Indicate by check mark whether the registrant
files or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate by check mark if the registrant is
submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is
submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Indicate by check mark whether by furnishing
the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to
Rule 12g3-2(b) under the Securities Exchange Act of 1934:
If “Yes” is marked, indicate below
the file number assigned to the registrant in connection with Rule 12g3-2(b):
N/A
Notes to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
CORPORATE
INFORMATION
Banco
Santander-Chile is a banking corporation (limited company) operating under the laws of the Republic of Chile, headquartered at
Bandera N°140, Santiago. The corporation provides a broad range of general banking services to its customers, ranging from
individuals to major corporations. Banco Santander-Chile and its subsidiaries (collectively referred to as the “Bank”
or “Banco Santander-Chile”) offers commercial and consumer banking services, including (but not limited to) factoring,
collection, leasing, securities and insurance brokering, mutual and investment fund management, and investment banking.
Banco
Santander Spain controls Banco Santander-Chile through its holdings in Teatinos Siglo XXI Inversiones Ltda. and Santander Chile
Holding S.A., which are controlled subsidiaries of Banco Santander Spain. As of December 31, 2018, Banco Santander Spain owns
or controls directly and indirectly 99.5% of Santander Chile Holding S.A. and 100% of Teatinos Siglo XXI Inversiones Ltda. This
makes Banco Santander Spain have control over 67.18% of the Bank’s shares.
These
Consolidated Interim Financial Statements have been prepared in accordance with the Compendium of Accounting Standards issued
by the Superintendency of Banks and Financial Institutions (SBIF), the Chilean regulatory agency. Article 15 of the General Banking
Law states that banks must apply accounting standards established by SBIF. For those issues not covered by the SBIF, the Bank
must apply generally accepted standards issued by the Colegio de Contadores de Chile A.G (Association of Chilean Accountants),
which conform with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
In the event that any discrepancies exist between IFRS and accounting standards issued by the SBIF (Compendium of Accounting Standards
and Instructions), the latter shall prevail.
For
purposes of these financial statements the Bank uses certain terms and conventions. References to “US$“, “U.S.
dollars” and “dollars” are to United States dollars, references to “EUR” are to European Economic
Community Euro, references to “CNY” are to Chinese Yuan, references to “CHF” are to Swiss franc, references
to “Chilean pesos”, “pesos” or “Ch$” are to Chilean pesos, and references to “UF”
are to Unidades de Fomento. The UF is an inflation-indexed Chilean monetary unit with a value in Chilean pesos that changes daily
to reflect changes in the official Consumer Price Index (“CPI”) of the Instituto Nacional de Estadísticas (the
Chilean National Institute of Statistics) for the previous month.
The
Notes to the Consolidated Interim Financial Statements contain additional information to support the figures submitted in the
Consolidated Interim Statement of Financial Position, Consolidated Interim Statement of Income, Consolidated Interim Statement
of Comprehensive Income, Consolidated Interim Statement of Changes in Equity and Consolidated Interim Statement of Cash Flows
for the period. These contain narrative descriptions and details of these statements in a clear, relevant, reliable and comparable
manner.
|
b)
|
Basis
of preparation for the Consolidated Interim Financial Statements
|
The
Consolidated Interim Financial Statements as of June 30, 2018 and 2017 and December 31, 2017, include the financial statements
from the Bank entities over which the Bank has control (including structured entities); and includes the adjustments, reclassifications
and eliminations needed to comply with the accounting and valuation criteria established by IFRS. Control is achieved when the
Bank:
I.
|
|
has
power over the investee (i.e., it has rights that grant the current capacity of managing
the relevant activities of the investee)
|
II.
|
|
is
exposed, or has rights, to variable returns from its involvement with the investee; and
|
III.
|
|
has
the ability to use its power to affect its returns.
|
The
Bank reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more
of the three elements listed above.
When
the Bank has less than the majority of the voting rights of an investee, it will be considered to have the power over the investee
when the voting rights are sufficient to give it the practical ability to direct the relevant activities over the investee unilaterally.
The Bank considers the following relevant facts and circumstances in assessing whether or not the Bank’s voting rights in
an investee are sufficient to give it power, these include:
|
●
|
The
size of the Bank’s holding of voting rights relative to the size and dispersion
of holdings of the other vote holders.
|
|
●
|
Potential
voting rights held by the Bank, other vote holders or other parties.
|
|
●
|
Rights
arising from other contractual agreements.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
9
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
|
●
|
Any
additional facts and circumstances that indicate that the Bank has, or does not have,
the current ability to direct the relevant activities at the time that decisions need
to be made, including voting patterns at previous shareholders’ meetings.
|
The consolidation
of a subsidiary starts when the Bank obtains control over it and ends when the bank loses this control. So, the income and expenses
from a subsidiary acquired or alienated during the period is included in the Consolidated Income Statement and the Consolidated
Statement of Other Comprehensive Income from the date in which the Bank obtains control until the date in which the Bank ends
its control over the subsidiary.
Profit
or loss and each component of other comprehensive income are attributed to the owners of the Bank and to the non-controlling interest.
Total comprehensive income of subsidiaries is attributed to the owners of the Bank and to the non-controlling interests even if
this results in the non-controlling interests having a deficit in certain circumstances.
When
necessary, adjustments are made to the financial statements of the subsidiaries to ensure their accounting policies are consistent
with the Bank’s accounting policies. All balances and transacctions between consolidated entities are eliminated.
Changes
in the consolidated entities ownership interests in subsidiaries that do not result in a loss of control over the subsidiaries
are accounted for as equity transactions. The carrying values of the Bank’s equity and the non-controlling interests’
equity are adjusted to reflect the changes to their relative interests in the subsidiaries. Any difference between the amount
by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly
in equity and attributed to owners of the Bank.
In
addition, third parties’ shares in the Bank’s consolidated equity are presented as “Non-controlling interests”
in the Consolidated Interim Statement of Changes in Equity. Their share in the income for the year is presented as “Attributable
to non-controlling interest” in the Consolidated Interim Statement of Income.
The
following companies are considered entities controlled by the Bank and are therefore within the scope of consolidation:
i.
|
Entities
controlled by the Bank through participation in equity
|
Name
of the Subsidiary
|
|
|
Percent
ownership share
|
|
|
As
of June 30,
|
|
As
of December 31,
|
|
As
of June 30,
|
|
Place
of Incorporation and
operation
|
2018
|
|
2017
|
|
2017
|
|
Direct
|
Indirect
|
Total
|
|
Direct
|
Indirect
|
Total
|
|
Direct
|
Indirect
|
Total
|
Main
Activity
|
%
|
%
|
%
|
%
|
%
|
%
|
|
%
|
%
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santander
Corredora de Seguros Limitada
|
Insurance
brokerage
|
Santiago,
Chile
|
99.75
|
0.01
|
99.76
|
|
99.75
|
0.01
|
99.76
|
|
99.75
|
0.01
|
99.76
|
Santander
Corredores de Bolsa Limitada
|
Financial
instruments brokerage
|
Santiago,
Chile
|
50.59
|
0.41
|
51.00
|
|
50.59
|
0.41
|
51.00
|
|
50.59
|
0.41
|
51.00
|
Santander
Agente de Valores Limitada (*)
|
Securities
brokerage
|
Santiago,
Chile
|
99.03
|
-
|
99.03
|
|
99.03
|
-
|
99.03
|
|
99.03
|
-
|
99.03
|
Santander
S.A. Sociedad Securitizadora
|
Purchase
of credits and issuance of debt instruments
|
Santiago,
Chile
|
99.64
|
-
|
99.64
|
|
99.64
|
-
|
99.64
|
|
99.64
|
-
|
99.64
|
The
details of non-controlling interest in all the subsidiaries can be seen in Note 23 – Non-controlling interest.
(*)
On July 25, 2018, the entity has stopped carrying out buying and selling operations of foreign currency, the Bank will now take
care of these operations.
ii.
|
Entities
controlled by the Bank through other considerations
|
The
following companies have been consolidated as of June 30, 2018 and 2017 and December 31, 2017 based on the fact that the activities
relevant to them are determined by the Bank (companies complementary to the banking sector) and therefore the Bank exercises control:
|
-
|
Santander
Gestión de Recaudación y Cobranza Limitada (collection services)
|
|
-
|
Bansa
Santander S.A. (management of repossessed assets and leasing of properties)
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
10
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
An
associate is an entity over which the Bank has the ability to exercise significant influence, but not control or joint control.
This ability is usually represented by a share equal to or higher than 20% of the voting rights of the Company and is accounted
for using the equity method.
The
following companies are considered “Associates” in which the Bank accounts for its participation using the equity
method:
|
|
|
Percentage
of ownership share
|
|
|
|
As
of June 30,
|
As
of December 31,
|
As
of June 30,
|
|
|
Place
of Incorporation and
operation
|
2018
|
2017
|
2017
|
Associates
|
Main
activity
|
%
|
%
|
%
|
Redbanc
S.A.
|
ATM
services
|
Santiago,
Chile
|
33.43
|
33.43
|
33.43
|
Transbank
S.A.
|
Debit
and credit card services
|
Santiago,
Chile
|
25.00
|
25.00
|
25.00
|
Centro
de Compensación Automatizado
|
Electronic
fund transfer and compensation services
|
Santiago,
Chile
|
33.33
|
33.33
|
33.33
|
Sociedad Interbancaria
de Depósito de Valores S.A.
|
Repository
of publically offered securities
|
Santiago,
Chile
|
29.29
|
29.29
|
29.29
|
Cámara
de Compensación de Pagos de Alto Valor S.A.
|
Payments
clearing
|
Santiago,
Chile
|
15.00
|
15.00
|
14.93
|
Administrador
Financiero del Transantiago S.A.
|
Administration
of boarding passes to public transportation
|
Santiago,
Chile
|
20.00
|
20.00
|
20.00
|
Sociedad
Nexus S.A.
|
Credit
card processor
|
Santiago,
Chile
|
12.90
|
12.90
|
12.90
|
Servicios
de Infraestructura de Mercado OTC S.A.
|
Administration
of the infrastructure for the financial market of derivative instruments
|
Santiago,
Chile
|
12.48
|
12.48
|
12.07
|
During
the year 2017, the entities Rabobank Chile in Liquidation and Banco París, ceded a portion of its participation to Banco
Santander in “Sociedad Operadora de la Cámara de Compensación de pagos de Valores S.A.”, increasing the
Bank’s participation to 15.00%.
In
the case of Nexus S.A. and Cámara Compensación de Alto Valor S.A., Banco Santander-Chile has a representative in
the Board of Directors of such companies, which is why the Administration has concluded that it exercises significant influence
over them.
In
the case of Servicios de Infraestructura de Mercado OTC S.A. The Bank participates, through its executives, actively in the administration
and in the organizational process, which is why the Administration has concluded that it exerts significant influence over it.
iv. Share
or rights in other companies
Entities
over which the Bank has no control or significant influences are presented in this category. These holdings are shown at acquisition
value (historical cost) less impairment, if any.
c) Non-controlling
interest
Non-controlling
interest represents the portion of gains or losses and net assets which the Bank does not own, either directly or indirectly.
It is presented separately in the Consolidated Interim Statement of Income, and separately from shareholders’ equity in
the Consolidated Interim Statement of Financial Position.
In
the case of entities controlled by the Bank through other considerations, income and equity are presented in full as non-controlling
interest, since the Bank controls them, but does not have any ownership.
d) Reporting
segments
According
to the information presented, the Bank’s segments were selected based on an operating segment being a component of an entity
that:
|
i.
|
engages
in business activities from which it may earn revenues and incur expenses (including
revenues and expenses from transactions with other components of the same entity).
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
11
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
|
ii.
|
whose
operating results are regularly reviewed by the entity’s chief executive officer,
who makes decisions about resources allocated to the segment and assess its performance.
|
|
iii.
|
for
which discrete financial information is available.
|
Operating
segments with similar economic characteristics often exhibit similar long-term financial performance. Two or more segments can
be combined only if aggregation is consistent with International Financial Reporting Standard 8 “Operating Segments”
(IFRS 8) and the segments have similar economic characteristics and are similar in each of the following respects:
|
i.
|
the
nature of the products and services;
|
|
ii.
|
the
nature of the production processes;
|
|
iii.
|
the
type or class of customers that use their products and services;
|
|
iv.
|
the
methods used to distribute their products or services; and
|
|
v.
|
if
applicable, the nature of the regulatory environment, for example, banking, insurance,
or public utilities.
|
The
Bank reports separately on each operating segment that exceeds any of the following quantitative thresholds:
|
i.
|
its
reported revenue, from both external customers and intersegment sales or transfers, is
10% or more of the combined internal and external revenue of all the operating segments.
|
|
ii.
|
the
absolute amount of its reported profit or loss is equal to or greater than 10% : (i)
the combined reported profit of all the operating segments that did not report a loss;
(ii) the combined reported loss of all the operating segments that reported a loss.
|
|
iii.
|
its
assets represent 10% or more of the combined assets of all the operating segments.
|
|
e)
|
Functional
and presentation currency
|
The
Bank, in accordance with IAS 21 “Effects of Variations in Exchange Rates of the Foreign Currency”, has defined as functional
and presentation currency the Chilean Peso, which is the currency of the primary economic environment in which the Bank operates,
it also obeys the currency that influences the structure of costs and revenues.
Therefore,
all balances and transactions denominated in currencies other than the Chilean Peso are considered as “Foreign currency”.
|
f)
|
Foreign
currency transactions
|
The
Bank performs transactions in foreign currencies, mainly U.S. dollar. Assets and liabilities denominated in foreign currencies
and held by the Bank are translated to Chilean pesos based on the representative market rate published by Reuters at 1:30 p.m.
on the month end date. The rate used was Ch$653.90 per US$1 for June, 2018 (Ch$663.80 per US$1 for June, 2017 and Ch$616.85 per
US$1 for December, 2017).
The
amount of net foreign exchange gains and losses include recognition of the effects that exchange rate variations have on assets
and liabilities denominated in foreign currencies and the profits and losses on foreign exchange spot and forward transactions
undertaken by the Bank.
|
g)
|
Definitions
and classification of financial instruments
|
A
“financial instrument” is any contract that gives rise to a financial asset of an entity, and a financial liability
or equity instrument of another entity.
An
“equity instrument” is a legal transaction that evidences a residual interest on the assets of an entity deducting
all of its liabilities.
A
“financial derivative” is a financial instrument whose value changes in response to changes with regard to an observed
market variable (such as an interest rate, a foreign exchange rate, a financial instrument’s price, or a market index, including
credit ratings), whose initial investment is very small compared with other financial instruments having a similar response to
changes in market factors, and which is generally settled at a future date.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
12
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
“Hybrid
financial instruments” are contracts that simultaneously include a non-derivative host contract together with a financial
derivative, known as an embedded derivative, which is not separately transferable and has the effect that some of the cash flows
of the hybrid contract vary in a way similar to a stand-alone derivative. As of June 30, 2018 and 2017 and December 31, 2017,
Banco Santander did not keep implicit derivatives in its portfolio.
|
ii.
|
Classification
of financial assets for measurement purposes
|
Financial
assets are classified into the following specified categories: financial assets trading investments at fair value through profit
or loss (FVTPL), ‘held to maturity investments’, ‘available for sale investments’ (AFS) financial assets
and ‘loans and accounts receivable from customers’. The classification depends on the nature and purpose of the financial
assets and is determined at the time of initial recognition. Regular way purchases or sales of financial assets require delivery
of the asset within the time frame established by regulation or convention in the marketplace.
Financial assets are initially recognized at fair value plus, in the case of financial assets that aren’t accounted for
at fair value with changes in profit or loss, transaction costs that are directly attributable to the acquisition or issue.
Effective interest
method
The
effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including
all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums
or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount
on initial recognition.
Income
is recognised on an effective interest basis for loans and accounts receivables other than those financial assets classified at
fair value through profit or loss.
Financial assets
FVTPL - Trading investments
Financial
assets are classified as FVTPL when the financial asset is either held for trading or it is designated as fair value through profit
or loss.
A
financial asset is classified as held for trading if:
- it
has been acquired with the purpose of selling it in the short term; or
- on
initial recognition it is part of a portfolio of identified financial instruments that the Bank manages together and has a recent
actual pattern of short-term profit-taking; or
- it
is a derivative that is not designated and effective as a hedging instrument
A
financial asset other than a financial asset held for trading may be designated as FVTPL upon initial recognition if:
- such
designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
- the
financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance
is evaluated on a fair value basis, in accordance with the Bank’s documented risk management or investment strategy, and information
about the grouping is provided internally on that basis; or
- it
forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated
as FVTPL.
Financial
assets FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net
gain or loss recognised incorporates any dividend or interest earned on the financial asset and is included in the ‘net
income (expense) from financial operations’ line item.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
13
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
Held to maturity
investments
Held-to-maturity
investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Bank has
the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured
at amortised cost using the effective interest method less impairment.
Available for
sale investments (AFS investments)
AFS
investments are non-derivatives that are either designated as AFS or are not classified as (a) loans and accounts receivable from
customers, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss (trading investments).
Financial
instruments held by the Bank that are traded in an active market are classified as AFS and are stated at fair value at the end
of each reporting period. The Bank also has investments in financial instruments that are not traded in an active market but that
are also classified as AFS investments and stated at fair value at the end of each reporting period (because the directors consider
that fair value can be reliably measured). Changes in the carrying amount of AFS monetary financial assets relating to changes
in foreign currency rates, interest income calculated using the effective interest method and dividends on AFS equity investments
are recognised in profit or loss. Other changes in the carrying amount of available for sale investments are recognised in other
comprehensive income and accumulated under the heading of “Valuation Adjustment”. When the investment is disposed
of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve
is reclassified to profit or loss.
Dividends
on AFS equity instruments are recognised in profit or loss when the Bank’s right to receive the dividends is established.
The
fair value of AFS monetary financial assets denominated in a foreign currency is determined in that foreign currency and translated
as the described in f) above. The foreign exchange gains and losses that are recognised in profit or loss are determined based
on the amortised cost of the monetary asset.
Loans
and accounts receivables from customers
Loans
and accounts receivable from customers are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. Loans and accounts receivables from customers (including loans and accounts receivable from customers and
interbank loans) are measured at amortised cost using the effective interest method, less any impairment.
Interest
income is recognised by applying the effective interest rate, except for short-term receivables where discounting effects are
immaterial.
|
iii.
|
Classification
of financial assets for presentation purposes
|
For
presentation purposes, the financial assets are classified by their nature into the following line items in the Consolidated Financial
Statements:
|
●
|
Cash
and deposits in banks: this line includes cash balances, checking accounts and on-demand
deposits with the Central Bank of Chile and other domestic and foreign financial institutions.
Amounts invested as overnight deposits are included in this item and in the corresponding
items. If a special item for these operations is not mentioned, they will be included
along with the accounts being reported.
|
|
●
|
Cash
items in process of collection: this item includes values of documents in process of
transfer and balances from operations that, as agreed, are not settled the same day,
and purchase of currencies not yet received.
|
|
●
|
Trading
investments: this item includes financial instruments held-for-trading and investments
in mutual funds which must be adjusted to their fair value.
|
|
●
|
Financial
derivative contracts: financial derivative contracts with positive fair values are presented
in this item. It includes both independent contracts as well as derivatives that should
and can be separated from a host contract, whether they are for trading or accounted
for as derivatives held for hedging, as shown in Note 6.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
14
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
|
●
|
Trading
derivatives: includes the fair value of derivatives which do not qualify for hedge accounting,
including embedded derivatives separated from hybrid financial instruments.
|
|
●
|
Hedging
derivatives: includes the fair value of derivatives designated as being in a hedging
relationship, including the embedded derivatives separated from the hybrid financial
instruments.
|
|
●
|
Interbank
loans: this item includes the balances of transactions with domestic and foreign banks,
including the Central Bank of Chile, other than those reflected in certain other financial
asset classifications listed above.
|
|
●
|
Loans
and accounts receivables from customers: these loans are non-derivative financial assets
for which fixed or determined amounts are charged, that are not listed on an active market
and which the Bank does not intend to sell immediately or in the short term. When the
Bank is the lessor in a lease, and it substantially transfers the risks and rewards incidental
to the leased asset, the transaction is presented in loans and accounts receivable from
customers while the leased asset is removed from the Bank´s financial statements.
|
|
●
|
Investment
instruments: are classified into two categories: held-to-maturity investments, and available-for-sale
investments. The held-to-maturity investment classification includes only those instruments
for which the Bank has the ability and intent to hold to maturity. The remaining investments
are treated as available for sale.
|
|
iv.
|
Classification
of financial liabilities for measurement purposes
|
Financial
liabilities are classified as either financial liabilities FVTPL or other financial liabilities.
Financial
liabilities FVTPL
As
of June 30, 2018 and December 31, 2017, the bank does not possess any financial liabilities FVTPL.
Other
financial liabilities
Other
financial liabilities (including loans and accounts payable) are subsequently measured at amortised cost using the effective interest
method.
|
v.
|
Classification
of financial liabilities for presentation purposes
|
Financial
liabilities are classified by their nature into the following items in the Consolidated Interim Statement of Financial Position:
|
●
|
Deposits
and other on-demand liabilities: this includes all on-demand obligations except for term
savings accounts, which are not considered on-demand instruments in view of their special
characteristics. Obligations whose payment may be required during the period are deemed
to be on-demand obligations. Operations which become callable the day after the closing
date are not treated as on-demand obligations.
|
|
●
|
Cash
items in process of collection: this item includes balances from asset purchase operations
that are not settled the same day, and sale of currencies not yet delivered.
|
|
●
|
Obligations
under repurchase agreements: this includes the balances of sales of financial instruments
under securities repurchase and loan agreements. The Bank does not record as own portfolio
instruments acquired under repurchase agreements.
|
|
●
|
Time
deposits and other time liabilities: this shows the balances of deposit transactions
in which a term at the end of which they become callable has been stipulated.
|
|
●
|
Financial
derivative contracts: this includes financial derivative contracts with negative fair
values (i.e. a liability of the Bank), whether they are for trading or for hedge accounting,
as set forth in Note 6.
|
|
●
|
Trading
derivatives: includes the fair value of derivatives which do not qualify for hedge accounting,
including embedded derivatives separated from hybrid financial instruments.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
15
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
|
●
|
Hedging
derivatives: includes the fair value of derivatives designated as being in a hedging
relationship, including the embedded derivatives separated from the hybrid financial
instruments.
|
Interbank
borrowings: this includes obligations due to other domestic banks, foreign banks, or the Central Bank of Chile, other than those
reflected in certain other financial liability classifications listed above.
|
●
|
Issued
debt instruments: there are three types of instruments issued by the Bank: obligations
under letters of credit, subordinated bonds and senior bonds placed in the local and
foreign market.
|
|
●
|
Other
financial liabilities: this item includes credit obligations to persons other than domestic
banks, foreign banks, or the Central Bank of Chile, for financing purposes or operations
in the normal course of business.
|
|
h)
|
Valuation
of financial instruments and recognition of fair value changes
|
Generally,
financial assets and liabilities are initially recognized at fair value, which, in the absence of evidence against it, is deemed
to be the transaction price. Financial instruments, other than those measured at fair value through profit or loss, are initially
recognized at fair value plus transaction costs. Subsequently, and at the end of each reporting period, financial instruments
are measured with the following criteria:
|
i.
|
Valuation
of financial instruments
|
Financial
assets are measured according to their fair value, gross of any transaction costs that may be incurred in the course of a sale,
except for credit investments and held to maturity investments.
According
to IFRS 13
Fair Value Measurement
, “fair value” is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date
under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using
another valuation technique. When measuring fair value an entity shall take into account the characteristics of the asset or liability
if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
The
fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either: (a) in the
principal market for the asset or liability, or (b) in the absence of a principal market, the most advantageous market for the
asset or liability. Even when there is no observable market to provide pricing information in connection with the sale of an asset
or the transfer of a liability at the measurement date, the fair value measurement shall assume that the transaction takes place,
considered from the perspective of a potential market participant who intends to maximize value associated with the asset or liability.
When
using valuation techniques, the Bank shall maximize the use of relevant observable inputs and minimize the use of unobservable
inputs as available. If an asset or a liability measured at fair value has a bid price and an ask price, the price within the
bid-ask spread that is most representative of fair value in the circumstances shall be used to measure fair value regardless of
where the input is categorized within the fair value hierarchy (i.e. Level 1, 2 or 3). IFRS 13 establishes a fair value hierarchy
that categorizes into three levels the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives
the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and
the lowest priority to unobservable inputs (Level 3 inputs).
Every
derivative is recorded in the Consolidated Interim Statements of Financial Position at fair value as previously described. This
value is compared to the valuation at the trade date. If the fair value is subsequently measured positive, this is recorded as
an asset, if the fair value is subsequently measured negative, this is recorded as a liability. The fair value on the trade date
is deemed, in the absence of evidence to the contrary, to be the transaction price. The changes in the fair value of derivatives
from the trade date are recorded in “Net income (expense) from financial operations” in the Consolidated Interim Statement
of Income.
Specifically,
the fair value of financial derivatives included in the portfolios of financial assets or liabilities held for trading is deemed
to be their daily quoted price. If, for exceptional reasons, the quoted price cannot be determined on a given date, the fair value
is determined using similar methods to those used to measure over the counter (OTC) derivatives. The fair value of OTC derivatives
is the sum of the future cash flows resulting from the instrument, discounted to present value at the date of valuation (“present
value” or “theoretical close”) using valuation techniques commonly used by the financial markets: “net
present value” (NPV) and option pricing models, among other methods. Also, within the fair value of derivatives are included
Credit Valuation Adjustment (CVA) and Debit Valuation Adjustment (DVA), all with the objective that the fair value of each instrument
includes the credit risk of its counterparty and Bank´s own risk. Counterparty Credit Risk
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
16
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
(CVA)
is a valuation adjustment to derivatives contracted in non-organized markets as a result of exposure to counterparty credit risk.
The CVA is calculated considering the potential exposure to each counterparty in future periods. Own-credit risk (DVA) is a valuation
adjustment similar to the CVA, but generated by the Bank’s credit risk assumed by our counterparties. As of June 30, 2018, the
CVA and DVA are Ch$ 8,462 million and Ch$ 14,838 million, respectively.
“Loans and
accounts receivable from customers” and Held-to-maturity instrument portfolio are measured at amortized cost using the effective
interest method. Amortized cost is the acquisition cost of a financial asset or liability, plus or minus, as appropriate, prepayments
of principal and the cumulative amortization (recorded in the consolidated income statement) of the difference between the initial
cost and the maturity amount as calculated under the effective interest method. For financial assets, amortized cost also includes
any reductions for impairment or uncollectibility. For loans and accounts receivable designated as hedged items in fair value
hedges, the changes in their fair value related to the risk or risks being hedged are recorded in “Net income (expense)
from financial operations”.
The
“effective interest rate” is the discount rate that exactly matches the initial amount of a financial instrument to
all its estimated cash flows over its remaining life. For fixed-rate financial instruments, the effective interest rate incorporates
the contractual interest rate established on the acquisition date. Where applicable, the fees and transaction costs that are a
part of the financial return are included. For floating-rate financial instruments, the effective interest rate matches the current
rate of return until the date of the next review of interest rates.
The
amounts at which the financial assets are recorded represent the Bank’s maximum exposure to credit risk as at the reporting
date. The Bank has also received collateral and other credit enhancements to mitigate its exposure to credit risk, which consist
mainly of mortgage guarantees, equity instruments and personal securities, assets under leasing agreements, assets acquired under
repurchase agreements, securities loans and derivatives.
Financial
instruments at fair value, determined on the basis of price quotations in active markets, include government debt securities,
private sector debt securities, equity shares, short positions, and fixed-income securities issued.
In
cases where price quotations cannot be observed in available markets, the Bank’s management determines a best estimate of
the price that the market would set using its own internal models. In most cases, these models use data based on observable market
parameters as significant inputs however for some valuations of financial instruments, significant inputs are unobservable in
the market. To determine a value for those instruments, various techniques are employed to make these estimates, including the
extrapolation of observable market data.
The
most reliable evidence of the fair value of a financial instrument on initial recognition usually is the transaction price, however
due to lack of availability of market information, the value of the instrument may be derived from other market transactions performed
with the same or similar instruments or may be measured by using a valuation technique in which the variables used include only
observable market data, mainly interest rates.
The
main techniques used as of June 30, 2018 and 2017 and as of December 31, 2017 by the Bank’s internal models to determine
the fair value of the financial instruments are as follows:
|
i.
|
In
the valuation of financial instruments permitting static hedging (mainly forwards and
swaps), the present value method is used. Estimated future cash flows are discounted
using the interest rate curves of the related currencies. The interest rate curves are
generally observable market data.
|
|
ii.
|
In
the valuation of financial instruments requiring dynamic hedging (mainly structured options
and other structured instruments), the Black-Scholes model is normally used. Where appropriate,
observable market inputs are used to obtain factors such as the bid-offer spread, exchange
rates, volatility, correlation indexes and market liquidity.
|
|
iii.
|
In
the valuation of certain financial instruments exposed to interest rate risk, such as
interest rate futures, caps and floors, the present value method (futures) and the Black-Scholes
model (plain vanilla options) are used. The main inputs used in these models are observable
market data, including the related interest rate curves, volatilities, correlations and
exchange rates.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
17
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
The
fair value of the financial instruments calculated by the aforementioned internal models considers contractual terms and observable
market data, which include interest rates, credit risk, exchange rates, quoted market price of shares and raw materials, volatility,
prepayments and liquidity. The Bank’s management considers that its valuation models are not significantly subjective, since
these methodologies can be adjusted and evaluated, as appropriate, through the internal calculation of fair value and the subsequent
comparison with the related actively traded price.
|
iii.
|
Hedging
transactions
|
The
Bank uses financial derivatives for the following purposes:
|
i.
|
to
sell to customers who request these instruments in the management of their market and
credit risks;
|
|
ii.
|
to
use these derivatives in the management of the risks of the Bank entities’ own
positions and assets and liabilities (“hedging derivatives”), and
|
|
iii.
|
to
obtain profits from changes in the price of these derivatives (trading derivatives).
|
All
financial derivatives that are not held for hedging purposes are accounted for as trading derivatives.
A
derivative qualifies for hedge accounting if all the following conditions are met:
|
1.
|
The
derivative hedges one of the following three types of exposure:
|
|
a.
|
Changes
in the value of assets and liabilities due to fluctuations, among others, in inflation
(UF), the interest rate and/or exchange rate to which the position or balance to be hedged
is subject (“fair value hedge”);
|
|
b.
|
Changes
in the estimated cash flows arising from financial assets and liabilities, commitments
and highly probable forecasted transactions (“cash flow hedge”);
|
|
c.
|
The
net investment in a foreign operation (“hedge of a net investment in a foreign
operation”).
|
|
2.
|
It
is effective in offsetting exposure inherent in the hedged item or position throughout
the expected term of the hedge, which means that:
|
|
a.
|
At
the date of arrangement the hedge is expected, under normal conditions, to be highly
effective (“prospective effectiveness”).
|
|
b.
|
There
is sufficient evidence that the hedge was actually effective during the life of the hedged
item or position (“retrospective effectiveness”).
|
|
3.
|
There
must be adequate documentation evidencing the specific designation of the financial derivative
to hedge certain balances or transactions and how this effective hedge was expected to
be achieved and measured, provided that this is consistent with the Bank’s management
of own risks.
|
The
changes in the value of financial instruments qualifying for hedge accounting are recorded as follows:
|
a.
|
For
fair value hedges, the gains or losses arising on both hedging instruments and the hedged
items (attributable to the type of risk being hedged) are included as “Net income
(expense) from financial operations” in the Consolidated Interim Statement of Income.
|
|
b.
|
For
fair value hedges of interest rate risk on a portfolio of financial instruments, gains
or losses that arise in measuring hedging instruments and other gains or losses due to
changes in fair value of the underlying hedged item (attributable to the hedged risk)
are recorded in the Consolidated Interim Financial Statement of Income under “Net
income (expense) from financial operations”.
|
|
c.
|
For
cash flow hedges, the change in fair value of the hedging instrument is included as “Cash
flow hedge” in “Other comprehensive income”, until the hedged transaction
occurs, thereafter being reclassified to the Consolidated Interim Statement of Income,
unless the hedged transaction results in the recognition of non–financial assets
or liabilities, in which case it is included in the cost of the non-financial asset or
liability.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
18
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
|
d.
|
The
differences in valuation of the hedging instrument corresponding to the ineffective portion
of the cash flow hedging transactions are recorded directly in the Consolidated Interim
Statement of Income under “Net income (expense) from financial operations”.
|
If
a derivative designated as a hedging instrument no longer meets the requirements described above due to expiration, ineffectiveness
or for any other reason, hedge accounting treatment is discontinued. When “fair value hedging” is discontinued, the
fair value adjustments to the carrying amount of the hedged item arising from the hedged risk are amortized to gain or loss from
that date, when applicable.
