FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
Commission File Number: 001-14554
Banco Santander Chile |
Santander Chile Bank |
(Translation of Registrant’s Name into English) |
Bandera 140 |
Santiago, Chile |
(Address of principal executive office) |
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F | x | Form 40-F | ¨ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes | ¨ | No | x |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes | ¨ | No | x |
Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes | ¨ | No | x |
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
2 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BANCO SANTANDER-CHILE | ||
By: | /s/ Cristian Florence | |
Name: | Cristian Florence | |
Title: | General Counsel |
Date: March 28, 2013
Consolidated Financial Statements | |
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | 5 |
CONSOLIDATED STATEMENTS OF INCOME | 6 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | 7 |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | 8 |
CONSOLIDATED STATEMENTS OF CASH FLOW | 9 |
Notes to the Consolidated Financial Statements | |
NOTE 01 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 11 |
NOTE 02 ACCOUNTING CHANGES | 42 |
NOTE 03 SIGNIFICANT EVENTS | 43 |
NOTE 04 BUSINESS SEGMENTS | 45 |
NOTE 05 CASH AND CASH EQUIVALENTS | 49 |
NOTE 06 TRADING INVESTMENTS | 50 |
NOTE 07 INVESTMENTS UNDER RESALE AGREEMENTS AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS | 51 |
NOTE 08 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING | 54 |
NOTE 09 INTERBANK LOANS | 61 |
NOTE 10 LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS | 62 |
NOTE 11 PURCHASES AND SALES OF LOANS | 69 |
NOTE 12 AVAILABLE FOR SALE INSTRUMENTS | 72 |
NOTE 13 INVESTMENTS IN ASSOCIATES AND OTHER COMPANIES | 76 |
NOTE 14 INTANGIBLE ASSETS | 78 |
NOTE 15 PROPERTY, PLANT, AND EQUIPMENT | 80 |
NOTE 16 CURRENT AND DEFERRED TAXES | 84 |
NOTE 17 OTHER ASSETS | 88 |
NOTE 18 TIME DEPOSITS AND OTHER TIME LIABILITIES | 89 |
NOTE 19 INTERBANK BORROWINGS | 90 |
NOTE 20 ISSUED DEBT INSTRUMENTS AND OTHER OBLIGATIONS | 92 |
NOTE 21 MATURITY OF ASSETS AND LIABILITIES | 98 |
NOTE 22 PROVISIONS | 100 |
NOTE 23 OTHER LIABILITIES | 102 |
NOTE 24 CONTINGENCIES AND COMMITMENTS | 103 |
NOTE 25 EQUITY | 105 |
NOTE 26 CAPITAL REQUIREMENTS (BASEL) | 108 |
NOTE 27 NON-CONTROLLING INTEREST | 110 |
NOTE 28 INTEREST INCOME AND EXPENSE | 112 |
NOTE 29 FEES AND COMMISSIONS | 114 |
NOTE 30 NET INCOME FROM FINANCIAL OPERATIONS | 115 |
NOTE 31 NET FOREIGN EXCHANGE INCOME | 115 |
NOTE 32 PROVISION FOR LOAN LOSSES | 116 |
NOTE 33 PERSONNEL SALARIES AND EXPENSES | 117 |
NOTE 34 ADMINISTRATIVE EXPENSES | 121 |
NOTE 35 DEPRECIATION, AMORTIZATION AND IMPAIRMENT | 122 |
NOTE 36 OTHER OPERATING INCOME AND EXPENSES | 123 |
NOTE 37 TRANSACTIONS WITH RELATED PARTIES | 125 |
NOTE 38 PENSION PLANS | 130 |
NOTE 39 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES | 133 |
NOTE 40 RISK MANAGEMENT | 138 |
Deloitte Auditores y Consultores Limitada RUT: 80.276.200-3 Rosario Norte 407 Las Condes, Santiago Chile Fono: (56-2) 2729 7000 Fax: (56-2) 2374 9177 e-mail: deloittechile@deloitte.com www.deloitte.cl |
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of
Banco Santander Chile
We have audited the accompanying consolidated financial statements of Banco Santander Chile and its subsidiaries (the "Bank"), which comprise the consolidated statements of financial position as of December 31, 2012 and 2011, and the related consolidated statements of income, statements of comprehensive income, statements of changes in equity, and statements of cash flows for the years then ended, and the related notes to the consolidated financial statements.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the accounting standards and instructions issued by the Superintendency of Banks and Financial Institutions. This responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Bank’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Banco Santander Chile and its subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended in accordance with accounting standards and instructions issued by the Superintendency of Banks and Financial Institutions.
Other matters
The accompanying financial statements have been translated into English for the convenience of readers outside Chile.
January 21, 2013
Santiago, Chile
Mauricio Farías N.
Banco Santander Chile and Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, | ||||||||||||
2012 | 2011 | |||||||||||
NOTE | MCh$ | MCh$ | ||||||||||
ASSETS | ||||||||||||
Cash and deposits in banks | 5 | 1,250,414 | 2,793,701 | |||||||||
Cash items in process of collection | 5 | 520,267 | 276,454 | |||||||||
Trading investments | 6 | 338,287 | 409,763 | |||||||||
Investments under resale agreements | 7 | 6,993 | 12,928 | |||||||||
Financial derivative contracts | 8 | 1,293,212 | 1,601,896 | |||||||||
Interbank loans, net | 9 | 90,527 | 87,541 | |||||||||
Loans and accounts receivable from customers, net | 10 | 18,325,957 | 16,823,407 | |||||||||
Available for sale investments | 12 | 1,826,158 | 1,661,311 | |||||||||
Held to maturity investments | 12 | - | - | |||||||||
Investments in other companies | 13 | 7,614 | 8,728 | |||||||||
Intangible assets | 14 | 87,347 | 80,739 | |||||||||
Property, plant, and equipment | 15 | 162,214 | 153,059 | |||||||||
Current taxes | 16 | 10,227 | 37,253 | |||||||||
Deferred taxes | 16 | 186,210 | 147,754 | |||||||||
Other assets | 17 | 656,200 | 546,470 | |||||||||
TOTAL ASSETS | 24,761,627 | 24,641,004 | ||||||||||
LIABILITIES | ||||||||||||
Deposits and other demand liabilities | 18 | 4,970,019 | 4.413.815 | |||||||||
Cash items in process of being cleared | 5 | 284,953 | 89.486 | |||||||||
Obligations under repurchase agreements | 7 | 304,117 | 544.381 | |||||||||
Time deposits and other time liabilities | 18 | 9,112,213 | 8.921.114 | |||||||||
Financial derivative contracts | 8 | 1,146,161 | 1.292.402 | |||||||||
Interbank borrowings | 19 | 1,438,003 | 1.920.092 | |||||||||
Issued debt instruments | 20 | 4,571,289 | 4.623.239 | |||||||||
Other financial liabilities | 20 | 192,611 | 176.599 | |||||||||
Current taxes | 16 | 525 | 1.498 | |||||||||
Deferred taxes | 16 | 9,544 | 5.315 | |||||||||
Provisions | 22 | 220,993 | 219.063 | |||||||||
Other liabilities | 23 | 341,274 | 398.977 | |||||||||
TOTAL LIABILITIES | 22,591,702 | 22,605,981 | ||||||||||
EQUITY | ||||||||||||
Attributable to the Bank’s shareholders: | 2,135,660 | 2,001,222 | ||||||||||
Capital | 25 | 891,303 | 891,303 | |||||||||
Reserves | 25 | 976,561 | 802,528 | |||||||||
Other comprehensive income | 25 | (3,781 | ) | 2,832 | ||||||||
Retained Earnings | 25 | 271,577 | 304,559 | |||||||||
Retained earnings of prior years | 25 | - | - | |||||||||
Income for the period | 25 | 387,967 | 435.084 | |||||||||
Minus: Provision for mandatory dividends | 25 | (116,390 | ) | (130.525 | ) | |||||||
Non-controlling interest | 27 | 34,265 | 33,801 | |||||||||
TOTAL EQUITY | 2,169,925 | 2,035,023 | ||||||||||
TOTAL LIABILITIES AND EQUITY | 24,761,627 | 24,641,004 |
Banco Santander Chile and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the years ended
December 31, | ||||||||||||
2012 | 2011 | |||||||||||
NOTE | MCh$ | MCh$ | ||||||||||
OPERATING INCOME | ||||||||||||
Interest income | 28 | 1,890,953 | 1,768,735 | |||||||||
Interest expense | 28 | (848,219 | ) | (796,435 | ) | |||||||
Net interest income | 1,042,734 | 972,300 | ||||||||||
Fee and commission income | 29 | 360,427 | 363,041 | |||||||||
Fee and commission expense | 29 | (89,855 | ) | (85,205 | ) | |||||||
Net fee and commission income | 270,572 | 277,836 | ||||||||||
Net income from financial operations (net trading income) | 30 | (64,079 | ) | 170,857 | ||||||||
Foreign exchange profit (loss), net | 31 | 146,378 | (76,660 | ) | ||||||||
Other operating income | 36 | 19,758 | 27,100 | |||||||||
Net operating profit before loan losses | 1,415,363 | 1,371,433 | ||||||||||
Provision for loan losses | 32 | (366,702 | ) | (282,527 | ) | |||||||
NET OPERATING PROFIT | 1,048,661 | 1,088,906 | ||||||||||
Personnel salaries and expenses | 33 | (300,298 | ) | (280,613 | ) | |||||||
Administrative expenses | 34 | (183,379 | ) | (166,825 | ) | |||||||
Depreciation and amortization | 35 | (56,369 | ) | (53,466 | ) | |||||||
Impairment | 35 | (90 | ) | (116 | ) | |||||||
Other operating expenses | 36 | (65,105 | ) | (66,558 | ) | |||||||
Total operating expenses | (605,241 | ) | (567,578 | ) | ||||||||
OPERATING INCOME | 443,420 | 521,328 | ||||||||||
Income from investments in other companies | 13 | 267 | 2,140 | |||||||||
Income before tax | 443,687 | 523,468 | ||||||||||
Income tax expense | 16 | (51,095 | ) | (83,453 | ) | |||||||
NET INCOME FOR THE PERIOD | 392,592 | 440,015 | ||||||||||
Attributable to: | ||||||||||||
Bank shareholders (Equity holders of the Bank) | 387,967 | 435,084 | ||||||||||
Non-controlling interest | 27 | 4,625 | 4,931 | |||||||||
Earnings per share attributable to Bank shareholders: | ||||||||||||
(expressed in Chilean pesos) | ||||||||||||
Basic earnings | 25 | 2,059 | 2,309 | |||||||||
Diluted earnings | 25 | 2,059 | 2,309 |
Banco Santander Chile and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended
December 31, | ||||||||||||
2012 | 2011 | |||||||||||
NOTE | MCh$ | MCh$ | ||||||||||
CONSOLIDATED INCOME FOR THE PERIOD | 392,592 | 440,015 | ||||||||||
OTHER COMPREHENSIVE INCOME | ||||||||||||
Available for sale investments | 12 | (13,060 | ) | 21,639 | ||||||||
Cash flow hedge | 25 | 4,921 | (11,564 | ) | ||||||||
Other comprehensive income before income tax | (8,139 | ) | 10,075 | |||||||||
Income tax related to other comprehensive income | 16 | 1,572 | (1,880 | ) | ||||||||
Total other comprehensive (loss) income | (6,567 | ) | 8,195 | |||||||||
CONSOLIDATED COMPREHENSIVE INCOME FOR THE PERIOD | 386,025 | 448,210 | ||||||||||
Attributable to: | ||||||||||||
Bank shareholders (Equity holders of the Bank) | 381,354 | 443,096 | ||||||||||
Non-controlling interest | 27 | 4,671 | 5,114 |
Banco Santander Chile and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2012 and 2011
RESERVES | ACCUMULATED OTHER COMPREHENSIVE INCOME | RETAINED EARNINGS | ||||||||||||||||||||||||||||||||||||||||||||||
Capital | Reserves and other retained earnings | Effects of merger of companies under common control | Available for sale investments | Cash flow hedge | Income tax effect | Retained earnings of prior years | Income for the period | Provision for mandatory dividends | Total attributable to Bank shareholders | Non-controlling interest | Total Equity | |||||||||||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||||||||||
Balances as of December 31, 2010 | 891,303 | 613,891 | (2,224 | ) | (18,341 | ) | 11,958 | 1,203 | - | 477,155 | (143,147 | ) | 1,831,798 | 31,809 | 1,863,607 | |||||||||||||||||||||||||||||||||
Distribution of income from previous period | - | - | - | - | - | - | 477,155 | (477,155 | ) | - | - | - | - | |||||||||||||||||||||||||||||||||||
Balances as of January 1, 2011 | 891,303 | 613,891 | (2,224 | ) | (18,341 | ) | 11,958 | 1,203 | 477,155 | - | (143,147 | ) | 1,831,798 | 31,809 | 1,863,607 | |||||||||||||||||||||||||||||||||
Increase or decrease of capital and reserves | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Dividends distributions / Withdrawals made | - | - | - | - | - | - | (286,294 | ) | - | 143,147 | (143,147 | ) | (3,122 | ) | (146,269 | ) | ||||||||||||||||||||||||||||||||
Other changes in equity | - | 190,861 | - | - | - | - | (190,861 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
Provisions for mandatory dividends | - | - | - | - | - | - | - | - | (130,525 | ) | (130,525 | ) | - | (130,525 | ) | |||||||||||||||||||||||||||||||||
Subtotals | - | 190,861 | - | - | - | - | (477,155 | ) | - | 12,622 | (273,672 | ) | (3,122 | ) | (276,794 | ) | ||||||||||||||||||||||||||||||||
Other comprehensive income | - | - | - | 21,418 | (11,564 | ) | (1,842 | ) | - | - | - | 8,012 | 183 | 8,195 | ||||||||||||||||||||||||||||||||||
Income for the period | - | - | - | - | - | - | - | 435,084 | - | 435,084 | 4,931 | 440,015 | ||||||||||||||||||||||||||||||||||||
Subtotals | - | - | - | 21,418 | (11,564 | ) | (1,842 | ) | - | 435,084 | - | 443,096 | 5,114 | 448,210 | ||||||||||||||||||||||||||||||||||
Equity as of December 31, 2011 | 891,303 | 804,752 | (2,224 | ) | 3,077 | 394 | (639 | ) | - | 435,084 | (130,525 | ) | 2,001,222 | 33,801 | 2,035,023 | |||||||||||||||||||||||||||||||||
Equity as of December 31, 2011 | 891,303 | 804,752 | (2,224 | ) | 3,077 | 394 | (639 | ) | - | 435,084 | (130,525 | ) | 2,001,222 | 33,801 | 2,035,023 | |||||||||||||||||||||||||||||||||
Distribution of income from previous period | - | - | - | - | - | - | 435,084 | (435,084 | ) | - | - | - | - | |||||||||||||||||||||||||||||||||||
Balances as of January 1, 2012 | 891,303 | 804,752 | (2,224 | ) | 3,077 | 394 | (639 | ) | 435,084 | - | (130,525 | ) | 2,001,222 | 33,801 | 2,035,023 | |||||||||||||||||||||||||||||||||
Increase or decrease of capital and reserves | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Dividends distributions / Withdrawals made | - | - | - | - | - | - | (261,051 | ) | - | 130,525 | (130,526 | ) | (4,207 | ) | (134,733 | ) | ||||||||||||||||||||||||||||||||
Other changes in equity | - | 174,033 | - | - | - | - | (174,033 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
Provision for mandatory dividends | - | - | - | - | - | - | - | - | (116,390 | ) | (116,390 | ) | - | (116,390 | ) | |||||||||||||||||||||||||||||||||
Subtotals | - | 174,033 | - | - | - | - | (435,084 | ) | - | 14,135 | (246,916 | ) | (4,207 | ) | (251,123 | ) | ||||||||||||||||||||||||||||||||
Other comprehensive income | - | - | - | (13,118 | ) | 4,921 | 1,584 | - | - | - | (6,613 | ) | 46 | (6,567 | ) | |||||||||||||||||||||||||||||||||
Income for the period | - | - | - | - | - | - | - | 387,967 | - | 387,967 | 4,625 | 392,592 | ||||||||||||||||||||||||||||||||||||
Subtotals | - | - | - | (13,118 | ) | 4,921 | 1,584 | - | 387,967 | - | 381,354 | 4,671 | 386,025 | |||||||||||||||||||||||||||||||||||
Balances as of December 31, 2012 | 891,303 | 978,785 | (2,224 | ) | (10,041 | ) | 5,315 | 945 | - | 387,967 | (116,390 | ) | 2,135,660 | 34,265 | 2,169,925 |
Total attributable to Bank shareholders | Allocated to reserves | Allocated to dividends | Percentage distributed | Number of | Dividend per share | |||||||||||||||||||
Period | MCh$ | MCh$ | MCh$ | % | shares | (in pesos) | ||||||||||||||||||
Year 2011 (Shareholders Meeting April 2012) | 435,084 | 174,033 | 261,051 | 60 | 188,446,126,794 | 1,385 | ||||||||||||||||||
Year 2010 (Shareholders Meeting April 2011) | 477,155 | 190,861 | 286,294 | 60 | 188,446,126,794 | 1,519 |
Financial Statements 2012 / Banco Santander Chile 8 |
Banco Santander Chile and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOW
For the years ended
December 31, | ||||||||||||
2012 | 2011 | |||||||||||
NOTE | MCh$ | MCh$ | ||||||||||
A - CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
CONSOLIDATED INCOME BEFORE TAX | 443,687 | 523,468 | ||||||||||
Debits (credits) to income that do not represent cash flows | (887,722 | ) | (916,135 | ) | ||||||||
Depreciation and amortization | 35 | 56,369 | 53,466 | |||||||||
Impairment of property, plant, and equipment | 15 | 90 | 116 | |||||||||
Provision for loan losses | 32 | 399,717 | 318,352 | |||||||||
Mark to market of trading investments | (9,978 | ) | (5,331 | ) | ||||||||
Income from investments in other companies | 13 | (267 | ) | (2,140 | ) | |||||||
Net gain on sale of assets received in lieu of payment | 36 | (9,307 | ) | (13,980 | ) | |||||||
Provisions for assets received in lieu of payment | 36 | 3,902 | 3,169 | |||||||||
Net gain on sale of investments in other companies | 36 | (599 | ) | - | ||||||||
Net gain on sale of property, plant and equipment | 36 | (9,194 | ) | (11,863 | ) | |||||||
Charge off of assets received in lieu of payment | 36 | 9,180 | 9,878 | |||||||||
Net interest income | 28 | (1,042,734 | ) | (972,300 | ) | |||||||
Net fee and commission income | 29 | (270,572 | ) | (277,836 | ) | |||||||
Changes to income that do not represent cash flows | 18,324 | 14,130 | ||||||||||
Changes in assets and liabilities due to deferred taxes | 16 | (32,653 | ) | (31,796 | ) | |||||||
Increase/decrease in operating assets and liabilities | (574,017 | ) | 1,872,978 | |||||||||
Increase of loans and accounts receivables from customers, net | (1,272,687 | ) | (1,498,981 | ) | ||||||||
Increase of foreign investments | (93,372 | ) | (217,426 | ) | ||||||||
Proceeds from maturity of resale agreements (assets) | 5,935 | 158,057 | ||||||||||
Increase of Interbank loans | (2,985 | ) | (17,869 | ) | ||||||||
Decrease of assets received or awarded in lieu of payment | 45,280 | 45,773 | ||||||||||
Increase of debits in customers checking accounts | 462,367 | 213,424 | ||||||||||
Increase of time deposits and other time liabilities | 195,535 | 1,652,580 | ||||||||||
Increase obligations with domestic banks | - | - | ||||||||||
Increase (decrease) of other demand liabilities or time obligations | 93,838 | (36,043 | ) | |||||||||
Increase (decrease) of obligations with foreign banks | (481,677 | ) | 336,614 | |||||||||
Decrease of obligations with Central Bank of Chile | (412 | ) | (497 | ) | ||||||||
Increase (decrease) due to repurchase agreements (liabilities) | (240,264 | ) | 249,656 | |||||||||
Increase by other financial liabilities | 16,012 | 10,310 | ||||||||||
Net increase of other assets and liabilities | (631,817 | ) | (411,734 | ) | ||||||||
Redemption of letters of credit | (45,830 | ) | (86,747 | ) | ||||||||
Senior bond issuances | 623,457 | 590,250 | ||||||||||
Redemption of senior bonds and payments of interest | (507,369 | ) | (283,570 | ) | ||||||||
Interest received | 1,910,729 | 1,787,128 | ||||||||||
Interest paid | (871,130 | ) | (813,125 | ) | ||||||||
Dividends received from investments in other companies | 13 | 896 | 795 | |||||||||
Fees and commissions received | 29 | 360,427 | 363,041 | |||||||||
Fees and commissions paid | 29 | (89,855 | ) | (85,205 | ) | |||||||
Income tax paid | 16 | (51,095 | ) | (83,453 | ) | |||||||
Net cash flow (used in) provided by operating activities | (1,018,052 | ) | 1,480,311 |
Financial Statements 2012 / Banco Santander Chile 9 |
Banco Santander Chile and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOW
For the years ended
December 31, | ||||||||||||
2012 | 2011 | |||||||||||
NOTE | MCh$ | MCh$ | ||||||||||
B - CASH FLOWS FROM INVESTMENT ACTIVITIES: | ||||||||||||
Purchases of property, plant, and equipment | 15 | (36,738 | ) | (26,689 | ) | |||||||
Sales of property, plant, and equipment | 15 | 6,573 | 8,645 | |||||||||
Purchases of investments in other companies | 13 | (61 | ) | - | ||||||||
Sales of investments in other companies | 13 | 401 | - | |||||||||
Purchases of intangibles assets | 14 | (42,261 | ) | (34,051 | ) | |||||||
Net cash flow used in investment activities | (72,086 | ) | (52,095 | ) | ||||||||
C - CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||||||
From shareholders’ financing activities | (396,932 | ) | (209,715 | ) | ||||||||
Issuance of subordinated bonds | - | 111,458 | ||||||||||
Redemption of subordinated bonds and payments of interest | (135,881 | ) | (34,879 | ) | ||||||||
Dividends paid | (261,051 | ) | (286,294 | ) | ||||||||
From non-controlling-interest financing activities | (4,207 | ) | (3,122 | ) | ||||||||
Dividends and/or withdrawals paid | (4,207 | ) | (3,122 | ) | ||||||||
Net cash flow used in financing activities | (401,139 | ) | (212,837 | ) | ||||||||
D – NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE PERIOD | (1,491,277 | ) | 1,215,379 | |||||||||
E – EFFECTS OF FOREIGN EXCHANGE RATE FLUCTUATIONS | (3,664 | ) | (71,151 | ) | ||||||||
F - INITIAL BALANCE OF CASH AND CASH EQUIVALENTS | 2,980,669 | 1,836,441 | ||||||||||
FINAL BALANCE OF CASH AND CASH EQUIVALENTS | 5 | 1,485,728 | 2,980,669 |
December 31, | ||||||||
2012 | 2011 | |||||||
Reconciliation of provisions for the Consolidated Statements of Cash Flow | MCh$ | MCh$ | ||||||
Provisions for loan losses for cash flow purposes | 399,717 | 318,352 | ||||||
Recovery of loans previously charged off | (33,015 | ) | (35,825 | ) | ||||
Provisions for loan losses - net | 366,702 | 282,527 |
Financial Statements 2012 / Banco Santander Chile 10 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CORPORATE INFORMATION
Banco Santander Chile (formerly Banco Santiago) is a corporation (sociedad anónima bancaria) organized under the laws of the Republic of Chile, headquartered at Bandera #140, Santiago, which provides a broad range of general banking services to its customers, from individuals to major corporations. Banco Santander Chile and its affiliates (collectively referred to herein as the “Bank” or “Banco Santander Chile”) offer commercial and consumer banking services, as well as other services, including factoring, collection, leasing, securities and insurance brokerage, mutual and investment fund management, and investment banking.
A Special Meeting of Shareholders of Banco Santiago was held on July 18, 2002, the minutes of which were notarized as a public deed on July 19, 2002 at the Notarial Office of Santiago before Notary Nancy de la Fuente Hernández, and it was agreed to merge Banco Santander Chile with Banco Santiago by merging the former into the latter, which acquired the former’s assets and liabilities. It was likewise agreed to dissolve Banco Santander Chile in advance and change the name of Banco Santiago to Banco Santander Chile. This change was authorized by Resolution No.79 of the Superintendency of Banks and Financial Institutions (SBIF), adopted on July 26, 2002, published in the Official Journal on August 1, 2002 and registered on page 19,992 under number 16,346 for the year 2002 in the Registry of Commerce of the Curator of Real Estate of Santiago.
In addition to the amendments to the bylaws discussed above, the bylaws have been amended on multiple occasions, the last time at the Special Shareholders Meeting of April 24, 2007, the minutes of which were notarized as a public deed on May 24, 2007 at the Notarial Office of Nancy de la Fuente Hernández. This amendment was approved pursuant to Resolution No.61 of June 6, 2007 of the Superintendency of Banks and Financial Institutions. An extract thereof and the resolution were published in the Official Journal of June 23, 2007 and registered in the Registry of Commerce for 2007 on page 24,064 under number 17,563 of the aforementioned Curator.
Banco Santander Spain controls Banco Santander-Chile through its holdings in Teatinos Siglo XXI Inversiones Ltda. and Santander-Chile Holding S.A., which are controlled subsidiaries by Banco Santander Spain. As of December 31, 2012 Banco Santander Spain owns or controls directly and indirectly 99.5% of the Santander-Chile Holding S.A. and 100% of Teatinos Siglo XXI Inversiones Ltda. This gives Banco Santander Spain control over 67,18% of the Bank’s shares.
a) | Basis of preparation |
These Consolidated Financial Statements have been prepared in accordance with the Compendium of Accounting Standards issued by the Superintendency of Banks and Financial Institutions (SBIF), the Chilean regulatory agency. The General Banking Law set out in its article 15, that banks must applied accounting standards established by SBIF. In any other matter not covered therein, they must apply general accepted standards issued by the Colegio de Contadores de Chile A.G (Association of Chilean Accountants), which coincide with International Financial Reporting Standards (IFRS). In the event of discrepancies between the accounting policies and accounting standards issued by the SBIF (Compendium of Accounting Standards), the latter shall prevail.
The notes to the financial statements contain additional information to that presented in the Consolidated Statement of Financial Position, Consolidated Statement of Income, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows. The notes provide narrative descriptions or disaggregation of items presented in those statements in a clear, relevant, reliable and comparable manner.
b) | Basis of preparation for the Consolidated Financial Statements |
The Consolidated Financial Statements consolidate the separate (individual) financial statements of the Bank and the companies that participate in the consolidation as of December 31, 2012 and 2011; and include the adjustments, reclassifications and eliminations needed to comply with the accounting policies and valuation criteria established by the Compendium of Accounting Regulations issued by the SBIF.
Financial Statements 2012 / Banco Santander Chile 11 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
i. | Subsidiaries |
“Subsidiaries” are defined as entities over which the Bank has the ability to exercise control, which is generally but not exclusively reflected by the direct or indirect ownership of at least 50% of the investee’s voting rights, or even if this percentage is lower or zero when the Bank is granted control pursuant to agreements with the investee’s shareholders. Control is the power to govern the financial and operating policies of an entity, so as to benefit from its activities
The financial statements of subsidiaries are consolidated with those of the Bank. Accordingly, all the balances and transactions between the consolidated companies are eliminated through the consolidation process.
In addition, third parties’ share in the Consolidated Bank’s equity are presented as “Non-controlling interests” in the Consolidated Statement of Financial Position. Their share in the income for the year is presented as “Atributable to non-controlling interests” in the Consolidated Statement of Income.
The following companies are considered “Subsidiaries” over which the Bank has the ability to exercise control and are therefore within the scope of consolidation:
Percentage Share | ||||||||||||||||||||||||
As of December 31 | ||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||
Subsidiaries | Direct % | Indirect % | Total % | Direct % | Indirect % | Total % | ||||||||||||||||||
Santander Corredora de Seguros Limitada | 99.75 | 0.01 | 99.76 | 99.75 | 0.01 | 99.76 | ||||||||||||||||||
Santander S.A. Corredores de Bolsa | 50.59 | 0.41 | 51.00 | 50.59 | 0.41 | 51.00 | ||||||||||||||||||
Santander Asset Management S.A. Administradora General de Fondos | 99.96 | 0.02 | 99.98 | 99.96 | 0.02 | 99.98 | ||||||||||||||||||
Santander Agente de Valores Limitada | 99.03 | - | 99.03 | 99.03 | - | 99.03 | ||||||||||||||||||
Santander S.A. Sociedad Securitizadora | 99.64 | - | 99.64 | 99.64 | - | 99.64 | ||||||||||||||||||
Santander Servicios de Recaudación y Pagos Limitada | 99.90 | 0.10 | 100.00 | 99.90 | 0.10 | 100.00 |
ii. | Special Purpose Entities |
According to IFRS, the Bank must continuously analyze its scope of consolidation. The key criteria for such analysis is the degree of control held by the Bank over a given entity, not the percentage of ownership interest in such entity’s equity.
In particular, as set forth by International Accounting Standard 27 “Consolidated and Separate Financial Statements” (IAS 27) and by the Standing Interpretations Committee 12 “Consolidation – Special Purpose Entities” (SIC 12), issued by the IASB, the Bank must determine the existence of Special Purpose Entities (SPEs), which must be included in its scope of consolidation. The following are the main criteria for SPEs that should be included in the scope of consolidation:
The SPEs’ activities have essentially been conducted on behalf of the company that presents the consolidated financial statements and in response to its specific business needs.
The necessary decision making authority is held to obtain most of the benefits from these entities’ activities, as well as the rights to obtain most of the benefits or other advantages from such entities.
The entity essentially retains most of the risks inherent to the ownership or residual interest of the SPEs or its assets, for the purpose of obtaining the benefits from its activities.
This assessment is based on methods and procedures which consider the risks and rewards retained by the Bank, for which all the relevant factors, including the guarantees furnished or the losses associated with collection of the related assets retained by the Bank, are taken into account. As a consequence of this assessment, the Bank concluded that it exercised control over the following entities, which are included within the scope of consolidation:
- | Santander Gestión de Recaudación y Cobranza Limitada (collection services). |
- | Multinegocios S.A. (management of sales force) |
- | Servicios Administrativos y Financieros Limitada (management of sales force). |
- | Fiscalex Limitada (collection services). |
- | Multiservicios de Negocios Limitada (call center). |
- | Bansa Santander S.A. |
Financial Statements 2012 / Banco Santander Chile 12 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
iii. | Associates |
Associates are those entities over which the Bank exercises significant influence, usually because it holds 20% or more of the entity’s voting power. Investments in associates are accounted for using the “equity method.”
The following companies are considered “Associates” in which the Bank accounts for its participation using the equity method:
Percent ownership share | ||||||||
As of December 31 | ||||||||
Associates | 2012 | 2011 | ||||||
Redbanc S.A. | 33.43 | % | 33.43 | % | ||||
Transbank S.A. (*) | 25.00 | % | 32.71 | % | ||||
Centro de Compensación Automatizado | 33.33 | % | 33.33 | % | ||||
Sociedad Interbancaria de Depósito de Valores S.A. | 29.28 | % | 29.28 | % | ||||
Cámara Compensación de Alto Valor S.A. (*) | 14.44 | % | 12.65 | % | ||||
Administrador Financiero del Transantiago S.A. | 20.00 | % | 20.00 | % | ||||
Sociedad Nexus S.A. | 12.90 | % | 12.90 | % |
(*) see details on Note 13 Purchase of Shares
In the case of Nexus S.A. and Cámara Compensación de Alto Valor S.A., Banco Santander Chile has a representative on the Board of Directors. According to this, the Bank has concluded that it exerts significant influence over those entities.
iv. | Share or rights in other companies |
Correspond to entities over which the Bank has no control or significant influence. These holdings are shown at purchase value (historical cost).
c) | Non-controlling interest |
Non-controlling interest represents the portion of gains and losses and net assets not attributable,directly or indirectly, to the Bank. It is presented as “Atributable to non-controlling interest” separately in the Consolidated Statement of Income, and separately from shareholders equity in the Consolidated Statement of Financial Position.
In the case of Special Purpose Entities (SPEs), 100% of their Income and Equity is presented in Non-controlling interest, since the Bank only has control but not actual ownership thereof.
d) | Operating segments |
The Bank discloses separate information for each operating segment that:
i. | has been identified; |
ii. | exceeds the quantitative thresholds required for a segment. |
Operating segments with similar economic characteristics often have a similar long-term financial performance. Two or more segments can be combined only if aggregation is consistent with the basic policies of the International Financial Reporting Standards 8 “Operating Segments” (IFRS 8) and the segments have similar economic characteristics and are similar in each of the following respects:
i. | the nature of the products and services; |
ii. | the nature of the production processes; |
iii. | the type or class of customers that use their products and services; |
iv. | the methods used to distribute their products or services; and |
v. | if applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities. |
Financial Statements 2012 / Banco Santander Chile 13 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
The Bank reports separately on each operating segment that exceeds any of the following quantitative thresholds:
i. | Its reported revenue, from both external customers and intersegment sales or transfers, is 10% or more of the combined internal and external revenue of all operating segments. |
ii. | The absolute amount of its reported profit or loss is 10% or more of the greater in absolute amount of: (i) the combined reported profit of all the operating segments that did not report a loss and; (ii) the combined reported loss of all the operating segments that reported a loss. |
iii. | Its assets represent 10% or more of the combined assets of all operating segments. |
Operating segments that do not meet any of the quantitative thresholds may be treated as segments to be reported, in which case the information must be disclosed separately if management believes it would be useful to users of the financial statements.
Information about other business activities and operating segments not separately reported is combined and disclosed in the “Other segments” category.
According to the information presented, the Bank’s segments were determined under the following definitions:
An operating segment is a component of an entity:
i. | that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses from transactions with other components of the same entity); |
ii. | whose operating results are regularly reviewed by the entity’s chief executive officer, who makes decisions about resources allocated to the segment and assess its performance; and |
iii. | For which discrete financial information is available. |
e) | Functional and presentation currency |
According to International Accounting Standard No.21 “The Effects of Changes in Foreign Exchange Rates” (IAS 21), the Chilean peso, which is the currency of the primary economic environment in which the Bank operates and the currency which influences its costs and revenues structure, has been defined as the Bank’s functional and presentation currency.
Accordingly, all balances and transactions denominated in currencies other than the Chilean Peso are treated as “foreign currency.”
f) | Foreign currency transactions |
The Bank grants loans and accepts deposits in amounts denominated in foreign currencies, mainly the U.S. dollar. Assets and liabilities denominated in foreign currencies and only held by the Bank are translated to Chilean pesos based on the market rate published by “Reuters rate” at 1:30 p.m. on the last business day of every month; the rate used was Ch$478.85 per US$1 as of December 31, 2012 (Ch$520.35 per US$1 as of December 31, 2011 for the Bank and Ch$521.46 per US$1 for subsidiaries who used the observed exchange rate informed by the Central Bank of Chile until 2011). The Bank, after an assessment, concludes that there are not significant differences arising from the use of that exchange rate as of December 31, 2011 in comparison with the Reuters rate at that date.
The amounts of net foreign exchange profits and losses include recognition of the effects that exchange rate fluctuations have on assets and liabilities denominated in foreign currencies and the profits and losses on foreign exchange spot and forward transactions undertaken by the Bank.
Financial Statements 2012 / Banco Santander Chile 14 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
g) | Definitions and classification of financial instruments |
i. | Definitions |
A “financial instrument” is any contract that gives rise to a financial asset of one entity, and a financial liability or equity instrument of another entity.
An “equity instrument” is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
A “Financial derivative” is a financial instrument whose value changes in response to the changes in an observable market variable (such as an interest rate, a foreign exchange rate, a financial instrument’s price, or a market index, including credit ratings), whose initial investment is very small compared with other financial instruments having a similar response to changes in market factors, and which is generally settled at a future date.
“Hybrid financial instruments” are contracts that simultaneously include a non-derivative host contract together with a financial derivative, known as an embedded derivative, which is not separately transferable and has the effect that some of the cash flows of the hybrid contract vary in a way similar to a stand-alone derivative.
ii. | Classification of financial assets for measurement purposes |
The financial assets are initially classified into the various categories used for management and measurement purposes.
Financial assets are included for measurement purposes in one of the following categories:
- | Portfolio of trading investments (at fair value through profit and loss): this category includes the financial assets acquired for the purpose of generating profits in the short term from fluctuations in their prices. This category includes the portfolio of trading investments and financial derivative contracts not designated as hedging instruments. |
- | Available for sale investment portfolio: debt instruments not classified as “held-to-maturity investments,” “Credit investments (loans and accounts receivable from customers or interbank loans)” or “Financial assets at fair value through profit or loss.” Available for sale (AFS) investments are initially recorded at cost, which includes transaction costs that are directly attributable to the acquisition. AFS instruments are subsequently measured at fair value, or based on appraisals made with the use of internal models when appropriate. Unrealized gains or losses arising from changes in fair value are recorded as a debit or credit in Other Comprehensive Income under the heading “Other comprehensive income” within equity. When these investments are disposed of or become impaired, the cumulative gains or losses previously recognized in Other Comprehensive Income are transferred to the Consolidated Statement of Income under “Net income from financial operations.” |
- | Held to maturity instruments portfolio: this category includes debt securities traded on an active market, with a fixed maturity, and with fixed or determinable payments, for which the Bank has both the intent and a proven ability to hold to maturity. Held to maturity investments are recorded at their amortized cost plus interest earned, less any impairment losses established when their carrying amount exceeds the present value of estimated future cash flows, using the effective interest method. |
- | Credit investments (loans and accounts receivable from customers or interbank loans): this category includes financing granted to third parties, based on their nature, regardless of the class of borrower and the form of financing. Includes loans and accounts receivable from customers, interbank loans, and financial lease transactions in which the Bank acts as lessor. Loans and receivable shall be measured at amortised cost using the effective interest method. |
Financial Statements 2012 / Banco Santander Chile 15 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
iii. | Classification of financial assets for presentation purposes |
Financial assets are classified by their nature into the following line items in the consolidated financial statements:
- | Cash and deposits in banks: This line includes cash balances, checking accounts and on-demand deposits with the Central Bank of Chile and other domestic and foreign financial institutions. |
- | Cash items in process of collection: This item includes the values of executed transactions which contractually defer the payment of purchase-sale transactions or the delivery of the foreign currency acquired. |
- | Trading investments: This item includes financial instruments held-for-trading and investments in mutual funds which must be adjusted to their fair value in the same way as instruments acquired for trading. |
- | Investment under resale agreements: This item includes the balances of purchase of financial instruments under resale agreements. |
- | Financial derivative contracts: Financial derivative contracts with positive fair values are presented in this item. It includes both independent contracts as well as derivatives that should and can be separated from a host contract, whether they are for trading or hedging, as shown in Note 8 to the Consolidated Financial Statements. |
- | Trading derivatives: Includes the fair value of derivatives which do not qualify for hedge accounting, including embedded derivatives separated from hybrid financial instruments. |
- | Hedging derivatives: Includes the fair value of derivatives designated as hedging instruments in hedge accounting, including the embedded derivatives separated from the hybrid financial instruments designated as hedging instruments in hedge accounting. |
- | Interbank loans: This item includes the balances of transactions with domestic and foreign banks, including the Central Bank of Chile, other than those reflected in the preceding items. |
- | Loans and accounts receivables from customers: These loans are non-derivative financial assets for which fixed or determined amounts are charged, that are not listed on an active market and which the Bank does not intend to sell immediately or in the short term. When the Bank is the lessor in a lease, and it substantially transfers the risks and benefits incidental to the leased asset, the transaction is presented in loans and accounts receivable from customers. |
- | Investment instruments: These are classified into two categories; held-to-maturity investments, and available-for-sale investments. The held-to-maturity investment category includes only those instruments for which the Bank has the ability and intent to hold them until their maturity. The remaining investments are treated as available for sale. |
iv. | Classification of financial liabilities for measurement purposes |
The financial liabilities are initially classified into the various categories used for management and measurement purposes.
Financial liabilities are included, for measurement purposes, in one of the following categories:
- | Financial liabilities held for trading (at fair value through profit or loss): financial liabilities issued to generate short-term profits from fluctuations in their prices, financial derivatives not deemed to qualify for hedge accounting and financial liabilities arising from firm commitment of financial assets purchased under repurchase agreements or borrowed (“short positions”). |
- | Financial liabilities at amortized cost: financial liabilities, regardless of their class and maturity, not included in any of the aforementioned categories which arise from the borrowing activities of financial institutions. |
Financial Statements 2012 / Banco Santander Chile 16 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
v. | Classification of financial liabilities for presentation purposes |
The financial liabilities are classified by their nature into the following line items in the consolidated statements of financial position:
- | Deposits and other demand liabilities This item includes all on-demand obligations except for term savings accounts, which are not considered on-demand instruments in view of their special characteristics. Obligations whose payment may be required during the period are deemed to be on-demand obligations. Operations which become callable the day after the closing date are not treated as on-demand obligations. |
- | Cash items in process of being cleared: This item includes the balances of asset purchases that are not settled on the same day and for sales of foreign currencies not delivered. |
- | Obligations under repurchase agreements: This item includes the balances of sales of financial instruments under repurchase and loan agreements. According to actual applicable regulation, the Bank does not record instruments acquired under repurchase agreements in its own portfolio. |
- | Time deposits and other demand liabilities: This item shows the balances of deposit transactions in which a term at the end of which they become callable has been stipulated. |
- | Financial derivative contracts: This item includes financial derivative contracts with negative fair values (i.e. against the Bank), whether they are for trading or hedge accounting, as set forth in Note 8. |
- | Trading derivatives: Includes the fair value of derivatives which do not qualify for hedge accounting, including embedded derivatives separated from hybrid financial instruments. |
- | Hedging derivatives: Includes the fair value of the derivatives designated as hedging instruments, including embedded derivatives separated from hybrid financial instruments and designated as hedging instruments. |
- | Interbank borrowings: This item includes obligations due to other domestic banks, foreign banks, or the Central Bank of Chile, which were not classified in any of the previous categories. |
- | Debt instruments issued: This encompasses three items; Obligations under letters of credit, Subordinated bonds and Senior bonds placed in the local and foreign market. |
- | Other financial liabilities: This item includes credit obligations to persons other than domestic banks, foreign banks, or the Central Bank of Chile, for financing purposes or operations in the normal course of business. |
h) | Valuation of financial assets and liabilities and recognition of fair value changes |
In general, financial assets and liabilities are initially recorded at fair value which, in the absence of evidence to the contrary, is deemed to be the transaction price. Financial instruments not measured at fair value through profit or loss includes transaction costs. Subsequently, and at the end of each reporting period, they are measured pursuant to the following criteria:
i. | Valuation of financial assets |
Financial assets are measured according to their fair value, gross of any transaction costs that may be incurred for their sale, except for loans and accounts receivable.
The “fair value” of a financial instrument on a given date is the amount for which it could be bought or sold on that date between knowledgeable, willing parties in an arm’s length transaction. The most objective and common reference for the fair value of a financial instrument is the price that would be paid on an active, transparent, and deep market (“quoted price” or “market price”).
Financial Statements 2012 / Banco Santander Chile 17 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
If there is no market price for a given financial instrument, its fair value is estimated based on the price established in recent transactions involving similar instruments and, in the absence thereof, of valuation techniques commonly used by the international financial community, considering the specific features of the instrument to be valued and, particularly, the various classes of risk associated with it.
All derivatives are recorded in the Consolidated Statements of Financial Position at the fair value from their trade date. If their fair value is positive, they are recorded as an asset, and if their fair value is negative, they are recorded as a liability. The fair value on the trade date is deemed, in the absence of evidence to the contrary, to be the transaction price. The changes in fair value of derivatives from the trade date are recorded in “Net income from financial operations” in the Consolidated Statement of Income.
Specifically, the fair value of financial derivatives included in the portfolios of financial assets or liabilities held for trading is deemed to be their daily quoted price. If, for exceptional reasons, the quoted price cannot be determined on a given date, the fair value is determined by using similar methods to those used to measure over the counter (OTC) derivatives. The fair value of OTC derivatives is the sum of the future cash flows resulting from the instrument, discounted to present value at the date of valuation (“present value” or “theoretical close”) using valuation techniques commonly used by the financial markets: “net present value” (NPV) and option pricing models, among other methods. In addition, the Credit Valuation Adjustment or CVA is included within the fair value of derivative instruments, so that the fair value of each instrument includes the credit risk of its counterpart.
“Loans and accounts receivable from customers” and “Held-to-maturity investments” are measured at amortized cost using the “effective interest method.” “Amortized cost” is the acquisition cost of a financial asset or liability, plus or minus, as appropriate, prepayments of principal and the cumulative amortization (recorded in the consolidated income statement) of the difference between the initial cost and the maturity amount as calculated under the effective interest method. For financial assets, amortized cost also includes any reductions for impairment or uncollectibility. For loans and accounts receivable designated as hedged items in fair value hedges, the changes in their fair value related to the risk or risks being hedged is recorded in “Net income from financial operations”.
The “effective interest rate” is the discount rate that exactly matches the initial amount of a financial instrument to all its estimated cash flows over its remaining life. For fixed-rate financial instruments, the effective interest rate coincides with the contractual interest rate established on the acquisition date plus, where applicable, the fees and transaction costs that, because of their nature, are a part of the financial return. For floating-rate financial instruments, the effective interest rate coincides with the rate of return prevailing until the next benchmark interest reset date.
