access their web account using a passcode
Strategy update
Closing the gap towards Top 1
Net Promoter Score (NPS)1
TOP | |||||||||||
2 | |||||||||||
40 | |||||||||||
2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 |
Competitor 1 | Santander | Competitor 2 | Competitor 3 | Competitor 4 | Competitor 5 |
Net Global Satisfaction2
TOP | |||||||||||
2 | |||||||||||
55 | |||||||||||
2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 |
Competitor 1 | Santander | Competitor 2 | Competitor 3 | Competitor 4 | Competitor 5 |
13 13 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. 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.
Strategy update
Santander is a leader in ESG
Under Retail and Specialized Banks:
#8
out of 270 in
the world
#4
out of 100 in
emerging
markets
38 58
100100
LimitedRobust
20172019
Overall Score Ranking
58
3432
Santander Chile | Other Chilean peers | Other Latam peers |
14 14
Strategy update
Clients can now compensate their carbon footprint
We are the first bank in the The carbon footprint is calculated country to give clients the using an international index which is
opportunity to compensate then adjusted to the local context. their carbon footprint The process is audited by KPMG.
Clients can compensate their carbon footprint through either:
Certified Carbon Credits
Supports the development of renewable energy, conservation, reforestation
Chilean environmental projects
Contributes to non-profit organization who seek to conserve protected ecosystems in Chile.
This initiative was launched at the end of November 2019.
During the month of December:
312 tons of CO2 were compensated through the purchase of carbon credits
Contribution to Fundación Llampangui for a project in Parque El Durazno in Coquimbo, Chile.
Strategy update
Strengthening our SPF culture throughout the company
Best in Corporate | Top 3 in Great Place to | |||
Governance | Work | |||
We were awarded with being | We were recognized as being one | |||
within the Top 3 of the country in | of the best places to work in the | |||
terms of corporate governance | country in the category of | |||
standards for second year in a row | institutions of over 1,000 | |||
347 | employees | |||
Ranking GPTW | ||||
Responded the survey, including | ||||
#5 | #3 | |||
board members, market analysts | ||||
#12 | ||||
and rating agencies |
Bank of the Year 2019
We were awarded Bank of Year in Chile, as well as Spain, Portugal, Argentina, Occidental Europe and America. The renowned magazine highlighted our improvement in client experience throughout the years through the development of
new digital services and our
operational efficiency
2018 2019 2020
Agenda
Macro-economic environment
Strategy update
Results
Outlook
17 17
Results
Recurring ROAE of 17.7% for December 2019
Net income to shareholders | ROAE | |
Ch$bn | % |
-6.7% | |
591,902 | |
552,093 | |
12M18 | 12M19 |
19.2%16.7%
12M1812M19
ROAE 2019 adjusted for extraordinary provisions = 17.7%
18 18
1. Net income attributable to shareholders for the year annualized divided by the average equity attributable to shareholders. 2018 excludes one-off $20 billion additional provisions for consumer . 2019 excludes the one-off $31 billion provisions for SMEs and $16 billion in additional provisions for consumer
Results
Positive evolution of funding mix
Total Deposits
Ch$bn
+7.7% | +2.7% | |||
21,809 | 21,462 | 22,032 | 22,868 | 23,490 |
Dec-18Mar-19Jun-19 | Sep-19Dec-19 | |||||||||||||||||||||||||||||||||||
CLP Time Deposit Cost Evolution5 | ||||||||||||||||||||||||||||||||||||
3.13% | ||||||||||||||||||||||||||||||||||||
2.86% | 2.61% | |||||||||||||||||||||||||||||||||||
2.75% | ||||||||||||||||||||||||||||||||||||
2.40% | ||||||||||||||||||||||||||||||||||||
2.50% | ||||||||||||||||||||||||||||||||||||
2.29% | ||||||||||||||||||||||||||||||||||||
1.75% | ||||||||||||||||||||||||||||||||||||
Dec-17 | Feb-18 | Apr-18 | Jun-18 | Aug-18 | Oct-18 | Dec-18 | Feb-19 | Apr-19 | Jun-19 | Aug-19 | Oct-19 | Dec-19 | ||||||||||||||||||||||||
Santander | Chile | BCI | Central Bank Rate | |||||||||||||||||||||||||||||||||
Ch$ bn | 12M19 | YoY | QoQ | |