When
cash flow hedges are interrupted, any cumulative gain or loss of the hedging instrument recognized under “Other comprehensive
income” (from the period when the hedge was effective) remains recorded in equity until the hedged transaction occurs, at
which time it is recorded in the Consolidated Interim Statement of Income, unless the transaction is no longer expected to occur,
in which case any cumulative gain or loss is recorded immediately in the Consolidated Interim Statement of Income.
|
iv.
|
Derivatives
embedded in hybrid financial instruments
|
Derivatives
embedded in other financial instruments or in other host contracts are accounted for separately as derivatives if 1) their risks
and characteristics are not closely related to the host contracts, 2) a separate instrument with the same terms as the embedded
derivative would meet the definition of a derivative, and 3) provided that the host contracts are not classified as “Trading
investments” or as other financial assets (liabilities) at fair value through profit or loss.
|
v.
|
Offsetting
of financial instruments
|
Financial
asset and liability balances are offset, i.e., reported in the Consolidated Interim Statements of Financial Position at their
net amount, only if there is a legally enforceable right to offset the recorded amounts and the Bank intends either to settle
them on a net basis or to realize the asset and settle the liability simultaneously. As of June 30, 2018 and 2017 and as of December
31, 2017, no offsetting exists for financial assets or liabilities.
|
vi.
|
Derecognition
of financial assets and liabilities
|
The
accounting treatment of transfers of financial assets is determined by the extent and the manner in which the risks and rewards
associated with the transferred assets are transferred to third parties:
|
i.
|
If
the Bank transfers substantially all the risks and rewards of ownership to third parties,
as in the case of unconditional sales of financial assets, sales under repurchase agreements
at fair value at the date of repurchase, sales of financial assets with a purchased call
option or written put option deeply out of the money, utilization of assets in which
the transferor does not retain subordinated debt nor grants any credit enhancement to
the new holders, and other similar cases, the transferred financial asset is derecognized
from the Consolidated Interim Statement of Financial Position and any rights or obligations
retained or created in the transfer are simultaneously recorded.
|
|
ii.
|
If
the Bank retains substantially all the risks and rewards of ownership associated with
the transferred financial asset, as in the case of sales of financial assets under repurchase
agreements at a fixed price or at the sale price plus interest, securities lending agreements
under which the borrower undertakes to return the same or similar assets, and other similar
cases, the transferred financial asset is not derecognized from the Consolidated Interim
Financial Statement of Financial Position and continues to be measured by the same criteria
as those used before the transfer. However, the following items are recorded:
|
|
-
|
An
associated financial liability for an amount equal to the consideration received; this
liability is subsequently measured at amortized cost.
|
|
-
|
Both
the income from the transferred (but not removed) financial asset as well as any expenses
incurred due to the new financial liability.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
19
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
iii.
If the Bank neither transfers nor substantially retains all the risks and
rewards of ownership associated with the transferred
financial
asset—as in the case of sales of financial assets with a purchased call option or written put option that is not
deeply
in or out of the money, securitization of assets in which the transferor retains a subordinated debt or other type of
credit
enhancement for a portion of the transferred asset, and other similar cases, the following distinction is made:
|
a.
|
If
the transferor does not retain control of the transferred financial asset: the asset
is derecognized from the Consolidated Interim Statement of Financial Position and any
rights or obligations retained or created in the transfer are recognized.
|
|
b.
|
If
the transferor retains control of the transferred financial asset: it continues to be
recognized in the Consolidated Interim Statement of Financial Position for an amount
equal to its exposure to changes in value and a financial liability associated with the
transferred financial asset is recorded. The net carrying amount of the transferred asset
and the associated liability is the amortized cost of the rights and obligations retained,
if the transferred asset is measured at amortized cost, or the fair value of the rights
and obligations retained, if the transferred asset is measured at fair value.
|
Accordingly,
financial assets are only derecognized from the Consolidated Interim Statement of Financial Position when the rights over the
cash flows they generate have terminated or when all the inherent risks and rewards of ownership have been substantially transferred
to third parties. Similarly, financial liabilities are only derecognized from the Consolidated Interim Financial Statement Financial
Position when the obligations specified in the contract are discharged or cancelled or the contract has matured.
|
i)
|
Recognizing
income and expenses
|
The
most significant criteria used by the Bank to recognize its revenues and expenses are summarized as follows:
|
i.
|
Interest
revenue, interest expense, and similar items
|
Interest
revenue, expense and similar items are recorded on an accrual basis using the effective interest method.
However,
when a given operation or transaction is past due by 90 days or more, when it originated from a refinancing or renegotiation,
or when the Bank believes that the debtor poses a high risk of default, the interest and adjustments pertaining to these transactions
are not recorded directly in the Consolidated Interim Statement of Income unless they have been actually received.
This
interest and adjustments are generally referred to as “suspended” and are recorded in they are reported as part of
the complementary information thereto and as memorandum accounts (Note 24). This interest is recognized as income, when collected.
The
resumption of interest income recognition of previously impaired loans only occurs when such loans become current (i.e. payments
were received such that the loans are contractually past-due for less than 90 days) or they are no longer classified under the
C3, C4, C5, or C6 risk categories (for loans individually evaluated for impairment).
|
ii.
|
Commissions,
fees, and similar items
|
Fee
and commission income and expenses are recognized in the Consolidated Interim Statement of Income using criteria stablished in
IFRS 15 “Revenue from contracts with customers”, using retrospectively with the cumulative effect recognised at the
date of initial application method and therefore has not restated the prior comparative information, which continues to be reporting
under IAS 18 “Revenue recognition”.
Under
IFRS 15, the Bank recognize revenue when (or as) satisfied a performance obligations by transferring a service (ie an asset) to
a customer; under this definition an asset is transferred when (or as) the customer obtains control of that asset. The Bank considers
the terms of the contract and its customary business practices to determine the transaction price. The transaction
price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or
services to a customer, excluding amounts collected on behalf of third parties.
The
Bank transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognises revenue over
time, and/or the Bank satisfies the performance obligation at a point in time.
Under
IAS 18 “Revenue recognition”, fees and commission income and expense are recognized in according to their nature.
The main criteria are:
|
-
|
Fee and
commission income and expenses on financial assets and liabilities are recognized when
they are earned.
|
|
-
|
Those
arising from transactions or services that are performed over a period of time are recognized
over the life of these transactions or services.
|
|
-
|
Those
relating to services provided in a single transaction are recognized when the single
transaction is performed.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
20
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
The main income
arising from commissions, fees and similar items correspond to:
|
-
|
Fees
and commissions for lines of credits and overdrafts:includes accrued fees related to
granting lines of credit and overdrafts in checking accounts.
|
|
-
|
Fees
and commissions for guarantees and letters of credit:includes accrued fees in the period
relating to granting of guarantee payment for current and contingent third party obligations.
|
|
-
|
Fees
and commissions for card services:includes accrued and earned commissions in the period
related to use of credit cards, debit cards and other cards
|
|
-
|
Fees
and commissions for management of accounts:includes accrued commissions for the maintenance
of checking, savings and other accounts
|
|
-
|
Fees
and commissions for collections and payments:includes income arising from collections
and payments services provided by the Bank.
|
|
-
|
Fees
and commissions for intermediation and management of securities:includes income from
brokerage, placements, administration and securitie’s custody services.
|
|
-
|
Fees
and commissions for insurance brokerage fees: includes income arising for insurances
distribution.
|
|
-
|
Other
fees and commissions:includes income arising from currency changes,financial advisory,
cashier check issuance, placement of financial products and onlilne banking services.
|
The
main expense arising from commissions, fees and similar items correspond to:
|
-
|
Compensation
for card operation:includes commission expenses for credit and debit card operations
related to income commissions card services.
|
|
-
|
Fees
and commissions for securities transactions:includes commissions expense for deposits,
securities custody service and securitie’s brokerage.
|
|
-
|
Other
fees and commissions:includes mainly expenses generayed from online services.
|
The
Bank has incorporated disaggregated revenue disclosure and reportable segment relationship in Note 25.
Additionaly,
the Bank maintains certain loyalty programme associated to its credit cards services, for which has deferred a percentage of the
consideration received in the statement of financial position to comply with its related performance obligation, or has liquidated
on a monthly basis as far they arise.
|
iii.
|
Non-financial
income and expenses
|
Non-financial
income and expenses are recognized for accounting purposes on an accrual basis.
iv.
Comissions on loan formalization
Financial
commissions that arise from loan formalization, fundamentally the commissions from the opening or study and information, are
periodized
and registered in the Consolidated Statement of Income throughout the life of the loan.
j)
Impairment
i. Financial
assets:
A
financial asset, other than that at fair value through profit and loss, is evaluated on each financial statement filing date to
determine whether objective evidence of impairment exists.
A
financial asset or group of financial assets will be impaired if, and only if, objective evidence of impairment exists as a result
of one or more events that occurred after initial recognition of the asset (“event causing the loss”), and this event
or events causing the loss have an impact on the estimated future cash flows of a financial asset or group of financial assets.
An
impairment loss relating to financial assets recorded at amortized cost is calculated as the difference between the recorded amount
of the asset and the present value of estimated future cash flows, discounted at the financial asset’s original effective
interest rate.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
21
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
Individually
significant financial assets are individually tested to determine their impairment. The remaining financial assets are evaluated
collectively in groups that share similar credit risk characteristics.
All
impairment losses are recorded in income. Any impairment loss relating to a financial asset available for sale previously recorded
in equity is transferred to profit or loss.
The
reversal of an impairment loss occurs only if it can be objectively related to an event occurring after the initial impairment
loss was recorded. The reversal of an impairment loss shall not exceed the carrying amount that would have been determined if
no impairment loss has been recognized for the asset in prior years. The reversal is recorded in income with the exception of
available for sale equity financial assets, in which case it is recorded in other comprehensive income.
ii. Non-financial
assets:
The
Bank’s non-financial assets, excluding investment properties, are reviewed at the reporting date to determine whether they
show signs of impairment (i.e. its carrying amount exceeds its recoverable amount). If any such evidence exists, the recoverable
amount of the asset is estimated, in order to determine the extent of the impairment loss.
Recoverable
amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If
the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced
to its recoverable amount. An impairment loss is recognized immediately in profit or loss.
In
connection with other assets, impairment losses recorded in prior periods are assessed at each reporting date to determine whether
the loss has decreased and should be reversed. The increased carrying amount of an asset other than goodwill attributable to a
reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation)
had no impairment loss been recognized for the asset in prior years. Losses for goodwill impairment recognized through capital
gains are not reversed.
k)
Property, plant, and equipment
This
category includes the amount of buildings, land, furniture, vehicles, computer hardware and other fixed assets owned by the consolidated
entities or acquired under finance leases. Assets are classified according to their use as follows:
i. Property,
plant and equipment for own use
Property,
plant and equipment for own use includes but is not limited to tangible assets received by the consolidated entities in full or
partial satisfaction of financial assets representing accounts receivable from third parties which are intended to be held for
continuing own use and tangible assets acquired under finance leases. These assets are presented at acquisition cost less the
related accumulated depreciation and, if applicable, any impairment losses resulting from comparing the net value of each item
to the respective recoverable amount.
Depreciation
is calculated using the straight line method over the acquisition cost of assets less their residual value, assuming that the
land on which buildings and other structures stand has an indefinite life and, therefore, is not subject to depreciation.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
22
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
The
Bank applies the following useful lives for the tangible assets that comprise its assets:
ITEM
|
Useful
life
(in
months)
|
Land
|
-
|
Paintings
and works of art
|
-
|
Carpets
and curtains
|
36
|
Computers
and hardware
|
36
|
Vehicles
|
36
|
IT
systems and software
|
36
|
ATMs
|
60
|
Other
machines and equipment
|
60
|
Office
furniture
|
60
|
Telephone
and communication systems
|
60
|
Security
systems
|
60
|
Rights
over telephone lines
|
60
|
Air
conditioning systems
|
84
|
Other
installations
|
120
|
Buildings
|
1,200
|
The
consolidated entities assess at each reporting date whether there is any indication that the carrying amount of any tangible asset
exceeds its recoverable amount. If this is the case, the carrying amount of the asset is reduced to its recoverable amount and
future depreciation charges are adjusted in accordance with the revised carrying amount and to the new remaining useful life.
The
estimated useful lives of the items of property, plant and equipment held for own use are reviewed at the end of each reporting
period to detect significant changes. If changes are detected, the useful lives of the assets are adjusted by correcting the depreciation
charge to be recorded in the Consolidated Interim Statement of Income in future years on the basis of the new useful lives.
Maintenance
expenses relating to tangible assets held for own use are recorded as an expense in the period in which they are incurred.
|
ii.
|
Assets
leased out under operating leases
|
The
criteria used to record the acquisition cost of assets leased out under operating leases, to calculate their depreciation and
their respective estimated useful lives, and to record their impairment losses, are the same as those for property, plant and
equipment held for own use.
l)
Leasing
Finance
leases are leases that substantially transfer all the risks and rewards incidental to ownership of the leased asset to the lessee.
When
a consolidated entity is the lessor of an asset, the sum of the present value of the lease payments receivable from the lessee,
including the exercise price of the lessee’s purchase option at the end of the lease term, which is equivalent to one additional
lease payment and so is reasonably certain to be exercised, is recognized as lending to third parties and is therefore included
under “Loans and accounts receivable from customers” in the Consolidated Interim Statement of Financial Position.
When
a consolidated entity is a lessee, it reports the cost of leased assets in the Consolidated Interim Statement of Financial Position
based on the nature of the leased asset, and simultaneously records a liability for the same amount (which is the lower of the
fair value of the leased asset, and the sum of the present value of the lease payments payable to the lessor plus, if appropriate,
the exercise price of the purchase option). The depreciation policy for these assets is the same as that for property, plant and
equipment for own use.
In
both cases, the finance income and finance expenses arising from these contracts are credited and debited, respectively, to “Interest
income” and “Interest expense” in the Consolidated Interim Statement of Income so as to achieve a constant rate
of return over the lease term.
In
operating leases, ownership of the leased asset and substantially all the risks and rewards incidental thereto remain with the
lessor.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
23
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
When
a consolidated entity is the lessor, it reports the acquisition cost of the leased assets under “Property, plant and equipment”.
The depreciation policy for these assets is the same as that for similar items of property, plant and equipment held for own use
and revenues from operating leases is recorded on a straight line basis under “Other operating income” in the Consolidated
Interim Statement of Income.
When a consolidated entity is the lessee, the lease expenses, including any incentives granted by the lessor, are charged on a
straight line basis to “Other operating expenses” in the Consolidated Interim Statement of Income.
|
iii.
|
Sale
and leaseback transactions
|
For
sale at fair value and operating leasebacks, the profit or loss generated is recorded at the time of sale. In the case of finance
leasebacks, the profit or loss generated is amortized over the lease term.
m)
Factored receivables
Factored
receivables are valued at the amount disbursed by the Bank in exchange of invoices or other commercial instruments representing
the credit which the transferor assigns to the Bank. The price difference between the amounts disbursed and the actual face value
of the credits is recorded as interest income in the Consolidated Interim Statement of Income using the effective interest method
over the financing period.
When
the assignment of these instruments involves no liability on the part of the assignee, the Bank assumes the risks of insolvency
of the parties responsible for payment.
n)
Intangible assets
Intangible
assets are identified as non-monetary assets (separately identifiable from other assets) without physical substance which arise
as a result of legal or contractual rights. The Bank recognizes an intangible asset, whether purchased or self-created (at cost),
when the cost of the asset can be measured reliably and it is probable that the future economic benefits that are attributable
to the asset will flow to the Bank.
Intangible
assets are recorded initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortization
and any accumulated impairment losses.
Internally
developed computer software is recorded as an intangible asset if, among other requirements (basically the Bank’s ability
to use or sell it), it can be identified and its ability to generate future economic benefits can be demonstrated. The estimated
useful life for software is 3 years.
Intangible
assets are amortized on a straight-line basis over their estimated useful life; which has been defined as 36 months.
Expenditure
on research activities is recorded as an expense in the year in which it is incurred and cannot be subsequently capitalized.
o)
Cash and cash equivalents
The
indirect method is used to prepare the cash flow statement, starting with the Bank’s consolidated pre-tax income and incorporating
non-cash transactions, as well as income and expenses associated with cash flows, which are classified as investing or financing
activities.
The
cash flow statement was prepared considering the following definitions:
|
i.
|
Cash
flows: Inflows and outflows of cash and cash equivalents, such as deposits with the Central
Bank of Chile, deposits in domestic banks, and deposits in foreign banks.
|
|
ii.
|
Operating
activities: Principal revenue-producing activities performed by banks and other activities
that cannot be classified as investing or financing activities.
|
|
iii.
|
Investing
activities: The acquisition and disposal of long-term assets and other investments not
included in cash and cash equivalents.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
24
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
|
iv.
|
Financing
Activities: Activities that result in changes in the size and composition of equity and
liabilities that are not operating or investing activities.
|
p)
Allowances for loan losses
The
Bank continuously evaluates the entire loan portfolio and contingent loans, as it is established by the SBIF, to timely provide
the necessary and sufficient provisions to cover expected losses associated with the characteristics of the debtors and their
loans, which determine payment behavior and recovery.
The Bank has established
allowances to cover probable losses on loans and account receivables in accordance with instructions issued by Superintendency
of Banks and Financial Institutions (SBIF) and models of credit risk rating and assessment approved by the Board’s Committee,
including the amendments introduced by Circular No. 3,573 (and its further modifications) applicable as of January 1, 2016 which
establishes a standard
method for residential mortgage loans and complements and specifies instructions on provisions and loans classified in the impaired
portfolio, and subsequent amendments.
The
Bank uses the following models established by the SBIF, to evaluate its loan portfolio and credit risk:
|
-
|
Individual
assessment - where the Bank assesses a debtor as individually significant when their
loans are significant, or when the debtor cannot be classified within a group of financial
assets with similar credit risk characteristics, due to its size, complexity or level
of exposure.
|
|
-
|
Group
assessment - a group assessment is relevant for analyzing a large number of transactions
with small individual balances due from individuals or small companies. The Bank groups
debtors with similar credit risk characteristics giving to each group a default probability
and recovery rate based on a historical analysis. The Bank has implemented standard models
for mortgage loans, established in Circular N°3,573 (modified by Circular N°3,584),
and internal models for commercial and consumer loans.
|
|
I.
|
Allowances
for individual assessment
|
An
individual assessment of commercial debtors is necessary according to the SBIF, in the case of companies which, due to their size,
complexity or level of exposure, must be known and analyzed in detail.
The
analysis of the debtor is primarily focused on their credit quality and their risk category classification of the debtor and of
their respective contingent loans and loans These are assigned to one of the following portfolio categories: Normal, Substandard
and Impaired. The risk factors considered are: industry or economic sector, owners or managers, financial situation and payment
ability, and payment behavior.
The
portfolio categories and their definitions are the following:
|
i.
|
Normal
Portfolio includes debtors with a payment ability that allows them to meet their obligations
and commitments. Evaluations of the current economic and financial environment do not
indicate that this will change. The classifications assigned to this portfolio are categories
from A1 to A6.
|
|
ii.
|
Substandard
Portfolio includes debtors with financial difficulties or a significant deterioration
of their payment ability. There is reasonable doubt concerning the future reimbursement
of the capital and interest within the contractual terms, with limited ability to meet
short-term financial obligations. The classifications assigned to this portfolio are
categories from B1 to B4.
|
|
iii.
|
Impaired
Portfolio includes debtors and their loans where repayment is considered remote, with
a reduced or no likelihood of repayment. This portfolio includes debtors who have stopped
paying their loans or that indicate that they will stop paying, as well as those who
require forced debt restructuration, reducing the obligation or delaying the term of
the capital or interest, and any other debtor who is over 90 days overdue in his payment
of interest or capital. The classifications assigned to this portfolio are categories
from C1 to C6.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
25
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
Normal
and Substandard Compliance Portfolio
As
part of individual assessment, the Bank classifies debtors into the following categories, assigning them a probability of non-performance
(PNP) and severity (SEV), which result in the expected loss percentages.
Portfolio
|
Debtor’s
Category
|
Probability
of
Non-Performance
(%)
|
Severity
(%)
|
Expected
Loss (%)
|
Normal
Portfolio
|
A1
|
0.04
|
90.0
|
0.03600
|
A2
|
0.10
|
82.5
|
0.08250
|
A3
|
0.25
|
87.5
|
0.21875
|
A4
|
2.00
|
87.5
|
1.75000
|
A5
|
4.75
|
90.0
|
4.27500
|
A6
|
10.00
|
90.0
|
9.00000
|
Substandard
Portfolio
|
B1
|
15.00
|
92.5
|
13.87500
|
B2
|
22.00
|
92.5
|
20.35000
|
B3
|
33.00
|
97.5
|
32.17500
|
B4
|
45.00
|
97.5
|
43.87500
|
The
Bank first determines all credit exposures, which includes the accounting balances of loans and accounts receivable from customers
plus contingent loans, less any amount recovered through executing the financial guarantees or collateral covering the operations.
The percentages of expected loss are applied to this exposure. In the case of collateral, the Bank must demonstrate that the value
assigned reasonably reflects the value obtainable on disposal of the assets or equity instruments. When the credit risk of the
debtor is substituted for the credit quality of the collateral or guarantor, this methodology is applicable only when the guarantor
or surety is an entity qualified in a assimilable investment grade by a local or international company rating agency recognized
by the SBIF. Guaranteed securities cannot be deducted from the exposure amount, only financial guarantees and collateral can be
considered.
Notwithstanding
the foregoing, the Bank must maintain a minimum provision of 0.5% over loans and contingent loans in the normal portfolio.
Impaired
Portfolio
The
impaired portfolio includes all loans and the entire value of contingent loans of the debtors that are over 90 days overdue on
the payment of interest or principal of any loan at the end of the month. It also includes debtors who have been granted a loan
to refinance loans over 60 days overdue, as well as debtors who have undergone forced restructuration or partial debt condonation.
The
impaired portfolio excludes: a) residential mortgage loans, with payments less than 90 days overdue; and, b) loans to finance
higher education according to Law 20,027, provided the breach conditions outlined in Circular No. 3,454 of December 10, 2008 are
not fulfilled.
The
provision for an impaired portfolio is calculated by determining the expected loss rate for the exposure, adjusting for amounts
recoverable through available financial guarantees and deducting the present value of recoveries made through collection services
after the related expenses.
Once
the expected loss range is determined, the related provision percentage is applied over the exposure amount, which includes loans
and contingent loans related to the debtor.
The
allowance rates applied over the calculated exposure are as follows:
Classification
|
Estimated
range of loss
|
Allowance
|
C1
|
Up
to 3%
|
2%
|
C2
|
Greater
than 3% and less than 20%
|
10%
|
C3
|
Greater
than 20% and less than 30%
|
25%
|
C4
|
Greater
than 30% and less than 50%
|
40%
|
C5
|
Greater
than 50% and less than 80%
|
65%
|
C6
|
Greater
than 80%
|
90%
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
26
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
Loans
are maintained in the impaired portfolio until their payment ability is normal, notwithstanding the write off of each particular
credit that meets conditions of Title II of Chapter B-2. Once the circumstances that led to classification in the Impaired Portfolio
have been overcome, the debtor can be removed from this portfolio once all the following conditions are met:
|
i.
|
the
debtor has no obligations of the debtor with the Bank more than 30 days overdue;
|
|
ii.
|
the
debtor has not been granted loans to pay its obligations;
|
|
iii.
|
at
least one of the payments include the amortization of capital;
|
|
iv.
|
if
the debtor has made partial loan payments in the last six months, two payments have already
been made;
|
|
v.
|
if
the debtor must pay monthly installments for one or more loans, four consecutive installments
have been made;
|
|
vi.
|
the
debtor does not appear to have bad debts in the information provided by the SBIF, except
for insignificant amounts.
|
|
II.
|
Allowances
for group assessments
|
Group
assessments are used to estimate allowances required for loans with low balances related to individuals or small companies.
Group
assessments require the formation of groups of loans with similar characteristics by type of debtor and loan conditions, in order
to establish both the group payment behavior and the recoveries of their defaulted loans, using technically substantiated estimates
and prudential criteria. The model used is based on the characteristics of the debtor, payment history, outstanding loans and
default among other relevant factors.
The
Bank uses methodologies to establish credit risk, based on internal models to estimate the allowances for the group-evaluated
portfolio. This portfolio includes commercial loans with debtors that are not assessed individually, mortgage and consumer loans
(including installment loans, credit cards and overdraft lines). These methods allow the Bank to independently identify the portfolio
behavior and establish the provision required to cover losses arising during the year.
The customers are classified according to their internal and external characteristics into profiles, using a customer-portfolio
model to differentiate each portfolio’s risk in an appropriate manner. This is known as the profile allocation method.
The
profile allocation method is based on a statistical construction model that establishes a relationship through logistic regression
between variables (for example default, payment behavior outside the Bank, socio-demographic data) and a response variable which
determines the client’s risk, which in this case is over 90 days overdue. Hence, common profiles are established and assigned
a Probability of Non-Performance (PNP) and a recovery rate based on a historical analysis known as Severity (SEV).
Therefore,
once the customers have been profiled, and the loan’s profile assigned a PNP and a SEV, the exposure at default (EXP) is
calculated. This exposure includes the book value of the loans and accounts receivable from the customer, plus contingent loans,
less any amount that can be recovered by executing guarantees (for credits other than consumer loans).
Notwithstanding
the above, on establishing provisions associated with housing loans, the Bank must recognize minimum provisions according to standard
methods established by the SBIF for this type of loan. While this is considered to be a prudent minimum base, it does not relieve
the Bank of its responsibility to have its own methodologies of determining adequate provisions to protect the credit risk of
the portfolio.
Standard method
of residential mortgage loan provisions
As of January 1,
2016 and in accordance with Circular No. 3,573 issued by the SBIF, the Bank began applying the standard method of provisions for
residential mortgage loans. According to this method, the expected loss factor applicable to residential mortgage loans will depend
on the default of each loan and the relationship between the outstanding principal of each loan and the value of the associated
mortgage guarantee (Loans to Value, LTV) at the end of each month.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
27
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
The
allowance rates applied according to default and LTV are the following:
LTV
Range
|
Days
overdue at
month end
|
0
|
1-29
|
30-59
|
60-89
|
Impaired
portfolio
|
LTV≤40%
|
PNP(%)
|
1.0916
|
21.3407
|
46.0536
|
75.1614
|
100
|
Severity
(%)
|
0.0225
|
0.0441
|
0.0482
|
0.0482
|
0.0537
|
Expected
Loss (%)
|
0.0002
|
0.0094
|
0.0222
|
0.0362
|
0.0537
|
40%<
LTV ≤80%
|
PNP(%)
|
1.9158
|
27.4332
|
52.0824
|
78.9511
|
100
|
Severity
(%)
|
2.1955
|
2.8233
|
2.9192
|
2.9192
|
3.0413
|
Expected
Loss (%)
|
0.0421
|
0.7745
|
1.5204
|
2.3047
|
3.0413
|
80%<
LTV ≤90%
|
PNP(%)
|
2.5150
|
27.9300
|
52.5800
|
79.6952
|
100
|
Severity
(%)
|
21.5527
|
21.6600
|
21.9200
|
22.1331
|
22.2310
|
Expected
Loss (%)
|
0.5421
|
6.0496
|
11.5255
|
17.6390
|
22.2310
|
LTV
>90%
|
PNP(%)
|
2.7400
|
28.4300
|
53.0800
|
80.3677
|
100
|
Severity
(%)
|
27.2000
|
29.0300
|
29.5900
|
30.1558
|
30.2436
|
Expected
Loss (%)
|
0.7453
|
8.2532
|
15.7064
|
24.2355
|
30.2436
|
LTV
=Loan capital/Value of guarantee
If
the same debtor has more than one residential mortgage loan with the Bank and one of them over 90 days overdue, all their loans
shall be allocated to the impaired portfolio, calculating provisions for each them in accordance with their respective LTV.
For
residential mortgage loans related to housing programs and grants from the Chilean government, the allowance rate may be weighted
by a factor of loss mitigation (LM), which depends on the LTV percentage and the price of the property in the deed of sale (S),
as long as the debtor has contracted auction insurance provided by the Chilean government.
III.
Additional provisions
According
to SBIF regulation, banks are allowed to establish provisions over the limits already described, to protect themselves from the
risk of non-predictable economical fluctuations that could affect the macro-economic environment or a specific economic sector.
According
to No. 10 of Chapter B-1 from the SBIF Compendium of Accounting Standards, these provisions will be recorded in liabilities, similar
to provisions for contingent loans.
IV.
Charge-offs
As
a general rule, charge-offs should be done when the contract rights over cash flow expire. In the case of loans, even if the above
does not happen, the Bank will charge-off these amounts in accordance with Title II of Chapter B-2 of the Compendium of Accounting
Standards (SBIF).
These
charge-offs refer to the derecognition from the Consolidated Interim Statements of Financial Position of the respective loan,
including any not yet due future payments in the case of installment loans or leasing transactions (for which partial charge-offs
do not exist).
Charge-offs
are always recorded as a charge to loan risk allowances according to Chapter B-1 of the Compendium of Accounting Regulations,
no matter the reason for the charge-off. Any payment received related to a loan previously charged-off will be recognized as recovery
of loan previously charged-off at the Consolidated Interim Statement of Income.
Loan
and accounts receivable charge-offs are recorded for overdue, past due, and current installments when they exceed the time periods
described below since reaching overdue status:
Type
of loan
|
|
Term
|
|
|
|
Consumer
loans with or without collateral
|
|
6
months
|
Other
transactions without collateral
|
|
24
months
|
Commercial
loans with collateral
|
|
36
months
|
Mortgage
loans
|
|
48
months
|
Consumer
leasing
|
|
6
months
|
Other
non-mortgage leasing transactions
|
|
12
months
|
Mortgage
leasing (household and business)
|
|
36
months
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
28
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
V.
Recovery of loans previously charged off and accounts receivable from customers
Any
recovery on “Loans and accounts receivable from customers” previously charged-off will be recognized as a reduction
in the credit risk provisons in the Consolidated Interim Statement of Income.
Any
renegotiation of a loan previously charged-off will not give rise to income, as long as the operation continues being considered
as impaired. The cash payments received must be treated as recoveries of charged-off loans.
The
renegotiated loan can only be included again in assets if it is no longer considered as impaired, also recognizing the capitalization
income as recovery of charged-off loans.
q)
Provisions, contingent assets, and contingent liabilities
Provisions
are liabilities of uncertain timing or amount. Provisions are recognized in the Consolidated Statements of Financial Position
when the Bank:
|
i.
|
has
a present obligation (legal or constructive) as a result of past events, and
|
|
ii.
|
it
is probable that an outflow of resources will be required to settle these obligations
and the amount of these resources can be reliably measured.
|
Contingent
assets or contingent liabilities are any potential rights or obligations arising from past events whose existence will be confirmed
only by the occurrence or non-occurrence if one or more uncertain future events that are not wholly within control of the Bank.
The
Consolidated Financial Statements reflect all significant provisions for which it is estimated that the probability of having
to meet the obligation is more than likely than not. Provisions are quantified using the best available information regarding
the consequences of the event giving rise to them and are reviewed and adjusted at the end of accounting period. Provisions are
used when the liabilities for which they were originally recognized are settled. Partial or total reversals are recognized when
such liabilities cease to exist or are reduced.
Provisions
are classified according to the obligation covered as follows:
|
-
|
Provision
for employee salaries and expenses
|
|
-
|
Provision
for mandatory dividends
|
|
-
|
Provision
for contingent loan risks
|
|
-
|
Provisions
for contingencies
|
r)
Income taxes and deferred taxes
The
Bank records, when appropriate, deferred tax assets and liabilities for the estimated future tax effects attributable to differences
between the carrying amount of assets and liabilities and their tax bases. The measurement of deferred tax assets and liabilities
is based on the tax rate, in accordance with the applicable tax laws, using the tax rate that applies to the period when the deferred
asset and liability will be recovered or settled. The future effects of changes in tax legislation or tax rates are recorded in
deferred taxes from the date on which the law is enacted or substantially enacted.
s)
Use of estimates
The
preparation of the financial statements requires the Bank’s management to make estimates and assumptions that affect the
application of the accounting policies and the reported values of assets, liabilities, revenues and expenses. Actual results may
differ from these estimates.
In
certain cases, International Financial Reporting Standards (IFRS) require that assets or liabilities be recorded or disclosed
at their fair values. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between informed market participants at the measurement date. When available, quoted market prices in active
markets have been used as the basis for measurement. When quoted market prices in active markets are not available, the Bank has
estimated such values based on the best information available, including the use of internal modeling and other valuation techniques.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
29
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
The
Bank has established allowances to cover cover probable losses, to estimate allowances. These allowances must be regularly reviewed
taking into consideration factors such as changes in the nature and volume of the loan portfolio, trends in forecasted portfolio
quality, credit quality and economic conditions that may adversely affect the borrowers’ ability to pay. Increases in the
allowances for loan losses are reflected as “Provision for loan losses” in the Consolidated Interim Statement of Income.
Loans
are charged-off when the contractual rights for the cash flows expire, however, for loans and accounts receivable from customers
the bank will charge-off in accordance with Title II of Chapter B-2 of the Compendium of Accounting Standards issued by the SBIF.
Charge-offs are recorded as a reduction of the allowance for loan losses.
The
relevant estimates and assumptions made to calculate provisions are regularly reviewed by the Bank’s Management to quantify
certain assets, liabilities, revenues, expenses, and commitments.
Revised
accounting estimates are recorded in the period in which the estimate is revised and in any affected future period.
These
estimates are based on the best available information and mainly refer to:
|
-
|
Allowances
for loan losses (Notes 8, 9, and 28)
|
|
-
|
Impairment
losses of certain assets (Notes 7, 8, 9, 10, and 31)
|
|
-
|
The
useful lives of tangible and intangible assets (Notes 11, 12 and 31)
|
|
-
|
The
fair value of assets and liabilities (Notes 6, 7, 10 and 34)
|
|
-
|
Commitments
and contingencies (Note 20)
|
|
-
|
Current
and deferred taxes (Note 13)
|
t)
Non-current assets held for sale
Non-current
assets (or a group of assets and liabilities) that expect to be recovered mainly through the sale of these items rather than through
their continued use, are classified as held for sale. Immediately prior to this classification, assets (or elements of a disposable
group) are valued in accordance with the Bank’s policies. The assets (or disposal group) are subsequently valued at the
lower of carrying amount and fair value less selling costs.
As
of June 30, 2018 and December 31, 2017, the bank has not qualified any non-current assets as held for sale.
Assets
received or awarded in lieu of payment
Assets
received or awarded in lieu of payment of loans and accounts receivable from clients are recognized at their fair value. A price
is agreed upon by the parties through negotiation or, when the parties do not reach an agreement, at the amount at which the Bank
is awarded those assets at a judicial auction. In the both cases, an independent appraisal is performed.
Any excess
of the outstanding loan balance over the fair value is recognized in the Consolidated Interim Statement of Income under “Provision
for loan losses”.
These
assets are subsequently valued at the lower of the amount initially recorded and the net realizable value, which corresponds to
its fair value (liquidity value determined through an independent appraisal) less their respective costs of sale. The difference
between both are recognized in the Consolidated Statement under “Other operating expenses”.
At
the end of each year the Bank performs an analysis to review the “selling costs” of assets received or awarded in
lieu of payments which will be applied at this date and during the following year. On December 31, 2017 the average selling cost
has been estimated at 3.4% of the appraisal value (5.1% for December 31, 2016).
