Banco Santander-Chile Announces First Quarter 2019 Earnings
Net income attributable to shareholders totaled Ch$125,430 million with ROAE of 15.3%
Net income attributable to shareholders in 1Q19 totaled Ch$125,430 million (Ch$0.67 per share and
3-year investment plan totaling
The Bank has announced a 3-year investment plan totaling
In this regard, the Bank announced its intentions to enter the acquiring business in 2020 with the aim of significantly modernizing and expanding the access of SMEs to POS terminals. In 2Q19 the Bank will also launch a new prepaid card, Superdigital, which aims to give the unbanked population greater access to the digital economy, enabling them to make online purchases. We calculate that 70% of small commerce in
Expansion into the automotive financing business announced
In order to enter the fast growing auto loan business, in
Loan growth driven by
Total loans increased 8.0% YoY and 1.1% QoQ, led by retail banking and the Middle-Market and offset by a fall in low yielding Corporate loans.
In 1Q19, Loans to individuals increased 1.4% QoQ and 9.6% YoY. Consumer loans increased 7.1% YoY and 0.9% QoQ. The growth of consumer loans was mainly driven by loans to high-income earners which grew 1.7% QoQ. Loans in the Santander Life group of products also expanded 21% during the year. Mortgage loans continued to grow healthily and increased 1.8% QoQ and 11.5% YoY. The Bank also maintained the loan-to-value ratio at origination below 80%.
Middle-market loans grew 2.5% QoQ and 13.0% YoY with the positive growth of investment driving loan growth in this segment. Loans toSMEs increased 2.7% YoY and decreased 0.8% QoQ. The Bank continues to maintain a conservative stance regarding loan growth in this segment by focusing our lending to larger, less risky SMEs while increasing transactional services for all of our SME clients that will generate non-lending revenues. We expect an acceleration of loan growth in these two segments during the rest of the year, in line with our expectations for the economy.
Loans in SCIB decreased 5.4% in the quarter, leading to a YoY decrease of 15.7%. However SCIB's overall contribution to income increased by 17.6% with a strong rise in non-interest revenue while optimizing capital usage.
Active management of funding costs to limit impact of rising rates and low inflation in 1Q19
In 1Q19, the Bank's funding strategy was centered on minimizing the impact of the lower inflation and higher interest rate environment. Total deposits increased 6.5% YoY and decreased 1.6% QoQ. In 1Q19, time deposits grew 8.1% YoY and decreased 1.0% QoQ. In the first quarter of 2019, the
Lower margin due to low inflation and rising interest rates
In 1Q19, Net interest income, NII, decreased 9.8% QoQ and 6.9% YoY. As a reminder, the Bank is asset sensitive to inflation, since the Bank has more assets than liabilities linked to inflation. The Bank is also liability sensitive to short-term rates, since the Bank's deposits are mainly comprised of nominal peso, which have a shorter duration than interest earning assets. During the quarter, the variation of the UF[2] was 0.0% in the quarter compared to 0.8% in 4Q18 and 0.6% in 1Q18 contributed to a lower interest earning assets yield. At the same time, the
As the year progresses, the acceleration of growth in higher yielding retail loans, a normalization of inflation rates, along with stable interest rates should help raise margins in coming quarters. We are expecting UF inflation rates of approximately 0.7%-0.8% per quarter and a stable monetary policy rate of 3% until year-end. This outlook is subject to modifications depending on possible future changes to our inflation and GDP growth forecast.
Positive evolution of asset quality in the quarter
During the quarter provisions increased 1.2% compared to 1Q18 and 4.1% compared to 4Q18. Cost of credit in 1Q19 remained stable at 1.0%. The impaired loan ratio also remained stable at 5.9% and the total NPL ratio improved to 2.0% as of
Non-interest income up 6.1% QoQ and 10.9% YoY partially offsetting lower margins
In 1Q19, non-interest income (fee income plus financial transactions, net) increased 6.1% QoQ and 10.9% YoY, partially offsetting the lower NIM in the quarter. This was mainly due to positive client revenues in fee income and our
Results from Total financial transactions, net was a gain of Ch$38,845 million in 1Q19, an increase of 67.3% compared to 1Q18 and an increase of 8.6% compared to 4Q18. Demand for Client treasury services such as
Costs rise 5.4% due to investments and implementation of IFRS 16
In 1Q19, operating expenses increased 5.4% YoY and decreased 1.8% QoQ with the Bank's efficiency ratio reaching 42.5% in 1Q19 compared to 38.7% in the same period of last year. The QoQ decline is mainly due to seasonal factors. The YoY increase in costs was mainly due to the various initiatives that the Bank has been implementing to improve productivity through digitalization, higher severance costs and the net effect of the implementation of IFRS 16 in the quarter. IFRS 16 increased depreciation costs by Ch$7.8 billion and reduced administrative expenses by Ch$7.3 billion with a net effect of Ch$500 million in the quarter. Going forward we expect cost growth for the year to stabilize at ~4%.
About Banco Santander
[1].The information contained in this report is unaudited and is presented in accordance with Chilean Bank GAAP as defined by the Superintendency of Banks of
[2] UF or Unidad de Fomento, an inflation indexed unit used in
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
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