U.S. Markets closed

Banco Santander Chile Announces Third Quarter 2013 Earnings

Santiago, Chile, October 24, 2013. Banco Santander Chile (NYSE: BSAC; SSE: Bsantander) announced today its unaudited results for the third quarter of 2013. These results are reported on a consolidated basis in accordance with Chilean GAAP.

Net income up 17.8% QoQ. ROE reaches 18.6% in 3Q13

Net income in the nine-month period ended September 30, 2013 totaled Ch$267,944 million (Ch$1.42 per share and US$1.13/ADR). In 3Q13, Net income attributable to shareholders totaled Ch$101,173 million (Ch$0.54 per share and US$0.43/ADR), increasing 17.8% compared to 2Q13 (from now on QoQ) and 99.8% compared to 3Q12 (from now on YoY). Solid loan and core deposits growth and a higher net interest margin boosted earnings in the quarter. The Bank`s ROE in the quarter reached 18.6%.

Loan growth continues to accelerate in the segments the Bank targets for growth

In 3Q13, total loans increased 2.8% QoQ (an annualized rate of 11%) and 9.8% YoY. In the quarter, loan growth continued to accelerate in the markets the Bank is targeting: high-income individuals, SMEs and middle market of companies. Loans in these combined markets increased 3.1% QoQ and 14.4% YoY. This is in line with the Bank`s strategy of expanding loan volumes with a focus on increasing spreads, net of provisions. In the quarter, the Bank focused on expanding its consumer loan portfolio in higher income segments, while remaining more selective in the mass consumer market and mortgages. Loans to high-income individuals increased 3.7% QoQ and 12.4% YoY.

Improved funding mix and strong growth of core deposits

Total deposits grew 2.3% QoQ and 6.1% YoY. In the quarter, the Bank`s continued to focus on increasing core deposits (demand and time deposits from our retail and corporate clients), while lowering deposits from more expensive institutional sources. Core deposits expanded 4.2% QoQ and 18.0% YoY. Core deposits represent 85% of the Bank`s total deposit base. Among core deposits, the bulk of growth came from individuals, which expanded 3.5% QoQ, and 21.8% YoY.

Net interest income up 15.7% QoQ. Net interest margin reaches 5.3% in 3Q13

In 3Q13, Net interest income increased 15.7% QoQ and 20.5% YoY. Loan growth, a better funding mix and higher inflation rates drove this rise in net interest income. The net interest margin (NIM) in 3Q13 reached 5.3% compared to 4.7% in both 2Q13 and 3Q12. In 3Q13, the variation of the Unidad de Fomento (an inflation indexed currency unit), was 1.04% compared to -0.07% in 2Q13 and -0.16% in 3Q12. The Bank has more assets than liabilities linked to inflation and, as a result, margins have a positive sensitivity to variations in inflation.

Non performing loans ratio improves 10bp in 3Q13. One-time events in commercial lending increases provision expense

The Bank`s non-performing loan (NPLs) ratio fell from 3.1% in 2Q13 to 3.0% in 3Q13 and the risk index remained stable at 2.9%. Total coverage of NPLs in 3Q13 reached 94.8% compared to 91.3% in 2Q13 and 98.3% in 3Q12. Excluding residential mortgage loans that have a lower coverage ratio due to the value of residential property collateral, the coverage ratio increased to 118% in 3Q13. Asset quality in consumer lending continues to improve. Consumer NPLs decreased 11.0% QoQ and 25.6% YoY. The coverage of consumer NPLs reached 339.6% in 3Q13.

Net provision for loan losses in the quarter increased 11.3% QoQ and decreased 19.2% YoY. The cost of credit reached 1.9% in 3Q13. Net provision expense in consumer loans decreased 4.2% QoQ and 46.4% YoY. This was offset by the 39.7% QoQ and 38.6% YoY rise in net provision expense in commercial loans. This increase was mainly due to: (i) the Bank lowered the risk rating of various clients in the middle-market segment, which signified approximately Ch$4 billion in higher provisions; (ii) stronger loan growth that led to higher loan loss provisions as the Bank`s internal provisioning models recognize provisions when a loan is granted.

Efficiency ratio improves to 39.8% in 3Q13. Cost growth flat QoQ  

Operating expenses in 3Q13 increased 0.6% QoQ as the Bank continued to wrap up its investment program in the Transformation Project. The efficiency ratio reached 39.8% in 3Q13 compared to 42.5% in 2Q13 and 41.9% in 3Q12.

Core capital ratio reaches 10.4% in 3Q13

Shareholders` equity totaled Ch$2,213,114 million (US$4.4 billion) as of September 30, 2013. The core capital ratio reached 10.4% as of September 30, 2013. The Bank`s BIS ratio reached 13.0% at the same date.

Robert Moreno
Manager, Investor Relations Department
Banco Santander Chile
Bandera 140 Piso 19
Santiago, Chile
Tel: (562) 2320-8284
Fax: (562) 671-6554
Email: rmorenoh@santander.cl
Website: www.santander.cl

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.

The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.

Source: Banco Santander-Chile via Thomson Reuters ONE