Independent
appraisals are obtained at least every 18 months and fair values are adjusted accordingly.
In
general, it is estimated that these assets will be disposed of within a term of one year from its date of award. As set forth
in article 84 of the General Banking Act, those assets that are not sold within that term are charged-off in a single installment.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
30
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
u)
Earnings per share
Basic
earnings per share are calculated by dividing the net income attributable to the equity holders of the Bank by the weighted average
number of shares outstanding during the reported period.
Diluted
earnings per share are calculated in a similar manner to basic earnings, but the weighted average number of outstanding shares
is adjusted to take into consideration the potential diluting effect of stock options, warrants, and convertible debt.
As
of June 30, 2018 and December 31, 2017, the Bank did not have any instruments that generated dilution.
v)
Temporary acquisition (assignment) of assets and liabilities
Purchases
or sales of financial assets under non-optional repurchase agreements at a fixed price (repos) are recorded in the Consolidated
Statements of Financial Position as an financial assignment based on the nature of the debtor (creditor) under “Deposits
in the Central Bank of Chile,” “Deposits in financial institutions” or “Loans and accounts receivable
from customers” (“Central Bank of Chile deposits,” “Deposits from financial institutions” or “Customer
deposits”).
Differences
between the purchase and sale prices are recorded as financial interest over the term of the contract.
w)
Assets under management and investment funds managed by the Bank
Assets
owned by third parties and managed by certain companies that are within the Bank’s scope of consolidation (Santander S.A.
Sociedad Securitizadora), are not included in the Consolidated Interim Statement of Financial Position. Management fees are included
in “Fee and commission income” in the Consolidated Interim Statement of Income.
x)
Provision for mandatory dividends
As
of June 30, 2018 and December 31, 2017, the Bank recorded a provision for minimum mandatory dividends. This provision is made
pursuant to Article 79 of the Corporations Act, which is in accordance with the Bank’s internal policy, which requires at
least 30% of net income for the period is distributed, except in the case of a contrary resolution adopted at the respective shareholders’
meeting by unanimous vote of the outstanding shares. This provision is recorded as a deduction from “Retained earnings”
– “Provision for mandatory dividends” in the Consolidated Statement of Changes in Equity with offset to Provisions.
y)
Employee benefits
|
i.
|
Post-employment
benefits – Defined Benefit Plan:
|
According
to current collective labor agreements and other agreements, the Bank has an additional benefit available to its principal executives,
consisting of a pension plan, whose purpose is to endow them with funds for a better supplementary pension upon their retirement.
Features
of the Plan
:
The
main features of the Post-Employment Benefits Plan promoted by the Banco Santander-Chile are:
I.
|
|
Aimed
at the Bank’s management.
|
II.
|
|
The
general requirement is that the beneficiary must still be employed by the Bank when reaching
60 years old.
|
III.
|
|
The
Bank will mixed collective life and savings insurance policy for each beneficiary in
the plan. Regular voluntary installments will be paid into this fund by the beneficiary
and matched by the Bank.
|
IV.
|
|
The
Bank will be responsible for granting the benefits directly.
|
The
projected unit credit method is used to calculate the present value of the defined benefit obligation and the current service
cost.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
31
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
Components
of defined benefit cost include:
|
-
|
current
service cost and any past service cost, which are recognized in profit or loss for the
period;
|
|
-
|
net
interest on the liability (asset) for net defined benefit, which is recognized in profit
or loss for the period;
|
|
-
|
new
liability (asset) remeasurements for net defined benefit include:
|
(a)
actuarial gains and losses;
(b)
the performance of plan assets, and;
(c)
changes in the effect of the asset ceiling which are recognized in other comprehensive income.
The
liability (asset) for net defined benefit is the deficit or surplus, calculated as the difference between the present value of
the defined benefit obligation less the fair value of plan assets.
Plan
assets comprise the pension fund taken out by the Group with a third party that is not a related party. These assets are held
by an entity legally separated from the Bank and exist solely to pay benefits to employees.
The
Bank recognizes the present service cost and the net interest of the Personnel wages and expenses on the Consolidated Statement
of Income. Given the plan’s structure, it does not generate actuarial gains or losses. The plan’s performance is established
and fices during the period; consequently, there are no changes in the asset’s cap. Accordingly, there are no amounts recognized
in other comprehensive income.
The
post-employment benefits liability, recognized in the Consolidated Statement of Financial Position, represents the deficit or
surplus in the defined benefit plans of the Bank. Any surplus resulting from the calculation is limited to the present value of
any economic benefits available in the form of refunds from the plan or reductions in future contributions.
When
employees leave the plan before meeting the requirements to be eligible for the benefit, contributions made by the Bank are reduced.
Severance
provision for years of employment are recorded only when they actually occur or upon the availability of a formal and detailed
plan in which the fundamental modifications to be made are identified, provided that such plan has already started to be implemented
or its principal features have been publicly announced, or objective facts about its execution are known.
|
iii.
|
Cash-settled
share based compensation
|
The
Bank allocates cash-settled share based compensation to executives of the Bank and its Subsidiaries in accordance with IFRS 2.
The Bank measures the services received and the obligation incurred at fair value.
Until
the obligation is settled, the Bank calculates the fair value at the end of each reporting period, as well as at the date of settlement,
recognizing any change in fair value in the income statement for the period.
z)
New accounting pronouncements
|
I.
|
Adoption
of new accounting standards and instructions issued both by the Superintendency of Banks
and Financial Institutions and the International Accounting Standards Board
|
As
of the issue date of these Consolidated Interim Financial Statements, the following new accounting pronouncements have been issued
by the both the SBIF and the IASB, which have been fully incorporated by the Bank and are detailed as follows:
|
1.
|
Accounting
Standards Issued by the SBIF
|
Circular
N°3634 - Activos ponderados por riesgo, equivalente de crédito y límites de crédito aplicables a instrumentos
derivados compensados y liquidados por una Entidad de Contraparte Central – El 9 de marzo de 2018 la SBIF emitio esta circular
con el objeto que los bancos puedan reconocer los efectos de los mecanismos de mitigación de riesgos propios de aquellos
sistemas de compensación y liquidación administrados por Entidades de Contraparte Central (ECC), introduciendo un
categoria intermedia para clasificar el equivalente de crédito de los instrumentos derivados compensados y liquidados en
una ECC, siendo el ponderador de riesgo para estos activos igual a 2%.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
32
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
A
efectos de determinar el equivalente de crédito de instrumentos derivados compensados y liquidados en una ECC, se deberá
tener en cuenta el tipo de relación del Banco con la ECC y el plazo residual del derivado, asi como las garantías
y resguardos.
Adicionalmente,
la SBIF considera que a las operaciones sobre instrumentos derivados negociados entre bancos constituidos en Chile, incluidas
las sucursales de bancos extranjeros, les resulta aplicable el límite de crédito interbancario, aun cuando dichas
operaciones posteriormente se compensen y liquiden en una ECC.
Estas
modificaciones sonnaplicacbles a partir del 30 de junio de 2018. La Administración ha llevado a cabo las adecuaciones necesarias
para cumplir con este requerimiento en tiempo y forma, no existiendo situaciones relevantes que indiquen lo contrario.
2.
Accounting Standards issued by the International Accounting Standards Board
IFRS
15, Income from contracts with clients -
On May 28, 2014, the IASB published IFRS 15, which aims to establish principles for
reporting useful information to users of financial information about the nature, amount, timing and uncertainty of The income
and cash flows generated from an entity’s contracts with its customers. IFRS 15 eliminates IAS 11 Construction Contracts, IAS
18 Income, IFRIC 13 Loyalty Programs with Customers, IFRIC 15 Real Estate Construction Agreements, IFRIC 18 Transfer of Assets
from Customers and SIC 31 Revenue - Exchange of Advertising Services.
On
April 12, 2016, the IASB issued “Clarifications to IFRS 15 Revenue from contracts with customers”, this amendments do
not change the underlying principles of the standard, just clarify and offer some additional transition relief. The main topics
addressed by this amendment comprise: Indentifying performance obligations, Principal versus agent cosniderations and licensing
in addition to transition relief.
This
standard was applicable from January 1, 2018, with early application permitted.
Management performed a detailed review of items
under the scope and its adaptation to the new five-step model of revenue recognition, and conclude that this standard did not
have material impact on the Bank’s financial statement.
Amendments
to IFRS 2 Classification and measurement of share-based payment transactions –
These amendments were published on June
20, 2016, to address issues with:
|
●
|
The
accounting of share- based payment transactions paid in cash that include a performance
condition
|
|
●
|
The
classification of share-based transactions
|
|
●
|
Accounting
for modifications of share-based payment transactions from cash-settled to equity-settled.
|
This
standard was applicable from January 1, 2018, with early application permitted.
Management evaluation conclude that this amendment
did not have material impact on the Bank’s financial statement.
Amendments
to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts -
The amendments are intended to address
concerns about the different effective dates of IFRS 9 and the forthcoming new insurance contracts standard (expected as IFRS
17 within the next six months). The amendments provide two options for entities that issue insurance contracts within the scope
of IFRS 4:
|
-
|
an
option that permits entities to reclassify, from profit or loss to other comprehensive
income, some of the income or expenses arising from designated financial assets (the
“overlay approach”);
|
|
-
|
an
optional temporary exemption from applying IFRS 9 for entities whose predominant activity
is issuing contracts within the scope of IFRS 4 (the “deferral approach”).
|
An
entity would apply the overlay approach retrospectively to qualifying financial assets when it first applies IFRS 9 while an entity
would apply the deferral approach for annual periods beginning on or after January 1, 2018.
Management evaluation conclude
that this amendment did not have material impact on the Bank’s financial statement.
IFRIC
22 Foreign Currency Transactions and Advance Consideration –
This interpretations issued on December 8, 2016, clarifies
the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The Interpretation
covers foreign currency transactions when an entity recognises a non-monetary asset or non-monetary liability arising from the
payment or receipt of advance consideration before the entity recognises the related asset, expense or income. It does not apply
when an entity measures the related asset, expense or income on initial recognition at fair value or at the fair value of the
consideration received or payed at a date other than the date of initial recognition of the non-monetary asset or non-monetary
liability. Also, the Interpretation need not be applied to income taxes, insurance contracts or reinsurance contracts.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
33
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
The
date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary
prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is
established for each payment or receipt.
IFRIC
22 was effective for annual reporting periods beginning on or after 1 January 2018. Earlier application was permitted.
Management
evaluation conclude that this amendment did not have material impact on the Bank’s financial statement.
Annual
Improvement 2014-2016
IFRS
1 First time adoption of IFRS
- Deletion of short-term exemptions for first-time adopters.
IAS
28 Investments in Associates and Joint Ventures
- Measuring an associate or joint venture at fair value.
The
amendments to IFRS 1 and IAS 28 were effective for annual periods beginning on or after 1 January 2018.
Management evaluation
conclude that this amendment did not have material impact on the Bank’s financial statement.
New
accounting standards and instructions issued by both the Superintendency of Banks and Financial Institutions and by the International
Accounting Standards Board that have not come into effect as of June 30, 2018
As
of the closing date of these financial statements, new International Financial Reporting Standards had been published as well
as interpretations of them and SBIF rules, which were not mandatory as of March 31, 2018. Although in some cases the application
is permitted by the IASB, the Bank has not made its application on that date.
1.
Accounting Standards issued by the Superintendency of Banks and Financial Institutions
As
of June 30, 2018, there are no new Accounting Standards issued by the Superintendency of Banks and Financial Institutions.
2.
Accounting Standards issued by the International Accounting Standards Board
IFRS
9, Financial Instruments -
On November 12, 2009, the International Accounting Standards Board (IASB) issued IFRS 9, Financial
Instruments. This Standard introduces new requirements for the classification and measurement of financial assets. IFRS 9 specifies
how an entity should classify and measure its financial assets. Requires that all financial assets are classified in their entirety
on the basis of the entity’s business model for the management of financial assets and the characteristics of the contractual
cash flows of financial assets.
On
October 28, 2010, the IASB published a revised version of IFRS 9, Financial Instruments. The revised Standard retains the requirements
for the classification and measurement of financial assets that was published in November 2009, but adds guidelines on the classification
and measurement of financial liabilities. Likewise, it has replicated the guidelines on the recognition of financial instruments
and the implementation guides related from IAS 39 to IFRS 9. These new guidelines conclude the first phase of the IASB project
to replace IAS 39. The other phases, impairment and hedge accounting, have not yet been finalized.
The
guidance included in IFRS 9 on the classification and measurement of financial assets has not changed from those established in
IAS 39. In other words, financial liabilities will continue to be measured either at amortized cost or at fair value with changes
in results. The concept of bifurcation of derivatives incorporated in a contract for a financial asset has not changed Financial
liabilities held for trading will continue to be measured at fair value with changes in results, and all other financial assets
will be measured at amortized cost unless the value option is applied reasonable using the criteria currently in IAS 39.
Notwithstanding
the foregoing, there are two differences with respect to IAS 39:
-
The presentation of the effects of changes in fair value attributable to the credit risk of a liability; and
-
The elimination of the cost exemption for liabilities derivatives to be settled through the delivery of non-traded equity instruments.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
34
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
On December 16, 2011, the IASB issued Mandatory
Application Date of IFRS 9 and Disclosures of the Transition, deferring the effective date of both the 2009 and 2010 versions
to annual periods beginning on or after January 1, 2015 . Prior to the amendments, the application of IFRS 9 was mandatory for
annual periods beginning on or after 2013. The amendments change the requirements for the transition from IAS
39
Financial Instruments: Recognition and Measurement to IFRS 9. In addition, they also modify IFRS 7 Financial Instruments: Disclosures
to add certain requirements in the reporting period in which the date of application of IFRS 9 is included. Finally, on July 24,
2014, it is established that the date Effective application of this rule will be for annual periods beginning on January 1, 2018.
On
November 19, 2013 ASB issued “Amendment to IFRS 9: hedge accounting and amendments to IFRS 9, IFRS 7 and IAS 39”, which
includes a new general hedge accounting model, which is more closely aligned with risk management, providing more useful information
to the users of the financial statements. On the other hand, the requirements relating to the fair value option for financial
liabilities were changed to address the credit risk itself, this improvement establishes that the effects of changes in the credit
risk of a liability should not affect the result of the period a unless the liabilities remain to negotiate; the early adoption
of this modification is permitted without the application of the other requirements of IFRS 9. In addition, it conditions the
effective date of entry into force upon completion of the IFRS 9 project, allowing its adoption in the same way.
On
July 24, 2014, the IASB published the final version of IFRS 9 - Financial Instruments, including the regulations already issued
together with a new expected loss model and minor modifications to the classification and measurement requirements for financial
assets, adding a new category of financial instruments: assets at fair value with changes in other comprehensive result for certain
debt instruments. It also includes an additional guide on how to apply the business model and testing of contractual cash flow
characteristics.
On
October 12, 2017, “Amendment to IFRS 9: Characteristics of Anticipated Cancellation with Negative Compensation” was
published, which clarifies that according to the current requirements of IFRS 9, the conditions established in Test SPPI are not
met if the Bank should make a settlement payment when the client decides to terminate the credit. With the introduction of this
modification, in relation to termination rights, it is allowed to measure at amortized cost (or FVOCI) in the case of negative
compensation.
This
regulation was effective as of January 1, 2018. Early application is allowed. The Administration in accordance with the Superintendency
of Banks and Financial Institutions pronouncement, will not apply this standard meantime SBIF does not provide it as a mandatory
standard for all Chilean banks.
Sale
or Contributions of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
- Issued
on September 11, 2014, the IASB has published ’Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
(Amendments to IFRS 10 and IAS 28)’. The amendments address a conflict between the requirements of IAS 28 ‘Investments in Associates
and Joint Ventures’ and IFRS 10 ‘Consolidated Financial Statements’ and clarifies the treatment of the sale or contribution of
assets from an investor to its associate or joint venture, as follows:
|
-
|
requires
full recognition in the investor’s financial statements of gains and losses arising on
the sale or contribution of assets that constitute a business (as defined in IFRS 3 Business
Combinations);
|
|
-
|
requires
the partial recognition of gains and losses where the assets do not constitute a business,
i.e. a gain or loss is recognized only to the extent of the unrelated investors’
interests in that associate or joint venture.
|
On
December 17, 2015 the IASB has published final amendments to “Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture”. The amendments defer the effective date of the September 2014 amendments to these standards
indefinitely until the research project on the equity method has been concluded.
The Administration will be waiting for the
new validity to evaluate the potential effects of this modification.
IFRS
16 Leases -
On January 13, 2016, the IASB issued this new regulation which replaces IAS 17 Leases, IFRIC 4 Determination of
whether an agreement contains a lease, SIC 15 Operating leases - incentives and SIC 27 Evacuation of the essence of Transactions
that take the legal form of a lease. The main effects of this rule apply to tenant accounting, mainly because it eliminates the
dual accounting model: operational or financial leasing, this means that tenants must recognize “a right to use an asset”
and a liability for Lease (the present value of lease futures payments). In the case of the landlord the current practice is maintained
- that is, lessors continue to classify leases as financial and operating leases. This regulation is applicable as of January
1, 2019, with early application permitted if IFRS 15 “Customer Contract Revenue” is applied.
The Administration is
evaluating the potential impact of the adoption of these regulations.
IFRS
17 Insurance contracts
– This standard issued on May 18, 2017 replaces the current IFRS 4. IFRS 17 will mainly change
accounting for all entities that issue insurance contracts and investment contracts with discretionary participation characteristics.
The standard applies to annual periods beginning on or after January 1, 2021, with early application permitted provided IFRS 15,
“Revenue from contracts with customers” and IFRS 9, “Financial instruments” is applied.
This norm does
not apply directly to the bank, but, the Bank participates in the insurance business and will make sure that this norm is correctly
applied.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
35
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
01
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, continued
IFRIC
23 Uncertainty over Income Tax Treatments
– This standard issued on June 7, 2017, clarifies how the recognition and
measurement requirements of IAS 12 apply when there is uncertainty about tax treatments. The standard applies to annual periods
beginning on or after January 1, 2019, with early application permitted.
The Bank’s management has considered that these
amendments will not have material impact on the consolidated financial statements of the Bank.
Amendments
to IAS 28 long-term interest in Associates and Joint Ventures -
This standard was issued in October 12, 2017 to clarify that
an entity applies IFRS 9 including its impairment requirements, to long-term interests in an associate or joint venture that form
part of the net investment in the associate or joint venture but to which the equity method is not applied. The amendments are
effective for periods beginning on or after January 1, 2019, early application is permitted.
Annual
Improvements to IFRS Standards 2015–2017 Cycle
This
annual improvements issued in December 12, 2017, containing the following amendments:
IFRS
3 Business Combination and IFRS 11 Joint Arrangements
– The amendments to IFRS 3 clarify that when an entity obtains
control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS
11 clarify an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held
interest in that business.
IAS
12 Income taxes
– The amendments clarify that all income tax consequences of dividends should be recognized in profit
or loss, regardless of how the tax arises.
IAS
23 Borrowing cost
– The amendments clarify that if any specific borrowing remain outstanding after the related asset
is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating
the capitalization rate on general borrowings.
The
amendments are effective for periods beginning on or after January 1, 2019, early application is permitted.
The Bank’s
management has considered that these amendments will not have material impact on the consolidated financial statements of the
Bank
.
Amendments
to IAS 19: Plan amendment, curtailment or settlement -
The amendment was issued on February 7, 2018 and include the following
changes:
|
-
|
If
a plan amendment, curtailment or settlement occurs, it is now mandatory that the current
service cost and the net interest for the period after the remeasurement are determined
using the assumptions used for the remeasurement.
|
|
-
|
In
addition, amendments have been included to clarify the effect of a plan amendment, curtailment
or settlement on the requirements regarding the asset ceiling.
|
The
amendments are effective for periods beginning on or after January 1, 2019, early application is permitted, but must be disclosed.
The Bank’s management is evaluating if these amendments will have material impact on the Bank’s consolidated financial
statements.
Conceptual
framework for financial reporting
- Issued on March 29, 2018, the purpose of the Conceptual Framework is to:
(a)
assist the International Accounting Standards Board to develop IFRS Standards that are based on consistent concepts;
(b)
assist preparers to develop consistent accounting policies when no Standard applies to a particular transaction or other event,
or when a Standard allows a choice of accounting policy; and
(c)
assist all parties to understand and interpret the Standards
The
Conceptual Framework is not a Standard and not overrides any Standard or any requirement in a Standard. The revised Conceptual
framework introduces the following main improvements:
|
-
|
Measurement:
concepts on measurement, including factors to be considered when selecting a measurement
basis
|
|
-
|
Presentation
and disclosure: concepts on presentation and disclosure, including when to classify income
and expenses in other comprehensive income
|
|
-
|
Derecognition:
guidance on when assets and liabilities are removed from financial statements
|
This
framework is effective for periods beginning on or after January 1, 2020.
The The Bank’s management is evaluating if
this conceptual framework will have material impact on the Bank’s consolidated financial statements.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
36
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 02
ACCOUNTING
CHANGES
Starting
on January 1, 2018, IFRS 15; revenues from contracts with customers has become effective. In accordance with the Bank activities,
income and expenses arising from fees and commission are under the scope of this new standard. Consequently a high deeply review
of the fees and comission has been performed, to ensure the five step approach are fully met.
The
Bank has ellected to apply retrospectively with the cumulative effect recognised at the date of initial application method, this
method allow not to restate prior compare period.
The
Bank concludes that there are not quantitative effects, however new disclosure requirements must be adopted. See Note 1 and Note
25.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
37
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
03
SIGNIFICANT
EVENTS
As
of June 30, 2018, the following significant events have occurred and affected the Bank’s operations and Consolidated Interim
Financial Statements.
a)
The Board
During
Banco Santader Chile’s ordinary board session held on February 27, 2018, the board agreed on the following matters:
|
–
|
Due
to Vittorio Corbo Lioi’s resignation from the board, who acted as the board’s
President, Claudio Melandri Hinojosa has been appointed as Banco Santader Chile’s
new board President. For the time being, Claudio Melandri Hinojosa will act as Chief
Executive Officer until Februrary 28, 2018 inclusive, in accordance with article 49 N°8
of the General Law of Banks.
|
|
–
|
Miguel
Mata Huerta has been named Chief Executive Officer, starting on March 1, 2018.
|
During
Banco Santader Chile’s ordinary board session held on March 27, 2018, the board agreed on the following matters:
|
–
|
Due
to Roberto Méndez Torres and Roberto Zahler Mayanz resignation from the board,
Félix de Vicente Mingo and Alfonso Gómez Morales have been appointed as
independent directors in the board.
|
|
–
|
Orlando
Poblete Iturrate has been named First Vicepresident and Oscar Von Chrismar Carvajal has
been named Second Vice President.
|
|
–
|
A
shareholder’s meeting has been summoned for April 24, 2018.
|
b)
Use profit and Distribution of Dividends
During
a ordinary board session held on April 24, 2018, together with approving the financial statements corresponding to the year 2017,
it was agreed to distribute 75% of the Net Income generated during the period (which in the financial statements is reffered to
as “Net Income Attributable to Equity holders of the Bank”), which amounted to Ch$564,815 million. This dividend is
equivalent to Ch$2.24791611 per share. Likewise, it was approved that the remaining 25% of the net income be destined to increase
the Bank’s reserves.
c)
External Auditor Appointment
During
the board session mentioned previously, it was agreed to name PricewaterhouseCoopers LLC, as the Bank’s and Subsidiaries
external auditor for the 2018 period.
d)
Issuance and repurchase of bank bonds – As of June 30, 2018
d.1)
Senior bonds
As
of June 30, 2018, the bank has placed senior bonds for EUR 66,000,000. The detail for this bond placement is included in Note
16.
Series
|
Currency
|
Original
Term
(Years)
|
Anual
Rate
|
Placement
Date
|
Amount
|
Expiration
Date
|
EUR
|
EUR
|
7.0
|
1.00%
|
05-04-2018
|
26,000,000
|
05-28-2025
|
EUR
|
EUR
|
12.0
|
1.78%
|
06-08-2018
|
40,000,000
|
06-15-2030
|
Total
|
EUR
|
|
|
|
66,000,000
|
|
d.2)
Subordinated bonds
As
of June 30, 2018, the Bank has not issued subordinated bonds.
d.3)
Mortgage bonds
As
of June 30, 2018, the Bank has not issued mortgage bonds.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
38
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
03
SIGNIFICANT
EVENTS, continued
d.4)
Repurchased bonds
During the
first semester of 2018 the Bank has repurchased the following bonds:
Date
|
|
Type
|
Currency
|
Amount
|
01-04-2018
|
|
Senior
|
CLP
|
12,890,000,000
|
01-05-2018
|
|
Senior
|
CLP
|
4,600,000,000
|
01-22-2018
|
|
Senior
|
UF
|
24,000
|
04-05-2018
|
|
Senior
|
UF
|
484,000
|
04-06-2018
|
|
Senior
|
UF
|
184,000
|
04-23-2018
|
|
Senior
|
UF
|
216,000
|
04-24-2018
|
|
Senior
|
UF
|
4,000
|
04-25-2018
|
|
Senior
|
UF
|
262,000
|
05-10-2018
|
|
Senior
|
UF
|
800,000
|
As
of June 30, 2017, the following significant events have occurred and affected the Bank’s operations and Consolidated Interim
Financial Statements.
a)
The Board
On
April 5, 2017, the bylaws of Banco Santander-Chile, approved at the extraordinary board session held on January 9, 2017, were
published in the Official Gazette, whose minutes were reduced to a public deed on February 14, 2017, in The Notary of Santiago
de Nancy de la Fuente Hernández. Among others, a consolidated text of the bylaws was established and, after the reforms
introduced, its essential clauses are the following:
|
-
|
Name:
Banco Santander-Chile
|
|
-
|
Purpose:
The execution or conclusion of all acts, contracts, businesses or operations that the
laws, especially the General Law of Banks, allow the banks to perform without prejudice
to extend or restrict their sphere of action in harmony with the legal provisions in
force Or that are established in the future, without the need to amend the present statutes.
|
|
-
|
Capital:
$ 891,302,881,691, divided into 188,446,126,794 nominative shares, with no par value,
of the same and only series.
|
|
-
|
Directory:
Corresponds to a Board composed of 9 full members and 2 alternates.
|
During
the ordinary board’ session held on April 26, 2017, the Board of Directors was elected for a period of three years, consisting
of nine Principal Directors and two Alternate Directors. The following persons were elected:
Principal
Directors: Vittorio Corbo Lioi, Oscar von Chrismar Carvajal, Roberto Méndez Torres, Juan Pedro Santa María Pérez,
Ana Dorrego de Carlos, Andreu Plaza López, Lucia Santa Cruz Sutil, Orlando Poblete Iturrate and Roberto Zahler Mayanz.
Alternate
Directors: Blanca Bustamante Bravo and Raimundo Monge Zegers
b)
Use profit and Distribution of Dividends
During
a ordinary board session held on April 26, 2017, together with approving the Financial Statements for 2016, it was agreed to distribute
70% of the net income for the period (which in the financial statements is reffered to as “Net Income Attributable to Equity
holders of the Bank”), which amounted to Ch $ 472,351 million. This dividend is equivalent to $ 1.75459102 per share. Likewise,
it was approved that the remaining 30% of the net income be destined to increase the Bank’s reserves.
c)
External Auditor Appointment
During
the board session mentioned previously, it was agreed to name PricewaterhouseCoopers LLC, as the Bank’s and Subsidiaries
external auditor for the 2017 period.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
39
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
03
SIGNIFICANT
EVENTS, continued
d)
Issuance and repurchase of bank bonds – As of June 30, 2017
b.1)
Senior bonds
As
of June 30, 2017, the Bank has not issued senior bonds.
b.2)
Subordinated bonds
As
of June 30, 2017, the Bank has not issued subordinated bonds.
b.3)
Mortgage bonds
As
of June 30, 2017, the Bank has not issued mortgage bonds.
b.4)
Repurchased bonds
During the
first semester of 2017 the Bank has repurchased the following bonds:
Date
|
|
Type
|
Currency
|
Amount
|
03-06-2017
|
|
Senior
|
USD
|
6,900,000
|
02-12-2017
|
|
Senior
|
UF
|
1,000,000
|
05-16-2017
|
|
Senior
|
UF
|
690,000
|
05-17-2017
|
|
Senior
|
UF
|
15,000
|
05-26-2017
|
|
Senior
|
UF
|
340,000
|
06-01-2017
|
|
Senior
|
UF
|
590,000
|
06-02-2017
|
|
Senior
|
UF
|
300,000
|
06-05-2017
|
|
Senior
|
UF
|
130,000
|
06-19-2017
|
|
Senior
|
UF
|
265,000
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
40
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
04
REPORTING
SEGMENTS
The Bank
manages and measures the performance of its operations by business segments. The information disclosed in this note is not necessarily
comparable to that of other financial institutions, since it is based on management’s internal information system by segment.
Inter-segment
transactions a re conducted under normal arm’s length commercial terms and conditions. Each segment’s assets, liabilities,
and income include items directly attributable to the segment to which they can be allocated on a reasonable basis.
In
order to achieve compliance with the strategic objectives established by senior management and adapt to changing market conditions,
from time to time, the Bank makes adjustments in its organization, modifications that in turn impact to a greater or lesser extent,
in the way in which it is managed or managed. Thus, the present disclosure provides information on how the Bank is managed as
of June 30, 2018. Regarding the information corresponding to the year 2017, it has been prepared with the current criteria at
the closing of these financial statements in order to achieve the duecomparability of the figures.
The Bank
has the reportable segments noted below:
Retail
Banking
Consists
of individuals and small to middle-sized entities (SMEs) with annual income less than Ch$1,200 million. This segment gives customers
a variety of services, including consumer loans, credit cards, auto loans, commercial loans, foreign exchange, mortgage loans,
debit cards, checking accounts, savings products, mutual funds, stockbrokerage, and insurance brokerage. Additionally the SME
clients are offered government-guaranteed loans, leasing and factoring.
Middle-market
This
segment is made up of companies and large corporations with annual sales exceeding Ch$1,200 million. It serves institutions such
as universities, government entities, local and regional governments and companies engaged in the real estate industry who carry
out projects to sell properties to third parties and annual sales exceeding Ch$800 million with no upper limit. The companies
within this segment have access to many products including commercial loans, leasing, factoring, foreign trade, credit cards,
mortgage loans, checking accounts, transactional services, treasury services, financial consulting, savings products, mutual funds,
and insurance brokerage. Also companies in the real estate industry are offered specialized services to finance residential projects,
with the aim of expanding sales of mortgage loans.
Global
Corporate Banking
This
segment consists of foreign and domestic multinational companies with sales over Ch$10,000 million. The companies within this
segment have access to many products including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans,
checking accounts, transactional services, treasury services, financial consulting, investments, savings products, mutual funds
and insurance brokerage.
This
segment also consists of a Treasury Division which provides sophisticated financial products, mainly to companies in the Middle-market
and Global Corporate Banking segments. These include products such as short-term financing and fund raising, brokerage services,
derivatives, securitization, and other tailor-made products. The Treasury area may act as brokers to transactions and also manages
the Bank’s investment portfolio.
Corporate
Activities (“Other”)
This
segment mainly includes the results of our Financial Management Division, which develops global management functions, including
managing inflation rate risk
, foreign currency gaps,
interest rate risk and liquidity risk. Liquidity risk is managed mainly through wholesale deposits, debt issuances and the Bank’s
available for sale portfolio. This segment also manages capital allocation by unit. These activities usually result in a negative
contribution to income.
In
addition, this segment encompasses all the intra-segment income and all the activities not assigned to a given segment or product
with customers.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
41
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
04
REPORTING
SEGMENTS, continued
The segments’
accounting policies are those described in the summary of accounting policies. The Bank earns most of its income in the form of
interest income, fee and commission income and income from financial operations. To evaluate a segment’s financial performance
and make decisions regarding the resources to be assigned to segments, the Chief Operating Decision Maker (CODM) bases his assessment
on the segment’s interest income, fee and commission income, and expenses.
Below
are the tables showing the Bank’s results by business segment, for the periods ending as of June 30, 2018 and 2017:
|
|
June
30, 2018
(Unaudited)
|
|
Loans
and accounts receivable from customers
(1)
|
Net interest income
|
Net
fee and commission income
|
Financial
transactions, net
(2)
|
Provision
for loan losses
|
Support
expenses
(3)
|
Segment’s
net contribution
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Segment
|
|
|
|
|
|
|
|
Retail
Banking
|
19,772,242
|
472,149
|
111,838
|
9,969
|
(135,845)
|
(270,527)
|
187,584
|
Middle-market
|
7,387,742
|
133,313
|
18,197
|
7,292
|
(13,316)
|
(45,957)
|
99,529
|
Commercial
Banking
|
27,159,984
|
605,462
|
130,035
|
17,261
|
(149,161)
|
(316,484)
|
287,113
|
|
|
|
|
|
|
|
|
Global
Corporate Banking
|
1,948,723
|
48,553
|
18,659
|
22,892
|
(314)
|
(32,086)
|
57,704
|
Other
|
125,221
|
46,030
|
5,624
|
1,628
|
(5,931)
|
(8,312)
|
39,039
|
Total
|
29,233,928
|
700,045
|
154,318
|
41,781
|
(155,406)
|
(356,882)
|
383,856
|
Other
operating income
|
|
|
|
|
24,564
|
Other
operating expenses
|
|
|
|
|
(19,891)
|
Income
from investments in associates and other companies
|
|
|
|
|
3,001
|
Income
tax expense
|
|
|
|
|
(84,584)
|
Net
income for the period
|
|
|
|
|
306,946
|
|
|
|
|
|
|
|
|
|
(1)
Loans receivable from customers plus the balance indebted by banks, without deducting their allowances for loan losses.
(2)
The sum of net income (expense) from financial operations and foreign exchange gains or losses.
