Banco Santander Chile (NYSE: BSAC; SSE: Bsantander) announced today
its unaudited results1 for the twelve month period ended
December 31, 2019 and fourth quarter 2019 (4Q19).
Recurring ROAE of 17.7% reached in 2019.
Net income attributable to shareholders
in 12M19 decreased 6.7% YoY with a stated ROAE at 16.7%
for the twelve month period. This decline was mainly due to the
increase of the Bank’s cost of credit form 1.0% in
2018 to 1.3% in 2019. This was partially offset by the 4.6%
increase in net operating profit before provisions for loan
losses as the Bank experienced a favorable year in
business activity and client growth. The Bank also continued to
show a world class efficiency ratio, which finished the year at
40%. Adjusting for the additional provisions in the fourth quarter
of Ch$ 16 billion, as well as the one-time charge for the
regulatory change in commercial loans analyzed on a group basis of
Ch$31 billion in 3Q19, the recurring
ROAE would have reached 17.7%.
Net income attributable to shareholders
in 4Q19 totaled Ch$116,707 million (Ch$0.62 per share and
US$0.33 per ADR). This was a decrease of 25.5% compared to 4Q18
(from now on YoY) and 15.9% compared to 3Q19 (from now on QoQ). In
the quarter net operating profit before provisions for loan
losses increased 9.3% YoY and 5.2% QoQ, with healthy
growth of margins, fees and financial transactions. This was offset
in the quarter by higher provisions for loan losses triggered by
the social unrest and lower growth expectations for 2020.
Furthermore, in November the Bank established additional provisions
in the quarter of Ch$16 billion for its consumer loan book.
Record client growth in 2019
The Bank’s business activity remained solid in
4Q19 despite the social unrest. During 2019 total client growth
reached record levels driven by higher client satisfaction and new
product launches. These trends continued in the fourth quarter
reflecting the strength of the Bank’s digital channels in capturing
new clients and cross-selling existing ones. In 2018, client
acquisition ranged between 30,000-40,000 a quarter compared to
84,248 in 3Q19 and 76,587 in 4Q19. Santander Life continues to be
the main contributor to new client growth due to the success of
this product’s Merit Program and Digital On-boarding process. Total
Santander Life clients reached over 138,600 clients and with a
total loan amount of more than Ch$ 43 billion. In checking
accounts, the Bank also had a record year. According to the lastest
available data, Santander Chile’s market share in new account
openings reached 26.0% in 2019 and we reached more than 1 million
checking accounts in the Chilean market.
Cross-selling among existing clients also
continued to rise in the quarter. Client loyalty2 continued to rise
with loyal individual customers in the high-income segment growing
6.8% YoY and 4.3% YoY among Mid-income earners. Loyal SMEs clients
rising 5.3% in 2019. Total digital customers3 increased 13.2% in
2019.
Top 2 for customer satisfaction and recommendation. Top
3 in GPTW
The rise in clients and cross-selling was also
fueled by the ongoing improvements in client service. Between
15-20% of every employee’s targets now depend on the Bank’s NPS and
customer satisfaction scores. These are done by an independent
evaluator and the results are audited by an external entity.
According to the latest surveys, we reached Top 2 in client
recommendation (NPS) and satisfaction, closing the gap with the
leader.
In 2019, we also improved our ranking according
to the Great Place to Work survey reaching 3rd place among all
Chilean companies with more than 1,000 employees. This also shows
the efforts to continue improving the quality of our workforce. We
were chosen best company in corporate governance in a survey by EY
in which 347 analysts, agencies and directors responded.
Furthermore in the quarter, we were awarded Bank of the Year in
Chile by The Banker, which highlighted our improvement in client
experience through the development of new digital services and our
operational efficiency.
Acquisition of Santander Consumer completed in November
2019
In the quarter we received the final approval of
the CMF for the acquisition of 51% of Santander Consumer Chile
S.A., an auto-financing company. We paid a total amount of Ch$
62,136 million for 51% of the company and the remaining 49% is
owned by Banco Santander S.A. (Spain). This amounted to Ch$451
billion of consumer loans as of December 2019, which is around 8%
of our consumer loan book.
