Banco Santander Chile Announces First Quarter 2015 Earnings
Santiago, Chile, April 29, 2015.
Banco Santander Chile (NYSE: BSAC; SSE: Bsantander) announced today its unaudited results for the first quarter of 2015[1].
Banco Santander Chile's net income attributable to shareholders totaled Ch$95,477 million (Ch$0.51 per share and US$0.32/ADR) in 1Q15, decreasing 31.2% QoQ and 32.7% YoY. The Bank's ROAE reached 14.6% in the same period.
As expected, the Bank's profitability was lower mainly because of the higher tax rate and zero inflation rate in the quarter. The Bank's pre-tax ROAE reached 19.9% in 1Q15 and its pre-tax ROAE, adjusting for the difference in inflation[2], reached 23.9% in 1Q15 compared to 24.9% in 1Q14, reflecting the stability of the Bank's core profitability trends.
Net operating profit from business segments rises 8.6% YoY
The Bank's business segments continued to perform well in the quarter. In 1Q15, the net operating profit from the Bank's business segments[3] increased 8.6% YoY. This was achieved with positive loan growth, a better funding mix and steady improvements in asset quality.
Loans up 9.9% YoY. Growth focused in segments with a higher risk-adjusted profitability
Total loans increased 3.0% QoQ and 9.9% YoY in 1Q15. Loan growth continued to be focused in higher income individuals and the middle-market of corporates, segments with a higher risk-adjusted profitability. Total loans to individuals increased 2.1% QoQ and 12.9% YoY. Loans in the Mid-high income segment increased 2.3% QoQ and 13.9% YoY. In the Middle-market segment, loans increased 3.0% QoQ and 9.6% YoY.
Asset quality improves. Coverage ratio of NPLs increased to 111.3%
The Bank's total Non-performing loans (NPLs) ratio decreased to 2.7% in 1Q15 compared to 2.8% in 4Q14 and was stable compared to 1Q14. Total Coverage of NPLs in 1Q15 reached 111.3% compared to 108.8% in 4Q14 and 107.0% in 1Q14. Provision for loan losses decreased 27.8% QoQ and 2.5% YoY in 1Q15.
The positive evolution of the majority of the Bank's asset quality metrics continues to reflect the change in the loan mix, the focus on pre-approved loan through our CRM, the improvements in asset quality in SMEs and the strengthening of our collections area.
Total deposits increased 15.9% YoY. High liquidity in the market lowered funding costs
Total deposits increased 4.6% QoQ and 15.9% YoY. The Bank continued to focus on increasing its Core deposit base[4] (all checking accounts plus time deposits from non-wholesale sources). Total core deposits increased 14.3% YoY, led by a 14.8% rise in demand deposits. This growth of demand deposit, which are mostly non-interest bearing, has partially counterbalanced the short-term negative effects of a zero quarterly inflation rate.
Client NIMs, net of provisions increase to 3.6% in 1Q15
In 1Q15, the Net interest margin[5](NIM) reached 4.4% compared to 5.4% in 1Q14. This fall was mainly due to the lower inflation rate in 1Q15 compared to 1Q14. On the other hand, Client NIMs[6], which excludes the impact of inflation, reached 5.0% in 1Q15 and was stable compared to both1Q14 and 4Q14.
Client NIMs remained stable despite the continued shift to less riskier segments and the fall in interest caps due to regulations since early 2014. This stability in margins was mainly due an improved funding mix. The Bank's strategy of focusing equally on lending and non-lending businesses has driven the stability observed in Client spreads. At the same time, the improvement in asset quality is leading to a rise in Client NIMs, net of provisions. These reached 3.6% in 1Q15 compared to 3.1% in 4Q14 and 3.5% in 1Q14.
Stable Fee income. Stronger retail fees offset by lower Corporate banking fees
Net fee and commission income decreased 0.5% YoY in 1Q15. The decline in fees was mainly due to a fall in fees in the Corporate banking segment. Fees in this segment tend to be more volatile than other segments due to large transactions that are not recurring between one quarter and the next. Excluding the Corporate segment, fees grew 2.1% YoY, led by the SME segment.
The Bank's client base continues to expand and cross-selling indicators are advancing. As of March 31, 2015, the Bank had a total of 3.6 million clients. Of this total, only 10% are considered to be cross-sold[7]. Cross-selling indicators are improving at a healthy pace. Among individuals, cross-sold clients grew 16.1% YoY and in the SME and middle-market segments, cross-sold clients rose 14.0% YoY. For this reason, fee income should rebound in the coming quarters.
Efficiency ratio reached 42.0% in 1Q15
Operating expenses, excluding impairment and other operating expenses increased 9.9% YoY in 1Q15. The Efficiency ratio reached 42.0% in 1Q15. This rise in costs was mainly due to: (i) the higher inflation rate in 2014 that has a lagged effect over salaries and some administrative expenses, which are indexed to inflation and, (ii) the on-going investments to continue optimizing the branch network.
This increase in costs was partially offset by the 9.9% YoY decrease in depreciation and amortization expenses. As a reminder, in 2014, the Bank performed a one-time impairment of intangibles, mainly of obsolete or unprofitable systems. This explains the reduction in amortization and depreciation charges. These savings will be used to finance further investments in systems and the Bank's network as mentioned above.
Core capital ratio stood at 10.6%. Dividend per share up 24.5% YoY. Dividend yield at 5.1%
The Bank's Core capital ratio reached 10.6% as of March 31, 2015. The Bank's shareholders approved on April 28, 2015 the Bank's annual dividend equivalent to 60% of 2014 net income (Ch$1.75/share). This was equivalent to a dividend yield of 5.1% on the dividend record date in Chile (April 13, 2015). The dividend increased 24.5% compared to the dividend paid in 2014. The prudent management of the Bank's capital ratios and solid yearly profitability has allowed the Bank to continue paying attractive dividends without issuing new shares since 2002.
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] Adjusted pre-tax ROAE = Annualized quarterly income before taxes adjusting net interest income by using a quarterly UF inflation rate of 0.75% (3% annualized inflation) for both periods being compared divided by average equity.
[3] Net operating profits business segments: Net interest income + fee income + financial transactions, net + provision expense. These results exclude our Corporate Center and the results from Financial Management, which includes, among other items, the impact of the inflation on results.
[4] Core deposits: all checking accounts plus non-Wholesale time deposits. Wholesale time deposits include deposits from: (i) banks and other financial institutions, (ii) economic groups with greater than 1% of short-term time deposits, (iii) economic groups with time deposits representing more than 2.5% of Core capital and, (iv) any other client defined as Wholesale.
[5] Net interest margin, NIM: net interest income (NI) divided by average interest earning assets.
[6] Client NIMs = NI from our business segments (excludes the impact of inflation) divided by average loans.
[7] Cross-selling definitions: Individuals: between 2-4 products plus a minimum profitability level and a minimum usage indicator all differentiated by segment. SMEs & Mid-market: cross-selling differentiated by client size using a point system that depends on number of products usage of products and income net of risks.