SEC Filing | Banco Santander Chile

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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

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

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

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

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

Table of Contents

Item

99.1		Third Quarter 2013 Earnings Report
99.2		Consolidated Interim Financial Statements as of September 30, 2013 and December 31, 2012 and for the three-month and the nine-month periods ended September 30, 2013 and 2012

IMPORTANT NOTICE

Santander-Chile is a Chilean bank and maintains its financial books and records in Chilean pesos. The consolidated interim unaudited financial statements included in this report have been prepared in accordance with Chilean accounting principles issued by the Superintendency of Banks and Financial Institutions "Chilean Bank GAAP" and the "SBIF," respectively). The accounting principles issued by the SBIF are substantially similar to IFRS but there are some exceptions. Therefore, the unaudited financial statements included in this 6K have some differences compared to the financial statements filed in our Annual Report on Form 20-F for the year ended December 31, 2012 (the "Annual Report"). For further details and a discussion on main differences between Chilean Bank GAAP and IFRS refer to "Item 5. Operating and Financial Review and Prospects. —A. Accounting Standards Applied in 2012" of our Annual Report.

In the quarter, the Bank reclassified various administrative and other operating expense to net fee income. The historical figures presented here have been adjusted to make them comparable. (Please see Annex 3 for a complete proforma income statement).

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: December 10, 2013

INDEX

SECTION		PAGE

SECTION 1: SUMMARY OF RESULTS		2

SECTION 2: BALANCE SHEET ANALYSIS		5

SECTION 3: ANALYSIS OF QUARTERLY INCOME STATEMENT		10

SECTION 4: CREDIT RISK RATINGS		20

SECTION 5: SHARE PERFORMANCE		21

ANNEX 1: BALANCE SHEET		22

ANNEX 2: YTD INCOME STATEMENTS		23

ANNEX 3: PROFORMA QUARTERLY INCOME STATEMENTS		24

ANNEX 4: QUARTERLY EVOLUTION OF MAIN RATIOS AND OTHER INFORMATION		25

CONTACT INFORMATION

Robert Moreno

Manager, Investor Relations Department

Banco Santander Chile

Bandera 140, 19^th floor

Santiago, Chile

Tel: (562) 2320-8284

Fax: (562) 2671-6554

Email: rmorenoh@santander.cl

Website: www.santander.cl

SECTION 1: SUMMARY OF RESULTS

Net income up 17.8% QoQ. ROE reaches 18.6% in 3Q13

Net income in the nine-month period ended September 30, 2013 totaled Ch$267,944 million (Ch$1.42 per share and US$1.13/ADR). In 3Q13, Net income attributable to shareholders totaled Ch$101,173 million (Ch$0.54 per share and US$0.43/ADR), increasing 17.8% compared to 2Q13 (from now on QoQ) and 99.8% compared to 3Q12 (from now on YoY). Solid loan and core deposits growth and a higher net interest margin boosted earnings in the quarter. The Bank’s ROE in the quarter reached 18.6%.

Loan growth continues to accelerate in the segments the Bank targeted for growth

In 3Q13, total loans and account receivables increased 2.8% QoQ (an annualized rate of 11%) and 9.8% YoY. In the quarter, loan growth continued to accelerate in the markets the Bank is targeting: high-income individuals, SMEs and middle market of companies. Loans in these combined markets increased 3.1% QoQ and 14.4% YoY. This is in line with the Bank’s strategy of expanding loan volumes with a focus on increasing spreads, net of provisions. In the quarter, the Bank focused on expanding its consumer loan portfolio in higher income segments, while remaining more selective in the mass consumer market and mortgages. Loans to high-income individuals increased 3.7% QoQ and 12.4% YoY.

* Targeted markets: High-income individuals, SMEs and Middle-market

Improved funding mix and strong growth of core deposits

Total deposits grew 2.3% QoQ and 6.1% YoY. In the quarter, the Bank’s funding strategy continued to focus on increasing core deposits (demand and time deposits from our retail and corporate clients), while lowering deposits from more expensive institutional sources. Core deposits expanded 4.2% QoQ and 18.0% YoY. Core deposits represent 85% of the Bank’s total deposit base. Among core deposits, the bulk of growth came from individuals, which expanded 3.5% QoQ, and 21.8% YoY.

* Core deposits: demand and time deposits from our retail and corporate clients

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

Net interest income up 15.7% QoQ. Net interest margin reaches 5.3% in 3Q13

In 3Q13, Net interest income increased 15.7% QoQ and 20.5% YoY. Loan growth, a better funding mix and higher inflation rates drove this rise in net interest income. The net interest margin (NIM) in 3Q13 reached 5.3% compared to 4.7% in both 2Q13 and 3Q12. In 3Q13, the variation of the Unidad de Fomento (an inflation indexed currency unit), was 1.04% compared to -0.07% in 2Q13 and -0.16% in 3Q12. The Bank has more assets than liabilities linked to inflation and, as a result, margins have a positive sensitivity to variations in inflation.