Demand | 10,297 | 17.8% | 8.8% | |
Time | 13,193 | 1.0% | (1.6%) | |
Total Deposits | 23,490 | 7.7% | 2.7% | |
Mutual funds1 | 6,524 | 17.0% | (2.4%) | |
Adjusted Loans | ||||
to deposits2 | 95.1% | |||
LCR3 | 143% | |||
NSFR4 | 108% |
Demand deposits by segment
Ch$ bn | 12M19 | YoY | QoQ |
Individuals | 3,650 | 8.5% | 0.5% |
SMEs | 1,698 | 15.3% | 0.5% |
Retail | 5,348 | 10.7% | 0.5% |
Middle Market | 2,991 | 14.4% | 2.7% |
Corporate (SCIB) | 1,959 | 55.0% | 13.0% |
Total2 | 10,297 | 17.8% | 8.8% |
19 | 19 |
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: Liquidity Coverage Ratio under new SBIF rules. 4. NSFR: Net Stable Funding Ratio according to internal methodology. This is not the Chilean model 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
Results
Loan growth driven by Retail banking
Total Loans
Ch$bn | +8.1% | |||||
+2.6% | ||||||
30,282 | 30,600 | 31,095 | 31,905 | 32,732 | ||
Dec-18Mar-19Jun-19Sep-19Dec-19
Ch$ bn | 12M19 | YoY | QoQ |
Individuals1 | 18,834 | 11.3% | 5.1% |
Consumer | 5,539 | 13.6% | 9.4% |
Mortgages | 11,263 | 11.0% | 3.3% |
SMEs | 4,085 | 5.7% | 1.1% |
Retail | 22,919 | 10.3% | 4.3% |
Middle Market | 8,093 | 5.2% | 1.1% |
Corporate (SCIB) | 1,672 | (0.6%) | (5.9%) |
Total2 | 32,732 | 8.1% | 2.6% |
2020: Loan growth forecast ~5%
20 20
1. Includes other commercial loans to individuals. 2. Includes other non-segmented loans and interbank loans
Results
Higher inflation and lower cost of funds leads to solid margins in 4Q19
NIM1 & Inflation
5.0% | 6.50% | |||||
4.5% | 4.4% | 4.4% | 4.0% | 4.2% | ||
3.9% | 5.50% | |||||
4.0% | ||||||
2.75% | 3.00% | 4.50% | ||||
3.5% | 3.50% | |||||
3.0% | 2.50% | |||||
2.5% | 2.00% | 1.75% | 2.50% | |||
2.0% | ||||||
1.50% | ||||||
1.5% | ||||||
1.0% | 1.2% | 0.9% | 0.50% | |||
0.8% | 0.0% | 0.5% | ||||
0.5% | ||||||
-0.50% | ||||||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | ||
NIM (1) | MPR (2) | UF |
Net Interest Income
Ch$ bn | 12M19 | YoY | QoQ |
Net interest income | 1,417 | 0.2% | 8.0% |
Average interest-earning assets | 31,836 | 0.0% | 3.8% |
Average loans | 29,145 | 0.0% | 4.7% |
Interest earning asset yield3 | 6.8% | -30bp | +53bp |
Cost of funds4 | 2.68% | -4bp | +32bp |
NIM YTD | 4.1% | -32bp |
Stable NIM outlook for 2020
21 21
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. Averages calculated using monthly figures.
Results
Rising inflation and greater slope of yield curve to support margins
10Y Nominal Central Bank Notes Rate, Monetary Policy Rate1 and 12M UF inflation
%
Negative slope in LT rates fell faster | Now slope of LT rate is |
than ST rates. This incentivized | increasing, as the Monetary |
refinancing of mortgages | Policy Rate has decreased |
5
4.5 | 4.25 | 4.03 | 3.89 | |
4 | ||||
3.42 | ||||
3.5 | ||||
3 | 2.51 | |||
2.5 | 3.00 | |||
2 | 2.50 | |||
2.00 | ||||
1.5 | 1.75 | |||
1 | 2.9% | |||
0.5 | 2.8% | |||
2.4% | 2.2% | 2.3% | ||
0 |
6.5%
5.5%
4.5%
3.5%
2.5%
1.5%
Jan-19Feb-19Mar-19Apr-19May-19Jun-19 | Jul-19Aug-19 | Sep-19Oct-19Nov-19Dec-19Jan-20 | |||
CHBCP10Y | MPR | 12M UF Inflation | |||
22 22
1. Source: Bloomberg
Results
Slight deterioration of asset quality in the quarter
Total loans
% of loans | |||
129% | 126% | 130% 135% | |
6.5% | 5.9% | 5.8% 5.9% | |
2.3% | 2.1% | 2.0% | 2.1% |
NPL Impaired loans Coverage ratio
Consumer loans
% of loans | |||
275% | 294% | 320%360% | |
7.2% | |||
5.6% | 5.2% | 5.1% | |
2.3% | 1.8% | 1.6% | 1.6% |
NPL | Impaired loans | Coverage ratio |
Commercial loans
% of loans | |||
126% | 115% | 128% 128% | |
7.3% | 6.8% | 6.7% | 7.0% |
2.6% | 2.7% | 2.4% | 2.5% |
NPL Impaired loans Coverage ratio
Mortgage loans
% of loans
10.0% | 48.0% | ||
42.7% | 38.1% | ||
5.1% | 4.7% | 4.8% | 4.7% |
1.8% | 1.3% | 1.5% | 1.6% |
0.0% |
NPL | Impaired loans | Coverage ratio |
23 23
1. 90 days or more NPLs. 2.Impaired NPLs + restructured loans 3. Loan loss reserves over NPLs. Includes the additional provisions for Consumer recognized in 3Q18 for Ch$ 20,000 million; provisions for the new standardized model for commercial loans analyzed on a group basis for Ch$ 31,000 million in 3Q19; additional provisions for Consumer recognized in 4Q19 for Ch$16,000 million.
