Banco Santander-Chile Management Discusses Q3 2010 Results – Earnings Call Transcript
Banco Santander-Chile (
)
Q3 2010 Earnings Conference Call
November 2, 2010 9:00 AM ET
Executives
Raimundo Monge – Director, Strategy
Analysts
Saul Martinez – JP Morgan
Tito Labarta – Deutsche Bank
Jason Mollin – Goldman Sachs
Presentation
Operator
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Good day, ladies and gentlemen, and welcome to the Third Quarter Banco Santander Chile Earnings Conference Call. My name is Marcela and I will be your operator for today. (Operator Instructions)
I would now like to turn the conference over to your host for today, Mr. Raimundo Monge, Director of Strategy. Please proceed, sir.
Raimundo Monge
Thank you very much and sorry for being late. We had some technicalities with the webcast. Good morning. First of all, good morning, ladies and gentlemen and welcome to Banco Santander Chile third quarter 2010 results conference call.
My name is Raimundo Monge, Director of Strategic Planning of the Bank and I’m joined today by Robert Moreno, Manager of Investor Relations.
Thank you for attending today’s conference call and in which we will discuss our performance in 3Q ‘10. Afterwards, we will be happy to answer your questions.
In the nine months period ended September 30, 2010, net income attributable to shareholders increased 30.4% compared to the result in the same period of last year. The Bank’s net interest margin reached 5.9% that is 40 basis point higher than in the first nine months of ‘09. The efficiency ratio in the first nine months reached 34%, while the banks ROE reached 30.5% among the highest in Chile’s financial system.
In the third of this year, net income attributable to shareholders totaled CLP125,356 million that is CLP0.67 per share and USD1.42/ADR. These results represent an increase of 14.1% compared to 3Q ‘09 with this result the bank ROE in the quarter reached 29.3% and efficiency levels stood at 33.8%.
By business segment, result was driven mainly by retail activity. In line with our strategic objective, gross income, net of provision and cost in retail banking increased 23.5% Q-on-Q and 42.1% year-on-year.
Net interest income grew 18.9% during Q and 15.1% during year driven by long growth and higher margins with both individuals and small and middle size companies, SME.
Fee income grew 3.7% Q-on-Q and 4.8% Y-on-Y in these segment. This reflects the more recurring nature of our earnings growth and return on equity. The bank capitalization ratios also strength in the quarter. The BASEL ratio reached 14.5%, 40 basis points higher than in last June.
The tier 1 ratio, which is compromises solely by shareholders equity stood at 7.5% among the highest in the Chilean market. Our strong capital base should allow us to support solid levels of asset growth in the future, while high internal capital growth allows us for an attractive dividend payment to shareholders.
The bank’s leading position in the Chilean market, strong profitability, conservative credit risk policies and strong capital ratios has also led to a continuous improvement in our credit risk rating. In October 2010, Fitch increased our foreign currency deposit rating to AA- two notches above Chile’s sovereign ceiling. With this action, these rating agencies has followed the other two that rate our deposit and bonds.
As a consequence, we have been able to access in convenient terms the international bond market in order to maintain solid liquidity levels and to minimize interest rate risk by funding the longer duration portion of the loan book with funding of similar characteristics. In September ‘10, the bank issued among other notes CLP248 billion 10-year bond in the international market. This was the first ever international Chilean Peso issuance abroad by a Chilean corporation.
Result in the quarter also reflected our strategy for the 2010, 2012 period, which has been designed to generate high EPS growth and solid ROEs. Accordingly, the bank activities have been and will be focus in four main strategic objectives to fuel our future growth and profitability.
The first objective is achieving high retail growth and to continue expanding banking penetration levels in Chile. These should help us to maintain our net interest margin and boost our net interest income.
Our second strategic goal is to increase fee income by expanding product use and cross selling. We believe there is still plenty of room for increasing the total client base, where alliance are becoming a key element in achieving greater use of our products specially credit cards.
The third strategic objective is to consolidate the improvement of our credit list management system. This will help us to support a health expansion of our growth in long volumes to riskier higher yielding retail segment.
Our last strategic goal is to continue an active efficiency management. we’re planning to expand our capacity during the next three years and the bank expect to invest close to $380 million in expanding our alternative channels and branch network to fuel growth and improve the systems and processes. Part of this investment will be funded with productivity gains and by lowering both the cost of bringing new clients to alliances and reducing our delivery and transactional cost, relying more on low cost renewed channels such as the internet, phone banking, mobile banking and ATM.
In terms of the goal, high retail growth. In 3Q ‘10, total loans increased 4.5% during Q with growth seen in all products and segment. The recent economic data for Chile show that economic growth has been accelerating with a strong [inaudible] in investment and consumption levels, and employment figures have also been better than expected as well as wage growth.
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