Non performing loans ratio down 10 bp. in 3Q13. One-time events in commercial lending increases provision expense

The Bank’s non-performing loan (NPLs) ratio fell from 3.1% in 2Q13 to 3.0% in 3Q13 and the risk index remained stable at 2.9%. Total coverage of NPLs in 3Q13 reached 94.8% compared to 91.3% in 2Q13 and 98.3% in 3Q12. Excluding residential mortgage loans that have a lower coverage ratio due to the value of residential property collateral, the coverage ratio increased to 118% in 3Q13. Asset quality in consumer lending continues to improve. Consumer NPLs decreased 11.0% QoQ and 25.6% YoY. The coverage of consumer NPLs reached 339.6% in 3Q13.

Net provision for loan losses in the quarter increased 11.3% QoQ and decreased 19.2% YoY. The cost of credit reached 1.9% in 3Q13. Net provision expense in consumer loans decreased 4.2% QoQ and 46.4% YoY. This was offset by the 39.7% QoQ and 38.6% YoY rise in net provision expense in commercial loans. This increase was mainly due to: (i) the Bank lowered the risk rating of various clients in the middle-market segment, which signified approximately Ch$4 billion in higher provisions; (ii) stronger loan growth that led to higher loan loss provisions as the Bank’s internal provisioning models recognize provisions when a loan is granted.

* Cost of credit is quarterly provision expense annualized over average loans

Efficiency ratio improves to 39.8% in 3Q13. Cost growth flat QoQ

Operating expenses in 3Q13 increased 0.6% QoQ as the Bank continues to wrap up its investment program in the Transformation Project. The efficiency ratio reached 39.8% in 3Q13 compared to 42.5% in 2Q13 and 41.9% in 3Q12.

Core capital ratio reaches 10.4% in 3Q13

Shareholders’ equity totaled Ch$2,213,114 million (US$4.4 billion) as of September 30, 2013. The core capital ratio reached 10.4% as of September 30, 2013. The Bank’s BIS ratio reached 13.0% at the same date.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

Banco Santander Chile: Summary of Quarterly Results¹

	Quarter									Change %
(Ch$ million)	3Q13			2Q13			3Q12			3Q13 / 3Q12			3Q13 / 2Q13
Net interest income		287,605			248,667			238,731			20.5	%		15.7	%
Fee income		54,931			58,144			63,403			(13.4	)%		(5.5	)%
Core revenues		342,536			306,811			302,134			13.4	%		11.6	%
Financial transactions, net		27,615			33,253			19,222			43.7	%		(17.0	)%
Provision expense		(96,479	)		(86,655	)		(119,459	)		(19.2	)%		11.3	%
Operating expenses		(142,881	)		(141,964	)		(133,294	)		7.2	%		0.6	%
Operating income, net of provisions and costs		130,791			111,445			68,603			90.6	%		17.4	%
Other operating & Non-op. Income		(29,618	)		(25,553	)		(17,960	)		64.9	%		15.9	%
Net income attributable to shareholders		101,173			85,892			50,643			99.8	%		17.8	%
Earnings per share (Ch$)		0.54			0.46			0.27			99.8	%		17.8	%
Earnings per ADR (US$)¹		0.43			0.36			0.23			86.9	%		18.0	%
Total loans		20,323,264			19,772,361			18,503,174			9.8	%		2.8	%
Deposits		14,947,496			14,615,036			14,088,770			6.1	%		2.3	%
Shareholders’ equity		2,213,114			2,136,835			2,057,294			7.6	%		3.6	%
Net interest margin		5.3	%		4.7	%		4.7	%
Efficiency ratio		39.8	%		42.5	%		41.9	%
Return on average equity²		18.6	%		16.1	%		9.9	%
NPL / Total loans³		3.0	%		3.1	%		3.0	%
Coverage NPLs		94.8	%		91.3	%		98.3	%
Risk index⁴		2.9	%		2.9	%		3.0	%
Cost of credit⁵		1.9	%		1.8	%		2.6	%
Core capital ratio		10.4	%		10.2	%		10.6	%
BIS ratio		13.0	%		12.9	%		13.9	%
Branches		488			485			496
ATMs		1,915			1,972			1,966
Employees		11,626			11,558			11,692

The change in earnings per ADR may differ from the change in earnings per share due to exchange rate movements. Earnings per ADR was calculated using the Observed Exchange Rate Ch$502.97 per US$ as of Sept. 30, 2013.

Annualized quarterly net income attributable to shareholders / Average equity attributable to shareholders in the quarter.

NPLs: Non-performing loans: full balance of loans with one installment 90 days or more overdue.

Risk Index: Loan loss allowances / Total loans: measures the percentage of loans the banks must provision for given their internal models and the Superintendency of Banks guidelines.

Cost of credit: Provision expenses annualized divided by total loans.