(3)
The sum of personnel salaries and expenses, administrative expenses, depreciation and amortization.
|
|
June
30, 2017
(Unaudited)
|
|
Loans
and accounts receivable from customers
(1)
|
Net
interest income
|
Net
fee and commission income
|
Financial
transactions, net
(2)
|
Provision
for loan losses
|
Support
expenses
(3)
|
Segment’s
net contribution
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Segment
|
|
|
|
|
|
|
|
Retail
Banking
|
18,725,149
|
485,587
|
105,262
|
9,452
|
(144,936)
|
(260,974)
|
194,391
|
Middle-market
|
6,470,422
|
131,741
|
18,260
|
6,748
|
(4,983)
|
(46,062)
|
105,704
|
Commercial
Banking
|
25,195,571
|
617,328
|
123,522
|
16,200
|
(149,919)
|
(307,036)
|
300,095
|
|
|
|
|
|
|
|
|
Global
Corporate Banking
|
1,876,105
|
49,739
|
16,543
|
30,689
|
1,785
|
(29,665)
|
69,091
|
Other
|
84,348
|
(4,458)
|
4,596
|
25,248
|
(2,238)
|
(6,590)
|
16,558
|
Total
|
27,156,024
|
662,609
|
144,661
|
72,137
|
(150,372)
|
(343,291)
|
385,744
|
Other
operating income
|
|
|
|
|
29,068
|
Other
operating expenses
|
|
|
|
|
(54,347)
|
Income
from investments in associates and other companies
|
|
|
|
|
1,605
|
Income
tax expense
|
|
|
|
|
(68,351)
|
Net
income for the period
|
|
|
|
|
293,719
|
(1)
Loans receivable from customers plus the balance indebted by banks, without deducting their allowances for loan losses.
(2)
The sum of net income (expense) from financial operations and foreign exchange gains or losses.
(3)
The sum of personnel salaries and expenses, administrative expenses, depreciation and amortization.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
42
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE
05
CASH
AND CASH EQUIVALENTS
a) The
detail of the balances included under cash and cash equivalents is as follows:
|
|
As
of
June 30,
|
|
As
of
December 31,
|
|
|
2018
|
|
2017
|
|
|
(Unaudited)
MCh$
|
|
MCh$
|
|
|
|
|
|
Cash
and deposits in banks
|
|
|
|
|
|
Cash
|
|
634,319
|
|
613,361
|
|
Deposits
in the Central Bank of Chile
|
|
346,545
|
|
441,683
|
|
Deposits
in domestic banks
|
|
267
|
|
393
|
|
Deposits
in foreign banks
|
|
468,884
|
|
397,485
|
Subtotal
|
|
1,450,015
|
|
1,452,922
|
|
|
|
|
|
|
Cash
in process of collection, net
|
|
28,357
|
|
181,419
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
1,478,372
|
|
1,634,341
|
The
balance of funds held in cash and at the Central Bank of Chile reflects the reserves that the Bank must maintain on average each
month.
b) Operations
in process of settlement:
Operations
in process of settlement are transactions with only settlement pending, which will increase or decrease the funds of the Central
Bank of Chile or of banks abread, usually within the next 24 or 48 working hours to each end of period. These operations are as
follows:
|
|
As
of
June 30,
|
|
As
of
December 31,
|
|
|
2018
|
|
2017
|
|
|
(Unaudited)
MCh$
|
|
MCh$
|
Assets
|
|
|
|
|
|
Documents
held by other banks (document to be cleared)
|
|
156.826
|
|
199,619
|
|
Funds
receivable
|
|
588.706
|
|
468,526
|
Subtotal
|
|
745,532
|
|
668.145
|
Liabilities
|
|
|
|
|
|
Funds
payable
|
|
717,175
|
|
486,726
|
|
Subtotal
|
|
717,175
|
|
486,726
|
|
|
|
|
|
|
Cash
in process of collection, net
|
|
28,357
|
|
181.419
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
43
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Interim Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE
06
TRADING INVESTMENTS
The detail of instruments deemed as financial trading investments is as follows:
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Chilean Central Bank and Government securities
|
|
|
|
Chilean Central Bank Bonds
|
61.939
|
|
272.272
|
Chilean Central Bank Notes
|
-
|
|
-
|
Other Chilean Central Bank and Government securities
|
201.954
|
|
209.370
|
Subtotal
|
263,893
|
|
481,642
|
|
|
|
|
Other Chilean securities
|
|
|
|
Time deposits in Chilean financial institutions
|
-
|
|
-
|
Mortgage finance bonds of Chilean financial institutions
|
-
|
|
-
|
Chilean financial institutions bonds
|
-
|
|
-
|
Chilean corporate bonds
|
832
|
|
-
|
Other Chilean securities
|
-
|
|
-
|
Subtotal
|
832
|
|
-
|
|
|
|
|
Foreign financial securities
|
|
|
|
Foreign Central Banks and Government securities
|
5,106
|
|
-
|
Other foreign financial instruments
|
-
|
|
-
|
Subtotal
|
5,106
|
|
-
|
|
|
|
|
Investments in mutual funds
|
|
|
|
Funds managed by related entities
|
3,737
|
|
4,094
|
Funds managed by third parties
|
-
|
|
-
|
Subtotal
|
3,737
|
|
4,094
|
|
|
|
|
Total
|
273,568
|
|
485,736
|
As of June 30, 2018 and December 31, 2017, there were
no trading investments sold under contracts to resell to clients and financial institutions.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
44
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Interim Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 07
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
|
a)
|
As of June 30, 2018 and December 31, 2017, the Bank holds the following portfolio of derivative
instruments:
|
|
As of June 30, 2018
(Unaudited)
|
|
Notional amount
|
|
Fair value
|
|
Up to 3
Months
|
More than 3
months to
1 year
|
More than
1 year
|
Total
|
|
Assets
|
Liabilities
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
Fair value hedge derivatives
|
|
|
|
|
|
|
|
Currency forwards
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Interest rate swaps
|
25,000
|
494,000
|
1,212,050
|
1,731,050
|
|
19,939
|
1,504
|
Cross currency swaps
|
704,407
|
335,943
|
6,017,950
|
7,058,300
|
|
40,369
|
56,825
|
Call currency options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Call interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Put currency options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Put interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Interest rate futures
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Other derivatives
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Subtotal
|
729,407
|
829,943
|
7,230,000
|
8,789,350
|
|
60,308
|
58,329
|
|
|
|
|
|
|
|
|
Cash flow hedge derivatives
|
|
|
|
|
|
|
|
Currency forwards
|
193,504
|
172,567
|
-
|
366,071
|
|
2,149
|
7,471
|
Interest rate swaps
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Cross currency swaps
|
1,537,630
|
4,371,560
|
6,958,487
|
12,867,677
|
|
31,951
|
86,429
|
Call currency options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Call interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Put currency options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Put interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Interest rate futures
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Other derivatives
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Subtotal
|
1,731,134
|
4,544,127
|
6,958,487
|
13,233,748
|
|
34,100
|
93,900
|
|
|
|
|
|
|
|
|
Trading derivatives
|
|
|
|
|
|
|
|
Currency forwards
|
13,162,489
|
12,246,829
|
3,669,856
|
29,079,174
|
|
457,540
|
384,345
|
Interest rate swaps
|
8,537,376
|
17,393,691
|
55,519,274
|
81,450,341
|
|
650,612
|
497,683
|
Cross currency swaps
|
2,656,555
|
5,899,611
|
55,930,265
|
64,486,431
|
|
1,025,675
|
1,031,838
|
Call currency options
|
84,872
|
56,228
|
52,847
|
193,947
|
|
5,305
|
4,854
|
Call interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Put currency options
|
75,543
|
54,900
|
52,847
|
183,290
|
|
278
|
1,159
|
Put interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Interest rate futures
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Other derivatives
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Subtotal
|
24,516,835
|
35,651,259
|
115,225,089
|
175,393,183
|
|
2,139,410
|
1,919,879
|
|
|
|
|
|
|
|
|
Total
|
26,977,376
|
41,025,329
|
129,413,576
|
197,416,281
|
|
2,233,818
|
2,072,108
|
|
|
|
|
|
|
|
|
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
45
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Interim Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 07
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING,
continued
|
As of December 31, 2017
|
|
Notional amount
|
|
Fair value
|
|
Up to 3
months
|
More than 3
months to
1 year
|
More than
1 year
|
Total
|
|
Assets
|
Liabilities
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
Fair value hedge derivatives
|
|
|
|
|
|
|
|
Currency forwards
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Interest rate swaps
|
-
|
162,985
|
1,554,171
|
1,717,156
|
|
23,003
|
1,424
|
Cross currency swaps
|
-
|
715,701
|
5,362,772
|
6,078,473
|
|
15,085
|
65,724
|
Call currency options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Call interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Put currency options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Put interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Interest rate futures
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Other derivatives
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Subtotal
|
-
|
878,686
|
6,916,943
|
7,795,629
|
|
38,088
|
67,148
|
|
|
|
|
|
|
|
|
Cash flow hedge derivatives
|
|
|
|
|
|
|
|
Currency forwards
|
801,093
|
218,982
|
-
|
1,020,075
|
|
39,233
|
59
|
Interest rate swaps
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Cross currency swaps
|
421,428
|
1,637,604
|
6,672,566
|
8,731,598
|
|
36,403
|
128,355
|
Call currency options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Call interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Put currency options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Put interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Interest rate futures
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Other derivatives
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Subtotal
|
1,222,521
|
1,856,586
|
6,672,566
|
9,751,673
|
|
75,636
|
128,414
|
|
|
|
|
|
|
|
|
Trading derivatives
|
|
|
|
|
|
|
|
Currency forwards
|
17,976,683
|
10,679,327
|
3,091,393
|
31,747,403
|
|
412,994
|
502,555
|
Interest rate swaps
|
9,069,964
|
14,389,389
|
46,342,779
|
69,802,132
|
|
467,188
|
392,366
|
Cross currency swaps
|
2,963,641
|
7,503,144
|
47,111,371
|
57,578,156
|
|
1,241,632
|
1,042,120
|
Call currency options
|
190,386
|
37,099
|
49,853
|
277,338
|
|
1,322
|
1,950
|
Call interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Put currency options
|
192,722
|
28,616
|
50,470
|
271,808
|
|
1,787
|
4,935
|
Put interest rate options
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Interest rate futures
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Other derivatives
|
-
|
-
|
-
|
-
|
|
-
|
-
|
Subtotal
|
30,393,396
|
32,637,575
|
96,645,866
|
159,676,837
|
|
2,124,923
|
1,943,926
|
|
|
|
|
|
|
|
|
Total
|
31,615,917
|
35,372,847
|
110,235,375
|
177,224,139
|
|
2,238,647
|
2,139,488
|
Fair value hedge
The Bank uses cross-currency swaps, interest rate swaps
and call money swaps to hedge its exposure to changes in fair value of hedged items attributable to interest rates. The aforementioned
hedging instruments change the effective cost of long-term issuances from a fixed interest rate to a variable interest rate.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
46
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Interim Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 07
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING,
continued
The hedged items and hedge instruments under fair value
hedges as of June 30, 2018 and December 31, 2017, classified by term to maturity are as follows:
As
of June 30, 2018
(Unaudited)
|
Within 1 year
|
Between 1 and 3 years
|
Between 3 and 6 years
|
Over 6 years
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Hedged
item
|
|
|
|
|
|
Credits
and accounts receivable from customers
|
|
|
|
|
|
Mortgage
loan
|
699,010
|
1,023,622
|
107,631
|
-
|
1,830,263
|
Available
for sale investments
|
|
|
|
|
|
Yankee
bond
|
-
|
-
|
-
|
161,256
|
161,256
|
Mortgage
finance bonds
|
-
|
-
|
4,268
|
-
|
4,268
|
American
treasury bonds
|
-
|
-
|
104,625
|
196,170
|
300,795
|
Chilean
General treasury bonds
|
-
|
649,465
|
-
|
243,646
|
893,111
|
Central
bank bonds (BCP)
|
129,156
|
446,350
|
-
|
-
|
575,506
|
Time
deposits and other demand liabilities
|
|
|
|
|
|
Time
deposits
|
244,000
|
-
|
-
|
-
|
244,000
|
Issued
debt instruments
|
|
|
|
|
|
Senior
bonds
|
487,184
|
1,272,584
|
815,165
|
2,205,218
|
4,777,151
|
Subordinated
bonds
|
-
|
-
|
-
|
-
|
-
|
Obligations
with Banks:
|
|
|
|
|
|
Interbank
loans
|
-
|
-
|
-
|
-
|
-
|
Total
|
1,559,350
|
3,392,021
|
1,031,689
|
2,806,290
|
8,798,350
|
Hedging
instrument
|
|
|
|
|
|
Cross
currency swaps
|
1,040,350
|
3,067,021
|
552,065
|
2,398,864
|
7,067,300
|
Interest
rate swaps
|
519,000
|
325,000
|
479,624
|
407,426
|
1,731,050
|
Total
|
1,559,350
|
3,392,021
|
1,031,689
|
2,806,290
|
8,798,350
|
As
of December 31, 2017
|
Within 1 year
|
Between 1 and 3 years
|
Between 3 and 6 years
|
Over 6 years
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Hedged
item
|
|
|
|
|
|
Credits
and accounts receivable from customers
|
|
|
|
|
|
Mortgage
loan
|
587,412
|
801,230
|
106,910
|
-
|
1,495,552
|
Available
for sale investments
|
|
|
|
|
|
Yankee
bonds
|
-
|
-
|
6,169
|
64,769
|
70,938
|
Mortgage
financing bonds
|
-
|
-
|
4,738
|
-
|
4,738
|
American
treasury bonds
|
-
|
-
|
-
|
129,539
|
129,539
|
Chilean
General treasury bonds
|
-
|
21,377
|
762,727
|
-
|
784,104
|
Central
bank bonds (BCP)
|
128,289
|
218,640
|
443,357
|
-
|
790,286
|
Time
deposits and other demand liabilities
|
|
|
|
|
|
Time
deposits
|
137,985
|
-
|
-
|
-
|
137,985
|
Issued
debt instruments
|
|
|
|
|
|
Senior
bonds
|
25,000
|
1,399,686
|
670,488
|
2,287,313
|
4,382,487
|
Subordinated
bonds
|
-
|
-
|
-
|
-
|
-
|
Obligations
with Banks:
|
|
|
|
|
|
Interbank
loans
|
-
|
-
|
-
|
-
|
-
|
Total
|
878,686
|
2,440,933
|
1,994,389
|
2,481,621
|
7,795,629
|
Hedging
instrument
|
|
|
|
|
|
Cross
currency swaps
|
715,701
|
1,512,238
|
1,813,221
|
2,037,313
|
6,078,473
|
Interest
rate swaps
|
162,985
|
928,695
|
181,168
|
444,308
|
1,717,156
|
Total
|
878,686
|
2,440,933
|
1,994,389
|
2,481,621
|
7,795,629
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
47
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Interim Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 07
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING,
continued
Cash flow hedges
The Bank uses cross currency swaps to hedge the risk
from variability of cash flows attributable to changes in the interest rates of mortgages, bonds and interbank loans at a variable
rate. To cover the inflation risk in some items, both forwards as well as currency swaps are used.
The notional values of the hedged items as of June 30,
2018 and December 31, 2017, and the periods when the cash flows will be generated are as follows:
As
of June 30, 2018
(Unaudited)
|
Within 1 year
|
Between 1 and 3
years
|
Between 3 and 6
years
|
Over 6 years
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Hedged
item
|
|
|
|
|
|
Loans
and accounts receivables from customers
|
|
|
|
|
|
Mortgage
loan
|
4,259,891
|
1,561,025
|
1,078,902
|
2,369,788
|
9,269,606
|
Commercial
loans
|
114,433
|
-
|
-
|
-
|
114,433
|
Available
for sale investments
|
|
|
|
|
|
Time
deposits (ASI)
|
-
|
-
|
-
|
135,130
|
135,130
|
Yankee
bond
|
-
|
-
|
244,457
|
-
|
244,457
|
Chilean
Central Bank bonds
|
-
|
-
|
124,042
|
41,344
|
165,386
|
Time
deposits and other time liabilities
|
|
|
|
|
|
Time
deposits
|
114,515
|
-
|
-
|
-
|
114,515
|
Issued
debt instruments
|
|
|
|
|
|
Senior
bonds (variable rate)
|
342,852
|
355,110
|
285,783
|
-
|
983,745
|
Senior
bonds (fixed rate)
|
379,388
|
161,881
|
193,967
|
407,058
|
1,142,294
|
Interbank
borrowings
|
|
|
|
|
|
Interbank
loans
|
1,064,182
|
-
|
-
|
-
|
1,064,182
|
Total
|
6,275,261
|
2,078,016
|
1,927,151
|
2,953,320
|
13,233,748
|
Hedging
instrument
|
|
|
|
|
|
Cross
currency swaps
|
5,909,190
|
2,078,016
|
1,927,151
|
2,953,320
|
12,867,677
|
Currency
forwards
|
366,071
|
-
|
-
|
-
|
366,071
|
Total
|
6,275,261
|
2,078,016
|
1,927,151
|
2,953,320
|
13,233,748
|
As
of December 31, 2017
|
Within 1 year
|
Between 1 and 3
years
|
Between 3 and 6
years
|
Over 6 years
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Hedged
item
|
|
|
|
|
|
Loans
and accounts receivables from customers
|
|
|
|
|
|
Mortgage
loan
|
1,153,348
|
583,061
|
1,335,141
|
2,353,871
|
5,425,421
|
Commercial
loans
|
644,608
|
-
|
-
|
-
|
644,608
|
Available
for sale investments
|
|
|
|
|
|
Time
deposits (ASI)
|
-
|
-
|
25,290
|
132,572
|
157,862
|
Yankee
bond
|
-
|
-
|
242,819
|
-
|
242,819
|
Chilean
Central Bank bonds
|
-
|
-
|
-
|
-
|
-
|
Time
deposits and other time liabilities
|
|
|
|
|
|
Time
deposits
|
-
|
-
|
-
|
-
|
-
|
Issued
debt instruments
|
|
|
|
|
|
Senior
bonds (variable rate)
|
120,520
|
647,550
|
302,454
|
-
|
1,070,524
|
Senior
bonds (fixed rate)
|
241,183
|
121,619
|
224,401
|
300,874
|
888,077
|
Interbank
borrowings
|
|
|
|
|
|
Interbank
loans
|
919,448
|
402,914
|
-
|
-
|
1,322,362
|
Total
|
3,079,107
|
1,755,144
|
2,130,105
|
2,787,317
|
9,751,673
|
Hedging
instrument
|
|
|
|
|
|
Cross
currency swaps
|
2,059,032
|
1,755,144
|
2,130,105
|
2,787,317
|
8,731,598
|
Currency
forwards
|
1,020,075
|
-
|
-
|
-
|
1,020,075
|
Total
|
3,079,107
|
1,755,144
|
2,130,105
|
2,787,317
|
9,751,673
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
48
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Interim Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 07
DERIVATIVE FINANCIAL INSTRUMENTS
AND HEDGE ACCOUNTING, continued
An estimate of the periods in which flows are expected to be produced is
as follows:
b.1) Forecasted cash flows for interest rate risk:
As of June 30, 2018
(Unaudited)
|
Within 1
year
|
Between 1 and 3 years
|
Between 3 and 6 years
|
Over 6 years
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Hedged item
|
|
|
|
|
|
Inflows
|
189,265
|
46,237
|
2,759
|
2,157
|
240,418
|
Outflows
|
(69,222)
|
(40,727)
|
(7,822)
|
(2,289)
|
(120,060)
|
Net flows
|
120,043
|
5,510
|
(5,063)
|
(132)
|
120,358
|
|
|
|
|
|
|
Hedging instrument
|
|
|
|
|
|
Inflows
|
69,222
|
40,727
|
7,822
|
2,289
|
120,060
|
Outflows (*)
|
(189,265)
|
(46,237)
|
(2,759)
|
(2,157)
|
(240,418)
|
Net flows
|
(120,043)
|
(5,510)
|
5,063
|
132
|
(120,358)
|
(*) Only includes cash flow forecast portion of the hedge instruments
used to cover interest rate risk.
As of December 31, 2017
|
Within 1
year
|
Between 1 and 3 years
|
Between 3 and 6 years
|
Over 6 years
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Hedged item
|
|
|
|
|
|
Inflows
|
308,737
|
60,515
|
13,780
|
2,594
|
385,626
|
Outflows
|
(60,733)
|
(43,507)
|
(7,757)
|
(878)
|
(112,875)
|
Net flows
|
248,004
|
17,008
|
6,023
|
1,716
|
272,751
|
|
|
|
|
|
|
Hedging instrument
|
|
|
|
|
|
Inflows
|
60,733
|
43,507
|
7,757
|
878
|
112,875
|
Outflows (*)
|
(308,737)
|
(60,515)
|
(13,780)
|
(2,594)
|
(385,626)
|
Net flows
|
(248,004)
|
(17,008)
|
(6,023)
|
(1,716)
|
(272,751)
|
(*) Only includes cash flow forecast portion of the hedge instruments
used to cover interest rate risk.
b.2) Forecasted cash flows for inflation risk:
As of June 30, 2018
(Unaudited)
|
Within 1
year
|
Between 1 and 3 years
|
Between 3 and 6 years
|
Over 6 years
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Hedged item
|
|
|
|
|
|
Inflows
|
50,716
|
64,349
|
106,335
|
323,251
|
544,651
|
Outflows
|
(7,550)
|
-
|
-
|
-
|
(7,550)
|
Net flows
|
43,166
|
64,349
|
106,335
|
323,251
|
537,101
|
|
|
|
|
|
|
Hedging instrument
|
|
|
|
|
|
Inflows
|
7,550
|
-
|
-
|
-
|
7,550
|
Outflows
|
(50,716)
|
(64,349)
|
(106,335)
|
(323,251)
|
(544,651)
|
Net flows
|
(43,166)
|
(64,349)
|
(106,335)
|
(323,251)
|
(537,101)
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
49
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Interim Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 07
DERIVATIVE FINANCIAL INSTRUMENTS
AND HEDGE ACCOUNTING, continued
As of December 31, 2017
|
Within 1
year
|
Between 1 and 3 years
|
Between 3 and 6 years
|
Over 6 years
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Hedged item
|
|
|
|
|
|
Inflows
|
20,300
|
29,008
|
103,544
|
286,471
|
439,323
|
Outflows
|
(1,645)
|
-
|
-
|
-
|
(1,645)
|
Net flows
|
18,655
|
29,008
|
103,544
|
286,471
|
437,678
|
|
|
|
|
|
|
Hedging instrument
|
|
|
|
|
|
Inflows
|
1,645
|
-
|
-
|
-
|
1,645
|
Outflows
|
(20,300)
|
(29,008)
|
(103,544)
|
(286,471)
|
(439,323)
|
Net flows
|
(18,655)
|
(29,008)
|
(103,544)
|
(286,471)
|
(437,678)
|
b.3) Forecasted cash flows for exchange rate risk:
As of June 30, 2018 and
December 31, 2017, the Bank did not have cash flow hedges for exchange rate risk.
|
c)
|
The accumulated effect of the mark to market adjustment of cash flow hedges produced by hedge instruments
used in hedged cash flow was recorded in the Consolidated Statement of Changes in Equity, specifically within Other comprehensive
income as of June 30, 2018 and December 31, 2017, and is as follows:
|
|
|
As of June 30,
(Unaudited)
|
Hedged item
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Interbank loans
|
|
(3,998)
|
|
(4,580)
|
Time deposits and other time liabilities
|
|
(79)
|
|
-
|
Issued debt instruments
|
|
(10,872)
|
|
(9,505)
|
Available for sale investments
|
|
(21,493)
|
|
7,853
|
Loans and accounts receivable from customers
|
|
(359)
|
|
13,161
|
Net flows
|
|
(36,801)
|
|
6,929
|
Since the inflows and outflows for both the hedged element
and the hedging instrument mirror each other, the hedges are
nearly 100% effective, which means that the fluctuations
of fair value attributable to risk components are almost completely offset.
As of June 30, 2018 and 2017 due to inneficiencies Ch$481
million and Ch$2,579 million were transferred to profit/loss respectively.
During the period, the bank did not have any cash flow
hedges of forecast transactions.
|
d)
|
Below is a presentation of income generated by cash flow hedges amount that were reclassified from
other comprehensive income to income for the year:
|
|
As of June 30,
(Unaudited)
|
|
2018
|
|
2017
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Bond hedging derivatives
|
-
|
|
226
|
Interbank loans hedging derivatives
|
-
|
|
-
|
|
|
|
|
Cash flow hedge net income
|
-
|
|
226
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
50
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Interim Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 07
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING,
continued
|
e)
|
Net investment hedges in foreign operations:
|
As of June 30, 2018 and December
31, 2017, the Bank does not have any net foreign investment hedges in its hedge accounting portfolio.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
51
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Interim Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 08
INTERBANK LOANS
|
a)
|
As of June 30, 2018 and December 31, 2017, the balances for “Interbank loans” are as
follows:
|
|
As of
June 30,
|
|
As of
December 31,
|
|
2018
(Unaudited)
|
|
2017
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Domestic banks
|
|
|
|
Loans and advances to banks
|
-
|
|
-
|
Deposits in the Central Bank of Chile - not available
|
-
|
|
-
|
Non-transferable Chilean Central Bank Bonds
|
-
|
|
-
|
Other Central Bank of Chile loans
|
-
|
|
-
|
Interbank loans
|
-
|
|
-
|
Overdrafts in checking accounts
|
-
|
|
-
|
Non-transferable domestic bank loans
|
-
|
|
-
|
Other domestic bank loans
|
1
|
|
-
|
Allowances and impairment for domestic bank loans
|
-
|
|
-
|
|
|
|
|
Foreign interbank loans
|
|
|
|
Interbank loans – Foreign
|
29,794
|
|
162,685
|
Overdrafts in checking accounts
|
-
|
|
-
|
Non-transferable foreign bank deposits
|
-
|
|
-
|
Other foreign bank loans
|
-
|
|
-
|
Provisions and impairment for foreign bank loans
|
(59)
|
|
(86)
|
|
|
|
|
Total
|
29,736
|
|
162,599
|
|
b)
|
The amount of provisions and impairment of interbank loans is detailed below:
|
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
Domestic
banks
|
Foreign
banks
|
Total
|
Domestic
banks
|
Foreign
banks
|
Total
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
Balance as of January 1
|
-
|
86
|
86
|
-
|
172
|
172
|
Charge-offs
|
-
|
-
|
-
|
-
|
-
|
-
|
Provisions established
|
-
|
41
|
41
|
251
|
56
|
307
|
Provisions released
|
-
|
(68)
|
(68)
|
(251)
|
(142)
|
(393)
|
|
|
|
|
|
|
|
Total
|
-
|
59
|
59
|
-
|
86
|
86
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
52
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Interim Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 09
LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS
|
a)
|
Loans and accounts receivable from customers
|
As of June 30, 2018 and December 31, 2017, the composition of the loan portfolio
is as follows:
As of June 30, 2018
(Unaudited)
|
Assets before allowances
|
|
Established Allowances
|
|
Normal
portfolio
|
Substandard portfolio
|
Non-compliance
portfolio
|
Total
|
|
Individual allowances
|
Group allowances
|
Total
|
|
Assets
Net Balances
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
9,869,046
|
463,878
|
645,457
|
10,978,381
|
|
157,393
|
172,056
|
329,449
|
|
10,648,932
|
Foreign trade loans
|
1,620,570
|
47,749
|
49,023
|
1,717,342
|
|
48,550
|
1,708
|
50,258
|
|
1,667,084
|
Checking accounts debtors
|
230,812
|
7,657
|
16,533
|
255,002
|
|
3,861
|
12,610
|
16,471
|
|
238,531
|
Factoring transactions
|
389,571
|
6,375
|
5,570
|
401,516
|
|
5,841
|
966
|
6,807
|
|
394,709
|
Student Loans
|
73,929
|
-
|
11,401
|
85,330
|
|
-
|
6,507
|
6,507
|
|
78,823
|
Leasing transactions
|
1,226,519
|
124,178
|
95,599
|
1,446,296
|
|
18,848
|
11,562
|
30,410
|
|
1,415,886
|
Other loans and account receivable
|
115,000
|
1,881
|
38,582
|
155,463
|
|
13,141
|
18,218
|
31,359
|
|
124,104
|
Subtotal
|
13,525,447
|
651,718
|
862,165
|
15,039,330
|
|
247,634
|
223,627
|
471,261
|
|
14,568,069
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans
|
|
|
|
|
|
|
|
|
|
|
Loans with mortgage finance bonds
|
19,250
|
-
|
1,389
|
20,639
|
|
-
|
122
|
122
|
|
20,517
|
Mortgage mutual loans
|
106,935
|
-
|
4,355
|
111,290
|
|
-
|
561
|
561
|
|
110,729
|
Other mortgage mutual loans
|
8,923,869
|
-
|
467,359
|
9,391,228
|
|
-
|
65,190
|
65,190
|
|
9,326,038
|
Subtotal
|
9,050,054
|
-
|
473,103
|
9,523,157
|
|
-
|
65,873
|
65,873
|
|
9,457,284
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans
|
|
|
|
|
|
|
|
|
|
|
Installment consumer loans
|
2,766,516
|
-
|
268,901
|
3,035,417
|
|
-
|
230,428
|
230,428
|
|
2,804,989
|
Credit card balances
|
1,320,754
|
-
|
20,986
|
1,341,740
|
|
-
|
28,739
|
28,739
|
|
1,313,001
|
Leasing transactions
|
4,364
|
-
|
190
|
4,554
|
|
-
|
116
|
116
|
|
4,438
|
Other consumer loans
|
254,969
|
-
|
4,966
|
259,935
|
|
-
|
8,595
|
8,595
|
|
251,340
|
Subtotal
|
4,346,603
|
-
|
295,043
|
4,641,646
|
|
-
|
267,878
|
267,878
|
|
4,373,768
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
26,922,104
|
651,718
|
1,630,311
|
29,204,133
|
|
247,634
|
557,378
|
805,012
|
|
28,399,121
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
53
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 09
LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued
As of December 31, 2017
|
Assets before allowances
|
|
Established Allowances
|
Normal
portfolio
|
Substandar portfolio
|
Non-compliance
portfolio
|
Total
|
|
Individual allowances
|
Group allowances
|
Total
|
|
Assets
Net Balances
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
8,998,957
|
369,830
|
621,869
|
9,990,656
|
|
148,482
|
168,736
|
317,218
|
|
9,673,438
|
Foreign trade loans
|
1,464,754
|
44,830
|
64,929
|
1,574,513
|
|
54,628
|
1,444
|
56,072
|
|
1,518,441
|
Checking accounts debtors
|
174,162
|
6,189
|
15,345
|
195,696
|
|
3,037
|
11,740
|
14,777
|
|
180,919
|
Factoring transactions
|
441,437
|
3,279
|
5,174
|
449,890
|
|
5,335
|
1,207
|
6,542
|
|
443,348
|
Student Loans
|
77,226
|
-
|
11,064
|
88,290
|
|
-
|
5,922
|
5,922
|
|
82,368
|
Leasing transactions
|
1,242,713
|
113,629
|
100,662
|
1,457,004
|
|
19,532
|
12,793
|
32,325
|
|
1,424,679
|
Other loans and account receivable
|
113,672
|
1,318
|
37,603
|
152,593
|
|
12,778
|
17,231
|
30,009
|
|
122,584
|
Subtotal
|
12,512,921
|
539,075
|
856,646
|
13,908,642
|
|
243,792
|
219,073
|
462,865
|
|
13,445,777
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans
|
|
|
|
|
|
|
|
|
|
|
Loans with mortgage finance bonds
|
22,620
|
-
|
1,440
|
24,060
|
|
-
|
123
|
123
|
|
23,937
|
Mortgage mutual loans
|
110,659
|
-
|
4,419
|
115,078
|
|
-
|
594
|
594
|
|
114,484
|
Other mortgage mutual loans
|
8,501,072
|
-
|
456,685
|
8,957,757
|
|
-
|
68,349
|
68,349
|
|
8,889,408
|
Subtotal
|
8,634,351
|
-
|
462,544
|
9,096,895
|
|
-
|
69,066
|
69,066
|
|
9,027,829
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans
|
|
|
|
|
|
|
|
|
|
|
Installment consumer loans
|
2,613,041
|
-
|
297,701
|
2,910,742
|
|
-
|
240,962
|
240,962
|
|
2,669,780
|
Credit card balances
|
1,341,098
|
-
|
23,882
|
1,364,980
|
|
-
|
33,401
|
33,401
|
|
1,331,579
|
Leasing transactions
|
4,638
|
-
|
77
|
4,715
|
|
-
|
62
|
62
|
|
4,653
|
Other consumer loans
|
271,790
|
-
|
5,465
|
277,255
|
|
-
|
9,331
|
9,331
|
|
267,924
|
Subtotal
|
4,230,567
|
-
|
327,125
|
4,557,692
|
|
-
|
283,756
|
283,756
|
|
4,273,936
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
25,377,839
|
539,075
|
1,646,315
|
27,563,229
|
|
243,792
|
571,895
|
815,687
|
|
26,747,542
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
54
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 09
LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued
|
b)
|
Portfolio characteristics
|
As of June 30, 2018 and December 31, 2017,
the portfolio before allowances is as follows, by customer’s economic activity:
|
Domestic loans (*)
|
|
Foreign interbank loans (**)
|
|
Total loans
|
|
Distribution percentage
|
|
As
of
June 30
|
As
of
December 31
|
As
of
June 30
|
As
of
December 31
|
|
As
of
June 30
|
As
of
December 31
|
|
As
of
June 30
|
As
of
December 31
|
|
2018
(Unaudited)
|
2017
|
|
2018
(Unaudited)
|
2017
|
|
2018
(Unaudited)
|
2017
|
|
2018
(Unaudited)
|
2017
|
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
|
%
|
%
|
Commercial loans
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
1,084,352
|
1,218,232
|
|
-
|
-
|
|
1,084,352
|
1,218,232
|
|
3.71
|
4.39
|
Mining
|
182,654
|
302,037
|
|
-
|
-
|
|
182,654
|
302,037
|
|
0.62
|
1.09
|
Electricity, gas, and water
|
480,241
|
336,048
|
|
-
|
-
|
|
480,241
|
336,048
|
|
1.64
|
1.21
|
Agriculture and livestock
|
1,143,880
|
1,114,597
|
|
-
|
-
|
|
1,143,880
|
1,114,597
|
|
3.91
|
4.02
|
Forest
|
116,225
|
98,941
|
|
-
|
-
|
|
116,225
|
98,941
|
|
0.40
|
0.36
|
Fishing
|
247,052
|
215,994
|
|
-
|
-
|
|
247,052
|
215,994
|
|
0.85
|
0.78
|
Transport
|
951,023
|
697,948
|
|
-
|
-
|
|
951,023
|
697,948
|
|
3.25
|
2.52
|
Communications
|
225,217
|
168,744
|
|
-
|
-
|
|
225,217
|
168,744
|
|
0.77
|
0.61
|
Construction
|
835,069
|
1,977,417
|
|
-
|
-
|
|
835,069
|
1,977,417
|
|
2.86
|
7.13
|
Commerce
|
3,170,988
|
3,131,870
|
|
29,794
|
162,685
|
|
3,200,782
|
3,294,555
|
|
10.95
|
11.88
|
Services
|
59,453
|
467,747
|
|
-
|
-
|
|
59,453
|
467,747
|
|
0.20
|
1.69
|
Other
|
6,543,177
|
4,179,067
|
|
-
|
-
|
|
6,543,177
|
4,179,067
|
|
22.38
|
15.07
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
15,039,331
|
13,908,642
|
|
29,794
|
162,685
|
|
15,069,125
|
14,071,327
|
|
51.54
|
50.75
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans
|
9,523,157
|
9,096,895
|
|
-
|
-
|
|
9,523,157
|
9,096,895
|
|
32.58
|
32.81
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans
|
4,641,646
|
4,557,692
|
|
-
|
-
|
|
4,641,646
|
4,557,692
|
|
15.88
|
16.43
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
29,204,134
|
27,563,229
|
|
29,794
|
162,685
|
|
29,233,928
|
27,725,914
|
|
100.00
|
100.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Includes domestic interbank loans for Ch$1 million as of June 30, 2018 (Ch$0 million as of December
31, 2017), see Note 8.
