'Overall, the 1Q21 was a good quarter, as reflected by a bottom line totalling Ch$162 Bn. and ROAE returning to ~18% levels. Even though the spread of a second wave imprinted some doubts on the outlook of the local economy and the speed of the expected rebound, we are confident on the control of the pandemic, based on an outperforming vaccination process that at this point is covering more than half of the target population. The banking business seems to be reflecting this positive tone. Notwithstanding the lockdowns established by the Health Ministry across the country by mid- March, transactionality has begun to recover in the 1Q21 as denoted by quarterly fee income increasing for first time since the 1Q20. From the lending perspective, drivers continued to be mixed. However, total loans grew 3% YoY in the 1Q21 and -more importantly- 2.7% on a sequential basis, which was primarily conducted by commercial and residential mortgage loans jointly growing 5.3% YoY. Whereas growth in commercial loans has been fostered by government- guaranteed credits granted to SMEs and Middle Market companies, in the context of the new Fogape Reactiva program of which we are the leading private bank, residential mortgage loans seem to be retaking and upward expansion trend in the 1Q21 after bottoming out last quarter. Consumer loans, showed a recovery in March by posting the highest level of monthly origination in more than two years. From a competitive perspective, our performance was very positive as we gained 55 bp. and 23 bp. of market share in total loans YoY and QoQ, respectively. On the other hand, revenues from Treasury remain stable, demonstrating our prudent approach to market risk and in-depth analysis before making decisions on these matters, which if not seriously thought, may result in important equity losses, particularly in the current volatile environment.
Undoubtedly, the main driver conducting an improved YoY net income was loan loss provisions, which declined Ch$72 Bn. YoY while the LLP ratio decreased from 1.7% to 0.7%. Nonetheless, we are aware this is a temporary effect that is, on the one hand, related to a high basis for comparison in the 1Q20 due to the COVID-19 outbreak and, on the other hand, an abnormal behaviour of delinquency as a consequence of high liquidity, particularly among individual customers, due to the diverse financial aid measures to cope with the pandemic. In order to address these transitory effects, we set additional allowances by Ch$40 Bn. this quarter.
Also, given the improvement we are seeing in contagion rates by the end of April, and the solid vaccine distribution pace across the country, we are confident that economic recovery will take place sooner than later, which should benefit the lending business and transactionality, among others key indicators'.
Fogape Reactiva loans
As of Mar21, we reached a Return on Average Equity (ROAE) of 18.2%, our highest quarterly ratio since 2019.
As of Mar21, we were the first private owned bank in Fogape Reactiva loans granted to SMEs and Middle Market companies.
We are the private bank with the greatest amount of additional allowances, which improves our recurrent coverage ratio from 236% to 354%.
Financial Snapshot 1Q21
(In billions of Ch$)
Loan Loss Prov.
LLP / Avg. Loans
TIER I Ratio
Increase in origination
Increase in origination
of Consumer Loans
As of Mar21, we achieved the highest market share in total loans since the 2Q19
Average LCR Ratio
in the 1Q21, based on a
average loans continued
solid buffers and term
to be below mid-term
Banchile Stock Brokerage
major local banks
ranked first1 as of Mar21
(1) Including the whole market and not only subsidiaries of local banks.
Lowest delinquency ratio Among peers as of Mar21 (>90 days past-due)
As of Mar21, our FAN account had nearly 289,000 users and ~Ch$64 Bn. in purchases
Financial Snapshot 1Q21
(In billions of Ch$)
Provisions for Loan Losses
Net Income amounted Ch$162 Bn. in the 1Q21,
equivalent to a 19% YoY increment. The main driver
behind this figure was the annual decline of Ch$71.5
Bn. in loan loss provisions, which was partly offset by
In the 1Q21, Operating revenues contracted 6% YoY
but increased 1% QoQ by totalling Ch$482 Bn. The main
explanatory factor was the annual decline of 12% in
customer income, which was partly offset by the YoY
growth of 18% in non-customer income given positive
trends in market factors.
OurLoan Loss Provisions decreased Ch$71.5 Bn. in the quarter, from Ch$126 Bn. in the 1Q20 to Ch$54 Bn. in the 1Q21, mostly explained by the decrease in past-
due ratios observed since the 2H20 that led to a YoY
drop in both provisioning and charge-offs in the retail
banking segment. This effect coupled with an annual
contraction in consumer loans. These factors were
partly counterbalanced by the establishment of
additional provisions by Ch$40 Bn. aiming to anticipate
potential fluctuations in credit quality over the coming quarters.