1. In the quarter, the Bank reclassified various administrative and other operating expenses to net fee income. The historical figures presented here have been adjusted to make them comparable. (Please see Annex 3 for a complete proforma income statement).

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

SECTION 2: BALANCE SHEET ANALYSIS

LOANS

Loan and accounts receivable from customers growth continues to accelerate in the segments the Bank has targeted for growth

Loans	Quarter ended,						% Change
(Ch$ million)	Sep-13		Jun-13		Sep-12		Sep. 13 / 12			Sep. / June 2013

Total loans to individuals¹		10,109,173		9,887,878		9,613,857		5.2	%		2.2	%
Consumer loans		3,423,558		3,266,648		3,039,998		12.6	%		4.8	%
Residential mortgage loans		5,465,600		5,355,978		5,208,217		4.9	%		2.0	%
SMEs		3,168,804		3,066,396		2,745,928		15.4	%		3.3	%
Institutional lending		360,276		385,782		355,119		1.5	%		(6.6	)%
Companies		4,541,825		4,444,673		3,918,713		15.9	%		2.2	%
Corporate		2,153,343		1,992,933		1,874,749		14.9	%		8.0	%
Total loans ²		20,323,264		19,772,361		18,503,174		9.8	%		2.8	%

1. Includes consumer loans, residential mortgage loans and other commercial loans to individuals.

2. Total loans gross of loan loss allowances. Total loans include other non-segmented loans and exclude interbank loans.

In 3Q13, total loans increased 2.8% QoQ (an annualized rate of 11%) and 9.8% YoY. In the quarter, loan growth continued to accelerate in the markets the Bank is targeting: high-income individuals, SMEs and middle market of companies. Loans in these combined markets increased 3.1% QoQ and 14.4% YoY. This is in line with the Bank’s strategy of expanding loan volumes with a focus on increasing spreads, net of provisions.

Loans to individuals, which include consumer, mortgage and commercial loans to individuals, increased 2.2% QoQ and 5.1% YoY in 3Q13. In the quarter, the Bank focused on expanding its consumer loan portfolio in higher income segments, while remaining more selective in the mass consumer market and mortgages. By products, total consumer loans increased 4.8% QoQ and 12.6% YoY. Residential mortgage loans expanded 2.0% QoQ and 4.9% YoY. By sub-segments, loans to high-income individuals led growth and increased 3.7% QoQ and 12.4% YoY.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

Loans to individuals in Santander Banefe began to grow again. Total loans in Banefe increased 1.8% QoQ and decreased 0.5% YoY. Our strategy to improve profitability in the lower income segments levels is beginning to show results. We are growing with a more efficient network and a less riskier client base (See Provision Expense).

Lending to SMEs, (defined as companies that sell less than Ch$1,200 million per year), one of the Bank’s most profitable business segment, expanded 3.3% QoQ and 15.6% YoY, reflecting the Bank’s consistent focus on this segment despite the higher credit risk. Growth continues to be focused among SME loans backed by state guarantees.

In 3Q13, the middle-market segment (companies with annual sales between Ch$1,200 million and Ch$10,000 million per year) loans increased 2.2% QoQ and 16.3% YoY. This segment continues to show healthy loan demand given the relatively high investment rate seen in the Chilean economy. This segment is also generating increasingly higher levels of business volumes in other areas such as cash management, which has helped to drive the rise in core deposits.

In the large corporate segment (companies with sale over Ch$10,000 million per year or that are part of a large foreign or local economic group), loans increased 8.0% QoQ and 14.0% YoY. The Bank’s non-lending business in this segment, especially cash management services, continues to thrive. This in many instances also results in an increase in lending to these clients. Moreover, the rise in external funding cost for companies throughout 2013 has resulted in higher local demand for short-term lending from corporates.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

FUNDING

Improved funding mix, with strong growth of core deposits

Funding	Quarter ended,									% Change
(Ch$ million)	Sep-13			Jun-13			Sep-12			Sep. 13 / 12			Sep. / June 2013
Deposits and other demand liabilities		5,257,128			5,188,708			4,601,160			14.3	%		1.3	%
Time deposits and other time liabilities		9,690,368			9,426,328			9,487,610			2.1	%		2.8	%
Total deposits		14,947,496			14,615,036			14,088,770			6.1	%		2.3	%
Loans to deposits¹		104.2	%		103.3	%		98.7	%

1. (Loans - marketable securities that fund mortgage loans) / (Time deposits + demand deposits).

Total deposits grew 2.3% QoQ and 6.1% YoY. In the quarter, the Bank’s funding strategy continued to be focused on increasing core deposits, while lowering deposits from more expensive short-term institutional sources. Core deposits (demand and time deposits from our retail and corporate clients) expanded 4.2% QoQ and 18.0% YoY. Among core deposits, the bulk of growth came from individuals. These deposits from individuals increased 3.5% QoQ, and 21.8% YoY. Core deposits now represent 85% of the Bank’s total deposit base. This was partially offset by lower deposits from institutional sources such as pension funds, mutual funds and insurance companies. Non-interest bearing demand deposits increased 1.3% QoQ and 14.3% YoY. As the Central Bank continues to cut interest rates, our focus on core deposits should help support net interest margins. Core deposits tend to be cheaper than institutional deposits and generally have a shorter contractual duration. Therefore, as rates decline, our interest bearing liabilities will re-price quicker than our interest earning assets.