|
|
(**)
|
Includes foreign interbank loans for Ch$29,794 million as of June 30, 2018 (Ch$162,685 million
as of December 31, 2017), see Note 8.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
55
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Interim Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 09
LOANS AND ACCOUNTS RECEIVABLE FROM
CUSTOMERS, continued
|
c)
|
Impaired portfolio (*)
|
|
i)
|
As of June 30, 2018 and December 31, 2017, the impaired portfolio is the following
:
|
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
|
Commercial
|
|
Mortgage
|
|
Consumer
|
|
Total
|
|
Commercial
|
|
Mortgage
|
|
Consumer
|
|
Total
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
Individually impaired portfolio
|
431,692
|
|
-
|
|
-
|
|
431,692
|
|
427,890
|
|
-
|
|
-
|
|
427,890
|
Non-performing loans (collectively evaluated)
|
387,289
|
|
161,207
|
|
101,514
|
|
650,010
|
|
368,522
|
|
161,768
|
|
103,171
|
|
633,461
|
Other impaired portfolio
|
215,950
|
|
311,896
|
|
193,529
|
|
721,375
|
|
217,091
|
|
300,776
|
|
223,955
|
|
741,822
|
Total
|
1,034,931
|
|
473,103
|
|
295,043
|
|
1,803,077
|
|
1,013,503
|
|
462,544
|
|
327,126
|
|
1,803,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
The impaired portfolio corresponds to the sum of loans
classified as substandard B3 and B4 category as well as the non-compliance portfolio.
|
|
ii)
|
The impaired portfolio with or without warranty as of June 30, 2018 and December 31, 2017 is the
following:
|
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
|
Commercial
|
|
Mortgage
|
|
Consumer
|
|
Total
|
|
Commercial
|
|
Mortgage
|
|
Consumer
|
|
Total
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
Secured debt
|
601,158
|
|
428,214
|
|
32,466
|
|
1,061,838
|
|
582,557
|
|
413,716
|
|
34,260
|
|
1,030,533
|
Unsecured debt
|
433,773
|
|
44,889
|
|
262,577
|
|
741,239
|
|
430,946
|
|
48,828
|
|
292,866
|
|
772,640
|
Total
|
1,034,931
|
|
473,103
|
|
295,043
|
|
1,803,077
|
|
1,013,503
|
|
462,544
|
|
327,126
|
|
1,803,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iii)
|
The portfolio of non-performing loans (due for 90 days or longer) as of June 30, 2018 and December
31, 2017 is the following:
|
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
|
Commercial
|
|
Mortgage
|
|
Consumer
|
|
Total
|
|
Commercial
|
|
Mortgage
|
|
Consumer
|
|
Total
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
Secured debt
|
176,480
|
|
144,289
|
|
9,608
|
|
330,377
|
|
167,909
|
|
141,413
|
|
8,896
|
|
318,218
|
Unsecured debt
|
210,809
|
|
16,918
|
|
91,906
|
|
319,633
|
|
200,613
|
|
20,355
|
|
94,275
|
|
315,243
|
Total
|
387,289
|
|
161,207
|
|
101,514
|
|
650,010
|
|
368,522
|
|
161,768
|
|
103,171
|
|
633,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iv)
|
Reconciliation of loans (with arrears equal to or greater tan 90 days), with past due loans as
of June 30, 2018 and December 31, 2017, is the following:
|
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
|
Commercial
|
|
Mortgage
|
|
Consumer
|
|
Total
|
|
Commercial
|
|
Mortgage
|
|
Consumer
|
|
Total
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
With defaults equal to or greater than 90 days
|
382,002
|
|
159,127
|
|
91,514
|
|
632,643
|
|
362,968
|
|
159,265
|
|
92,541
|
|
614,774
|
With defaults up to 89 days, classified in past due portfolio
|
5,287
|
|
2,080
|
|
10,000
|
|
17,367
|
|
5,554
|
|
2,503
|
|
10,630
|
|
18,687
|
Total
|
387,289
|
|
161,207
|
|
101,514
|
|
650,010
|
|
368,522
|
|
161,768
|
|
103,171
|
|
633,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
56
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 09
LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued
The changes in allowances balances during
2018 and 2017 is the following:
Activity as of June 30, 2018
|
Commercial
loans
|
Mortgage
loans
|
Consumer
loans
|
Total
|
(Unaudited)
|
Individual
|
Group
|
Group
|
Group
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
Balance as of January 01, 2018
|
243,792
|
219,073
|
69,066
|
283,756
|
815,687
|
Allowances established
|
32,843
|
40,920
|
7,786
|
94,558
|
176,107
|
Allowances released
|
(14,520)
|
(4,201)
|
(4,895)
|
(20,860)
|
(44,476)
|
Allowances released due to charge-off
|
(14,481)
|
(32,165)
|
(6,084)
|
(89,576)
|
(142,306)
|
Balance as of June 30, 2018
|
247,634
|
223,627
|
65,873
|
267,878
|
805,012
|
Activity as of December 31, 2017
|
Commercial
loans
|
Mortgage
loans
|
Consumer
loans
|
Total
|
|
Individual
|
Group
|
Group
|
Group
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
Balance as of January 01, 2017
|
275,973
|
183,106
|
61,041
|
300,019
|
820,139
|
Allowances established
|
60,023
|
99,407
|
22,163
|
157,595
|
339,188
|
Allowances released
|
(55,925)
|
(20,491)
|
(11,426)
|
(46,089)
|
(133,932)
|
Allowances released due to charge-off
|
(36,279)
|
(42,949)
|
(2,712)
|
(127,769)
|
(209,708)
|
Balance as of December 31, 2017
|
243,792
|
219,073
|
69,066
|
283,756
|
815,687
|
In addition to credit
risk allowances, there are allowances held for:
|
i)
|
Country risk to cover the risk taken when holding or
committing resources with any foreign country, these allowances are established according to country risk classifications as set
forth in Chapter 7-13 of the Updated Compilation of Rules, issued by the SBIF, the balances of allowances as of June 30, 2018
and December 31, 2017 are Ch$629 million and Ch$599 million respectively. These are presented as “Allowances” in the
liabilities section of the “Consolidated Interim Statement of Financial Position”.
|
|
ii)
|
According to SBIF’s regulations (compendium of Accounting Standards), the Bank has established
allowances related to the undrawn available credit lines and contingent loans. The balances of allowances as of June 30, 2018 and
December 31, 2017 are Ch$16,265 million and Ch$15,103 million, respectively, and are presented as “Allowances” in the
liabilities section of the “Consolidated Interim Statement of Financial Position”.
|
Allowances established
The following chart shows the balance of provisions
established, associated with credits granted to customers and banks:
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
MCh$
|
|
MCh$
|
|
|
|
|
Customers loans
|
176,107
|
|
339,188
|
Interbank loans
|
41
|
|
307
|
Total
|
176,148
|
|
339,495
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
57
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 09
LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued
|
e)
|
Portfolio by its impaired
and non-impaired condition
|
|
As
of June 30, 2018
(Unaudited)
|
|
Non-impaired
|
Impaired
|
Total
portfolio
|
|
Commercial
|
Mortgage
|
Consumer
|
Total
non-impaired
|
Commercial
|
Mortgage
|
Consumer
|
Total
impaired
|
Commercial
|
Mortgage
|
Consumer
|
Total
portfolio
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
portfolio
|
13,801,289
|
8,764,878
|
4,136,868
|
26,703,035
|
458,695
|
155,114
|
99,371
|
713,180
|
14,259,984
|
8,919,992
|
4,236,239
|
27,416,215
|
Overdue
for 1-29 days
|
148,126
|
194,910
|
125,554
|
468,590
|
94,325
|
78,963
|
37,290
|
210,578
|
242,451
|
273,873
|
162,844
|
679,168
|
Overdue
for 30-89 days
|
54,984
|
90,266
|
84,181
|
229,431
|
99,909
|
79,899
|
66,868
|
246,676
|
154,893
|
170,165
|
151,049
|
476,107
|
Overdue
for 90 days or more
|
-
|
-
|
-
|
-
|
382,002
|
159,127
|
91,514
|
632,643
|
382,002
|
159,127
|
91,514
|
632,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
portfolio before allowances
|
14,004,399
|
9,050,054
|
4,346,603
|
27,401,056
|
1,034,931
|
473,103
|
295,043
|
1,803,077
|
15,039,330
|
9,523,157
|
4,641,646
|
29,204,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overdue
loans (less than 90 days) presented as portfolio percentage
|
1.45%
|
3.15%
|
4.83%
|
2.55%
|
18.77%
|
33.58%
|
35.30%
|
25.36%
|
2.64%
|
4.66%
|
6.76%
|
3.96%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overdue
loans (90 days or more) presented as portfolio percentage
|
-
|
-
|
-
|
-
|
36.91%
|
33.63%
|
31.02%
|
35.09%
|
2.54%
|
1.67%
|
1.97%
|
2.17%
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
58
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 09
LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued
|
e)
|
Portfolio by its impaired and non-impaired condition, continued
|
|
As
of December 31, 2017
|
|
|
|
Non-impaired
|
Impaired
|
Total
portfolio
|
|
Commercial
|
Mortgage
|
Consumer
|
Total
non-impaired
|
Commercial
|
Mortgage
|
Consumer
|
Total
impaired
|
Commercial
|
Mortgage
|
Consumer
|
Total
portfolio
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
portfolio
|
12,737,508
|
8,357,733
|
4,012,489
|
25,107,730
|
449,895
|
158,770
|
110,184
|
718,849
|
13,187,403
|
8,516,503
|
4,122,673
|
25,826,579
|
Overdue
for 1-29 days
|
103,908
|
180,294
|
132,136
|
416,338
|
110,834
|
74,072
|
46,283
|
231,189
|
214,742
|
254,366
|
178,419
|
647,527
|
Overdue
for 30-89 days
|
53,723
|
96,324
|
85,941
|
235,988
|
89,806
|
70,437
|
78,118
|
238,361
|
143,529
|
166,761
|
164,059
|
474,349
|
Overdue
for 90 days or more
|
-
|
-
|
-
|
-
|
362,968
|
159,265
|
92,541
|
614,774
|
362,968
|
159,265
|
92,541
|
614,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
portfolio before allowances
|
12,895,139
|
8,634,351
|
4,230,566
|
25,760,056
|
1,013,503
|
462,544
|
327,126
|
1,803,173
|
13,908,642
|
9,096,895
|
4,557,692
|
27,563,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overdue
loans (less than 90 days) presented as portfolio percentage
|
1.22%
|
3.20%
|
5.15%
|
2.53%
|
19.80%
|
31.24%
|
38.03%
|
26.04%
|
2.58%
|
4.63%
|
7.51%
|
4.07%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overdue
loans (90 days or more) presented as portfolio percentage
|
-
|
-
|
-
|
-
|
35.81%
|
34.43%
|
28.29%
|
34.09%
|
2.61%
|
1.75%
|
2.03%
|
2.23%
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
59
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 10
AVAILABLE FOR SALE
INVESTMENTS
As of June 30, 2018 and December 31, 2017, details
of instruments defined as available for sale investments are as follows:
|
As of
June 30, 2018
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
MCh$
|
MCh$
|
|
|
|
Chilean Central Bank and Government securities
|
|
|
Chilean Central Bank Bonds
|
619,334
|
816,331
|
Chilean Central Bank Notes
|
349,524
|
330,952
|
Other Chilean Central Bank and Government securities
|
1,388,313
|
1,115,518
|
Subtotal
|
2,357,171
|
2,262,801
|
Other Chilean securities
|
|
|
Time deposits in Chilean financial institutions
|
951
|
2,361
|
Mortgage finance bonds of Chilean financial institutions
|
20,674
|
22,312
|
Chilean financial institution bonds
|
-
|
-
|
Chilean corporate bonds
|
-
|
-
|
Other Chilean securities
|
3,000
|
3,000
|
Subtotal
|
24,625
|
27,673
|
Foreign financial securities
|
|
|
Foreign Central Banks and Government securities
|
301,593
|
132,822
|
Other foreign financial securities
|
225,738
|
151,250
|
Subtotal
|
527,331
|
284,072
|
|
|
|
Total
|
2,909,127
|
2,574,546
|
As of June 30, 2018 and December 31, 2017, the item
Chilean Central Bank and Government securities
item includes securities sold under repurchase agreements to clients and
financial institutions for Ch$51,268 million and Ch$241,995 million, respectively. Under the same item, there are instruments that
guarantee margins for operations of derivatives through Comder Contraparte Central S.A. for an amount of $73,417 million and $42,910
million as of June 30, 2018 and December 31 of 2017. Also through London Clearing House (LCH) an amount of $2,270 million as of
June 30, 2018 and $0 million as of December 31, 2017. At last Euroclear for an amount of $24,060 million as of June 30, 2018 and
$0 million as of December 31, 2017.
As of June 30, 2018 and December 31, 2017, the item
Other Chilean Securities
includes securities sold to customers and financial institutions under repurchase agreements totaling
Ch$59,317 million and Ch$1,156 million, respectively.
The instruments of Foreign Institutions include instruments
sold under repurchase agreements with customers and financial institutions for a total of $0 and $24.910 million as of June 30,
2018 and December 31, 2017. Under the same item, there are instruments that guarantee margins for derivative transactions through
the London Clearing House (LCH) for an amount of $ 49,043 million and $48,106 million as of June 30, 2018 and December 31, 2017.
In order to comply with the initial margin specified in the European EMIR standard, instruments in guarantee with Euroclear are
maintained for an amount of $ 185,946 million and $33,711 million as of June 30, 2018 and December 31, 2017.
As of June 30, 2018 available for sale investments included
a net unrealized profit of Ch$632 million, recorded as a “Valuation adjustment” in equity, distributed between a profit
of Ch$1,990 million attributable to equity holders of the Bank and a profit of Ch$1,358 million attributable to non-controlling
interest.
As of December 31, 2017 available for sale investments
included a net unrealized loss of Ch$1,855 million, recorded as a “Valuation adjustment” in equity, distributed between
a profit of Ch$459 million attributable to equity holders of the Bank and a profit of Ch$1,396 million attributable to non-controlling
interest.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
60
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 11
INTANGIBLE ASSETS
|
a)
|
As of June 30, 2018 and December 31, 2017 the composition of intangible assets is as follows:
|
|
|
|
|
As of June 30, 2018
(Unaudited)
|
|
Years of
useful
life
|
Average remaining useful life
|
Net opening balance as of
January 1, 2018
|
Gross balance
|
Accumulated
amortization
|
Net balance
|
|
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
Licenses
|
3
|
1
|
1,200
|
10,932
|
(9,844)
|
1,088
|
Software development
|
3
|
2
|
62,019
|
323,983
|
(264,015)
|
59,968
|
|
|
|
|
|
|
|
Subtotal
|
|
|
63,219
|
334,915
|
(273,859)
|
61,056
|
Fully amortized assets
|
|
|
-
|
(200,774)
|
200,774
|
-
|
Total
|
|
|
63,219
|
134,141
|
(73,085)
|
61,056
|
|
|
|
|
As of December 31, 2017
|
|
Years of
useful
life
|
Average remaining useful life
|
Net opening balance as of
January 1, 2017
|
Gross balance
|
Accumulated
amortization
|
Net balance
|
|
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
Licenses
|
3
|
2
|
1,656
|
10,932
|
(9,732)
|
1,200
|
Software development
|
3
|
2
|
56,429
|
314,115
|
(252,096)
|
62,019
|
|
|
|
|
|
|
|
Subtotal
|
|
|
58,085
|
325,047
|
(261,828)
|
63,219
|
Fully amortized assets
|
|
|
-
|
(200,774)
|
200,774
|
-
|
Total
|
|
|
58,085
|
124,273
|
(61,054)
|
63,219
|
|
b)
|
The changes in the value of intangible assets during the periods of June 30, 2018 and December
31, 2017 is as follows:
|
b.1)
Gross balance
Gross balances
|
Licenses
|
Software development
|
Fully
amortized assets
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
Balances as of January 1, 2018
|
10,932
|
314,115
|
(200,774)
|
124,273
|
Acquisitions
|
-
|
10,019
|
-
|
10,019
|
Disposals and impairment (*)
|
-
|
-
|
-
|
-
|
Other
|
-
|
(151)
|
-
|
(151)
|
Balances as of June 30, 2018 (Unaudited)
|
10,932
|
323,983
|
(200,774)
|
134,141
|
|
|
|
|
|
Balances as of January 1, 2017
|
10,932
|
286,781
|
(200,774)
|
96,939
|
Acquisitions
|
-
|
32,624
|
-
|
32,624
|
Disposals and impairment
|
-
|
(5,290)
|
-
|
(5,290)
|
Other
|
-
|
-
|
-
|
-
|
Balances as of December 31, 2017
|
10,932
|
314,115
|
(200,774)
|
124,273
|
(*) See Note 31 a).
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
61
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 11
INTANGIBLE ASSETS, continued
b.2) Accumulated amortization
Accumulated amortization
|
Licenses
|
Software development
|
Fully
amortized
assets
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
Balances as of January 1, 2018
|
(9,732)
|
(252,096)
|
200,774
|
(61,054)
|
Amortization for the period
|
(112)
|
(11,919)
|
-
|
(12,031)
|
Other changes
|
-
|
-
|
-
|
-
|
Balances as of June 30, 2018 (Unaudited)
|
(9,844)
|
(264,015)
|
200,774
|
(73,085)
|
|
|
|
|
|
Balances as of January 1, 2017
|
(9.276)
|
(230.352)
|
200.774
|
(38.854)
|
Amortization for the period
|
(456)
|
(21.744)
|
-
|
(22.200)
|
Other changes
|
-
|
-
|
-
|
-
|
Balances as of December 31, 2017
|
(9.732)
|
(252.096)
|
200.774
|
(61.054)
|
|
c)
|
The Bank has no restriction on intangible assets as of June 30, 2018 and December 31, 2017. Additionally,
the intangible assets have not been pledged as guarantee to secure compliance with financial liabilities. Also, the Bank has no
debt related to Intangible assets as of those dates.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
62
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE
12
PROPERTY,
PLANT AND EQUIPMENT
a)
As
of June 30, 2018 and December 31, 2017 the property, plant and equipment balances is as follows:
|
|
As
of June 30, 2018
(Unaudited)
|
|
Net
opening balance as of
January
1, 2018
|
Gross
balance
|
Accumulated
depreciation
|
Net
balance
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
Land
and building
|
159,352
|
281,591
|
(123,712)
|
157,879
|
Equipment
|
63,516
|
198,790
|
(143,977)
|
54,813
|
Ceded
under operating leases
|
4,221
|
4,888
|
(667)
|
4,221
|
Other
|
15,458
|
62,613
|
(48,954)
|
13,659
|
Subtotal
|
242,547
|
547,882
|
(317,310)
|
230,572
|
Fully
depreciated assets
|
-
|
(65,159)
|
65,159
|
-
|
Total
|
242,547
|
482,723
|
(252,151)
|
230,572
|
|
|
As
of December 31, 2017
|
|
Net
opening balance as of
January
1, 2017
|
Gross
balance
|
Accumulated
depreciation
|
Net
balance
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
Land
and building
|
169,809
|
274,079
|
(114,727)
|
159,352
|
Equipment
|
66,506
|
193,689
|
(130,173)
|
63,516
|
Ceded
under operating leases
|
4,230
|
4,888
|
(667)
|
4,221
|
Other
|
16,834
|
60,822
|
(45,364)
|
15,458
|
Subtotal
|
257,379
|
533,478
|
(290,931)
|
242,547
|
Fully
depreciated assets
|
-
|
(59,045)
|
59,045
|
-
|
Total
|
257,379
|
474,433
|
(231,886)
|
242,547
|
b)
The
changes in the value of property, plant and equipment as of June 30, 2018 and December 31, 2017 is the following:
b.1)
Gross
balance
2018
|
Land
and buildings
|
Equipment
|
Operating
leases
|
Other
|
Fully
depreciated assets
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
Balances
as of January 1, 2018
|
274,079
|
193,689
|
4,888
|
60,822
|
(59,045)
|
474,433
|
Additions
|
7,512
|
5,199
|
-
|
1,818
|
-
|
14,529
|
Disposals
|
-
|
(60)
|
-
|
(26)
|
-
|
(86)
|
Impairment
due to damage (*)
|
-
|
(39)
|
-
|
-
|
-
|
(39)
|
Other
|
-
|
-
|
-
|
-
|
(6,114)
|
(6,114)
|
Balances
as of June 30, 2018 (Unaudited)
|
281,591
|
198,789
|
4,888
|
62,614
|
(65,159)
|
482,723
|
(*) Banco Santander-Chile has recognized for June 30, 2017 impairment for Ch$39 million due to looting in ATM’s.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
63
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE
12
PROPERTY,
PLANT AND EQUIPMENT, continued
2017
|
Land
and buildings
|
Equipment
|
Operating
leases
|
Other
|
Fully
depreciated assets
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
Balances
as of January 1, 2017
|
264,016
|
168,124
|
4,888
|
55,973
|
(39,958)
|
453,043
|
Additions
|
27,592
|
26,278
|
-
|
4,901
|
-
|
58,771
|
Disposals
|
(17,529)
|
(359)
|
-
|
(52)
|
-
|
(17,940)
|
Impairment
due to damage (*)
|
-
|
(354)
|
-
|
-
|
-
|
(354)
|
Other
|
-
|
-
|
-
|
-
|
(19,087)
|
(19,087)
|
Balances
as of December 31, 2017
|
274,079
|
193,689
|
4,888
|
60,822
|
(59,045)
|
474,433
|
(*) Banco Santander-Chile has had
to recognize in its financial statements as of December 31, 2017 impairment by 354 million, corresponding to looting in ATM’s.
Compensation charged for insurance concepts involved, amounted to Ch$1,238 million, which are presented in “Other income
and operational expenses”.
b,2) Accumulated
depreciation
2018
|
Land
and buildings
|
Equipment
|
Operating
leases
|
Other
|
Fully
depreciated assets
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
Balances
as of January 1, 2018
|
(114,727)
|
(130,173)
|
(667)
|
(45,364)
|
59,045
|
(231,886)
|
Depreciation
in the period
|
(8,988)
|
(13,809)
|
-
|
(3,612)
|
-
|
(26,409)
|
Sales
and disposals in the period
|
3
|
5
|
-
|
22
|
-
|
30
|
Transfers
|
-
|
-
|
-
|
-
|
-
|
-
|
Others
|
-
|
-
|
-
|
-
|
6,114
|
6,114
|
Balances
as of June 30, 2018 (Unaudited)
|
(123,712)
|
(143,977)
|
(667)
|
(48,954)
|
65,159
|
(252,151)
|
|
|
|
|
|
|
|
2017
|
Land
and buildings
|
Equipment
|
Operating
leases
|
Other
|
Fully
depreciated assets
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
Balances
as of January 1, 2017
|
(94,207)
|
(101,618)
|
(658)
|
(39,139)
|
39,958
|
(195,664)
|
Depreciation
in the period
|
(20,744)
|
(28,593)
|
(9)
|
(6,276)
|
-
|
(55,622)
|
Sales
and disposals in the period
|
224
|
38
|
-
|
51
|
-
|
313
|
Transfers
|
-
|
-
|
-
|
-
|
-
|
-
|
Others
|
-
|
-
|
-
|
-
|
19,087
|
19,087
|
Balances
as of December 31, 2017
|
(114,727)
|
(130,173)
|
(667)
|
(45,364)
|
59,045
|
(231,886)
|
|
|
|
|
|
|
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
64
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE 12
PROPERTY, PLANT
AND EQUIPMENT, continued
|
c)
|
Operational
leases - Lessor
|
As of June 30,
2018 and December 31, 2017, the future minimum lease cash inflows under non-cancellable operating leases are as follows:
|
As
of
June 30, 2018
|
|
As
of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Due
within 1 year
|
506
|
|
567
|
Due
after 1 year but within 2 years
|
943
|
|
749
|
Due
after 2 years but within 3 years
|
426
|
|
480
|
Due
after 3 years but within 4 years
|
312
|
|
348
|
Due
after 4 years but within 5 years
|
312
|
|
308
|
Due
after 5 years
|
1,659
|
|
1,792
|
|
|
|
|
Total
|
4,158
|
|
4,244
|
|
d)
|
Operational
leases - Lessee
|
Some of the Bank’s
premises and equipment are under operating leases. Future minimum rental payments under non-cancellable leases are as follows:
|
As
of
June 30, 2018
|
|
As
of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Due
within 1 year
|
23,026
|
|
26,059
|
Due
after 1 year but within 2 years
|
19,780
|
|
21,343
|
Due
after 2 years but within 3 years
|
17,588
|
|
18,091
|
Due
after 3 years but within 4 years
|
15,356
|
|
15,736
|
Due
after 4 years but within 5 years
|
12,831
|
|
12,734
|
Due
after 5 years
|
50,637
|
|
51,502
|
Total
|
139,218
|
|
145,465
|
|
e)
|
As
of June 30, 2018 and December 31, 2017 the Bank has no finance leases which cannot be
unilaterally cancelled.
|
|
f)
|
The
Bank has no restriction on property, plant and equipment as of June 30, 2018 and December
31, 2017. Additionally, the property, plant, and equipment have not been provided as
guarantees to secure compliance with financial liabilities. The Bank has no debt in connection
with property, plant and equipment.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
65
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE 13
CURRENT AND DEFERRED
TAXES
a) Current
taxes
As of December 31, 2017 and 2016,
the Bank recognizes taxes payable (recoverable), which is determined based on the currently applicable tax legislation. This amount
is recorded net of recoverable taxes, and is shown as follows:
|
As
of
June 30, 2018
|
|
As
of
December 31, 2017
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Summary
of current tax liabilities (assets)
|
|
|
|
Current
tax (assets)
|
(10,623)
|
|
-
|
Current
tax liabilities
|
-
|
|
6,435
|
|
|
|
|
Total
tax payable (recoverable)
|
(10,623)
|
|
6,435
|
|
|
|
|
(Assets)
liabilities current taxes detail (net)
|
|
|
|
Income
tax (*)
|
58,130
|
|
145,112
|
Less:
|
|
|
|
Provisional
monthly payments
|
(68,587)
|
|
(136,562)
|
Credit
for training expenses
|
(753)
|
|
(1,768)
|
Grant
credits
|
(306)
|
|
(968)
|
Other
|
893
|
|
621
|
|
|
|
|
Total
tax payable (recoverable)
|
(10,623)
|
|
6,435
|
(*)
For 2018 the tax rates were 27% and 25.5% for 2017
b) Income
tax
The effect tax
expense has on income for the period ended June 30, 2018 and 2017 is comprised of the following items:
|
As
of June 30,
(Unaudited)
|
|
2018
MCh$
|
|
2017
MCh$
|
Income
tax expense
|
|
|
|
Current
tax
|
56,586
|
|
57,709
|
Credits
(debits) for deferred taxes
|
|
|
|
Origination
and reversal of temporary differences
|
27,168
|
|
7,674
|
Provision
due to valuation
|
-
|
|
-
|
Subtotal
|
83,754
|
|
65,383
|
Tax
for rejected expenses (Article No,21)
|
886
|
|
268
|
Other
|
(56)
|
|
2,700
|
Net
income tax expense
|
84,584
|
|
68,351
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
66
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE 13
CURRENT AND DEFERRED
TAXES, continued
c) Effective
tax rate reconciliation
The reconciliation
between the income tax rate and the effective rate in tax expense as of June 30, 2018 and 2017 is as follows:
|
As
of June 30,
(Unaudited)
|
|
2018
|
|
2017
|
|
Tax
rate
|
|
Amount
|
|
Tax
rate
|
|
Amount
|
|
|
%
|
|
MCh$
|
|
%
|
|
MCh$
|
|
|
|
|
|
|
|
|
Tax
calculated over profit before tax
|
27.00
|
|
105,714
|
|
25.50
|
|
92,326
|
Permanent
differences
|
(5.53)
|
|
(21,659)
|
|
(3.68)
|
|
(13,571)
|
Penalty
tax (rejected expenses)
|
0.23
|
|
886
|
|
0.07
|
|
268
|
Rate
change effect
|
0.00
|
|
-
|
|
(2.94)
|
|
(10,650)
|
Other
|
(0.09)
|
|
(357)
|
|
(0.07)
|
|
(22)
|
Effective
rates and expenses for income tax
|
21.60
|
|
84,584
|
|
18.88
|
|
68,351
|
|
(1)
|
Mainly corresponds to the permanent
differences originated from the Own Tax Monetary Correction.
|
|
(2)
|
On September 29, 2014, the established
law 20.780 increased the tax rate from 25.5% in 2017 to 27% permanently from 2018.
|
d) Effect
of deferred taxes on other comprehensive income
A summary of
the separate effect of deferred tax on other comprehensive income, showing the asset and liability balances, for the periods ended
June 30, 2018 and December 31, 2017 is the following:
|
As
of
June 30, 2018
|
|
As
of December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
Deferred
tax assets
|
|
|
|
Available
for sale investments
|
|
2,614
|
|
368
|
Cash
flow hedges
|
|
9,937
|
|
908
|
Total
deferred tax assets recognized through other comprehensive income
|
12,551
|
|
1,276
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
Available
for sale investments
|
|
(2,444)
|
|
(841)
|
Cash
flow hedges
|
|
-
|
|
-
|
Total
deferred tax liabilities recognized through other comprehensive income
|
(2,444)
|
|
(841)
|
|
|
|
|
Net
deferred tax balances in equity
|
10,107
|
|
435
|
|
|
|
|
Deferred
taxes in equity attributable to equity holders of the bank
|
10,474
|
|
791
|
Deferred
tax in equity attributable to non-controlling interests
|
(367)
|
|
(356)
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
67
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE 13
CURRENT AND DEFERRED
TAXES, continued
e) Effect
of deferred taxes on income
During 2018 and 2017, the Bank has
registered in its finiancial statements the effects from deffered taxes.
Below are effects
of deferred taxes on assets, liabilities and income allocated for temporary differences:
|
As
of
June 30, 2018
|
|
As
of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
Deferred
tax assets
|
|
|
|
Interests
and adjustments
|
8,822
|
|
8,645
|
Non-recurring
charge-offs
|
14,163
|
|
11,651
|
Assets
received in lieu of payment
|
2,583
|
|
4,073
|
Exchange
rate adjustment
|
2,698
|
|
882
|
Property,
plant and equipment
|
5,111
|
|
4,410
|
Provision
for loan losses
|
165,218
|
|
172,386
|
Provision
for expenses
|
60,886
|
|
73,518
|
Derivatives
|
-
|
|
5,243
|
Leased
assets
|
102,629
|
|
98,090
|
Subsidiaries
tax losses
|
5,809
|
|
5,277
|
|
151
|
|
151
|
Investment
valuation
|
-
|
|
-
|
Others
(*)
|
(11)
|
|
5,249
|
Total
deferred tax assets
|
386,059
|
|
384,332
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
Valuation
of investments
|
(10,339)
|
|
(1,911)
|
Depreciation
|
(247)
|
|
(532)
|
Anticipated
Expenses
|
(6,590)
|
|
(5,955)
|
Derivatives
|
(3,021)
|
|
|
Others
|
(2)
|
|
(424)
|
Total
deferred tax liabilities
|
(20,199)
|
|
(8,822)
|
(*)
Includes the asset from deffered income due to temporary differences in derivative contracts.
f) Summary
of deferred tax assets and liabilities
A summary of
the effect of deferred taxes on equity and income follows:
|
As
of
June 30, 2018
|
|
As
of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
Deferred
tax assets
|
|
|
|
Recognized
through other comprehensive income
|
12,551
|
|
1,276
|
Recognized
through profit or loss
|
368,059
|
|
384,332
|
Total
deferred tax assets
|
380,610
|
|
385,608
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
Recognized
through other comprehensive income
|
(2,444)
|
|
(841)
|
Recognized
through profit or loss
|
(20,199)
|
|
(8,822)
|
Total
deferred tax liabilities
|
(22,643)
|
|
(9,663)
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
68
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE 14
OTHER ASSETS
The composition of other assets is
the following:
|
|
|
As
of
June 30, 2018
|
|
As
of
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
|
|
|
MCh$
|
|
MCh$
|
Assets
for leasing (1)
|
|
49,760
|
|
48,099
|
|
|
|
|
|
Assets
received or awarded in lieu of payment (2)
|
|
|
|
|
Assets
received in lieu of payment
|
|
8,266
|
|
11,677
|
Assets
awarded at judicial sale
|
|
25,798
|
|
24,800
|
Provision
on assets received in lieu of payment or awarded
|
|
(1,044)
|
|
(1,440)
|
Subtotal
|
|
33,020
|
|
35,037
|
|
|
|
|
|
Other
assets
|
|
|
|
|
Guarantee
deposits (margin accounts) (3)
|
|
389,847
|
|
323,767
|
Investments
in gold
|
|
477
|
|
478
|
VAT
credit tax
|
|
7,935
|
|
9,570
|
Income
tax recoverable
|
|
3,710
|
|
1,381
|
Prepaid
expenses
|
|
96,685
|
|
116,512
|
Plant,
Property and Equipment held for sale
|
|
663
|
|
|
Assets
recovered from leasing held for sale
|
|
6,240
|
|
4,235
|
Macro-hedging
valuation adjustment
|
|
4,053
|
|
|
Pension
plan assets
|
|
890
|
|
921
|
Accounts
and notes receivable
|
|
60,363
|
|
59,574
|
Notes
receivable through brokerage and simultaneous transactions
|
|
72,701
|
|
68,272
|
Other
receivable accounts
|
|
58,198
|
|
53,500
|
Other
assets
|
|
48,880
|
|
33,837
|
Subtotal
|
|
750,642
|
|
672,047
|
|
|
|
|
|
Total
|
|
833,422
|
|
755,183
|
|
(1)
|
Corresponds to the assets available to be delivered under the financial lease modality.
|
|
(2)
|
The
goods received in payment correspond to the goods received as payment of debts due from
customers. The set of goods that remain acquired in this way must not exceed 20% of the
Bank’s effective equity at any time. These assets currently represent 0.22% (0.30% as
of December 31, 2017) of the Bank’s effective equity.
|
The
assets awarded in judicial auction, correspond to assets that have been acquired at judicial auction in payment of debts previously
contracted with the Bank. The assets acquired at judicial auction are not subject to the above mentioned margin. These properties
are assets available for sale. For most assets, the sale can be completed within one year from the date the asset is received
or acquired, In case the good is not sold within a year, it must be punished.