224Operating expenses totalled Ch$224.5 Bn. in the 1Q21, growing Ch$4.2 Bn. YoY, which is well below
inflation. This figure was influenced by an increase
232 personnel expenses, which was partly offset by lower other operating expenses. Despite the moderate
220 increase in OpEx, our efficiency ratio increased from 42.9% in the 1Q20 to 46.5% in the 1Q21.
Total Loans reached Ch$31,767 Bn. as of Mar21, representing an annual advance of 2.9% that was mostly concentrated in the retail banking segment (+6.3% YoY). The main explanatory factor behind this
expansion was the behavior of commercial loans that
31,767 expanded 5.7% and 3.4% YoY and QoQ, respectively, mostly supported by the government-guaranteed
30,937 Fogape Reactiva program for companies deployed during the 1Q21. Similarly, residential mortgage loans
30,863 grew 4.6% on an annual basis, retaking a positive growth trend after the 4Q20. On the opposite, consumer loans decreased 11.2% YoY, although this downward trend seems to be starting to reverse as reflected by a loan origination rebound in Mar21 (Ch$225 Bn.).
1Q20 2Q20 3Q20 4Q20 1Q21e
CPI & Unemployment Rate
3.72.6 3.1 3.0 2.9
(12m% change as of Mar21, in real terms)
Figures do not include operations of subsidiaries abroad.
1.5%, 8.6%, 14.9%, 16.4% and 16.1% YoY contractions in the 1Q20, 2Q20, 3Q20, 4Q20 and 1Q21, respectively, adjusted by the effect of the acquisition of Santander Consumer Chile by Santander.
The Chilean economy continued improving during the first quarter, as a consequence of the joint contribution of three main factors: (i) the positive impact of the expansionary fiscal and monetary policies implemented by Chilean authorities since last year, (ii) the temporary impact of pension funds withdrawals, and (iii) the pickup in copper prices, which fueled both exports and fiscal revenues.
According to monthly GDP figures, the economy posted a sequential annualized growth of 16.1% in the 1Q21 (0.5% YoY), after expanding 30.1% in the previous quarter. As a result of this positive trend, Chile was the first Latin-American country in reaching its pre-pandemic level of economic activity. This recovery has been driven by the strong pick up in commerce (12.2% YoY in 1Q22) and, to a lesser extent, by manufacturing (2.6% YoY). On the other hand, services continue posting negative growth rates.
The labor market remained subdued. The unemployment rate was 10.4% in March, in line with the level observed in December, though the latter was 220 bps above the level of a year ago. Despite GDP recovery, total employment has had only a slight improvement due to lagged activity in sectors more intensive in social contacts. In this environment, total employment decreased 8.9% YoY in 1Q21, while the labor force fell 6.7% YoY. All in all, the participation rate remains low.
The CPI has been hovering around the Central Bank target. Specifically, it posted a 2.9% YoY increase in March, after posting a 3.0% rise at the end of 2020. Although remaining slightly below the policy target in March (2.6%), core inflation has been stable. On the whole, inflation has been the result of two opposite factors: a positive contribution from non-tradable prices (driven by the pension funds withdrawals) and a negative impact of lower exchange rate volatility, which has reduced pressures on tradable goods. Due to this, the Central Bank has maintained both the overnight rate at 0.5% and non- conventional measures that have implemented since the last year.
There has been an improvement in GDP expectations mainly due to the impressive advance in the vaccination process and higher commodity prices. For 2021, the Central Bank raised the GDP forecast to a range between 6.0% and 7.0%, while the market expects a 6.2% rise. Estimates for 2022 have remained at 3.5%, while CPI expectations have also been around the 3.0% target. Finally, analysts anticipate an overnight rate unchanged at least during this year.
As of Mar21, in terms of the banking industry, total loans contracted 3.1% YoY in real terms. This behavior was mainly due to the performance observed in consumer loans that went down by 15.9% on a 12-month period due to the COVID-19 pandemic, although its quarterly loan origination has been stabilizing over the last quarters. To a lesser extent, commercial loans posted a YoY drop of 4.4%, which should smooth over the next months as long as the Fogape Reactiva program strengthened and an economic recovery takes place. On a positive note, mortgage loans posted an annual advance of 5.4% in the 1Q21, demonstrating a decoupling from economic trends.
Regarding industry's results, it posted a bottom line of Ch$929 Bn. as of Mar21, denoting a Ch$293 Bn. growth (or 46%) when compared to Mar20. This was the outcome of a YoY contraction of Ch$458 Bn. YoY (-56%) in LLPs driven by a high basis for comparison due to the early effects of the COVID-19 pandemic in 2020. This figure was partly offset by: (i) lower operating revenues by Ch$84 Bn. YoY (-2.7%), (ii) an annual increase of Ch$44 Bn. (+3.1%) in OpEx, and (iii) income tax & others growing Ch$37 Bn. YoY (+17%).