Update regarding the sale of Santander Asset Management

On May 30, it was reported that Banco Santander Chile had received from Banco Santander SA, an offer to purchase all of the shares of its subsidiary Santander Asset Management. A new holding company, composed of Santander, Warburg Pincus and General Atlantic, will concentrate the stakes of the Group's subsidiaries in each of the countries in which Santander is present in the Asset Management business. The main goal of this transformation is to enhance the quality and variety of asset management products to be marketed by Banco Santander, a global management focused on value-added products and close and collaborative relationship with various distribution networks. The Bank will continue to focus on its strength in this business, which is the distribution of mutual funds.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

On September 16, we received reports commissioned by the Bank's Board and Audit Committee of Directors and independent evaluators to Ernst & Young and Claro y Associates, respectively regarding the fairness of this transaction. On September 23, the individual opinion of each Board member was published. These reports are available to the shareholders at www.santander.cl section "Accionistas" in Spanish and “Investor Relations” in English. The direct links are the following:

http://phx.corporate-ir.net/phoenix.zhtml?c=71614&p=irol-sec

http://www.santander.cl/accionistas/santander_administradora_general_de_fondos.asp

Our asset management subsidiary was valued at Ch$130 billion and the transaction would generate a one-time gain of Ch$77 billion for the Bank. This one-time gain will only be booked once shareholders approve the transaction in an extraordinary shareholders meeting, the date of which has not been determined. This offer also contains a contractual agreement for the brokerage of asset management services between the Bank and the Asset Management business, for a period of 20 years maximum, which is also reviewed by the Board members and the independent consultants. The Bank’s Board and management have not determined the use of proceeds. The one-time gain may be used to strengthen the Bank’s balance sheet.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL

Core capital ratio reaches 10.4% in 3Q13

Shareholders' Equity	Quarter ended,									Change %
(Ch$ million)	Sep-13			Jun-13			Sep-12			Sep. 13 / 12			Sep. / June 2013
Capital		891,303			891,303			891,303			0.0	%		0.0	%
Reserves		1,130,962			1,130,962			975,460			15.9	%		0.0	%
Accumulated other comprehensive income		3,288			(2,170	)		(1,828	)		(279.9	)%		(251.5	)%
Retained Earnings:		187,561			116,740			192,364			(2.5	)%		60.7	%
Retained earnings from prior years		-			-			-			—	%		—	%
Income for the period		267,944			166,771			274,806			(2.5	)%		60.7	%
Provision for mandatory dividend		(80,383	)		(50,031	)		(82,442	)		(2.5	)%		60.7	%
Equity attributable to shareholders		2,213,114			2,136,835			2,057,299			7.6	%		3.6	%
Non-controlling interest		27,388			27,469			33,485			(18.2	)%		(0.3	)%
Total Equity		2,240,502			2,164,304			2,090,784			7.2	%		3.5	%
Quarterly ROAE		18.6	%		16.1	%		9.9	%

Shareholders’ equity totaled Ch$2,213,114 million (US$4.4 billion) as of September 30, 2013. The ROAE in the quarter reached 18.6%. The core capital ratio reached 10.4% as of September 30, 2013. The Bank’s BIS ratio reached 13.0% at the same date. Chilean regulations only permit the inclusion of voting common shareholders’ equity as Tier I capital.

Capital Adequacy	Quarter ended,									Change %
(Ch$ million)	Sep-13			Jun-13			Sep-12*			Sep. 13 / 12			Sep. / June 2013
Tier I (Core Capital)		2,213,114			2,136,835			2,058,231			7.5	%		3.6	%
Tier II		564,191			561,047			642,650			(12.2	)%		0.6	%
Regulatory capital		2,777,305			2,697,882			2,700,881			2.8	%		2.9	%
Risk weighted assets		21,334,180			20,959,977			19,479,092			9.5	%		1.8	%
Tier I (Core capital) ratio		10.4	%		10.2	%		10.6	%
BIS ratio		13.0	%		12.9	%		13.9	%

* Calculated based on financials published in 2012 and does not include accounting change introduced in 2013 as this modification is not meaningful.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

