Banco Santander Chile Announces Fourth Quarter Earnings Report 2014
Santiago, Chile, February 4, 2015. Banco Santander Chile (NYSE: BSAC; SSE: Bsantander) announced today its unaudited results for the fourth quarter of 2014[1].
Net income up 24.5% in 2014. ROAE reached 22.5%
Banco Santander Chile's net income attributable to shareholders in 2014 totaled Ch$550,331 million (Ch$2.92 per share and US$1.92/ADR), increasing 24.5% compared to 20132. The Bank's ROAE in the same period was 22.5% compared to 17.4% in 12M13. The net interest margin rose to 5.6% in 2014 compared to 5.0% in 2013 driven by stable loan spreads, a better funding mix and the higher inflation rate. The efficiency ratio reached 36.8% in 2014 compared to 40.4% in 2013, as the Bank has expanded its business activity with higher productivity levels.
In 4Q14, net income attributable to shareholders totaled Ch$138,741 million (Ch$0.74 per share and US$0.48/ADR), increasing 26.0% compared to 3Q14 (from now on QoQ) and 24.4%2 compared to 4Q13 (from now on YoY). The Bank's ROAE reached 21.7% in 4Q14 compared to 18.0%2 in 3Q14 and 19.7% in 4Q13. Fourth quarter results were positively affected by solid business activity with positive loan growth, an improved funding mix, stable asset quality and upward trending fee income. At the same time, the higher quarterly inflation rate boosted margins in the quarter.
Loans up 9.3% YoY. Growth focused in segments with a higher risk-adjusted profitability
Total loans increased 2.8% QoQ and 9.3% YoY in 4Q14. Lending to individuals increased 4.4% QoQ and 13.0% YoY. The Bank focused on expanding its loan portfolio in Mid-higher income segment, while remaining more selective in lower income segments. Loans in the Mid-high income segment increased 6.0% QoQ and 17.1% YoY. The other area of relevant growth in the loan book was in the Middle-market segment. In 4Q14, loans in this segment increased 1.1% QoQ and 8.1% YoY. Loan growth in this segment was focused on mid-sized exporters, which are benefitting from stronger external conditions and the weaker peso.
Total deposits increased 10.4% YoY, led by non-interest bearing demand deposits
Total deposits increased 3.9% QoQ and 10.4% YoY. The Bank continued to focus on increasing its core deposit base (all checking accounts plus retail time deposits). Total core deposits increased 16.3% in 2014 and represented 77.9% of total deposits compared to 73.9% in 2013. This was led by the 13.2% QoQ and 15.3% YoY rise in non-interest bearing demand deposits.
Net interest margin reached 5.8% in 4Q14
In 4Q14, Net interest income increased 19.2% QoQ and 21.2% mainly due to the higher quarterly inflation rate, solid loan growth and the better funding mix. The Net interest margin (NIM) in 4Q14 reached 5.8% compared to 5.0% in 3Q14 and 5.2% in 4Q13.
In 4Q14, Client NIMs (defined as net interest income from our business segments divided by average loans) reached 5.4% compared to 5.5% in 3Q14 and 5.6% in 4Q13.
In 4Q14, Client NIMs in the Middle-market and Corporate segments increased as loan spreads have remained stable and the funding mix improved. This was offset by the reduction in client NIMs in Individuals. This was mainly due to the shift in the loan mix to higher income segments, which have a lower risk profile. This strategy has resulted in lower provisions and charge-offs. For the full year 2014, net interest income in the Individual segment, net of provisions increased 13.8% and the net interest margin in this segment, net of provisions reached 4.0% compared to 3.9% in 2013.
Stable asset quality. Coverage ratio of NPLs increased to 108.8%
The Bank's total Non-performing loans (NPLs) ratio decreased to 2.8% in 4Q14 compared to 2.9% in 3Q14 and 2.9% in 4Q13. Total Coverage of NPLs in 4Q14 reached 108.8% compared to 104.4% in 3Q14 and 99.2% in 4Q13.
Provision for loan losses increased 10.5% QoQ and 24.7% YoY in 4Q14. During the quarter, three factors affected provision for loan losses: (i) loan growth resulted in higher provisions as the Bank's expected loss models require the recognition of provisions the moment loans are granted; (ii) the Bank recognized approximately Ch$20 billion in above normal provision from further improvements made to the provisioning model in consumer lending and the downgrading of certain loan positions, mainly in the SME and middle-market segment and; (iii) the depreciation of the exchange rate and the higher inflation rate in the quarter resulted in greater provisions over loans denominated in foreign currency and in UFs.
For the full year in 2014, the Bank's total net provision expense increased 2.9% YoY. The Cost of credit reached 1.71% in 2014 compared to 1.84% in 2013. These figures reflect that despite the slowdown in economic activity, the Bank's asset quality has remained healthy. As of November 2014, the latest data available, the net provision expense in the Chilean banking system, excluding Santander, increased 19.7% YoY.
Fee income continued to rebound
Net fee and commission income increased 6.4% QoQ and 6.2% YoY. Fee and commission income continued to rebound as the Bank's client base has been steadily expanding. The Bank achieved positive net client growth[2] for the 7th consecutive quarter and as of December 2014, the Bank reached 3.6 million clients. Fees from our business segments in 4Q14, which exclude the effects of regulations, increased 5.7% QoQ and 22.0% YoY.
Efficiency ratio reached 36.9% in 4Q14
The Efficiency ratio reached 36.9% in 4Q14. For the full year 2014, the efficiency ratio reached 36.8% compared to 40.4% in 2013.
Operating expenses, excluding impairment and other operating expenses, increased 7.0% QoQ and 9.8% YoY in 4Q14. Personnel salaries and expenses increased 5.0% QoQ. This was mainly due to an increase in variable incentives given the solid year the Bank had in most segments. Administrative expenses decreased 0.9% QoQ and increased 10.3% YoY. This rise was mainly due to: (i) greater business activity that has resulted in higher system and data processing costs, (ii) the effects of a higher inflation rate over costs indexed to inflation and (iii) the on-going investments to continue optimizing the branch network.
CONTACT INFORMATION
Robert Moreno
Manager, Investor Relations Department
Banco Santander Chile
Bandera 140 Piso 19
Santiago, Chile
Tel: (562) 2320-8284
Email: rmorenoh@santander.cl
Website: www.santander.cl
[1]. The information contained in this report is unaudited and is presented in Chilean Bank GAAP as defined by the Superintendency of Banks of Chile (SBIF).
2. In 4Q13, the Bank recognized a pre-tax one-time gain of Ch$78,122 million from the sale of its asset management business. All figures and ratios for 2013 and 4Q13 exclude this gain.