Getnet, our new acquiring business, performed its
inaugural transaction. Klare subsidiary created.
In the quarter, we also made progress with our
acquiring business, with the President of the Bank, Claudio
Melandri, making the first transaction through Getnet, the new
brand name of our acquiring business. We expect to start to ramp up
this business in the first semester of the year. We also
completed the creation of a new subsidiary called Klare, which will
be an online platform where individuals can compare insurance
between different providers and this will drive insurance brokerage
fees.
Advancing in ESG metrics.
During 2019, we continued to focus on ESG
themes. During the year, we maintained our position as part of the
Dow Jones Sustainability Index in Chile and MILA and our MSCI
sustainability grade of A. Furthermore, we improved our rating with
Vigeo Eiris from a score of 38 out of 100 to 58 out of 100,
improving from Limited to Robust. This score puts us at Top 4 in
emerging markets and Top 8 in the world in our industry (retail and
specialized banks).
In the quarter, we also launched our first green
product for retail clients. Clients can now compensate their
monthly carbon footprint through our webpage and APP. The Bank with
the aid of external advisors is now able to calculate a client’s
carbon footprint based on their monthly expenditures. The amount of
carbon a client uses can be offset by buying, on the Bank’s webpage
or APP, carbon bonds or donating to a green project in Chile. 312
tons of carbon emissions were compensated by our clients in
December.
Non-interest bearing demand deposits
increase 8.8% QoQ and 17.8% YoY
The Bank’s total deposits
increased 7.7% YoY and 2.7% QoQ in 4Q19. In 4Q19, deposit growth
was led by a strong rise of non-interest bearing demand deposits,
which grew 8.8% QoQ and 17.8% YoY. This growth was due to high
growth of retail checking accounts, continued strength in the
Bank’s transactional banking services for companies, a seasonal
rise in demand deposits in 4Q on behalf of corporates and a
preference of clients for liquidity during the social unrest
events. This also led to a high liquidity ratio at year-end with
the Bank’s LCR and NSFR reaching 143% and 108%,
respectively.
Loan growth driven by retail banking in
the quarter
Total loans increased 8.1% YoY
and 2.6% QoQ, led by loans in retail banking which grew 4.3% QoQ
and 10.3% YoY. In 4Q19, Loans to individuals was
the fastest growing segment and increased 5.1% QoQ and 11.3% YoY.
Consumer loans increased 13.6% YoY and 9.4% QoQ
driven by the incorporation of Santander Consumer Chile S.A. in
November following the final approval at the extraordinary
shareholders’ meeting in August and of the CMF4. This contributed
Ch$451 billion of consumer loans as of December 2019, representing
8% of the consumer loan book. Mortgage loans
continued to grow healthily and increased 3.3% QoQ and 11.0% YoY.
Long-term interest rates decreased in 2019, and despite rising in
4Q19, they remained at attractive levels, fueling loan growth in
this product. Loans to SMEs
increased 5.7% YoY and 1.1% QoQ with growth in the quarter being
led by the larger SMEs. The Bank continues to maintain a
conservative stance regarding loan growth in this segment by
focusing on larger, less risky SMEs that will generate non-lending
revenues as well. Middle-market loans grew 5.2%
YoY and 1.1% QoQ as this segment is more sensitive to the evolution
of the economy, growth in this segment is in line with the slower
economic growth and the Bank’s more prudence stance regarding risk.
Loans in SCIB decreased 0.6% YoY and 5.9% QoQ as
the Bank continued to follow a strategy of profitability.
Higher NIMs in the quarter due to higher
inflation and improved funding mix
In 4Q19, Net interest income,
NII, increased 8.0% compared to 3Q19 and 5.1% compared to
4Q18. The Bank’s NIM in 4Q19 was 4.2%, lower than
the 4.4% in 4Q18, but higher than the 4.0% in 3Q19. The QoQ
increase in the NIM was mainly due to the higher UF inflation rate,
a decrease of 25bp in the short-term interest rates, the improved
funding mix driven by the high growth of demand deposits and an
increase in long-term interest rates in the quarter. The variation
of the UF5 was 0.9% compared to 0.5% in 3Q19, mainly due to the
depreciation of the Chilean peso. Simultaneously, and in order to
stimulate growth, the Central Bank in 2019, started a process of
relaxing monetary policy with the latest rate cut in October 2019,
when it was reduced by 25bp to 1.75%. This had a positive impact on
deposit costs. Furthermore, in 4Q19 the rise in non-interest
bearing demand deposits also had a positive impact on margins.
