Banco Santander Chile Announces First Quarter 2011 Earnings

SANTIAGO, Chile, April 29, 2011 /PRNewswire/ -- Banco Santander Chile (NYSE: SAN; SSE: Bsantander) announced today its unaudited results for the first quarter of 2011. These results are reported on a consolidated basis in accordance with Chilean Bank GAAP in nominal Chilean pesos.

Pre-tax net income increases 2.6% YoY in 1Q11

In 1Q11, net income attributable to shareholders(1) totaled Ch$116,298 million (Ch$0.62 per share and US$1.33/ADR(2)). On a pre-tax basis, net income increased 2.6% compared to 1Q10 (from now on YoY). Compared to 4Q10 (from now on QoQ), pre-tax net income increased 25.6% mainly as a result of a one-time charge of Ch$39,800 million recognized in 4Q10. After tax net income fell 2.4% YoY mainly as a result of the higher statutory corporate tax rate that increased to 20% in 2011.

Strong loan growth in the quarter.

In 1Q11, total loans increased 7.1% QoQ and 19.4% YoY. Higher yielding retail loans, which include loans to individuals and small and middle-sized companies - increased 3.1% QoQ and 16.4% YoY in 1Q11. In the middle market, loans increased 8.3% QoQ and 22.5% YoY. This segment was positively affected by economic growth, especially the rise in investment levels. Corporate lending increased 35.9% QoQ and 37.3% YoY. This rise was due, in part, to the increase in loans to Chilean blue chip corporations. Loan market share in March 2011, the latest figure available, reached 21.6% and has increased 130 bp in the last twelve months. Notable has been the increase of our consumer loan market share that increased 140 basis points to 27.7% YoY.

Record growth of core deposits

Customer deposits increased 10.7% in the quarter, led by a record 12.1% QoQ and 40.7% rise in core deposits (non-institutional deposits). In the quarter, the Bank focused on increasing its core deposit base in line with growth of the loan book. The Bank's loan to deposit ratio (measured as loans minus marketable securities that fund mortgage portfolio over total deposits) improved to 96.9% as of March 2011 from 99.8% as of December 2010 and 104.3% as of March 2010. As of March 2011, 74% of the Bank's deposits were core.

Operating income net of provisions and costs* increases 14.1% QoQ and 11.0% YoY in 1Q11

Operating income, net of provisions and costs, an indicator or recurring revenue generation increased a solid 14.1% QoQ and 11.0% YoY in 1Q11. This was led by a 6.5% QoQ and 14.0% YoY increase in net interest income, net of provisions. The Central Bank continued to tighten monetary policy in the quarter and boosted short-term interest rates 75 basis points to 4.00%. As the Bank's liabilities have a shorter duration than assets, they re-price more quickly than assets in a rising interest rate environment. This explains, in part, the 1.4% QoQ and 0.3% YoY decrease in net interest income in 1Q11.

The decline in net interest income was also due to the normalization of credit margins to pre-crisis levels as asset quality has improved across the board in the Chilean economy. This has also had a positive effect on provision expense. Provision expense in the quarter decreased 22.5% QoQ and 31.9% YoY, offsetting the negative effect on margins of higher funding costs. The net interest margin net of provisions reached 4.0% in 1Q11 compared to 3.9% in 4Q10 and 4.0% in 1Q10. The NPL ratio improved to 2.47% of total loans from 2.66% in 4Q10 and 2.74% in 1Q10. The coverage ratio of total NPLs (loan loss reserves over non-performing loans) reached 118.2% as of March 31, 2011 compared to 115.6% as of December 31, 2010 and 97.4% as of March 31, 2010. The Banks on-going efforts in 2009 and 2010 of improving credit scoring models, boosting coverage and improving collection efforts of early non-performance at the branch level has also been a driver of the lower provision expense and higher coverage ratios.