SECTION 3: ANALYSIS OF QUARTERLY INCOME STATEMENT

NET INTEREST INCOME

Net interest income up 15.7% QoQ. Net interest margin reaches 5.3% in 3Q13

Net Interest Income / Margin	Quarter									Change %
(Ch$ million)	3Q13			2Q13			3Q12			3Q13 / 3Q12			3Q13 / 2Q13
Client net interest income¹		282,518			280,722			274,076			3.1	%		0.6	%
Non-client net interest income²		5,087			(32,055	)		(35,345	)		nm			nm
Net interest income		287,605			248,667			238,731			20.5	%		15.7	%
Average interest-earning assets		21,799,660			21,215,426			20,410,407			6.8	%		2.8	%
Average loans		20,047,191			19,384,881			18,546,119			8.1	%		3.4	%
Interest earning asset yield³		9.5	%		7.8	%		8.0	%
Cost of funds⁴		4.5	%		3.2	%		3.4	%
Client net interest margin⁵		5.6	%		5.8	%		5.9	%
Net interest margin (NIM)⁶		5.3	%		4.7	%		4.7	%
Avg. equity + non-interest bearing demand deposits / Avg. interest earning assets		33.7	%		34.7	%		32.5	%
Quarterly inflation rate⁷		1.04	%		(0.07	)%		(0.16	)%
Central Bank reference rate		5.00	%		5.00	%		5.00	%
Avg. 10 year Central Bank yield (real)		2.25	%		2.38	%		2.42	%

Client net interest income is mainly net interest income from the from all client activities such as loans and deposits minus the internal transfer rate. See footnote 2 at the end of this page.

Non-client interest income is net interest income mainly from the Bank’s ALCO positions and treasury. See footnote 2.

Interest income divided by interest earning assets.

Interest expense divided by interest bearing liabilities + demand deposits.

Client net interest income annualized divided by average loans.

Net interest income divided by average interest earning assets annualized.

Inflation measured as the variation of the Unidad de Fomento in the quarter.

In 3Q13, Net interest income increased 15.7% QoQ and 20.5% YoY. Loan growth, a better funding mix and higher inflation rates drove this rise in net interest income. The Net interest margin (NIM) in 3Q13 reached 5.3% compared to 4.7% in both 2Q13 and 3Q12. In order to improve the explanation of margins, we have divided the analysis of net interest income between client interest income² and non-client net interest income.

2 Client net interest income is net interest income from all client activities such as loans and deposits minus the internal transfer rate. Non-client interest income is net interest income from Bank’s inflation gap, the financial cost of hedging, the financial cost of the Bank’s structural liquidity position, net interest income from treasury positions and the interest expense of the Bank’s financial investments classified as trading, since interest income from this portfolio is recognized as financial transactions net.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

Client net interest income. In 3Q13, client net interest income increased 0.6% QoQ and 3.1% YoY, driven mainly by loan growth. Average loans increased 2.8% QoQ and 6.8% YoY. Client net interest margin (defined as client net interest income divided by average loans) reached 5.6% in 3Q13 compared to 5.8% in 2Q13 and 5.9% in 3Q12. The lower client margin in the quarter was mainly due to the higher growth of Corporate loans and lower growth in the low-end of the consumer market. Additionally, a key strategic objective of the Bank is to gradually achieve a higher client margin, net of provision expenses by focusing growth in the middle-market, SMEs and the high end of the consumer market even though this could result in lower gross client margins. In consumer lending, the gross spread has declined from 15.6% in 3Q12 to 13.6% in 3Q13, but the spread net of risk has increased from 7.4% to 8.2% in the same period.

Non-client net interest income. The volatility of our total net interest margin and income is mainly due to the quarterly fluctuations of inflation. In 3Q13, the variation of the Unidad de Fomento (an inflation indexed currency unit), was 1.04% compared to -0.07% in 2Q13 and -0.16% in 3Q12. It is important to point out that the Bank has more assets than liabilities linked to inflation and, as a result, margins have a positive sensitivity to variations in inflation. The gap between assets and liabilities indexed to the UF averaged approximately Ch$3.4 trillion (US$6.8 billion) in 3Q13. This signifies that for every 100 basis point change in inflation, our net interest income increases or decrease by Ch$34 billion, all other factors equal. Therefore, the rise in inflation largely explains the increase in non-client net interest income in 3Q13 compared to both 2Q13 and 3Q12.

For the remainder of 2013 and 2014, the evolution of margins should reflect various factors. First, we expect UF inflation to normalize at a quarterly rate of approximately 0.7% per quarter with seasonal fluctuations. In addition, the Central Bank reduced interest rates by 25 basis points to 4.75%. As the Central Bank continues to cuts rates, our focus on core deposits should help support net interest margins. Core deposits tend to be cheaper than institutional deposits and generally have a shorter contractual duration. Therefore, as rates decline, our interest bearing liabilities will re-price quicker than our interest earning assets.