Equity instruments whose fair value cannot be determined in a sufficiently objective manner and financial derivatives that have those instruments as their underlying assets and are settled by delivery of those instruments are measured at acquisition cost, adjusted, where appropriate, by any related impairment loss.
The amounts at which the financial assets are recorded represent, in all material respects, the Bank’s maximum exposure to credit risk at each reporting date. The Bank has also received collateral and other credit enhancements to mitigate its exposure to credit risk, which consist mainly of mortgage guarantees, equity instruments and personal securities, assets leased out under leasing and rental agreements, assets acquired under repurchase agreements, securities loans and derivatives.
ii. | Valuation of financial liabilities |
In general, financial liabilities are measured at amortized cost, as defined above, except for those financial liabilities designated as hedged items or hedging instruments and financial liabilities held for trading, which are measured at fair value.
Financial Statements 2012 / Banco Santander Chile 18 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
iii. | Valuation techniques |
Financial instruments at fair value, determined on the basis of price quotations in active markets, include government debt securities, private sector debt securities, equity shares, short positions, and fixed-income securities issued.
In cases where price quotations cannot be observed, the Management makes its best estimate of the price that the market would set using its own internal models. In most cases, these models use data based on observable market parameters as significant inputs and, in very specific cases, they use significant inputs not observable in market data. Various techniques are employed to make these estimates, including the extrapolation of observable market data.
The best evidence of the fair value of a financial instrument on initial recognition is the transaction price, unless the value of the instrument can be obtained from other market transactions performed with the same or similar instruments or can be measured by using a valuation technique in which the variables used include only observable market data, mainly interest rates.
The main techniques used as of December 31, 2012 and 2011 by the Bank’s internal models to determine the fair value of the financial instruments are as follows:
i. | In the valuation of financial instruments permitting static hedging (mainly “forwards” and “swaps”), the “present value” method is used. Estimated future cash flows are discounted using the interest rate curves of the related currencies. The interest rate curves are generally observable market data. |
ii. | In the valuation of financial instruments requiring dynamic hedging (mainly structured options and other structured instruments), the Black-Scholes model is normally used. Where appropriate, observable market inputs are used to obtain factors such as the bid-offer spread, exchange rates, volatility, correlation indexes and market liquidity. |
iii. | In the valuation of certain financial instruments exposed to interest rate risk, such as interest rate futures, caps and floors, the present value method (futures) and the Black-Scholes model (plain vanilla options) are used. The main inputs used in these models are observable market data, including the related interest rate curves, volatilities, correlations and exchange rates. |
The fair value of the financial instruments arising from the aforementioned internal models considers contractual terms and observable market data, which include interest rates, credit risk, exchange rates, quoted market price of shares, volatility and prepayments, among others. The valuation models are not significantly subjective, since these methodologies can be adjusted and evaluated, as appropriate, through the internal calculation of fair value and the subsequent comparison with the related actively traded price.
iv. | Recording results |
As a general rule, changes in the carrying amount of financial assets and liabilities are recorded in the Consolidated Statement of Income, distinguishing between those arising from the accrual of interest, which are recorded under interest income or interest expense as appropriate, and those arising for other reasons, which are recorded at their net amount under “Net income from financial operations”.
In the case of trading investments, the fair value adjustments, interest income, indexation adjustment and foreign exchange, are included in the Consolidated Statement of Income under “Net income from financial operations.”
Adjustments due to changes in fair value from:
- | “Available-for-sale instruments” are recorded in Other Comprehensive Income and accumulated under the heading “Other comprehensive income” within Equity. |
- | When the AFS instruments are disposed of or are determined to be impaired, the cumulative gain or loss previously accumulated as “Other comprehensive income” is reclassified to the Consolidated Statement of Income. |
Financial Statements 2012 / Banco Santander Chile 19 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
v. | Hedging transactions |
The Bank uses financial derivatives for the following purposes:
i. | to sell to customers who request these instruments in the management of their market and credit risks, |
ii. | to use these derivatives in the management of the risks of the Bank entities’ own positions and assets and liabilities (“hedging derivatives”), and |
iii. | to obtain profits from changes in the price of these derivatives (“trading derivatives”). |
All financial derivatives that do not qualify for hedge accounting are accounted for as “trading derivatives.”
A derivative qualifies for hedge accounting if all the following conditions are met:
1) | The derivative hedges one of the following three types of exposure: |
a) | Changes in the value of assets and liabilities due to fluctuations, among others, in the interest rate and/or exchange rate to which the position or balance to be hedged is subject (“fair value hedge”); |
b) | Changes in the estimated cash flows arising from financial assets and liabilities, commitments and highly probable forecasted transactions (“cash flow hedge”); |
c) | The net investment in a foreign operation (“hedge of a net investment in a foreign operation”). |
2) | It is effective in offsetting exposure inherent in the hedged item or position throughout the expected term of the hedge, which means that: |
a) | At the date of arrangement the hedge is expected, under normal conditions, to be highly effective (“prospective effectiveness”). |
b) | There is sufficient evidence that the hedge was actually effective during the life of the hedged item or position (“retrospective effectiveness”). |
3) | There must be adequate documentation evidencing the specific designation of the financial derivative to hedge certain balances or transactions and how this effective hedge was expected to be achieved and measured, provided that this is consistent with the Bank’s management of own risks. |
The changes in the value of financial instruments qualifying for hedge accounting are recorded as follows:
a) | In fair value hedges, the gains or losses arising on both hedging instruments and the hedged items (attributable to the type of risk being hedged) are recorded directly in the Consolidated Statement of Income. |
b) | In fair value hedges of interest rate risk on a portfolio of financial instruments, gains or losses that arise in measuring hedging instruments are recorded directly in the Consolidated Statement of Income, whereas gains or losses due to changes in fair value of the hedged item (attributable to the hedged risk) are recorded in the Consolidated Statement of Income with an offset to “Net income from financial operations”. |
c) | In cash flow hedges, the effective portion of the change in value of the hedging instrument is recorded in Other Comprehensive Income under the heading “Cash flow hedge” within equity component “Other comprehensive income”, until the hedged transaction occurs, thereafter being recorded in the Consolidated Statement of Income, unless the hedged transaction results in the recognition of non–financial assets or liabilities, in which case it is included in the cost of the non-financial asset or liability. |
d) | The differences in valuation of the hedging instrument corresponding to the ineffective portion of the cash flow hedging transactions are recorded directly in the Consolidated Statement of Income under “Net Income from financial operations”. |
Financial Statements 2012 / Banco Santander Chile 20 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
If a derivative designated as a hedging instrument no longer meets the requirements described above due to expiration, ineffectiveness or for any other reason, the derivative is classified as a “trading derivative.” When “fair value hedging” is discontinued, the fair value adjustments to the carrying amount of the hedged item arising from the hedged risk are amortized to gain or loss from that date.
When cash flow hedges are discontinued, any cumulative gain or loss of the hedging instrument recognized in other comprehensive income under “Other comprehensive income” (from the period when the hedge was effective) remains recorded in equity until the hedged transaction occurs, at which time it is recorded in the Consolidated Statement of Income, unless the transaction is no longer expected to occur, in which case any cumulative profit or loss is recorded immediately in the Consolidated Statement of Income.
i. | Derivatives embedded in hybrid financial instruments |
Derivatives embedded in other financial instruments or in other host contracts are accounted for separately as derivatives if their risks and characteristics are not closely related to those of the host contracts, provided that the host contracts are not classified as “Other financial assets (liabilities) at fair value through profit or loss” or as “Portfolio of trading investments.”
ii. | Offsetting of financial instruments |
Financial asset and liability balances are offset, i.e., reported in the Consolidated Statements of Financial Position at their net amount, only if there is a legally enforceable right to offset the recorded amounts and the Banks intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
iii. | Derecognition of financial assets and liabilities |
The accounting treatment of transfers of financial assets depends on the extent and the manner in which the risks and rewards associated with the transferred assets are transferred to third parties:
i. | If the Bank transfers substantially all the risks and rewards of ownership to third parties, as in the case of unconditional sales of financial assets, sales under repurchase agreements at fair value at the date of repurchase, sales of financial assets with a purchased call option or written put option deeply out of the money, utilization of assets in which the trasferor does not retain subordinated debt nor grants any credit enhancement to the new holders, and other similar cases, the transferred financial asset is removed from the Consolidated Statements of Financial Position and any rights or obligations retained or created in the transfer are simultaneously recorded. |
ii. | If the Bank retains substantially all the risks and rewards of ownership associated with the transferred financial asset, as in the case of sales of financial assets under repurchase agreements at a fixed price or at the sale price plus interest, securities lending agreements under which the borrower undertakes to return the same or similar assets, and other similar cases, the transferred financial asset is not derecognized from the Consolidated Statements of Financial Position and continues to be measured by the same criteria as those used before the transfer. However, the following items are recorded: |
- | An associated financial liability for an amount equal to the consideration received; this liability is subsequently measured at amortized cost. |
- | Both the income from the transferred (but not removed) financial asset as well as any expenses incurred on the new financial liability. |
iii. | If the Bank neither transfers nor substantially retains all the risks and rewards of ownership associated with the transferred financial asset—as in the case of sales of financial assets with a purchased call option or written put option that is not deeply in or out of the money, securitization of assets in which the transferor retains a subordinated debt or other type of credit enhancement for a portion of the transferred asset, and other similar cases—the following distinction is made: |
Financial Statements 2012 / Banco Santander Chile 21 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
1. | If the transferor does not retain control of the transferred financial asset: the asset is removed from the Consolidated Statements of Financial Position and any rights or obligations retained or created in the transfer are recorded. |
2. | If the transferor retains control of the transferred financial asset: it continues to be recorded in the Consolidated Statements of Financial Position for an amount equal to its exposure to changes in value and a financial liability associated with the transferred financial asset is recorded. The net carrying amount of the transferred asset and the associated liability is the amortized cost of the rights and obligations retained, if the transferred asset is measured at amortized cost, or the fair value of the rights and obligations retained, if the transferred asset is measured at fair value. |
Accordingly, financial assets are only removed from the Consolidated Statements of Financial Position when the rights over the cash flows they generate have terminated or when all the inherent risks and rewards of ownership have been substantially transferred to third parties. Similarly, financial liabilities are only derecognized from the Consolidated Statements of Financial Position when the obligations specified in the contract are discharged or cancelled or the contract has matured.
i) | Recognizing income and expenses |
The most significant criteria used by the Bank to recognize its revenues and expenses are summarized as follows:
i. | Interest revenue, interest expense, and similar items |
Interest revenue and expense are recorded on an accrual basis using the effective interest method.
However, when a given operation or transaction is past due by 90 days or more, when it originated from a refinancing or renegotiation, or when the Bank believes that the debtor poses a high risk of default, the interest and adjustments pertaining to these transactions are not recorded directly in the Consolidated Statement of Income unless they have been actually received.
These interest and adjustments balances are generally referred to as “suspended” and are recorded in suspense accounts which are not part of the Consolidated Statements of Financial Position, instead they are reported as part of the complementary information thereto (Note 28). This interest is recognized as income, when collected, as a reversal of the related impairment losses.
The interest income arising from “transactions with suspended interest accruals” are recorded as income when those operations become “current transactions” (ie. transactions with less than 90 days of default, after payment) or when they are no longer classified as C3, C4, C5 or C6 (for individual evaluation).
Dividends received from companies classified as “Investments in other companies” are recorded as income when the right to receive them arises.
ii. | Commissions, fees, and similar items |
Fee and commission income and expenses are recognized in the Consolidated Statement of Income using criteria that vary according to their nature. The main criteria are:
- | Fee and commission income and expenses relating to financial assets and liabilities measured at fair value through profit or loss are recognized when they are paid. |
- | Those arising from transactions or services that are performed over a period of time are recognized over the life of these transactions or services. |
- | Those relating to services provided in a single act are recognized when the single act is performed. |
iii. | Non-financial income and expenses |
These are recognized for accounting purposes on an accrual basis.
Financial Statements 2012 / Banco Santander Chile 22 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
iv. | Loan arrangement fees |
Fees that arise as a result of the origination of a loan, mainly application and analysis-related fees, are accrued and recorded in the Consolidated Statement of Income over the term of the loan.
Regarding fees arising as a result of new products, the Bank immediately records within the Consolidated Statements of Income the portion that corresponds to direct costs related to loan origination.
j) | Impairment |
i. | Financial assets: |
A financial asset, other than that a fair value through profit and loss, is evaluated on each financial statement reporting date to determine whether objective evidence of impairment exists.
A financial asset or group of financial assets will be impaired if, and only if, objective evidence of impairment exists as a result of one or more events that occurred after initial recognition of the asset (“event causing the loss”), and this event or events have an impact on the estimated future cash flows of a financial asset or group of financial assets.
An impairment loss relating to financial assets recorded at amortized cost is calculated as the difference between the carrying amount of the asset and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
An impairment loss relating to a financial asset available for sale is calculated based on a significant or prolonged decline in its fair value.
Individually significant financial assets are individually tested to determine their impairment. The remaining financial assets are evaluated collectively in groups that share similar credit risk characteristics.
All impairment losses are recorded in income. Any cumulative loss relating to a financial asset available for sale previously recorded in equity is transferred to profit or loss.
The reversal of an impairment loss occurs only if it can be objectively related to an event occurring after the initial impairment loss was recorded.
ii. | Non-financial assets: |
The Bank’s non-financial assets, excluding investment properties, are reviewed at reporting date to determine whether they show signs of impairment (i.e. its carrying amount exceeds its recoverable amount). If such evidence exists, the amount to be recovered from the assets is then estimated.
In connection with other assets, impairment losses recorded in prior periods are assessed at each reporting date in search of any indication that the loss has decreased or disappeared and should be reversed. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years
k) | Property, plant, and equipment |
This category includes buildings, land, furniture, vehicles, computer hardware and other fixtures owned by the consolidated entities or acquired under finance leases. Assets are classified according to their use as follows:
Financial Statements 2012 / Banco Santander Chile 23 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
i. | Property, plant and equipment for own use |
Property, plant and equipment for own use (including, among other things, tangible assets received by the consolidated entities in full or partial satisfaction of financial assets representing accounts receivable from third parties which are intended to be held for continuing own use and tangible assets acquired under finance leases) are accounted at acquisition cost less the related accumulated depreciation and, if applicable, any impairment losses (net carrying amount higher than recoverable amount).
Depreciation is calculated using the straight line method over the acquisition cost of assets less their residual value, assuming that the land on which buildings and other structures stand has an indefinite life and, therefore, is not subject to depreciation.
The Bank must apply the following useful lives for the tangible assets that comprise its assets:
ITEM | Useful Life (Months) | |||
Land | - | |||
Paintings and works of art | - | |||
Assets retired for disposal | - | |||
Carpets and curtains | 36 | |||
Computers and hardware | 36 | |||
Vehicles | 36 | |||
Computational systems and software | 36 | |||
ATM’s | 60 | |||
Machines and equipment in general | 60 | |||
Office furniture | 60 | |||
Telephone and communication systems | 60 | |||
Security systems | 60 | |||
Rights over telephone lines | 60 | |||
Air conditioning systems | 84 | |||
Installations in general | 120 | |||
Security systems (acquisitions up to October 2002) | 120 | |||
Buildings | 1200 |
The consolidated entities assess at each reporting date whether there is any indication that the carrying amount of any of their tangible assets’ exceeds its recoverable amount. If this is the case, the carrying amount of the asset is reduced to its recoverable amount and future depreciation charges are adjusted in proportion to the revised carrying amount and to the new remaining useful life, if the useful life needs to be revised.
Similarly, if there is an indication of a recovery in the value of a tangible asset, the consolidated entities record the reversal of the impairment loss recorded in prior periods and adjust the future depreciation charges accordingly. In no circumstance may the reversal of an impairment loss on an asset increase its carrying amount above the one it would have had if no impairment losses had been recorded in prior years.
The estimated useful lives of the items of property, plant and equipment held for own use are reviewed at least at the end of each reporting period to detect significant changes therein. If changes are detected, the useful lives of the assets are adjusted by correcting the depreciation charge to be recorded in the Consolidated Statement of Income in future years on the basis of the new useful lives.
Maintenance expenses relating to tangible assets (property, plant and equipment) held for own use are recorded as an expense in the period in which they are incurred.
Financial Statements 2012 / Banco Santander Chile 24 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
ii. | Assets leased out under operating leases |
The criteria used to record the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their respective estimated useful lives, and to record the impairment losses thereof, are consistent with those described in relation to property, plant and equipment held for own use.
l) | Leasing |
i. | Finance leases |
Finance leases are leases that substantially transfer all the risks and rewards incidental to ownership of the leased asset to the lessee.
When the consolidated entities act as the lessor of an asset, the sum of the present value of the lease payments receivable from the lessee plus the guaranteed residual value, which is generally the exercise price of the lessee’s purchase option at the end of the lease term, is recognized as loans to third parties and is therefore included under “Loans and accounts receivable from customers” in the Consolidated Statements of Financial Position.
When the consolidated entities act as lessees, they show the cost of the leased assets in the Consolidated Statements of Financial Position based on the nature of the leased asset, and simultaneously record a liability for the same amount (which is the lower of the fair value of the leased asset and the sum of the present value of the lease payments payable to the lessor plus, if appropriate, the exercise of the purchase option). The depreciation policy for these assets is consistent with that for property, plant and equipment for own use.
In both cases, the finance income and finance expenses arising from these contracts are credited and debited, respectively, to “Interest income” and “Interest expense” in the Consolidated Statement of Income so as to achieve a constant rate of return over the lease term.
ii. | Operating leases |
In operating leases, ownership of the leased asset and substantially all the risks and rewards incidental thereto remain with the lessor.
When the consolidated entities act as the lessor, they present the acquisition cost of the leased assets under “Property, plant and equipment”. The depreciation policy for these assets is consistent with that for similar items of property, plant and equipment held for own use and revenues from operating leases is recorded on a straight line basis under “Other operating income” in the Consolidated Statement of Income.
When the consolidated entities act as the lessees, the lease expenses, including any incentives granted by the lessor, are charged on a straight line basis to “Administrative expenses” in the Consolidated Statement of Income.
iii. | Sale and leaseback transactions |
For sale at fair value and operating leasebacks, the gain or loss generated is recorded at the time of sale. In the case of finance leasebacks, the gain or loss generated is amortized over the lease term.
m) | Factored receivables |
Factored receivables are valued at the amount disbursed by the Bank in exchange for invoices or other commercial instruments representing the credit which the transferor assigns to the Bank. The price difference between the amounts disbursed and the actual face value of the credits is recorded as interest income in the Consolidated Statement of Income through the effective interest method over the financing period.
When the assignment of these instruments involves no liability for the assignee, the Bank assumes the risks of insolvency of the parties responsible for payment.
Financial Statements 2012 / Banco Santander Chile 25 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
n) | Intangible assets |
Intangible assets are identified as non-monetary assets (separately identifiable from other assets) without physical substance which arise as a result of a legal transaction (contractual terms) or are developed internally by the consolidated entities. They are assets whose cost can be estimated reliably and from which the consolidated entities have control and consider it probable that future economic benefits will be generated.
Intangible assets are recorded initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortization and any accumulated impairment losses.
Internally developed computer software
Internally developed computer software is recorded as an intangible asset if, among other requirements (basically the Bank’s ability to use or sell it), it can be identified and its ability to generate future economic benefits can be demonstrated. The estimated useful life for software is 3 years.
Intangible assets are amortized on a straight-line basis over their estimated useful life; which has been defined as 36 months.
Expenditure on research activities is recorded as an expense in the year in which it is incurred and cannot be subsequently capitalized.
o) | Cash and cash equivalents |
For the preparation of the cash flow statement, the indirect method was used, beginning with the Bank’s consolidated pre-tax income and incorporating non-cash transactions, as well as income and expenses associated with cash flows, which are classified as investment or financing activities.
For the preparation of the cash flow statement, the following items are considered:
i. | Cash flows: Inflows and outflows of cash and cash equivalents, such as deposits with the Central Bank of Chile, deposits in domestic banks, and deposits in foreign banks |
i. | Operating activities: Principal revenue-producing activities performed by banks and other activities that cannot be classified as investing or financing activities. |
ii. | Investing activities: The acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents. |
iii. | Financing activities: Activities that result in changes in the size and composition of the equity and liabilities that are not operating activities. |
p) | Provisions for loan losses |
The Bank records allowances for loan losses in accordance with its internal models. These internal models for rating and evaluating credit risk were approved by the Bank’s Board of Directors
The Bank has developed models to determine allowances for loan losses according to the type of portfolio or operations. Loans and accounts receivables from customers are divided into three categories:
i. | Consumer loans, |
ii. | Mortgage loans, and |
iii. | Commercial loans. |
The Bank performs an assessment of loans and account receivable from customers to determine their provision for loan losses in accordance with:
Financial Statements 2012 / Banco Santander Chile 26 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
- | Individual assessment - When the Bank assess as a debtor as individually significant, or when cannot be classified within a group of financial assets with similar credit risk characteristics, due to their size, complexity or level of exposure. |
- | Collectively assessment – A group assessment is relevant for analyzing a large number of operations with small individual balances from individuals or small-size companies. The Bank group debtors with similar credit risk characteristics giving to each group a default probability and recovery rate based on a historical analysis. |
The models used to determine credit risk provisions are described below:
i. | Allowances for individual evaluations |
An individual assessment of commercial debtors is necessary in accordance with the SBIF, in the case of companies which, due to their size, complexity or level of exposure, must be known and analyzed in detail.
The Bank assigns to each debtor and his contingent loans and credits a risk category, after assigning them to one of the following portfolio categories: Normal, Substandard and Default. The risk factors used are: industry or economic sector, owners or managers, financial situation and payment capacity, and payment behavior.
The portfolio categories and their definitions are as follows:
i. | Normal Portfolio includes debtors with a payment capacity that allows them to comply with their obligations and commitments and which is not likely to change, based on the current economic and financial situation. The classifications assigned to this portfolio are categories from A1 to A6. |
ii. | Substandard Portfolio includes debtors with financial difficulties or a significant deterioration of their payment capacity and about which there are reasonable doubts about the reimbursement of the capital and interest within the contractual terms. The classifications assigned to this portfolio are categories from B1 to B4. |
iii. | Default Portfolio includes debtors and their credits from which payment is considered remote since they show a deteriorated or null payment capacity, with signs of a possible bankruptcy,who required a forced debt restructuring or any debtor who has been in default for over 90 days in his payment of interest or capital, are included in this portfolio. The classifications assigned to this portfolio are categories from C1 to C6. |
Financial Statements 2012 / Banco Santander Chile 27 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
Normal and Substandard Compliance Portfolio
As part of individual assessment, the Bank classifies debtors into the following categories, assigning them a probability of non-performance (PNP) and severity (SEV), which result in the expected loss percentages.
Type of Portfolio | Debtor’s Category | Probability of Non- Performance (%) | Severity (%) | Expected Loss (%) | ||||||||||
A1 | 0.04 | 90.0 | 0.03600 | |||||||||||
A2 | 0.10 | 82.5 | 0.08250 | |||||||||||
Normal portfolio | A3 | 0.25 | 87.5 | 0.21875 | ||||||||||
A4 | 2.00 | 87.5 | 1.75000 | |||||||||||
A5 | 4.75 | 90.0 | 4.27500 | |||||||||||
A6 | 10.00 | 90.0 | 9.00000 | |||||||||||
B1 | 15.00 | 92.5 | 13.87500 | |||||||||||
Substandard Portfolio | B2 | 22.00 | 92.5 | 20.35000 | ||||||||||
B3 | 33.00 | 97.5 | 32.17500 | |||||||||||
B4 | 45.00 | 97.5 | 43.87500 |
At the beginning the Bank determines all credit exposure, which includes the accounting balances of loans and accounts receivable from customers plus contingent loans, minus any amount recovered through executing the guarantees. To the exposure amount thus determined is applied the respective expected loss percentages.
Default Portfolio
The provisions over default portfolio include determining, at first, the expected loss rate, deducting any amount to be recovered by guarantee execution and the present value of expected recoveries through collection actions, net of related expenses.
Once expected loss range is determined, the related allowance percentage is applied over the exposure amount, which includes loans plus contingent loans related to a debtor.
The allowance percentages applied are as follows:
Classification | Estimated range of loss | Allowance | ||||||
C1 | Up to 3% | 2 | % | |||||
C2 | More than 3% and up to 20% | 10 | % | |||||
C3 | More than 20% and up to 30% | 25 | % | |||||
C4 | More than 30% and up to 50% | 40 | % | |||||
C5 | More than 50% and up to 80% | 65 | % | |||||
C6 | More than 80% | 90 | % |
Financial Statements 2012 / Banco Santander Chile 28 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
ii. | Allowances for group evaluations |
The collective evaluation is relevant to address a large number of smaller balance loans related to individuals and small-size companies.
The levels of required allowances have been established by the Bank, in accordance with loan loss methodology by classifying and grouping the loan portfolio based on similar credit risk characteristic indicative of debtor’s ability to pay all amounts due according to the contractual terms. The Bank uses models based on debtors’ characteristics, payment history, due and default loans, among others.
The Bank uses methodologies to establish credit risk, based on internal models to estimate the allowances for the group-evaluated portfolio, which include non-individually commercial significant loans, mortgage and consumer loans (including installment loans, credit cards and overdraft lines). These methodologies allow us to independently identify the portfolio behavior and establish the provision required to cover losses arising during the year.
The customers are classified according to their internal and external characteristics, using customer-portfolio model to differentiate each portfolio’s risk, this is known as the allocation profile method.
The allocation profile method is based on a statistical construction model that establishes a relation through logistic regression between variables such as default, payment behavior outside the Bank, socio-demographic data, among others, and a response variable which determines the client’s risk, in this case is 90 or more delinquency days. Afterwards, common profiles are established and assigned a Probability of Non-Performance (PNP) and a recovery rate based on a historical analysis known as Severity (SEV).
Therefore, once the customers have been profiled and assigned a PNP and a SEV relating to the loan’s profile, the exposure at default (EXP) is calculated. This exposure includes the book value of the loans and accounts receivable from the customer, plus contingent loans, minus any amount that can be recovered by executing guarantees (for credits other than consumer loans).
Changes in accounting estimates
In 2012, and as a response to the ongoing improvement and monitoring process of the allowance models, the Bank updated its allowance model for consumer loans. Until June 2012, estimated loss rates were established by the historical behavior of charge-offs net of recoveries for each risk profile. This methodology only considered historical debt data for each specific profile and did not include the use of any other statistical information. Since June 2012, loss rate has been estimated as the product of the Probability of Non-Performance (PNP) and Severity (SEV); established according to the historical behavior of the profiles and based on a historical analysis properly supported. These changes had an effect on Consolidated Statement of Income for MCh$ 24,756. The effect of these improvements was considered as a change of estimate, according to International Accounting Standards No. 8 “Accounting Policies, Changes in Accounting Estimates and Errors”; therefore, the effect was reported on the Consolidated Statement for the year.
In 2011, the Bank recalibrated their models for mortgage and commercial loans provisions, which caused an effect over the profit and loss for MCh$ 16,258 and MCh$ 16,560, respectively. The effects of these improvements were accounted as a change of estimate according to the IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, and were recorded in the Consolidated Financial Statements for the year.
According to the Administration, it is impracticable to determine the effects of these changes in accounting estimate for future periods.
Financial Statements 2012 / Banco Santander Chile 29 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
iii. | Additional provisions |
According to the SBIF regulation, banks are allowed to establish provisions over the limits described above to protect themselves from the risk of non-predictable economic fluctuations that could affect the macroeconomic environment or a specific economic sector.
According to No. 10 of Chapter B-1 of Compendium of Accounting Regulations (SBIF), these provisions will be reported under liabilities as provisions for contingent loans.
iv. | Charge-offs |
As a general rule, charge-offs should be done when the contract rights over cash flow expire. In the case of loans and account receivable from customers, even if the above does not happen, the Bank will charged-off those amount in accordance with Title II of Chapter B-2 of the Compendium of Accounting Regulations (SBIF).
These charge-offs refer to derecognition from Consolidated Statements of Financial Position of the corresponding loans operations, therefore, includes a non past due portion of a loan in the case of installments loans or leasing operations (no partial charge-offs exists).
Charge-offs are always recorded under provision for loan losses in accordance with Chapter B-1 of the Compendium of Accounting Regulations (SBIF), no matter the cause of the charge-off. Subsequent payments obtained on charge-off amounts will be recognized in the Consolidated Statement of Income as Recovery of loan previously charge-off.
Loan and accounts receivable charge-offs are recorded on and the entire loan balance based on the past due deadlines presented below:
Type of loan | Term | |||
Consumer loans with or without real guarantees | 6 months | |||
Other transactions without real guarantees | 24 months | |||
Consumer loans with real guarantees | 36 months | |||
Mortgage loans | 48 months | |||
Consumer leasing | 6 months | |||
Other non-mortgage leasing transactions | 12 months | |||
Mortgage leasing (household and business) | 36 months |
Any renegotiation of an already charged-off loan will not give rise to income—as long as the operation is still impaired—and the effective payments received must be accounted for as recovery from loans previously charged off.
The renegotiated loans only shall recognized as an asset if it is no longer deteriorated, recognizing also the activation as loans previously charge-off.
v. | Recovery of loans previously charged off and accounts receivable from clients |
Recovery of previously charged off loans and accounts receivable from customers, are recorded in the Consolidated Statement of Income as a reduction of provision for loan losses.
Financial Statements 2012 / Banco Santander Chile 30 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
q) | Provisions, contingent assets, and contingent liabilities |
Provisions are liabilities of uncertain timing or amount. Provisions are recognized in the Consolidated Statements of Financial Position when the Bank:
i. | has a present obligation (legal or constructive) as a result of past events, and |
ii. | It is probable that an outflow of resources will be required to settle these obligations and the amount of these resources can be reliably measured. |
Contingent assets or contingent liabilities are any potential rights or obligations arising from past events whose existence will be confirmed only by occurrence or non-occurrence of one or more uncertain future events that are not wholly within control of the Bank.
The following are classified as contingent in the supplementary information:
i. | Guarantees and bonds: Encompasses guarantees, bonds, standby letters of credit and guarantees of payment from buyers in factored receivables. |
ii. | Confirmed foreign letters of credit: Encompasses letters of credit confirmed by the Bank. |
iii. | Documentary letters of credit: Includes documentary letters of credit issued by the Bank, which have not yet been negotiated. |
iv. | Documented guarantees: Guarantees with promissory notes. |
v. | Interbank guarantee: Guarantees issued. |
vi. | Unrestricted credit lines: The unused amount of credit lines that allow customers to draw without prior approval by the Bank (for example, using credit cards or overdrafts in checking accounts). |
vii. | Other credit commitments: Amounts not yet lent under committed loans, which must be disbursed at an agreed future date when events contractually agreed upon with the customer occur, such as in the case of lines of credit linked to the progress of a construction or similar projects. |
viii. | Other contingent credits: Includes any other kind of commitment by the Bank which may exist and give rise to lending when certain future events occur. In general, this includes unusual transactions such as pledges made to secure the payment of loans among third parties or derivative contracts made by third parties that may result in a payment obligation and are not covered by deposits. |
The consolidated annual accounts reflect all significant provisions for which it is estimated that the probability of having to meet the obligation is more likely than not.
Financial Statements 2012 / Banco Santander Chile 31 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
Provisions are quantified using the best available information on the consequences of the event giving rise to them and are reviewed and adjusted at the end of each year and are used to address the specific liabilities for which they were originally recognized. Partial or total reversals are recognised when such obligations cease to exist or are reduced.
Provisions are classified according to the obligation covered as follows:
- | Provision for employee salaries and expenses |
- | Provision for mandatory dividends |
- | Allowance for contingent credit risks |
- | Provisions for contingencies |
r) | Deferred income taxes and other deferred taxes |
The Bank records, when appropriate, deferred tax assets and liabilities for the estimated future tax effects attributable to differences between the carrying amount of assets and liabilities and their tax bases. The measurement of deferred tax assets and liabilities is based on the tax rate, according to the applicable tax laws, using the tax rate that applies to the period when the deferred asset and liability will be settled. The future effects of changes in tax legislation or tax rates are recorded in deferred taxes beginning on the date on which the law approving such changes is published.
s) | Use of estimates |
The preparation of the financial statements requires Management to make estimates and assumptions that affect the application of the accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates.
In certain cases, generally accepted accounting policies require that assets or liabilities be recorded or disclosed at their fair values. The fair value is the amount at which an asset could be exchanged, or a liability settled, between knowledgeable parties, in an arm’s length transaction. Where available, quoted market prices in active markets have been used as the basis for measurement. Where quoted market prices in active markets are not available, the Bank has estimated such values based on the best information available, including the use of modeling and other valuation techniques.
The Bank has established allowances to cover incurred losses in accordance with SBIF regulation, therefore, to estimate the allowances, they must be regularly evaluated taking into consideration factors such as changes in the nature and volume of the loan portfolio, trends in forecasted portfolio quality, credit quality and economic conditions that may adversely affect the borrowers’ payment capacity. Increases in the allowances for loan losses are reflected as “Provision for loan losses” in the Consolidated Statement of Income. Loans are charged-off when management determines that a loan or a portion thereof is uncollectible. Charge-offs are recorded as a reduction of the provisions for loan losses.
The relevant estimates and assumptions are regularly reviewed by the Bank’s Management to quantify certain assets, liabilities, revenues, expenses, and commitments. Revised accounting estimates are recorded in the period in which the estimate is revised and in any affected future period.
These estimates, made on the basis of the best available information, mainly refer to:
- | Impairment losses of certain assets (Notes 8, 9, 10 and 35) |
- | The useful lives of tangible and intangible assets (Notes 14, 15, and 35) |
- | The fair value of assets and liabilities (Notes 6, 7,8, 12, and 39) |
- | Commitments and contingencies (Note 24) |
- | Current and deferred taxes (Note 16) |
Financial Statements 2012 / Banco Santander Chile 32 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
t) | Non-current assets held for sale |
Non-current assets (or a group which includes assets and liabilities for disposal) expected to be recovered mainly through sales rather than through continued use, are classified as held for sale. Immediately prior to this classification, assets (or elements of a disposable group) are re-measured in accordance with the Bank’s policies. The assets (or disposal group) are measured at the lower of carrying amount or fair value minus cost of sales.
Any impairment loss on disposal is first allocated to goodwill and then to the remaining assets and liabilities on a pro rata basis, except no losses are recorded in financial assets, deferred assets, employee benefit plan assets, and investment property, which are still evaluated according to the Bank’s accounting policies. Impairment losses on the initial classification of held-for-sale assets, and profits and losses from the revaluation are recorded in income. Reversals of impairment losses are recorded to extent they do not result in a higher carrying amount than that originally recorded for “Non-current assets held for sale”.
As of December 31, 2012 and 2011, the Bank has not classified any non-current assets as held for sale.
Assets received or awarded in lieu of payment
Assets received or awarded in lieu of payment of loans and accounts receivable from customers are recognized, at the price agreed by the parties, or otherwise, when the parties do not reach an agreement, at the amount at which the Bank is awarded those assets at a judicial auction. In both cases, an independent assessment of the good’s market value is established on the basis of the state in which it was acquired.
If there is an excess on the Loans and accounts receivables from customers, compared to the fair value of the good received or awarded as payment, minus costs of sales, this is recorded in the Consolidated Financial Statement under “Other operational costs”.
These assets are subsequently measured at the lower of initially recorded amount or net realizable value, which corresponds to their fair value (liquidity value determined through an independent appraisal) less cost of sale.
At least once a year, the Bank performs the necessary analysis to update these assets’s cost to sale. According to the Banks survey, as of December 31, 2012, the average cost to sale (the cost of maintaining and selling the asset) was estimated at 4.5% of the appraised value. As of December 31, 2011 the average cost to sale used was at 5.2%.
In general, the Banks estimates that these assets will be disposed within one year since their awarding date. If those assets are not sold within that period, they will be charged-off in a single amount, in accordance with article No 84 of the General Banking Law.
u) | Earnings per share |
Basic earnings per share are determined by dividing the net income attributable to the Bank shareholders for the period by the weighted average number of shares outstanding during the period.
Diluted earnings per share are determined in the same way as basic earnings per share, but the weighted average number of outstanding shares is adjusted to take into account the potential diluting effect of stock options, warrants, and convertible debt.
As of December 31, 2012 and 2011 the Bank did not have any instruments that generated diluting effects.
v) | Temporary acquisition (assignment) of assets |
Purchases (sales) of financial assets under non-optional resale (repurchase) agreements at a fixed price (“repos”) are recorded in the Consolidated Statements of Financial based on the nature of the debtor (creditor) under “Deposits in the Central Bank of Chile,” “Deposits in financial institutions” or “Loans and accounts receivable from customers” (“Central Bank of Chile deposits,” “Deposits from financial institutions” or “Customer deposits”).
Differences between the purchase and sale prices are recorded as financial interest over the term of the contract.
Financial Statements 2012 / Banco Santander Chile 33 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
w) | Assets under management and investment funds managed by the Bank |
Assets owned by third parties and managed by certain companies that are within the Bank’s scope of consolidation (Santander Asset Management S.A., Administradora General de Fondos and Santander S.A. Sociedad Securitizadora), are not included in the Consolidated Statements of Financial Position. Management fees are included in “Fee and commission income” in the Consolidated Statement of Income.
x) | Provision for mandatory dividends |
As of December 2012 and 2011 the Bank recorded a provision for mandatory dividends. This provision is made pursuant to Article 79 of the Corporations Act, which is in accordance with the Bank’s internal policy. Under Article No 79 of the Corporations Act, at least 30% of net income for the period should be distributed, except in the case of a contrary resolution adopted at the respective shareholders’ meeting by unanimous vote of the outstanding shares. This provision is recorded, as a deduction, in “Retained earnings – Provisions for mandatory dividends” line of the Consolidated Statement of Changes in Equity.
y) | Employee benefits |
i. | Post-employment benefits – Defined benefit plans: |
According to current collective bargaining and other labor agreements, the Bank has undertaken to supplement the benefits granted by the public systems corresponding to certain employees and to their beneficial right holders, for retirement, permanent disability or death, outstanding salaries and compensations, contributions to pension funds for active employees and post-employment social benefits.
Features of the Plan:
The main features of the Post-Employment Benefits Plan sponsored by Grupo Santander Chile are:
a. | Aimed at the Group’s management |
b. | The general requisite to apply is that the employee must be carrying out his duties when turning 60 years old. |
c. | The Bank will take on insurance (pension fund) on the employee’s behalf, for which it will pay regularly the respective premium (contribution). |
d. | The Bank will be directly responsible for granting benefits. |
The Bank recognizes under line item “Provisions” in the Consolidated Statements of Financial Position (or in assets under “Other assets,” depending on the funded status of the plan) the present value of its post-employment defined benefit obligations, net of the fair value of the plan assets and of the net recognized cumulative actuarial gains or losses, disclosed in the valuation of these obligations, which are deferred using “corridor approach”, net of the past service cost, which is deferred over time as explained below.
“Plan assets” are defined as that will be used to settle the obligations and that meet the following requirements:
- | They are not owned by the consolidated entities, but by a legally separate third party not related to the Bank. |
- | They are available only to pay or fund post-employment benefits and cannot be returned to the consolidated entities except when the assets remaining in the plan are sufficient to meet all the obligations of the plan and of the entity in relation to the benefits due to current or former employees or to reimburse employee benefits already paid by the Bank. |
“Actuarial gains and losses” are defined as those arising from the differences between previous actuarial assumptions and what has actually occurred, and from changes in the actuarial assumptions used. For the plans, the Bank applies the “corridor approach” criterion, whereby it recognizes in the Consolidated Statement of Income, the amount resulting from dividing by five the higher of the net value of the accumulated actuarial gains and/or losses not recognized at the beginning of each period and exceeding 10% of the present value of the obligations or 10% of the fair value of the assets at the beginning of the period.
Financial Statements 2012 / Banco Santander Chile 34 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
“Past services cost” — which arise from changes made to existing post-employment benefits or from the introduction of new benefits — is recognized in the Consolidated Statement of Income on a straight line basis over the period beginning on the date on which the new commitments arose to the date on which the employee has an irrevocable right to receive the new benefits.
Post-employment benefits are recognized in the Consolidated Statement of Income as follows:
- | Current service cost, defined as the increase in the present value of the obligations arising as a consequence of the services provided by the employees during the period under the “Personnel salaries and expenses” item. |
- | Interest cost, defined as the increase in the present value of the obligations as a consequence of the passage of time which occurs during the period. When the obligations are shown in liabilities in the Consolidated Statements of Financial Position net of the plan assets, the cost of the liabilities recognized in the Consolidated Statement of Income runder “Personnel salaries and expenses” reflects exclusively the obligations recorded as liabilities. |
- | The expected return on the plan’s assets and the gains and losses on their value, less any cost arising from their management and the taxes to which they are subject. |
- | The actuarial gains and losses calculated using the corridor approach and the unrecognized past service cost, generally amendments made for benefits to be received for past services, are recorded under “Personnel salaries and expense” in the Consolidated Statement of Income under. |
- |
ii. | Severance Provision: |
Severance provisions for years of employment are recorded only when they actually occur or upon the availability of a formal and detailed plan in which the fundamental modifications to be made are identified, provided that such plan has already started to be implemented or its principal features have been publicly announced, or objective facts about its execution are known.
iii. | Share-based compensation: |
The allocation of equity instruments to executives of the Bank and its Subsidiaries as a form of compensation for their services, when those instruments are provided at the end of a specific period of employment, is recorded as an expense in the Consolidated Statement of Income under the “Personnel salaries and expenses” item, as the relevant executives provide their services over the course of the period.
These benefits do not generate diluting effects, since they are based on shares of Banco Santander S.A. (the parent company of Banco Santander Chile, headquartered in Spain).
z) | Reclassification of items. |
Banco Santander Chile has reclassified some items in the Financial Statements to provide relevant, reliable, comparable and understandable information.
These reclassifications have no significant impact on the current Consolidated Financial Statements.
Financial Statements 2012 / Banco Santander Chile 35 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
aa) | Application of new and revised accounting pronouncements |
i. | New and revised SBIF and IFRS standards effective in current year |
The following accounting pronouncements have been issued by SBIF and the IASB, which have been fully incorporated by the Bank and are detailed as follows:
1. | Accounting Regulations Issued by the SBIF |
In 2012, no Accounting Regulations Issued by the SBIF were issued.
2. | Accounting Regulations Issued by the International Accounting Standards Board |
Amendments to IAS 12: Deferred Tax – recovery of Underlying Assets - The amendments to IAS 12 provide an exemption to the general principle set out in IAS 12 Income Taxes that the measurements of deferred tax should reflect the manner in which an entity expects to recover the carrying amount of an asset. Specifically, the amendments establish a rebuttable presumption that the carrying amount of an investment property measured using the fair value model in IAS 40 Investment Property will be recovered entirely through sale. The amendments were issued in response to concerns that application of IAS 12’s general approach can be difficult or subjective for investment property measured at fair value because it may be that the entity intends to hold the asset for an indefinite or indeterminate period of time, during which it anticipates both rental income and capital appreciation.
Under the amendments, unless the presumption is rebutted, the measurement of the deferred tax liability or deferred tax asset is required to reflect the tax consequences of recovering the carrying amount of the investment property entirely through sale. The ‘sale’ presumption is rebutted if the investment property is depreciable and the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.
Following the application of the amendments, entities holding investment property accounted for using the fair value model in accordance with IAS 40 in jurisdictions where tax is not imposed on sale of the investment property will no longer recognize deferred tax on any temporary differences arising from fair value gains or losses (unless the presumption is rebutted). This is because there would be no tax consequences expected to arise from recovering the carrying amount entirely through sale, regardless of whether the entity intends to use the property to generate rental income for a period of time prior to sale. These modifications will be mandatorily applied for annual periods beginning on or after January 1, 2012. Early adoption is allowed. These amendments did not have any impact on our consolidated financial statements.
Amendments to IFRS 7 Disclosures – Transfers of Financial Assets – The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures of transactions where a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. These modifications will be mandatorily applied for annual periods beginning on or after July 1, 2011. Early adoption is allowed. Disclosures are not required for any of the periods presented starting before the initial application date of the modifications. These amendments did not have a material impact on our consolidated financial statements.
ii. | ii. New accounting regulations and instructions issued by the SBIF as well as by the IASB not enforced as of December 31, 2011 |
1. | Accounting Regulations Issued by the SBIF |
As of December 31, 2012 there are no new Accounting Regulations
Financial Statements 2012 / Banco Santander Chile 36 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
2. | Accounting Regulations Issued by the International Accounting Standards Board |
IFRS 9, Financial Instruments (as revised in 2010) – IFRS 9 (as originally issued in 2009) introduces new requirements for the classification and measurement of financial assets.
Under IFRS 9, all recognized financial assets that are currently within the scope of IAS 39 Financial Instruments: Recognition and Measurement will be subsequently measured at either amortized cost or fair value. A debt instrument that (i) is held within a business model whose objective is to collect the contractual cash flows and (ii) has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding are generally measured at amortized cost. All other debt instruments must be measured at fair value through profit or loss (FVTPL). A fair value option is available (provided that certain specified conditions are met) as an alternative to amortized cost measurement.
All equity investments within the scope of IAS 39 are to be measured in the statement of financial position at fair value, with the gains and losses recognized in profit or loss. If an equity investment is not held for trading, an irrevocable election can be made at initial recognition to measure the investment at fair value through other comprehensive income (FVTOCI), with only dividend income generally recognized in profit or loss.