Results
Higher provisions in order to bolster coverage
Cost of credit1
%
1.9%
1.5%
Provision for loan losses
Ch$ bn | 12M19 YoY QoQ |
1.0% 1.0% 1.0%
1.7%
Gross provisions & | (503,161) | 21.7% | 23.4% |
charge-offs | |||
1.1%
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
Cost of credit Adjusted cost of credit2
Loan loss recoveries | 82,714 | (6.5%) | (17.2%) |
Provision for loan losses | (420,447) | 29.3% | 31.2% |
Cost of credit (YTD)1 | 1.34% | 22bp | |
Adjusted cost of | 1.19% | +14bp | |
credit(YTD)2 | |||
2020: Cost of Risk stable at 1.3%-1.4%
24 24
1. Provision expense annualized divided by average loans 2. Cost of credit adjusted for additional provisions of provisions due to change in local SME model for Ch$31 billion in 3Q19 and Ch$16 billion in additional provisions for consumer in 4Q19.
Results
Non-NII: Strong fee income in the quarter
Non-interest income (fee + financial trxs)
Ch$bn
27.1%
-3.9% | ||||
103.2 | 109.5 | 117.0 | 136.4 | 131.1 |
35.8 | 38.8 | 49.0 | 64.7 | 54.4 |
67.4 70.7 68.0 71.7 76.7
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | ||
Net fee income | Financial trx | |||||
Total Non-NII increases 24.8% in 2019
Fee income
Ch$ bn | 12M19 | YoY | QoQ | |||
Retail | 230.6 | 4.6% | 4.4% | |||
Middle Market | 38.7 | 5.4% | 14.4% | |||
Corporate | 29.1 | (17.0%) | 27.8% | |||
Subtotal | 298.4 | 2.1% | 7.7% | |||
Others | (11.4) | --% | 40.7% | |||
Total Fees | 287.1 | (1.3%) | 6.9% | |||
Financial transactions, net | ||||||
Ch$ bn | 12M19 | YoY | QoQ | |||
Client | 139.1 | 44.1% | (7.1%) | |||
Non Client | 67.9 | --% | (28.1%) | |||
Total Financial trx | 207.0 | 97.0% | (15.9%) |
25 25
Results
Increasing productivity and improving the branch layout
Points of sale
Work Café
53
-0.8% | ||
380 | Traditional | |
377 | 324 | |
12M18 | 12M19 |
Volume per branch1 | Employees | ||||
8.8% | -0.9% | ||||
137,082 | 149,130 |
11,305 | |
11,200
12M18 | 12M19 | 12M18 | 12M19 |
26 26
1. Volume per branch calculated as total loans divided by number of branches.
Results
Investing to improve productivity and efficiency
Operating Expenses
Ch$bn
194.0 | 42.5% | 191.6 | |||
192.0 | |||||
190.0 | 189.1 | 189.1 | |||
188.0 | 40.0% | 40.3% | |||
39.3% | |||||
186.0 | |||||
184.0 | 183.4 | ||||
182.0 | 180.1 | 38.3% | |||
180.0 | |||||
178.0 | |||||
176.0 | |||||
174.0 | |||||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | |
Expenses | Efficiency |
43.0%
42.0%
41.0%
40.0%
39.0%
38.0%
37.0%
36.0%
Ch$ bn | 12M19 | YoY | QoQ |
Personnel expenses | 410.2 | 3.2% | 0.8% |
Administrative | 233.6 | (4.7%) | (3.2%) |
expenses | |||
Depreciation | 106.1 | 33.8% | 3.3% |
Operating expenses | 749.9 | 3.9% | (0.0%) |
Efficiency ratio | 40.0% | -1bp | -102bp |
Cost/Assets | 1.7% | -21.2bp | -18bp |
2020: Efficiency ratio ~40%
27 27
1. Operating expenses excluding Impairment and Other operating expenses 2. Efficiency ratio: Oper. Expense excluding impairment / Net interest income + fee income + financial transactions, and Other operating income, net
Results
Solid capital ratios
Core capital | BIS ratio | |
10.6% | 10.1% |
12M18 | 12M19 |
13.4% | 12.9% |
12M18 | 12M19 |
RWA model for credit risk recently published
28 28
Agenda
Macro-economic environment
Strategy update
Results
Outlook
29 29
Outlook
Outlook for 2020
- 2020 economic growth lowered due to fall in investment rate. Export growth and greater fiscal spending to push growth
- We will continue with ambitious investment plan focusing on technology and new businesses
- Estimated loan growth of 5% in 2020 with higher growth in retail loans
- NIMs stable at 4.1% for 2020, depending on inflation and potential regulatory changes
- Greater client loyalty should drive non-interest income
- Cost of credit of 1.3%-1.4% in 2020 (1.3% all-in in 2019).
- Efficiency ratio ~40% led by improved productivity through digitalization
- Effective tax rate of ~21%
ROAE* of ~17% in 2020 (16.7% in 2019)
30 30
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Banco Santander-Chile published this content on 29 January 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 January 2020 15:34:01 UTC