The Chilean Congress continues to discuss regulations regarding the formula in which maximum rates are calculated. This may have a negative impact on margins even though there is no clarity as to when this legislation will be approved. To counterbalance this we expect: (1) healthier loan growth both in terms of volumes and margins, post provision expense and, (2) an improved funding mix via healthy growth of core deposits. We estimate that the impact the change in maximum rate could have on our net interest margins could be approximately 15 basis points of less net interest margin in 2014. This estimate is subject to further revisions once Congress finally approves this law.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

PROVISION FOR LOAN LOSSES AND ASSET QUALITY

Non-performing loans ratio improves 10bp in 3Q13. One-time events in commercial lending increases provisions

Provision for loan losses	Quarter									Change %
(Ch$ million)	3Q13			2Q13			3Q12			3Q13 / 3Q12			3Q13 / 2Q13
Gross provisions		(61,943	)		(51,159	)		(84,858	)		(27.0	)%		21.1	%
Charge-offs¹		(48,722	)		(49,853	)		(44,350	)		9.9	%		(2.3	)%
Gross provisions and charge-offs		(110,665	)		(101,012	)		(129,208	)		(14.4	)%		9.6	%
Loan loss recoveries		14,186			14,357			9,749			45.5	%		(1.2	)%
Net provisions for loan losses		(96,479	)		(86,655	)		(119,459	)		(19.2	)%		11.3	%
Total loans²		20,323,264			19,772,361			18,503,174			9.8	%		2.8	%
Total reserves (RLL)		586,416			564,994			552,138			6.2	%		3.8	%
Non-performing loans³ (NPLs)		618,419			618,917			561,730			10.1	%		(0.1	)%
NPLs commercial loans		383,024			369,280			307,658			24.5	%		3.7	%
NPLs residential mortgage loans		157,885			162,589			149,936			5.3	%		(2.9	)%
NPLs consumer loans		77,510			87,048			104,136			(25.6	)%		(11.0	)%
Cost of credit⁴		1.9	%		1.8	%		2.6	%
Risk index⁵ (RLL / Total loans)		2.9	%		2.9	%		3.0	%
NPL / Total loans		3.0	%		3.1	%		3.0	%
NPL / Commercial loans		3.3	%		3.3	%		3.0	%
NPL / Residential mortgage loans		2.9	%		3.0	%		2.9	%
NPL / Consumer loans		2.3	%		2.7	%		3.4	%
Coverage of NPLs⁶		94.8	%		91.3	%		98.3	%
Coverage of NPLs ex-mortgage⁷		117.9	%		114.7	%		125.2	%
Coverage of commercial NPLs		73.1	%		72.4	%		80.0	%
Coverage of residential mortgage NPLs		27.4	%		25.5	%		24.5	%
Coverage of consumer NPLs		339.6	%		294.2	%		258.6	%

Charge-offs correspond to the direct charge-offs and are net of the reversal of provisions already established on charged-off loan

Excludes interbank loans.

NPLs: Non-performing loans: full balance of loans with one installment 90 days or more overdue.

Cost of credit: Quarterly provision expense annualized divided by average loans

Risk Index: Loan loss allowances / Total loans; measures the percentage of loans the banks must provision for given their internal models and the Superintendency of Banks guidelines.

Loan loss allowances / NPLs.

Loan loss allowance of commercial + consumer loans divided by NPLs of commercial and consumer loans

The Bank’s non-performing loan (NPLs) ratio fell from 3.1% in 2Q13 to 3.0% in 3Q13 and the risk index remained stable at 2.9%. Total coverage of NPLs in 3Q13 reached 94.8% compared to 91.3% in 2Q13 and 98.3% in 3Q12.

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	12
email: rmorenoh@santander.cl

Excluding residential mortgage loans that have a lower coverage ratio due to the value of residential property collateral, the coverage ratio improved to 118% in 3Q13 compared to 113% in 2Q13. Consumer NPLs decreased 11.0% QoQ and 25.6% YoY. The coverage of consumer NPLs reached 339.6% in 3Q13.

Net provision for loan losses in the quarter increased 11.3% QoQ and decreased 19.2% YoY. The cost of credit reached 1.9% in 3Q13. By product, the evolution of net provision expense was as following:

Provision for loan losses	Quarter									Change %
(Ch$ million)	3Q13			2Q13			3Q12			3Q13 / 3Q12			3Q13 / 2Q13
Commercial loans		(42,662	)		(30,530	)		(30,791	)		38.6	%		39.7	%
Residential mortgage loans		(8,682	)		(9,026	)		(4,488	)		93.4	%		(3.8	)%
Consumer loans		(45,135	)		(47,099	)		(84,180	)		(46.4	)%		(4.2	)%
Net provisions for loan losses		(96,479	)		(86,655	)		(119,459	)		(19.2	)%		11.3	%

Net provision expense in consumer loans, which represented 47% of total provision expense, decreased 4.2% QoQ and 46.4% YoY. Compared to 2Q13, the decline in consumer provision expense can be explained by the various actions taken to improve credit risk in the consumer lending. This includes focusing loan growth in the higher end of the consumer market, tightening admissions policies, improving the collections process and updating the consumer provisioning models (performed in 3Q12, which signified a one-time provision expense of Ch$24,753 million in said quarter).