In 2010, a revised version of IFRS 9 was issued. The revised version of IFRS 9 mainly adds the requirements for the classification and measurement of financial liabilities and derecognition requirements. One major change from IAS 39 relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the presentation of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in the fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as FVTPL is presented in profit or loss.
In December 2011, the IASB issued Amendments to IFRS 9 and IFRS 7. The amendments defer the mandatory effective date of IFRS 9 from January 1, 2013 to January 1, 2015, with early application permitted. The amendments also modify the transitional requirements from IAS 39 to IFRS 9.
At the date of publication of these financial statements, phases two and three of the financial instruments project, being the impairment of financial assets and hedge accounting phases respectively, are still a work in progress. The IASB is also considering limited improvements to IFRS 9 regarding the classification and measurement of financial instruments.
Early adoption is permitted. Management, pursuant to SBIF, will not adopt this regulation early. Moreover, it will not be applied until the SBIF establishes it as mandatory for all banks.
New and revised IFRSs on consolidation, joint arrangements, associates and disclosures
In 2011, the IASB issued a package of five standards on consolidation, joint arrangements, associates and disclosures, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011).
Each of the five standards is effective for annual periods beginning on or after January 1, 2013, with early application permitted. In general, if an entity wishes early application, it should apply all of the five standards early at the same time.
IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the part of IAS 27 Consolidated and Separate Financial Statements that deals with consolidated financial statements and SIC-12 Consolidation – Special Purpose Entities.
Headline changes brought about by IFRS 10 are as follows:
• | Under IFRS 10, there is only one basis for consolidation for all entities, and that basis is control. This change removes the perceived inconsistency between the previous version of IAS 27 and SIC-12 – the former used control concept whilst the latter placed greater emphasis on risk and rewards. |
Financial Statements 2012 / Banco Santander Chile 37 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
• | A more robust definition of control has been developed in IFRS 10 in order to address unintentional weaknesses of the definition of control set out in the previous version of IAS 27. The definition of control in IFRS 10 includes three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee; and (c) ability to use its power over the investee to affect the amount of the investor’s returns. |
- | IFRS 10 requires an investor to focus on activities that significantly affect the returns of an investee (‘relevant activities’) in assessing whether it has control over the investee (not merely financial and operating policies as set out in the previous version of IAS 27). |
- | IFRS 10 replaces the term ‘benefits’ with the term ‘returns’ so as to clarify that an investor’s returns could potentially be positive, negative or both. |
- | IFRS 10 makes it clear that there must be a linkage between ‘power’ and ‘returns from the investee’. |
- | IFRS 10 requires that, in assessing control, only substantive rights (i.e. rights that their holder has the practical ability to exercise) are considered. For a right to be substantive, the right needs to be currently exercisable at the time when decisions about the relevant activities need to be made. |
• | IFRS 10 adds application guidance to assist in assessing whether an investor controls an investee in complex scenarios, including: |
- | Application guidance on when an investor that has less than 50 percent of the voting rights of an investee has control over the investee (commonly referred to as ‘de facto control’). |
- | Application guidance on whether a decision maker is acting as a principal or an agent for another party. A decision maker that has decision-making authority over the relevant activities of an investee does not have control over the investee when it is merely an agent. |
- | Application guidance on when a particular set of assets and liabilities of an investee (i.e. a portion of an investee) can be deemed as a separate entity for the purposes of determining whether that portion is a subsidiary of the investor. IFRS 10 states that a portion of an investee is treated as a separate entity for consolidation purposes when that portion is economically ‘ring-fenced’ from the rest of the investee. |
IFRS 10 does not contain ‘bright lines’ as to when an investor should or should not consolidate an investee.
Overall, the application of IFRS 10 requires significant judgment on a number of aspects.
IFRS 10 requires investors to reassess whether or not they have control over their investees on transition to IFRS 10. In general, IFRS 10 requires retrospective application, with certain limited transitional provisions.
Regarding the requirements for the preparation of consolidated financial statements, most of the requirements have been moved unchanged from the previous version of IAS 27 to IFRS 10.
Management believes this new regulation will be adopted in the Bank’s Consolidated Financial Statements for the period beginning on January 1, 2013. Management is currently evaluating the possible impact this might have.
IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities—Non-Monetary Contributions by Venturers.
IFRS 11 deals with how a joint arrangement should be classified where two or more parties have joint control. There are two types of joint arrangements under IFRS 11: joint operations and joint ventures. These two types of joint arrangements are distinguished by parties’ rights and obligations under the arrangements.
Financial Statements 2012 / Banco Santander Chile 38 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
Type of joint arrangement | Features | Accounting under IFRS 11 | ||
Joint venture | Joint venturers have rights to the net assets of the arrangement. | Equity method of accounting – proportionate consolidation is not allowed. | ||
Joint operation | Joint operators have rights to the assets and obligations for the liabilities of the arrangement. | Each joint operator recognizes its share of the assets, liabilities, revenues and expenses. |
Under IFRS 11, the existence of a separate vehicle is no longer a sufficient condition for a joint arrangement to be classified as a joint venture whereas, under ISA 31, the establishment of a separate legal vehicle is the key factor in determining the existence of a jointly controlled entity.
Therefore, upon application of IFRS 11, the following change may occur:
IAS 31 | IFRS 11 | |||
Jointly controlled entity accounted for using equity method | Joint operation | |||
Jointly controlled entity accounted for using proportionate consolidation | Joint venture (must be accounted for using the equity method of accounting) |
IFRS 11 requires retrospective application with specific transitional provisions.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates or unconsolidated structured entities.
IFRS 12 establishes disclosure objectives and specifies minimum disclosures that entities must provide to meet those objectives. The objective of IFRS 12 is that an entity should disclose information that helps users of financial statements evaluate the nature of, and risks associated with, its interests in other entities and the effects of those interests on its financial statements.
The disclosure requirements set out in IFRS 12 are more extensive than those in the current standards.
Management believes this new regulation will be adopted in the Bank’s Consolidated Financial Statements for the period beginning on January 1, 2013. Management is currently evaluating the possible impact this might have.
Amendments to IFRS 10, IFRS 11 and IFRS 12 Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance
The amendments clarify certain transitional guidance on the application of IFRS 10, IFRS 11 and IFRS 12 for the first time. The major clarifications are as follows:
• | The amendments explain that the ‘date of initial application’ of IFRS 10 means the beginning of the annual period in which IFRS 10 is applied for the first time. |
• | The amendments clarify how a reporting entity should adjust comparative period(s) retrospectively if the consolidation conclusion reached at the date of initial application under IFRS 10 is different from that under IAS 27/SIC-12. |
• | When the control over an investee was lost during the comparative period (e.g. as a result of a disposal), the amendments confirm there is no need to adjust the comparative figures retrospectively (even though a different consolidation conclusion might have been reached under IAS 27/SIC-12 and IFRS 10). |
Financial Statements 2012 / Banco Santander Chile 39 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
• | When a reporting entity concludes, on the basis of the requirements of IFRS 10, that it should consolidate an investee that was not previously consolidated, IFRS 10 requires the entity to apply acquisition accounting in accordance with IFRS 3 Business Combinations to measure assets, liabilities and non-controlling interests of the investee at the date when the entity obtained control of the investee (based on the requirements of IFRS 19). The amendments clarify which version of IFRS 3 should be used in different scenarios. |
• | The amendments provide additional transitional relief by limiting the requirement to present adjusted comparative information to the period immediately before the date of initial application. They also eliminate the requirements to present comparative information for disclosures related to unconsolidated structured entities for any period before the first annual period in which IFRS 12 is applied. |
• | The effective date of the amendments is the same as the effective date of IFRS 10, IFRS 11 and IFRS 12 (January 1, 2013). |
Management believes this new regulation will be adopted in the Bank’s Consolidated Financial Statements for the period beginning on January 1, 2013. Management is currently evaluating the possible impact this might have.
IAS 27 (2011), Separate Financial Statements - IAS 27 Consolidated and Separate Financial Statements was modified by IFRS 10 but keeps the current guidelines for separate financial statements. Management believes that this new standard will be adopted in its financial statements for the period beginning January 1, 2013, but would not lead to any changes as the Bank presents consolidated financial statements.
IAS 28 (2011), Investments in Associates and Joint Ventures – IAS 28 Investments in Associates was modified to comply with changes related to the issuance of IFRS 10 and IFRS 11. Management is currently evaluating the possible impact this amendment will have on the Bank’s financial statements.
IFRS 13, Fair Value Measurement – IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. IFRS 13 does not change the requirements regarding which items should be measured or disclosed at fair value.
IFRS 13 defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are more extensive than those required by the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under IFRS 7 Financial Instruments: Disclosures will be extended by IFRS 13 to cover all assets and liabilities within its scope.
IFRS 13 is effective for annual periods beginning on or after January 1, 2013 with earlier application permitted. IFRS 13 should be applied prospectively as of the beginning of the annual period in which it is initially applied. The disclosure requirements of IFRS 13 need not be applied in comparative information provided for periods before initial application of the Standard. Management is currently evaluating the potential impact this amendment will have on the Bank’s financial statements.
Amendment to IAS 1, Presentation of Items of Other Comprehensive Income – The amendments to IAS 1 introduce new terminology for the statement of comprehensive income and income statement. Under the amendments to IAS 1, the statement of comprehensive income is renamed as a statement of profit or loss and other comprehensive income and the income statement is renamed as a statement of profit or loss. The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis—the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. Management is currently evaluating the potential impact this amendment will have on the Bank’s financial statements.
Financial Statements 2012 / Banco Santander Chile 40 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 01
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
Amendment to IAS 19, Employee Benefits – The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognized immediately through other comprehensive income in order for the net pension asset or liability recognized in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus.
Another significant change to IAS 19 relates to the presentation of changes in defined benefit obligations and plan assets with changes being split into three components:
• | Service cost – recognized in profit or loss and includes current and past service cost as well as gains or losses on settlements. |
• | Net interest – recognized in profit or loss and calculated by applying the discount rate at the beginning of the reporting period to the net defined benefit liability or asset at the beginning of each reporting period. |
• | Remeasurement – recognized in other comprehensive income and comprises actuarial gains and losses on the defined benefit obligation, the excess of the actual return on plan assets over the change in plan assets due to the passage of time and the changes, if any, due to the impact of the asset ceiling. |
As a result, the profit or loss will no longer include an expected return on plan assets; instead, imputed finance income is calculated on the plan assets and is recognized as part of the net interest cost in profit or loss. Any actual return above or below the imputed finance income on plan assets is recognized as part of remeasurement in other comprehensive income.
The amendments to IAS 19 are effective for annual periods beginning on or after January 1, 2013 and require retrospective application with certain exceptions. Management is currently evaluating the potential impact this amendment will have on the Bank’s financial statements.
Amendment to IAS 32 and IFRS 7, Offsetting Financial Assets and Financial Liabilities and the related disclosures – The amendments to IAS 32 clarify existing application issues relating to the offsetting requirements. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realization and settlement’. The amendments to IAS 32 are effective for annual periods beginning on or after January 1, 2014, with retrospective application required. Management believes this new regulation will be adopted in the Bank’s Consolidated Financial Statements for the period beginning on January 1, 2013. Management is currently evaluating the possible impact this might have.
The amendments to IFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement. The amendments to IFRS 7 are required for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The disclosures should be provided retrospectively for all comparative periods. Management believes this new regulation will be adopted in the Bank’s Consolidated Financial Statements for the period beginning on January 1, 2013. Management is currently evaluating the possible impact this might have.
IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine – IFRIC 20 applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (‘production stripping costs’). Under the interpretation, the costs from this waste removal activity (‘stripping’) which provide improved access to ore is recognized as a non-current asset (‘stripping activity asset’) when certain criteria are met, whereas the costs of normal ongoing operational stripping activities are accounted for in accordance with IAS 2 Inventories. The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset, and classified as tangible or intangible according to the nature of the existing asset of which it forms a part.
The interpretation is effective for annual periods beginning on or after January 1, 2013. An entity should apply this interpretation to production stripping costs incurred on or after the beginning of the earliest period presented, with certain transitional provisions. Management believes this new interpretation will have no impact on our financial statements since our business activities do not consider the mining of natural resources.
Financial Statements 2012 / Banco Santander Chile 41 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 02
ACCOUNTING CHANGES
As of December 31, 2012, there are no accounting changes from previous year to be disclosed.
Financial Statements 2012 / Banco Santander Chile 42 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 03
SIGNIFICANT EVENTS
As of December 31, 2012, the following significant events have occurred and had an impact on the Bank’s operations or the financial statements:
a) | The Board |
A Shareholders’ Meeting of Banco Santander Chile was held on April 24, 2011, chaired by Mr. Mauricio Larraín Garcés (Chairman), and attended by Jesús María Zabalza Lotina (First Vice President), Oscar von Chrismar Carvajal (Second Vice President), Víctor Arbulú Crousillat, Lisandro Serrano Spoerer, Marco Colodro Hadjes, Vittorio Corbo Lioi, Carlos Olivos Marchant, Roberto Méndez Torres, Lucía Santa Cruz Sutil, Roberto Zahler Mayanz, and Raimundo Monge Zegers (Alternate Director). Also, the CEO Claudio Melandri Hinojosa and CAO Felipe Contreras Fajardo attended the meeting.
In Extraordinary Board Session No. 103 held on May 24, 2012, Mr. Juan Manuel Hoyos Martínez de Irujo resigned from his position as Alternate Director.
In the Extraordinary Board Session No. 436 held on August 28, 2012, Mr. Juan Pedro Santa María Pérez resigned from his position as Alternate Director.
Use of income and Distribution of Dividends
According to the information presented in the shareholders’ meeting, 2011 net income (designated in the financial statements as “Income attributable to equity holders of the Bank ”) amounted Ch$ 435,084 million. The Board approved the distribution of 60% of such net income which divided by the amount of shares issued corresponds to a Ch$ $1.385 dividend per share, which was payable starting on April 25, 2012. In addition, the Board approved that 40% of the remaining profit be destined to increase the Bank’s reserves.
b) | Issuance of Bonds during 2012 |
In 2012, the Bank issued senior bonds in the amount of USD 1,085,990,000; UF 4,000,000; CLP 25,000,000,000 and CNY 500,000,000. The placement detail in 2012 is included in Note 20.
b.1) 2012 Senior Bonds
Series | Amount | Term | Issue rate | Date of Issuance |
Maturity date | ||||||
Senior bonds | USD | 250,000,000 | 2 years | Libor (3 months) + 200 bp | 02-14-2012 | 02-14-2014 | |||||
Zero-coupon bond | USD | 85,990,000 | 1 year | Libor (3 months) + 100 bp | 08-29-2012 | 08-30-2013 | |||||
Senior bonds | USD | 750,000,000 | 10 years | 3.875 % per annum simple | 09-20-2012 | 09-20-2022 | |||||
Total | USD | 1,085,990,000 | |||||||||
E6 | UF | 4,000,000 | 10 years | 3.5 % per annum simple | 04-01-2012 | 04-01-2022 | |||||
Total | UF | 4,000,000 | |||||||||
E7 | CLP | 25,000,000,000 | 5 years | 6.75% per annum simple | 03-01-2012 | 03-01-2017 | |||||
Total | CLP | 25,000,000,000 | |||||||||
CNY Bond | CNY | 500,000,000 | 2 years | 3.75% per annum simple | 11-26-2012 | 11-26-2014 | |||||
Total | CNY | 500,000,000 |
b.2) 2012 Subordinated bonds
In 2012, the Bank has not issued subordinated bonds.
Financial Statements 2012 / Banco Santander Chile 43 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 03
SIGNIFICANT EVENTS, continued:
c) Building sale
In 2012 first quarter, the Bank sold 17 offices, recording a MCh$ 8,564 gain. See the detail of these transactions on Note 36.
d) Sale and purchase of Shares
Purchase:
In August 2012, Banco Santander Chile acquired 144 shares from Sociedad Operadora de la Cámara de Compensación de pagos de Alto Valor S.A. See the detail of this transaction in note 13.
Sale:
In July 2012, Banco Santander Chile sold 3,628,154 shares from the support corporation Transbank S.A. See the detail of this transaction in note 13.
e) Assignment of Loans Previously Charged Off
In 2012, Banco Santander Chile signed assignment agreements of loans previously charged off with “Fondo de Inversiones Cantábrico.” As of December 31, we have made portfolio sales to this institution for MCh$ 2,608. See the detail of these transactions in note 11.
f) Sales of Current Mortgage Loans
In 2012, Banco Santander Chile signed assignment agreements of mortgage loans with “Metlife Chile Seguros de Vida S.A.” As of December 31, we have made portfolio sales to this institution for MCh$ 18,587. See the detail of these transactions in note 11.
g) Sales of Current Commercial Loans
In 2012, Banco Santander Chile signed assignment agreements of current loans. As of December 31, we have made portfolio sales to this institution for MCh$ 7,655. See the detail of these transactions in note 11.
Financial Statements 2012 / Banco Santander Chile 44 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 04
BUSINESS SEGMENTS
The Bank manages and measures the performance of its operations by business segment. The information disclosed in this note is not necessarily comparable to that of other financial institutions, since it is based on management’s internal information.
Inter-segment transactions are conducted under normal arm’s length commercial terms and conditions. Each segment’s assets, liabilities, and income include items directly attributable to the segment to which they can be allocated on a reasonable basis.
The Bank has the following business segments:
Individuals
Santander Banefe
Serves individuals with monthly incomes from CLP 150,000 to CLP 400,000, who receive services through Santander Banefe. This segment gives customers a variety of services, including consumer loans, credit cards, auto loans, mortgage loans, debit cards, savings products, mutual funds, and insurance.
b. Commercial banking
Serves individuals with monthly incomes below CLP 400,000. This segment gives customers a variety of services, including consumer loans, credit cards, auto loans, mortgage loans, debit cards, savings products, mutual funds, and insurance.
Small and mid-sized companies (PYMEs)
Serves small companies with annual sales below Ch$1,200 million. This segment gives customers a variety of products, including commercial loans, government-guaranteed loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, savings products, mutual funds, and insurance.
Institutional
Serves institutions such as universities, government entities, local and regional governments. This segment provides a wide variety of products, including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, transactional services, treasury services, financial consulting, savings products, mutual funds, and insurance.
Companies
The Companies segment is composed of Commercial Banking and Company Banking, where sub-segments of medium-sized companies (Companies), real estate companies (Real Estate) and large corporations are found:
a. | Companies |
Serves companies with annual sales exceeding Ch$1,200 million and up to Ch$10,000 million. This segment provides a wide variety of products, including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, transactional services, treasury services, financial consulting, savings products, mutual funds, and insurance.
b. | Real estate |
This segment also includes all the companies engaged in the real estate industry who carry out projects to sell properties to third parties and all builders with annual sales exceeding CLP 800 million with no ceiling. These clients are offered not only the traditional banking services but also specialized services to finance projects, chiefly residential, with the aim of expanding sales of mortgage loans.
c. | Large Corporations |
Serves companies with annual sales exceeding Ch$10,000 million. This segment provides a wide variety of products, including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, transactional services, treasury services, financial consulting, savings products, mutual funds, and insurance. |
Financial Statements 2012 / Banco Santander Chile 45 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 04
BUSINESS SEGMENTS, continued
Global Banking and Markets
The Global Banking and Markets segment is comprised of:
a. | Corporate |
Foreign multinational corporations or Chilean corporations with sales over Ch$10,000 million. This segment provides a wide variety of products, including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, transactional services, treasury services, financial consulting, savings products, mutual funds, and insurance. |
b. | Treasury |
The Treasury Division provides sophisticated financial products, mainly to companies in the Wholesale Banking area and the Companies segment. These include products such as short-term financing and fund raising, brokerage services, derivatives, securitization, and other tailor-made products. The Treasury area also handles intermediation of positions and manages the Bank’s investment portfolio. |
Corporate Activities (“Other”)
This segment includes Financial Management, which perform global foreign exchange structural position functions, involving the parent company’s structural interest risk and liquidity risk. The latter, through bonds issuances. This segment also manages the Bank’s personal funds, capital allocation by unit, and the financing of investments made. The foregoing usually results in a negative contribution to income.
In addition, this segment encompasses all the intra-segment income and all the activities not assigned to a given segment or product with customers.
The segments’ accounting policies are the same as those described in the summary of accounting policies. The Bank earns most of its income in the form of interest income, fee and commission income and income from financial operations. To evaluate a segment’s financial performance, the highest decision making authority bases his assessment on the segment’s interest income, fee and commission income, and expenses.
Financial Statements 2012 / Banco Santander Chile 46 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 04
BUSINESS SEGMENTS, continued
Below are the tables showing the Bank’s results by business segment, for the periods ending as of December 31, 2012 and 2011 in addition to the corresponding balances of loans and accounts receivable from customers as of December 31, 2012 and 2011:
As of December 31, 2012 | ||||||||||||||||||||||||||||
Loans and accounts receivable from customers (1) | Net interest income | Net fee and commission income | ROF (2) | Allowances | Support expenses (3) | Segment’s net contribution | ||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||
Segments | ||||||||||||||||||||||||||||
Individuals | 9,723,801 | 620,970 | 174,283 | 7,790 | (274,275 | ) | (349,513 | ) | 179,255 | |||||||||||||||||||
Santander Banefe | 799,412 | 123,168 | 33,853 | 102 | (81,472 | ) | (66,386 | ) | 9,265 | |||||||||||||||||||
Commercial Banking | 8,924,389 | 497,802 | 140,430 | 7,688 | (192,803 | ) | (283,127 | ) | 169,990 | |||||||||||||||||||
Small and mid-sized companies (PYMEs) | 2,836,695 | 234,012 | 39,024 | 4,903 | (72,719 | ) | (76,864 | ) | 128,356 | |||||||||||||||||||
Institutional | 356,465 | 28,466 | 2,466 | 615 | (346 | ) | (12,686 | ) | 18,515 | |||||||||||||||||||
Companies | 4,072,191 | 148,433 | 25,836 | 11,062 | (24,608 | ) | (47,756 | ) | 112,967 | |||||||||||||||||||
Companies | 1,632,276 | 70,962 | 13,863 | 5,118 | (21,598 | ) | (24,521 | ) | 43,824 | |||||||||||||||||||
Large Corporations | 1,668,828 | 56,045 | 8,679 | 5,623 | (3,705 | ) | (17,989 | ) | 48,653 | |||||||||||||||||||
Real estate | 771,087 | 21,426 | 3,294 | 321 | 695 | (5,246 | ) | 20,490 | ||||||||||||||||||||
Commercial Banking | 16,989,152 | 1,031,881 | 241,609 | 24,370 | (371,948 | ) | (486,819 | ) | 439,093 | |||||||||||||||||||
Global Banking and Markets | 1,858,116 | 57,591 | 26,315 | 66,804 | 5,334 | (35,209 | ) | 120,835 | ||||||||||||||||||||
Corporate | 1,851,127 | 65,838 | 29,336 | 815 | 5,334 | (13,909 | ) | 87,414 | ||||||||||||||||||||
Treasury | 6,989 | (8,247 | ) | (3,021 | ) | 65,989 | - | (21,300 | ) | 33,421 | ||||||||||||||||||
Other | 119,384 | (46,738 | ) | 2,648 | (8,875 | ) | (88 | ) | (18,108 | ) | (71,161 | ) | ||||||||||||||||
Total | 18,966,652 | 1,042,734 | 270,572 | 82,299 | (366,702 | ) | (540,136 | ) | 488,767 | |||||||||||||||||||
Other operating income | 19,758 | |||||||||||||||||||||||||||
Other operating expenses | (65,105 | ) | ||||||||||||||||||||||||||
Income from investments in other companies | 267 | |||||||||||||||||||||||||||
Income tax | (51,095 | ) | ||||||||||||||||||||||||||
Net income for the period | 392,592 |
(1) | Corresponds to Loans and accounts receivable from customers plus the Interbank loans balance, without deducting their allowances for loan losses. |
(2) | Corresponds to the sum of the net income from financial operations and the foreign exchange gain. |
(3) | Corresponds to the sum of personnel salaries and expenses, administrative expenses, depreciation, amortization, and impairment. |
Financial Statements 2012 / Banco Santander Chile 47 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 04
BUSINESS SEGMENTS, continued
As of December 31, 2011 | ||||||||||||||||||||||||||||
Loans and accounts receivables from customers (1) | Net interest income | Net fee and commission income | ROF (2) | Allowances | Support expenses (3) | Segment’s net contribution | ||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||
Segments | ||||||||||||||||||||||||||||
Individuals | 9,289,345 | 570,293 | 187,176 | 9,095 | (214,527 | ) | (322,273 | ) | 229,764 | |||||||||||||||||||
Santander Banefe | 804,852 | 117,154 | 37,206 | 275 | (62,250 | ) | (70,719 | ) | 21,666 | |||||||||||||||||||
Commercial Banking | 8,484,493 | 453,139 | 149,970 | 8,820 | (152,277 | ) | (251,554 | ) | 208,098 | |||||||||||||||||||
Small and mid-sized companies (PYMEs) | 2,560,736 | 207,008 | 38,274 | 9,577 | (65,028 | ) | (74,962 | ) | 114,869 | |||||||||||||||||||
Institutional | 355,199 | 26,856 | 1,831 | 859 | 503 | (11,329 | ) | 18,720 | ||||||||||||||||||||
Companies | 3,650,709 | 140,818 | 24,310 | 13,427 | (11,592 | ) | (40,680 | ) | 126,283 | |||||||||||||||||||
Companies | 1,583,895 | 65,499 | 12,785 | 7,134 | (10,080 | ) | (22,698 | ) | 52,640 | |||||||||||||||||||
Large Corporations | 1,470,447 | 56,467 | 8,594 | 5,669 | (1,212 | ) | (13,496 | ) | 56,022 | |||||||||||||||||||
Real estate | 596,367 | 18,852 | 2,931 | 624 | (300 | ) | (4,486 | ) | 17,621 | |||||||||||||||||||
Commercial Banking | 15,855,989 | 944,975 | 251,591 | 32,958 | (290,644 | ) | (449,244 | ) | 489,636 | |||||||||||||||||||
Global Banking and Markets | 1,494,752 | 48,942 | 31,908 | 68,530 | 7,614 | (35,302 | ) | 121,692 | ||||||||||||||||||||
Corporate | 1,479,838 | 64,845 | 30,745 | 1,368 | 7,614 | (13,790 | ) | 90,782 | ||||||||||||||||||||
Treasury | 14,914 | (15,903 | ) | 1,163 | 67,162 | - | (21,512 | ) | 30,910 | |||||||||||||||||||
Other | 84,041 | (21,617 | ) | (5,663 | ) | (7,291 | ) | 503 | (16,474 | ) | (50,542 | ) | ||||||||||||||||
Total | 17,434,782 | 972,300 | 277,836 | 94,197 | (282,527 | ) | (501,020 | ) | 560,786 | |||||||||||||||||||
Other operating income | 27,100 | |||||||||||||||||||||||||||
Other operating expenses | (66,558 | ) | ||||||||||||||||||||||||||
Income from investments in other companies | 2,140 | |||||||||||||||||||||||||||
Income tax | (83,453 | ) | ||||||||||||||||||||||||||
Net income for the period | 440,015 |
(1) | Corresponds to Loans and accounts receivable from customers, net without deducting their allowances for loan losses. |
(2) | Corresponds to the sum of the net income from financial operations and the foreign exchange gain. |
(3) | Corresponds to the sum of personnel salaries and expenses, administrative expenses, depreciation, amortization, and impairment. |
Financial Statements 2012 / Banco Santander Chile 48 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 05
CASH AND CASH EQUIVALENTS
a) The detail of the balances included under cash and cash equivalents is as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Cash and deposits in banks | ||||||||
Cash | 435,687 | 369,585 | ||||||
Deposits in the Central Bank of Chile | 520,031 | 2,142,550 | ||||||
Deposits in domestic banks | 4,057 | 465 | ||||||
Deposits in foreign banks | 290,639 | 281,101 | ||||||
Subtotals – Cash and bank deposits | 1,250,414 | 2,793,701 | ||||||
Cash items in process of collection, net | 235,314 | 186,968 | ||||||
Cash and cash equivalents | 1,485,728 | 2,980,669 |
The level of funds in cash and at the Central Bank of Chile, which are included in the “Deposits in the Central Bank of Chile” line, reflects regulations governing the reserves that the Bank must maintain on average on a monthly basis.
b) Cash items in process of collection and being cleared:
Unsettled transactions are transactions in which only settlement remains pending, which will increase or decrease funds in the Central Bank of Chile or in foreign banks, normally within the next 24 to 48 business hours from the end of each period. These transactions are presented according to the following detail:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Assets | ||||||||
Documents held by other banks (documents to be exchanged) | 238,714 | 188,907 | ||||||
Funds receivable | 281,553 | 87,547 | ||||||
Subtotals | 520.267 | 276,454 | ||||||
Liabilities | ||||||||
Funds payable | 284,953 | 89,486 | ||||||
Subtotals | 284,953 | 89,486 | ||||||
Cash in process of collection, net | 235,314 | 186,968 |
Financial Statements 2012 / Banco Santander Chile 49 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 06
TRADING INVESTMENTS
The detail of the instruments deemed as financial trading investments is as follows:
As of December 31 | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Chilean Central Bank and Government securities: | ||||||||
Chilean Central Bank Bonds | 267,008 | 311,503 | ||||||
Chilean Central Bank Notes | 3,397 | 60,233 | ||||||
Other Chilean Central Bank and Government securities | 48,160 | 15,789 | ||||||
Subtotals | 318.565 | 387,525 | ||||||
Other Chilean securities: | ||||||||
Time deposits in Chilean financial institutions | 3,531 | - | ||||||
Mortgage finance bonds of Chilean financial institutions | - | - | ||||||
Chilean financial institution bonds | - | - | ||||||
Chilean corporate bonds | - | - | ||||||
Other Chilean securities | - | - | ||||||
Subtotals | 3,531 | - | ||||||
Foreign financial securities: | ||||||||
Foreign Central Banks and Government securities | - | - | ||||||
Other foreign financial instruments | - | - | ||||||
Subtotals | - | - | ||||||
Investments in mutual funds: | ||||||||
Funds managed by related entities | 16,191 | 22,238 | ||||||
Funds managed by others | - | - | ||||||
Subtotals | 16,191 | 22,238 | ||||||
Total | 338,287 | 409,763 |
As of December 31, 2012 in the “Chilean Central Bank and Government securities” item there are no securities sold with repurchase agreement to clients and financial institutions (MCh$ 27,017 as of December 31, 2011).
As of December 31, 2012 and 2011 under “Other Chilean securities” there are no securities sold with repurchase agreement to clients and financial institutions.
Financial Statements 2012 / Banco Santander Chile 50 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 07
INVESTMENTS UNDER RESALE AGREEMENTS AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS
a) | Rights arising from purchase agreements |
The Bank purchases financial instruments agreeing to resell them at a future date. As of December 31, 2012 and 2011, rights associated with instruments acquired with resale agreements are as follows:
As of December 31, | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
From 1 day and less than 3 months | More than 5 months and less than 1 year | More than 1 year | Total | From 1 day and less than 3 months | More than 3 months and less than 1 year | More than 1 year | Total | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Chilean Government and Central Bank securities | ||||||||||||||||||||||||||||||||
Chilean Central Bank Bonds | 6,993 | - | - | 6,993 | 12,928 | - | - | 12,928 | ||||||||||||||||||||||||
Chilean Central Bank Notes | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Other Chilean Central Bank and Government securities | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Subtotals | 6,993 | - | - | 6,993 | 12,928 | - | - | 12,928 | ||||||||||||||||||||||||
Instruments from other domestic institutions: | ||||||||||||||||||||||||||||||||
Time deposits in Chilean financial institutions | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Mortgage finance bonds of Chilean financial institutions | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Chilean financial institution bonds | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Chilean corporate bonds | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Other Chilean securities | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Subtotals | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Foreign financial securities: | ||||||||||||||||||||||||||||||||
Foreign government or central banks securities | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Other foreign financial instruments | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Subtotals | - | - | - | - - | - | - | - | - | ||||||||||||||||||||||||
Investments in mutual funds: | ||||||||||||||||||||||||||||||||
Funds managed by related entities | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Funds managed by others | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Subtotals | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total | 6,993 | - | - | 6,993 | 12,928 | - | - | 12,928 |
Financial Statements 2012 / Banco Santander Chile 51 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 07
INVESTMENTS UNDER RESALE AGREEMENTS AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS, continued:
b) | Obligations under repurchase agreements |
The Bank raises funds by selling financial instruments and committing itself to buy them back at future dates, plus interest at a predetermined rate. As of December 31, 2012 and 2011, obligations related to instruments sold under repurchase agreements are as follows:
As of December 31 | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
From 1 day to less than 3 months | More than 3 months and less than 1 year | More than 1 year | Total | From 1 day to less than 3 months | More than 3 months and less than 1 year | More than 1 year | Total | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Chilean Government and Central Bank securities | ||||||||||||||||||||||||||||||||
Chilean Central Bank Bonds | 155,869 | - | - | 155,869 | 27,638 | - | - | 27,638 | ||||||||||||||||||||||||
Chilean Central Bank Notes | 33 | - | - | 33 | 270,591 | - | - | 270,591 | ||||||||||||||||||||||||
Other Chilean Central Bank and Government securities Chilean Central Bank Bonds | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Subtotals | 155,902 | - | - | 155,902 | 298,229 | - | - | 298,229 | ||||||||||||||||||||||||
Instruments from other domestic institutions: | ||||||||||||||||||||||||||||||||
Time deposits in Chilean financial institutions | 144,935 | 3,280 | - | 148,215 | 243,548 | 2,584 | - | 246,132 | ||||||||||||||||||||||||
Mortgage finance bonds of Chilean financial institutions | - | - | - | - | 18 | 2 | - | 20 | ||||||||||||||||||||||||
Chilean financial institution bonds | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Chilean corporate bonds | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Other Chilean securities | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Subtotals | 144,935 | 3,280 | - | 148,215 | 243,566 | 2,586 | - | 246,152 | ||||||||||||||||||||||||
Foreign financial securities: | ||||||||||||||||||||||||||||||||
Foreign government or central banks securities | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Other foreign financial instruments | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Subtotals | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Investments in mutual funds: | ||||||||||||||||||||||||||||||||
Funds managed by related entities | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Funds managed by others | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Subtotals | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total | 300,837 | 3,280 | - | 304,117 | 541,795 | 2,586 | - | 544,381 |
Financial Statements 2012 / Banco Santander Chile 52 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 07
INVESTMENTS UNDER RESALE AGREEMENTS AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS, continued:
c) | Below there is the detail by portfolio of collaterals associated with repurchase agreements as of December 31, 2012 and 2011, valued at market rate: |
As of December 31 | ||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||
Available for Sale Portfolio | Trading Portfolio | Total Instruments with agreement | Available for Sale Portfolio | Trading Portfolio | Total Instruments with agreement | |||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||
Chilean Central Bank and Government securities: | ||||||||||||||||||||||||
Chilean Central Bank Bonds | 156,307 | - | 156,307 | 27,688 | - | 27,688 | ||||||||||||||||||
Chilean Central Bank Notes | 33 | - | 33 | 245,635 | 27,017 | 272,652 | ||||||||||||||||||
Other Chilean Central Bank and Government securities | - | - | - | - | - | - | ||||||||||||||||||
Subtotals | 156,340 | - | 156,340 | 273,323 | 27,017 | 300,340 | ||||||||||||||||||
Other Chilean securities: | ||||||||||||||||||||||||
Time deposits in Chilean financial institutions | 148,277 | - | 148,277 | 246,205 | - | 246,205 | ||||||||||||||||||
Mortgage finance bonds of Chilean financial institutions | - | - | - | 19 | - | 19 | ||||||||||||||||||
Chilean financial institution bonds | - | - | - | - | - | - | ||||||||||||||||||
Chilean corporate bonds | - | - | - | - | - | - | ||||||||||||||||||
Other Chilean securities | - | - | - | - | - | - | ||||||||||||||||||
Subtotals | 148,277 | - | 148,277 | 246,224 | - | 246,224 | ||||||||||||||||||
Foreign financial securities: | ||||||||||||||||||||||||
Foreign Central Banks and Government securities | - | - | - | - | - | - | ||||||||||||||||||
Other foreign financial instruments | - | - | - | - | - | - | ||||||||||||||||||
Subtotals | - | - | - | - | - | - | ||||||||||||||||||
Investments in mutual funds: | ||||||||||||||||||||||||
Funds managed by related entities | - | - | - | - | - | - | ||||||||||||||||||
Funds managed by others | - | - | - | - | - | - | ||||||||||||||||||
Subtotals | - | - | - | - | - | - | ||||||||||||||||||
Total | 304,617 | - | 304,617 | 519,547 | 27,017 | 546,564 |
Financial Statements 2012 / Banco Santander Chile 53 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 08
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
a) | As of December 31, 2012 and 2011 the Bank holds the following portfolio of derivative instruments: |
As of December 31, 2012 | ||||||||||||||||||||||||
Notional amount | Fair value | |||||||||||||||||||||||
Up to 3 months | More than 3 months to 1 year | More than 1 year | Total | Assets | Liabilities | |||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||
Fair value hedge derivatives | ||||||||||||||||||||||||
Currency forwards | - | - | - | - | - | - | ||||||||||||||||||
Interest rate swaps | 95,200 | 397,092 | 395,471 | 887,763 | 12,647 | 4,054 | ||||||||||||||||||
Cross currency swaps | 25,396 | 14,975 | 671,942 | 712,313 | 12,716 | 4,361 | ||||||||||||||||||
Call currency options | - | - | - | - | - | - | ||||||||||||||||||
Call interest rate options | - | - | - | - | - | - | ||||||||||||||||||
Put currency options | - | - | - | - | - | - | ||||||||||||||||||
Put interest rate options | - | - | - | - | - | - | ||||||||||||||||||
Interest rate futures | - | - | - | - | - | - | ||||||||||||||||||
Other derivatives | - | - | - | - | - | - | ||||||||||||||||||
Subtotals | 120,596 | 412,067 | 1,067,413 | 1,600,076 | 25,363 | 8,415 | ||||||||||||||||||
Cash flow hedge derivatives | ||||||||||||||||||||||||
Currency forwards | 13,704 | - | - | 13,704 | - | 298 | ||||||||||||||||||
Interest rate swaps | - | - | - | - | - | - | ||||||||||||||||||
Cross currency swaps | 268,693 | 666,668 | 689,045 | 1,624,406 | 1,851 | 52,589 | ||||||||||||||||||
Call currency options | - | - | - | - | - | - | ||||||||||||||||||
Call interest rate options | - | - | - | - | - | - | ||||||||||||||||||
Put currency options | - | - | - | - | - | - | ||||||||||||||||||
Put interest rate options | - | - | - | - | - | - | ||||||||||||||||||
Interest rate futures | - | - | - | - | - | - | ||||||||||||||||||
Other derivatives | - | - | - | - | - | - | ||||||||||||||||||
Subtotals | 282,397 | 666,668 | 689,045 | 1,638,110 | 1,851 | 52,887 | ||||||||||||||||||
Trading derivatives | ||||||||||||||||||||||||
Currency forwards | 17,560,012 | 7,109,216 | 563,301 | 25,232,529 | 159,624 | 187,304 | ||||||||||||||||||
Interest rate swaps | 4,578,678 | 9,882,478 | 13,752,690 | 28,213,846 | 204,800 | 230,380 | ||||||||||||||||||
Cross currency swaps | 1,126,961 | 3,215,654 | 11,639,636 | 15,982,251 | 899,174 | 665,100 | ||||||||||||||||||
Call currency options | 413,452 | 8,032 | - | 421,484 | 567 | 1,485 | ||||||||||||||||||
Call interest rate options | 3,917 | 14,458 | 12,481 | 30,856 | 24 | 20 | ||||||||||||||||||
Put currency options | 402,234 | 1,928 | - | 404,162 | 1,777 | 516 | ||||||||||||||||||
Put interest rate options | - | - | - | - | - | - | ||||||||||||||||||
Interest rate futures | - | - | - | - | - | - | ||||||||||||||||||
Other derivatives | 19,415 | - | - | 19,415 | 32 | 54 | ||||||||||||||||||
Subtotals | 24,104,669 | 20,231,766 | 25,968,108 | 70,304,543 | 1,265,998 | 1,084,859 | ||||||||||||||||||
Total | 24,507,662 | 21,310,501 | 27,724,566 | 73,542,729 | 1,293,212 | 1,146,161 |
Financial Statements 2012 / Banco Santander Chile 54 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 08
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued:
As of December 31, 2011 | ||||||||||||||||||||||||
Notional amount | Fair value | |||||||||||||||||||||||
Up to 3 months | More than 3 months to 1 year | More than 1 year | Total | Assets | Liabilities | |||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||
Fair value hedge derivatives | ||||||||||||||||||||||||
Currency forwards | - | - | - | - | - | - | ||||||||||||||||||
Interest rate swaps | - | 368,885 | 444,845 | 813,730 | 22,374 | 35 | ||||||||||||||||||
Cross currency swaps | 30,989 | - | 277,469 | 308,458 | 20,498 | 869 | ||||||||||||||||||
Call currency options | - | - | - | - | - | - | ||||||||||||||||||
Call interest rate options | - | - | - | - | - | - | ||||||||||||||||||
Put currency options | - | - | - | - | - | - | ||||||||||||||||||
Put interest rate options | - | - | - | - | - | - | ||||||||||||||||||
Interest rate futures | - | - | - | - | - | - | ||||||||||||||||||
Other derivatives | - | - | - | - | - | - | ||||||||||||||||||
Subtotals | 30,989 | 368,885 | 722,314 | 1,122,188 | 42,872 | 904 | ||||||||||||||||||
Cash flow hedge derivatives | ||||||||||||||||||||||||
Currency forwards | - | - | - | - | - | - | ||||||||||||||||||
Interest rate swaps | - | - | - | - | - | - | ||||||||||||||||||
Cross currency swaps | 284,875 | 1,234,882 | 394,050 | 1,913,807 | 94,544 | 713 | ||||||||||||||||||
Call currency options | - | - | - | - | - | - | ||||||||||||||||||
Call interest rate options | - | - | - | - | - | - | ||||||||||||||||||
Put currency options | - | - | - | - | - | - | ||||||||||||||||||
Put interest rate options | - | - | - | - | - | - | ||||||||||||||||||
Interest rate futures | - | - | - | - | - | - | ||||||||||||||||||
Other derivatives | - | - | - | - | - | - | ||||||||||||||||||
Subtotals | 284,875 | 1,234,882 | 394,050 | 1,913,807 | 94,544 | 713 | ||||||||||||||||||
Trading derivatives | ||||||||||||||||||||||||
Currency forwards | 14,305,612 | 8,473,390 | 604,935 | 23,383,937 | 264,574 | 217,022 | ||||||||||||||||||
Interest rate swaps | 5,527,118 | 11,459,132 | 13,716,043 | 30,702,293 | 264,084 | 302,327 | ||||||||||||||||||
Cross currency swaps | 1,405,419 | 2,511,430 | 10,688,479 | 14,605,328 | 934,045 | 769,203 | ||||||||||||||||||
Call currency options | 36,180 | 23,502 | - | 59,682 | 740 | 560 | ||||||||||||||||||
Call interest rate options | 5,855 | 18,773 | 29,672 | 54,300 | 68 | 256 | ||||||||||||||||||
Put currency options | 14,416 | 17,503 | - | 31,919 | 750 | 1,017 | ||||||||||||||||||
Put interest rate options | - | - | - | - | - | - | ||||||||||||||||||
Interest rate futures | - | - | - | - | - | - | ||||||||||||||||||
Other derivatives | 102,084 | 1,694 | - | 103,778 | 219 | 400 | ||||||||||||||||||
Subtotals | 21,396,684 | 22,505,424 | 25,039,129 | 68,941,237 | 1,464,480 | 1,290,785 | ||||||||||||||||||
Total | 21,712,548 | 24,109,191 | 26,155,493 | 71,977,232 | 1,601,896 | 1,292,402 |
Financial Statements 2012 / Banco Santander Chile 55 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 08
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued
b) | Hedge Accounting |
Fair Value Hedge:
The Bank uses cross-currency swaps, interest rate swaps, and call money swaps to hedge its exposure to changes in fair value of hedged items attributable to interest rates. The aforementioned hedging instruments change the effective cost of long-term issuances from a fixed interest rate to a variable interest rate, decreasing the duration and modifying the sensitivity to the shortest segments of the curve.