Additionally,
a provision is recorded for the difference between the initial award value plus the additions and their estimated realizable value,
when the former is higher.
|
(3)
|
Correspond
to deposits left in guarantee from determined derivative contracts. These guarantees
become operative when the valuation from these derivatives surpases the defined thresholds
for the contracts, these can be in favor or against the Bank.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
69
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE 15
TIME DEPOSITS
AND OTHER TIME LIABILITIES
As of June 30, 2018 and December 31,
2017, the composition of the item time deposits and other liabilities is as follows:
|
|
As
of
June 30, 2018
|
|
As
of
December 31, 2017
|
|
|
(Unaudited)
|
|
|
|
|
MCh$
|
|
MCh$
|
Deposits
and other demand liabilities
|
|
|
|
|
Checking
accounts
|
|
6,427,131
|
|
6,272,656
|
Other
deposits and demand accounts
|
|
656,492
|
|
590,221
|
Other
demand liabilities
|
|
1,044,135
|
|
905,289
|
|
|
|
|
|
Total
|
|
8,127,758
|
|
7,768,166
|
|
|
|
|
|
Time
deposits and other time liabilities
|
|
|
|
|
Time
deposits
|
|
12,558,283
|
|
11,792,466
|
Time
savings account
|
|
118,611
|
|
116,179
|
Other
time liabilities
|
|
4,700
|
|
5,300
|
|
|
|
|
|
Total
|
|
12,681,594
|
|
11,913,945
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
70
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE 16
ISSUED DEBT INSTRUMENTS
AND OTHER FINANCIAL LIABILITIES
As of June 30, 2018 and December 31,
2017, the composition for this item is as follows:
|
As
of
June 30, 2018
|
|
As
of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
Other
financial liabilities
|
|
|
|
Obligations
to public sector
|
58,764
|
|
59,470
|
Other
domestic obligations
|
166,941
|
|
175,389
|
Foreign
obligations
|
23,842
|
|
7,171
|
Subtotal
|
249,547
|
|
242,030
|
Issued
debt instruments
|
|
|
|
Mortgage
finance bonds
|
29,798
|
|
34,479
|
Senior
bonds
|
7,109,765
|
|
6,186,760
|
Mortgage
Bonds
|
97,057
|
|
99,222
|
Subordinated
bonds
|
783,775
|
|
773,192
|
Subtotal
|
8,020,395
|
|
7,093,653
|
|
|
|
|
Total
|
8,269,942
|
|
7,335,683
|
Debts
classified as current are either demand obligations or will mature in one year or less. All other debts are classified as non-current.
The Bank’s debts, both current and non-current, are summarized below:
|
As
of June 30, 2018
(Unaudited)
|
|
Current
|
|
Non-current
|
Total
|
|
MCh$
|
|
MCh$
|
MCh$
|
Mortgage
finance bonds
|
7,749
|
|
22,049
|
29,798
|
Senior
bonds
|
1,044,473
|
|
6,065,292
|
7,109,765
|
Mortgage
Bonds
|
4,681
|
|
92,376
|
97,057
|
Subordinated
bonds
|
2
|
|
783,773
|
783,775
|
Issued
debt instruments
|
1,056,905
|
|
6,963,490
|
8,020,395
|
|
|
|
|
|
Other
financial liabilities
|
221,108
|
|
28,439
|
249,547
|
|
|
|
|
|
Total
|
1,278,013
|
|
6,991,929
|
8,269,942
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
71
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE 16
ISSUED DEBT INSTRUMENTS
AND OTHER FINANCIAL LIABILITIES, continued
|
As
of December 31, 2017
|
|
Current
|
|
Non-current
|
Total
|
|
MCh$
|
|
MCh$
|
MCh$
|
Mortgage
finance bonds
|
8,691
|
|
25,788
|
34,479
|
Senior
bonds
|
337,166
|
|
5,849,594
|
6,186,760
|
Mortgage
Bonds
|
4,541
|
|
94,681
|
99,222
|
Subordinated
bonds
|
3
|
|
773,189
|
773,192
|
Issued
debt instruments
|
350,401
|
|
6,743,252
|
7,093,653
|
|
|
|
|
|
Other
financial liabilities
|
212,825
|
|
29,205
|
242,030
|
|
|
|
|
|
Total
|
563,226
|
|
6,772,457
|
7,335,683
|
|
a)
|
Mortgage
finance bonds
|
These bonds are
used to finance mortgage loans. Their principal amounts are amortized on a quarterly basis. The range of maturities of these bonds
is between five and twenty years. Loans are indexed to UF and create a yearly interest rate of 5.30% as of June 30, 2018 (5.39%
as of December 31, 2017).
|
As
of
June 30, 2018
|
|
As
of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Due
within 1 year
|
7,749
|
|
8,691
|
Due
after 1 year but within 2 years
|
6,258
|
|
6,744
|
Due
after 2 years but within 3 years
|
5,633
|
|
6,096
|
Due
after 3 years but within 4 years
|
4,593
|
|
5,155
|
Due
after 4 years but within 5 years
|
3,351
|
|
4,101
|
Due
after 5 years
|
2,214
|
|
3,692
|
Total
mortgage finance bonds
|
29,798
|
|
34,479
|
The following table
shows senior bonds by currency:
|
As
of
June
30, 2018
|
|
As
of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Santander
bonds in UF
|
4,030,771
|
|
3,542,006
|
Santander
bonds in USD
|
1,381,318
|
|
1,045,465
|
Santander
bonds in CHF
|
282,934
|
|
268,281
|
Santander
bonds in Ch$
|
1,155,742
|
|
1,135,527
|
Santander
bonds in AUD
|
14,646
|
|
14,534
|
Santander
bonds in JPY
|
136,422
|
|
126,059
|
Santander
bonds in EUR
|
107,932
|
|
54,888
|
Total
senior bonds
|
7,109,765
|
|
6,186,760
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
72
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated
Financial Statements
AS OF JUNE 30, 2018
AND 2017 AND DECEMBER 31, 2017
NOTE
16
ISSUED
DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued
i. Placement of senior bonds:
As of June 30, 2018 the
Bank has placed bonds for UF 19,000,000, CLP 75,000,000,000 and EUR 66,000,000 detailed as follows:
Series
|
Currency
|
Amount
placed
|
Term
(years)
|
Issuance
rate
(Annual)
|
Issue
date
|
Amount
|
Maturity
date
|
T15
|
UF
|
5,000,000
|
11,0
|
3.00%
|
02-01-2016
|
5,000,000
|
08-01-2028
|
T11
|
UF
|
5,000,000
|
7,0
|
2.65%
|
02-01-2016
|
5,000,000
|
02-01-2025
|
T1
|
UF
|
4,000,000
|
2,0
|
2.20%
|
02-01-2016
|
7,000,000
|
02-01-2020
|
T12
|
UF
|
5,000,000
|
7,0
|
2.70%
|
02-01-2016
|
5,000,000
|
08-01-2025
|
Total
|
UF
|
19,000,000
|
|
|
|
19,000,000
|
|
P5
|
CLP
|
75,000,000,000
|
4,0
|
5.30%
|
03-05-2015
|
150,000,000,000
|
03-01-2022
|
P5
|
CLP
|
75,000,000,000
|
|
|
|
150,000,000,000
|
|
EUR
|
EUR
|
26,000,000
|
7,0
|
1.00%
|
05-04-2018
|
26,000,000
|
05-28-2025
|
EUR
|
EUR
|
40,000,000
|
12,0
|
1.78%
|
06-08-2018
|
40,000,000
|
06-15-2030
|
Total
|
UF
|
66,000,000
|
|
|
|
66,000,000
|
|
During 2018’s first
semester, the Bank partially repurchased the following bonds:
Date
|
|
Type
|
Currency
|
Amount
|
01-04-2018
|
|
Senior
|
CLP
|
12,890,000,000
|
01-05-2018
|
|
Senior
|
CLP
|
4,600,000,000
|
01-22-2018
|
|
Senior
|
UF
|
24,000
|
04-05-2018
|
|
Senior
|
UF
|
484,000
|
04-06-2018
|
|
Senior
|
UF
|
184,000
|
04-23-2018
|
|
Senior
|
UF
|
216,000
|
04-24-2018
|
|
Senior
|
UF
|
4,000
|
04-25-2018
|
|
Senior
|
UF
|
262,000
|
05-10-2018
|
|
Senior
|
UF
|
800,000
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
73
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 16
ISSUED DEBT INSTRUMENTS AND OTHER
FINANCIAL LIABILITIES, continued
During 2017 the Bank has placed bonds for UF 10,000,000, CLP 160,000,000,000,
USD 770,000,000, and AUD 30,000,000, detailed as follows:
Series
|
Currency
|
Amount Placed
|
Term
(Years)
|
Issuance rate
(Annual)
|
Issue date
|
Amount
|
Maturity date
|
T9
|
UF
|
5,000,000
|
7
|
2.60%
|
02-01-2016
|
5,000,000
|
02-01-2024
|
T13
|
UF
|
5,000,000
|
9
|
2.75%
|
02-01-2016
|
5,000,000
|
02-01-2026
|
Total
|
UF
|
10,000,000
|
|
|
|
10,000,000
|
|
SD
|
CLP
|
60,000,000,000
|
5
|
5.50%
|
06-01-2014
|
200,000,000,000
|
06-01-2019
|
T16
|
CLP
|
100,000,000,000
|
6
|
5.20%
|
02-01-2016
|
100,000,000,000
|
08-01-2021
|
Total
|
CLP
|
160,000,000,000
|
|
|
|
300,000,000,000
|
|
DN
|
USD
|
100,000,000
|
3
|
Libor-USD 3M+0.80%
|
07-20-2017
|
100,000,000
|
07-27-2020
|
DN
|
USD
|
50,000,000
|
3
|
Libor-USD 3M+0.80%
|
07-20-2017
|
50,000,000
|
07-27-2020
|
DN
|
USD
|
50,000,000
|
3
|
Libor-USD 3M+0.80%
|
07-24-2017
|
50,000,000
|
07-27-2020
|
DN
|
USD
|
10,000,000
|
4
|
Libor-USD 3M+0.80%
|
08-23-2017
|
10,000,000
|
11-23-2021
|
DN
|
USD
|
10,000,000
|
4
|
Libor-USD 3M+0.80%
|
08-23-2017
|
10,000,000
|
11-23-2021
|
DN
|
USD
|
50,000,000
|
3
|
Libor-USD 3M+0.80%
|
09-14-2017
|
50,000,000
|
09-15-2020
|
DN
|
USD
|
500,000,000
|
3
|
2.50%
|
12-12-2017
|
500,000,000
|
12-15-2020
|
Total
|
USD
|
770,000,000
|
|
|
|
770,000,000
|
|
AUD
|
AUD
|
30,000,000
|
10
|
3.96%
|
12-05-2017
|
30,000,000
|
12-12-2027
|
Total
|
AUD
|
30,000,000
|
|
|
|
30,000,000
|
|
ii. Maturities for senior bonds are the following:
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Due within 1 year
|
1,044,473
|
|
337,166
|
Due after 1 year but within 2 years
|
866,790
|
|
866,936
|
Due after 2 years but within 3 years
|
1,330,233
|
|
832,978
|
Due after 3 years but within 4 years
|
774,057
|
|
1,177,081
|
Due after 4 years but within 5 years
|
854,069
|
|
902,647
|
Due after 5 years
|
2,240,143
|
|
2,069,952
|
Total senior bonds
|
7,109,765
|
|
6,186,760
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
74
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 16
ISSUED DEBT INSTRUMENTS AND OTHER
FINANCIAL LIABILITIES, continued
The detail of mortgage bonds per currency is the following:
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Mortgage bonds in UF
|
97,057
|
|
99,222
|
Total mortgage bonds
|
97,057
|
|
99,222
|
i. Placement of Mortgage bonds
As of June 30, 2018 and during 2017 the Bank has not placed any mortgage bonds.
ii. Maturities of mortgage bonds are the following:
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Due within 1 year
|
4,681
|
|
4,541
|
Due after 1 year but within 2 years
|
7,514
|
|
7,291
|
Due after 2 years but within 3 years
|
7,756
|
|
7,526
|
Due after 3 years but within 4 years
|
8,007
|
|
7,769
|
Due after 4 years but within 5 years
|
8,265
|
|
8,019
|
Due after 5 years
|
60,834
|
|
64,076
|
Total mortgage bonds
|
97,057
|
|
99,222
|
Detail of subordinated bonds per currency is as follows:
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Subordinated bonds denominated in Ch$
|
2
|
|
3
|
Subordinated bonds denominated in USD
|
-
|
|
-
|
Subordinated bonds denominated in UF
|
783,773
|
|
773,189
|
Total subordinated bonds
|
783,775
|
|
773,192
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
75
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 16
ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES,
continued
i. Placement of subordinated
bonds
As of June 30, 2018 and during 2017, the Bank has not placed any subordinated bonds.
ii. Maturity of subordinated bonds are the following:
The maturity of subordinated bonds considered long-term
are the following:
|
As of
Junio 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Due within 1 year
|
2
|
|
3
|
Due after 1 year but within 2 years
|
-
|
|
-
|
Due after 2 years but within 3 years
|
-
|
|
-
|
Due after 3 years but within 4 years
|
-
|
|
-
|
Due after 4 years but within 5 years
|
-
|
|
-
|
Due after 5 years
|
783,773
|
|
773,189
|
Total subordinated bonds
|
783,775
|
|
773,192
|
|
e)
|
Other financial liabilities
|
The composition of other financial
liabilities, by maturity, is detailed below:
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Non-current portion:
|
|
|
|
Due after 1 year but within 2 years
|
26,677
|
|
23,401
|
Due after 2 year but within 3 years
|
207
|
|
4,181
|
Due after 3 year but within 4 years
|
201
|
|
194
|
Due after 4 year but within 5 years
|
220
|
|
210
|
Due after 5 years
|
1,134
|
|
1,219
|
Non-current portion subtotal
|
28,439
|
|
29,205
|
|
|
|
|
Current portion:
|
|
|
|
Amounts due to credit card operators
|
174,012
|
|
173,271
|
Acceptance of letters of credit
|
3,984
|
|
2,780
|
Other long-term financial obligations, short-term portion
|
43,112
|
|
36,774
|
Current portion subtotal
|
221,108
|
|
212,825
|
|
|
|
|
Total other financial liabilities
|
249,547
|
|
242,030
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
76
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 17
MATURITY OF FINANCIAL ASSETS AND LIABILITIES
As of June 30, 2018 and December 31, 2017, the detail
of the maturities of assets and liabilities is as follows:
As of June 30, 2018
(Unaudited)
|
Demand
|
Up to
1 month
|
Between 1 and
3 months
|
Between 3 and
12 months
|
Up to 1 year
Subtotal
|
Between 1 and
3 years
|
Between 3 and
5 years
|
More than
5 years
|
More than 1 year
Subtotal
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and deposits in banks
|
1,450,015
|
-
|
-
|
-
|
1,450,015
|
-
|
-
|
-
|
-
|
1,450,015
|
Cash items in process of collection
|
745,532
|
-
|
-
|
-
|
745,532
|
-
|
-
|
-
|
-
|
745,532
|
Trading investments
|
-
|
4,743
|
262
|
969
|
5,974
|
104,892
|
36,039
|
126,663
|
267,594
|
273,568
|
Investments under resale agreements
|
1,746
|
-
|
-
|
-
|
1,746
|
-
|
-
|
-
|
-
|
1,746
|
Financial derivatives contracts
|
-
|
63,886
|
193,112
|
337,138
|
594,136
|
420,069
|
424,301
|
795,312
|
1,639,682
|
2,233,818
|
Interbank loans (1)
|
-
|
18,726
|
9,528
|
1,541
|
29,795
|
-
|
-
|
-
|
-
|
29,795
|
Loans and accounts receivables from customers (2)
|
639,338
|
2,581,378
|
2,360,475
|
4,776,710
|
10,357,901
|
5,494,218
|
3,131,949
|
10,220,065
|
18,846,232
|
29,204,133
|
Available for sale investments
|
-
|
149,643
|
159,825
|
107,307
|
416,775
|
977,246
|
446,437
|
1,068,669
|
2,492,352
|
2,909,127
|
Held to maturity investments
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Guarantee deposits (margin accounts)
|
389,847
|
-
|
-
|
-
|
389,847
|
-
|
-
|
-
|
-
|
389,847
|
Total financial assets
|
3,226,478
|
2,818,376
|
2,723,202
|
5,223,665
|
13,991,721
|
6,996,425
|
4,038,726
|
12,210,709
|
23,245,860
|
37,237,581
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits and other demand liabilities
|
8,127,758
|
-
|
-
|
-
|
8,127,758
|
-
|
-
|
-
|
-
|
8,127,758
|
Cash items in process of collection
|
717,175
|
-
|
-
|
-
|
717,175
|
-
|
-
|
-
|
-
|
717,175
|
Obligations under repurchase agreements
|
-
|
110,585
|
-
|
-
|
110,585
|
-
|
-
|
-
|
-
|
110,585
|
Time deposits and other time liabilities
|
123,310
|
5,738,907
|
4,312,959
|
2,385,444
|
12,560,620
|
53,441
|
2,950
|
64,583
|
120,974
|
12,681,594
|
Financial derivatives contracts
|
-
|
122,107
|
112,071
|
307,252
|
541,430
|
376,559
|
409,455
|
744,664
|
1,530,678
|
2,072,108
|
Interbank borrowings
|
4,802
|
14,758
|
147,210
|
1,363,509
|
1,530,279
|
22,933
|
-
|
-
|
22,933
|
1,553,212
|
Issued debts instruments
|
-
|
400,339
|
75,627
|
580,939
|
1,056,905
|
2,224,185
|
1,652,341
|
3,086,964
|
6,963,490
|
8,020,395
|
Other financial liabilities
|
169,406
|
14,883
|
9,722
|
27,097
|
221,108
|
26,884
|
421
|
1,134
|
28,439
|
249,547
|
Guarantees received (margin accounts)
|
397,630
|
-
|
-
|
-
|
397,630
|
-
|
-
|
-
|
-
|
397,630
|
Total financial liabilities
|
9,540,081
|
6,401,579
|
4,657,589
|
4,664,241
|
25,263,490
|
2,704,002
|
2,065,167
|
3,897,345
|
8,666,514
|
33,930,004
|
|
(1)
|
Interbank loans are presented on a gross basis. The amount
of allowances is Ch$59 million.
|
|
(2)
|
Loans and accounts receivables from customers are presented on a gross basis. Provisions on loans amounts according to customer
type are the following: Commercial loans Ch$471,261 million, Mortgage loans Ch$65,873 million and Consumer loans Ch$267,878 million.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
77
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 17
MATURITY OF FINANCIAL ASSETS
AND LIABILITIES, continued
As of December 31, 2017
|
Demand
|
Up to
1 month
|
Between 1 and
3 months
|
Between 3 and
12 months
|
Up to 1 year
Subtotal
|
Between 1 and
3 years
|
Between 3 and
5 years
|
More than
5 years
|
More than 1 year
Subtotal
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and deposits in banks
|
1,452,922
|
-
|
-
|
-
|
1,452,922
|
-
|
-
|
-
|
-
|
1,452,922
|
Cash items in process of collection
|
668,145
|
-
|
-
|
-
|
668,145
|
-
|
-
|
-
|
-
|
668,145
|
Trading investments
|
-
|
72,983
|
4,024
|
68,277
|
145,284
|
110,824
|
90,507
|
139,121
|
340,452
|
485,736
|
Investments under resale agreements
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Financial derivatives contracts
|
-
|
135,780
|
198,876
|
410,415
|
745,071
|
385,428
|
371,090
|
737,058
|
1,493,576
|
2,238,647
|
Interbank loans (1)
|
-
|
6,064
|
152,911
|
3,710
|
162,685
|
-
|
-
|
-
|
-
|
162,685
|
Loans and accounts receivables from customers (2)
|
769,823
|
2,206,734
|
2,288,372
|
4,348,975
|
9,613,904
|
5,187,501
|
2,938,326
|
9,823,498
|
17,949,325
|
27,563,229
|
Available for sale investments
|
-
|
58,850
|
11,788
|
102,600
|
173,238
|
556,289
|
975,372
|
869,647
|
2,401,308
|
2,574,546
|
Held to maturity investments
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Guarantee deposits (margin accounts)
|
323,767
|
-
|
-
|
-
|
323,767
|
-
|
-
|
-
|
-
|
323,767
|
Total financial assets
|
3,214,657
|
2,480,411
|
2,655,971
|
4,933,977
|
13,285,016
|
6,240,042
|
4,375,295
|
11,569,324
|
22,184,661
|
35,469,677
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits and other demand liabilities
|
7,768,166
|
-
|
-
|
-
|
7,768,166
|
-
|
-
|
-
|
-
|
7,768,166
|
Cash items in process of collection
|
486,726
|
-
|
-
|
-
|
486,726
|
-
|
-
|
-
|
-
|
486,726
|
Obligations under repurchase agreements
|
-
|
268,061
|
-
|
-
|
268,061
|
-
|
-
|
-
|
-
|
268,061
|
Time deposits and other time liabilities
|
121,479
|
5,120,171
|
4,201,271
|
2,299,018
|
11,741,939
|
106,833
|
2,811
|
62,362
|
172,006
|
11,913,945
|
Financial derivatives contracts
|
-
|
144,410
|
196,444
|
356,288
|
697,142
|
378,582
|
358,358
|
705,406
|
1,442,346
|
2,139,488
|
Interbank borrowings
|
4,130
|
46,013
|
397,419
|
1,030,241
|
1,477,803
|
220,554
|
-
|
-
|
220,554
|
1,698,357
|
Issued debts instruments
|
-
|
21,043
|
55,119
|
274,239
|
350,401
|
1,727,571
|
2,104,771
|
2,910,910
|
6,743,252
|
7,093,653
|
Other financial liabilities
|
177,663
|
701
|
2,583
|
31,879
|
212,826
|
27,581
|
404
|
1,219
|
29,204
|
242,030
|
Guarantees received (margin accounts)
|
408,313
|
-
|
-
|
-
|
408,313
|
-
|
-
|
-
|
-
|
408,313
|
Total financial liabilities
|
8,966,477
|
5,600,399
|
4,852,836
|
3,991,665
|
23,411,377
|
2,461,121
|
2,466,344
|
3,679,897
|
8,607,362
|
32,018,739
|
|
(1)
|
Interbank loans are presented on a gross basis. The amount of allowances is Ch$86 million.
|
|
(2)
|
Loans and accounts receivables from customers are presented on a gross basis. Provisions amounts according to customer type
of loan are the following: Commercial loans for Ch$462,865 million, Mortgage loans for Ch$69,066 million and Consumer loans for
Ch$283,756 million.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
78
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 18
PROVISIONS
|
a)
|
As of June 30, 2018 and December 31, 2017, the detail for the provisions is as follows:
|
|
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
|
(Unaudited)
|
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Provision for employee salaries and expenses
|
|
74,737
|
|
97,576
|
Provision for mandatory dividends
|
|
91,659
|
|
169,444
|
Provision for contingent loan risks:
|
|
|
|
|
Provision for lines of credit of immediate disponibility
|
|
15,609
|
|
15,103
|
Other provisions for contingent loans
|
|
14,952
|
|
14,304
|
Provision for contingencies
|
|
8,720
|
|
27,303
|
Additonal provisions
|
|
-
|
|
-
|
Provision for foreign bank loans
|
|
629
|
|
599
|
Total
|
|
206,306
|
|
324,329
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
79
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 19
OTHER LIABILITIES
Other liabilities consist of:
|
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
|
(Unaudited)
|
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Accounts and notes payable
|
|
154,790
|
|
196,965
|
Income received in advance
|
|
590
|
|
601
|
Adjustment due to macro-hedging valuation
|
|
2,475
|
|
-
|
Guarantees received (margin accounts) (1)
|
|
397,630
|
|
408,313
|
Notes payable through brokerage and simultaneous transactions
|
|
16,009
|
|
17,799
|
Other payable obligations
|
|
76,061
|
|
58,921
|
Withheld VAT
|
|
2,216
|
|
1,887
|
Accounts payable by insurance companies
|
|
9,142
|
|
13,873
|
Other liabilities
|
|
125,872
|
|
47,004
|
Total
|
|
784,785
|
|
745,363
|
|
(1)
|
Guarantee deposits (margin accounts) correspond to collaterals associated with derivative financial
contracts to mitigate the counterparty credit risk and are mainly established in cash. These guarantees operate when the mark to
market from derivative financial instruments exceed the levels of threshold agreed in the contracts, which could result in a delivery
or reception of collateral for the Bank.
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
80
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 20
CONTINGENCIES AND COMMITMENTS
a) Lawsuits and legal procedures
At the date these financial statements were issued,
the Bank and its affiliates were subject to certain legal actions in the normal course of their business. As of June 30, 2018,
the Bank and its subsidiaries have provisions for this item for Ch$778 million and Ch$0 million, respectively (Ch$1,214 million
and Ch$0 million as of December 31, 2017) which is included in “Provisions” in the Consolidated Statement of Financial
Position as provisions for contingencies.
As of June 30, 2018, the following legal situations
are pending:
Santander Corredores de Bolsa Limitada
The case “Echeverría with Santander Corredora”
(currently Santander Corredores de Bolsa Ltda.), followed before the 21st Civil Court of Santiago, Case C-21,366-2014, on compensation
for damages for faults in the purchase of shares. With regard to its actual situation as of December 31, 2017, Santander Corredores
de Bolsa Limitada requested the Court to declare the proceeding abandoned due to the pending actions of the plaintiff, a situation
that is pending for the Court to resolve.
Santander Corredora de Seguros Limitada
There are lawsuits amounting to UF 5,111 corresponding
to processes mainly for goods delivered in leasing. Our lawyers have not estimated additional material losses for these trials.
b) Contingent
loans
To meet customer needs, the Bank acquired several irrevocable
commitments and contingent liabilities, although these obligations should not be recognized in the Consolidated Statement of Financial
Position, these contain credit risks and are therefore part of the Bank’s overall risk.
The following table shows the Bank’s contractual
obligations to issue loans:
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Letters of credit issued
|
220,508
|
|
201,699
|
Foreign letters of credit confirmed
|
75,794
|
|
75,499
|
Performance guarantees
|
1,897,826
|
|
1,823,793
|
Personal guarantees
|
124,470
|
|
81,577
|
Subtotal
|
2,318,598
|
|
2,182,568
|
On demand credit lines
|
8,654,598
|
|
8,135,489
|
Other irrevocable credit commitments
|
371,035
|
|
260,691
|
Total
|
11,344,231
|
|
10,578,748
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
81
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 20
CONTINGENCIES AND COMMITMENTS
,
continued
The Bank holds securities in the normal course of its
business as follows:
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
Third party operations
|
|
|
|
Collections
|
231,514
|
|
175,200
|
Transferred financial assets managed by the Bank
|
28,608
|
|
33,278
|
Assets from third parties managed by the Bank and its affiliates (1)
|
1,679,178
|
|
1,660,804
|
Subtotal
|
1,939,300
|
|
1,869,282
|
Custody of securities
|
|
|
|
Securities held in custody
|
428,899
|
|
383,002
|
Securities held in custody deposited in other entity
|
918,332
|
|
760,083
|
Issued securities held in custody
|
21,170,423
|
|
22,046,700
|
Subtotal
|
22,517,654
|
|
23,189,785
|
Total
|
24,456,954
|
|
25,059,067
|
(1) The Bank classified the portfolios managed
by private banking in “Assets from third parties managed by the Bank and its affiliates”, as of June 30, 2018, the
balance for this was Ch$1,679,143 million (Ch$1,660,768 million at December 31, 2017).
Banco Santander-Chile has an integral bank policy of
coverage of Official Loyalty N °4505199 in force with the company Compañía de Seguros Chilena Consolidada SA,
Coverage for 50,000,000 USD per claim with an annual limit of 100,000,000 USD, which covers both the Bank and its subsidiaries,
with an expiration date of June 30, 2018.
Santander Agente de Valores Limitada
In order to ensure the correct and full compliance of
all its obligations as securities agent in accordance with the provisions of articles N° 30 and following of Law N° 18,045,
on Stock Market, the company constituted a guarantee for 4,000 UF with insurance policy N° 216113821 taken with the Insurance
Company of Crédito Continental S.A. and whose maturity is December 19, 2018.
Santander Corredores de Bolsa Limitada
i) As of June 30, 2018, the Company has comprehensive
guarantees in the Santiago Stock Exchange to cover simultaneous operations carried out through its own portfolio for a total of
Ch$ 21,074,054 (Ch$ 25,218,779 as of December 31, 2017).
ii) Additionally, as of June 30, 2018, the Company holds
a guarantee in CCLV Contraparte Central S.A., in cash, for an amount of Ch$ 6,350,000 (Ch$ 5,000,000 as of December 31, 2017).
iii) In order to ensure the correct and full compliance
of all its obligations as Brokerage Broker, in accordance with the provisions of articles 30 and following of Law N°18,045
on Securities Market, the Company has delivered fixed-income securities to the Santiago Stock Exchange for a present value of Ch$
1,014,160 as of June 30, 2018 (Ch$ 1,014,400 as of December 31, 2017).
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
82
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 20
CONTINGENCIES AND COMMITMENTS
,
continued
Santander Corredora de Seguros Limitada
i) In accordance with those established in Circular N° 1,160 of the Superintendency
of Securities and Insurance, the company has contracted an insurance policy to respond to the correct and full compliance with
all obligations arising from its operations as an intermediary in the hiring insurance.
ii) The insurance policy for insurance brokers N°
4461903, which covers 500 UF, and the professional liability policy for insurance brokers N°4462082 for an amount equivalent
to UF 60,000, were contracted with the Compañía de Seguros Generales Chilena Consolidada S.A. both are valid from
April 15, 2018 to April 14, 2019.
iii) The Company maintains a guarantee slip with Banco
Santander-Chile to guarantee the faithful fulfillment of the public bidding rules of the tax and deductibility insurance plus ITP
2/3 of the mortgage portfolio for the housing of Banco Santander-Chile. This amounts to 10,000 UF for each portfolio respectively,
both with an expiration date of July 31, 2019. For the same reason, the Company maintains a guarantee voucher in compliance with
the public tender for fire and earthquake insurance, which amounts to 200 UF and 3,000 UF with the same financial institution,
both with an expiration date as of December 31, 2018.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
83
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 21
EQUITY
As of June 30, 2018 and December 31, 2017 the Bank had
188,446,126,794 shares outstanding amounting to Ch$ 891,303 million. All of which are subscribed for and paid in full. All shares
have the same rights, and have no preferences or restrictions.
The movement in shares for the period of June 30, 2018
and December 31, 2017 is the following:
|
Shares
|
|
As of June 30,
|
As of December 31,
|
2018
|
|
2017
|
|
|
|
|
Issued as of January 1
|
188,446,126,794
|
|
188,446,126,794
|
Issuance of paid shares
|
-
|
|
-
|
Issuance of outstanding shares
|
-
|
|
-
|
Stock options exercised
|
-
|
|
-
|
Issued as period end
|
188,446,126,794
|
|
188,446,126,794
|
|
|
|
|
|
As of June 30, 2018 and December 31, 2017 the Bank does
not own any of its shares in treasury, nor do any of the consolidated companies.