The measures mentioned above have gradually resulted in an improvement of asset quality in consumer lending. Consumer NPLs decreased 11.0% QoQ and 25.6% YoY. The coverage of consumer NPLs reached 339.6% in 3Q13. At the same time, the amount of impaired consumer loans (consumer NPLs + renegotiated consumer loans) has evolved favorably. The ratio of impaired consumer loans to total consumer loans reached 10.3% as of September 2013 compared to 13.1% as of September 2012. This tends to be a leading indicator for the evolution of future charge-offs in this product. Better collection efforts led to an important rise in consumer loan loss recoveries. These increased 38.1% in 3Q13 compared to 3Q12.

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	13
email: rmorenoh@santander.cl

Provision expense for mortgage residential loans decreased 3.8% QoQ and increased 93.4% YoY. The YoY increase was mainly due to higher charge-offs of mortgage loans that totaled Ch$6,655 million in 3Q13 compared to Ch$3,880 million in 3Q12. The charge-off ratio (mortgage loan charge-offs annualized divided by average mortgage loans) reached 0.5% compared to 0.3% in 3Q12. Mortgage NPLs have remained relatively stable during the last 12 months, as seen in the graph. Including collateral, the coverage of residential mortgage NPLs has improved to 115.2% as of September 2013.

*Total coverage ratio = Loan loss reserves plus mortgage collateral

We expect net provision expenses in mortgage lending to continue to rise, albeit remaining at low levels as a percentage of the total mortgage loan book, as the growth rate of the economy moderates. In response to this, the Bank has strengthened its admission policies for mortgage loans and has increased minimum loan-to-value requirements.

Provision expense in commercial loans increased 39.7% QoQ and 38.6% YoY. This increase was mainly due to: (i) the Bank lowered the risk rating of various clients in the middle-market segment, which signified approximately Ch$4 billion in higher provisions. This was not a sector specific phenomenon, but occurred among clients in various sectors; (ii) stronger loan growth that led to higher loan loss provisions as the Bank’s internal provisioning models recognize provisions when a loan is granted. Total commercial NPLs grew 3.7% QoQ while the commercial NPL ratio remained steady at 3.3%. The rise in NPLs was mainly due to a rise in NPLs of SME loans granted through various government guarantee program. The coverage ratio of commercial NPLs increased to 73.1% in 3Q13 compared to 72.4% in 2Q13.

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	14
email: rmorenoh@santander.cl

NET FEE INCOME³

Fee income impacted by new regulations. The growth of the client base begins to accelerate

Fee Income	Quarter						Change %
(Ch$ million)	3Q13		2Q13		3Q12		3Q13 / 3Q12			3Q13 / 2Q13
Collection fees		10,839		11,471		14,816		(26.8	)%		(5.5	)%
Asset management		8,446		8,540		8,270		2.1	%		(1.1	)%
Credit, debit & ATM card fees		8,208		9,776		11,741		(30.1	)%		(16.0	)%
Insurance brokerage		8,005		8,081		8,670		(7.7	)%		(0.9	)%
Guarantees, pledges and other contingent operations		7,649		7,624		7,222		5.9	%		0.3	%
Checking accounts		6,920		6,948		7,143		(3.1	)%		(0.4	)%
Lines of credit		1,479		1,728		2,228		(33.6	)%		(14.4	)%
Fees from brokerage and custody of securities		1,266		1,647		2,353		(46.2	)%		(23.1	)%
Other Fees		2,119		2,329		960		120.7	%		(9.0	)%
Total fees		54,931		58,144		63,403		(13.4	)%		(5.5	)%

Net fee income decreased 5.5% QoQ and 13.4% YoY. This decline is mainly due to various changes in regulations adopted by the Bank in 2013. These new regulations mainly affected insurance brokerage, credit card, checking account and line of credit fees.

The Bank also continued to reduce its exposure to clients in the mass consumer segment. This in the short-term also affects fees, but positively affects provision expense and overall profitability in this segment.

As of September 3012, the Bank had 3.4 million clients. The launching of Santander Select, the investments made in the new CRM and the improvements in quality of service are beginning to produce an important acceleration in the growth rate of clients since 2Q13, as can be observed in the chart below.

3 In the quarter, the Bank reclassified various administrative and other operating expenses to net fee income. The historical figures presented here have been adjusted to make them comparable. (Please see Annex 3 for a complete proforma income statement).

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	15
email: rmorenoh@santander.cl

The amount of clients entering the Bank has nearly doubled since the beginning of the year. At the same time, the amount of clients exiting the Bank per month has fallen by approximately 55% in the same period. As a result, net client growth, which in the first quarter averaged approximately 16,000 clients, has doubled to approximately 32,000 clients per month. This should lead to a 7-8% client base growth in 2014, which in turn should fuel fee growth.