Below is a detail of the hedged elements and hedge instruments under fair value hedges as of December 31, 2012 and 2011, classified by term to maturity:
As of December 31, 2012 | ||||||||||||||||||||
Within 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Total | ||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Hedged item | ||||||||||||||||||||
Corporate bonds | 10,295 | - | - | - | 10,295 | |||||||||||||||
Senior bonds | - | 300,769 | 4,568 | 582,226 | 887,563 | |||||||||||||||
Subordinated bonds | - | 143,655 | - | - | 143,655 | |||||||||||||||
Short-term loans | 25,000 | - | - | - | 25,000 | |||||||||||||||
Time deposits | 497,368 | - | - | 27,409 | 524,777 | |||||||||||||||
Mortgage finance bonds | - | - | - | 3,995 | 3,995 | |||||||||||||||
Yankee Bond | - | - | - | 4,791 | 4,791 | |||||||||||||||
Total | 532,663 | 444,424 | 4,568 | 618,421 | 1,600,076 | |||||||||||||||
Hedging instrument | ||||||||||||||||||||
Cross currency swap | 40,371 | 300,769 | 4,568 | 366,605 | 712,313 | |||||||||||||||
Interest rate swap | 39,295 | 143,655 | - | 28,731 | 211,681 | |||||||||||||||
Call money swap | 452,997 | - | - | 223,085 | 676,082 | |||||||||||||||
Total | 532,663 | 444,424 | 4,568 | 618,421 | 1,600,076 |
As of December 31, 2011 | ||||||||||||||||||||
Within 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Total | ||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Hedged item | ||||||||||||||||||||
Corporate bonds | - | 11,188 | - | - | 11,188 | |||||||||||||||
Senior bonds | 364,245 | - | 326,129 | 148,484 | 838,858 | |||||||||||||||
Subordinated bonds | - | 158,124 | - | - | 158,124 | |||||||||||||||
Short-term loans | - | 25,000 | - | - | 25,000 | |||||||||||||||
Time deposits | 35,629 | 25,050 | - | - | 60,679 | |||||||||||||||
Mortgage finance bonds | - | - | 28,339 | 28,339 | ||||||||||||||||
Yankee Bond | - | - | - | - | - | |||||||||||||||
Total | 399,874 | 219,362 | 326,129 | 176,823 | 1,122,188 | |||||||||||||||
Hedging instrument | ||||||||||||||||||||
Cross currency swap | 30,989 | 183,174 | 65,956 | 28,339 | 308,458 | |||||||||||||||
Interest rate swap | 364,245 | 11,188 | 260,173 | - | 635,606 | |||||||||||||||
Call money swap | 4,640 | 25,000 | - | 148,484 | 178,124 | |||||||||||||||
Total | 399,874 | 219,362 | 326,129 | 176,823 | 1,122,188 |
Financial Statements 2012 / Banco Santander Chile 56 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 08
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued
Cash flow hedges:
The Bank uses cross currency swaps to hedge the risk from variability of cash flows attributable to changes in the interest rates of bonds and interbank loans at a variable rate. To cover the inflation risk in some items, we use both forwards as well as currency swaps. Both the cash flows of the cross currency swaps as well as over forwards equal the cash flows of the hedged items.
Below is the nominal amount of the hedged items as of December 31, 2012 and 2011, and an associated maturity analysis:
As of December 31, 2012 | ||||||||||||||||||||
Within 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Total | ||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Hedged item | ||||||||||||||||||||
Interbank loans | 754,673 | 165,204 | - | - | 919,877 | |||||||||||||||
Bonds | 57,102 | 106,942 | - | 28,265 | 192,309 | |||||||||||||||
Time deposits and other time liabilities | 51,008 | - | - | - | 51,008 | |||||||||||||||
Variable rate bonds | 52,780 | 239,425 | 93,232 | - | 385,437 | |||||||||||||||
Available for sale investments (deposits) | 33,502 | 11,328 | - | - | 44,830 | |||||||||||||||
Mortgage loans | - | 44,649 | - | - | 44,649 | |||||||||||||||
Total | 949,065 | 567,548 | 93,232 | 28,265 | 1,638,110 | |||||||||||||||
Hedging instrument | ||||||||||||||||||||
Cross currency swap | 935,361 | 567,548 | 93,232 | 28,265 | 1,624,406 | |||||||||||||||
Forward | 13,704 | - | - | - | 13,704 | |||||||||||||||
Total | 949,065 | 567,548 | 93,232 | 28,265 | 1,638,110 |
As of December 31, 2011 | ||||||||||||||||||||
Within 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Total | ||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Hedged item | ||||||||||||||||||||
Interbank loans | 1,142,238 | 147,329 | - | - | 1,289,567 | |||||||||||||||
Bonds | 377,519 | 246,721 | - | - | 624,240 | |||||||||||||||
Total | 1,519,757 | 394,050 | - | - | 1,913,807 | |||||||||||||||
Hedging instrument | ||||||||||||||||||||
Cross currency swap | 1,519,757 | 394,050 | - | - | 1,913,807 | |||||||||||||||
Total | 1,519,757 | 394,050 | - | - | 1,913,807 |
Financial Statements 2012 / Banco Santander Chile 57 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 08
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued
Below is an estimate of the periods in which the flows are expected to be produced:
b.1) Future forecast of hedged items and its corresponding hedging instruments for interest rate risk:
As of December 31, 2012 | ||||||||||||||||||||
Within 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Total | ||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Hedged item | ||||||||||||||||||||
Inflows | - | - | - | - | - | |||||||||||||||
Outflows | (13,675 | ) | (6,515 | ) | (577 | ) | - | (20,767 | ) | |||||||||||
Net flows | (13,675 | ) | (6,515 | ) | (577 | ) | - | (20,767 | ) | |||||||||||
Hedging instrument | ||||||||||||||||||||
Inflows | 13,675 | 6,515 | 577 | - | 20,767 | |||||||||||||||
Outflows | (32,129 | ) | (9,782 | ) | (845 | ) | - | (42,756 | ) | |||||||||||
Net flows | (18,454 | ) | (3,267 | ) | (268 | ) | - | (21,989 | ) |
As of December 31, 2011 | ||||||||||||||||||||
Within 1 year | Between 1 and 3 years | Between 6 and 6 years | Over 6 years | Total | ||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Hedged item | ||||||||||||||||||||
Inflows | - | - | - | - | - | |||||||||||||||
Outflows | (26,147 | ) | (9,791 | ) | - | - | (35,938 | ) | ||||||||||||
Net flows | (26,147 | ) | (9,791 | ) | - | - | (35,938 | ) | ||||||||||||
Hedging instrument | ||||||||||||||||||||
Inflows | 26,147 | 9,791 | - | - | 35,938 | |||||||||||||||
Outflows | (44,257 | ) | (13,692 | ) | - | - | (57,949 | ) | ||||||||||||
Net flows | (18,110 | ) | (3,901 | ) | - | - | (22,011 | ) |
Financial Statements 2012 / Banco Santander Chile 58 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 08
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued
b.2) Future forecast of hedged items and its corresponding hedging instruments for inflation risk:
As of December 31, 2012 | ||||||||||||||||||||
Within 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Total | ||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Hedged item | ||||||||||||||||||||
Inflows | 24,089 | 20,802 | - | - | 44,891 | |||||||||||||||
Outflows | (2,938 | ) | (2,658 | ) | (2,301 | ) | (2,991 | ) | (10,888 | ) | ||||||||||
Net flows | 21,151 | 18,144 | (2,301 | ) | (2,991 | ) | 34,003 | |||||||||||||
Hedging instrument | ||||||||||||||||||||
Inflows | 2,938 | 2,658 | 2,301 | 2,991 | 10,888 | |||||||||||||||
Outflows | (24,089 | ) | (20,802 | ) | - | - | (44,891 | ) | ||||||||||||
Net flows | (21,151 | ) | (18,144 | ) | 2,301 | 2,991 | (34,003 | ) |
As of December 31, 2011, the Bank does not have any cash flow hedge by inflation risk.
Financial Statements 2012 / Banco Santander Chile 59 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 08
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued
c) | The income generated by cash flow hedges whose effect was recorded in the Consolidated Statement of Changes in Equity as of December 31, 2012 and 2011, is shown below: |
As of December 31 | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Bonds | (1,925 | ) | (1,892 | ) | ||||
Interbank loans | 2,943 | 2,286 | ||||||
Time deposits and other time liabilities | (551 | ) | - | |||||
Variable rate bonds | 4,393 | - | ||||||
Available for sale investments (deposits) | 321 | - | ||||||
Mortgage loans | 134 | - | ||||||
Net flows | 5,315 | 394 |
Since the variable flows for both the hedged element and the hedging element mirror each other, the hedges are nearly 100% effective, which means that the fluctuations of value almost completely offset. As of December 2012 and 2011, MCh$ 46 and MCh$ (23) respectively were recognized in profit and loss for the ineffective portions.
During the period, the Bank did not register in its cash flow hedge accounting portfolio forecast transactions.
d) | Below are the reclassification adjustments of cash flow hedges from other comprehensive income to profit and loss during the period: |
As of December 31 | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Bond hedging derivatives | (863 | ) | (121 | ) | ||||
Interbank loans hedging derivatives | 1,458 | (346 | ) | |||||
Cash flow hedge net income | 595 | (467 | ) |
e) | Hedges of net investment hedges in foreign operations: |
As of December 31, 2012 and 2011, the Bank does not present foreign net investment hedges in its hedge accounting portfolio.
Financial Statements 2012 / Banco Santander Chile 60 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 09
INTERBANK LOANS
a) | At the end of the 2012 and 2011 reporting periods, the balances in the “Interbank loans” item are as follows: |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Domestic banks | ||||||||
Loans and advances to banks | - | - | ||||||
Deposits in the Central Bank of Chile | - | - | ||||||
Non-transferable Chilean Central Bank Bonds | - | - | ||||||
Other Central Bank of Chile loans | - | - | ||||||
Interbank loans | 27 | 647 | ||||||
Overdrafts in checking accounts | - | - | ||||||
Non-transferable domestic bank loans | - | - | ||||||
Other domestic bank loans | - | - | ||||||
Allowances and impairment for domestic bank loans | - | (1 | ) | |||||
Foreign banks | ||||||||
Loans to foreign banks | 90,546 | 87,041 | ||||||
Overdrafts in checking accounts | - | - | ||||||
Non-transferable foreign bank deposits | - | - | ||||||
Other foreign bank loans | - | - | ||||||
Allowances and impairment for foreign bank loans | (46 | ) | (146 | ) | ||||
Total | 90,527 | 87,541 |
b) | The amount in each period for allowances and impairment of interbank loans, which are included in the “Provisions for loan losses” item, is shown below: |
As of December 31, | ||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||
Domestic banks | Foreign banks | Total | Domestic banks | Foreign banks | Total | |||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||
As of January 1 | 1 | 146 | 147 | - | 54 | 54 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | ||||||||||||||||||
Allowances established | - | 299 | 299 | 406 | 194 | 600 | ||||||||||||||||||
Allowances released | (1 | ) | (399 | ) | (400 | ) | (405 | ) | (102 | ) | (507 | ) | ||||||||||||
Total | - | 46 | 46 | 1 | 146 | 147 |
Financial Statements 2012 / Banco Santander Chile 61 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 10
LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS
a) | Loans and accounts receivable from customers |
As of December 31, 2012 and 2011, the composition of the loan portfolio is as follows:
Assets before allowances | Allowances established | |||||||||||||||||||||||||||||||
Normal portfolio | Substandard Portfolio | Default Portfolio | Total | Individual allowances | Group allowances | Total | Net assets | |||||||||||||||||||||||||
As of December 31, 2012 | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||||||||||
Commercial loans | 6,585,063 | 187,762 | 543,592 | 7,316,417 | 108,184 | 83,690 | 191,874 | 7,124,543 | ||||||||||||||||||||||||
Foreign trade loans | 1,220,303 | 28,085 | 22,035 | 1,270,423 | 26,306 | 921 | 27,227 | 1,243,196 | ||||||||||||||||||||||||
Checking accounts debtors | 191,714 | 3,692 | 9,949 | 205,355 | 1,709 | 2,519 | 4,228 | 201,127 | ||||||||||||||||||||||||
Factoring transactions | 317,837 | 869 | 3,536 | 322,242 | 3,538 | 784 | 4,322 | 317,920 | ||||||||||||||||||||||||
Leasing transactions | 1,168,825 | 66,724 | 42,006 | 1,277,555 | 14,985 | 5,987 | 20,972 | 1,256,583 | ||||||||||||||||||||||||
Other loans and accounts receivable | 78,506 | 765 | 17,758 | 97,029 | 213 | 2,037 | 2,250 | 94,779 | ||||||||||||||||||||||||
Subtotals | 9,562,248 | 287,897 | 638,876 | 10,489,021 | 154,935 | 95,938 | 250,873 | 10,238,148 | ||||||||||||||||||||||||
Mortgage loans | ||||||||||||||||||||||||||||||||
Loans with mortgage finance bonds | 88,643 | - | 3,561 | 92,204 | - | 493 | 493 | 91,711 | ||||||||||||||||||||||||
Mortgage mutual loans | 43,690 | - | 2,415 | 46,105 | - | 936 | 936 | 45,169 | ||||||||||||||||||||||||
Other mortgage mutual loans | 4,910,218 | - | 223,054 | 5,133,272 | - | 34,561 | 34,561 | 5,098,711 | ||||||||||||||||||||||||
Leasing transactions | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Subtotals | 5,042,551 | - | 229,030 | 5,271,581 | - | 35,990 | 35,990 | 5,235,591 | ||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||||||||||
Installment consumer loans | 1,502,346 | - | 355,311 | 1,857,657 | - | 218,474 | 218,474 | 1,639,183 | ||||||||||||||||||||||||
Credit card balances | 1,023,776 | - | 30,697 | 1,054,473 | - | 38,719 | 38,719 | 1,015,754 | ||||||||||||||||||||||||
Leasing transactions | 3,433 | - | 255 | 3,688 | - | 160 | 160 | 3,528 | ||||||||||||||||||||||||
Other consumer loans | 192,937 | - | 6,722 | 199,659 | - | 5,906 | 5,906 | 193,753 | ||||||||||||||||||||||||
Subtotals | 2,722,492 | - | 392,985 | 3,115,477 | - | 263,259 | 263,259 | 2,852,218 | ||||||||||||||||||||||||
Total | 17,327,291 | 287,897 | 1,260,891 | 18,876,079 | 154,935 | 395,187 | 550,122 | 18,325,957 |
Financial Statements 2012 / Banco Santander Chile 62 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 10
LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued
Assets before allowances | Allowances established | |||||||||||||||||||||||||||||||
Normal portfolio | Substandard Portfolio | Default Portfolio | Total | Individual allowances | Group allowances | Total | Net assets | |||||||||||||||||||||||||
As of December 31, 2011 | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||||||||||
Commercial loans | 5,903,830 | 170,829 | 527,713 | 6,602,372 | 97,127 | 81,802 | 178,929 | 6,423,443 | ||||||||||||||||||||||||
Foreign trade loans | 971,662 | 31,818 | 38,544 | 1,042,024 | 30,654 | 1,059 | 31,713 | 1,010,311 | ||||||||||||||||||||||||
Checking accounts debtors | 119,178 | 3,455 | 9,750 | 132,383 | 268 | 3,097 | 3,365 | 129,018 | ||||||||||||||||||||||||
Factoring transactions | 181,104 | 5,452 | 2,074 | 188,630 | 3,131 | 822 | 3,953 | 184,677 | ||||||||||||||||||||||||
Leasing transactions | 1,139,799 | 57,023 | 40,853 | 1,237,675 | 15,310 | 6,167 | 21,477 | 1,216,198 | ||||||||||||||||||||||||
Other loans and accounts | 65,793 | 683 | 18,025 | 84,501 | 1,427 | 4,168 | 5,595 | 78,906 | ||||||||||||||||||||||||
Subtotals | 8,381,366 | 269,260 | 636,959 | 9,287,585 | 147,917 | 97,115 | 245,032 | 9,042,553 | ||||||||||||||||||||||||
Mortgage loans | ||||||||||||||||||||||||||||||||
Loans with mortgage finance bonds | 109,790 | - | 4,068 | 113,858 | - | 707 | 707 | 113,151 | ||||||||||||||||||||||||
Mortgage mutual loans | 68,844 | - | 3,034 | 71,878 | - | 1,241 | 1,241 | 70,637 | ||||||||||||||||||||||||
Other mortgage mutual loans | 4,737,333 | - | 192,594 | 4,929,927 | - | 33,685 | 33,685 | 4,896,242 | ||||||||||||||||||||||||
Leasing transactions | - | - | - | - | - | - | - | |||||||||||||||||||||||||
Subtotals | 4,915,967 | - | 199,696 | 5,115,663 | - | 35,633 | 35,633 | 5,080,030 | ||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||||||||||
Installment consumer loans | 1,425,369 | - | 383,225 | 1,808,594 | - | 193,874 | 193,874 | 1,614,720 | ||||||||||||||||||||||||
Credit card balances | 889,303 | - | 31,549 | 920,852 | - | 43,922 | 43,922 | 876,930 | ||||||||||||||||||||||||
Leasing transactions | 3,551 | - | 176 | 3,727 | - | 109 | 109 | 3,618 | ||||||||||||||||||||||||
Other consumer loans | 203,933 | - | 6,740 | 210,673 | - | 5,117 | 5,117 | 205,556 | ||||||||||||||||||||||||
Subtotals | 2,522,156 | - | 421,690 | 2,943,846 | - | 243,022 | 243,022 | 2,700,824 | ||||||||||||||||||||||||
Total | 15,819,489 | 269,260 | 1,258,345 | 17,347,094 | 147,917 | 375,770 | 523,687 | 16,823,407 |
Financial Statements 2012 / Banco Santander Chile 63 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 10
LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued
b) | Portfolio characteristics: |
As of December 31, 2012 and 2011, the portfolio before allowances has the following detail by customer’s economic activity:
Domestic loans (*) | Foreign loans (**) | Total loans | Distribution percentage | |||||||||||||||||||||||||||||
As of December 31 | As of December 31 | As of December 31 | As of December 31 | |||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | % | % | |||||||||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||||||||||
Manufacturing | 1,014,777 | 834,011 | - | - | 1,014,777 | 834,011 | 5.35 | 4.78 | ||||||||||||||||||||||||
Mining | 292,217 | 266,442 | - | - | 292,217 | 266,442 | 1.54 | 1.53 | ||||||||||||||||||||||||
Electricity, gas, and water | 337,269 | 221,039 | - | - | 337,269 | 221,039 | 1.78 | 1.27 | ||||||||||||||||||||||||
Agriculture and livestock | 770,558 | 760,527 | - | - | 770,558 | 760,527 | 4.06 | 4.36 | ||||||||||||||||||||||||
Forest | 120,002 | 89,353 | - | - | 120,002 | 89,353 | 0.63 | 0.51 | ||||||||||||||||||||||||
Fishing | 188,803 | 144,162 | - | - | 188,803 | 144,162 | 1.00 | 0.83 | ||||||||||||||||||||||||
Transport | 511,407 | 473,414 | - | - | 511,407 | 473,414 | 2.70 | 2.72 | ||||||||||||||||||||||||
Communications | 179,544 | 252,528 | - | - | 179,544 | 252,528 | 0.95 | 1.45 | ||||||||||||||||||||||||
Construction | 1,130,194 | 980,797 | - | - | 1,130,194 | 980,797 | 5.96 | 5.63 | ||||||||||||||||||||||||
Commerce | 2,396,428 | 1,916,400 | 90,546 | 87,041 | 2,486,974 | 2,003,441 | 13.11 | 11.49 | ||||||||||||||||||||||||
Services | 400,716 | 384,061 | - | - | 400,716 | 384,061 | 2.11 | 2.20 | ||||||||||||||||||||||||
Other | 3,147,133 | 2,965,498 | - | - | 3,147,133 | 2,965,498 | 16.59 | 17.00 | ||||||||||||||||||||||||
- | ||||||||||||||||||||||||||||||||
Subtotals | 10,489,048 | 9,288,232 | 90,546 | 87,041 | 10,579,594 | 9,375,273 | 55.78 | 53.77 | ||||||||||||||||||||||||
Mortgage loans | 5,271,581 | 5,115,663 | - | - | 5,271,581 | 5,115,663 | 27.79 | 29.35 | ||||||||||||||||||||||||
Consumer loans | 3,115,477 | 2,943,846 | - | - | 3,115,477 | 2,943,846 | 16.43 | 16.88 | ||||||||||||||||||||||||
Total | 18,876,106 | 17,347,741 | 90,546 | 87,041 | 18,966,652 | 17,434,782 | 100.00 | 100.00 |
(*) | Includes foreign loans for MCh$ 27 as of December 31, 2012 (MCh$ 647 as of December 31, 2011), see Note 9. |
(**) | Includes foreign loans for MCh$90,546 as of December 31, 2012 (MCh$ 87,041 as of December 31, 2011), see Note 9. |
Financial Statements 2012 / Banco Santander Chile 64 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 10
LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued
c) | Impaired Portfolio (*) |
i) | As of December 31, 2012 and 2011, the composition of the impaired portfolio is as follows: |
As of December 31, | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Commercial | Mortgage | Consumer | Total | Commercial | Mortgage | Consumer | Total | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Individual impaired portfolio | 298,868 | - | - | 298,868 | 285,930 | - | - | 285,930 | ||||||||||||||||||||||||
Non-performing loans | 320,461 | 159,802 | 117,504 | 597,767 | 251,881 | 152,911 | 106,565 | 511,357 | ||||||||||||||||||||||||
Other impaired portfolio | 96,793 | 69,228 | 275,481 | 441,502 | 164,158 | 46,785 | 315,125 | 526,068 | ||||||||||||||||||||||||
Total | 716,122 | 229,030 | 392,985 | 1,338,137 | 701,969 | 199,696 | 421,690 | 1,323,355 |
(*) Impaired portfolio includes loans classified as substandard in groups B3 and B4, as well as the default portfolio.
ii) | The impaired portfolio with or without guarantee as of December 31, 2012 and 2011 is as follows: |
As of December 31, | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Commercial | Mortgage | Consumer | Total | Commercial | Mortgage | Consumer | Total | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Secured debt | 377,169 | 208,616 | 51,549 | 637,334 | 376,864 | 183,657 | 58,335 | 618,856 | ||||||||||||||||||||||||
Unsecured debt | 338,953 | 20,414 | 341,436 | 700,803 | 325,105 | 16,039 | 363,355 | 704,499 | ||||||||||||||||||||||||
Total | 716,122 | 229,030 | 392,985 | 1,338,137 | 701,969 | 199,696 | 421,690 | 1,323,355 |
iii) | The portfolio of past due (90-day non-performing or more) loans as of December 31 2012 and 2011 is as follows: |
As of December 31, | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Commercial | Mortgage | Consumer | Total | Commercial | Mortgage | Consumer | Total | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Secured debt | 154,675 | 143,814 | 8,293 | 306,782 | 116,201 | 138,234 | 9,920 | 264,355 | ||||||||||||||||||||||||
Unsecured debt | 165,786 | 15,988 | 109,211 | 290,985 | 135,680 | 14,677 | 96,645 | 247,002 | ||||||||||||||||||||||||
Total | 320,461 | 159,802 | 117,504 | 597,767 | 251,881 | 152,911 | 106,565 | 511,357 |
Financial Statements 2012 / Banco Santander Chile 65 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 10
LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued
d) | Allowances |
The allowance activities in the 2012 and 2011 years are as follows:
Commercial loans | Mortgage loans | Consumer loans | ||||||||||||||||||
Individual | Group | Group | Group | Total | ||||||||||||||||
2012 Activities | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Balances as of December 31, 2011 | 147,917 | 97,115 | 35,633 | 243,022 | 523,687 | |||||||||||||||
Allowances established | 48,745 | 31,772 | 10,741 | 239,607 | 330,865 | |||||||||||||||
Allowances released | (20,716 | ) | (16,624 | ) | (7,449 | ) | (38,471 | ) | (83,260 | ) | ||||||||||
Allowance release due to loan charge-off | (21,011 | ) | (16,325 | ) | (2,935 | ) | (180,899 | ) | (221,170 | ) | ||||||||||
Balances as of December 31, 2012 | 154,935 | 95,938 | 35,990 | 263,259 | 550,122 |
Commercial loans | Mortgage loans | Consumer loans | ||||||||||||||||||
Individual | Group | Group | Group | Total | ||||||||||||||||
2011 Activities | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Balances as of December 31, 2011 | 152,748 | 85,942 | 17,332 | 225,559 | 481,581 | |||||||||||||||
Allowances established | 51,969 | 72,601 | 27,406 | 184,488 | 336,464 | |||||||||||||||
Allowances released | (41,741 | ) | (26,582 | ) | (7,645 | ) | (25,185 | ) | (101,153 | ) | ||||||||||
Allowance release due to loan charge-off | (15,059 | ) | (34,846 | ) | (1,460 | ) | (141,840 | ) | (193,205 | ) | ||||||||||
Balances as of December 31, 2011 | 147,917 | 97,115 | 35,633 | 243,022 | 523,687 |
In addition to credit risk allowances, there are allowances held for:
i) | Country risk to cover the risk taken when holding or commiting resources with any foreign country. These allowances are established over country classifications performed by the Bank, according to the provisions established on Chapter 7-13 of the Updated Regulations Compendium. The balance of established allowances as of December 31, 2012 and 2011 totals MCh$ 88 and MCh$ 19, respectively. |
ii) | According to Circular letter 3489 from the SBIF on December 29, 2009 the Bank has established allowances related to the unused balances of lines of credit with free disposal. The balance of established allowances for this concept as of December 31, 2012 and 2011 totals MCh$ 17,850 and MCh$ 17,473, respectively. |
They are both recorded as liabilities, specifically under Provisions (Note 22).
e) | Allowances established |
As of December 31 | ||||||||
2012 | 2011 | |||||||
Customer loans | 330,865 | 336,465 | ||||||
Interbank loans | 299 | 600 | ||||||
Total | 331,164 | 337,065 |
Financial Statements 2012 / Banco Santander Chile 66 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 10
LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued
f) | Loan portfolio by impairment and non-impairment status. |
As of December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||
Non-impaired | Impaired | Portfolio total | ||||||||||||||||||||||||||||||||||||||||||||||
Commercial | Mortgage | Consumer | Non- impaired total | Commercial | Mortgage | Consumer | Impaired total | Commercial | Mortgage | Consumer | Total portfolio | |||||||||||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||||||||||
Current or standard portfolio | 9,500,231 | 4,725,955 | 2,511,869 | 16,738,055 | 273,481 | 43,502 | 160,480 | 477,463 | 9,773,712 | 4,769,457 | 2,672,349 | 17,215,518 | ||||||||||||||||||||||||||||||||||||
1 to 29 days of default | 195,667 | 202,142 | 132,475 | 530,284 | 63,868 | 18,391 | 60,055 | 142,314 | 259,535 | 220,533 | 192,530 | 672,598 | ||||||||||||||||||||||||||||||||||||
30 to 89 days of default | 77,001 | 114,454 | 78,148 | 269,603 | 75,659 | 34,240 | 68,316 | 178,215 | 152,660 | 148,694 | 146,464 | 447,818 | ||||||||||||||||||||||||||||||||||||
90 or more days of default | - | - | - | - | 303,114 | 132,897 | 104,134 | 540,145 | 303,114 | 132,897 | 104,134 | 540,145 | ||||||||||||||||||||||||||||||||||||
Total portfolio before allowances | 9,772,899 | 5,042,551 | 2,722,492 | 17,537,942 | 716,122 | 229,030 | 392,985 | 1,338,137 | 10,489,021 | 5,271,581 | 3,115,477 | 18,876,079 | ||||||||||||||||||||||||||||||||||||
Default loans (less than 90 days) presented as portfolio percentage | 2.79 | % | 6.28 | % | 7.74 | % | 4.56 | % | 19.48 | % | 22.98 | % | 32.67 | % | 23.95 | % | 3.93 | % | 7.00 | % | 10.88 | % | 5.94 | % | ||||||||||||||||||||||||
Default loans (over 90 days) presented as portfolio percentage | - | - | - | - | 42.33 | % | 58.03 | % | 26.50 | % | 40.37 | % | 2.89 | % | 2.52 | % | 3.34 | % | 2.86 | % |
Financial Statements 2012 / Banco Santander Chile 67 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 10
LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued
g) | Loan portfolio by impairment and non-impairment status, continued. |
As of December 31, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||
Non-impaired | Impaired | Portfolio total | ||||||||||||||||||||||||||||||||||||||||||||||
Commercial | Mortgage | Consumer | Non-impaired total | Commercial | Mortgage | Consumer | Impaired total | Commercial | Mortgage | Consumer | Total portfolio | |||||||||||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||||||||||
Current or standard portfolio | 8,404,128 | 4,632,605 | 2,336,453 | 15,373,186 | 337,536 | 32,089 | 184,057 | 553,682 | 8,741,664 | 4,664,694 | 2,520,510 | 15,926,868 | ||||||||||||||||||||||||||||||||||||
1 to 29 days of default | 124,374 | 165,142 | 113,237 | 402,753 | 49,682 | 10,298 | 58,590 | 118,570 | 174,056 | 175,440 | 171,827 | 521,323 | ||||||||||||||||||||||||||||||||||||
30 to 89 days of default | 57,114 | 118,220 | 72,466 | 247,800 | 76,263 | 36,847 | 84,118 | 197,228 | 133,377 | 155,067 | 156,584 | 445,028 | ||||||||||||||||||||||||||||||||||||
90 or more days of default | - | - | - | - | 238,488 | 120,462 | 94,925 | 453,875 | 238,488 | 120,462 | 94,925 | 453,875 | ||||||||||||||||||||||||||||||||||||
Total portfolio before allowances | 8,585,616 | 4,915,967 | 2,522,156 | 16,023,739 | 701,969 | 199,696 | 421,690 | 1,323,355 | 9,287,585 | 5,115,663 | 2,943,846 | 17,347,094 | ||||||||||||||||||||||||||||||||||||
Default loans (less than 90 days) presented as portfolio percentage | 2.11 | % | 5.76 | % | 7.36 | % | 4.06 | % | 17.94 | % | 23.61 | % | 33.84 | % | 23.86 | % | 3.31 | % | 6.46 | % | 11.16 | % | 5.57 | % | ||||||||||||||||||||||||
Default loans (over 90 days) presented as portfolio percentage | - | - | - | - | 33.97 | % | 60.32 | % | 22.51 | % | 34.30 | % | 2.57 | % | 2.35 | % | 3.22 | % | 2.62 | % |
Financial Statements 2012 / Banco Santander Chile 68 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 11
PURCHASES AND SALES OF LOANS
a) | Sales of portfolios |
i) As of December 31, 2012 the following loan sale transactions have been made:
As of December 31, 2012 | ||||||||||||||||
Book value | Selling price | Reserve fund | Effect on income | |||||||||||||
Loans | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||
Charged-off (1) | - | 2,608 | 518 | 2,090 | ||||||||||||
Current mortgage (2) | 17,808 | 18,587 | - | 779 | ||||||||||||
Current commercial (3) | 5,689 | 7,655 | - | 1,966 |
(1) Sale of previously charged-off loans
In 2012, Banco Santander Chile signed assignment agreements of loans previously charged off with “Fondo de Inversiones Cantábrico.” These were the sales:
Nominal portfolio sale | Nominal | Selling | ||||||||||||||
Date of | Commercial | Consumer | portfolio sale | price | ||||||||||||
contract | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||
01-24-2012 | 603 | 12,527 | 13,130 | 853 | ||||||||||||
02-21-2012 | 411 | 12,946 | 13,357 | 868 | ||||||||||||
03-20-2012 | 412 | 13,226 | 13,638 | 887 | ||||||||||||
Total | 1,426 | 38,699 | 40,125 | 2,608 |
The gain on sale was MCh$ 2,090. This amount was recorded entirely as income from Sale of previously charged-off loans under “Income from financial transactions”. See Note 30.
(2) Sales of current mortgage loans
In 2012, Banco Santander Chile signed assignment agreements of mortgage loans with “Metlife Chile Seguros de Vida S.A.” These were the sales:
Date of | Book value | Selling price (*) | Effect on income | |||||||||
contract | MCh$ | MCh$ | MCh$ | |||||||||
01-19-2012 | 9,032 | 9,349 | 317 | |||||||||
02-02-2012 | 7,849 | 8,250 | 401 | |||||||||
08-13-2012 | 927 | 988 | 61 | |||||||||
Total | 17,808 | 18,587 | 779 |
(*) | Sales of current mortgage loans totaled MCh$ 18,587; this amount roughly equals UF 813,764.87 and was recorded under “Income from financial transactions”. See Note 30. |
Financial Statements 2012 / Banco Santander Chile 69 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 11
PURCHASES AND SALES OF LOANS, continued
(3) Sales of current commercial loans
In 2012, Banco Santander Chile signed assignment agreements of current loans related to funding higher education. As of December 31 the following portfolio sales have been carried out:
Date of | Book value | Selling price (*) | Effect on income | |||||||||
contract | MCh$ | MCh$ | MCh$ | |||||||||
12-27-2012 | 5,689 | 7,655 | 1,966 | |||||||||
Total | 5,689 | 7,655 | 1,966 |
(*) | Sales of current commercial loans totaled MCh$ 7,655; this amount roughly equals UF 335,130.58 and was recorded under “Income from financial transactions.” See Note 30. |
ii) In 2011 the following loan sales transactions were conducted:
As of December 31, 2011 | ||||||||||||||||
Book value | Selling price | Reserve fund | Effect on income | |||||||||||||
Loans | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||
Charged-off(1) | - | 8,180 | 856 | 7,324 | ||||||||||||
Current (2). | 6,630 | 8,998 | - | 2,368 |
(1) Sale of charged-off loans
In 2011, Banco Santander Chile signed assignment agreements of loans previously charged off with “Fondo de Inversiones Cantábrico.” As of December 31 the following portfolio sales have been carried out:
Nominal portfolio sale | Nominal | |||||||||||||||
Date of | Commercial | Consumer | portfolio sale | Selling price | ||||||||||||
contract | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||
20-01-2011 | 888 | 8,222 | 9,110 | 592 | ||||||||||||
23-02-2011 | 774 | 6,802 | 7,576 | 492 | ||||||||||||
23-03-2011 | 969 | 6,958 | 7,927 | 507 | ||||||||||||
26-04-2011 | 768 | 6,386 | 7,154 | 465 | ||||||||||||
25-05-2011 | 990 | 6,611 | 7,601 | 494 | ||||||||||||
22-06-2011 | 805 | 7,676 | 8,481 | 551 | ||||||||||||
26-07-2011 | 930 | 9,207 | 10,137 | 659 | ||||||||||||
24-08-2011 | 2,351 | 10,221 | 12,572 | 817 | ||||||||||||
22-09-2011 | 664 | 14,745 | 15,409 | 1,002 | ||||||||||||
27-10-2011 | 716 | 12,702 | 13,418 | 872 | ||||||||||||
22-11-2011 | 476 | 10,898 | 11,374 | 739 | ||||||||||||
26-12-2011 | 762 | 14,462 | 15,224 | 990 | ||||||||||||
Total | 11,093 | 114,890 | 125,983 | 8,180 |
The portfolio’s result was MCh$ 7,324. This amount was recorded entirely as income from Sale of previously charged-off loans.
Financial Statements 2012 / Banco Santander Chile 70 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 11
PURCHASES AND SALES OF LOANS, continued
(2) Sales of current loans
In 2011, Banco Santander Chile signed assignment agreements of current loans related to financing higher education. As of December 31, the following portfolio sales have been carried out:
Book value | Selling price (*) | Effect on income | ||||||||||
Date of contract | MCh$ | MCh$ | MCh$ | |||||||||
As of December 31, 2011 | 6,630 | 8,998 | 2,368 | |||||||||
Total | 6,630 | 8,998 | 2,368 |
(*) Sales of current mortgage loans totaled MCh$ 8,998; this amount roughly equals UF 405,925.69.
b) | Purchase of portfolios |
i) | In 2012, there has been no purchase of loans. |
ii) | In 2011 the following loan trading operations were conducted: |
In 2011, Banco Santander Chile purchased allocation portfolios (loans granted to Chilean companies) from its head office and other companies under common control for a total of approximately USD 971.0 million, detailed as follows:
- | Purchase to Banco Santander S.A. (Parent Company) located in Spain. The sale amount totaled USD 318.5 million (MCh $ 166,065 approx.); said value corresponds to the fair value of the loans, established by independent third parties. |
- | Purchase to Banco Santander U.K. (corporation under common control), located in England. The sale amount totaled USD 526.4 million (MCh $ 274,496 approx.); said value corresponds to the fair value of the loans, established by independent third parties. |
- | Purchase to Banco Santander New York (corporation under common control), located in the USA. The sale amount totaled USD 126.1 million (MCh $ 65,770 approx.); said value corresponds to the fair value of the loans, established by independent third parties. |
- | As of December 31, 2011 the book amount of current operations is approximately USD 406.6 million (MCh $ 211,574 approximately). |
Financial Statements 2012 / Banco Santander Chile 71 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 12
AVAILABLE FOR SALE INSTRUMENTS
As of December 31, 2012 and 2011, the detail of the instruments deemed as available for sale investments is as follows:
As of December 31, | ||||||||
2012 MCh$ | 2011 MCh$ | |||||||
Chilean Central Bank and Government securities | ||||||||
Chilean Central Bank Bonds | 712,278 | 570,573 | ||||||
Chilean Central Bank Notes | 8,270 | 563,114 | ||||||
Other Chilean Central Bank and Government securities | 296,010 | 173,839 | ||||||
Subtotals | 1,016,558 | 1,307,526 | ||||||
Other Chilean securities | ||||||||
Time deposits in Chilean financial institutions | 756,136 | 275,022 | ||||||
Mortgage finance bonds of Chilean financial institutions | 37,319 | 66,806 | ||||||
Chilean financial institution bonds | - | - | ||||||
Chilean corporate bonds | - | - | ||||||
Other Chilean securities | 321 | 319 | ||||||
Subtotals | 793,776 | 342,147 | ||||||
Foreign financial securities: | ||||||||
Foreign Central Banks and Government securities | - | - | ||||||
Other foreign financial securities | 15,824 | 11,638 | ||||||
Subtotals | 15,824 | 11,638 | ||||||
Total | 1,826,158 | 1,661,311 |
Chilean Central Bank and Government securities include instruments sold to customers and financial institutions under repurchase agreements totaling MCh$ 156,340 and MCh$ 273,323 as of December 31, 2012 and 2011, respectively.
Other Chilean securities include instruments sold to customers and financial institutions under repurchase agreements totaling MCh$ 148,277 and MCh$ 246,224 December 31, 2012 and 2011, respectively.
Financial Statements 2012 / Banco Santander Chile 72 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 12
AVAILABLE FOR SALE INSTRUMENTS, continued:
As of December 31, 2012 available for sale investments included unrealized net losses of Ch$ 10,017 million, recorded as a “Valuation adjustment” in Equity, distributed between Ch$ 10,041 million attributable to Bank shareholders and Ch$ 24 million attributable to non-controlling interest.
As of December 31, 2011 available for sale investments included unrealized net profits of MCh$ 3,043, recorded as a “Valuation adjustment” in Equity, distributed between MCh$ 3,077 of profits attributable to Bank shareholders and MCh$ 34 of losses attributable to non-controlling interest.
Realized profit and losses are established using the sales procedure minus costs (specific identification method) of the investments identified for sale. Additionally, any unrealized gain or losses recorded is reversed against income statement.
Gross profits and losses realized on the sale of available for sale investments as of December 31, 2012 and 2011, are as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Sale date of available for sale investments generating realized profits | 4,886,706 | 3,883,812 | ||||||
Realized profits | 2,574 | 4,959 | ||||||
Sale of available for sale investments generating realized losses | 665,779 | 1,359,177 | ||||||
Realized losses | 503 | 7,922 |
The Bank checked the unrealized instruments with loss as of December 31, 2012 and 2011 and concludes they were not significant or prolonged. This review consisted of evaluating the economic reasons for any declines, the credit ratings of the securities’ issuers and the Bank’s intention and ability to hold the securities until the unrealized loss is recovered. Based on this analysis, the Bank believes that there were no other than temporary impairments in its investment portfolio, since most of the decline in fair value of these securities was caused by market conditions which the Bank considers not be significant or pronlonged. All of the instruments that have unrealized losses as of December 31, 2012 and 2011, were in a continuous unrealized loss position for less than one year.
The unrealized gains and losses arising from available for sale investments as of December 31, 2012 and 2011 are as follows:
Financial Statements 2012 / Banco Santander Chile 73 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 12
AVAILABLE FOR SALE INSTRUMENTS, continued:
The following charts show the available for sale investments in unrealized profit (loss) as of December 31, 2012 and 2011.
