Banco Santander Chile Announces First Quarter 2017 Earnings
April 27 2017 - 6:30PM
Banco Santander
Chile Announces First Quarter 2017 Earnings
Santiago, Chile, April 27,
2017. Banco Santander Chile (NYSE: BSAC; SSE: Bsantander)
announced today its unaudited results1 for the first
quarter of 2017.
Net income
increased 31.1% QoQ and 13.5% YoY in 1Q17. ROAE reached 19.5% in
1Q17
Net income
attributable to shareholders[1] in 1Q17 totaled Ch$142,375 million (Ch$0.76 per
share and US$0.46/ADR), increasing 31.1% QoQ and 13.5% YoY. The
Bank's ROAE[2] expanded
140bp compared to 1Q16 and reached 19.5%, well above initial
guidance. This was achieved despite a lower inflation rate and the
higher corporate tax rate.
The rise in the Bank's ROE was
driven by a solid growth of client revenues leveraged on a lower
cost of credit and improved efficiency. This is reflected in
the 31.9% YoY rise in net contribution from our
business segments.[3] This
was led by a 54.3% increase in net contribution from our Retail
Banking segment[4].
Loans up 6.7%
YoY. Loan growth among Middle & High-income earners grew 8.8%
YoY
Total loans
increased 0.9% QoQ and 6.7% YoY in 1Q17. Retail banking loans
increased 0.4% QoQ and 6.8% YoY. Loans to
individuals increased 1.2% QoQ and 7.6%. Consumer loans increased 1.3% QoQ and 8.7% YoY and
mortgage loans increased 1.5% QoQ and 8.0%
YoY. The Bank continued to prioritize
growth among middle and high-income individuals. Loan growth
among middle and high-income earners increased 1.5% QoQ and 8.8%
YoY.
Rate cut drives
shift of time deposits towards fee generating mutual funds
Total customer
funds (deposits plus mutual funds) managed by the Bank
decreased 0.5% QoQ and grew 4.5% YoY. In 1Q17, the Chilean Central
Bank cut interest rates 50 basis points. This resulted in lower
funding costs and a switch away from time deposits to fee
generating mutual funds. As a result, time
deposits decreased 3.4% QoQ and 0.2% YoY. Non-interest bearing demand deposits were 1.7% down QoQ
and increased 4.7% YoY, outstripping time deposit
growth. Mutual funds brokered by
the Bank increased 9.2% QoQ and 16.9% YoY.
Core
capital[5] ratio reached 10.8% as of March 2017. Dividend payout of
70% approved by shareholders
The Bank's Core capital ratio reached 10.8% at the end of 1Q17, 30bp higher
than the levels at year-end 2016 and 20bp higher than the core
capital ratio in 1Q16. The total BIS
ratio[6]reached
13.7% as of March 2017. The YoY growth of RWA was 3.3%
compared to 6.7% for loans. This high level of capital and
efficient growth of RWAs allowed the Bank's Board to propose the
distribution of 70% of 2016 earnings as a dividend, which was
approved by shareholders on April 26, 2017. The dividend yield,
considering the share price on March 31, 2017, was 4.2%.
Cost of credit
falls to at 1.1%. NPL ratio stable at 2.2%
Asset quality
remained stable in the quarter. On a YoY basis the NPL ratio decreased from 2.5% in 1Q16 to 2.2% in 1Q17,
in line with the Bank's loan growth strategy of focusing on those
segments with the highest return, net of risk. This also had a
similar effect on the cost of credit, which descend to 1.1% in the
quarter compared to 1.2% in 1Q16 and 1.3% in 4Q16. Compared
to 4Q16 the NPL ratio increased 10bp mainly due to seasonal factors
and high growth in retail banking segments compared to a reduction
in wholesale lending. In 2017, we expect Non-performing loans to
rise moderately due to sluggish economic growth and a weakening job
market, but the loans entering NPL status already have a high
coverage ratio, therefore, the cost of credit should remain stable.