Fee income was up 2.5% QoQ and 14.5% YoY as product usage and cross-selling indicators continued to improve in the quarter. The number of checking accounts increased 13.9% YoY, credit cards +18.1% YoY and Debit cards grew 9.8% YoY. Purchases with Santander Chile's credit cards increased 31.6% YoY in monetary terms. Greater commercial activity in retail banking also boosted fees, especially in insurance brokerage, stock brokerage, asset management and fees from credit and debit cards.

Operating expenses in 1Q11 decreased 0.6% QoQ and increased 11.2% YoY. The efficiency ratio reached 37.5% in 1Q11. The QoQ decrease in personnel expenses was mainly due to seasonal factors and no significant variation in headcount. The 13.0% YoY increase in personnel expenses was mainly due greater commercial activity in various business segments, especially retail banking. Administrative expenses were up 5.1% QoQ and 9.6% YoY. This rise was in line with the significant expansion of business activity in the quarter. At the same time, the Bank, in anticipation of a more positive economic environment forecast for the coming years, has been investing in technology and alternative distribution channels. In 2011, the Bank expects to open approximately 25 branches and has already begun an important investment program in CRM technology, client service and new credit scoring models for SMEs. These projects should drive stronger revenue growth while increasing productivity.

ROE reaches 25.0% in 1Q11. Core capital at 10.2%.

With these results, the Bank's ROAE, reached 25% (25.5% post-dividend). The Bank currently has one of the highest ROEs and capitalization levels in the Chilean financial system. Voting common shareholders' equity is the sole component of our Tier I capital and represented 10.2% of risk-weighted assets. The BIS ratio reached 13.9% as of March 31, 2011. On April 27, 2011, the Bank paid its annual dividend of Ch$1.52/share, 10.6% more than in 2010 and equivalent to 60% of 2010 earnings attributable to shareholders. At the record date in Chile, the dividend yield was 3.7%. The Bank has not issued shares since 2002 and dividends per share have increased for the last five years in a row.

INSTITUTIONAL BACKGOUND

As per the latest public records published by the Superintendency of Banks of Chile for March 2011, Banco Santander Chile was the largest bank in terms of loans and equity. The Bank has the highest credit ratings among all Latin American companies, with an A+ rating from Standard and Poor's and Aa3 by Moody's, which are the same ratings assigned to the Republic of Chile, and AA- by Fitch, which pierces the sovereign ceiling. The stock is traded on the New York Stock Exchange (NYSE: SAN) and the Santiago Stock Exchange (SSE: Bsantander). The Bank's main shareholder is Santander, which controls 75.0% of Banco Santander Chile.

For more information see http://www.santander.cl

Banco Santander (SAN.MC, STD.N) is a retail and commercial bank, based in Spain. Santander has more than 90 million customers, 13,660 branches - more than any other international bank - and 169,460 employees around the world. It is the largest financial group in Spain and Latin America, with leading positions in the United Kingdom and Portugal and a broad presence in Europe through its Santander Consumer Finance arm. In 2010, Santander registered EUR 8,181 million in net attributable profit.

Banco Santander ended 2010 with eligible capital of EUR 79,276 million, with a surplus of EUR 30,885 million above the required regulatory minimum. With this capital base, the BIS ratio, using Basel II criteria, comes to 13.1%, Tier I to 10.0% and core capital to 8.8%. The Bank has announced that it expects to end this year with its core capital above 9%.

These ratios make Banco Santander one of the most solvent financial institutions in the world, without having received state aid in any of the markets in which it operates. Moreover, ratings agencies Standard & Poor's and Fitch have reviewed and confirmed their ratings of Banco Santander long-term debt at AA, making the bank one of few international banks with ratings of AA or above from the three main ratings agencies.

For more information see http://www.santander.com

(1) The results in this report are unaudited.

(2) Earnings per ADR was calculated using the observed exchange rate of Ch$482.08 per US$. As of March 31, 2010.

    
    CONTACT INFORMATION
    Robert Moreno
    Manager, Investor Relations Department
    Banco Santander Chile
    Bandera 140 Piso 19
    Santiago, Chile
    Tel: (562)-320-8284
    Fax: (562)-671-6554
    Email: rmorenoh@santander.cl
    Website: http://www.santander.cl