As of December 31, 2012:
Under 12 months | Over 12 months | Total | ||||||||||||||||||||||||||||||||||||||||||||||
Carrying amount | Fair value | Unrealized profit | Unrealized loss | Carrying Amount | Fair value | Unrealized profit | Unrealized loss | Carrying amount | Fair value | Unrealized profit | Unrealized loss | |||||||||||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||||||||||
Chilean Central Bank and Government securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Chilean Central Bank Bonds | 720,198 | 712,278 | 362 | (8,282 | ) | - | - | - | - | 720,198 | 712,278 | 362 | (8,282 | ) | ||||||||||||||||||||||||||||||||||
Chilean Central Bank Notes | 8,408 | 8,270 | - | (138 | ) | - | - | - | - | 8,408 | 8,270 | - | (138 | ) | ||||||||||||||||||||||||||||||||||
Other Chilean Central Bank and Government securities | 297,863 | 296,010 | 521 | (2,374 | ) | - | - | - | - | 297,863 | 296,010 | 521 | (2,374 | ) | ||||||||||||||||||||||||||||||||||
Subtotals | 1,026,469 | 1,016,558 | 883 | (10,794 | ) | - | - | - | - | 1,026,469 | 1,016,558 | 883 | (10,794 | ) | ||||||||||||||||||||||||||||||||||
Other Chilean securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Time deposits in Chilean financial institutions | 755,903 | 756,136 | 498 | (265 | ) | - | - | - | - | 755,903 | 756,136 | 498 | (265 | ) | ||||||||||||||||||||||||||||||||||
Mortgage finance bonds of Chilean financial institutions | 37,925 | 37,319 | 71 | (677 | ) | - | - | - | - | 37,925 | 37,319 | 71 | (677 | ) | ||||||||||||||||||||||||||||||||||
Chilean financial institution bonds | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Chilean corporate bonds | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Other Chilean securities | 320 | 321 | 1 | - | - | - | - | - | 320 | 321 | 1 | - | ||||||||||||||||||||||||||||||||||||
Subtotals | 794,148 | 793,776 | 570 | (942 | ) | - | - | - | - | 794,148 | 793,776 | 570 | (942 | ) | ||||||||||||||||||||||||||||||||||
Foreign financial securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Central Banks and Government securities | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Other foreign financial securities | 15,558 | 15,824 | 266 | - | - | - | - | - | 15,558 | 15,824 | 266 | - | ||||||||||||||||||||||||||||||||||||
Subtotals | 15,558 | 15,824 | 266 | - | - | - | - | - | 15,558 | 15,824 | 266 | - | ||||||||||||||||||||||||||||||||||||
Total | 1,836,175 | 1,826,158 | 1,719 | (11,736 | ) | - | - | - | - | 1,836,175 | 1,826,158 | 1,719 | (11,736 | ) |
Financial Statements 2012 / Banco Santander Chile 74 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 12
AVAILABLE FOR SALE INSTRUMENTS, continued:
As of December 31, 2011:
Under 12 months | Over 12 months | Total | ||||||||||||||||||||||||||||||||||||||||||||||
Carrying amount | Fair value | Unrealized profit | Unrealized loss | Carrying Amount | Fair value | Unrealized profit | Unrealized loss | Carrying amount | Fair value | Unrealized profit | Unrealized loss | |||||||||||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||||||||||
Chilean Central Bank and Government securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Chilean Central Bank Bonds | 571,340 | 570,573 | 2,397 | (3,164 | ) | - | - | - | - | 571,340 | 570,573 | 2,397 | (3,164 | ) | ||||||||||||||||||||||||||||||||||
Chilean Central Bank Notes | 563,293 | 563,114 | 303 | (482 | ) | - | - | - | - | 563,293 | 563,114 | 303 | (482 | ) | ||||||||||||||||||||||||||||||||||
Other Chilean Central Bank and Government securities | 170,802 | 173,839 | 3,054 | (17 | ) | - | - | - | - | 170,802 | 173,839 | 3,054 | (17 | ) | ||||||||||||||||||||||||||||||||||
Subtotals | 1,305,435 | 1,307,526 | 5,754 | (3,663 | ) | - | - | - | - | 1,305,435 | 1,307,526 | 5,754 | (3,663 | ) | ||||||||||||||||||||||||||||||||||
Other Chilean securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Time deposits in Chilean financial institutions | 274,959 | 275,022 | 66 | (3 | ) | - | - | - | - | 274,959 | 275,022 | 66 | (3 | ) | ||||||||||||||||||||||||||||||||||
Mortgage finance bonds of Chilean financial institutions | 66,341 | 66,806 | 1,123 | (658 | ) | - | - | - | - | 66,341 | 66,806 | 1,123 | (658 | ) | ||||||||||||||||||||||||||||||||||
Chilean financial institution bonds | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Chilean corporate bonds | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Other Chilean securities | 315 | 319 | 4 | - | - | - | - | - | 315 | 319 | 4 | - | ||||||||||||||||||||||||||||||||||||
Subtotals | 341,615 | 342,147 | 1,193 | (661 | ) | - | - | - | - | 341,615 | 342,147 | 1,193 | (661 | ) | ||||||||||||||||||||||||||||||||||
Foreign financial securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Central Banks and Government securities | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Other foreign financial securities | 11,218 | 11,638 | 420 | - | - | - | - | - | 11,218 | 11,638 | 420 | - | ||||||||||||||||||||||||||||||||||||
Subtotals | 11,218 | 11,638 | 420 | - | - | - | - | - | 11,218 | 11,638 | 420 | - | ||||||||||||||||||||||||||||||||||||
Total | 1,658,268 | 1,661,311 | 7,367 | (4,324 | ) | - | - | - | - | 1,658,268 | 1,661,311 | 7,367 | (4,324 | ) |
Financial Statements 2012 / Banco Santander Chile 75 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 13
INVESTMENTS IN OTHER COMPANIES
a) | The Consolidated Statements of Financial Position reflects investments in other companies amounting to MCh$ 7,614 as of December 31, 2012, MCh$ 8,728 as of December 31, 2011, as shown in the following table: |
Investment | ||||||||||||||||||||||||
Ownership interest | Investment value | Income | ||||||||||||||||||||||
As of December 31 | As of December 31 | for the year ended December 31 | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
% | % | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||
Company | ||||||||||||||||||||||||
Centro de Compensación Automatizado | 33.33 | 33.33 | 548 | 432 | 116 | 105 | ||||||||||||||||||
Redbanc S.A. (1) | 33.43 | 33.43 | 1,374 | 1,929 | (199 | ) | 323 | |||||||||||||||||
Transbank S.A. (2) | 25.00 | 32.71 | 1,607 | 2,092 | 306 | 391 | ||||||||||||||||||
Sociedad Interbancaria de Depósito de Valores S.A. | 29.28 | 29.28 | 501 | 461 | 86 | 58 | ||||||||||||||||||
Sociedad Nexus S.A. | 12.90 | 12.90 | 1,106 | 941 | 278 | 114 | ||||||||||||||||||
Administrador Financiero del Transantiago S.A. (3) | 20.00 | 20.00 | 1,215 | 1,742 | (527 | ) | 966 | |||||||||||||||||
Cámara de Compensación de Alto Valor S.A. (4) | 14.14 | 12.65 | 678 | 526 | 114 | 91 | ||||||||||||||||||
Subtotals | 7,029 | 8,123 | 174 | 2,048 | ||||||||||||||||||||
Shares or rights in other companies | ||||||||||||||||||||||||
Bladex | - | - | 136 | 136 | 13 | 10 | ||||||||||||||||||
Bolsas de Comercio | - | - | 417 | 417 | 80 | 82 | ||||||||||||||||||
Others | - | - | 32 | 52 | - | - | ||||||||||||||||||
Total | - | - | 7,614 | 8,728 | 267 | 2,140 |
(1) | Losses arising from these investments were mainly due to the charge-off of Accounts receivable from Banco Estado that were billed for brand usage, and were under arbitration procedures. On May 31, 2012, the arbitrating judge determined that those amount are not in accordance with contractual term, therefore that account receivable was charged-off, with a MCh$ 1,176 impact on income. |
(2) | In July 2012, Banco Santander Chile sold 3,628,154 shares from the Sociedad de apoyo Transbank S.A, decreasing its share from 32.71% to 25%. The transaction amount totaled MCh$ 1,000 and the investment’s accounting value was MCh$ 401, creating a MCh$ 599 profit, recorded under other income. See Note 36. |
(3) | Losses arising from this investment were mainly due to the end of the renegotiation process with the Ministry of Transport and Telecommunications of our current service contract. We signed a complementary contract of “Mutual Termination of Contract” for the “Providing of complementary financial administration services of the Santiago Public Transportation System resources”. Due to the latter, AFT had to adjust its income, charging profit and loss in 2012 for MCh$ 7,177. |
(4) | In August 2012, Banco Santander Chile bought 144 shares from Sociedad Operadora de la Cámara de Compensación de pagos de Alto Valor S.A through Banco Scotiabank Chile, increasing its share from 12.65% to 14.44%. The purchase value was MCh$ 61 million. |
b) | Investments in associates and other companies do not have market prices. |
c) | Summary of financial information of associates, 2012 and 2011: |
As of and for the years ended December 31 | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Assets | Liabilities | Capital | Net income | Assets | Liabilities | Capital | Net income | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Centro de Compensación Automatizado | 2,014 | 405 | 1,263 | 346 | 1,586 | 334 | 937 | 315 | ||||||||||||||||||||||||
Redbanc S.A. | 15,973 | 11,863 | 4,706 | (596 | ) | 15,009 | 9,529 | 4,515 | 965 | |||||||||||||||||||||||
Transbank S.A. | 316,881 | 310,576 | 5,076 | 1,224 | 277,424 | 271,150 | 5,080 | 1,194 | ||||||||||||||||||||||||
Sociedad Interbancaria de Depósito de Valores S.A. | 1,714 | 4 | 1,415 | 295 | 1,576 | 53 | 1,179 | 344 | ||||||||||||||||||||||||
Sociedad Nexus S.A. | 14,439 | 8,027 | 4,256 | 2,156 | 14,534 | 8,122 | 5,250 | 1,162 | ||||||||||||||||||||||||
Administrador Financiero del Transantiago S.A. | 81,017 | 74,940 | 8,714 | (2,637 | ) | 70,023 | 61,309 | 3,883 | 4,831 | |||||||||||||||||||||||
Cámara de Compensación de Alto Valor S.A. | 5,109 | 772 | 3,631 | 706 | 4,498 | 703 | 3,073 | 722 | ||||||||||||||||||||||||
Total | 437,147 | 406,587 | 29,061 | 1,494 | 384,650 | 351,200 | 23,917 | 9,533 |
Financial Statements 2012 / Banco Santander Chile 76 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 13
INVESTMENTS IN OTHER COMPANIES, continued:
d) | Restrictions over the ability of associated companies to transfer funds to investors. |
There are no significant restrictions regarding the capacity of associates to transfer funds, whether in cash dividends or refund of loans or advance payments to the Bank.
e) | Activity with respect to investments in other companies during 2012 and 2011 is as follows: |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Initial book value | 8,728 | 7,275 | ||||||
Acquisition of equity (*) | 61 | - | ||||||
Sale of equity (**) | (401 | ) | - | |||||
Participation in income | 267 | 2,140 | ||||||
Dividends received (***) | (690 | ) | (795 | ) | ||||
Other equity adjustments | (351 | ) | 108 | |||||
Total | 7,614 | 8,728 |
(*) | See letter a), reference (4) |
(**) | See letter a), reference (2) |
(***) | It does not include those dividends received by investments accounted at lower value, for MCh$ 206. |
Financial Statements 2012 / Banco Santander Chile 77 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 14
INTANGIBLE ASSETS
a) | As of December 31, 2012 and 2011, the composition of the item is as follows: |
2012 | ||||||||||||||||||||||||
Years of Useful life | Remaining useful life average | Net opening balance January 1, 2012 | Gross balance | Accumulated amortization | Net balance | |||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||
Licenses | 3 | 2 | 2,496 | 9,329 | (6,708 | ) | 2,621 | |||||||||||||||||
Software development | 3 | 2 | 78,243 | 224,671 | (139,945 | ) | 84,726 | |||||||||||||||||
Total | 80,739 | 234,000 | (146,653 | ) | 87,347 |
2011 | ||||||||||||||||||||||||
Years of Useful Life | Remaining useful life average | Net opening balance January 1, 2011 | Gross balance | Accumulated amortization | Net balance | |||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||
Licenses | 3 | 2 | 2,108 | 8,085 | (5,589 | ) | 2,496 | |||||||||||||||||
Software development | 3 | 1,8 | 75,882 | 184,133 | (105,890 | ) | 78,243 | |||||||||||||||||
Total | 77,990 | 192,218 | (111,479 | ) | 80,739 |
b) | The activity in intangible assets during 2012 and 2011 is as follows: |
b.1) Gross balance
Gross balances | Licenses | Software development (acquired) | Total | |||||||||
MCh$ | MCh$ | MCh$ | ||||||||||
Balances as of January 1, 2012 | 8,085 | 184,133 | 192,218 | |||||||||
Acquisitions | 1,244 | 41,018 | 42,262 | |||||||||
Disposals | - | (480 | ) | (480 | ) | |||||||
Other | - | - | - | |||||||||
Balances as of December 31, 2012 | 9,329 | 224,671 | 234,000 | |||||||||
Balances as of January 1, 2011 | 6,229 | 150,090 | 156,319 | |||||||||
Acquisitions | 1,856 | 32,195 | 34,051 | |||||||||
Disposals | - | (409 | ) | (409 | ) | |||||||
Other | - | 2,257 | 2,257 | |||||||||
Balances as of December 31, 2011 | 8,085 | 184,133 | 192,218 |
Financial Statements 2012 / Banco Santander Chile 78 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 14
INTANGIBLE ASSETS, continued
b.2) Accumulated amortization
Accumulated amortization | Licenses | Software development (acquired) | Total | |||||||||
MCh$ | MCh$ | MCh$ | ||||||||||
Balances as of January 1, 2012 | (5,589 | ) | (105,890 | ) | (111,479 | ) | ||||||
Amortization for the period | (1,119 | ) | (34,055 | ) | (35,174 | ) | ||||||
Other changes | - | - | - | |||||||||
Balances as of December 31, 2012 | (6,708 | ) | (139,945 | ) | (146,653 | ) | ||||||
Balances as of January 1, 2011 | (4,121 | ) | (74,208 | ) | (78,329 | ) | ||||||
Amortization for the period | (1,468 | ) | (31,625 | ) | (33,093 | ) | ||||||
Other changes | - | (57 | ) | (57 | ) | |||||||
Balances as of December 31, 2011 | (5,589 | ) | (105,890 | ) | (111,479 | ) |
c) | As of December 31, 2012 and 2011, the Bank does not have any restriction on intangible assets. Additionally, intangible assets have not been pledged as security for liabilities. |
Financial Statements 2012 / Banco Santander Chile 79 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 15
PROPERTY, PLANT, AND EQUIPMENT
a) | As of December 31, 2012 and 2011, the composition of the item is as follows: |
2012 | ||||||||||||||||
Net opening balance January 1, 2012 | Gross balance | Accumulated depreciation | Net balance | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Land and buildings | 118,493 | 167,760 | (47,335 | ) | 120,425 | |||||||||||
Equipment | 22,570 | 66,170 | (37,545 | ) | 28,625 | |||||||||||
Ceded under operating leases | 4,071 | 4,477 | (542 | ) | 3,935 | |||||||||||
Other | 7,925 | 28,957 | (19,728 | ) | 9,229 | |||||||||||
Total | 153,059 | 267,364 | (105,150 | ) | 162,214 |
2011 | ||||||||||||||||
Net opening balance January 1, 2011 | Gross balance | Accumulated depreciation | Net balance | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Land and buildings | 126,550 | 156,950 | (38,457 | ) | 118,493 | |||||||||||
Equipment | 20,346 | 51,781 | (29,211 | ) | 22,570 | |||||||||||
Ceded under operating leases | 1,802 | 4,477 | (406 | ) | 4,071 | |||||||||||
Other | 6,287 | 24,081 | (16,156 | ) | 7,925 | |||||||||||
Total | 154,985 | 237,289 | (84,230 | ) | 153,059 |
Financial Statements 2012 / Banco Santander Chile 80 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 15
PROPERTY, PLANT, AND EQUIPMENT, continued:
b) | The activity in property, plant, and equipment during 2012 and 2011 is as follows: |
b.1) Gross balance
2012 | Land and buildings | Equipment | Ceded under an operating leases | Other | Total | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Balances as of January 1, 2012 | 156,950 | 51,781 | 4,477 | 24,081 | 237,289 | |||||||||||||||
Additions | 17,177 | 14,570 | - | 4,991 | 36,738 | |||||||||||||||
Disposals (i) | (6,367 | ) | (91 | ) | - | (115 | ) | (6,573 | ) | |||||||||||
Impairment due to damage (ii) | - | (90 | ) | - | - | (90 | ) | |||||||||||||
Transfers | - | - | - | - | - | |||||||||||||||
Other | - | - | - | - | - | |||||||||||||||
Balances as of December 31, 2012 | 167,760 | 66,170 | 4,477 | 28,957 | 267,364 |
(i) | As stated on Note 36 “Other operating income and expenses”, in 2012 Banco Santander Chile has sold 17 offices which, at the time of sale, had a net book amount of MCh$ 6,357. |
(ii) | Banco Santander Chile recognized on its financial statements as of December 31, 2012 a MCh$ 90 impairment from damages to ATMs. Indemnifications received from insurances totaled MCH$ 262, which are presented in the “other operating income” line (Note 36). |
2011 | Land and buildings | Equipment | Ceded under an operating leases | Other | Total | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Balances as of January 1, 2011 | 155,821 | 42,757 | 1,840 | 18,943 | 219,361 | |||||||||||||||
Additions | 8,326 | 8,503 | 5,741 | 4,119 | 26,689 | |||||||||||||||
Disposals (i) | (8,508 | ) | (132 | ) | - | (5 | ) | (8,645 | ) | |||||||||||
Impairment due to damage (ii) | - | (116 | ) | - | - | (116 | ) | |||||||||||||
Transfers | 1,311 | 769 | (3,104 | ) | 1,024 | - | ||||||||||||||
Other | - | - | - | - | - | |||||||||||||||
Balances as of December 31, 2011 | 156,950 | 51,781 | 4,477 | 24,081 | 237,289 |
(i) As stated in Note 36 Other Operating Income and Expenses, in 2011 the Bank sold 8 offices which, at the time of sale, had a net carrying amount of approximately MCh$ 6,237.
(ii) | Banco Santander Chile recognized on its financial statements as of December 31, 2011 a MCh$ 116 impairment from damages to ATMs. Indemnifications received from insurances totaled MCh$ 437, which are presented in the “other operating income” line (Note 36). |
Financial Statements 2012 / Banco Santander Chile 81 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 15
PROPERTY, PLANT, AND EQUIPMENT, continued:
b.2) Accumulated depreciation
2012 | Land and buildings | Equipment | Ceded under an operating leases | Other | Total | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Balances as of January 1, 2012 | (38,457 | ) | (29,211 | ) | (406 | ) | (16,156 | ) | (84,230 | ) | ||||||||||
Depreciation charges in the period | (9,100 | ) | (8,351 | ) | (136 | ) | (3,608 | ) | (21,195 | ) | ||||||||||
Sales and disposals in the period | 222 | 17 | - | 36 | 275 | |||||||||||||||
Other | - | - | - | - | - | |||||||||||||||
Balances as of December 31, 2012 | (47,335 | ) | (37,545 | ) | (542 | ) | (19,728 | ) | (105,150 | ) |
2011 | Land and buildings | Equipment | Ceded under an operating leases | Other | Total | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Balances as of January 1, 2011 | (29,271 | ) | (22,411 | ) | (38 | ) | (12,656 | ) | (64,376 | ) | ||||||||||
Depreciation charges in the period | (10,011 | ) | (6,845 | ) | - | (3,517 | ) | (20,373 | ) | |||||||||||
Sales and disposals in the period | 419 | 45 | - | 17 | 481 | |||||||||||||||
Transfers | 406 | - | (406 | ) | - | - | ||||||||||||||
Other | - | - | 38 | - | 38 | |||||||||||||||
Balances as of December 31, 2011 | (38,457 | ) | (29,211 | ) | (406 | ) | (16,156 | ) | (84,230 | ) |
c) | Operational leases – Lessor |
As of December 31, 2012 and 2011, the future minimum lease inflows under non-cancellable operating leases are as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Due within 1 year | 626 | 1,151 | ||||||
Due after 1 year but within 2 years | 1,163 | 1,165 | ||||||
Due after 2 years but within 3 years | 502 | 605 | ||||||
Due after 3 years but within 42 years | 294 | 582 | ||||||
Due after 4 years but within 5 years | 258 | 293 | ||||||
Due after 5 years | 2,148 | 2,337 | ||||||
Total | 4,991 | 6,133 |
Financial Statements 2012 / Banco Santander Chile 82 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 15
PROPERTY, PLANT, AND EQUIPMENT, continued:
d) | Operational leases – Lessee |
Certain of the Bank’s premises and equipment are leased under various operating leases. Future minimum rental payments under non-cancellable leases are as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Due within 1 year | 16,266 | 15,089 | ||||||
Due after 1 year but within 2 years | 14,845 | 13,521 | ||||||
Due after 2 years but within 3 years | 12,960 | 12,373 | ||||||
Due after 3 years but within 4 years | 11,443 | 10,781 | ||||||
Due after 4 years but within 5 years | 10,465 | 9,347 | ||||||
Due after 5 years | 63,035 | 63,686 | ||||||
Total | 129,014 | 124,797 |
e) | As of December 31, 2012 and 2011, the Bank has no financial leases which cannot be unilaterally rescinded. |
f) | As of December 31,2012 and 2011, the Bank does not have any restriction over property, plant, and equipment. Additionally, property, plant, and equipment have not been pledged as security for liabilities. Also, the Bank has no debt regarding Property, plant, and equipment on those dates. |
Financial Statements 2012 / Banco Santander Chile 83 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 16
CURRENT AND DEFERRED TAXES
a) | Current taxes |
At the end of each reporting period in 2012 and 2011 the bank recognizes an Income Tax Provision, which is determined based on the currently applicable tax legislation. This provision is recorded net of recoverable taxes, as shown as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Summary of current tax liabilities (assets) | ||||||||
Current tax (assets) | (10,227 | ) | (37,253 | ) | ||||
Current tax liabilities | 525 | 1,498 | ||||||
Total tax payable (recoverable) | (9,702 | ) | (35,755 | ) | ||||
(Assets) liabilities current taxes detail (net) | ||||||||
Income tax, tax rate 20% | 83,381 | 101,853 | ||||||
Minus: | ||||||||
Provisional monthly payments (PPM) | (84,940 | ) | (138,329 | ) | ||||
Credit for training expenses | (1,505 | ) | (1,366 | ) | ||||
Land taxes leasing | (2,939 | ) | (1,467 | ) | ||||
Grant credits | (2,534 | ) | (1,140 | ) | ||||
Other | (1,165 | ) | 4,694 | |||||
Total tax payable (recoverable) | (9,702 | ) | (35,755 | ) |
b) | Effect on income |
The effect of tax expense on income during the periods from January 1 to December 31, 2012 and 2011 is comprised of the following items:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Income tax expense | ||||||||
Current tax | 83,381 | 101,853 | ||||||
Credits (debits) for deferred taxes | ||||||||
Origination and reversal of temporary differences | (32,653 | ) | (19,165 | ) | ||||
Subtotals | 50,728 | 82,688 | ||||||
Tax for rejected expenses (Article No.21) | 70 | 716 | ||||||
Other | 297 | 49 | ||||||
Net charges for income tax expense | 51,095 | 83,453 |
Financial Statements 2012 / Banco Santander Chile 84 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 16
CURRENT AND DEFERRED TAXES, continued:
c) | Effective tax rate reconciliation |
The reconciliation between the income tax rate and the effective rate applied in determining tax expenses as of December 31, 2012 and 2011, is as follows:
As of December 31, | ||||||||||||||||
2012 | 2011 | |||||||||||||||
Tax rate | Amount | Tax rate | Amount | |||||||||||||
% | MCh$ | % | MCh$ | |||||||||||||
Income tax using statutory rate | 20.00 | 88,737 | 20.00 | 104,694 | ||||||||||||
Permanent differences | (2.74 | ) | (12,161 | ) | (2.00 | ) | (10,453 | ) | ||||||||
Unique tax (rejected expenses) | (0.21 | ) | (936 | ) | 0.14 | 716 | ||||||||||
Effect of change in tax rate | (3.66 | ) | (16,221 | ) | (0.98 | ) | (5,108 | ) | ||||||||
Real state taxes | (1.87 | ) | (8,324 | ) | (1.22 | ) | (6,393 | ) | ||||||||
Other | - | - | - | (3 | ) | |||||||||||
Effective rates and expenses for income tax | 11.52 | 51,095 | 15.94 | 83,453 |
Law No. 20,455 from 2010 increased the statutory tax rate to be applied during 2011 and 2012, to 20% and 18.5% respectively. Due to this, a MCH$5,108 income was recorded in 2011, corresponding to the adjustment of temporary differences to be reversed during those years. Law No. 20,630 published on the Official Newspaper on September 27, 2012 increased the First Class Rate from 18.5% to 20%, permanently, for transactions accounted from January 1, 2012 onwards. This created income for MCh$ 16,221, corresponding to the adjustment of current time differences.
d) | Effect of deferred taxes on comprehensive income |
Below is a summary of the separate effect of deferred tax on Equity, showing the asset and liability balances, during the periods between January 1, 2012 and December 31, 2012 and January 1, 2011 and December 31, 2011, which include of the following items:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Deferred tax assets | ||||||||
Available for sale investments | 2,004 | 143 | ||||||
Cash flow hedges | 389 | - | ||||||
Total deferred tax assets affecting other comprehensive income | 2.393 | 143 | ||||||
Deferred tax liabilities | ||||||||
Available for sale investments | (1 | ) | (705 | ) | ||||
Cash flow hedges | (1,452 | ) | (72 | ) | ||||
Total deferred tax liabilities affecting other comprehensive income | (1.453 | ) | (777 | ) | ||||
Net deferred tax balances in equity | 940 | (634 | ) | |||||
Deferred taxes in equity attributable to Bank shareholders | 945 | (639 | ) | |||||
Deferred tax in equity attributable to non-controlling interests | (5 | ) | 5 |
Financial Statements 2012 / Banco Santander Chile 85 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 16
CURRENT AND DEFERRED TAXES, continued:
e) | Effect of deferred taxes on income |
In 2012 and 2011, the Bank has recorded deferred tax assests and liabilities in its financial statements as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Deferred tax assets | ||||||||
Interest and adjustments | 7,854 | 1,936 | ||||||
Non-recurring charge-offs | 12,046 | 7,028 | ||||||
Assets received in lieu of payment | 1,265 | 1,322 | ||||||
Exchange rate adjustments | 43 | 1,890 | ||||||
Property, plant and equipment | 3,654 | 5,906 | ||||||
Allowance for loan losses | 96,071 | 77,199 | ||||||
Provision for expenses | 17,903 | 15,961 | ||||||
Derivatives | 54 | 27 | ||||||
Leased assets | 39,168 | 31,244 | ||||||
Subsidiaries tax losses | 5,232 | 4,229 | ||||||
Other | 527 | 869 | ||||||
Total deferred tax assets | 183,817 | 147,611 | ||||||
Deferred tax liabilities | ||||||||
Valuation of investments | (6,555 | ) | (2,301 | ) | ||||
Depreciation | (261 | ) | (178 | ) | ||||
Prepaid expenses | - | (1,303 | ) | |||||
Other | (1,275 | ) | (756 | ) | ||||
Total deferred tax liabilities | (8,091 | ) | (4,538 | ) |
f) | Summary of deferred tax assets and liabilities |
The summary of deferred taxes is presented below, presenting their cumulative effect both on equity and income:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Deferred tax assets | ||||||||
Recognized through other comprehensive income | 2,393 | 143 | ||||||
Recognized through profit or loss | 183,817 | 147,611 | ||||||
Total deferred tax assets | 186,210 | 147,754 | ||||||
Deferred tax liabilities | ||||||||
Recognized through other comprehensive income | (1,453 | ) | (777 | ) | ||||
Recognized through profit or loss | (8,091 | ) | (4,538 | ) | ||||
Total deferred tax liabilities | (9,544 | ) | (5,315 | ) |
Financial Statements 2012 / Banco Santander Chile 86 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 16
CURRENT AND DEFERRED TAXES, continued:
g) | Supplementary information related to the Circular issued by the tax authority and SBIF: |
As of December 31 | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
g.1) Loans and accounts receivables from customers | Tax value assets | Tax value assets | ||||||||||||||||||||||||||||||
Non-performing loans | Non-performing loans | |||||||||||||||||||||||||||||||
Financial value | With | Without | Financial | With | Without | |||||||||||||||||||||||||||
assets | Total | Guarantees | Guarantees | value assets | Total | Guarantees | Guarantees | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Interbank loans | 90,573 | 90,527 | - | - | 87,688 | 87,688 | - | - | ||||||||||||||||||||||||
Commercial loans | 10,489,021 | 8,914,074 | 108,784 | 117,987 | 9,287,585 | 7,866,160 | 62,643 | 93,672 | ||||||||||||||||||||||||
Consumer loans | 3,115,477 | 3,171,438 | 519 | 15,420 | 2,943,846 | 2,982,135 | 646 | 13,068 | ||||||||||||||||||||||||
Mortgage loans | 5,271,581 | 5,281,568 | 64,616 | 12,312 | 5,115,663 | 5,116,230 | 61,338 | 3,777 | ||||||||||||||||||||||||
Total | 18,966,652 | 17,457,607 | 173,919 | 145,719 | 17,434,782 | 16,052,213 | 124,627 | 110,517 |
g.2) Allowances for substandard loans without guarantees | Balance as of 12.31.2011 | Application of Allowances | Allowances established | Allowances released | Balance as of 12.31.2012 | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Commercial loans | 93,672 | (981 | ) | 134,081 | (108,785 | ) | 117,987 | |||||||||||||
Consumer loans | 13,068 | (4,738 | ) | 77,114 | (70,024 | ) | 15,420 | |||||||||||||
Mortgage loans | 3,777 | (481 | ) | 37,780 | (28,764 | ) | 12,312 | |||||||||||||
Total | 110,517 | (6,200 | ) | 248,975 | (207,573 | ) | 145,719 |
g.3) Direct charge offs and recoveries | As of December 31 | |||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Direct charge-off article 31 n°4 paragraph II | 6,454 | (14,701 | ) | |||||
Cancellations that created release of allowances | - | - | ||||||
Retrieval or renegoctiation of charged-off loans | 31,322 | (105,072 | ) | |||||
Total | 37,776 | (119,773 | ) |
g.4) Enforcement of article 31, paragraphs 1 and 3 | As of December 31 | |||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Charge-offs according to paragraph I | - | - | ||||||
Cancellations according to paragraph III | 7,698 | 10,114 | ||||||
Total | 7,698 | 10,114 |
Financial Statements 2012 / Banco Santander Chile 87 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 17
OTHER ASSETS
Other assets item are as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Assets for leasing (*) | 42,891 | 105,150 | ||||||
Assets received or awarded in lieu of payment (**) | ||||||||
Assets received in lieu of payment | 15,058 | 11,428 | ||||||
Assets awarded at judicial sale | 9,974 | 10,226 | ||||||
Provisions for assets received in lieu of payment or awarded | (3,091 | ) | (2,227 | ) | ||||
Subtotals | 21,941 | 19,427 | ||||||
Other assets | ||||||||
Guarantee deposits | 256,854 | 149,583 | ||||||
Gold investments | 464 | 466 | ||||||
VAT credit | 10,337 | 8,953 | ||||||
Income tax recoverable | 28,274 | 6,849 | ||||||
Prepaid expenses | 50,870 | 70,927 | ||||||
Assets recovered from leasing for sale | 3,335 | 2,693 | ||||||
Pension plan assets (Note 38) | 2,972 | 3,348 | ||||||
Accounts and notes receivable | 82,378 | 64,667 | ||||||
Notes receivable through brokerage and simultaneous transactions | 89,314 | 66,406 | ||||||
Other assets | 66,570 | 48,001 | ||||||
Subtotals | 591,368 | 421,893 | ||||||
Total | 656,200 | 546,470 |
(*) | Assets available to be granted under the financial leasing agreements. |
(**) | Assets received in lieu of payment correspond to assets received as payment of overdue debts. The assets acquired must at no time exceed, in the aggregate, assets that represent 20% of the Bank’s effective equity. These assets currently represent 0.58% (0.81% as of December 31, 2011) of the Bank’s effective equity. |
The assets awarded at judicial sale are assets that have been acquired as payment of debts previously owed to the Bank. The assets awarded at judicial sale are not subject to the aforementioned requirement. These properties are assets available for sale. For most assets, sale is expected to be completed within one year from the date on which the asset was received or acquired. If the asset in question is not sold within the year, it must be written off.
In addition, a provision is recorded for the diference between initial awarded value plus its additions and its estimated realization value (appraisal) when the first is higher.
Financial Statements 2012 / Banco Santander Chile 88 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 18
TIME DEPOSITS AND OTHER TIME LIABILITIES
As of December 31, 2012 and 2010, the composition of the item is as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Deposits and other demand liabilities | ||||||||
Checking accounts | 4,006,143 | 3,543,776 | ||||||
Other deposits and demand accounts | 455,315 | 350,519 | ||||||
Other demand liabilities | 508,561 | 519,520 | ||||||
Total | 4,970,019 | 4,413,815 | ||||||
Time deposits and other time liabilities | ||||||||
Time deposits | 9,008,902 | 8,816,766 | ||||||
Time savings account | 101,702 | 102,831 | ||||||
Other time liabilities | 1,609 | 1,517 | ||||||
Total | 9,112,213 | 8,921,114 |
Financial Statements 2012 / Banco Santander Chile 89 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 19
INTERBANK LOANS
At December 31, 2012 and 2011 financial statements, interbank borrowings are as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Loans from financial institutions and the Central Bank of Chile | ||||||||
Other obligations with Central Bank of Chile | 398 | 810 | ||||||
Subtotals | 398 | 810 | ||||||
Loans from domestic financial institutions | - | - | ||||||
Loans from foreign financial institutions | ||||||||
Standard Chartered Bank, New York | 279,966 | 362,041 | ||||||
Wachovia Bank N.A., Miami | 204,184 | 189,894 | ||||||
Citibank N.A., New York | 187,036 | 208,967 | ||||||
Bank of America | 139,570 | 177,182 | ||||||
Bank of Montreal – Toronto | 112,236 | 122,014 | ||||||
Mizuho Corporate Bank | 95,290 | 104,374 | ||||||
Commerzbank A.G. - Frankfurt | 88,801 | 113,704 | ||||||
The Toronto Dominion Bank – Toronto | 74,486 | 85,994 | ||||||
Sumitomo Mitsui Banking Corporation | 67,105 | 72,935 | ||||||
Banco Santander – Montevideo | 57,532 | - | ||||||
J.P. Morgan Chase Bank N.A., New York | 48,176 | 127,762 | ||||||
Royal Bank of Scotland – London | 40,784 | 39,122 | ||||||
Commerzbank N.A. – Miami | 14,368 | 36,451 | ||||||
Banco Santander – Hong Kong | 4,283 | 2,585 | ||||||
Discount Bank – Montevideo | 3,835 | - | ||||||
UBS A.G. | 3,786 | - | ||||||
Bank of China | 1,510 | 326 | ||||||
Banca Antoniana Popolare – Venetto | 746 | - | ||||||
Bancolombia S.A. (Panamá) | 709 | - | ||||||
Unicredit Banca d Impresa | 544 | - | ||||||
U.S. Bank | 513 | 344 | ||||||
Banca Commerciale Italiana S.P. | 494 | 289 | ||||||
Unicrédito Italiano, New York | 410 | 13,207 | ||||||
Turkiye Halk Bankasi | 403 | - | ||||||
Banco Santander – Madrid | 660 | - | ||||||
Banco General S.A. | 349 | - | ||||||
Banco Popolare di Novara | 308 | - | ||||||
Banco do Brasil S.A. – London | 285 | 67,820 | ||||||
Banco Español de Crédito | 281 | - | ||||||
ING Bank N.V. Amsterdam | 257 | 5,241 | ||||||
Deutsche Bank A.G., New York | 245 | 14,126 | ||||||
Banco Bradesco S.A. | 245 | - | ||||||
Banca Nazionale del Lavoro S.P. | 216 | - | ||||||
Banco Sofisa | 212 | - | ||||||
Banca Popolare di Vicenza SCPA | 208 | - | ||||||
Landesbank Baden - Wuerttemberg | - | 119,999 | ||||||
Intesa San Paolo SPA U.S.A. | - | 33,920 | ||||||
Branch Banking and Trust Co. | - | 14,926 | ||||||
ABN Ambro Bank N.V., Amsterdam | - | 1,175 | ||||||
Banco de Occidente | - | 750 | ||||||
BBVA Banco Francés S.A. | - | 745 | ||||||
State Bank of India | - | 358 | ||||||
Bank of Tokyo Mitsubischi | - | 297 | ||||||
Other | 7,572 | 2,734 | ||||||
Subtotals | 1,437,605 | 1,919,282 | ||||||
Total | 1,438,003 | 1,920,092 |
Financial Statements 2012 / Banco Santander Chile 90 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 19
INTERBANK LOANS, continued:
a) | Obligations with Central Bank of Chile |
Debts to the Central Bank of Chile include credit lines for the renegotiation of loans and other borrowings withn Central Bank of Chile. These credit lines were provided by the Central Bank of Chile for the renegotiation of loans due to the need to refinance debt as a result of the economic recession and crisis of the banking system in the early 1980s.
The outstanding amounts owed to the Central Bank of Chile under these credit lines are as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Line of credit for renegotiation of obligations to the Central Bank of Chile | 398 | 810 | ||||||
Totals Line of credit for renegotiation of obligations to the Central Bank of Chile | 398 | 810 |
b) | Loans from domestic financial institutions |
As of December 31, 2012 and 2011, the Banks does not have any loan from domestic financial institutions
c) | Foreign obligations |
These obligations’ maturities are as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Due within 1 year | 1,272,994 | 1,740,254 | ||||||
Due after 1 year but within 2 years | 164,611 | 87,102 | ||||||
Due after 2 years but within 3 years | - | 91,926 | ||||||
Due after 3 years but within 4 years | - | - | ||||||
Due after 5 years | - | - | ||||||
Total loans from foreign financial institutions | 1,437,605 | 1,919,282 |
Financial Statements 2012 / Banco Santander Chile 91 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 20
ISSUED DEBT INSTRUMENTS AND OTHER OBLIGATIONS
As of December 31, 2012 and 2011, the composition of the item is as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Other financial liabilities | ||||||||
Obligations to public sector | 96,185 | 100,299 | ||||||
Other domestic obligations | 93,653 | 75,260 | ||||||
Foreign obligations | 2,773 | 1,040 | ||||||
Subtotals | 192,611 | 176,599 | ||||||
Issued debt instruments | ||||||||
Mortgage finance bonds | 128,086 | 160,243 | ||||||
Senior bonds | 3,717,213 | 3,601,125 | ||||||
Subordinated bonds | 725,990 | 861,871 | ||||||
Subtotals | 4,571,289 | 4,623,239 | ||||||
Total | 4,763,900 | 4,799,838 |
Debts classified as current are either demand obligations or will mature in one year or less. All other debts are classified as non-current. The Bank’s debts, both current and non-current, are summarized below:
As of December 31, 2012 | ||||||||||||
Non-current | Current | Total | ||||||||||
MCh$ | MCh$ | MCh$ | ||||||||||
Mortgage finance bonds | 6,863 | 121,223 | 128,086 | |||||||||
Senior bonds | 534,852 | 3,182,361 | 3,717,213 | |||||||||
Subordinated bonds | 16,037 | 709,953 | 725,990 | |||||||||
Issued debt instruments | 557,752 | 4,013,537 | 4,571,289 | |||||||||
Other financial liabilities | 101,335 | 91,276 | 192,611 | |||||||||
Total | 659,087 | 4,104,813 | 4,763,900 |
Financial Statements 2012 / Banco Santander Chile 92 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 20
ISSUED DEBT INSTRUMENTS AND OTHER OBLIGATIONS, continued:
As of December 31, 2011 | ||||||||||||
Non-current | Current | Total | ||||||||||
MCh$ | MCh$ | MCh$ | ||||||||||
Mortgage finance bonds | 7,707 | 152,536 | 160,243 | |||||||||
Senior bonds | 749,340 | 2,851,785 | 3,601,125 | |||||||||
Subordinated bonds | 136,842 | 725,029 | 861,871 | |||||||||
Issued debt instruments | 893,889 | 3,729,350 | 4,623,239 | |||||||||
Other financial liabilities | 56,078 | 120,521 | 176,599 | |||||||||
Total | 949,967 | 3,849,871 | 4,799,838 |
a) | Mortgage finance bonds |
Their main amounts are amortized on a quarterly basis. The range of maturities of these bonds is between five and twenty years. Loans are indexed to UF and create a yearly interest rate of 5.95% as of December 2012 (5.7% as of December 2011).
As of December 31 | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Due within 1 year | 6,863 | 7,707 | ||||||
Due after 1 year but within 2 years | 7,595 | 7,535 | ||||||
Due after 2 years but within 3 years | 14,752 | 10,333 | ||||||
Due after 3 years but within 4 years | 11,026 | 21,122 | ||||||
Due after 4 years but within 5 years | 11,923 | 14,010 | ||||||
Due after 5 years | 75,927 | 99,536 | ||||||
Total mortgage bonds | 128,086 | 160,243 |
b) | Senior bonds |
The following table shows senior bonds by currency:
As of December 31 | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Santander bonds in UF | 2,025,105 | 2,001,713 | ||||||
Santander bonds in US$ | 1,269,454 | 1,268,763 | ||||||
Santander bonds in CHF$ | 90,249 | 119,394 | ||||||
Santander bonds in $ | 293,933 | 211,255 | ||||||
Santander bonds in CNY $ | 38,472 | - | ||||||
Total senior bonds | 3,717,213 | 3,601,125 |
Financial Statements 2012 / Banco Santander Chile 93 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 20
ISSUED DEBT INSTRUMENTS AND OTHER OBLIGATIONS, continued:
i. | Placement of senior bonds: |
In 2012, the Bank placed bonds for UF 698,000; USD 1,085,990,000; CLP 55,600,000,000; and CNY 500,000,000 detailed as follows:
Series | Amount | Term | Issue rate | Issuance date |
Issue amount | Maturity date | ||||||||
FD | UF | 50,000 | 5 years | 3.00% per annum simple | 08-01-2010 | UF | 3,000,000 | 08-01-2015 | ||||||
E1 | UF | 362,000 | 5 years | 3.00% per annum simple | 02-01-2011 | UF | 4,000,000 | 02-01-2016 | ||||||
E3 | UF | 6,000 | 8.5 years | 3.50% per annum simple | 01-01-2011 | UF | 4,000,000 | 07-01-2019 | ||||||
E6 | UF | 280,000 | 10 years | 3.50% per annum simple | 04-01-2012 | UF | 4,000,000 | 04-01-2022 | ||||||
Total UF | UF | 698,000 | ||||||||||||
E4 | CLP | 5,600,000,000 | 5 years | 6.75% per annum simple | 06-01-2011 | CLP | 50,000,000,000 | 06-01-2016 | ||||||
E5 | CLP | 25,000,000,000 | 10 years | 6.30% per annum simple | 12-01-2011 | CLP | 25,000,000,000 | 12-01-2021 | ||||||
E7 | CLP | 25,000,000,000 | 5 years | 6.75% per annum simple | 03-01-2012 | CLP | 25,000,000,000 | 03-01-2017 | ||||||
CLP Total | CLP | 55,600,000,000 | ||||||||||||
Senior bonds | USD | 250,000,000 | 2 years | Libor (3 months) + 200 bp | 02-14-2012 | USD | 250,000,000 | 02-14-2014 | ||||||
Zero-coupon bond | USD | 85,990,000 | 1 year | Libor (3 months) + 100 bp | 08-29-2012 | USD | 85,990,000 | 08-30-2013 | ||||||
Senior bonds | USD | 750,000,000 | 10 years | 3.875% per annum simple | 09-20-2012 | USD | 750,000,000 | 09-20-2022 | ||||||
USD Total | USD | 1,085,990,000 | ||||||||||||
CNY Bond | CNY | 500,000,000 | 2 years | 3.75% per annum simple | 11-26-2012 | CNY | 500,000,000 | 11-26-2014 | ||||||
CNY Total | CNY | 500,000,000 |
During the first 2012 quarter, the Bank performed a partial repurchase of bonds for CHF 45,000,000.
During the second semester of 2012, the Bank repurchased a bond for USD 53,500,000.
Financial Statements 2012 / Banco Santander Chile 94 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 20
ISSUED DEBT INSTRUMENTS AND OTHER OBLIGATIONS, continued:
In 2011 the Bank placed bonds for UF 5,694,000; USD 635,000,000; and CLP 36,900,000,000; detailed as follows:
Series | Amount | Term | Issue rate | Issuance date |
Issue amount | Maturity date | ||||||||
Floating rate bond | USD | 500,000,000 | 5 years | Libor (3 months) + 160 bp | 01-19-2011 | USD | 500,000,000 | 01-19-2016 | ||||||
Floating rate bond | USD | 135,000,000 | 6 months | Libor (3 months) + 80 bp | 11-29-2011 | USD | 135,000,000 | 01-29-2012 | ||||||
USD Total | USD | 635,000,000 | ||||||||||||
E1 | UF | 896,000 | 5 years | 3.00% per annum simple | 02-01-2011 | UF | 4,000,000 | 02-01-2016 | ||||||
E2 | UF | 3,048,000 | 7.5 years | 3.50% per annum simple | 01-01-2011 | UF | 4,000,000 | 07-01-2018 | ||||||
E3 | UF | 1,750,000 | 8.5 years | 3.50% per annum simple | 01-01-2011 | UF | 4,000,000 | 07-01-2019 | ||||||
Total UF | UF | 5,694,000 | ||||||||||||
E4 | CLP | 36,900,000,000 | 5 years | 6.75% per annum simple | 06-01-2011 | CLP | 50,000,000,000 | 06-01-2016 | ||||||
CLP Total | CLP | 36,900,000,000 |
In 2011, a total payment of the Bond Series BSTDH20799 was carried out in July and a total payment of Bond Series BSTDR0207 took place in August. Also, a partial payment of the fixed rate bond for CHF 133,000,000 was done.
ii. | Nominal bonds to be placed: |
As of December 31, 2012 the balance for each bond is as follows:
Series | Amount | Term | Issue rate | Issuance date | Maturity date | ||||||
FD | UF | 110,000 | 5 years | 3.00% per annum simple | 08-01-2010 | 08-01-2015 | |||||
E1 | UF | 2,742,000 | 5 years | 3.00% per annum simple | 02-01-2011 | 02-01-2016 | |||||
E2 | UF | 952,000 | 7.5 years | 3.50% per annum simple | 01-01-2011 | 07-01-2018 | |||||
E3 | UF | 2,244,000 | 8.5 years | 3.50% per annum simple | 01-01-2011 | 07-01-2019 | |||||
E6 | UF | 3,720,000 | 10 years | 3.50% per annum simple | 04-01-2012 | 04-01-2022 | |||||
Total | UF | 9,768,000 | |||||||||
E4 | CLP | 7,500,000,000 | 5 years | 6.75% per annum simple | 06-01-2011 | 06-01-2016 | |||||
Total | CLP | 7,500,000,000 |
Financial Statements 2012 / Banco Santander Chile 95 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 20
ISSUED DEBT INSTRUMENTS AND OTHER OBLIGATIONS, continued:
Maturity of senior bonds is as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Due within 1 year | 534,852 | 749,340 | ||||||
Due after 1 year but within 2 years | 600,723 | 460,200 | ||||||
Due after 2 years but within 3 years | 643,791 | 408,723 | ||||||
Due after 3 years but within 4 years | 610,817 | 656,201 | ||||||
Due after 4 years but within 5 years | 323,474 | 488,425 | ||||||
Due after 5 years | 1,003,556 | 838,236 | ||||||
Total senior bonds | 3,717,213 | 3,601,125 |
c) | Subordinated bonds |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Subordinated bonds denominated in US$ | 174,285 | 316,169 | ||||||
Subordinated bonds denominated in UF | 551,705 | 545,702 | ||||||
Total subordinated bonds | 725,990 | 861,871 |
i. Placement of subordinated bonds
During the first semester of 2012 the Bank has not issued any subordinated bonds on the local market.