As of June 30, 2018 the shareholder composition is the
following:
Corporate Name or Shareholder’s Name
|
Shares
|
ADRs (*)
|
Total
|
% of equity holding
|
|
|
|
|
|
Santander Chile Holding S.A.
|
66,822,519,695
|
-
|
66,822,519,695
|
35,46
|
Teatinos Siglo XXI Inversiones Limitada
|
59,770,481,573
|
-
|
59,770,481,573
|
31,72
|
The Bank of New York Mellon
|
-
|
28,135,498,471
|
28,135,498,471
|
14,93
|
Banks on behalf of third parties
|
14,771,223,510
|
-
|
14,771,223,510
|
7,84
|
Pension funds (AFP) on behalf of third parties
|
8,309,683,925
|
-
|
8,309,683,925
|
4,41
|
Stock brokers on behalf of third parties
|
4,399,737,440
|
-
|
4,399,737,440
|
2,33
|
Other minority holders
|
6,236,982,180
|
-
|
6,236,982,180
|
3,31
|
Total
|
160,310,628,323
|
28,135,498,471
|
188,446,126,794
|
100,00
|
(*)
American Depository Receipts (ADR) are certificates issued by a U.S. commercial bank to be traded on the U.S. securities markets.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
84
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 21
EQUITY, continued
As of December 31, 2017 the shareholder composition
is the following:
Corporate Name or Shareholder’s Name
|
Shares
|
ADRs (*)
|
Total
|
% of equity holding
|
|
|
|
|
|
Santander Chile Holding S,A,
|
66,822,519,695
|
-
|
66,822,519,695
|
35.46
|
Teatinos Siglo XXI Inversiones Limitada
|
59,770,481,573
|
-
|
59,770,481,573
|
31.72
|
The Bank of New York Mellon
|
-
|
31,238,866,071
|
31,238,866,071
|
16.58
|
Banks on behalf of third parties
|
13,892,691,988
|
-
|
13,892,691,988
|
7.37
|
Pension fund (AFP) on behalf of third parties
|
6,896,552,755
|
-
|
6,896,552,755
|
3.66
|
Stock brokers on behalf of third parties
|
3,762,310,365
|
-
|
3,762,310,365
|
2.00
|
Other minority holders
|
6,062,704,347
|
-
|
6,062,704,347
|
3.21
|
Total
|
157,207,260,723
|
31,238,866,071
|
188,446,126,794
|
100.00
|
|
(*)
|
American Depository Receipts (ADR) are certificates issued
by a U,S, commercial bank to be traded on the U,S, securities markets,
|
The distribution of dividends has been disclosed in the Consolidated Statements
of Changes in Equity.
|
c)
|
Diluted earnings per share and basic earnings per share
|
As of June 30, 2018 and December 31, 2017, the composition of diluted earnings
per share and basic earnings per share are as follows:
|
As of June 30,
(Unaudited)
|
|
2018
|
|
2017
|
|
MCh$
|
|
MCh$
|
|
|
|
|
a) Basic earnings per share
|
|
|
|
Total attributable to equity holders of the Bank
|
305,531
|
|
292,811
|
Weighted average number of outstanding shares
|
188,446,126,794
|
|
188,446,126,794
|
Basic earnings per share (in Ch$)
|
1,621
|
|
1.554
|
|
|
|
|
b) Diluted earnings per share
|
|
|
|
|
|
|
|
Total attributable to equity holders of the Bank
|
305,531
|
|
292,811
|
Weighted average number of outstanding shares
|
188,446,126,794
|
|
188,446,126,794
|
Assumed conversion of convertible debt
|
-
|
|
-
|
Adjusted number of shares
|
188,446,126,794
|
|
188,446,126,794
|
Diluted earnings per share (in Ch$)
|
1.621
|
|
1.554
|
As of June 30, 2018 and December 31, 2017, the Bank does not own
instruments with dilutive effects.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
85
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 21
EQUITY, continued
|
d)
|
Other comprehensive income of available for sale investments and cash flow hedges:
|
|
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
|
(Unaudited)
|
|
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Available for sale investments
|
|
|
|
|
As of January 1,
|
|
1,855
|
|
7,375
|
Gain (losses) on the re-valuation of available for sale investments, before tax
|
|
(6,039)
|
|
(10,384)
|
Reclassification from other comprehensive income to net income for the year
|
|
-
|
|
-
|
Net income realized
|
|
3,552
|
|
4,864
|
Subtotal
|
|
(2,487)
|
|
(5,520)
|
Total
|
|
(632)
|
|
1,855
|
|
|
|
|
|
Cash flow hedges
|
|
|
|
|
As of January 1,
|
|
(3,562)
|
|
2,288
|
Gains (losses) on the re-valuation of cash flow hedges, before tax
|
|
(33,239)
|
|
(5,850)
|
Reclassification and adjustments on cash flow hedges, before tax
|
|
-
|
|
-
|
Amounts removed from equity and included in carrying amount of non-financial asset (liability) whose acquisition or assignment was hedged as a highly probable transaction
|
|
-
|
|
-
|
Subtotal
|
|
(33,239)
|
|
(5,850)
|
Total
|
|
(36,801)
|
|
(3,562)
|
|
|
|
|
|
Other comprehensive income, before tax
|
|
(37,433)
|
|
(1,707)
|
|
|
|
|
|
Income tax related to other comprehensive income components
|
|
|
|
|
Income tax relating to available for sale investments
|
|
170
|
|
(473)
|
Income tax relating to cash flow hedges
|
|
9,937
|
|
908
|
Total
|
|
10,107
|
|
435
|
|
|
|
|
|
Other comprehensive income, net of tax
|
|
(27,326)
|
|
(1,272)
|
Attributable to:
|
|
|
|
|
Equity holders of the Bank
|
|
(28,318)
|
|
(2,312)
|
Non-controlling interest
|
|
992
|
|
1,040
|
The Bank expects that
the results included in “Other comprehensive income” will be reclassified to profit or loss when the specific conditions
have been met.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
86
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 22
CAPITAL REQUIREMENTS (BASEL)
In accordance with Chilean General Banking Law, the
Bank must maintain a minimum ratio of effective equity to risk-weighted consolidated assets of 8% net of required allowances, and
a minimum ratio of basic equity to consolidated total assets of 3%, net of required allowances. However, as a result of the Bank’s
merger in 2002, the SBIF has determined that the Bank’s combined effective equity cannot be lower than 11% of its risk-weighted
assets. Effective net equity is defined for these purposes as basic equity (capital and reserves) plus subordinated bonds, up to
a maximum of 50% of basic equity.
Assets are allocated to different risk categories, each
of which is assigned a weighting percentage according to the amount of capital required to be held for each type of asset. For
example, cash, deposits in banks and financial instruments issued by the Central Bank of Chile have a 0% risk weighting, meaning
that it is not necessary to hold equity to back these assets according to current regulations. Property, plant and equipment have
a 100% risk weighting, meaning that a minimum capital equivalent to 11% of these assets must be held. All derivatives traded off
the exchanges are also assigned a risk weighting, using a conversion factor applied to their notional values, to determine the
amount of their exposure to credit risk. Off-balance-sheet contingent credits are also included for weighting purposes, as “Credit
equivalents”.
According to Chapter 12-1 of the SBIF’s Recopilación
Actualizada de Normas [Updated Compilation of Rules] effective January 2010, the SBIF changed existing regulation with the enforcement
of Chapter B-3 from the Compendium of Accounting Standards, which changed the risk exposure of contingent allocations from 100%
exposure to the following:
Type of contingent loan
|
|
Exposure
|
|
|
|
a) Pledges and other commercial commitments
|
|
100%
|
b) Foreign letters of credit confirmed
|
|
20%
|
c) Letters of credit issued
|
|
20%
|
d) Guarantees
|
|
50%
|
e) Interbank guarantee letters
|
|
100%
|
f) Available lines of credit
|
|
35%
|
g) Other loan commitments:
|
|
|
- Higher education loans Law No, 20,027
|
|
15%
|
- Other
|
|
100%
|
h) Other contingent loans
|
|
100%
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
87
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 22
CAPITAL REQUIREMENTS (BASEL), continued
The levels of basic capital and effective net equity as of June 30, 2018 and December 31, 2017, are the following:
|
Consolidated assets
|
|
Risk-weighted assets
|
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
|
|
|
Balance-sheet assets (net of allowances)
|
|
|
|
|
|
|
|
Cash and deposits in banks
|
1,450,015
|
|
1,452,922
|
|
-
|
|
-
|
Cash in process of collection
|
745,532
|
|
668,145
|
|
188,296
|
|
300,302
|
Trading investments
|
273,568
|
|
485,736
|
|
29,870
|
|
25,031
|
Investments under resale agreements
|
1,746
|
|
-
|
|
349
|
|
-
|
Financial derivative contracts (*)
|
1,670,921
|
|
1,014,070
|
|
1,126,577
|
|
718,426
|
Interbank loans, net
|
29,736
|
|
162,599
|
|
29,736
|
|
162,598
|
Loans and accounts receivables from customers, net
|
28,399,121
|
|
26,747,542
|
|
24,581,996
|
|
23,102,177
|
Available for sale investment
|
2,909,127
|
|
2,574,546
|
|
254,288
|
|
147,894
|
Investments in associates and other companies
|
30,292
|
|
27,585
|
|
30,292
|
|
27,585
|
Intangible assets
|
61,056
|
|
63,219
|
|
61,056
|
|
63,219
|
Property, plant, and equipment
|
230,572
|
|
242,547
|
|
230,572
|
|
242,547
|
Current taxes
|
10,623
|
|
-
|
|
1,062
|
|
-
|
Deferred taxes
|
380,610
|
|
385,608
|
|
38,061
|
|
38,561
|
Other assets
|
833,422
|
|
755,184
|
|
791,226
|
|
722,617
|
Off-balance-sheet assets
|
|
|
|
|
|
|
|
Contingent loans
|
4,512,563
|
|
4,133,897
|
|
2,581,939
|
|
2,360,877
|
Total
|
41,538,904
|
|
38,713,600
|
|
29,945,320
|
|
27,911,834
|
|
(*)
|
“Financial derivative contracts” are presented at their “Credit Equivalent Risk”
value as established in Chapter 12-1 of the Updated Compilation of Rules issued by the SBIF.
|
The ratios of basic capital and effective net equity
at the close of each period are as follows:
|
Ratio
|
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
|
As of
June 30, 2018
|
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
MCh$
|
|
MCh$
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
Basic capital
|
2,999,879
|
|
3,066,180
|
|
7.22
|
|
7.92
|
Effective net equity
|
3,826,903
|
|
3,881,252
|
|
12.78
|
|
13.91
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
88
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 23
NON-CONTROLLING INTEREST
|
a)
|
It reflects the net amount of equity of dependent entities attributable to
capital instruments which do not belong, directly or indirectly, to the Bank, including the portion of the income for the period
that has been attributed to them.
|
The non-controlling interest included in the equity and the income from the
subsidiaries is summarized as follows:
|
|
|
|
Other comprehensive income
|
As of June 30, 2018
(Unaudited)
|
Non
controlling interest
|
Equity
|
Income
|
Available for sale investments
|
Deferred tax
|
Total other comprehensive income
|
Comprehensive income
|
|
%
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
Subsidiaries:
|
|
|
|
|
|
|
|
Santander Corredora de Seguros Limitada
|
0.25
|
170
|
3
|
(2)
|
-
|
(2)
|
1
|
Santander Corredores de Bolsa Limitada
|
49.41
|
21,440
|
487
|
(36)
|
(10)
|
(46)
|
441
|
Santander Agente de Valores Limitada
|
0.97
|
463
|
75
|
-
|
-
|
-
|
75
|
Santander S.A. Sociedad Securitizadora
|
0.36
|
1
|
-
|
-
|
-
|
-
|
-
|
Subtotal
|
|
22,074
|
565
|
(38)
|
(10)
|
(48)
|
517
|
|
|
|
|
|
|
|
|
Entities controlled through other considerations:
|
|
|
|
|
|
|
|
Bansa Santander S.A.
|
100.00
|
17,684
|
282
|
-
|
-
|
-
|
282
|
Santander Gestión de Recaudación y Cobranzas Limitada
|
100.00
|
3,493
|
568
|
-
|
-
|
-
|
568
|
Subtotal
|
|
21,177
|
850
|
-
|
-
|
-
|
850
|
|
|
|
|
|
|
|
|
Total
|
|
43,251
|
1,415
|
(38)
|
(10)
|
(48)
|
1,367
|
|
|
|
|
Other comprehensive income
|
As of December 31, 2017
|
Non-controlling interest
|
Equity
|
Income
|
Available for sale investments
|
Deferred tax
|
Total other comprehensive income
|
Comprehensive income
|
|
%
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
Subsidiaries:
|
|
|
|
|
|
|
|
Santander Corredora de Seguros Limitada
|
0.25
|
167
|
4
|
-
|
-
|
-
|
4
|
Santander Corredores de Bolsa Limitada
|
49.00
|
21,000
|
702
|
470
|
(134)
|
336
|
1,038
|
Santander Agente de Valores Limitada
|
0.97
|
389
|
132
|
-
|
-
|
-
|
132
|
Santander S.A. Sociedad Securitizadora
|
0.36
|
1
|
-
|
-
|
-
|
-
|
-
|
Subtotal
|
|
21,557
|
838
|
470
|
(134)
|
336
|
1,174
|
|
|
|
|
|
|
|
|
Entities controlled through other considerations:
|
|
|
|
|
|
|
|
Bansa Santander S.A. (1)
|
100.00
|
17,401
|
10,869
|
-
|
-
|
-
|
10,869
|
Santander Gestión de Recaudación y
Cobranzas Limitada
|
100.00
|
2,925
|
741
|
-
|
-
|
-
|
741
|
Subtotal
|
|
20,326
|
11,610
|
-
|
-
|
-
|
11,610
|
|
|
|
|
|
|
|
|
Total
|
|
41,883
|
12,448
|
470
|
(134)
|
336
|
12,784
|
(1) In September 2017, Bansa Santander S.A., held a legal assignment of rights
by leasing contract, which resulted in a result of $ 20,663 million before taxes ($15,197 million net of taxes).
According to what is indicated in note 1 ii) Bansa Santander S.A. is an entity
controlled by the Bank for reasons other than its participation in equity, therefore the income from this company is assigned entirely
to non-controlling interest.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
89
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 23
NON-CONTROLLING INTEREST, continued
|
|
|
|
Other comprehensive income
|
As of June 30, 2017
(Unaudited)
|
Non-controlling interest
|
Equity
|
Income
|
Available for sale investments
|
Deferred tax
|
Total other comprehensive income
|
Comprehensive income
|
|
%
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
Subsidiaries:
|
|
|
|
|
|
|
|
Santander Corredora de Seguros Limitada
|
0.25
|
167
|
3
|
-
|
-
|
-
|
3
|
Santander Corredores de Bolsa Limitada
|
49.00
|
20,039
|
261
|
(263)
|
72
|
(191)
|
70
|
Santander Agente de Valores Limitada
|
0.97
|
555
|
63
|
-
|
-
|
-
|
63
|
Santander S.A. Sociedad Securitizadora
|
0.36
|
1
|
-
|
-
|
-
|
-
|
-
|
Subtotal
|
|
20,762
|
327
|
(263)
|
72
|
(191)
|
136
|
|
|
|
|
|
|
|
|
Entities controlled through other considerations:
|
|
|
|
|
|
|
|
Bansa Santander S.A.
|
100.00
|
6,835
|
302
|
-
|
-
|
-
|
302
|
Santander Gestión de Recaudación y
Cobranzas Limitada
|
100.00
|
2,461
|
279
|
-
|
-
|
-
|
279
|
Subtotal
|
|
9,296
|
581
|
-
|
-
|
-
|
581
|
|
|
|
|
|
|
|
|
Total
|
|
30,058
|
908
|
(263)
|
72
|
(191)
|
717
|
|
b)
|
A summary of the financial information of subsidiaries
included in the consolidation with non-controlling interests (before consolidation or conforming adjustments) is as follows:
|
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
Net Income
|
Assets
|
Liabilities
|
Capital
|
|
Assets
|
Liabilities
|
Capital
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
Santander Corredora de Seguros Limitada
|
77,193
|
9,665
|
66,374
|
1,154
|
|
76,177
|
9,803
|
64,937
|
1,437
|
Santander Corredores de Bolsa Limitada
|
102,343
|
58,596
|
42,761
|
986
|
|
88,711
|
45,855
|
41,424
|
1,432
|
Santander Agente de Valores Limitada
|
51,061
|
3,152
|
40,177
|
7,732
|
|
44,910
|
4,732
|
26,569
|
13,609
|
Santander S.A. Sociedad Securitizadora
|
374
|
71
|
350
|
(47)
|
|
400
|
50
|
432
|
(82)
|
Santander Gestión de Recaudación y Cobranzas Ltda.
|
6,961
|
3,468
|
2,925
|
568
|
|
10,826
|
7,901
|
2,184
|
741
|
Bansa Santander S.A.
|
25,403
|
7,720
|
17,401
|
282
|
|
25,535
|
8,134
|
6,533
|
10,868
|
Total
|
263,335
|
82,672
|
169,988
|
10,675
|
|
246,559
|
76,475
|
142,079
|
28,005
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
90
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 24
INTEREST INCOME
This item refers to interest earned in the period from the financial assets
whose return, whether implicitly or explicitly, is determined by applying the effective interest rate method, regardless of the
value at fair value, as well as the effect of hedge accounting.
|
a)
|
As of June 30, 2018 and 2017, the income from interest income, not including income from hedge
accounting, is attributable to the following items:
|
|
As of June 30,
(Unaudited)
|
|
2018
|
|
2017
|
|
Interest
|
Inflation adjustments
|
Prepaid
fees
|
Total
|
|
Interest
|
Inflation adjustments
|
Prepaid
fees
|
Total
|
Items
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
Resale agreements
|
493
|
-
|
-
|
493
|
|
515
|
-
|
-
|
515
|
Interbank loans
|
725
|
-
|
-
|
725
|
|
171
|
-
|
-
|
171
|
Commercial loans
|
375,711
|
70,582
|
5,701
|
451,994
|
|
378,553
|
58,869
|
5,118
|
442,540
|
Mortgage loans
|
160,983
|
122,416
|
222
|
283,621
|
|
159,395
|
103,895
|
197
|
263,487
|
Consumer loans
|
290,676
|
207
|
2,955
|
293,838
|
|
310,487
|
246
|
2,374
|
313,107
|
Investment instruments
|
35,986
|
13,865
|
-
|
49,851
|
|
42,885
|
433
|
-
|
43,318
|
Other interest income
|
6,328
|
2,985
|
-
|
9,313
|
|
6,252
|
524
|
-
|
6,776
|
|
|
|
|
|
|
|
|
|
|
Interest income without income from hedge accounting
|
870,902
|
210,055
|
8,878
|
1,089,835
|
|
898,258
|
163,967
|
7,689
|
1,069,914
|
|
b)
|
As indicated in section i) of Note 1, suspended interest relates to loans with payments over 90
days overdue, which are recorded in off-balance sheet accounts until they are effectively received.
|
As of June 30, 2018 and December 31, 2017, the suspended
interest and adjustments income consists of the following:
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
Interest
|
Inflation adjustments
|
Total
|
|
Interest
|
Inflation adjustments
|
Total
|
Items
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
Commercial loans
|
12,642
|
7,656
|
20,298
|
|
12,709
|
7,703
|
20,412
|
Mortgage loans
|
2,941
|
5,665
|
8,606
|
|
2,871
|
4,999
|
7,870
|
Consumer loans
|
4,456
|
363
|
4,819
|
|
5,084
|
377
|
5,461
|
|
|
|
|
|
|
|
|
Total
|
20,039
|
13,684
|
33,723
|
|
20,664
|
13,079
|
33,743
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
91
Banco
Santander-Chile and Subsidiaries
Notes to the Consolidated Financial
Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31,
2017
NOTE 24
INTEREST INCOME, continued
|
c)
|
As of June 30, 2018 and 2017, the expenses from interest
expense, excluding expense from hedge accounting, are as follows:
|
|
As of June 30,
(Unaudited)
|
|
2018
|
|
2017
|
|
Interest
|
Inflation adjustments
|
Total
|
|
Interest
|
Inflation adjustments
|
Total
|
Items
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
Demand deposits
|
(6,238)
|
(539)
|
(6,777)
|
|
(6,152)
|
(487)
|
(6,639)
|
Repurchase agreements
|
(2,219)
|
-
|
(2,219)
|
|
(4,023)
|
-
|
(4,023)
|
Time deposits and liabilities
|
(152,316)
|
(16,738)
|
(169,054)
|
|
(183,010)
|
(14,648)
|
(197,658)
|
Interbank borrowings
|
(15,334)
|
-
|
(15,334)
|
|
(11,649)
|
-
|
(11,649))
|
Issued debt instruments
|
(117,019)
|
(62,972)
|
(179,991)
|
|
(111,571)
|
(54,869)
|
(166,440)
|
Other financial liabilities
|
(1,442)
|
(53)
|
(1,495)
|
|
(1,465)
|
(317)
|
(1,782)
|
Other interest expense
|
(3,277)
|
(4,500)
|
(7,777)
|
|
(2,497)
|
(3,346)
|
(5,843)
|
Interest expense without expenses from hedge accounting
|
(297,845)
|
(84,802)
|
(382,647)
|
|
(320,367)
|
(73,667)
|
(394,034)
|
|
d)
|
As of June 30, 2018 and 2017, the income and expense from
interest is as follows:
|
|
|
As of June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
Items
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Interest income less income from hedge accounting
|
|
1,089,835
|
|
1,069,914
|
Interest expense less expense from hedge accounting
|
|
(382,647)
|
|
(394,034)
|
|
|
|
|
|
Net Interest income (expense) from hedge accounting
|
|
707,188
|
|
675,880
|
|
|
|
|
|
Hedge accounting (net)
|
|
(7,143)
|
|
(13,271)
|
|
|
|
|
|
Total net interest income
|
|
700,045
|
|
662,609
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
92
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 25
FEES AND COMMISSIONS
|
a)
|
Fees and commissions includes the value of fees earned and paid during the year, except those which
are an integral part of the financial instrument’s effective interest rate:
|
|
|
As of June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Fee and commission income
|
|
|
|
|
Fees and commissions for lines of credits and overdrafts
|
|
3,202
|
|
2,914
|
Fees and commissions for guarantees and letters of credit
|
|
16,332
|
|
18,210
|
Fees and commissions for card services
|
|
111,743
|
|
101,662
|
Fees and commissions for management of accounts
|
|
16,532
|
|
15,722
|
Fees and commissions for collections and payments
|
|
23,315
|
|
22,381
|
Fees
and commissions for intermediation and management of securities
|
|
5,203
|
|
4,913
|
Fees and commissions for insurance marketing
|
|
18,824
|
|
19,266
|
Office banking
|
|
8,013
|
|
7,561
|
Fees for other services rendered
|
|
22,531
|
|
20,809
|
Other fees earned
|
|
20,853
|
|
17,424
|
Total
|
|
246,548
|
|
230,862
|
|
|
As of June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Fee and commission expense
|
|
|
|
|
Compensation for card operations
|
|
(81,816)
|
|
(72,888)
|
Fees and commissions for securities transactions
|
|
(485)
|
|
(405)
|
Office banking
|
|
(3,671)
|
|
(7,920)
|
Other fees
|
|
(6,258)
|
|
(4,988)
|
Total
|
|
(92,230)
|
|
(86,201)
|
|
|
|
|
|
Net fees and commissions income
|
|
154,318
|
|
144,661
|
The fees earned in transactions with letters of credit
are presented in the Consolidated Interim Statement of Income in the item “Interest income”.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
93
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 25
FEES AND COMMISSIONS, continued
|
b)
|
Income and expenses from commissions that are generated through the different segments of
the business are presented in the following chart as well as the calendar which recognizes ordinary activity income.
|
|
Segments
|
|
Calendar recognizing ordinary activity income
|
As of June 30, 2018
(Unaudited)
|
Retail Banking
|
Middle Market
|
Global Corporate Banking
|
Others
|
Total
|
|
Transfered through time
|
Transfered in an exact moment
|
Accrual model
|
|
MM$
|
MM$
|
MM$
|
MM$
|
MM$
|
|
MM$
|
MM$
|
MM$
|
|
|
|
|
|
|
|
|
|
|
Fee and commission income
|
|
|
|
|
|
|
|
|
|
Fees and commissions for lines of credits and overdrafts
|
2,895
|
101
|
208
|
(2)
|
3,202
|
|
3,202
|
-
|
-
|
Fees and commissions for guarantees and letters of credit
|
5,485
|
7,827
|
2,967
|
53
|
16,332
|
|
16,332
|
-
|
-
|
Fees and commissions for card services
|
107,703
|
3,418
|
582
|
40
|
111,743
|
|
10,999
|
100,744
|
-
|
Fees and commissions for management of accounts
|
14,904
|
1,236
|
391
|
1
|
16,532
|
|
16,532
|
-
|
-
|
Fees and commissions for collections and payments
|
31,055
|
845
|
249
|
(8,834)
|
23,315
|
|
-
|
21,800
|
1,515
|
Fees and commissions for intermediation and management of securities
|
2,296
|
15
|
3,588
|
(696)
|
5,203
|
|
-
|
5,203
|
-
|
Fees and commissions for insurance marketing
|
-
|
-
|
-
|
18,824
|
18,824
|
|
-
|
-
|
18,824
|
Office banking
|
5,896
|
1,844
|
271
|
2
|
8,013
|
|
-
|
8,013
|
-
|
Fees for other services rendered
|
20,179
|
1,905
|
425
|
22
|
22,531
|
|
-
|
22,531
|
-
|
Other fees earned
|
2,946
|
4,802
|
13,050
|
55
|
20,853
|
|
-
|
20,853
|
-
|
Totals
|
193,359
|
21,993
|
21,731
|
9,465
|
246,548
|
|
47,065
|
179,144
|
20,339
|
|
|
|
|
|
|
|
|
|
|
Fee and commission expense
|
|
|
|
|
|
|
|
|
|
Compensation for card operations
|
(79,861)
|
(1,644)
|
(158)
|
(153)
|
(81,816)
|
|
-
|
(81,816)
|
-
|
Fees and commissions for securities transactions
|
(169)
|
(3)
|
(378)
|
65
|
(485)
|
|
-
|
(485)
|
-
|
Office banking
|
(2,357)
|
(764)
|
(544)
|
(6)
|
(3,671)
|
|
-
|
(3,671)
|
-
|
Other fees
|
866
|
(1,385)
|
(1,992)
|
(3,747)
|
(6,258)
|
|
-
|
(6,258)
|
-
|
Totals
|
(81,521)
|
(3,796)
|
(3,072)
|
(3,841)
|
(92,230)
|
|
-
|
(92,230)
|
-
|
Net fees and commissions income
|
111,838
|
18,197
|
18,659
|
5,624
|
154,318
|
|
47,065
|
86,914
|
20,339
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
94
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 26
NET INCOME (EXPENSE) FROM FINANCIAL OPERATIONS
Includes the amount of the adjustments from the financial
instruments variation, except those attributable to the interest accrued by the application of the effective interest rate method
of the value adjustments of the assets, as well as the results obtained in their sale.
As of June 30, 2018 and 2017, the detail of income from
financial operations is as follows:
|
|
As of June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Profit and loss from financial operations
|
|
|
|
|
Trading derivatives
|
|
(21,729)
|
|
(497)
|
Trading investments
|
|
6,866
|
|
6,675
|
Sale of loans and accounts receivables from customers
|
|
|
|
|
Current portfolio
|
|
70
|
|
2,647
|
Charged-off portfolio
|
|
729
|
|
1,040
|
Available for sale investments
|
|
6,472
|
|
(3,197)
|
Repurchase of issued bonds (1)
|
|
(334)
|
|
(381)
|
Other profit and loss from financial operations
|
|
(927)
|
|
(1,388)
|
Total
|
|
(8,853)
|
|
4,899
|
(1) As of June 30, 2018 the Bank hasn’t made any repurchases of bonds,
see Note 3.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
95
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 27
NET FOREIGN EXCHANGE INCOME
Net foreign exchange income includes the income earned
from foreign currency trading, differences arising from converting monetary items in a foreign currency to the functional currency,
and those generated by non-monetary assets in a foreign currency at the time of their sale.
As of June 30, 2018 and 2017, net foreign exchange income
is as follows:
|
|
As of June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
Net foreign exchange gain (loss)
|
|
|
|
|
Net gain (loss) from currency exchange differences
|
|
(83,651)
|
|
(91,278)
|
Hedging derivatives
|
|
129,202
|
|
159,199
|
Income from assets indexed to foreign currency
|
|
5,124
|
|
(693)
|
Income from liabilities indexed to foreign currency
|
|
(41)
|
|
10
|
Total
|
|
50,634
|
|
67,238
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
96
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 28
PROVISIONS FOR LOAN LOSSES
|
a)
|
The movement in provisions for loan losses registered for June 30, 2018 and 2017 is the following:
|
|
Loans and accounts receivable from customers
|
|
|
|
As of June 30, 2018
(Unaudited)
|
Interbank
loans
Individual
|
Commercial
loans
|
Mortgage loans
|
Consumer loans
|
Contingent loans
|
|
|
Individual
|
Group
|
Group
|
Group
|
Individual
|
Group
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Charged-off of loans
|
-
|
(6,944)
|
(11,089)
|
(5,351)
|
(44,522)
|
-
|
-
|
(67,906)
|
Provisions established
|
(41)
|
(32,843)
|
(40,920)
|
(7,786)
|
(94,558)
|
(2,776)
|
(1,239)
|
(180,163)
|
Total provisions and charge-offs
|
(41)
|
(39,787)
|
(52,009)
|
(13,137)
|
(139,080)
|
(2,776)
|
(1,239)
|
(248,069)
|
Provisions released (*)
|
68
|
14,520
|
4,201
|
4,895
|
20,860
|
1,832
|
1,030
|
47,406
|
Recovery of loans previously charged-off
|
-
|
5,621
|
10,335
|
9,492
|
19,808
|
-
|
-
|
45,257
|
Net charge to income
|
27
|
(19,646)
|
(37,473)
|
1,250
|
(98,412)
|
(944)
|
(209)
|
(155,406)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and accounts receivable from customers
|
|
|
|
As of June 30, 2017
(Unaudited)
|
Interbank
loans
Individual
|
Commercial
loans
|
Mortgage loans
|
Consumer loans
|
Contingent loans
|
Total
|
|
Individual
|
Group
|
Group
|
Group
|
Individual
|
Group
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Charged-off of loans
|
-
|
(8,121)
|
(26,183)
|
(8,782)
|
(54,417)
|
-
|
-
|
(97,503)
|
Provisions established
|
(194)
|
(35,723)
|
(44,441)
|
(9,735)
|
(80,086)
|
(4,741)
|
(2,120)
|
(177,040)
|
Total provisions and charge-offs
|
(194)
|
(43,844)
|
(70,624)
|
(18,517)
|
(134,503)
|
(4,741)
|
(2,120)
|
(274,543)
|
Provisions released (*)
|
264
|
44,994
|
6,064
|
10,289
|
14,918
|
6,421
|
1,136
|
84,086
|
Recovery of loans previously charged-off
|
-
|
3,196
|
11,803
|
5,115
|
19,971
|
-
|
-
|
40,085
|
Net charge to income
|
70
|
4,346
|
(52,757)
|
(3,113)
|
(99,614)
|
1,680
|
(984)
|
(150,372)
|
|
|
|
|
|
|
|
|
|
|
|
b)
|
The detail for Charge-off to individually significant
loans, is the following:
|
|
Loans and accounts receivable from customers
|
|
As of June 30, 2018
(Unaudited)
|
Commercial
loans
|
Mortgage
loans
|
Consumer
loans
|
|
|
Individual
|
Group
|
Group
|
Group
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Charge-off of loans
|
21,425
|
43,254
|
11,435
|
134,098
|
210,212
|
Provision applied
|
(14,481)
|
(32,165)
|
(6,084)
|
(89,576)
|
(142,306)
|
Net charge offs of individually significant loans
|
6,944
|
11,089
|
5,351
|
44,522
|
67,906
|
|
Loans and accounts receivables from customers
|
|
As of June 30, 2017
(Unaudited)
|
Commercial
loans
|
Mortgage
loans
|
Consumer
loans
|
|
|
Individual
|
Group
|
Group
|
Group
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Loan charge-off
|
33,493
|
46,520
|
10,067
|
121,944
|
212,024
|
Provision applied
|
(25,372)
|
(20,337)
|
(1,285)
|
(67,527)
|
(114,521)
|
Net charge offs of individually significant loans
|
8,121
|
26,183
|
8,782
|
54,417
|
97,503
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
97
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 29
PERSONNEL SALARIES AND EXPENSES
|
a)
|
Composition of personnel salaries and expenses:
|
As of June 30, 2018 and 2017, the composition for personnel
salaries and expenses is the following:
|
|
As of June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Personnel compensation
|
|
125,176
|
|
120,364
|
Bonuses or gratuities
|
|
38,267
|
|
37,804
|
Stock-based benefits
|
|
(76)
|
|
560
|
Seniority compensation
|
|
5,962
|
|
12,870
|
Pension plans
|
|
565
|
|
252
|
Training expenses
|
|
1,940
|
|
1,510
|
Day care and kindergarden
|
|
1,606
|
|
1,437
|
Health and welfare funds
|
|
2,979
|
|
2,807
|
Other personnel expenses
|
|
17,158
|
|
16,422
|
Total
|
|
193,577
|
|
194,026
|
Share-based compensation (settled in cash)
In accordance with IFRS 2, equity instruments settled
in cash are allocated to executives of the Bank and its Subsidiaries as a form of compensation for their services. The Bank measures
the services received and the cash obligation at fair value at the end of each reporting period and on the settlement date, recognizing
any change in fair value in the income statement for the period.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
98
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 30
ADMINISTRATIVE EXPENSES
As of June 30, 2018 and 2017, the composition for administrative
expenses is the following:
|
|
As of June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
General administrative expenses
|
|
75,148
|
|
69,338
|
Maintenance and repair of property, plant and equipment
|
|
11,122
|
|
10,046
|
Office lease
|
|
14,659
|
|
13,573
|
Equipment lease
|
|
66
|
|
89
|
Insurance premiums
|
|
1,598
|
|
1,650
|
Office supplies
|
|
3,245
|
|
3,941
|
IT and communication expenses
|
|
21,746
|
|
18,732
|
Lighting, heating, and other utilities
|
|
2,794
|
|
2,606
|
Security and valuables transport services
|
|
6,261
|
|
6,621
|
Representation and personnel travel expenses
|
|
2,500
|
|
2,350
|
Judicial and notarial expenses
|
|
449
|
|
499
|
Fees for technical reports and auditing
|
|
4,776
|
|
4,257
|
Other general administrative expenses
|
|
5,932
|
|
4,974
|
Outsourced services
|
|
33,878
|
|
27,316
|
Data processing
|
|
16,757
|
|
18,121
|
Archive service
|
|
461
|
|
494
|
Valuation service
|
|
1,451
|
|
1,367
|
Outsourced staff
|
|
5,753
|
|
2,631
|
Other
|
|
9,456
|
|
4,703
|
Board expenses
|
|
639
|
|
636
|
Marketing expenses
|
|
8,494
|
|
8,928
|
Taxes, payroll taxes, and contributions
|
|
6,706
|
|
6,647
|
Real estate taxes
|
|
839
|
|
840
|
Patents
|
|
829
|
|
842
|
Other taxes
|
|
3
|
|
17
|
Contributions to SBIF
|
|
5,035
|
|
4,948
|
Total
|
|
124,865
|
|
112,865
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
99
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 31
DEPRECIATION, AMORTIZATION AND IMPAIRMENT
|
a)
|
The values of depreciation and amortization during June 30, 2018 and 2017 are detailed below:
|
|
|
As June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
Property, plant, and equipment depreciation
|
|
(26,409)
|
|
(25,791)
|
Intangible assets amortization
|
|
(12,031)
|
|
(10,610)
|
Total depreciation and amortization
|
|
(38,440)
|
|
(36,400)
|
Property, plant and equipment impairment
|
|
(39)
|
|
(349)
|
Intangible impairment
|
|
-
|
|
-
|
Totales
|
|
(38,479)
|
|
(36,749)
|
As of June 30, 2018, the
impairment amount of fixed assets amounts to $39 million ($349 million as of June 30, 2017), mainly due to ATM looting.
|
b)
|
The changes in book value due to depreciation and amortization for June 30, 2018 and 2017 are the
following:
|
|
Depreciation and amortization
|
|
|
Property, plant, and equipment
|
Intangible assets
|
Total
|
|
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
Balances as of January 1, 2018
|
(290,931)
|
(261,828)
|
(552,759)
|
Depreciation and amortization for the period
|
(26,409)
|
(12,031)
|
(38,440)
|
Sales and disposals in the period
|
30
|
-
|
30
|
Other
|
-
|
-
|
-
|
Balance as of June 30, 2018 (Unaudited)
|
(317,310)
|
(273,859)
|
(591,169)
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
Property, plant, and equipment
|
Intangible assets
|
Total
|
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
Balances as of January 1, 2017
|
(235,622)
|
(239,628)
|
(475,250)
|
Depreciation and amortization for the period
|
(25,791)
|
(10,610)
|
(36,400)
|
Sales and disposals in the period
|
-
|
-
|
-
|
Other
|
-
|
-
|
-
|
Balance as of June 30, 2017 (Unaudited)
|
(261,413)
|
(250,238)
|
(511,650)
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
100
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 32
OTHER OPERATING INCOME AND EXPENSES
|
a)
|
Other operating income is conformed by the following concepts:
|
|
|
As of June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Income from assets received in lieu of payment
|
|
|
|
|
Income from sale of assets received in lieu of payment
|
|
2,335
|
|
1,466
|
Recovery of charge-offs and income from assets received in lieu of payment
|
|
8,971
|
|
8,513
|
Other income from assets received in lieu of payment
|
|
910
|
|
4,982
|
Subtotal
|
|
12,216
|
|
14,961
|
Provisions released due to contingencies (1)
|
|
|
|
8,553
|
Subtotal
|
|
11,576
|
|
8,553
|
Other income
|
|
|
|
|
Leases
|
|
122
|
|
133
|
Income from sale of property, plant and equipment
|
|
250
|
|
1,105
|
Recovery of provisions for contingencies
|
|
-
|
|
-
|
Compensation from insurance companies due to damages
|
|
144
|
|
1,095
|
Other
|
|
256
|
|
3,221
|
Subtotal
|
|
772
|
|
5,554
|
|
|
|
|
|
Total
|
|
24,564
|
|
29,068
|
(1)
The bank maintained provisions due to contingencies according to IAS 37, which resulted in favor of the bank.
|
b)
|
Other operating expenses is conformed by the following
concepts:
|
|
|
As of June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
Allowances and expenses for assets received in lieu of payment
|
|
|
|
|
Charge-offs of assets received in lieu of payment
|
|
7,879
|
|
16,831
|
Provisions on assets received in lieu of payment
|
|
1,177
|
|
2,463
|
Expenses for maintenance of assets received in lieu of payment
|
|
780
|
|
1,123
|
Subtotal
|
|
9,836
|
|
20,417
|
|
|
|
|
|
Credit card expenses
|
|
1,759
|
|
1,468
|
Customer services
|
|
1,606
|
|
1,390
|
Other expenses
|
|
|
|
|
Operating charge-offs
|
|
280
|
|
1,503
|
Life insurance and general product insurance policies
|
|
1,925
|
|
12,475
|
Additional tax on expenses paid overseas
|
|
-
|
|
-
|
Gain (Loss) for sale of PP&E
|
|
21
|
|
-
|
Provisions for contingencies
|
|
31
|
|
-
|
Expense for the Retail Association
|
|
442
|
|
400
|
Other
|
|
3,952
|
|
16,345
|
Subtotal
|
|
6,651
|
|
30,723
|
|
|
|
|
|
Total
|
|
19,852
|
|
53,998
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
101
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE N°33
TRANSACTIONS WITH RELATED PARTIES
Associated and dependent entities are the Bank’s
“related parties”. However, this also includes its “key personnel” from the executive staff (members of
the Bank’s Board of Directors and Managers of Banco Santander-Chile and its affiliates, together with their close relatives),
as well as the entities over which the key personnel could exercise significant influence or control.
