Banco Santander Chile : 4Q19 Earnings Webcast

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