In 2011 the Bank placed subordinated bonds on the local market for UF 5,100,000, detailed as follows:
Issuance | |||||||||||||
Series | Amount | Term | Issue rate | date | Issue amount | Maturity date | |||||||
G3 | UF | 3,000,000 | 25 years | 3.90% per annum simple | 07-01-2012 | 3,000,000 | 07-01-2035 | ||||||
G5 | UF | 2,100,000 | 20 years | 3.90% per annum simple | 04-01-2011 | 4,000,000 | 04-01-2031 | ||||||
Total UF | UF | 5,100,000 |
Financial Statements 2012 / Banco Santander Chile 96 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 20
ISSUED DEBT INSTRUMENTS AND OTHER OBLIGATIONS, continued:
The maturities of subordinated bonds are as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Due within 1 year | 16,037 | 136,842 | ||||||
Due after 1 year but within 2 years | 182,844 | - | ||||||
Due after 2 years but within 3 years | 9,535 | 179,327 | ||||||
Due after 3 years but within 4 years | 5,760 | 10,567 | ||||||
Due after 4 years but within 5 years | - | 29,616 | ||||||
Due after 5 years | 511,814 | 505,519 | ||||||
Total subordinated bonds | 725,990 | 861,871 |
d) | Other financial liabilities |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Non-current portion: | ||||||||
Due after 1 year but within 2 years | 3,897 | 29,575 | ||||||
Due after 2 years but within 3 years | 2,501 | 2,866 | ||||||
Due after 3 years but within 4 years | 3,090 | 3,489 | ||||||
Due after 4 years but within 5 years | 2,937 | 3,095 | ||||||
Due after 5 years | 78,851 | 81,496 | ||||||
Non-current portion subtotals | 91,276 | 120,521 | ||||||
Current portion: | ||||||||
Amounts due to credit card operators | 70,410 | 50,840 | ||||||
Acceptance of letters of credit | 1,683 | 704 | ||||||
Other long-term financial obligations, short-term portion | 29,242 | 4,534 | ||||||
Current portion subtotals | 101,335 | 56,078 | ||||||
Total other financial liabilities | 192,611 | 176,599 |
Financial Statements 2012 / Banco Santander Chile 97 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 21
MATURITY OF ASSETS AND LIABILITIES
As of December 31, 2012 and 2011, the detail of maturities of assets and liabilities is as follows:
As of December 31, 2012 | Demand | Up to 1 month | Between 1 and 3 months | Between 3 and 12 months | Subtotal Up to 1 year | Between 1 and 5 years | More than 5 years | Subtotal Over 1 year | Total | |||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Cash and deposits in banks | 1,250,414 | - | - | - | 1,250,414 | - | - | - | 1,250,414 | |||||||||||||||||||||||||||
Cash items in process of collection | 520,267 | - | - | - | 520,267 | - | - | - | 520,267 | |||||||||||||||||||||||||||
Trading investments | - | 19,565 | 2,597 | 237,726 | 259,888 | 58,138 | 20,261 | 78,399 | 338,287 | |||||||||||||||||||||||||||
Investments under repurchase agreements | - | 6,993 | - | - | 6,993 | - | - | - | 6,993 | |||||||||||||||||||||||||||
Financial derivative contracts | - | 58,311 | 77,728 | 216,832 | 352,871 | 571,315 | 369,026 | 940,341 | 1,293,212 | |||||||||||||||||||||||||||
Interbank loans (*) | 60,654 | - | 29,919 | - | 90,573 | - | - | - | 90,573 | |||||||||||||||||||||||||||
Loans and accounts receivables from customers (**) | 1,123,417 | 1,156,145 | 1,736,942 | 2,995,860 | 7,012,364 | 5,925,100 | 5,938,615 | 11,863,715 | 18,876,079 | |||||||||||||||||||||||||||
Available for sale investments | - | 112,173 | 234,566 | 519,181 | 865,920 | 506,152 | 454,086 | 960,238 | 1,826,158 | |||||||||||||||||||||||||||
Held to maturity investments | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Total assets | 2,954,752 | 1,353,187 | 2,081,752 | 3,969,599 | 10,359,290 | 7,060,705 | 6,781,988 | 13,842,693 | 24,201,983 | |||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||
Deposits and other demand liabilities | 4,970,019 | - | - | - | 4,970,019 | - | - | - | 4,970,019 | |||||||||||||||||||||||||||
Cash items in process of being cleared | 284,953 | - | - | - | 284,953 | - | - | - | 284,953 | |||||||||||||||||||||||||||
Obligations under repurchase agreements | - | 275,303 | 25,534 | 3,280 | 304,117 | - | - | - | 304,117 | |||||||||||||||||||||||||||
Time deposits and other time liabilities | 65,854 | 4,981,947 | 2,278,958 | 1,600,701 | 8,927,460 | 133,760 | 50,993 | 184,753 | 9,112,213 | |||||||||||||||||||||||||||
Financial derivative contracts | - | 71,445 | 80,484 | 208,473 | 360,402 | 503,036 | 282,723 | 785,759 | 1,146,161 | |||||||||||||||||||||||||||
Interbank borrowings | 5,820 | 82,965 | 185,730 | 998,877 | 1,273,392 | 164,611 | - | 164,611 | 1,438,003 | |||||||||||||||||||||||||||
Issued debt instruments | - | 10,855 | 168,817 | 378,080 | 557,752 | 2,422,240 | 1,591,297 | 4,013,537 | 4,571,289 | |||||||||||||||||||||||||||
Other financial liabilities | 70,136 | 718 | 733 | 29,748 | 101,335 | 12,425 | 78,851 | 91,276 | 192,611 | |||||||||||||||||||||||||||
Total liabilities | 5,396,782 | 5,423,233 | 2,740,256 | 3,219,159 | 16,779,430 | 3,236,072 | 2,003,864 | 5,239,936 | 22,019,366 |
(*) | Interbank loans are presented in a gross basis. The amount of allowance totals Ch$ 46 million. |
(**) | Loans and accounts receivables from customers are presented in a gross basis. Allowance amounts according to type of loan are detailed as follows: Commercial MCh$ 250,873, Mortgage MCh$ 35,990 and Consumer MCh$ 263,259. |
Financial Statements 2012 / Banco Santander Chile 98 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 21
MATURITY OF ASSETS AND LIABILITIES, continued:
As of December 31, 2011 | Demand | Up to 1 month | Between 1 and 3 months | Between 3 and 12 months | Subtotal up to 1 year | Between 1 and 5 years | More than 5 years | Subtotal more than 1 year | Total | |||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Cash and deposits in banks | 2,793,701 | - | - | - | 2,793,701 | - | - | - | 2,793,701 | |||||||||||||||||||||||||||
Cash items in process of collection | 276,454 | - | - | - | 276,454 | - | - | - | 276,454 | |||||||||||||||||||||||||||
Trading investments | - | 27,909 | 40,608 | 272,544 | 341,061 | 44,857 | 23,845 | 68,702 | 409,763 | |||||||||||||||||||||||||||
Investments under repurchase agreements | - | 12,928 | - | - | 12,928 | - | - | - | 12,928 | |||||||||||||||||||||||||||
Financial derivative contracts | - | 63,090 | 167,558 | 295,674 | 526,322 | 684,260 | 391,314 | 1,075,574 | 1,601,896 | |||||||||||||||||||||||||||
Interbank loans (*) | 36,785 | 50,903 | - | - | 87,688 | - | - | - | 87,688 | |||||||||||||||||||||||||||
Loans and accounts receivables from customers (**) | 492,635 | 1,510,419 | 1,277,005 | 2,653,577 | 5,933,636 | 5,697,193 | 5,716,265 | 11,413,458 | 17,347,094 | |||||||||||||||||||||||||||
Available for sale investments | - | 607,472 | 190,642 | 180,451 | 978,565 | 403,577 | 279,169 | 682,746 | 1,661,311 | |||||||||||||||||||||||||||
Held to maturity investments | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Total assets | 3,599,575 | 2,272,721 | 1,675,813 | 3,402,246 | 10,950,355 | 6,829,887 | 6,410,593 | 13,240,480 | 24,190,835 | |||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||
Deposits and other demand liabilities | 4,413,815 | - | - | - | 4,413,815 | - | - | - | 4,413,815 | |||||||||||||||||||||||||||
Cash items in process of being cleared | 89,486 | - | - | - | 89,486 | - | - | - | 89,486 | |||||||||||||||||||||||||||
Obligations under repurchase agreements | - | 463,083 | 78,712 | 2,586 | 544,381 | - | - | - | 544,381 | |||||||||||||||||||||||||||
Time deposits and other time liabilities | 105,463 | 4,415,765 | 2,509,308 | 1,496,193 | 8,526,729 | 371,736 | 22,649 | 394,385 | 8,921,114 | |||||||||||||||||||||||||||
Financial derivative contracts | - | 64,290 | 158,204 | 209,746 | 432,240 | 513,944 | 346,218 | 860,162 | 1,292,402 | |||||||||||||||||||||||||||
Interbank borrowings | 194,451 | 7,750 | 470,749 | 1,068,014 | 1,740,964 | 179,128 | - | 179,128 | 1,920,092 | |||||||||||||||||||||||||||
Issued debt instruments | - | 3,788 | 15 | 890,086 | 893,889 | 2,286,059 | 1,443,291 | 3,729,350 | 4,623,239 | |||||||||||||||||||||||||||
Other financial liabilities | 50,840 | 761 | 980 | 3,497 | 56,078 | 39,025 | 81,496 | 120,521 | 176,599 | |||||||||||||||||||||||||||
Total liabilities | 4,854,055 | 4,955,437 | 3,217,968 | 3,670,122 | 16,697,582 | 3,389,892 | 1,893,654 | 5,283,546 | 21,981,128 |
(*) | Interbank loans are presented in a gross basis. Allowances total MCh$ 147. |
(**) | Loans and accounts receivables from customers are presented in a gross basis Allowance amounts according to type of loan are detailed as follows: Commercial MCh$ 245,032, Mortgage MCh$ 35,633 and Consumer MCh$ 243,022. |
Financial Statements 2012 / Banco Santander Chile 99 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 22
PROVISIONS
a) | As of December 31, 2012 and 2011, the composition is as shown below: |
As of December 31 | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Provisions for personnel salaries and expenses. | 47,574 | 42,974 | ||||||
Provisions for mandatory dividends | 116,390 | 130,525 | ||||||
Allowance for contingent loan risk | ||||||||
Provision for immediately available credit lines | 17,850 | 17,473 | ||||||
Other allowances for contingent loan risk | 8,941 | 7,515 | ||||||
Provisions for contingencies | 30,150 | 20,557 | ||||||
Country risk | 88 | 19 | ||||||
Total | 220,993 | 219,063 |
b) | Below is the activity in provisions during the 2012 and 2011 periods: |
Provisions for | ||||||||||||||||||||||||
Personnel salaries and expenses | Provisions for contingent loans | Contingencies | Mandatory dividends | Risk Provisions | Total | |||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||
Balances as of January 1, 2012 | 42,974 | 24,988 | 20,557 | 130,525 | 19 | 219,063 | ||||||||||||||||||
Provisions established | 39,151 | 7,926 | 26,382 | 116,390 | 464 | 190,313 | ||||||||||||||||||
Application of provisions | (34,551 | ) | (6,123 | ) | (12,469 | ) | (130,525 | ) | - | (183,668 | ) | |||||||||||||
Provisions released | - | - | (4,862 | ) | - | (395 | ) | (5,257 | ) | |||||||||||||||
Reclassifications | - | - | 542 | - | - | 542 | ||||||||||||||||||
Other | - | - | - | - | - | - | ||||||||||||||||||
Balances as of December 31, 2012 | 47,574 | 26,791 | 30,150 | 116,390 | 88 | 220,993 | ||||||||||||||||||
Balances as of January 1, 2011 | 36,016 | 40,638 | 16,151 | 143,147 | 1 | 235,953 | ||||||||||||||||||
Provisions established | 35,452 | 8,795 | 22,608 | 130,525 | 18 | 197,398 | ||||||||||||||||||
Application of provisions | (28,494 | ) | (24,445 | ) | (4,352 | ) | (143,147 | ) | - | (200,438 | ) | |||||||||||||
Provisions released | - | - | (15,198 | ) | - | - | (15,198 | ) | ||||||||||||||||
Reclassifications | - | - | 1,348 | - | - | 1,348 | ||||||||||||||||||
Other | - | - | - | - | - | - | ||||||||||||||||||
Balances as of December 31, 2011 | 42,974 | 24,988 | 20,557 | 130,525 | 19 | 219,063 |
Financial Statements 2012 / Banco Santander Chile 100 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 22
PROVISIONS, continued
c) | Provisions for personnel salaries and expenses. |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Provision for seniority compensation | 1,299 | 1,510 | ||||||
Provision for stock-based personnel benefits | 1,986 | 1,139 | ||||||
Provision for performance bonds | 23,667 | 21,788 | ||||||
Provision for vacations | 18,802 | 17,196 | ||||||
Provision for other personnel benefits | 1,820 | 1,341 | ||||||
Total | 47,574 | 42,974 |
d) | Seniority compensation: |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Balances as of January 1, 2012 | 1,510 | 1,882 | ||||||
Increase in provisions | 2,069 | 1,432 | ||||||
Payments made | (2,280 | ) | (1,804 | ) | ||||
Prepayments | - | - | ||||||
Provisions released | - | - | ||||||
Other | - | - | ||||||
Total | 1,299 | 1,510 |
e) | Movements in provision for performance bonds: |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Balances as of January 1, 2012 | 21,788 | 17,107 | ||||||
Provisions established | 22,737 | 21,980 | ||||||
Application of provisions | (20,858 | ) | (17,299 | ) | ||||
Provisions released | - | - | ||||||
Other | - | - | ||||||
Total | 23,667 | 21,788 |
f) | Movements in provision for personnel vacation: |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Balances as of January 1, 2012 | 17,196 | 14,534 | ||||||
Provisions established | 13,019 | 12,040 | ||||||
Application of provisions | (11,413 | ) | (9,378 | ) | ||||
Provisions released | - | - | ||||||
Other | - | - | ||||||
Total | 18,802 | 17,196 |
Financial Statements 2012 / Banco Santander Chile 101 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 23
OTHER LIABILITIES
The Other liabilities item is as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Accounts and notes payable | 89,034 | 70,555 | ||||||
Unearned income | 426 | 948 | ||||||
Guarantees received (threshold) | 179,820 | 271,980 | ||||||
Notes payable through brokerage and simultaneous transactions | - | 8,725 | ||||||
Other payable obligations | 59,824 | 29,564 | ||||||
Other liabilities | 12,170 | 17,205 | ||||||
Total | 341,274 | 398,977 |
Financial Statements 2012 / Banco Santander Chile 102 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 24
COMMITMENTS AND CONTINGENCIES
a) | Lawsuits and legal procedures |
At the issuance date of these financial statements, the Bank and its affiliates were subject to certain legal actions in the normal course of their business. As of December 31, 2012, the Banks and its subsidiaries have Provisions for this item for MCh$ 428 (MCh$ 784 as of December 31, 2011) which are under “Contingency Provisions” in the Consolidated Statements of Financial Position. In addition, there are other lawsuits for UF 27,056.90, mainly the litigation between Santander Corredores de Seguros Limitada for leasing assets.
b) | Contingent loans |
The following table shows the Bank’s contractual obligations to issue loans.
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Letters of credit issued | 199,420 | 184,649 | ||||||
Foreign letters of credit confirmed | 113,878 | 52,889 | ||||||
Guarantees | 1,046,114 | 920,986 | ||||||
Personal guarantees | 139,059 | 147,081 | ||||||
Subtotals | 1,498,471 | 1,305,605 | ||||||
Available on demand credit lines | 4,933,335 | 4,673,525 | ||||||
Other irrevocable credit commitments | 63,828 | 95,150 | ||||||
Total | 6,495,634 | 6,074,280 |
c) | Held securities |
The Bank holds securities in the normal course of its business as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Third party operations | ||||||||
Collections | 287,128 | 212,784 | ||||||
Assets from third parties managed by the Bank and its affiliates (1) | 821,080 | 752,662 | ||||||
Subtotals | 1,108,208 | 965,446 | ||||||
Custody of securities | ||||||||
Securities held in custody | 227,554 | 250,291 | ||||||
Securities held in custody deposited in other entity | 573,129 | 557,493 | ||||||
Issued securities held in custody | 14,931,587 | 10,636,123 | ||||||
Subtotals | 15,732,270 | 11,443,907 | ||||||
Total | 16,840,478 | 12,409,353 |
(1) In 2012, portfolios managed by private banking were classified as third party resources managed by the Bank and its subsidiaries so, at the end of the year, balance was MCh$ 821,045 (MCh$ 752,627 for 2011).
d) | Guarantees |
Banco Santander Chile has a comprehensive officer fidelity insurance policy, No. 2700659, with the Chilena Consolidada de Seguros insurance company, for an amount of USD $5,000,000, which jointly covers both the Bank and its affiliates for the period from July 1, 2012 to June 30, 2013.
Financial Statements 2012 / Banco Santander Chile 103 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 24
CONTINGENCIES AND COMMITMENTS, continued:
e) | Contingent loans and liabilities |
To satisfy its clients’ needs, the Bank took on several contingent loans and liabilities, yet these could not be recognized in the Consolidated Statements of Financial Position; these contain loan risks and they are, therefore, part of the Banks global risk.
Santander Asset Management S.A. Administradora General de Fondos
i) | In conformity with General Standard No.125, the company designated Banco Santander Chile as the representative of the beneficiaries of the guarantees established by each of the managed funds, in compliance with Articles 226 and onward of Law No.18,045. |
ii) | In addition to these guarantees for creating mutual funds, there are other guarantees for a guaranteed return on certain mutual funds, totaling Ch$67,703 million and time deposits totaling Ch$ 10,286 million and time deposits for UF 1,644,198.2617 as a guaranty of Private Investment Funds (P.I.F.), as of December 31, 2012. |
Santander Agente de Valores Limitada
i) | To ensure correct and full performance of all its obligations as an Agent, in conformity with the provisions of Articles No.30 and onward of Law No.18,045 on the Securities Market, the Company provided a guarantee in the amount of UF 4,000 through Insurance Policy No.212114948, underwritten by the Compañía de Seguros de Crédito Continental S.A., which matures on December 19, 2013. |
Santander S.A. Corredores de Bolsa
i) | The Company has given guarantees to the Bolsa de Comercio de Santiago for a current value of Ch$ 21,884 million to cover simultaneous transactions. |
ii) | In addition, the company has issued a guarantee to CCLV Contraparte Central S.A. (formerly known as Cámara de Compensación) in cash, for a total MCh$ 3,180 and an additional guaranteed entered at the Electronical Stock Market for MCh$ 953 as of December 31, 2012. |
iii) | As of December 31, 2012, the following legal situations are in process: |
- | Complaint procedures before the 27th Civil Court of Santiago, labeled “Nahum con Santander Investmente S.A. Corredores de Bolsa” predecessor of Santander S.A. Corredores de Bolsa, File No. 16.703-2010 for MCh$ 200. Regarding its current state, the ruling granted the appeal and it is currently pending the revision of the Court of Appeals. There are no provisions accounted since they are not considered necessary given that the cause is in its preliminary stages. |
- | Case of “Inverfam S.A. vs. Santander Investment S.A. Corredores de Bolsa” predecessor of Santander S.A. Corredores de Bolsa, followed in Santiago First Civil Court, File No. 32.543-2011; a claim for indemnity damages from the loss of some securities destined to Optimal Funds which were affected by the Madoff case, that amount to MCh$ 107, approximately. We are currently waiting for a conciliatory meeting. |
Santander Corredora de Seguros Limitada
i) | In accordance with Circular No.1,160 of the Chilean Securities and Insurance Supervisor, the Company has an insurance policy in connection with its obligations as an intermediary in insurance contracts. |
ii) | The company purchased a guarantee policy (No.10022204), and professional liability policy (No.10022208) for its insurance brokers, from the Seguros Generales Consorcio Nacional de Seguros S.A. The policies have a UF 500 and UF 60,000 coverage, respectively, and are valid from April 15, 2012 through April 14, 2013. |
iii) | There are lawsuits for UF 27,056; which corresponds mainly to goods given in leasing. Our lawyers have estimated a loss of MCh$51. The estimated loss amount is registered under provisions. |
Financial Statements 2012 / Banco Santander Chile 104 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 25
EQUITY
a) | Capital |
As of December 31, 2012 and 2011 the Bank had 188,446,126,794 shares outstanding, all of which are subscribed for and paid in full. All shares have the same rights, and have no preferences of restrictions.
The activity with respect to shares during 2012 and 2011 was as follows:
SHARES As of December 31, | ||||||||
2012 | 2011 | |||||||
Issued as of January 1 | 188,446,126,794 | 188,446,126,794 | ||||||
Issue of paid shares | - | - | ||||||
Issue of outstanding shares | - | - | ||||||
Stock options exercised | - | - | ||||||
Issued as of | 188,446,126,794 | 188,446,126,794 |
As of December 31, 2012 and 2011 the Bank does not have any of its own shares in treasury, nor do any of the consolidated companies.
As of December 31, 2012 the shareholder composition was as follows:
Corporate Name or Shareholder’s Name | Shares | ADRs | Total | Non-controlling | ||||||||||||
Teatinos Siglo XXI Inversiones Limitada | 59,770,481,573 | - | 59,770,481,573 | 31.72 | ||||||||||||
Santander Chile Holding S.A. | 66,822,519,695 | - | 66,822,519,695 | 35.46 | ||||||||||||
J.P. Morgan Chase Bank | - | 35,111,060,871 | 35,111,060,871 | 18.63 | ||||||||||||
BNP Paribas Arbitrage | 173,328,889 | - | 173,328,889 | 0.09 | ||||||||||||
MBI Arbitrage Fondo de Inversion | 495,766,248 | - | 495,766,248 | 0.26 | ||||||||||||
Banks and stock brokers on behalf of third parties | 12,473,837,817 | - | 12,473,837,817 | 6.62 | ||||||||||||
AFP on behalf of third parties | 6,346,809,483 | - | 6,346,809,483 | 3.37 | ||||||||||||
Other minority holders | 3,839,358,209 | 3,412,964,009 | 7,252,322,218 | 3.85 | ||||||||||||
Total | 188,446,126,794 | 100.00 |
Financial Statements 2012 / Banco Santander Chile 105 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 25
EQUITY, continued
As of December 31, 2011 the shareholder composition was as follows:
Corporate Name or Shareholder’s Name | Shares | ADRs | Total |
Non-controlling | ||||||||||||
Teatinos Siglo XXI Inversiones Limitada | 59,770,481,573 | - | 59,770,481,573 | 31.72 | ||||||||||||
Santander Chile Holding S.A. | 66,822,519,695 | - | 66,822,519,695 | 35.46 | ||||||||||||
J.P. Morgan Chase Bank | - | 39,287,497,122 | 39,287,497,122 | 20.85 | ||||||||||||
Inversiones Antares S.A. | 170,363,545 | - | 170,363,545 | 0.09 | ||||||||||||
Banks and stock brokers on behalf of third parties | 10,132,511,637 | - | 10,132,511,637 | 5.38 | ||||||||||||
AFP on behalf of third parties | 5,751,493,833 | - | 5,751,493,833 | 3.05 | ||||||||||||
Other minority holders | 3,827,146,677 | 2,684,112,712 | 6,511,259,389 | 3.45 | ||||||||||||
Total | 188,446,126,794 | 100.00 |
American Depository Receipts (ADR) are certificates issued by a U.S. commercial bank to be traded on the U.S. securities markets.
(*) In 2011, Teatinos Siglo XXI Inversiones Limitada sold 9.73% of its shares in Banco Santander Chile. This sale took place on February and December, with sales of 1.91% and 7.82%, respectively.
b) | Reserves |
In 2012, due to the April’s Shareholders Meeting, the Bank agreed to capitalize as reserves 40% of the profits from 2011; which equals MCh$ 174,033 (MCh$ 190,861 for 2011).
c) | Dividends |
The distribution of dividends is detailed in the chart of the Consolidated Statements of Changes in Equity.
d) | As of December 31, diluted earnings and basic earnings were as follows: |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
a) Basic earnings per share | ||||||||
Total attributable to Bank shareholders | 387,967 | 435,084 | ||||||
Weighted average number of outstanding shares | 188,446,126,794 | 188,446,126,794 | ||||||
Basic earnings per share (in Ch$) | 2,059 | 2,309 | ||||||
b) Diluted earnings per share | ||||||||
Total attributable to Bank shareholders | 387,967 | 435,084 | ||||||
Weighted average number of outstanding shares | 188,446,126,794 | 188,446,126,794 | ||||||
Adjusted number of shares | 188,446,126,794 | 188,446,126,794 | ||||||
Diluted earnings per share (in Ch$) | 2,059 | 2,309 |
As of December 31, 2012 and 2011 there are no potential shares with dilutive effect.
Financial Statements 2012 / Banco Santander Chile 106 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 25
EQUITY, continued
e) | Other comprehensive income of available for sale investments and cash flow hedges: |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Available for sale investments | ||||||||
As of January 1 | 3,043 | (18,596 | ) | |||||
Gain (losses) on remeasuring available for sale investments, before tax | (15,131 | ) | 18,676 | |||||
Reclassification adjustments on available for sale investments, before tax | - | - | ||||||
Realized losses | 2,071 | 2,963 | ||||||
Subtotals | (13,060 | ) | 21,639 | |||||
Totals as of December 31, | (10,017 | ) | 3,043 | |||||
Cash flow hedges | ||||||||
As of January 1 | 394 | 11,958 | ||||||
Gains (losses) on remeasuring cash flow hedges, before tax | 4,326 | (12,031 | ) | |||||
Reclassification adjustments on cash flow hedges, before tax | 595 | 467 | ||||||
Amounts removed from equity and included in carrying amount of non-financial asset (liability) which acquisition or incurrence was hedged as a highly probable transition | - | - | ||||||
Subtotals | 4,921 | (11,564 | ) | |||||
Totals as of December 31, | 5,315 | 394 | ||||||
Other comprehensive income, before taxes | (4,702 | ) | 3,437 | |||||
Income tax related to other comprehensive income components | ||||||||
Income tax relating to available for sale investments | 2,003 | (562 | ) | |||||
Income tax relating to cash flow hedges | (1,063 | ) | (72 | ) | ||||
Totals as of December 31, | 940 | (634 | ) | |||||
Other comprehensive income, net of tax | (3,762 | ) | 2,803 | |||||
Attributable to: | ||||||||
Bank shareholders (Equity holders of the Bank) | (3,781 | ) | 2,832 | |||||
Non-controlling interest | 19 | (29 | ) | |||||
Financial Statements 2012 / Banco Santander Chile 107 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 26
CAPITAL REQUIREMENTS (BASEL)
Pursuant to the Chilean General Banking Law, the Bank must maintain a minimum ratio of effective equity to risk-weighted consolidated assets of 8% net of required allowances, and a minimum ratio of basic equity to consolidated total assets of 3%, net of required allowances. However, as a result of the Bank’s merger in 2002, the SBIF has determined that the Bank’s combined effective equity cannot be lower than 11% of its risk-weighted assets. Effective net equity is defined for these purposes as basic equity (capital and reserves) plus subordinated bonds, up to a maximum of 50% of basic equity, and FOGAPE (small companies guarantee funds) guarantees (CORFO) up to 15% over guarantees covering assets assessed by risk. Starting on December 31, 2012 this will decrease linearly on the last day of each month, in twelve equal and successive installments.
Assets are allocated to different risk categories, each of which is assigned a weighting percentage according to the amount of capital required to be held for each type of asset. For example, cash, deposits in banks and financial instruments issued by the Central Bank of Chile have a 0% risk weighting, meaning that it is not necessary to hold equity to back these assets according to current regulations. Property, plant and equipment have a 100% risk weighting, meaning that a minimum capital equivalent to 11% of these assets must be held. All derivatives traded off the exchanges are also assigned a risk weighting, using a conversion factor applied to their notional values, to determine the amount of their exposure to credit risk. Off-balance-sheet contingent credits are also included for weighting purposes, as “Credit equivalents.”
According to Chapter 12-1 of the SBIF’s Recopilación Actualizada de Normas [Updated Compilation of Rules] effective January 2010, the SBIF changed existing regulation with the enforcement of Chapter B-3 from the Compendium of Accounting Standards, with changed the risk exposure of contingent allocations from 100% exposition to the following:
Type of contingent loan | Exposure | |||
a) Pledges and other commercial commitments | 100 | % | ||
b) Foreign letters of credit confirmed | 20 | % | ||
c) Letters of credit issued | 20 | % | ||
d) Guarantees | 50 | % | ||
e) Interbank guarantee letters | 100 | % | ||
f) Available lines of credit | 50 | % | ||
h) Other loan commitments | ||||
- Higher Education Loans Law No. 20,027 | 15 | % | ||
- Other | 100 | % | ||
h) Other contingent loans | 100 | % |
Financial Statements 2012 / Banco Santander Chile 108 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 26
CAPITAL REQUIREMENTS (BASEL), continued:
The levels of basic capital and effective net equity at the close of each period are as follows:
Consolidated assets | Risk-weighted assets | |||||||||||||||
As of December 31, | As of December 31, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Balance-sheet assets (net of allowances) | ||||||||||||||||
Cash and deposits in banks | 1,250,414 | 2,793,701 | - | - | ||||||||||||
Cash items in process of collection | 520,267 | 276,454 | 75,429 | 45,737 | ||||||||||||
Trading investments | 338,287 | 409,763 | 21,713 | 23,817 | ||||||||||||
Investments under repurchase agreements | 6,993 | 12,928 | 6,993 | 12,928 | ||||||||||||
Financial derivative contracts (*) | 937,291 | 1,158,023 | 830,133 | 807,233 | ||||||||||||
Interbank loans | 90,527 | 87,541 | 18,105 | 17,508 | ||||||||||||
Loans and accounts receivable from customers | 18,325,957 | 16,823,407 | 16,205,004 | 14,746,903 | ||||||||||||
Available for sale investments | 1,826,158 | 1,661,311 | 200,285 | 99,197 | ||||||||||||
Investments in other companies | 7,614 | 8,728 | 7,614 | 8,728 | ||||||||||||
Intangible assets | 87,347 | 80,739 | 87,347 | 80,739 | ||||||||||||
Property, plant, and equipment | 162,214 | 153,059 | 162,214 | 153,059 | ||||||||||||
Current taxes | 10,227 | 37,253 | 1,023 | 3,725 | ||||||||||||
Deferred taxes | 186,210 | 147,754 | 18,621 | 14,775 | ||||||||||||
Other assets | 656,200 | 546,470 | 402,547 | 426,822 | ||||||||||||
Off-balance-sheet assets | ||||||||||||||||
Contingent loans | 3,201,028 | 3,023,330 | 1,903,368 | 1,801,971 | ||||||||||||
Total | 27,606,734 | 27,220,461 | 19,940,396 | 18,243,142 |
(*) | “Financial derivative contracts” are presented at their “Credit Equivalent Risk” value as established in Chapter 12-1 of the Recopilación Actualizada de Normas – RAN – (updated compilation of rules) issued by the SBIF. |
The levels of basic capital and effective net equity at the close of each period are as follows:
Ratio | ||||||||||||||||
As of December 31, | As of December 31, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
MCh$ | MCh$ | % | % | |||||||||||||
Basic capital | 2,135,660 | 2,001,222 | 7.74 | 7.35 | ||||||||||||
Effective net equity | 2,735,316 | 2,687,393 | 13.72 | 14.73 |
Financial Statements 2012 / Banco Santander Chile 109 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 27
NON-CONTROLLING INTEREST
This item reflects the net amount of the subsidiaries’ net equity attributable to equity instruments which do not belong to the Bank either directly or indirectly, including the part that has been attributed to income for the period.
The non-controlling interest in the subsidiaries’ equity is summarized as follows:
Other comprehensive income | ||||||||||||||||||||||||||||
As of December 31, 2012 | Non- controlling | Equity | Income | Available for sale investments | Deferred
tax | Total other comprehensive income | Comprehensive income | |||||||||||||||||||||
% | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||
Subsidiaries: | ||||||||||||||||||||||||||||
Santander Agente de Valores Limitada | 0.97 | 656 | 84 | 1 | - | 1 | 85 | |||||||||||||||||||||
Santander S.A. Sociedad Securitizadora | 0.36 | 3 | - | - | - | - | - | |||||||||||||||||||||
Santander S.A. Corredores de Bolsa | 49.00 | 25,646 | 2,423 | 57 | (12 | ) | 45 | 2,468 | ||||||||||||||||||||
Santander Asset Management S.A. Administradora General de Fondos | 0.02 | 10 | 4 | - | - | - | 4 | |||||||||||||||||||||
Santander Corredora de Seguros Limitada | 0.24 | 148 | 4 | - | - | - | 4 | |||||||||||||||||||||
Subtotals | 26,463 | 2,515 | 58 | (12 | ) | 46 | 2,561 | |||||||||||||||||||||
Special Purpose Entities: | ||||||||||||||||||||||||||||
Bansa Santander S.A. | 100.00 | 2,127 | 1,098 | - | - | - | 1,098 | |||||||||||||||||||||
Santander Gestión de Recaudación y Cobranzas Limitada | 100.00 | 2,505 | 171 | - | - | - | 171 | |||||||||||||||||||||
Multinegocios S.A. | 100.00 | 244 | 93 | - | - | - | 93 | |||||||||||||||||||||
Servicios Administrativos y Financieros Limitada. | 100.00 | 1,411 | 328 | - | - | - | 328 | |||||||||||||||||||||
Servicios de Cobranzas Fiscalex Limitada | 100.00 | 216 | 64 | - | - | - | 64 | |||||||||||||||||||||
Multiservicios de Negocios Limitada. | 100.00 | 1,299 | 356 | - | - | - | 356 | |||||||||||||||||||||
Subtotals | 7,802 | 2,110 | - | - | - | 2,110 | ||||||||||||||||||||||
Total | 34,265 | 4,625 | 58 | (12 | ) | 46 | 4,671 |
Financial Statements 2012 / Banco Santander Chile 110 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 27
NON CONTROLLING INTERESTS continued:
The non-controlling interest in equity and the affiliates’ income as of December 31, 2011 is summarized as follows:
Other comprehensive income | ||||||||||||||||||||||||||||
As of December 31, 2011 | Non- controlling | Equity | Income | Available for sale investments | Deferred tax | Total other comprehensive income | Comprehensive income | |||||||||||||||||||||
% | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||
Subsidiaries: | ||||||||||||||||||||||||||||
Santander Agente de Valores Limitada | 0.97 | 571 | 68 | 15 | (3 | ) | 12 | 80 | ||||||||||||||||||||
Santander S.A. Sociedad Securitizadora | 0.36 | 3 | - | - | - | - | - | |||||||||||||||||||||
Santander S.A. Corredores de Bolsa | 49.00 | 27,378 | 4,077 | 206 | (35 | ) | 171 | 4,248 | ||||||||||||||||||||
Santander
Asset Management S.A. Administradora General de Fondos | 0.02 | 13 | 6 | - | - | - | 6 | |||||||||||||||||||||
Santander Corredora de Seguros Limitada | 0.24 | 143 | 7 | - | - | - | 7 | |||||||||||||||||||||
Subtotals | 28,108 | 4,158 | 221 | (38 | ) | 183 | 4,341 | |||||||||||||||||||||
Special Purpose Entities: | ||||||||||||||||||||||||||||
Bansa Santander S.A. | 100.00 | 1,029 | (613 | ) | - | - | - | (613 | ) | |||||||||||||||||||
| 100.00 | 2,335 | 616 | - | - | - | 616 | |||||||||||||||||||||
Multinegocios S.A. | 100.00 | 150 | 17 | - | - | - | 17 | |||||||||||||||||||||
Servicios Administrativos y Financieros Limitada. | 100.00 | 1,083 | 426 | - | - | - | 426 | |||||||||||||||||||||
Servicios de Cobranzas Fiscalex Limitada | 100.00 | 152 | 37 | - | - | - | 37 | |||||||||||||||||||||
Multiservicios de Negocios Limitada. | 100.00 | 944 | 290 | - | - | - | 290 | |||||||||||||||||||||
Subtotals | 5,693 | 773 | - | - | - | 773 | ||||||||||||||||||||||
Total | 33,801 | 4,931 | 221 | (38 | ) | 183 | 5,114 |
Financial Statements 2012 / Banco Santander Chile 111 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 28
INTEREST AND ADJUSTMENTS
This item refers to interest earned in the period by all the financial assets whose return, whether implicitly or explicitly, is determined by applying the effective interest rate method, regardless of the value at fair value, as well as the reclassifications of products as a consequence of hedge accounting.
a) | For the years ended December 31, 2012 and 2011 the composition of income from interest and adjustments, not including income from hedge accounting, is as follows: |
As of December 31, | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Interest | Inflation | Prepaid fees | Total | Interest | inflation | Prepaid fees | Total | |||||||||||||||||||||||||
Items | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||
Repurchase agreements | 4,796 | (10 | ) | - | 4,786 | 5,448 | (2 | ) | - | 5,446 | ||||||||||||||||||||||
Interbank loans | 790 | - | - | 790 | 3,486 | - | - | 3,486 | ||||||||||||||||||||||||
Commercial loans | 698,925 | 78,762 | 4,924 | 782,611 | 596,171 | 121,704 | 4,462 | 722,337 | ||||||||||||||||||||||||
Mortgage loans | 227,994 | 123,297 | 11,401 | 362,692 | 205,288 | 181,966 | 10,524 | 397,778 | ||||||||||||||||||||||||
Consumer loans | 613,543 | 2,804 | 2,797 | 619,144 | 544,671 | 3,093 | 2,977 | 550,741 | ||||||||||||||||||||||||
Investment instruments | 95,732 | 2,011 | - | 97,743 | 89,823 | 9,371 | - | 99,194 | ||||||||||||||||||||||||
Other interest income | 19,880 | 3,037 | - | 22,917 | 7,569 | 4,281 | - | 11,850 | ||||||||||||||||||||||||
Interest income | 1,661,660 | 209,901 | 19,122 | 1,890,683 | 1,452,456 | 320,413 | 17,963 | 1,790,832 |
b) | As it is stated on paragraph i) of Note 1, suspended interests and adjustments that belong to transactions with 90 days or more of default are recorded in memo accounts (out of the Consolidated Statements of Financial Position), as long as these are not effectively collected. |
As of December 31, 2012 and 2011, the detail of income from suspended interest is as follows:
For the years ended December 31, | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Interest | Inflation | Prepaid fees | Total | Interest | Inflation | Prepaid fees | Total | |||||||||||||||||||||||||
Memo accounts | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||
Commercial loans | 16,907 | 3,688 | - | 20,595 | 14,266 | 3,288 | - | 17,554 | ||||||||||||||||||||||||
Mortgage loans | 3,962 | 4,882 | - | 8,844 | 4,086 | 5,257 | - | 9,343 | ||||||||||||||||||||||||
Consumer loans | 7,825 | 917 | - | 8,742 | 8,356 | 890 | - | 9,246 | ||||||||||||||||||||||||
Total | 28,694 | 9,487 | - | 38,181 | 26,708 | 9,435 | - | 36,143 |
Financial Statements 2012 / Banco Santander Chile 112 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 28
INTEREST INCOME AND EXPENSE, continued:
c) | On the financial statement closing date, the composition of income from interest and adjustments, not including income from hedge accounting, is as follows: |
As of December 31, | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Interest | Inflation | Prepaid fees | Total | Interest | Inflation | Prepaid fees | Total | |||||||||||||||||||||||||
Items | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||
Demand deposits | (3,601 | ) | (535 | ) | - | (4,136 | ) | (1,283 | ) | (658 | ) | - | (1,941 | ) | ||||||||||||||||||
Repurchase agreements | (10,707 | ) | 9 | - | (10,698 | ) | (8,603 | ) | (184 | ) | - | (8,787 | ) | |||||||||||||||||||
Time deposits and liabilities | (456,348 | ) | (45,743 | ) | - | (502,091 | ) | (351,009 | ) | (86,772 | ) | - | (437,781 | ) | ||||||||||||||||||
Interbank loans | (26,182 | ) | (14 | ) | - | (26,196 | ) | (26,006 | ) | (41 | ) | - | (26,047 | ) | ||||||||||||||||||
Issued debt instruments | (172,138 | ) | (64,006 | ) | - | (236,144 | ) | (170,756 | ) | (98,374 | ) | - | (269,130 | ) | ||||||||||||||||||
Other financial liabilities | (4,884 | ) | (881 | ) | - | (5,765 | ) | (5,019 | ) | (1,485 | ) | - | (6,504 | ) | ||||||||||||||||||
Other interest expense | (2,366 | ) | (3,435 | ) | - | (5,801 | ) | (2,372 | ) | (7,195 | ) | - | (9,567 | ) | ||||||||||||||||||
Interest expense total | (676,226 | ) | (114,605 | ) | - | (790,831 | ) | (565,048 | ) | (194,709 | ) | - | (759,757 | ) |
d) | At the end of the years the summary of interest and expenses is as follows: |
For
the years ended December 31, | ||||||||
2012 | 2011 | |||||||
Items | MCh$ | MCh$ | ||||||
Interest income | 1,890,683 | 1,790,832 | ||||||
Interest expense | (790,831 | ) | (759,757 | ) | ||||
Interest income | 1,099,852 | 1,031,075 | ||||||
Income from hedge accounting (net) | (57,118 | ) | (58,775 | ) | ||||
Total net interest income | 1,042,734 | 972,300 |
Financial Statements 2012 / Banco Santander Chile 113 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 29
FEES AND COMMISSIONS
This item includes the amount of fees earned and expenses in the period, except for those which are an integral part of the financial instrument’s effective interest rate:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Fees and commissions income | ||||||||
Fees and commissions for lines of credits and overdrafts | 9,296 | 11,602 | ||||||
Fees and commissions for guarantees and letters of credit | 28,523 | 24,388 | ||||||
Fees and commissions for card services | 127,437 | 122,900 | ||||||
Fees and commissions for management of accounts | 28,755 | 28,725 | ||||||
Fees and commissions for collections and payments | 56,472 | 61,803 | ||||||
Fees and commissions for intermediation and management of securities | 11,272 | 13,072 | ||||||
Fees and commissions for investments in mutual funds or others | 33,414 | 37,618 | ||||||
Insurance brokerage fees | 32,499 | 34,066 | ||||||
Office banking | 13,507 | 11,884 | ||||||
Other fees earned | 19,252 | 16,983 | ||||||
Total | 360,427 | 363,041 |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Fees and commissions expense | ||||||||
Compensation for card operation | (73,503 | ) | (63,375 | ) | ||||
Fees and commissions for securities transactions | (1,687 | ) | (2,555 | ) | ||||
Office banking | (12,026 | ) | (9,617 | ) | ||||
Other fees | (2,639 | ) | (9,658 | ) | ||||
Total | (89,855 | ) | (85,205 | ) | ||||
Net fees and commissions income | 270,572 | 277,836 |
The fees earned in transactions with letters of credit are recorded in the line item “Interest income” in the Consolidated Statement of Income.
Financial Statements 2012 / Banco Santander Chile 114 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 30
OTHER INCOME FROM FINANCIAL OPERATIONS
This item includes the adjustments for changes in financial instruments, except for interest attributable to the application of the effective interest rate method for adjustments to asset values, as well as the income earned in purchases and sales of financial instruments.
As of December 31, 2012 and 2011, the detail of income from financial operations is as follows:
For the years ended December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Net income from financial operations | ||||||||
Trading derivatives | (104,344 | ) | 116.877 | |||||
Trading investments | 36,338 | 38.819 | ||||||
Sale of loans and accounts receivables from customers | ||||||||
Current portfolio (Note 11) | 2,745 | 2.368 | ||||||
Charged-off portfolio (Note 11) | 2,090 | 7.324 | ||||||
Available for sale investments | (1,764 | ) | (3.356 | ) | ||||
Other income from financial operations (*) | 856 | 8.825 | ||||||
Total | (64.079 | ) | 170,857 |
(*) | In 2011, Banco Santander Chile sold all of its shares in Visa Inc. Their book value was Ch$ 1, generating a MCh$ 5,705 profit. |
NOTE 31
NET FOREIGN EXCHANGE INCOME
This item includes the income earned from foreign currency trading, differences arising from converting monetary items in a foreign currency to the functional currency, and those generated by non-monetary assets in a foreign currency at the time of their sale.
As of December 31, 2012 and 2011, the detail of foreign exchange income is as follows:
For the years ended December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Currency exchange differences | ||||||||
Net profit (loss) from currency exchange differences | 270,990 | (257.986 | ) | |||||
Hedging derivatives: | (120,610 | ) | 177.553 | |||||
Income from inflation-indexed assets in foreign currency | (5,574 | ) | 4.632 | |||||
Income from inflation-indexed liabilities in foreign currency | 1,572 | (859 | ) | |||||
Total | 146.378 | (76,660 | ) |
Financial Statements 2012 / Banco Santander Chile 115 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 32
ALLOWANCES FOR LOAN LOSSES
a) | The 2012 and 2011 activity for allowances for loan losses recorded on the Statement of Income is as follows: |
Loans and accounts receivable from customers | ||||||||||||||||||||||||||||||||
Interbank loans | Commercial loans | Mortgage loans | Consumer loans | Contingent loans | Total | |||||||||||||||||||||||||||
Individual | Individual | Group | Group | Group | Individual | Group | ||||||||||||||||||||||||||
As of December 31, 2012 | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||
- | (5,470 | ) | (51,409 | ) | (14,573 | ) | (78,958 | ) | - | - | (150,410 | ) | ||||||||||||||||||||
Allowances established | (299 | ) | (48,745 | ) | (31,772 | ) | (10,741 | ) | (239,607 | ) | (3,292 | ) | (4,634 | ) | (339,090 | ) | ||||||||||||||||
Total allowances and charge-offs | (299 | ) | (54,215 | ) | (83,181 | ) | (25,314 | ) | (318,565 | ) | (3,292 | ) | (4,634 | ) | (489,500 | ) | ||||||||||||||||
Allowances released | 400 | 20,716 | 16,624 | 7,449 | 38,471 | 2,017 | 4,106 | 89,783 | ||||||||||||||||||||||||
Recovery of loans previously charged off | - | 1,991 | 6,704 | 2,305 | 22,015 | - | - | 33,015 | ||||||||||||||||||||||||
Net charge to income | 101 | (31,508 | ) | (59,853 | ) | (15,560 | ) | (258,079 | ) | (1,275 | ) | (528 | ) | (366,702 | ) |
Charged-off loans, net of allowances:
Loans and accounts receivable from customers | ||||||||||||||||||||
Commercial loans | Mortgage loans | Consumer
loans | ||||||||||||||||||
Individual | Group | Group | Group | Total | ||||||||||||||||
As of December 31, 2012 | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Charged-off loans | 26,481 | 67,734 | 17,508 | 259,857 | 371,580 | |||||||||||||||
Applied allowances | (21,011 | ) | (16,325 | ) | (2,935 | ) | (180,899 | ) | (221,170 | ) | ||||||||||
Charged-off loans, net of allowances: | 5,470 | 51,409 | 14,573 | 78,958 | 150,410 |
Loans and accounts receivable from customers | ||||||||||||||||||||||||||||||||
Interbank
loans | Commercial loans | Mortgage
loans | Consumer
loans | Contingent loans | ||||||||||||||||||||||||||||
Individual | Individual | Group | Group | Group | Individual | Group | Total | |||||||||||||||||||||||||
As of December 31, 2011 | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||
Charged-off loans, net of allowances: | - | (8,141 | ) | (33,042 | ) | (11,317 | ) | (46,098 | ) | - | - | (98,598 | ) | |||||||||||||||||||
Allowances established | (600 | ) | (51,969 | ) | (72,601 | ) | (27,406 | ) | (184,488 | ) | (4,835 | ) | (3,960 | ) | (345,859 | ) | ||||||||||||||||
Total allowances and charge-offs | (600 | ) | (60,110 | ) | (105,643 | ) | (38,723 | ) | (230,586 | ) | (4,835 | ) | (3,960 | ) | (444,457 | ) | ||||||||||||||||
Allowances released | 507 | 41,741 | 26,582 | 7,645 | 25,185 | 2,876 | 21,569 | 126,105 | ||||||||||||||||||||||||
Recovery of loans previously charged off (*) | - | 7,216 | 16,135 | 12,474 | - | - | 35,825 | |||||||||||||||||||||||||
Net charge to income | (93 | ) | (18,369 | ) | (71,845 | ) | (14,943 | ) | (192,927 | ) | (1,959 | ) | 17,609 | (282,527 | ) |
(*) During the last quarter, the Ministry for Housing and Urban Development (MINVU) made payments to pay charge-off mortgage loans belonging to the National Association of Saving and Loans (ANAP) for a total MCh$ 14,390.