The Bank also includes those companies that are part
of the Santander Group worldwide as related parties, given that all of them have a common parent, i.e. Banco Santander S.A. (located
in Spain).
Article 89 of the Ley de Sociedades Anónimas
(Public Companies Act), which is also applicable to banks, states that any transaction with a related party must be made under
equitable conditions similar to those that customarily prevail in the market.
Article 84 of the Ley General de Bancos (General Banking
Act) establishes limits for loans that can be granted to related parties and prohibits lending to the Bank’s directors, General
Manager, or representatives.
Transactions between the Bank and its related parties
are specified below and have been divided into four categories:
Companies with relation to the Santander Group
This category includes all the companies that are controlled
by the Santander Group around the world, and hence, it also includes the companies over which the Bank exercises any degree of
control (Affiliates and special-purpose entities).
Associated companies
This category includes the entities over which the Bank
exercises a significant degree of influence, in accordance with section b) of Note 1, and which generally belong to the group of
entities known as “business support companies”.
Key personnel
This category includes members of the Bank’s Board
of Directors and managers of Banco Santander-Chile and its affiliates, together with their close relatives.
Other
This category encompasses the related parties that are
not included in the groups identified above and which are, in general, entities over which the key personnel could exercise significant
influence or control.
The terms for transactions with related parties are
equivalent to those which prevail in transactions made under market conditions or to which the corresponding considerations in
kind have been attributed.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
102
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE N°33
TRANSACTIONS WITH RELATED PARTIES, continued
|
a)
|
Loans to related parties
|
Loans and receivables as well as contingent loans are
as follows:
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
Companies with relation to the
Santander
Group
|
Associated companies
|
Key personnel
|
Other
|
|
|
Companies with relation to the
Santander
Group
|
Associated companies
|
Key personnel
|
Other
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
Loans and accounts receivable
|
|
|
|
|
|
|
|
|
|
Commercial loans
|
123,748
|
449
|
3,529
|
7,622
|
|
80,076
|
771
|
3,947
|
7,793
|
Mortgage loans
|
-
|
-
|
20,408
|
-
|
|
-
|
-
|
18,796
|
-
|
Consumer loans
|
-
|
-
|
5,152
|
1
|
|
-
|
-
|
4,310
|
-
|
Loans and account receivable
|
123,748
|
449
|
29,089
|
7,623
|
|
80,076
|
771
|
27,053
|
7,793
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
(320)
|
(9)
|
(167)
|
(60)
|
|
(209)
|
(9)
|
(177)
|
(18)
|
Net loans
|
123,428
|
440
|
28,922
|
7,563
|
|
79,867
|
762
|
26,876
|
7,775
|
|
|
|
|
|
|
|
|
|
|
Guarantees
|
429,852
|
-
|
24,494
|
6,020
|
|
361,452
|
-
|
23,868
|
7,164
|
|
|
|
|
|
|
|
|
|
|
Contingent loans
|
|
|
|
|
|
|
|
|
|
Personal guarantees
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
Letters of credit
|
8,212
|
-
|
-
|
51
|
|
19,251
|
-
|
-
|
33
|
Performance guarantees
|
432,323
|
-
|
-
|
-
|
|
377,578
|
-
|
-
|
-
|
Contingent loans
|
440,535
|
-
|
-
|
51
|
|
396,829
|
-
|
-
|
33
|
|
|
|
|
|
|
|
|
|
|
Provision for contingent loans
|
(2)
|
-
|
-
|
-
|
|
(4)
|
-
|
-
|
1
|
|
|
|
|
|
|
|
|
|
|
Net contingent loans
|
440,533
|
-
|
-
|
51
|
|
396,825
|
-
|
-
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans regarding activity with related parties during the periods of 2018 and is the following:
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
Santander Group companies
|
Associated companies
|
Key personnel
|
Other
|
Santander Group companies
|
Associated companies
|
Key personnel
|
Other
|
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
Opening balances as of January 1,
|
476,906
|
771
|
27,051
|
7,826
|
546,058
|
532
|
26,423
|
7,100
|
Loans granted
|
128,498
|
13
|
6,412
|
88
|
78,214
|
318
|
7,777
|
1,050
|
Loan payments
|
(41,121)
|
(335)
|
(4,375)
|
(239)
|
(147,366)
|
(79)
|
(7,149)
|
(324)
|
|
|
|
|
|
|
|
|
|
Total
|
564,283
|
449
|
29,088
|
7,675
|
476,906
|
771
|
27,051
|
7,826
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
103
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 33
TRANSACTIONS WITH RELATED PARTIES, continued
|
b)
|
Assets and liabilities with related parties
|
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
|
Companies with relation to the
Santander
Group
|
Associated companies
|
Key personnel
|
Other
|
|
Companies with relation to the
Santander
Group
|
Associated companies
|
Key personnel
|
Other
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and deposits in banks
|
56,529
|
-
|
-
|
-
|
|
74,949
|
-
|
-
|
-
|
Trading investments
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
Investments under resale agreements
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
Financial derivative contracts
|
295,243
|
121,588
|
-
|
-
|
|
545,028
|
86,011
|
-
|
14
|
Available for sale investments
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
Other assets
|
113,375
|
83,009
|
-
|
-
|
|
8,480
|
118,136
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Deposits and other demand liabilities
|
25,826
|
11,040
|
3,585
|
363
|
|
24,776
|
25,805
|
2,470
|
221
|
Obligations under repurchase agreements
|
17,678
|
-
|
422
|
119
|
|
50,945
|
-
|
-
|
-
|
Time deposits and other time liabilities
|
1,576,428
|
-
|
5,852
|
62
|
|
785,988
|
27,968
|
3,703
|
3,504
|
Financial derivative contracts
|
456,674
|
70,693
|
-
|
-
|
|
418,647
|
142,750
|
-
|
7,190
|
Bank obligation
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
-
|
Issued debts instruments
|
497,508
|
-
|
-
|
-
|
|
482,626
|
-
|
-
|
-
|
Other financial liabilities
|
4,731
|
-
|
-
|
-
|
|
4,919
|
-
|
-
|
-
|
Other liabilities
|
95,306
|
122,345
|
-
|
-
|
|
164,303
|
58,168
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
c)
|
Recognized income (expense) with related parties
|
|
As of June 30,
(Unaudited)
|
|
2018
|
|
2017
|
|
Companies with relation to the
Santander
Group
|
Associated companies
|
Key personnel
|
Other
|
|
Companies with relation to the
Santander
Group
|
Associated companies
|
Key personnel
|
Other
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
MCh$
|
MCh$
|
MCh$
|
MCh$
|
|
|
|
|
|
|
|
|
|
|
Income (expense) recorded
|
|
|
|
|
|
|
|
|
|
Income and expenses from interest and inflation
|
(20,866)
|
(124)
|
615
|
260
|
|
(13,098)
|
15
|
650
|
233
|
Fee and commission income and expenses
|
(12,043)
|
5,603
|
79
|
13
|
|
20,859
|
150
|
116
|
17
|
Net income (expense) from financial operations and foreign exchange transactions (*)
|
(247,522)
|
42,302
|
12
|
(2)
|
|
70,404
|
(8,954)
|
1
|
(1)
|
Other operating income and expenses
|
542
|
(360)
|
-
|
-
|
|
487
|
(1,470)
|
-
|
-
|
Key personnel compensation and expenses
|
-
|
-
|
(9,202)
|
-
|
|
-
|
-
|
(18,077)
|
-
|
Administrative and other expenses
|
(19,241)
|
(26,351)
|
-
|
-
|
|
(17,995)
|
(25,685)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
(299,130)
|
21,070
|
(8,496)
|
271
|
|
60,657
|
(35,944)
|
(17,310)
|
249
|
(*) Primarily relates to derivative contracts used
to hedge economically the exchange risk of assets and liabilities that hedge positions of the Bank and its subsidiaries.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
104
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 33
TRANSACTIONS WITH RELATED PARTIES, continued
|
d)
|
Payment to Board members and key management personnel
|
The compensation received by key management personnel,
including Board members and all the executives holding Manager positions, is shown in the “Personnel salaries and expenses”
and/or “Administrative expenses” of the Consolidated Interim Statements of Income, and detailed as follows:
|
|
As of June 30,
(Unaudited)
|
|
|
2018
|
|
2017
|
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
Personnel compensation
|
|
8,559
|
|
8,548
|
Board member’s salaries and expenses
|
|
611
|
|
602
|
Bonuses or gratuity
|
|
7,772
|
|
6,894
|
Compensation in stock
|
|
(76)
|
|
560
|
Training expenses
|
|
109
|
|
57
|
Seniority compensation
|
|
841
|
|
666
|
Health funds
|
|
142
|
|
140
|
Other personnel expenses
|
|
437
|
|
358
|
Pension Plans
|
|
565
|
|
252
|
Total
|
|
18,960
|
|
18,077
|
|
e)
|
Composition of key personnel
|
As of June 30, 2018 and December 31, 2017, the composition
of the Bank’s key personnel is as follows:
Position
|
N° of executives
|
As of June 30, 2018
|
As of December 31, 2017
|
|
(Unaudited)
|
|
|
|
|
Directors
|
11
|
11
|
Division managers
|
12
|
13
|
Managers
|
118
|
109
|
Total key personnel
|
141
|
133
|
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
105
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 34
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction on the main market (or the most advantageous) at the
measurement date in the current market conditions (in other words, an exit price) regardless of whether that price is
directly observable or estimated by using a different valuation technique. The measurement of fair value assumes the sale
transaction of an asset or the transference of the liability happens within the main asset or liability market, or the most
advantageous market for the asset or liability.
For financial instruments with no available market prices,
fair values have been estimated by using recent transactions in analogous instruments, and in the absence thereof, the present
values or other valuation techniques based on mathematical valuation models sufficiently accepted by the international financial
community, In the use of these models, consideration is given to the specific particularities of the asset or liability to be valued,
and especially to the different kinds of risks associated with the asset or liability.
These techniques are significantly influenced by the
assumptions used, including the discount rate, the estimates of future cash flows and prepayment expectations. Hence, the fair
value estimated for an asset or liability may not coincide exactly with the price at which that asset or liability could be delivered
or settled on the date of its valuation, and may not be justified in comparison with independent markets.
Determination of fair value of financial instruments
Below is a comparison between the value at which the Bank’s financial
assets and liabilities are recorded and their fair value as of June 30, 2018 and December 31, 2017:
|
As of
June 30, 2018
(Unaudited)
|
|
As of
December 31, 2017
|
|
Book value
|
|
Fair value
|
|
Book value
|
|
Fair value
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Trading investments
|
273,568
|
|
273,568
|
|
485,736
|
|
485,736
|
Financial derivative contracts
|
2,233,818
|
|
2,233,818
|
|
2,238,647
|
|
2,238,647
|
Loans and accounts receivable from customers and interbank loans, (net)
|
28,428,857
|
|
31,445,639
|
|
26,910,141
|
|
28,518,929
|
Investments available for sale
|
2,909,127
|
|
2,909,127
|
|
2,574,546
|
|
2,574,546
|
Guarantee deposits (margin accounts)
|
389,847
|
|
389,847
|
|
323,767
|
|
323,767
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Deposits and interbank borrowings
|
22,362,564
|
|
22,429,792
|
|
21,380,468
|
|
20,887,959
|
Financial derivative contracts
|
2,072,108
|
|
2,072,108
|
|
2,139,488
|
|
2,139,488
|
Issued debt instruments and other financial liabilities
|
8,269,942
|
|
8,861,008
|
|
7,335,683
|
|
7,487,591
|
Guarantees received (margin accounts)
|
397,630
|
|
397,630
|
|
408,313
|
|
408,313
|
Fair value is approximated to book value in the following
accounts, due to their short-term nature in the following cases: cash and bank deposits, operations with liquidation in progress
and buyback contracts as well as security loans.
In addition, the fair value estimates presented above
do not attempt to estimate the value of the Bank’s profits generated by its business activity, nor its future activities,
and accordingly, they do not represent the Bank’s value as a going concern.
Below is a detail of the methods used to estimate the
financial instruments’ fair value.
|
a)
|
Operations pending settlement, trading investments, available
for sale investment instruments, repurchase agreements and securities loans
|
The estimated fair value of these financial instruments
was established using market values or estimates from an available dealer, or quoted market prices of similar financial instruments.
Investments with maturities of less than 1 year are evaluated at recorded value since they are considered as having a fair value
not significantly different from their recorded value, due to their short maturity term. To estimate the fair value of debt investments
or representative values in these lines of businesses, we take into consideration additional variables and elements, as long as
they apply, including the estimate of prepayment rates and credit risk of issuers.
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
106
Banco Santander-Chile and Subsidiaries
Notes to the Consolidated Financial Statements
AS OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 34
FAIR VALUE OF FINANCIAL ASSETS AND
LIABILITIES, continued
|
b)
|
Loans and accounts receivable from customers and interbank loans
|
Fair value of commercial, mortgage and consumer loans
and credit cards is measured through a discounted cash flow (DCF) analysis. To do so, we use current market interest rates considering
product, term, amount and similar loan quality. Fair value of loans with 90 days or more of delinquency are measured by means of
the market value of the associated guarantee, minus the rate and term of expected payment. For variable rate loans whose interest
rates change frequently (monthly or quarterly) and that are not subjected to any significant credit risk change, the estimated
fair value is based on their book value.
Disclosed fair value of deposits
that do not bear interest and saving accounts is the amount payable at the reporting date and, therefore, equals the recorded amount.
Fair value of time deposits is calculated through a discounted cash flow calculation that applies current interest rates from a
monthly calendar of scheduled maturities in the market.
|
d)
|
Short and long term issued debt instruments
|
The fair value of these financial instruments is calculated
by using a discounted cash flow analysis based on the current incremental lending rates for similar types of loans having similar
maturities.
|
e)
|
Financial derivative contracts
|
The estimated fair value of financial derivative contracts
is calculated using the prices quoted on the market for financial instruments having similar characteristics.
The fair value of interest rate swaps represents the
estimated amount that the Bank expects to receive to cancel the contracts or agreements, considering the term structures of the
interest curve, volatility of the underlying asset and credit risk of counterparties.
If there are no quoted prices from the market (either
direct or indirect) for any derivative instrument, the respective fair value estimates have been calculated by using models and
valuation techniques such as Black-Scholes, Hull, and Monte Carlo simulations, taking into consideration the relevant inputs/outputs
such as volatility of options, observable correlations between underlying assets, counterparty credit risk, implicit price volatility,
the velocity with which the volatility reverts to its average value, and the straight-line relationship (correlation) between the
value of a market variable and its volatility, among others.
Fair
value and hierarchy measurement
IFRS 13 - Fair Value Measurement, provides a hierarchy
of reasonable values which separates the inputs and/or valuation technique assumptions used to measure the fair value of financial
instruments. The hierarchy reflects the significance of the inputs used in making the measurement. The three levels of the hierarchy
of fair values are the following:
• Level 1: the inputs are quoted prices (unadjusted)
on active markets for identical assets and liabilities that the Bank can access on the measurement date.
• Level 2: inputs other than the quoted prices
included within Level 1 that are observable for the asset or liability, either directly or indirectly.
• Level 3: inputs are unobservable inputs for the
asset or liability.
The hierarchy level within which the fair value measurement
is categorized in its entirety is determined based on the lowest level of input that is significant to the fair value measurement
in its entirety.
The best evidence of a financial instrument’s
fair value at the initial time is the transaction price (Level 1).
Consolidated Interim Financial Statements June 2018 / Banco Santander-Chile
107
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 34
FAIR VALUE OF FINANCIAL ASSETS AND
LIABILITIES, continued
In cases where quoted market prices cannot be observed,
Management makes its best estimate of the price that the market would set using its own internal models which in most cases use
data based on observable market parameters as a significant input (Level 2) and, in very specific cases, significant inputs not
observable in market data (Level 3). Various techniques are employed to make these estimates, including the extrapolation of observable
market data.
Financial instruments at fair value and determined by
quotations published in active markets (Level 1) include:
|
-
|
Chilean Government and Department of Treasury bonds
|
Instruments which cannot be 100% observable in the market
are valued according to other inputs observable in the market (Level 2).
The following financial instruments are classified under
Level 2:
Type of
financial instrument
|
Model
used in valuation
|
Description
|
Mortgage and private bonds
|
Present Value of Cash Flows Model
|
Internal Rates of Return (“IRRs”) are provided
by RiskAmerica, according to the following criterion:
If, at the valuation day, there are one or more valid
transactions at the Santiago Stock Exchange for a given mnemonic, the reported rate is the weighted average amount of the observed
rates.
In the case there are no valid transactions for a given
mnemonic on the valuation day, the reported rate is the IRR base from a reference structure, plus a spread model based on historical
spread for the same item or similar ones.
|
Time deposits
|
Present Value of Cash Flows Model
|
IRRs are provided by RiskAmerica, according to the following
criterion:
If, at the valuation day, there are one or more valid
transactions at the Santiago Stock Exchange for a given mnemonic, the reported rate is the weighted average amount of the observed
rates.
In the case there are no valid transactions for a given
mnemonic on the valuation day, the reported rate is the IRR base from a reference structure, plus a spread model based on issuer
curves.
|
Constant
Maturity Swaps (CMS), FX and Inflation Forward (Fwd) , Cross Currency Swaps (CCS), Interest Rate Swap (IRS)
|
Present Value of Cash Flows Model
|
IRRs are provided by ICAP, GFI, Tradition, and Bloomberg
according to this criterion:
With published market prices, a valuation curve is created
by the bootstrapping method and is then used to value different derivative instruments.
|
FX
Options
|
Black-Scholes
|
Formula adjusted by the volatility smile (implicit volatility),
Prices (volatility) are provided by BGC Partners, according to this criterion:
With published market prices, a volatility surface is
created by interpolation and then these volatilities are used to value options.
|
In limited occasions significant inputs not observable
in market data are used (Level 3). To carry out this estimate, several techniques are used, including extrapolation of observable
market data or a mix of observable data.
The following financial instruments are classified under
Level 3:
Type of
financial instrument
|
Model
used in valuation
|
Description
|
Caps/ Floors/ Swaptions
|
Black Normal Model for Cap/Floors and Swaptions
|
There is no observable input of implicit volatility.
|
UF
options
|
Black – Scholes
|
There is no observable input of implicit volatility.
|
Cross
currency swap with window
|
Hull-White
|
Hybrid HW model for rates and Brownian motion for FX, There is no observable input of implicit volatility.
|
CCS
(special contracts)
|
Implicit Forward Rate Agreement (FRA)
|
Start Fwd unsupported by MUREX (platform) due to the UF forward estimate.
|
Cross
currency swap, Interest rate swap, Call money swap in Tasa Activa Bancaria (Active Bank Rate) TAB
|
Present Value of Cash Flows Model
|
Validation obtained by using the interest curve and interpolating at flow maturities, but TAB is not a directly observable variable and is not correlated to any market input.
|
Bonds (in our case, low liquidity bonds)
|
Present Value of Cash Flows Model
|
Valued by using similar instrument prices plus a charge-off rate by liquidity.
|
Consolidated
Interim Financial Statements June 2018 / Banco Santander-Chile
108
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 34
FAIR VALUE OF FINANCIAL ASSETS AND
LIABILITIES, continued
The Bank does not believe that any change in unobservable inputs with respect
to level 3 instruments would result in a significantly different fair value measurement.
The following table presents the assets and liabilities that are measured at fair value on a recurring basis, as of June 30, 2018
and December 31, 2017.
|
Fair value measurement
|
As of June 30,
(Unaudited)
|
2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Trading investments
|
273,568
|
|
263,893
|
|
9,675
|
|
-
|
Available for sale investments
|
2,909,127
|
|
2,886,833
|
|
21,626
|
|
668
|
Derivatives
|
2,233,818
|
|
-
|
|
2,220,811
|
|
13,007
|
Guarantee deposits (margin accounts)
|
389,847
|
|
389,847
|
|
-
|
|
-
|
Total
|
5,806,360
|
|
3,540,573
|
|
2,252,112
|
|
13,675
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Derivatives
|
2,072,108
|
|
-
|
|
2,072,108
|
|
-
|
Guarantees received (margin accounts)
|
397,630
|
|
397,630
|
|
-
|
|
-
|
Total
|
2,469,738
|
|
397,630
|
|
2,072,108
|
|
-
|
|
|
|
|
|
|
|
|
|
Fair value measurement
|
As of December 31,
|
2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Trading investments
|
485,736
|
|
481,642
|
|
4,094
|
|
-
|
Available for sale investments
|
2,574,546
|
|
2,549,226
|
|
24,674
|
|
646
|
Derivatives
|
2,238,647
|
|
-
|
|
2,216,306
|
|
22,341
|
Guarantee deposits (margin accounts)
|
323,767
|
|
323,767
|
|
-
|
|
-
|
Total
|
5,622,696
|
|
3,354,635
|
|
2,245,074
|
|
22,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Derivatives
|
2,139,488
|
|
-
|
|
2,139,481
|
|
7
|
Guarantees received (margin accounts)
|
408,313
|
|
408,313
|
|
-
|
|
-
|
Total
|
2,547,801
|
|
408,313
|
|
2,139,481
|
|
7
|
Consolidated
Interim Financial Statements June 2018 / Banco Santander-Chile
109
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 34
FAIR VALUE OF FINANCIAL ASSETS AND
LIABILITIES, continued
The following table presents the Bank’s activity
for assets and liabilities that aren’t measured at fair value in the consolidated financial statements. Their fair value
is shown as of June 30, 2018 and December 31, 2017:
|
Fair value measurement
|
As of June 30,
(Unaudited)
|
2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Loans and accounts receivable and Interbank Loans
|
31,445,639
|
|
-
|
|
-
|
|
31,445,639
|
Total
|
31,445,639
|
|
-
|
|
-
|
|
31,445,639
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Deposits and Interbank borrowing
|
22,429,792
|
|
-
|
|
22,429,792
|
|
-
|
Issued debt instruments and other liabilities
|
8,861,008
|
|
-
|
|
8,861,008
|
|
-
|
Total
|
31,290,800
|
|
-
|
|
31,290,800
|
|
-
|
|
|
|
|
|
|
|
|
|
Fair value measurement
|
As of December 31,
|
2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
MCh$
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Loans and accounts receivable and Interbank Loans
|
28,518,929
|
|
-
|
|
-
|
|
28,518,929
|
Total
|
28,518,929
|
|
-
|
|
-
|
|
28,518,929
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Deposits and Interbank borrowing
|
20,887,959
|
|
-
|
|
20,887,959
|
|
-
|
Issued debt instruments and other liabilities
|
7,487,591
|
|
-
|
|
7,487,591
|
|
-
|
Total
|
28,375,550
|
|
-
|
|
28,375,550
|
|
-
|
There weren’t any transfers made between level
1 and 2 for the periods ended as of June 30, 2018 and December 31, 2017.
The following table presents the Bank’s activity
for assets and liabilities measured at fair value on a recurrent basis using unobserved significant entries (Level 3) as of June
30, 2018 and 2017:
|
Assets
|
|
Liabilities
|
|
MCh$
|
|
MCh$
|
|
|
|
|
As of January 1, 2018
|
22,987
|
|
7
|
Total realized and unrealized profits (losses)
|
|
|
|
Included in statement of income
|
(9,334)
|
|
(7)
|
Included in other comprehensive income
|
22
|
|
-
|
Purchases, issuances, and loans (net)
|
-
|
|
-
|
|
|
|
|
As of June 30, 2018 (Unaudited)
|
13,675
|
|
-
|
|
|
|
|
Total profits or losses included in comprehensive income as of June 30, 2018 that are attributable to change in unrealized profit (losses) related to assets or liabilities as of December 31, 2017
|
(9,312)
|
|
(7)
|
Consolidated
Interim Financial Statements June 2018 / Banco Santander-Chile
110
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 34
FAIR VALUE OF FINANCIAL ASSETS AND
LIABILITIES, continued
|
Assets
|
|
Liabilities
|
|
MCh$
|
|
MCh$
|
|
|
|
|
As of January 1, 2017
|
40,034
|
|
43
|
|
|
|
|
Total realized and unrealized profits (losses)
|
|
|
|
Included in statement of income
|
(2,026)
|
|
(28)
|
Included in other comprehensive income
|
27
|
|
-
|
Purchases, issuances, and loans (net)
|
-
|
|
-
|
|
|
|
|
As of June 30, 2017 (Unaudited)
|
38,035
|
|
15
|
|
|
|
|
Total profits or losses included in comprehensive income at June 30, 2017 that are attributable to change in unrealized profit (losses) related to assets or liabilities as of December 31, 2016
|
(1,999)
|
|
(28)
|
The realized and unrealized profits (losses) included
in comprehensive income for 2018 and 2017, in the assets and liabilities measured at fair value on a recurrent basis through unobservable
market data (Level 3) are recorded in the Interim Statement of Comprehensive Income in the associate line item.
The potential effect as of June 30, 2018 and 2017 on
the valuation of assets and liabilities valued at fair value on a recurrent basis through unobservable significant entries (level
3), generated by changes in the principal assumptions if other reasonably possible assumptions that are less or more favorable
were used, is not considered by the Bank to be significant.
The following tables show the financial instruments subject to compensation
in accordance with IAS 32, for 2018 and 2017:
|
As of June 30, 2018
(Unaudited)
|
|
Linked financial instruments, compensated in balance
|
|
Financial instruments
|
Gross amounts
|
Compensated in balance
|
Net amount presented in balance
|
Remains of unrelated and / or unencumbered financial instruments
|
Amount in Statements of Financial Position
|
Assets
|
Ch$ Million
|
Ch$ Million
|
Ch$ Million
|
Ch$ Million
|
|
Financial derivative contracts
|
1,947,726
|
-
|
1,947,726
|
286,092
|
2,233,818
|
Investments under resale agreements
|
1,746
|
-
|
1,746
|
-
|
1,746
|
Loans and accounts receivable from customers, and Interbank loans, net
|
-
|
-
|
-
|
28,428,857
|
28,428,857
|
Total
|
1,949,472
|
-
|
1,949,472
|
28,714,949
|
30,664,421
|
Liabilities
|
|
|
|
|
|
Financial derivative contracts
|
1,735,555
|
-
|
1,735,555
|
336,553
|
2,072,108
|
Investments under resale agreements
|
110,585
|
-
|
110,585
|
-
|
110,585
|
Déposits and interbank borrowings
|
-
|
-
|
-
|
22,362,564
|
22,362,564
|
Total
|
1,846,140
|
-
|
1,846,140
|
22,699,117
|
24,545,257
|
Consolidated
Interim Financial Statements June 2018 / Banco Santander-Chile
111
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 34
FAIR VALUE OF FINANCIAL ASSETS AND
LIABILITIES, continued
|
As of December 31, 2017
|
|
Linked financial instruments, compensated in balance
|
|
Financial instruments
|
Gross amounts
|
Compensated in balance
|
Net amount presented in balance
|
|
Remains of unrelated and / or unencumbered financial instruments
|
Amount in Statements of Financial Position
|
Assets
|
Ch$ Million
|
Ch$ Million
|
Ch$ Million
|
|
Ch$ Million
|
|
Financial derivative contracts
|
2,029,657
|
-
|
2,029,657
|
|
208,990
|
2,238,647
|
Investments under resale agreements
|
-
|
-
|
-
|
|
-
|
-
|
Loans and accounts receivable from customers, and Interbank loans, net
|
-
|
-
|
-
|
|
26,910,141
|
26,910,141
|
Total
|
2,029,657
|
-
|
2,029,657
|
|
27,119,131
|
29,148,788
|
Liabilities
|
|
|
|
|
|
|
Financial derivative contracts
|
1,927,654
|
-
|
1,927,654
|
|
211,834
|
2,139,488
|
Investments under resale agreements
|
268,061
|
-
|
268,061
|
|
-
|
268,061
|
Déposits and interbank borrowings
|
-
|
-
|
-
|
|
21,380,467
|
21,380,467
|
Total
|
2,195,715
|
-
|
2,195,715
|
|
21,592,301
|
23,788,016
|
Consolidated
Interim Financial Statements June 2018 / Banco Santander-Chile
112
Banco
Santander-Chile and Subsidiaries
Notes
to the Consolidated Financial Statements
AS
OF JUNE 30, 2018 AND 2017 AND DECEMBER 31, 2017
NOTE 35
SUBSEQUENT EVENTS
During an extraordinary session held on July 12, 2018, the
board agreed on the following:
|
–
|
Due to the resignation of substitute director Raimundo Monge Zegers, the board
has named Oscar Von Chrismar Carvajal in his replacement, who was previously a principal director.
|
|
–
|
Rodrigo Vergara Montes has been named independent director.
|
|
–
|
Mr. Rodrigo Vergara Montes was named First Vicepresident and Orlando Poblete
Iturrate was named Second Vicepresident.
|
There are no other subsequent events to be disclosed that
occurred between July 1, 2018 and the date of issuance of these Interim Consolidated Financial Statements (July 30, 2018).
|
|
|
FELIPE CONTRERAS FAJARDO
Chief Accounting Officer
|
|
MIGUEL MATA HUERTA
Chief Executive Officer
|
Consolidated
Interim Financial Statements June 2018 / Banco Santander-Chile
113