For these reasons the Bank's expected loss ratio
or risk index, measured as Loan Loss Allowances (LLA) over
total loans improved to 2.9% as of March 2017 compared to 3.0% at
year-end 2016 and 1Q16.
Client NIMs, net
of risk rise 20bp to 3.7%.
A key driver of profitability in
the quarter was the rise in client NIMs, net of risk. In
1Q17, Net interest income from our business segments (Client NII[7]) increased
1.2% QoQ and 6.5% YoY. Client NIMs[8], which
excludes the impact of inflation and the ALCO's liquidity
portfolio, reached 4.8% in 1Q17 compared to 4.8% in 4Q16 and 4.9%
in 1Q16. Despite the change of the loan mix towards less riskier
segments, the Bank has managed to sustain client NIMs by increasing
the retail loan book as mentioned above. At the same time funding
costs have improved, which also kept client margins elevated. In
addition, the cost of credit is falling. Provision
for loan losses decreased 15.8% QoQ and 5.2% YoY in
1Q17. The cost of credit in the
quarter was 1.1% compared to 1.3% in 4Q16 and 1.2% in 1Q16. This is
a direct result of the de-risking strategy enforced by the Bank. As
a result, Client NIMs, net of risk increased 20bp in 1Q17 compared
to 1Q16.
Greater customer
loyalty & satisfaction indicators fueling solid fee
growth
In 1Q17, fee
income increased 15.3% QoQ and 15.6% YoY. This solid growth of
fees was mainly driven by the steady improvement in customer
satisfaction, which is attracting new clients and increasing
cross-selling ratios. Loyal customers[9] in the
high-income segment grew 11.5% YoY. Among Mid-income earners, loyal
customers increased 7.9% YoY. Loyal Middle-market and SME clients
grew 12.2% YoY.
Efficiency ratio
improves to 40.0%. Sustained rise in productivity
The Bank's efficiency ratio reached 40.0% in 1Q17 compared to
41.6% in the same period of last year. Operating
expenses growth on a YoY basis was 1.7%. The low cost growth is
a direct consequence of the various initiatives that the Bank has
been implementing to improve productivity and efficiency.
Personnel expenses in 1Q17 decreased 0.3% YoY.
Total headcount has decreased 4.8% in the last twelve months.
Administrative expenses also decreased 0.4%
YoY in 1Q17. The Bank's digital transformation and new branch
formats have been successful in increasing productivity. In total,
in the last twelve months, 11.7% of the Bank's branch network has
been closed and 15.8% of our ATMs were eliminated. This has been
replaced by an increase in transactions through channels such as
internet, mobile and phone banking and greater productivity in the
existing branch network.
CONTACT INFORMATION
Robert Moreno
Manager, Investor Relations
Department
Banco Santander Chile
Bombero Ossa 1068, Piso 8
Santiago, Chile
Tel: (562) 2320-8284
Email:
robert.moreno@santander.cl
Website: www.santander.cl
[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].
ROAE: Return on average equity: annualized
quarterly net income attributable to shareholders divided by
average equity attributable to shareholders in the quarter.
Averages calculated using monthly figures.
[3].
Net operating profit is defined as Net interest
income + Net fee and commission income + Total financial
transactions - provision for loan losses - operating expenses.
[4].
Retail banking = Individuals + Small and
Mid-sized companies (SMEs).
[5]. Core
capital ratio = Shareholders' equity divided by risk-weighted
assets according to SBIF BIS I definitions.
[6]. BIS ratio:
Regulatory capital divided by RWA.
[7]. Client net
interest income is net interest income from the Bank's reporting
segments that includes net interest income from the Retail,
Middle-market and GCB segments, excluding GCB's Treasury division.
Non-client NII is NII from Bank's inflation gap, the financial cost
of hedging, the financial cost of the Bank's structural liquidity
position, NII from treasury positions and the interest expense of
the Bank's financial investments classified as trading, since NII
from this portfolio is recognized as financial transactions
net.
[8]. Client net
interest income divided by average loans.
[9]. Clients
with >4 products plus minimum usage and profitability
levels.
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Banco Santander-Chile via Globenewswire
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