Charged-off loans, net of allowances:
Loans and accounts receivable from customers | ||||||||||||||||||||
Commercial loans | Mortgage
loans | Consumer loans | ||||||||||||||||||
Individual | Group | Group | Group | Total | ||||||||||||||||
As of December 31, 2011 | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Charged-off loans | 23,200 | 67,888 | 12,777 | 187,938 | 291,803 | |||||||||||||||
Applied allowances | (15,059 | ) | (34,846 | ) | (1,460 | ) | (141,840 | ) | (193,205 | ) | ||||||||||
Charged-off loans, net of allowances: | 8,141 | 33,042 | 11,317 | 46,098 | 98,598 |
Financial Statements 2012 / Banco Santander Chile 116 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 33
PERSONNEL SALARIES AND EXPENSES
a) | Composition of personnel salaries and expenses |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Personnel compensation | 188,563 | 173,540 | ||||||
Bonuses or gratifications | 66,666 | 62,450 | ||||||
Stock-based benefits | 1,747 | 2,261 | ||||||
Seniority compensation | 8,966 | 8,424 | ||||||
Pension plans | 452 | 1,207 | ||||||
Training expenses | 2,423 | 2,176 | ||||||
Day care and kindergarten | 2,487 | 2,367 | ||||||
Health funds | 3,571 | 2,940 | ||||||
Welfare fund | 397 | 447 | ||||||
Other personnel expenses | 25,026 | 24,801 | ||||||
Total | 300,298 | 280,613 |
b) | Share-based compensation: |
Banco Santander Chile and Subsidiaries, regarding salaries, have designed variable compensation plans for their employees, linked to the achievement of goals and objectives, which is evaluated and rewarded on a quarterly and/or yearly basis. In addition, there are multi-year variable compensation plans aimed at keeping and motivating sellers. Their payment depends on the extent to which goals are achieved. Goals are individual and for a group, and measured in more than one year.
Long-term incentive policy
The Committee of Directors of Shareholders approved a long-term incentive plan. This plan focuses on the Santander Group’s executive directors and certain executive employees in Spain and other Santander Group companies.
Stock performance plan
It includes a multi-year incentive plan compensated in Banco Santander S.A. shares (Parent Company in Spain). The beneficiaries are Executive Directors, other Senior management members and other employees determined by the Directors Committee from the Parent Company or its deputy, the Executive Committee. These shares will be distributed if the following criteria are met:
i. | The share price reaches the top 10 as compared to 30 other global banks. |
ii. | Earnings per share reach the top 10 as compared to 30 other global banks. |
iii. | The Bank has achieved its commercial and financial budget objectives in the last two years. |
iv. | The executive has achieved his/her personal targets during the last two years and has continued to work at the Bank until the end of the program. |
This plan involves share cycles delivered to beneficiaries. Each cycle lasts three years therefore, each year a new cycle will begin and, since 2007 onwards, another cycle will end. The aim is to establish a proper sequence between the end of the incentive program linked to the previous plan and the following cycles of this plan.
a) In June 2008 and 2010 the beginning of the third-cycle (PI11) and fourth-cycle (PI12) incentive plans was approved by the Parent Company. These new plans consist of three-year cycles and are linked to the fulfillment of the predetermined objectives. In 2010, the beginning of the fifth cycle was approved. This new cycle has a standard term of three years and it has begun to impact on the Consolidated Statements of Income in 2010. In 2012, no new plan was approved.
Financial Statements 2012 / Banco Santander Chile 117 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 33
PERSONNEL SALARIES AND EXPENSES, continued
For each cycle and beneficiary who remains employed at the Bank throughout the plan’s term, the shareholders determine a maximum number of shares that may be granted. The objectives to be fulfilled, which will determine the number of shares to be granted, were defined by comparing the Santander Group’s performance with that of a reference group of financial institutions. These objectives are linked to two parameters: Total Shareholder Return (TSR) and Increase in Earnings per Share (EPS), each of which has a 50% weighting in the determination of the percentage of shares to be granted.
The final number of shares to be granted in each cycle is determined by the degree of fulfillment of the objectives on the third anniversary of each cycle (with the exception of the first cycle, for which the second anniversary is used), and the shares will be delivered within seven months from the date the cycle ends. The TSR and the growth of EPS for Santander and the reference financial institutions will be calculated at that time, which will yield 50% of the percentage of shares to be granted according to the following scale and based on the relative position of Banco Santander S.A. (Parent Company in Spain).
The achievement of objectives chart for the I10, and I11 plans is as follows:
Santander’s position in the TSR Ranking | Maximum percentage of shares earned | Santander’s position in the EPS growth ranking | Maximum percentage of shares earned | |||||||
1st to 6th | 50.0 | % | 1st to 6th | 50.0 | % | |||||
7° | 43.0 | % | 7° | 43.0 | % | |||||
8° | 36.0 | % | 8° | 36.0 | % | |||||
9° | 29.0 | % | 9° | 29.0 | % | |||||
10° | 22.0 | % | 10° | 22.0 | % | |||||
11° | 15.0 | % | 11° | 15.0 | % | |||||
12th and more | 0.0 | % | 12th and more | 0.0 | % |
For the I12 and I13 plans only TRS is measured:
Santander’s position in the TSR Ranking | Maximum percentage of shares earned | ||||
1st to 5th | 100.00 | % | |||
6° | 82.50 | % | |||
7° | 65.00 | % | |||
8° | 47.50 | % | |||
9° | 30.00 | % | |||
10th and more | 0.00 | % |
For the I14 plan only TRS is measured:
Santander’s position in the TSR Ranking | Maximum percentage of shares earned | ||||
1st to 5th | 100.00 | % | |||
6° | 86.05 | % | |||
7° | 72.00 | % | |||
8° | 58.00 | % | |||
9° | 44.00 | % | |||
10° | 30.00 | % | |||
11th to 17th | 0.00 | % |
Financial Statements 2012 / Banco Santander Chile 118 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 33
PERSONNEL SALARIES AND EXPENSES, continued
If Banco Santander, S.A. is within the first quartile (including the 25th percentile) for each of the measures considered (TSR and EPS growth), the maximum percentage of shares will be earned; if it is at the median (including the 50th percentile), 30% of the maximum percentage of shares will be earned. If Banco Santander S.A. (Parent Company located in Spain) is below the median, all the share distributions will be voided.
b) | As of December 31, 2012 the abovementioned objectives for the I12 Plan were fulfilled and plans I13 and I14 are still valid. These plans have a cost of MCh$ 1,747 by ceded equity instruments, which was charged to income for the specific period in which beneficiaries provided services to Banco Santander Chile. This program had no diluting effects over non-controlling interest. This fair value was calculated as described: |
The fair value of the 50% which is linked to the TSR was determined by Santander Group on the basis of the Monte Carlo valuation model with 10,000 simulations run to determine the TSR for each of the reference Group companies, considering the aforementioned variables. The results (each of which represents the distribution of a number of shares) are classified in descending order through the calculation of the weighted average, and this amount is discounted at the risk-free interest rate.
PI11 | PI12 | PI13 | PI14 | |||||||||||||
% | % | % | % | |||||||||||||
Expected volatility (*) | 19.31 | 42.36 | 49.65 | 51.35 | ||||||||||||
Historical annual dividend return | 3.47 | 4.88 | 6.34 | 6.06 | ||||||||||||
Risk-free interest rate | 4.83 | 2.04 | 3.33 | 4.07 |
(*) Determined on the basis of the historical volatility over the course of the period (two or three years).
In view of the high correlation between the TSR and EPS, it can reasonably be concluded that the TSR value is also valid for EPS in a high percentage of cases. Accordingly, it was determined that the fair value of the portion of the plans linked to the Bank’s relative EPS position, for example the remaining 50% of the shares granted, was the same as the 50% corresponding to TSR. Since this valuation does not refer to market conditions, the number of shares expected to be granted will be re-examined and adjusted on a per-annum basis.
Financial Statements 2012 / Banco Santander Chile 119 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 33
PERSONNEL SALARIES AND EXPENSES, continued
Below is a table which provides a detail of the foregoing:
Number
of shares | Exercise
price € | Group of employees | Number
of individuals | Date
of commencement of the benefit | Date
of termination of benefit | |||||||||||||
Options granted Plan I11 | 1,057,204 | - | Manager | 161 | 07-01-2008 | 06-30-2011 | ||||||||||||
Options granted Plan I11 | 71,042 | - | Other non-managerial positions | 53 | 07-01-2008 | 06-30-2011 | ||||||||||||
Options granted Plan I12 | 327,882 | - | Manager | 157 | 07-01-2009 | 06-30-2012 | ||||||||||||
Options granted Plan I12 | 36,848 | - | Other non-managerial positions | 76 | 07-01-2009 | 06-30-2012 | ||||||||||||
Plans in force on December 31, 2009 | 1,492,976 | |||||||||||||||||
2010 Flow | ||||||||||||||||||
Options granted Plan I11 | 557,772 | - | Manager | 167 | 07-01-2008 | 06-30-2011 | ||||||||||||
Options granted Plan I11 | 31,171 | - | Other non-managerial positions | 47 | 07-01-2008 | 06-30-2011 | ||||||||||||
Options granted Plan I12 | 564,339 | - | Manager | 170 | 07-01-2009 | 06-30-2012 | ||||||||||||
Options granted Plan I12 | 43,787 | - | Other non-managerial positions | 63 | 07-01-2009 | 06-30-2012 | ||||||||||||
Options granted Plan I13 | 310,902 | - | Manager | 166 | 07-01-2010 | 06-30-2013 | ||||||||||||
Options granted Plan I13 | 65,148 | - | Other non-managerial positions | 68 | 07-01-2010 | 06-30-2013 | ||||||||||||
Plans in force on December 31, 2010 | 3,066,095 | |||||||||||||||||
2011 Flow | ||||||||||||||||||
Options granted Plan I11 | 315,716 | - | Manager | 174 | 07-01-2008 | 06-30-2011 | ||||||||||||
Options granted Plan I11 | 16,868 | - | Other non-managerial positions | 47 | 07-01-2008 | 06-30-2011 | ||||||||||||
Options granted Plan I12 | 591,686 | - | Manager | 157 | 07-01-2009 | 06-30-2012 | ||||||||||||
Options granted Plan I12 | 79,631 | - | Other non-managerial positions | 77 | 07-01-2009 | 06-30-2012 | ||||||||||||
Options granted Plan I13 | 650,474 | - | Manager | 166 | 07-01-2011 | 06-30-2013 | ||||||||||||
Options granted Plan I13 | 136,303 | - | Other non-managerial positions | 68 | 07-01-2011 | 06-30-2013 | ||||||||||||
Options granted Plan I14 | 268,318 | - | Manager | 147 | 07-01-2012 | 06-30-2014 | ||||||||||||
Options granted Plan I14 | 27,185 | - | Other non-managerial positions | 82 | 07-01-2012 | 06-30-2014 | ||||||||||||
Options exercised Plan I11 | (1,930,691 | ) | - | Manager | 174 | 07-01-2008 | 06-30-2011 | |||||||||||
Options exercised Plan I11 | (119,082 | ) | - | Other non-managerial positions | 47 | 07-01-2008 | 06-30-2011 | |||||||||||
Plans in force on December 31, 2011 | 3,102,503 | |||||||||||||||||
2012 Flow | ||||||||||||||||||
Options granted Plan I12 | 601,101 | - | Manager | 157 | 07-01-2009 | 06-30-2012 | ||||||||||||
Options granted Plan I12 | 63,254 | - | Other non-managerial positions | 77 | 07-01-2009 | 06-30-2012 | ||||||||||||
Options granted Plan I13 | 501,456 | - | Manager | 166 | 07-01-2010 | 06-30-2013 | ||||||||||||
Options granted Plan I13 | 129,076 | - | Other non-managerial positions | 114 | 07-01-2010 | 06-30-2013 | ||||||||||||
Options granted Plan I14 | 508,144 | - | Manager | 147 | 07-01-2011 | 06-30-2014 | ||||||||||||
Options granted Plan I14 | 46,810 | - | Other non-managerial positions | 82 | 07-01-2011 | 06-30-2014 | ||||||||||||
Options exercise Plan I12 | (2,085,008 | ) | - | Manager | 157 | 07-01-2009 | 06-30-2012 | |||||||||||
Options exercised Plan I12 | (223,520 | ) | - | Other non-managerial positions | 77 | 07-01-2009 | 06-30-2012 | |||||||||||
Plans in force on December 31, 2012 | 2,643,816 | |||||||||||||||||
Plan I13 | 1,793,359 | |||||||||||||||||
Plan I14 | 850,457 |
Financial Statements 2012 / Banco Santander Chile 120 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 34
ADMINISTRATIVE EXPENSES
As of December 31, 2012 and 2011, the composition of the item is as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
General administrative expenses | ||||||||
Maintenance and repair of property, plant and equipment | 14,290 | 12,171 | ||||||
Office lease | 24,113 | 22,386 | ||||||
Equipment lease | 367 | 198 | ||||||
Insurance payments | 2,420 | 2,562 | ||||||
Office supplies | 5,796 | 6,354 | ||||||
IT and communication expenses | 24,873 | 22,005 | ||||||
Lighting, heating, and other utilities | 4,086 | 4,739 | ||||||
Security and valuables transport services | 11,929 | 11,122 | ||||||
Representation and personnel travel expenses | 5,101 | 4,548 | ||||||
Judicial and notarial expenses | 8,609 | 7,203 | ||||||
Fees for technical reports | 3,968 | 2,870 | ||||||
Fees for professional services | 3,428 | 2,990 | ||||||
Other general administrative expenses | 4,589 | 2,920 | ||||||
Outsourced services | ||||||||
Data processing | 26,581 | 26,073 | ||||||
Other | 14,781 | 12,487 | ||||||
Board expenses | ||||||||
Board members’ compensation | 1,034 | 1,002 | ||||||
Board expenses | 39 | 309 | ||||||
Marketing expenses | ||||||||
Marketing expenses | 16,899 | 15,262 | ||||||
Taxes, payroll taxes, and contributions | ||||||||
Real state contributions | 1,615 | 1,742 | ||||||
Patents | 1,961 | 1,708 | ||||||
Other taxes | 15 | 31 | ||||||
Contributions to SBIF | 6,885 | 6,143 | ||||||
Total | 183,379 | 166,825 |
Financial Statements 2012 / Banco Santander Chile 121 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 35
DEPRECIATION, AMORTIZATION AND IMPAIRMENT
a) | The values of depreciation, amortization and impairment charges during the 2012 and 2011 periods are detailed below: |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Depreciation and amortization | ||||||||
Depreciation of property, plant, and equipment | (21,195 | ) | (20,373 | ) | ||||
Amortizations of Intangible assets | (35,174 | ) | (33,093 | ) | ||||
Total depreciation and amortization | (56,369 | ) | (53,466 | ) | ||||
Impairment of property, plant, and equipment | (90 | ) | (116 | ) | ||||
Total | (56,459 | ) | (53,582 | ) |
As of December 31, 2012, the costs for Property, plant, and equipment impairment total MCh$ 90, mainly due to damages to ATMs (MCh$ 116 as of December 31, 2011).
b) | The reconciliation between the book values and balances as of December 31, 2012 and 2011 is as follows: |
Depreciation and amortization | ||||||||||||
2012 | ||||||||||||
Property, plant, and equipment | Intangible assets | Total | ||||||||||
MCh$ | MCh$ | MCh$ | ||||||||||
Balances as of January 1, 2012 | (84,230 | ) | (111,479 | ) | (195,709 | ) | ||||||
Depreciation and amortization charges in the period | (21,195 | ) | (35,174 | ) | (56,369 | ) | ||||||
Sales and disposals in the period | 275 | - | 275 | |||||||||
Other | - | - | - | |||||||||
Balances as of December 31, 2012 | (105,150 | ) | (146,653 | ) | (251,803 | ) |
Depreciation and amortization | ||||||||||||
2011 | ||||||||||||
Property, plant, and equipment | Intangible assets | Total | ||||||||||
MCh$ | MCh$ | MCh$ | ||||||||||
Balances as of January 1, 2011 | (64,376 | ) | (78,329 | ) | (142,705 | ) | ||||||
Depreciation and amortization charges in the period | (20,373 | ) | (33,093 | ) | (53,466 | ) | ||||||
Sales and disposals in the period | 481 | - | 481 | |||||||||
Other | 38 | (57 | ) | (19 | ) | |||||||
Balances as of December 31, 2011 | (84,230 | ) | (111,479 | ) | (195,709 | ) |
Financial Statements 2012 / Banco Santander Chile 122 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 36
OTHER OPERATING INCOME AND EXPENSES
a) | Other operating expenses are comprised of the following components: |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Income from assets received in lieu of payment | ||||||||
Income from sale of assets received in lieu of payment | 2,654 | 5,629 | ||||||
Recovery of charge-offs and income from assets received in lieu of payment | 6,653 | 8,351 | ||||||
Subtotals | 9,307 | 13,980 | ||||||
Income from sale of investments in other companies | ||||||||
Gain on sale of investments in other companies | 599 | - | ||||||
Subtotals | 599 | - | ||||||
Other income | ||||||||
Leases | 142 | 305 | ||||||
Income from sale of property, plant and equipment (1) | 9,194 | 11,863 | ||||||
Recovery of provisions for contingencies | - | - | ||||||
Compensation from insurance companies due to damages | 262 | 437 | ||||||
Other | 254 | 515 | ||||||
Subtotals | 9,852 | 13,120 | ||||||
Total | 19,758 | 27,100 |
(1) As of December 31, 2012 and 2011 the sale of offices is detailed as follows:
Number of | Book value | Selling price | Profit | |||||||||||||
As of December 31, 2012 | assets | MCh$ | MCh$ | MCh$ | ||||||||||||
August | 2 | 361 | 1,045 | 684 | ||||||||||||
September | 9 | 4,578 | 9,485 | 4,907 | ||||||||||||
October | 4 | 704 | 1,274 | 570 | ||||||||||||
December | 2 | 714 | 3,117 | 2,403 | ||||||||||||
Total | 17 | 6,357 | 14,921 | 8,564 |
Number of | Book value | Selling price | Profit | |||||||||||||
As of December 31, 2011 | assets | MCh$ | MCh$ | MCh$ | ||||||||||||
March | 1 | 48 | 165 | 117 | ||||||||||||
November | 6 | 5,504 | 13,556 | 8,052 | ||||||||||||
December | 1 | 685 | 3,609 | 2,924 | ||||||||||||
Total | 8 | 6,237 | 17,330 | 11,093 |
In July 2012, the profit from selling Transbank S.A. shares was MCh$ 599, see Note 13.
Financial Statements 2012 / Banco Santander Chile 123 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 36
OTHER OPERATING INCOMES AND EXPENSES, continued:
b) | Other operating expenses are detailed as follows: |
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Provisions and expenses for assets received in lieu of payment | ||||||||
Charge-offs of assets received in lieu of payment | 9,180 | 9,878 | ||||||
Provisions for assets received in lieu of payment | 3,902 | 3,169 | ||||||
Expenses for maintenance of assets received in lieu of payment | 2,630 | 2,732 | ||||||
Subtotals | 15,712 | 15,779 | ||||||
Credit card expenses | ||||||||
Credit card expenses | 974 | 1,955 | ||||||
Credit card memberships | 5,388 | 4,472 | ||||||
Subtotals | 6,362 | 6,427 | ||||||
Customer services | 8,674 | 8,965 | ||||||
Other expenses | ||||||||
Operating charge-offs (1) | 8,366 | 9,884 | ||||||
Life insurance and general product insurance policies | 7,211 | 6,524 | ||||||
Additional tax on expenses paid overseas | 3,283 | 3,516 | ||||||
Provisions for contingencies | 7,964 | 8,144 | ||||||
Other | 7,533 | 7,319 | ||||||
Subtotals | 34,357 | 35,387 | ||||||
Total | 65,105 | 66,558 |
(1) | Includes MCh$ 1,566 paid to our customers as compensation for the delay in fund transferring that took place on October 31, 2012. |
Financial Statements 2012 / Banco Santander Chile 124 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 37
TRANSACTIONS WITH RELATED PARTIES
In addition to Affiliates and associated entities, the Bank’s “related parties” include its “key personnel” from the executive staff (members of the Bank’s Board and the Managers of Banco Santander Chile and its Affiliates, together with their close relatives), as well as the entities over which the key personnel could exercise significant influence or control.
The Bank also considers the companies that are part of the Santander Group worldwide as related parties, given that all of them have a common parent, i.e., Banco Santander S.A. (located in Spain).
Article 89 of the Ley de Sociedades Anónimas (Public Companies Act), which is also applicable to banks, provides that any transaction with a related party must be made under equitable conditions similar to those that customarily prevail in the market.
Moreover, Article 84 of the Ley General de Bancos (General Banking Act) establishes limits for loans that can be granted to related parties and prohibits lending to the Bank’s directors, managers, or representatives.
Transactions between the Bank and its related parties are specified below. To facilitate comprehension, we have divided the information into four categories:
Santander Group Companies
This category includes all the companies that are controlled by the Santander Group around the world, and hence, it also includes the companies over which the Bank exercises any degree of control (Affiliates and special-purpose entities).
Associated companies
This category includes the entities over which the Bank, in accordance with section b) of Note 1 to these Financial Statements, exercises a significant degree of influence and which generally belong to the group of entities known as “business support companies.”
Key personnel
This category includes members of the Bank’s Board and the managers of Banco Santander Chile and its Affiliates, together with their close relatives.
Other
This category encompasses the related parties that are not included in the groups identified above and which are, in general, entities over which the key personnel could exercise significant influence or control.
The terms for transactions with related parties are equivalent to those which prevail in transactions made under market conditions or to which the corresponding considerations in kind have been attributed.
Financial Statements 2012 / Banco Santander Chile 125 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 37
TRANSACTIONS WITH RELATED PARTIES, continued:
a) | Loans to related parties: |
Below are loans and receivables, and contingent loans, corresponding to related entities:
As of December 31, | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Companies of the Group | Associated companies | Key personnel | Other | Companies of the Group | Associated companies | Key personnel | Other | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Loans and accounts receivables | ||||||||||||||||||||||||||||||||
Commercial loans | 46,790 | 668 | 2,910 | 57,723 | 39,708 | 663 | 2,234 | 62,512 | ||||||||||||||||||||||||
Mortgage loans | - | - | 15,089 | - | - | - | 15,657 | - | ||||||||||||||||||||||||
Consumer loans | - | - | 1,513 | - | - | - | 1,808 | - | ||||||||||||||||||||||||
Loans and accounts receivables | 46,790 | 668 | 19,512 | 57,723 | 39,708 | 663 | 19,699 | 62,512 | ||||||||||||||||||||||||
Allowance for loan losses | (329 | ) | (3 | ) | (39 | ) | (9 | ) | (54 | ) | (1 | ) | (39 | ) | (23 | ) | ||||||||||||||||
Net loans | 46,461 | 665 | 19,473 | 57,714 | 39,654 | 662 | 19,660 | 62,489 | ||||||||||||||||||||||||
Guarantees | 9 | - | 17,909 | 1,349 | 25,311 | - | 18,244 | 1,241 | ||||||||||||||||||||||||
Contingent loans | ||||||||||||||||||||||||||||||||
Personal guarantees | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Letters of credit | 25,697 | - | - | - | 187 | - | - | - | ||||||||||||||||||||||||
Guarantees | 34,897 | - | - | 1,443 | 12,778 | - | - | 569 | ||||||||||||||||||||||||
Contingent loans | 60,594 | - | - | 1,443 | 12,965 | - | - | 569 | ||||||||||||||||||||||||
Provisions for contingent loans | (15 | ) | - | - | (2 | ) | (63 | ) | - | - | (1 | ) | ||||||||||||||||||||
Net contingent loans | 60,579 | - | - | 1,441 | 12,902 | - | - | 568 |
The activity of loans to related parties during the years 2012 and 2011 is shown below:
As of December 31 | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Companies of the Group | Associated companies | Key personnel | Other | Companies of the Group | Associated companies | Key personnel | Other | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Opening balances as of January 1, | 52,673 | 663 | 19,698 | 63,081 | 52,237 | 670 | 19,817 | 14,099 | ||||||||||||||||||||||||
Loans granted | 78,586 | 21 | 6,132 | 10,927 | 40,471 | 24 | 5,260 | 62,528 | ||||||||||||||||||||||||
Loans payments | (23,875 | ) | (16 | ) | (6,318 | ) | (14,842 | ) | (40,035 | ) | (31 | ) | (5,379 | ) | (13,546 | ) | ||||||||||||||||
Balances as of December 31 | 107,384 | 668 | 19,512 | 59,166 | 52,673 | 663 | 19,698 | 63,081 |
Financial Statements 2012 / Banco Santander Chile 126 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 37
TRANSACTIONS WITH RELATED PARTIES, continued:
b) | Assets and liabilities with related parties |
As of December 31, | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Companies of the Group | Associated companies | Key personnel | Other | Companies of the Group | Associated companies | Key personnel | Other | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and deposits in banks | 5,357 | - | - | - | 178,567 | - | - | - | ||||||||||||||||||||||||
Trading investments | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Investments under repurchase agreements | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Financial derivative contracts | 526,734 | - | - | - | 506,880 | - | - | - | ||||||||||||||||||||||||
Available for sale investments | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Other assets | 4,339 | - | - | - | 4,617 | - | - | - | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Deposits and other demand liabilities | 65,386 | 2,563 | 2,286 | 17,211 | 5,057 | 4,009 | 1,425 | 16,782 | ||||||||||||||||||||||||
Obligations under repurchase agreements | 92,862 | - | - | - | 137,191 | - | - | - | ||||||||||||||||||||||||
Time deposits and other time liabilities | 97,449 | 373 | 2,842 | 39,193 | 248,206 | 368 | 3,627 | 41,732 | ||||||||||||||||||||||||
Financial derivative contracts | 387,903 | - | - | - | 396,538 | - | - | - | ||||||||||||||||||||||||
Issued debt instruments | 67,368 | - | - | - | 1,683 | - | - | - | ||||||||||||||||||||||||
Other financial liabilities | 103,207 | - | - | - | 58,848 | - | - | - | ||||||||||||||||||||||||
Other liabilities | 1,241 | - | - | - | 1,339 | - | - | - |
c) | Income (expenses) recorded with related parties |
For the years ended December 31, | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Companies of the Group | Associated companies | Key personnel | Other | Companies of the Group | Associated companies | Key personnel | Other | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Income (expense) recorded | ||||||||||||||||||||||||||||||||
Income and expenses from interest and inflation | (11,660 | ) | 54 | 948 | (2,819 | ) | (17,892 | ) | 54 | 1,289 | (3,683 | ) | ||||||||||||||||||||
Income and expenses from fees and services | (1,191 | ) | 59 | 114 | 214 | 387 | 38 | 110 | 196 | |||||||||||||||||||||||
Net income from financial operations | 241,424 | - | (1 | ) | 107 | 38,744 | - | 5 | 392 | |||||||||||||||||||||||
Other operating revenues and expenses | 643 | - | - | - | 519 | - | - | - | ||||||||||||||||||||||||
Key personnel compensation and expenses | - | - | (30,999 | ) | - | - | - | (32,773 | ) | - | ||||||||||||||||||||||
Administrative and other expenses | (23,121 | ) | (20,461 | ) | - | - | (13,303 | ) | (25,509 | ) | - | - | ||||||||||||||||||||
Total | 206,095 | (20,348 | ) | (29,938 | ) | (2,498 | ) | 8,455 | (25,417 | ) | (31,369 | ) | (3,095 | ) |
(*) It corresponds to derivative contracts used to financially cover exchange risk of assets and liabilities that cover positions of the Bank and its subsidiaries.
Financial Statements 2012 / Banco Santander Chile 127 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 37
TRANSACTIONS WITH RELATED PARTIES, continued:
d) | Payments to Board members and key management personnel |
The compensation received by the key management personnel, including Board members and all the executives holding Manager positions, shown in the “Personnel salaries and expenses” and/or “Administrative expenses” items of the Consolidated Statement of Income, corresponds to the following categories:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Personnel compensation | 16,880 | 16,155 | ||||||
Board members’ salaries and expenses | 1,034 | 1,002 | ||||||
Bonuses or gratifications | 10,255 | 10,292 | ||||||
Compensation in stock | 1,508 | 1,765 | ||||||
Training expenses | 138 | 108 | ||||||
Seniority compensation | 12 | 1,580 | ||||||
Health funds | 289 | 272 | ||||||
Other personnel expenses | 431 | 392 | ||||||
Pension plans | 452 | 1,207 | ||||||
Total | 30,999 | 32,773 |
e) | Composition of key personnel |
As of December 31, 2012 and 2011, the composition of the Bank’s key personnel is as follows:
No. of executives | ||||||||
Position | 2012 | 2011 | ||||||
Director | 13 | 13 | ||||||
Division manager | 19 | 18 | ||||||
Department manager | 85 | 88 | ||||||
Manager | 63 | 62 | ||||||
Total key personnel | 180 | 181 |
Financial Statements 2012 / Banco Santander Chile 128 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 37
TRANSACTIONS WITH RELATED PARTIES, continued:
f) | Stock-based benefits |
The following table details the activity in stock-based benefits paid to the key personnel of the Bank and its Affiliates. The detail for each of these benefit plans is described in section b) of Note 33.
Number
of Shares | Exercise price € | Group
of employees | Number
of people | Date
of commencement of the benefit | Date
of termination of benefit | |||||||||||||||||
Options granted (Plan I11) | 1,057,204 | - | Manager | 161 | 07-01-2008 | 06-30-2011 | ||||||||||||||||
Options granted (Plan I12) | 327,882 | - | Manager | 157 | 07-01-2009 | 06-30-2012 | ||||||||||||||||
Plans in force on December 31, 2009 | 1,385,086 | |||||||||||||||||||||
2010 Flow | ||||||||||||||||||||||
Options granted (Plan I11) | 557,772 | - | Manager | 167 | 07-01-2008 | 06-30-2011 | ||||||||||||||||
Options granted (Plan I12) | 564,339 | - | Manager | 170 | 07-01-2009 | 06-30-2012 | ||||||||||||||||
Options granted (Plan I13) | 310,902 | - | Manager | 166 | 07-01-2010 | 06-30-2013 | ||||||||||||||||
Plans in force on December 31, 2010 | 2,818,099 | |||||||||||||||||||||
2011 Flow | ||||||||||||||||||||||
Options granted (Plan I11) | 315,716 | - | Manager | 174 | 07-01-2008 | 06-30-2011 | ||||||||||||||||
Options granted (Plan I12) | 591,686 | - | Manager | 157 | 07-01-2009 | 06-30-2012 | ||||||||||||||||
Options granted (Plan I13) | 650,474 | - | Manager | 166 | 07-01-2010 | 06-30-2013 | ||||||||||||||||
Options granted (Plan I14) | 268,318 | - | Manager | 147 | 07-01-2011 | 06-30-2014 | ||||||||||||||||
Options exercised (Plan I11) | (1,930,692 | ) | - | Manager | 174 | 07-01-2008 | 06-30-2011 | |||||||||||||||
Plans in force on December 31, 2011 | 2,713,601 | |||||||||||||||||||||
2012 Flow | ||||||||||||||||||||||
Options granted (Plan I12) | 601,101 | - | Manager | 157 | 07-01-2009 | 06-30-2012 | ||||||||||||||||
Options granted (Plan I13) | 501,456 | - | Manager | 166 | 07-01-2010 | 06-30-2013 | ||||||||||||||||
Options granted (Plan I14) | 508,144 | - | Manager | 147 | 07-01-2011 | 06-30-2014 | ||||||||||||||||
Options exercised (Plan I12) | (2,085,008 | ) | - | Manager | 157 | 07-01-2009 | 06-30-2012 | |||||||||||||||
Plans in force on December 31, 2012 | 2,239,294 | |||||||||||||||||||||
Plan I13 | 1,462,832 | |||||||||||||||||||||
Plan I14 | 776,462 |
Financial Statements 2012 / Banco Santander Chile 129 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 38
PENSION PLANS
For this purpose, the Bank will match the voluntary contributions made by the beneficiaries for their future pensions with an equivalent contribution. The executives will be entitled to receive this benefit only when they fulfill the following conditions:
i. | Aimed at the Group’s management |
ii. | The general requisite to apply for this benefit is that the employee must be carrying out his/her duties when turning 60 years old. |
iii. | The Santander Group will take on insurance (pension fund) on your behalf that it will pay (contribution) periodically. |
iv. | The Santander Group will be responsible for granting the benefits directly. |
If the working relationship between the manager and the respective company ends, before s/he fulfills the abovementioned requirements, s/he will have no rights under this benefit plan.
In the event of the executive’s death or total or partial disability, s/he will be entitled to receive this benefit.
The Bank will make the contributions to this benefit plan on the basis of mixed collective insurance policies whose beneficiary is the Bank. The life insurance company with whom such policies are executed is not an entity linked or related to the Bank or any other Santander Group company.
Assets related toplan by the end of the 2012 period total MCh$ 5,584 (MCh$ 5,508 in 2011).
The amount of the defined benefit plans has been quantified by the Bank, based on the following criteria:
1. | Calculation method: |
Use of the credit unit projected method which considers each working year as generating an additional unit of rights over benefits and values each unit separately. It is calculated in function of the fund contributions considered as main parameter, factors associated with the legal annual pension limit, seniority, age and yearly income for each unit valued individually.
2. | Updated actuarial hypothesis: |
Actuarial presuppositions with respect to demographic and financial variables are non-biased and mutually compatible with each other. The most significant actuarial hypotheses considered in the calculations were:
Post- employment plans | Post- employment plans | |||
2012 | 2011 | |||
Mortality charts | RV-2004 | RV-2004 | ||
Termination of contract rates | 5.0% | 5.0% | ||
Impairment chart | PDT 1985 | PDT 1985 |
Financial Statements 2012 / Banco Santander Chile 130 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 38
PENSION PLANS, continued:
Assets related to the pension fund contributed by the Bank into the Seguros Euroamérica insurance company with respect to defined benefit plans are presented as net of associated commitments.
The period’s activity for post-employment benefits is as follows:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Plan assets | 5,584 | 5,508 | ||||||
Commitments for defined-benefit plans | ||||||||
For active personnel | (2,612 | ) | (2,160 | ) | ||||
Incurred by inactive personnel | - | - | ||||||
Minus: | ||||||||
Unrealized actuarial (gain) losses | - | - | ||||||
Balances at the year end | 2,972 | 3,348 |
The period’s flow for post-employment benefits is as follows:
As of December 31 | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
a ) Fair value of plan assets | ||||||||
Balance at beginning of year | 5,508 | 5,170 | ||||||
Expected yield of insurance contracts | 326 | 403 | ||||||
Employer contributions | (250 | ) | (65 | ) | ||||
Actuarial (gain) losses | - | - | ||||||
Premiums paid | - | - | ||||||
Benefits paid | - | - | ||||||
Fair value of plan assets at end of year | 5,584 | 5,508 | ||||||
b ) Present value of obligations | ||||||||
Present value of obligations at beginning of the year | (2,160 | ) | (953 | ) | ||||
Net incorporation of Group companies | - | - | ||||||
Service cost | (452 | ) | (1,207 | ) | ||||
Interest cost | - | - | ||||||
Curtailment/settlement effect | - | - | ||||||
Benefits paid | - | - | ||||||
Past service cost | - | - | ||||||
Actuarial (gain) losses | - | - | ||||||
Other | - | - | ||||||
Present value of obligations at end of the year | (2,612 | ) | (2,160 | ) | ||||
Net balance at the year end | 2,972 | 3,348 |
Financial Statements 2012 / Banco Santander Chile 131 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 38
PENSION PLANS, continued:
Plan expected profit:
As of December 31, | ||||||||
2012 | 2011 | |||||||
Expected yield from the plan’s assets | UF + 2.50% annual | UF + 2.50% annual | ||||||
Yield expected from the reimbursement rights | UF + 2.50% annual | UF + 2.50% annual |
Plan associated expenses:
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Current period service expenses | 452 | 1.207 | ||||||
Interest cost | - | - | ||||||
Expected yield from the plan’s assets | (326 | ) | (403 | ) | ||||
Expected yield of insurance contracts linked to the Plan: | - | - | ||||||
Extraordinary allocations | - | - | ||||||
Actuarial (earn)/losses recorded in the period | - | - | ||||||
Past service cost | - | - | ||||||
Other | - | - | ||||||
Total | 126 | 804 |
Financial Statements 2012 / Banco Santander Chile 132 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 39
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
Fair value is defined as the amount at which a financial instrument (asset or liability) could be delivered or settled, respectively, on a given date between two independent knowledgeable parties who act freely and prudently (i.e., not in a forced or liquidation sale). The most objective and customary reference for the fair value of an asset or liability is the quoted price that would be paid for it on a transparent organized market (“estimated fair value”).
For financial instruments with no available market prices, fair values have been estimated by using recent transactions in analogous instruments, and in the absence thereof, the present values or other valuation techniques based on mathematical valuation models sufficiently accepted by the international financial community. In the use of these models, consideration is given to the specific particularities of the asset or liability to be valued, and especially to the different kinds of risks associated with the asset or liability.
These techniques are inherently subjective and are significantly influenced by the assumptions used, including the discount rate, the estimates of future cash flows and prepayment expectations. Hence, the fair value estimated for an asset or liability may not coincide exactly with the price at which that asset or liability could be delivered or settled on the date of its valuation, and may not be justified in comparison with independent markets.
Determination of fair value of financial instruments
Below is a comparison between the value at which the Bank’s financial assets and liabilities are recorded and their fair value as of December 31, 2012 and 2011:
As of December 31, | ||||||||||||||||
2012 | 2011 | |||||||||||||||
Amount recorded | Financial fair value | Amount recorded | Financial fair value | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Assets | ||||||||||||||||
Cash and deposits in banks | 1,250,414 | 1,250,414 | 2,793,701 | 2,793,701 | ||||||||||||
Cash items in process of collection | 520,267 | 520,267 | 276,454 | 276,454 | ||||||||||||
Trading investments | 338,287 | 338,287 | 409,763 | 409,763 | ||||||||||||
Investments under repurchase agreements | 6,993 | 6,993 | 12,928 | 12,928 | ||||||||||||
Financial derivative contracts | 1,293,212 | 1,293,212 | 1,601,896 | 1,601,896 | ||||||||||||
Loans and accounts receivable from customers and interbank loans (Net) | 18,416,484 | 20,682,784 | 16,910,948 | 18,261,301 | ||||||||||||
Available for sale investments | 1,826,158 | 1,826,158 | 1,661,311 | 1,661,311 | ||||||||||||
Liabilities | ||||||||||||||||
Deposits and interbank borrowings | 15,520,235 | 15,495,714 | 15,255,021 | 14,631,032 | ||||||||||||
Cash items in process of being cleared | 284,953 | 284,953 | 89,486 | 89,486 | ||||||||||||
Obligations under repurchase agreements | 304,117 | 304,117 | 544,381 | 544,381 | ||||||||||||
Financial derivative contracts | 1,146,161 | 1,146,161 | 1,292,402 | 1,292,402 | ||||||||||||
Issued debt instruments and other financial liabilities | 4,763,900 | 5,300,998 | 4,799,838 | 5,238,471 |
In addition, the fair value estimates presented above do not attempt to estimate the value of the Bank’s profits generated by its business activity, nor its future activities, and accordingly, they do not represent the Bank’s value as a going concern. Below is a detail of the methods used to estimate the financial instruments’ fair value:
a) | Cash and deposits in banks |
The recorded value of cash and interbank loans approximates its estimated fair value in view of these instruments’ short-term nature.
Financial Statements 2012 / Banco Santander Chile 133 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 39
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES, continued:
b) | Unsettled transactions, trading instruments, available for sale investment instruments, resale agreements, and securities loans |
The estimated fair value of these financial instruments was established using market values or estimates from an available dealer, or quoted market prices of similar financial instruments. Investments with maturity in less than one year are evaluated at recorded value since, due to their short maturity term, they are considered as having a fair value not significantly different from their recorded value. To estimate the fair value of debt investments or representative values in these lines of businesses, we take into consideration additional variables and elements, as long as they apply, including the estimate of prepayment rates and credit risk of issuers.
c) | Loans and accounts receivable from customers and interbank loans |
Fair value of commercial, mortgage and consumer loans and credit cards is measured by the discounted cash flow (DCF) analysis. To do so, we use current market interest rates considering product, term, amount and similar loan quality. Fair value of loans with 90 days or more of delinquency is measured by means of the market value of the associated guarantee, minus the rate and term of expected payment. For variable rate loans which interest rates change frequently (monthly or quarterly) and that are not subjected to any significant credit risk change, the estimated fair value is based on their book value.
d) | Deposits |
Disclosed fair value of deposits that do not produce interests and saving accounts is the amount payable at reporting date and, therefore, equals the recorded amount. Fair value of time deposits is calculated by a discounted cash flow calculation that applies current interest rates from a market monthly maturity calendar.
e) | Short and long term issued debt instruments |
Fair value of these instruments is calculated by a discounted cash flow (DCF) analysis based on market rates and using these for each of the portfolio’s terms.
f) | Financial derivative contracts |
The estimated fair value of financial derivative contracts was calculated using the prices quoted on the market for financial instruments having similar characteristics.
The fair value of interest rate swaps represents the estimated amount that the Bank expects to receive or pay to rescind the contracts or agreements, bearing in mind the term structures of the interest rate curve, the underlying asset’s volatility and the counterparts’ credit risk.
If there are no quoted prices on the market (either direct or indirect) for any derivative instrument, the respective fair value estimates have been calculated by using models and valuation techniques such as Black-Scholes, Hull, and Monte Carlo simulations, taking into consideration the relevant inputs/outputs such as volatility of options, observable correlations between underlying assets, counterparts’ credit risk, implicit price volatility, the velocity with which the volatility reverts to its average value, and the straight-line relationship (correlation) between the value of a market variable and its volatility, among others.
Measurement of fair value and hierarchy
IAS 39 provides a hierarchy of reasonable value which separates the inputs and/or valuation technique assumptions used to measure the fair value of financial instruments. The hierarchy reflects the significance of the inputs used in making the measurement. The three levels of the hierarchy of fair values are the following:
Financial Statements 2012 / Banco Santander Chile 134 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 39
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES, continued:
Level 1: In quoted prices on active markets for identical assets and liabilities.
Level 2: Inputs other than the quoted prices included in level 1 that are observable for assets or liabilities, either directly or indirectly; and
Level 3: Inputs for the asset or the liability that are not based on observable market data.
The hierarchy level within which the fair value measurement is categorized in its entirely is determined based on the lowest level of input that is significant to fair value the measurement in its entirety.
The best evidence of a financial instrument’s fair value at the initial time is the transaction price (Level 1).
In cases where quoted market prices cannot be observed, Management makes its best estimate of the price that the market would set using its own internal models which in most cases use data based on observable market parameters as significant input (Level 2) and, in very specific cases, significant inputs not observable in market data (Level 3).
Financial instruments at fair value and determined by quotations published in active markets (Level 1) include:
- Chilean Government and Department of Treasure bonds
In the case instruments that cannot be totally observed in the market, price is established based on other observable prices (level 2).
The following financial instruments are classified under Level 2:
Type of financial instrument | Model used in valuation | Description | ||
Mortgage and private bonds |
Present value model |
IRR are provided by Riskamerica, according to the following criterion: If, at the valuation day, there are one or more valid transactions at the Santiago Stock Exchange for a given nemotechnic, the reported rate is the weighted average by the amount of observed rates. In case there are no valid transactions for a given nemotechnic on valuation day, the reported rate is IRR base from a reference structure, plus a spread model based on historical spread for the same item or similar ones. | ||
Time deposits |
Present value model |
IRR are provided by Riskamerica, according to the following criterion: If, at the valuation day, there are one or more valid transactions at the Santiago Stock Exchange for a given nemotechnic, the reported rate is the weighted average by the amount of observed rates. In case there are no valid transactions for a given nemotechnic on valuation day, the reported rate is IRR base from a reference structure, plus a spread model based on issuer curves. | ||
Constant Maturity Swaps (CMS), FX and Inflation Forward (Fwd) , Cross Currency Swaps (CCS), Interest Rate Swap (IRS) |
Present value model |
IRR are provided by pricing providers such as ICAP, GFI, Tradition, and Bloomberg according to this criterion: With published market prices, a valuation curve is created by the bootstrapping method and is then used to value different derivative instruments. | ||
FX Options |
Black-Scholes |
Formula adjusted by volatility smile Prices (volatility) are provided by BGC Partners, according to this criterion: With published market prices, a volatility surface is created by interpolation and then these volatilities are used to value options. |
Financial Statements 2012 / Banco Santander Chile 135 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 39
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES, continued:
In limited occasions significant inputs not observable in market data are used (Level 3). To carry out this estimate, several techniques are used, including extrapolation of observable market data or a mix of observable data.