These positive effects were partially offset by the negative impact
of lower long-term interest rates that drove a record level of
refinancing of mortgage loans in the year.
Asset quality remains stable with
conservative outlook leading to higher provisions
During the quarter provisions increased 31.2%
compared to 3Q19 and 107.4% compared to 4Q18 due to higher
provisioning resulting from the negative impact on asset quality
from the social unrest in Chile and a weaker economic scenario
expected for 2020. This included establishing additional
provisions6 of Ch$16 billion for our consumer loan book analyzed on
a group basis to cover possible higher risk levels and any greater
provisions required by the bank regulator for this portfolio in
2020. Therefore, the cost of credit in 4Q19
reached 1.87%. The incorporation of Santander Consumer Chile S.A.
also increased the cost of risk by ~10bp in the quarter.
The expected loan loss ratio
(Loan loss allowance over total loans) increased slightly to 2.7%
compared to 2.6% in the previous quarter. The NPL and
Impaired loans ratio both increased by 10bp QoQ to 2.1% and
5.9%, respectively. The total Coverage
ratio including the additional provisions reached 135.4%
at year-end 2019. The cost of credit for 12M19
reached 1.34%, including all one-time impacts.
Fee income increased 6.9% QoQ driven by
business segments
In 4Q19, fee income increased
6.9% compared to 3Q19 and 13.7% compared to 4Q18. The Bank
experienced positive client and business activity in 4Q19, despite
the social unrest. This was mainly due to the strength of the
Bank’s digital channels, which continued attracting new clients and
cross-selling existing ones. Fee growth in the quarter was
mainly led by the following products: (i) a rebound of card fees
due to the migration of our cards to an interchange fee model; (ii)
an increase in collection fees from Santander Consumer Chile S.A,
which we started to consolidate in the quarter (iii) an increase in
financial advisory among our corporate clients.
Positive client and non-client treasury
results in the quarter
Results from Total financial
transactions, net was a gain of Ch$54,444 million in 4Q19,
an increase of 52.2% compared to 4Q18 and a decrease of 15.9%
compared to 3Q19. Client treasury services
revenues reached a gain of Ch$35,080 million in the quarter, an
increase of 1.9% compared to 4Q18 and a decrease of 7.1% compared
to 3Q19. The movement of client treasury revenue, which usually
makes up the bulk of our treasury income, reflects the demand on
behalf of clients for treasury products, mainly for their hedging
needs and market making. With the uncertainty in the global markets
and volatility of exchange rates, demand for treasury products was
strong during 2019, reaching the peak in 3Q19. The increase in
demand for hedging products reflects a shift in the behavior of our
commercial clients and the Bank’s ability to capture this profit
generating business, strengthened by our good customer service.
____________________________
1.The information contained in this report is
unaudited and is presented in accordance with Chilean Bank GAAP as
defined by the Superintendency of Banks of Chile (SBIF).2. Loyal
high income and middle income customers with 4 products plus a
minimum profitability level and a minimum usage indicator, all
differentiated by segment. SME + Middle-market cross-selling
differentiated by client size using a point system that depends on
number of products, usage of products and income net of risk.3
Digital customers are clients who access their web account using a
passcode4 Santander Consumer Chile S.A. does auto financing and we
paid a total amount of Ch$ 62,136 million for 51% of the company.
The remaining 49% if owned by Banco Santander S.A. (Spain).5 UF or
Unidad de Fomento, an inflation indexed unit used in Chile6
Additional provisions as defined by the CMF, which are not for any
specific to any loan provisioning model and must be approved by the
Board
CONTACT INFORMATIONRobert MorenoInvestor RelationsBanco
Santander ChileBandera 140, Floor 20Santiago, ChileTel: (562)
2320-8284Email: irelations@santander.clWebsite: www.santander.cl
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