The following financial instruments are classified under Level 3:
Type of financial instrument | Model used in valuation | Description | ||
Caps/Floors/Swaptions | Black Normal Model for Cap/Floors and Swaptions | There is no observable input of implicit volatility. | ||
UF options | Black – Scholes | There is no observable input of implicit volatility. | ||
Cross currency swap with window | Hull-White | Hybrid HW model for rates and Brownian motion for FX There is no observable input of implicit volatility. | ||
CCS (special contracts) | Implicit Forward Rate Agreement (FRA) | Start Fwd unsupported by MUREX (platform) due to the UF forward estimate. | ||
Cross currency swap, Interest rate swap, Call money swap in Tasa Activa Bancaria (Active Bank Rate) TAB, | Other | Validation obtained by using the interest curve and interpolating at flow maturities, but TAB is not a directly observable variable and is not correlated to any market input. | ||
Bonds (in our case, low liquidity bonds) | Valuated by using similar instrument prices plus an adjustment rate by liquidity. |
The following table presents the assets and liabilities that are measured at fair value on a recurrent basis, as of December 31, 2012 and 2011:
Fair value measurement | ||||||||||||||||
2012 | Level 1 | Level 2 | Level 3 | |||||||||||||
December 31, | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||
Assets | ||||||||||||||||
Trading investments | 338,287 | 334,756 | 3,531 | - | ||||||||||||
Available for sale investments | 1,826,158 | 1,020,904 | 803,895 | 1,359 | ||||||||||||
Derivatives | 1,293,212 | - | 1,231,422 | 61,790 | ||||||||||||
Total | 3,457,657 | 1,355,660 | 2,038,848 | 63,149 | ||||||||||||
Liabilities | ||||||||||||||||
Derivatives | 1,146,161 | - | 1,145,055 | 1,106 | ||||||||||||
Total | 1,146,161 | - | 1,145,055 | 1,106 |
Fair value measurement | ||||||||||||||||
2011 | Level 1 | Level 2 | Level 3 | |||||||||||||
December 31, | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||
Assets | ||||||||||||||||
Trading investments | 409,763 | 409,763 | - | - | ||||||||||||
Available for sale investments | 1,661,311 | 1,305,876 | 353,466 | 1,969 | ||||||||||||
Derivatives | 1,601,896 | - | 1,520,382 | 81,514 | ||||||||||||
Total | 3,672,970 | 1,715,639 | 1,873,848 | 83,483 | ||||||||||||
Liabilities | ||||||||||||||||
Derivatives | 1,292,402 | - | 1,291,033 | 1,369 | ||||||||||||
Total | 1,292,402 | - | 1,291,033 | 1,369 |
Financial Statements 2012 / Banco Santander Chile 136 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 39
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES, continued:
The following table presents the Bank’s activity for assets and liabilities measured at fair value on a recurrent basis using unobserved significant entries (Level 3) as of December 31, 2012 and 2011:
Assets | Liabilities | |||||||
MCh$ | MCh$ | |||||||
As of January 1, 2012 | 83,483 | (1,369 | ) | |||||
Total realized and unrealized profits (losses): | ||||||||
Included in statement of income | (19,724 | ) | 263 | |||||
Included in comprehensive income | (610 | ) | - | |||||
Purchases, issuances, and allocations (net) | - | - | ||||||
As of December 31, 2012 | 63,149 | (1,106 | ) | |||||
Profits or losses included in income for 2012 that are attributable to change in unrealized profits (losses) related to assets or liabilities as of December 31, 2012 | (20,334 | ) | 263 |
Assets | Liabilities | |||||||
MCh$ | MCh$ | |||||||
As of January 1, 2011 | 104,308 | (5,422 | ) | |||||
Total realized and unrealized profits (losses): | ||||||||
Included in statement of income | (22,525 | ) | 4,053 | |||||
Included in comprehensive income | 1,700 | - | ||||||
Purchases, issuances, and allocations (net) | - | - | ||||||
As of December 31, 2011 | 83,483 | (1,369 | ) | |||||
Total profits or losses included in income for 2011 that are attributable to change in unrealized profits (losses) related to assets or liabilities as of December 31, 2011 | (20,825 | ) | 4,053 |
The realized and unrealized profits (losses) included in income for 2012 and 2011, in the assets and liabilities measured at fair value on a recurrent basis through unobservable market data (Level 3) are recorded in the Statement of Income in the line item.
The potential effect as of December 31, 2012 and 2011 on the valuation of assets and liabilities valued at fair value on a recurrent basis through unobservable significant entries (level 3), generated by changes in the principal assumptions if other reasonably possible assumptions that are less or more favorable were used, is not considered by the Bank to be significant.
Financial Statements 2012 / Banco Santander Chile 137 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT
Introduction and general description
The Bank, due to its activities with financial instruments is exposed to several type of risks. The main risks related to financial instruments that apply to the Bank are as follows:
- | Market risks: these arise from holding financial instruments whose value may be affected by fluctuations in market conditions, generally including the following types of risk: |
a. | Foreign exchange risk: this arises as a consequence of exchange rate fluctuations among currencies. |
b. | Interest rate risk: this arises as a consequence of fluctuations in market interest rates. |
c. | Price risk: this arises as a consequence of changes in market prices, either due to factors specific to the instrument itself or due to factors that affect all the instruments negotiated in the market. |
d. | Inflation risk: this arises as a consequence of changes in Chile’s inflation rate, whose effect would be mainly applicable to financial instruments denominated in UFs. |
- | Credit risk this is the risk of one of the parties to a financial instrument failing to meet its contractual obligations for reasons of insolvency or inability of the individuals or legal entities in question, causing a financial loss on the other party. |
- | Liquidity risk liquidity risk is the possibility that an entity may be unable to meet its payment commitments, or that in order to meet them, it may have to raise funds on onerous terms or damage its image and reputation |
- | Operating risk this is a risk arising from human errors, system errors, fraud or external events which may damage the Bank’s reputation, may have legal or regulatory implications, or cause financial losses |
This note includes information on the Bank’s exposure to these risks and on its objectives, policies, and processes involved in their measurement and management.
Risk management structure
The Board is responsible for the establishment and monitoring of the Bank’s risk management structure, for which purpose it has an on-line corporate governance system with the international recommendations and trends, adapted to Chilean regulatory conditions and able to apply the most advanced practices in the markets in which the Bank operates. To optimize the performance of this function, the Board has established the Assets and Liabilities Committee (“ALCO”), whose principal task is to assist in carrying out its functions relating to oversight and management of the Bank’s risks. To complement the ALCO in the risk management function, the Board also has three key committees: the Markets Committee (“CDM,” the acronym in Spanish) the Executive Credit Committee (“CEC,” the acronym in Spanish) and the Audit Committee (“CDA,” the acronym in Spanish). Each of these committees is composed of directors and executive members of the Bank’s management.
The ALCO is responsible for developing risk handling policies of the Bank following the Board and Santander Spain Global Risk Department guidelines, as well as the requirements of the Chilean SBIF. Said policies have been created mainly to identify and analyse the risks the Bank faces, establishing risk limits and adequate controls and monitor risks and the abiding of limits. Risk handling policies and systems are revised regularly to reflect changes in market conditions and products or services offered. The Bank, through the creation and management of regulations and procedures, aims at developing a disciplined and constructive control environment in which all employees understand their role and duties.
To carry out its duties, the ALCO works directly with the Bank’s control and risk departments, whose joint objectives include the following:
- | evaluate risks whose magnitude might threaten the Bank’s solvency or which might potentially pose significant risks to its operations or reputation; |
- | ensure that the Bank is equipped with the means, systems, structures, and resources consistent with best practices, which enable the implementation of the risk management strategy; |
- | ensure the integration, control, and management of all the Bank’s risks; |
- | apply homogeneous risk policies, policies and metrics throughout the Bank and its businesses; |
- | develop and implement a risk management model at the bank, in order for risk exposure to be adequately integrated into the different decision making processes; |
Financial Statements 2012 / Banco Santander Chile 138 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
- | identify risk concentrations and mitigation alternatives, monitor the macroeconomic and competitive environment, quantifying sensitivities and the foreseeable impact of different scenarios on risk positioning; and |
- | carry out the management of structural liquidity, interest rate and exchange rate risks, as well as those arising from the Bank’s own resource base. |
To achieve the abovementioned goals, the Bank (Management and ALCO) carries out several activities related to risk management, including the following: calculate exposures to risk of different portfolios and/or investments, taking into consideration mitigating factors (guarantees, netting, collateral, etc.); calculate the probabilities of expected loss for each portfolio and/or investment; assign loss factors to the new transactions (rating and scoring); measure the risk values of the portfolios and/or investments based on different scenarios by means of historical simulations; specify limits for potential losses based on the different risks incurred; determine the potential impact of the structural risks on the Bank’s Consolidated Statements of Income; set limits and alerts which guarantee the Bank’s liquidity; and identify and quantify the operating risks by line of business, so as to facilitate their mitigation through corrective actions.
The CDA is mainly responsible for supervising compliance with the Bank’s risk management policies and procedures, and for reviewing the adaptation of the risk management framework to the risks faced by the Bank.
Credit risk
Credit risk: this is the risk of one of the parties to a financial instrument failing to meet its contractual obligations for reasons of insolvency or inability of the individuals or legal entities in question, causing a financial loss on the other party. To manage credit risks, the Bank consolidates all elements and components of credit risk exposure (e.g. individual delinquency risk, innate risk of a business line or segment, and/or geographical risk).
Mitigation of credit risk for loans and accounts receivable
The Board has delegated the duty of credit risk management to the ALCO and CEC, as well as to the Bank’s risk departments, whose roles are summarized below:
- | Formulation of credit policies, by consulting with the business units, meeting requirements of guarantees, credit evaluation, risk rating and submission of reports, documentation and legal procedures in compliance with the regulatory, legal and internal requirements of the Bank. |
- | Establish the structure to approve and renew credit applications. The Bank structures credit risks by assigning limits to the concentration of that risk in terms of individual debtors, debtors groups, industry segment and country. Approval levels are assigned to the correspondent officials of the business unit (commercial, consumer, SMEs) to be controlled permanently by management. In addition, those limits are revised constantly. Teams in charge of risk evaluation at branch level interact on a regular basis with customers; however, for large operations, the head office risk teams and even the CEC, work directly with customers to assess credit risks and prepare risk requests. Moreover, Banco Santander Spain participates in the process to approve larger credits; for example, to customers or economical groups with debts over USD 40 million. |
- | Limit concentrations of exposure to customers or counterparts, in geographic areas or industries (for accounts receivable or loans), and by issuer, credit rating, and liquidity (for investments). |
- | Develop and maintain the Bank’s credit risk classifications, for the purpose of classifying risks according to the degree of exposure to financial loss that is faced by the respective financial instruments, with the aim of focusing risk management specifically on the associated risks. |
- | Review and evaluate credit risk. Review and evaluate credit risk. Management’s risk divisions are largely independent of the Bank’s commercial division and evaluate all credit risks in excess of the specified limits, prior to loan approvals for customers or prior to the acquisition of specific investments. Renewals and revisions of loans are subject to similar processes. |
Financial Statements 2012 / Banco Santander Chile 139 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
When preparing a credit application for a corporate customer, the Bank verifies several parameters such as debt service capacity (generally including future cash flows), customer's financial record and/or projections for their economic area. The risk division is closely involved in this process. All applications include an analysis of the customer’s strengths and drawbacks, a classification and a recommendation. Credit limits are not established over customers’ outstanding balances but on the direct and indirect credit risk of the financial group. For example, a corporation would be evaluated together with subsidiaries and affiliates.
Consumer loans are evaluated and approved by their respective risk divisions (individual, PYME), and the evaluation process is based on an evaluation system known as Garra (Hook) (Banco Santander) and Syseva (Santander Banefe). Both of these processes are decentralized, automated, and based on a scoring system that includes the credit risk policies adopted by the Bank’s Board. The loan application process is based on a collection of information to determine the customer’s financial condition and payment capacity. The parameters used to evaluate an applicant’s credit risk include several variables, such as: income level, duration of current employment, indebtedness and credit bureau reports.
- | Provide advice, orientation and specialized knowledge to the business units in order to promote the Bank’s best practices in credit risk management. |
Mitigation of credit risk of other financial assets (investments, derivatives, commitments)
As a part of the acquisition process of financial investments and financial instruments, the Bank examines the probability of uncollectibility from issuers or counterparties, using internal and external evaluations, such as risk evaluators that are independent from the Bank.
The Bank is also governed by a strict and conservative policy which ensures that the issuers of its investments and the counterparties in derivative transactions are highly reputable.
In addition, the Bank operates with a variety of instruments which imply credit risk, but are not reflected in the Consolidated Statement of Financial Position, such as: guarantees and bonds, documentary letters of credit, performance bonds, and commitments to grant loans.
Guarantees and bonds imply an irrevocable payment obligation. If a guaranteed customer fails to meet their obligations to third parties secured by the Bank, the Bank will make the relevant payments; hence, these transactions imply the same credit risk exposure as an ordinary loan.
Documentary letters of credit are commitments documented by the Bank on behalf of customers, which are secured by the shipped merchandise to which they relate, and hence, have a lower risk than direct indebtedness. Performance bonds are contingent commitments which become enforceable only if the customer fails to carry out the work agreed upon with a third party and secured by such performance bonds.
In the case of loan commitments, the Bank is potentially exposed to losses for an amount equivalent to the amount unused of the commitment. However, the expected loss amount is lower than the commitment’s unused amount. The Bank controls the maturity term of credit lines since generally, long-term obligations have a larger credit risk than short-term ones.
Maximum credit risk exposure
For financial assets recorded in the Consolidated Statements of Financial Position, risk exposure equals their book amount. For ceded financial bonds, maximum exposure to credit risk equals the maximum amount the Banks would have to pay if the bond is executed.
Financial Statements 2012 / Banco Santander Chile 140 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
Below is the distribution by financial asset of the Bank’s maximum exposure to credit risk as of December 31, 2012 and 2011, without deduction of collateral or credit improvements received:
As of December 31, | ||||||||||||
2012 | 2011 | |||||||||||
Amount of exposure | Amount of exposure | |||||||||||
Note | MCh$ | MCh$ | ||||||||||
Cash and deposits in banks | 5 | 1,250,414 | 2,793,701 | |||||||||
Cash items in process of collection | 5 | 520,267 | 276,454 | |||||||||
Trading investments | 6 | 338,287 | 409,763 | |||||||||
Investments under repurchase agreements | 7 | 6,993 | 12,928 | |||||||||
Financial derivative contracts | 8 | 1,293,212 | 1,601,896 | |||||||||
Loans and accounts receivable from customers and interbank loans (Net) | 9 and 10 | 18,416,484 | 16,910,948 | |||||||||
Available for sale investments | 12 | 1,826,158 | 1,661,311 | |||||||||
Off-balance commitments: | ||||||||||||
Letters of credit issued | 24 | 199,420 | 184,649 | |||||||||
Foreign letters of credit confirmed | 24 | 113,878 | 52,889 | |||||||||
Guarantees | 24 | 1,046,114 | 920,986 | |||||||||
Available credit lines | 24 | 4,933,335 | 4,673,525 | |||||||||
Personal guarantees | 24 | 139,059 | 147,081 | |||||||||
Other irrevocable credit commitments | 24 | 63,828 | 95,150 | |||||||||
Total | 30,147,449 | 29,741,281 |
Financial Statements 2012 / Banco Santander Chile 141 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
Credit quality is classified as described in the SBIF’s Compendium of Standards as of December 31, 2012 and 2011:
December 31, | ||||||||||||||||||||||||||||||||
Category | 2012 | 2011 | ||||||||||||||||||||||||||||||
loans | Individual | Percentage | Allowance | Percentage | Individual | Percentage | Allowance | Percentage | ||||||||||||||||||||||||
Default | MCh$ | % | MCh$ | % | MCh$ | % | MCh$ | % | ||||||||||||||||||||||||
A1 | 169,601 | 0.89 | 59 | 0.01 | 109,771 | 0.63 | 36 | 0.01 | ||||||||||||||||||||||||
A2 | 1,945,252 | 10.26 | 1,249 | 0.23 | 1,401,030 | 8.04 | 1,016 | 0.19 | ||||||||||||||||||||||||
A3 | 2,531,416 | 13.35 | 2,650 | 0.48 | 2,371,890 | 13.60 | 2,772 | 0.53 | ||||||||||||||||||||||||
A4 | 1,587,998 | 8.37 | 12,230 | 2.22 | 1,555,956 | 8.92 | 13,404 | 2.56 | ||||||||||||||||||||||||
A5 | 701,917 | 3.70 | 12,356 | 2.25 | 510,164 | 2.93 | 8,966 | 1.71 | ||||||||||||||||||||||||
A6 | 335,676 | 1.77 | 13,972 | 2.54 | 307,875 | 1.77 | 8,927 | 1.70 | ||||||||||||||||||||||||
B1 | 133,240 | 0.70 | 5,699 | 1.04 | 136,783 | 0.78 | 8,846 | 1.69 | ||||||||||||||||||||||||
B2 | 77,411 | 0.41 | 4,714 | 0.86 | 67,467 | 0.39 | 4,829 | 0.92 | ||||||||||||||||||||||||
B3 | 41,266 | 0.22 | 5,393 | 0.98 | 45,330 | 0.26 | 6,390 | 1.22 | ||||||||||||||||||||||||
B4 | 35,980 | 0.19 | 7,331 | 1.33 | 19,680 | 0.11 | 1,487 | 0.28 | ||||||||||||||||||||||||
C1 | 45,104 | 0.24 | 902 | 0.16 | 28,888 | 0.17 | 578 | 0.11 | ||||||||||||||||||||||||
C2 | 30,796 | 0.16 | 3,080 | 0.56 | 26,896 | 0.15 | 2,690 | 0.51 | ||||||||||||||||||||||||
C3 | 34,685 | 0.18 | 8,672 | 1.58 | 47,494 | 0.27 | 11,873 | 2.27 | ||||||||||||||||||||||||
C4 | 28,246 | 0.15 | 11,298 | 2.05 | 40,879 | 0.23 | 16,352 | 3.12 | ||||||||||||||||||||||||
C5 | 36,545 | 0.19 | 23,754 | 4.32 | 36,163 | 0.21 | 23,506 | 4.49 | ||||||||||||||||||||||||
C6 | 46,246 | 0.24 | 41,622 | 7.57 | 40,600 | 0.23 | 36,392 | 6.95 | ||||||||||||||||||||||||
Subtotal | 7,781,379 | 41.02 | 154,981 | 28.18 | 6,746,866 | 38,69 | 148,064 | 28,26 |
Group | Percentage | Allowance | Percentage | Group | Percentage | Allowance | Percentage | |||||||||||||||||||||||||
MCh$ | % | MCh$ | % | MCh$ | % | MCh$ | % | |||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||||||
Normal portfolio | 2,380,961 | 12.55 | 33,821 | 6.15 | 2,212,368 | 12.69 | 36,394 | 6.95 | ||||||||||||||||||||||||
Default portfolio | 417,254 | 2.20 | 62,117 | 11.29 | 416,039 | 2.39 | 60,721 | 11.59 | ||||||||||||||||||||||||
Subtotal | 2,798,215 | 14.75 | 95,938 | 17.44 | 2,628,407 | 15.08 | 97,115 | 18.54 | ||||||||||||||||||||||||
Mortgage | ||||||||||||||||||||||||||||||||
Normal portfolio | 5,042,551 | 26.59 | 17,485 | 22.99 | 4,915,967 | 28.20 | 17,962 | 3.43 | ||||||||||||||||||||||||
Default Portfolio | 229,030 | 1.21 | 18,505 | 24.85 | 199,696 | 1.15 | 17,671 | 3.37 | ||||||||||||||||||||||||
Subtotal | 5,271,581 | 27.80 | 35,990 | 47.84 | 5,115,663 | 29.35 | 35,633 | 6.80 | ||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||
Normal portfolio | 2,722,492 | 14.36 | 126,493 | 3.18 | 2,522,156 | 14.46 | 93,243 | 17.80 | ||||||||||||||||||||||||
Default Portfolio | 392,985 | 2.07 | 136,766 | 3.36 | 421,690 | 2.42 | 149,779 | 28.60 | ||||||||||||||||||||||||
Subtotal | 3,115,477 | 16.43 | 263,259 | 6.54 | 2,943,846 | 16.88 | 243,022 | 46.40 | ||||||||||||||||||||||||
Total portfolios | 18,966,652 | 100.00 | 550,168 | 100.00 | 17,434,782 | 100.00 | 523,834 | 100.00 |
Financial Statements 2012 / Banco Santander Chile 142 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
Regarding the individual evaluation portfolio, the different categories correspond to:
- | A Categories or Normal Portfolios. Constituted by debtors with a payment capacity that allows them to fulfill their financial obligations and commitments and who, according to their financial situation, are not likely to change this condition in the short term. |
- | B Categories or Substandard Portfolio. Includes debtors with financial difficulties or whose payment capacity has been diminished and about whom the Bank has considerable doubts about the total reimbursement of the capital and interest within the agreed terms, showing they are slightly tight regarding their financial obligations in the short term. |
- | C Categories or Default Portfolio. Constituted by those debtors the Bank consider remote reimbursement since they have an impaired or null payment capacity. |
Regarding group evaluation portfolios, all of the operations compounding them are evaluated together.
See Note 32 for the detail of the Bank’s impaired loans and their allowances. Also, see Note 21 for a detail of the maturity of the Bank’s financial assets.
Exposure to credit risk in foreign derivative contracts
As of December 31, 2012, the Bank’s foreign exposure—including the counterpart risk in the derivative instruments’ portfolio was USD 1,275 or 2.4% of assets. In the table below, exposure to derivative instruments is calculated by using the equivalent credit risk; which equals the replacement carrying amount plus the maximum potential value, considering the cash collateral that minimizes exposure.
Below, there are additional details regarding our exposure to Spain and Italy, since they are classified above 1 and where most of our exposure to categories other than 1 is. We have no sovereign exposures to Spain or Italy. Below we detail exposure to Italy and Spain as of December 31, 2012, considering fair value of derivative instruments.
Country | Classification | Derivative instruments (market adjusted) USD MM | Deposits
USD MM | Loans
USD MM | Financial investments USD MM | Exposure
Total USD MM | ||||||||||||||||||
Spain | 2 | 19.22 | 24.47 | 0.00 | 0.00 | 43.69 | ||||||||||||||||||
Italy | 2 | 73.51 | 4.59 | 0.00 | 0.00 | 78.10 | ||||||||||||||||||
Total | 92.73 | 29.06 | 0.00 | 0.00 | 121.79 |
* | The total amount of this exposure to derivative instruments must be compensated daily with collateral and, therefore, the net credit exposure is USD 0. |
Our exposure to Spain within the group is as follows:
Counterpart | Country | Classification | Derivative instruments (market adjusted) USD MM | Deposits
USD MM | Loans
USD MM |
USD MM | Exposure
Total USD MM | |||||||||||||||||||||
Banco Santander Spain | Spain | 2 | 19.22 | 24.47 | 0.2 | 0.0 | 0.0 |
* | The total amount of this exposure to derivative instruments must be compensated daily with collateral and, therefore, the net credit exposure is USD 0. |
** | We have included our exposure to Santander branches in New York and Hong Kong as exposure to Spain. |
Financial Statements 2012 / Banco Santander Chile 143 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
Impairment of other financial instruments
As of December 31, 2012 and 2011, the Bank had no significant impairment of its financial assets other than loans and accounts receivable
Security interests and credit improvements
The maximum exposure to credit risk is reduced in some cases by security interests, credit improvements, and other actions which mitigate the Bank’s exposure. Based on the foregoing, the creation of security interests are a necessary but not a sufficient condition for granting a loan; accordingly, the Bank’s acceptance of risks requires the verification of other variables and parameters, such as the ability to pay or generate funds in order to mitigate the risk being taken on.
Procedures for management and valuation of securities are compiled in the internal policies of risk management. Said policies set the basic policies for credit risk management, including the management of securities received in customers’ operations. In this sense, the risk management model includes valuating the existence of adequate and sufficient guarantees that allow recovering the credit when the debtor’s circumstances prevent them from fulfilling their obligations.
The procedures used for the valuation of security interests conform to best market practices, which provide for the use of appraisals for mortgage securities, market prices for stock securities, value of the interest for investment funds, etc. All collateral received must be properly documented and registered in the appropriate registry, and must be approved by the Bank’s legal divisions.
In addition, the Bank has classification tools that allow it to group the credit quality of transactions or customers. To study how this probability varies, the Bank has historical record databases that keep the internally generated information. Classification tools vary according to the analyzed customer (commercial, consumer, SMEs, etc.).
Below is the detail of security interests provided to the Bank as of December 31, 2012 and 2011.
As of December 31, | ||||||||
2012 | 2011 | |||||||
MCh$ | MCh$ | |||||||
Non-impaired financial assets: | ||||||||
Properties/mortgages | 11,462,572 | 8,285,570 | ||||||
Investments and others | 869,036 | 716,735 | ||||||
Impaired financial assets: | ||||||||
Properties/mortgages | 1,145,721 | 622,723 | ||||||
Investments and others | 105,903 | 102,906 | ||||||
Total | 13,583,232 | 9,727,934 |
Financial Statements 2012 / Banco Santander Chile 144 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
Liquidity risk
Liquidity risk is the risk that the Bank may have difficulty meeting the obligations associated with its financial obligations.
Liquidity risk management
The Bank is continually exposed to demands for cash arising from multiple banking transactions such as payments from checking accounts, payments on time deposits, payments of guarantees, disbursements for derivative transactions, etc. As is inherent in banking activity, the Bank does not hold enough cash to cover the balance of these positions, since experience shows that only a minimal amount of these funds will be withdrawn, which amount can be foreseen with a high degree of certainty.
The Bank’s approach to liquidity management is to ensure—within possible—to have enough liquidity to fulfill its obligations to maturity, in normal circumstances and stress conditions, without entering unacceptable debts or risking the Bank’s reputation. The Board establishes limits in a minimal part of available funds close to maturity to fulfill said payments and over a minimum level of interbank operations and other loan facilities that should be available to cover transfers at unexpected demand levels. This is constantly reviewed. On the other hand, the Bank must comply the regulation limits established by the SBIF for maturity mismatches.
These limits affect the asymmetries of future flows of income and outlays on an individual basis. They are:
i. | mismatches of up to 30 days for all currencies, up to the amount of basic capital; |
ii. | mismatches of up to 30 days for foreign currencies, up to the amount of basic capital; and |
iii. | mismatches of up to 90 days for all currencies, twice the basic capital. |
The treasury department receives information from all business units about the liquidity profile of its financial assets and liabilities in addition to details from other future cash flows that arise from future businesses. Based on this information, the Treasury keeps a short-term liquid assets portfolio, mainly composed of liquid investments, interbank loans and advanced payments, to guarantee that the Bank has enough liquidity. Liquidity needs of business units are fulfilled through short-term transfers from Treasury to cover any short-term variation and long-term financing to address all structural liquidity requirements.
The Bank monitors its liquidity position daily to establish future flows of inflow and outflow. At each month's closing, stress tests are carried out for which a variety of scenarios is used, from normal market conditions to fluctuations. Liquidity policy and procedures are subjected to review and approval of the Bank’s Board. There are periodical reports detailing the Bank’s and its subsidiaries’ liquidity position, including any exception and adopted correcting measures, which are also reviewed periodically by the ALCO.
The Bank relies on customer (retail) and institutional deposits, obligations to banks, debt instruments, and time deposits as its main sources of funding. Although most obligations to banks, debt instruments and time deposits have maturities of more than one year, customer (retail) and institutional deposits tend to have shorter maturities and a large proportion of them are payable within 90 days. The short-term nature of these deposits increases the Bank’s liquidity risk, and hence, the Bank actively manages this risk through continual supervision of the market trends and price management.
Financial Statements 2012 / Banco Santander Chile 145 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
Exposure to liquidity risk
One of the key measures the Bank uses for its liquidity risk management is providing net liquid assets to customers’ deposits. To do this, net liquid assets must include cash, cash equivalents and debt investments with an active and liquid market, minus interbank deposits, issued fixed rate securities, loans and other securities that mature next month. A similar, yet not identical measure is used as a calculation to measure the Bank's default with the liquidity limit established by the SBIF, in which the Bank establishes the mismatch between its benefits and obligations according to maturity based on estimate behavior. Mismatch proportion to 30 days regarding capital and 90 days regarding 2 times the capital is shown below:
As of December 31, | ||||||||
2012 | 2011 | |||||||
% | % | |||||||
30 days | 51.00 | 21.00 | ||||||
30 days foreign currency | 3.00 | 17.00 | ||||||
90 days | 29.00 | 53.00 |
Next, is the breakdown by maturity, of the assets and liabilities balances of the Bank as of December 31, 2012 and 2011, also considering those off-balance commitments:
Demand | Up to 1 month | Between 1 and 3 months | Between 3 and 12 months | Between 1 and 5 years | More than 5 years | Total | ||||||||||||||||||||||
As of December 31, 2012 | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||
Maturity of assets (Note 21) | 2,954,752 | 1,353,187 | 2,081,752 | 3,969,599 | 7,060,705 | 6,781,988 | 24,201,983 | |||||||||||||||||||||
Maturity of liabilities (Note 21) | (5,396,782 | ) | (5,423,233 | ) | (2,740,256 | ) | (3,219,159 | ) | (3,236,072 | ) | (2,003,864 | ) | (22,019,366 | ) | ||||||||||||||
Net maturity | (2,442,030 | ) | (4,070,046 | ) | (658,504 | ) | 750,440 | 3,824,633 | 4,778,124 | 2,182,617 | ||||||||||||||||||
Off-balance commitments: | ||||||||||||||||||||||||||||
Personal guarantees | - | (23,315 | ) | (24,201 | ) | (22,051 | ) | (65,571 | ) | (3,921 | ) | (139,059 | ) | |||||||||||||||
Foreign letters of credit confirmed | - | (4,786 | ) | (22,127 | ) | (40,870 | ) | (46,095 | ) | - | (113,878 | ) | ||||||||||||||||
Letters of credit issued | - | (52,056 | ) | (103,153 | ) | (6,351 | ) | (37,860 | ) | - | (199,420 | ) | ||||||||||||||||
Guarantees | - | (82,428 | ) | (136,561 | ) | (312,299 | ) | (488,770 | ) | (26,056 | ) | (1,046,114 | ) | |||||||||||||||
Net maturity, including commitments | (2,442,030 | ) | (4,232,631 | ) | (944,546 | ) | 368,869 | 3,186,337 | 4,748,147 | 684,146 |
Demand | Up to 1 month | Between 1 and 3 months | Between 3 and 12 months | Between 1 and 5 years | More than 5 years | Total | ||||||||||||||||||||||
As of December 31, 2011 | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||
Maturity of assets (Note 21) | 3,599,575 | 2,272,721 | 1,675,813 | 3,402,246 | 6,829,887 | 6,410,593 | 24,190,835 | |||||||||||||||||||||
Maturity of liabilities (Note 21) | (4,854,055 | ) | (4,955,437 | ) | (3,217,968 | ) | (3,670,122 | ) | (3,389,892 | ) | (1,893,654 | ) | (21,981,128 | ) | ||||||||||||||
Net maturity | (1,254,480 | ) | (2,682,716 | ) | (1,542,155 | ) | (267,876 | ) | 3,439,995 | 4,516,939 | 2,209,707 | |||||||||||||||||
Off-balance commitments: | ||||||||||||||||||||||||||||
Personal guarantees | (195 | ) | (22,058 | ) | (31,783 | ) | (27,934 | ) | (59,849 | ) | (5,262 | ) | (147,081 | ) | ||||||||||||||
Foreign letters of credit confirmed | - | (21,653 | ) | (19,091 | ) | (377 | ) | (11,768 | ) | - | (52,889 | ) | ||||||||||||||||
Letters of credit issued | (28 | ) | (58,637 | ) | (85,747 | ) | (1,552 | ) | (38,685 | ) | - | (184,649 | ) | |||||||||||||||
Guarantees | (135 | ) | (77,553 | ) | (120,989 | ) | (314,486 | ) | (383,712 | ) | (24,111 | ) | (920,986 | ) | ||||||||||||||
Net maturity, including commitments | (1,254,838 | ) | (2,862,617 | ) | (1,799,765 | ) | (612,225 | ) | 2,945,981 | 4,487,566 | 904,102 |
The tables above show cash flows without deducting financial assets and liabilities over estimated maturity base. Future cash flows from these instruments might vary significantly compared to this analysis. For example, we expect that Demand deposits remain stable or grow steadily and we do not expect to execute all unrecognized loan obligations. In addition, the above detail excludes available credit lines since they do not have contract-defined maturities.
Financial Statements 2012 / Banco Santander Chile 146 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
Market risk
Market risk arises as a consequence of the market activity, by means of financial instruments which value can be affected by market variations, reflected in different assets and financial risk factors. The risk can be diminished by means of hedging through other products (assets/liabilities or derivative instruments) or undoing the open transaction/position. The goal of market risk management is to manage and control market risk exposure within acceptable parameters.
There are four major risk factors that affect market prices: interest rates, exchange type, prices, and inflation. In addition and for certain positions, it is necessary to consider other risks as well, such as spread risk, base risk, commodity risk, volatility or correlation risk.
Market risk management
The Bank’s internal management to measure market risk is based mainly on the procedures and standards of Santander Spain, which are in turn based on analysis of management in three principal components:
- | trading portfolio; |
- | -domestic financial management portfolio; |
- | foreign financial management portfolio. |
The trading portfolio is comprised mainly of investments valued at fair value and free of any restriction on their immediate sale, which are often bought and sold by the Bank with the intent of selling them in the short term in order to benefit from short-term price fluctuations. The financial management portfolios include all the financial investments not considered a part of trading portfolio.
The ALCO is the general responsible for the market risk. The Bank’s risk/finance department is responsible for formulating detailed management policies and applying them to the Bank’s operations, in conformity with the guidelines adopted by the ALCO and the Global Risk Department of Banco Santander – Spain.
The department’s functions in connection with financial management portfolios include the following:
i. | apply the “Value at Risk” (VaR) techniques to measure interest rate risk, |
ii. | adjust the trading portfolios to market and measure the daily income and loss from commercial activities, |
iii. | compare the real VAR with the established limits, |
iv. | establish procedures to prevent losses in excess of predetermined limits, and |
v. | furnish information on the trading activities to the ALCO, other members of the Bank’s management and the Global Risk Department of Santander – Spain. |
The department’s functions in connection with financial management portfolios include the following:
i. | perform sensitivity simulations (as explained below) to measure interest rate risk for activities denominated in local currency and the potential loss forecasted by these simulations, and |
ii. | provide daily reports thereon to the ALCO, other members of the Bank’s management, and the Global Risk Department of Santander - Spain. |
Market risk - trading portfolio
The Bank applies VaR methods to measure the market risk of its trading portfolio. The Bank has a consolidated commercial position that made of fixed income investments, currency trade and a minimum position of share investments. This portfolio is mostly made of Chilean Central Bank bonds, mortgage bonds and corporate bonds issued locally at low risk. At the closing date, the trading portfolio did not show investments in another portfolio.
Financial Statements 2012 / Banco Santander Chile 147 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
For the Bank, VaR estimate is done through the historical simulation method which consists in observing the behavior of profit and loss that might have taken place with the current portfolio if the market conditions of a given time had been present so to, based on that information, infer maximum loss with a determined confidence level. This method has the advantage of reflecting precisely the historical distribution of market values and not requiring any distribution assumption for specific probability. All VaR measures are destined to establish the distribution function for the value change in a given portfolio and, once this distribution is known, to calculate the percentile related to the necessary confidence level, which will match the risk value in virtue of those parameters. According to what the Bank calculated, the VaR is an estimate of the maximum expected loss of value market of a given portfolio in one day, with 99.00% confidence. It is the maximum loss in one day the Bank could expect in a given portfolio with a confidence level of 99.00%. In other words, it is the loss the Bank would have to deal only 1.0% of the time. VaR provides a single estimation of the market risk that cannot be compared between market risks. Returns are calculated using a time window of 2 years or, at least, 520 data points gathered since the reference date in the past to calculate VaR.
The Bank does not calculate three separate VaR. Only one VaR is calculated for the entire trading portfolio which, in addition, in separated into risk types. The VaR program carries out a historical simulation and calculates a G&P Statement for 520 data points (days) for each risk factor (fixed income, currency and variable income). Each risk factor’s G&P is added and a consolidated VaR is calculated with 520 data points or days. In addition, the VaR is calculated for each risk factor based on the individual G&P calculated for each. Moreover, a weighted VaR is calculated following the above mentioned method but giving a larger weight to the 30 most recent data points. The highest VaR is reported. In 2011 and 2010, we were still using the same VaR model and the methodology has not changed.
The Bank uses VaR estimates to issue a warning in case the statistically estimated losses for the trading portfolio exceed the cautionary levels and, therefore, there are certain predetermined levels.
Limitations of the VaR model
When applying a calculation methodology, no assumptions are made regarding the probability distribution of the changes in the risk factors; the historically observed changes are used for the risk factors on which each position in the portfolio will be valued.
It is necessary to define a valuation function fj(xi) for each instrument j, preferably the same one used to calculate the market value and income of the daily position. This valuation function will be applied in each scenario to generate simulated prices for all the instruments in each scenario.
In addition, the VaR methodology should be interpreted taking into consideration the following limitations:
- | Changes in market rates and prices may not be independent and identically distributed random variables, and may not have a normal distribution. In particular, the assumption of normal distribution may underestimate the probability of extreme market movements; |
- | -The historical data used by the Bank may not provide the best estimate of the joint distribution of changes in the risk factors in the future, and any modification of the data may be inadequate. In particular, the use of historical data may fail to capture the risk of potential extreme and adverse market fluctuations, regardless of the time period used; |
- | A 1-day time horizon may not fully capture the market risk positions which cannot be liquidated or covered in a single day. It would not be possible to liquidate or cover all the positions in a single day; |
- | The VaR is calculated at the close of business, but trading positions may change substantially in the course of the trading day; |
- | -The use of a 99% level of confidence does not take account of, or make any statement about, the losses that could occur outside of that degree of confidence; and |
- | A model such as the VaR does not capture all the complex effects of the risk factors over the value of the positions or portfolios, and accordingly, it could underestimate potential losses. |
Financial Statements 2012 / Banco Santander Chile 148 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
In 2012 and 2011, Bank did not, at any time, exceed the VaR limits related to the three elements of the trading portfolio: fixed income investments, variable income investments or foreign currency investments.
The Bank carries out back-testings on a daily basis and, generally, we discover that trading losses exceed the estimated VaR almost one out hundred business days. Also, a maximum VaR limit was established that can be applied over the trading portfolio. Both in 2012 and 2011, the Bank has kept within the maximum limit it established for the VaR; even when the real VaR exceeded estimations.
High, low and average levels for each component and year were as follows:
VaR | 2012 USDMM | 2011 USDMM | ||||||
Consolidated: | ||||||||
High | 4.62 | 11.02 | ||||||
Low | 0.96 | 2.39 | ||||||
Average | 2.33 | 6.07 | ||||||
Fixed-income investments: | ||||||||
High | 4.99 | 11.18 | ||||||
Low | 0.95 | 2.54 | ||||||
Average | 2.24 | 6.09 | ||||||
Variable-income investments | ||||||||
High | 0.07 | 0.23 | ||||||
Low | 0.00 | 0.00 | ||||||
Average | 0.00 | 0.07 | ||||||
Foreign currency investments | ||||||||
High | 3.23 | 3.87 | ||||||
Low | 0.03 | 0.09 | ||||||
Average | 0.66 | 0.90 |
Market risk - local and foreign financial management
The Bank’s financial management portfolio includes most of the Bank’s non-trading assets and liabilities, including the credit/loan portfolio. For these portfolios, investment and financing decisions are strongly influenced by the Bank’s commercial strategies.
The Bank uses a sensitivity analysis to measure market risk for domestic and foreign currencies (not included in the trading portfolio). The Bank carries out a simulation of scenarios that will be calculated as the difference between current flows in the chosen scenario (curve with a parallel movement of 100pb in all its sections) and its value in the base scenario (current market). All positions in domestic currency indexed to inflation (UF) are adjusted by a sensitivity factor of 0.57 which represents a change in the curve of 57 base points in all real rates and 100 base points in nominal rates. The same scenario is carried out for net positions in foreign currency and interest rates in USD. In addition, the Bank has established limits regarding maximum loss this kind of movements in interest rates can have over capital and net financial income budgeted for the year.
To establish the consolidated limit, we add the foreign currency limit to the domestic currency limit both for net financial loss limit as well as for the capital and reserves loss limit, using the following formula:
Consolidated limit = square root of a2 + b2 + 2ab
a: domestic currency limit
b: foreign currency limit
Since we assume the correlation is 0; 2ab = 0.
Financial Statements 2012 / Banco Santander Chile 149 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
Limitations of the sensitivity models
The most important assumption is using an exchange rate of 100 base points based on yield curve (57 base points for real rates). The Bank uses a 100 base points exchange since sudden changes of this magnitude are considered realistic. Santander Spain Global Risk Department has also established comparable limits by country, so as to compare, control and consolidate market risk by country in a realistic and orderly fashion.
In addition, the sensitivity simulation methodology should be interpreted taking into consideration the following limitations:
- | The simulation of scenarios assumes that the volumes remain in the Bank’s Consolidated Statements of Financial Position and are always renewed at maturity, thereby omitting the fact that certain credit risk and prepayment considerations may affect the maturity of certain positions. |
- | This model assumes an identical change along the entire length of the yield curve and takes no account of the different movements for different maturities. |
- | The model takes no account of the sensitivity of volumes which results from interest rate changes. |
- | The limits to losses of budgeted financial income are calculated based on the financial income foreseen for the year, which may not be actually earned, meaning that the real percentage of financial income at risk may be higher than the expected one. |
Market risk – Financial management portfolio – December 31, 2012 and 2011
2012 | 2011 | |||||||||||||||
Effect on financial income | Effect on capital | Effect on financial income | Effect on capital | |||||||||||||
Financial management portfolio – local currency (MCh$) | ||||||||||||||||
Loss limit | 37,300 | 167,530 | 22,380 | 167,530 | ||||||||||||
High | 26,233 | 100,175 | 19,823 | 107,745 | ||||||||||||
Low | 13,885 | 85,546 | 590 | 71,805 | ||||||||||||
Average | 20,054 | 92,312 | 9,053 | 93,328 | ||||||||||||
Financial management portfolio – foreign currency (in millions of $US) | ||||||||||||||||
Loss limit | 40,0 | 40,0 | 44,0 | 44,0 | ||||||||||||
High | 24,3 | 14,7 | 22,8 | 16,0 | ||||||||||||
Low | 3,7 | 4,5 | 3,0 | 1,2 | ||||||||||||
Average | 12,8 | 11,7 | 14,1 | 7,8 | ||||||||||||
Financial management portfolio – consolidated (in MCh$) | ||||||||||||||||
Loss limit | 39,200 | 167,530 | 37,300 | 167,530 | ||||||||||||
High | 26,437 | 100,201 | 21,149 | 107,845 | ||||||||||||
Low | 17,037 | 85,566 | 7,032 | 71,863 | ||||||||||||
Average | 21,165 | 92,457 | 13,004 | 93,417 |
Operating risk
Operating risk is the risk of direct or indirect losses stemming from a wide variety of causes related to the Bank’s processes, personnel, technology and infrastructure, as well as external factors other than credit, market, or liquidity, such as those related to legal or regulatory requirements. Operating risks arise from all the Bank’s operations.
The Bank’s objective is to manage operating risk in order to mitigate economic losses and damage to the Bank’s reputation through a flexible internal control structure.
The Bank’s management has the main responsibility to develop and apply controls to face operating risks. This responsibility is supported by the global development of the Bank’s standards for operating risk management in the following areas:
- | Requirements for adequate segregation of duties, including independent authorization of transactions |
- | Requirements for reconciliation and supervision of transactions |
Financial Statements 2012 / Banco Santander Chile 150 |
Banco Santander Chile and Subsidiaries Notes to the Consolidated Financial Statements AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 |
NOTE 40
RISK MANAGEMENT, continued:
- | Compliance with the applicable legal and regulatory requirements |
- | Documentation of controls and procedures |
- | Requirements for periodic evaluation of applicable operating risks and improvement of the controls and procedures to address the risks that are identified |
- | Requirements for disclosure of operating losses and the proposed corrective measures |
- | Development of contingency plans |
- | Training and professional development |
- | Adoption of ethical business standards |
- | Reduction or mitigation of risks, including acquisition of insurance policies if they are effective |
Compliance with the Bank’s standards is supported by a program of periodic reviews conducted by the Bank’s internal audit unit, whose results are internally submitted to the management of the business unit that was examined and to the CDA.
Risk Concentration
The Bank operates mainly in Chile, so most of its financial instruments are concentrated in that country. See Note 10 of the financial statements for a detail of the concentration of the Bank’s loans and accounts receivable by industry.
NOTE 41
SUBSEQUENT EVENTS
Between January 1, 2013 and the date on which these Consolidated Financial Statements were issued (January 21, 2013), no other events have occurred which could significantly affect their interpretation.
FELIPE CONTRERAS FAJARDO Accounting Manager |
CLAUDIO MELANDRI HINOJOSA Chief Executive Officer |
Financial Statements 2012 / Banco Santander Chile 151 |