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	16
email: rmorenoh@santander.cl

NET RESULTS FROM FINANCIAL TRANSACTIONS

Lower rates drives results from financial transactions

Financial Transactions*	Quarter								Change %
(Ch$ million)	3Q13			2Q13		3Q12			3Q13 / 3Q12			3Q13 / 2Q13
Net income from financial operations		55,813			15,039		(19,161	)		—	%		271.1	%
Foreign exchange profit (loss), net		(28,198	)		18,214		38,383			—	%		—	%
Net results from financial transactions		27,615			33,253		19,222			43.7	%		(17.0	)%

* These results mainly include the mark-to-market of the Available for sale investment portfolio, realized and unrealized gains of Financial investments held for trading, the interest revenue generated by the Held for trading portfolio, gains or losses from the sale of charged-off loans and the mark-to-market of derivatives. The results recorded as Foreign exchange profits (loss), net mainly includes the translation gains or losses of assets and a liability denominated in foreign currency.

Net results from financial transactions totaled a gain of Ch$27,615 million in 3Q13, a decrease of 17.0% QoQ and a 43.7% YoY increase. In order to understand more clearly these line items, we present them by business area in the table below.

Financial Transactions	Quarter						Change %
(Ch$ million)	3Q13		2Q13		3Q12		3Q13 / 3Q12			3Q13 / 2Q13
Santander Global Connect¹		10,469		10,965		9,467		10.6	%		(4.5	)%
Market-making		7,788		10,107		8,659		(10.1	)%		(22.9	)%
Client treasury services		18,257		21,071		18,126		0.7	%		(13.4	)%
Non-client treasury income		9,358		12,182		1,096		753.8	%		(23.2	)%
Net results from financial transactions		27,615		33,253		19,222		43.7	%		(17.0	)%

1. Santander Global Connect is the Bank’s commercial platform for selling treasury products to our clients.

In the quarter, market volatility decreased following a very volatile environment in 2Q13. This lowered the demand for hedging on behalf of our corporate and middle-market clients. This explains the 13.4% QoQ decrease in the Bank’s income from client treasury services, which still represented 66% of total financial transaction income.

Non-client treasury income totaled Ch$9,358 million in 3Q13. In 3Q13, Chilean interest rates continued to decline in line with expectations of rate cuts on behalf of the Central Bank. This had a positive effect on non-client treasury income even though the impact was lower than in 2Q13. The Bank also recognized a gain of Ch$1,583 million from the sale of charged-off loans in 3Q13.

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	17
email: rmorenoh@santander.cl

OPERATING EXPENSES AND EFFICIENCY⁴

Efficiency ratio improves to 39.8% in 3Q13. Cost growth flat QoQ

Operating Expenses	Quarter									Change %
(Ch$ million)	3Q13			2Q13			3Q12			3Q13 / 3Q12			3Q13 / 2Q13
Personnel expenses		(78,584	)		(79,794	)		(75,461	)		4.1	%		(1.5	)%
Administrative expenses		(48,545	)		(46,762	)		(43,782	)		10.9	%		3.8	%
Depreciation, amortization and impairment		(15,752	)		(15,407	)		(14,051	)		12.1	%		2.2	%
Operating expenses		(142,881	)		(141,963	)		(133,294	)		7.2	%		0.6	%
Branches		488			485			496			(1.6	)%		0.6	%
ATMS		1,915			1,972			1,966			(2.6	)%		(2.9	)%
Employees		11,626			11,558			11,692			(0.6	)%		0.6	%
Efficiency ratio¹		39.8	%		42.5	%		41.9	%

Operating expenses / Operating income. Operating income = Net interest income + Net fee income+ Net results from Financial transactions + Other operating income and expenses.

The 7.2% YoY increase in operating expenses was mainly due to the 10.9% increase in administrative expenses. This rise was mainly due to higher investments in technology and systems as the Bank continued with its Transformation Projects aimed at enhancing productivity and client service in retail banking. The Bank also opened 3 branches in the quarter, while we accelerated a program to optimize the ATM network in order to lower security expenses. Going forward administrative expenses should grow at a slower pace as many of these projects are wrapping up.

The 4.1% YoY increase in personnel expenses in 3Q13 reflects an increase in variable incentives paid to commercial teams as the Bank has begun to grow at a more rapid pace, especially in the segments the Bank has targeted for growth. This was partially offset by a stable headcount level.

4 In the quarter, the Bank reclassified various administrative and other operating expenses to net fee income. The historical figures presented here have been adjusted to make them comparable. (Please see Annex 3 for a complete proforma income statement).

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	18
email: rmorenoh@santander.cl

OTHER INCOME AND EXPENSES⁵

Other Income and Expenses	Quarter									Change %
(Ch$ million)	3Q13			2Q13			3Q12			3Q13 / 3Q12			3Q13 / 2Q13
Other operating income		4,112			7,188			8,074			(49.1	)%		(42.8	)%
Other operating expenses		(15,462	)		(12,870	)		(11,645	)		32.8	%		20.1	%
Other operating income, net		(11,350	)		(5,682	)		(3,571	)		217.8	%		99.8	%
Income from investments in other companies		345			667			143			141.3	%		(48.3	)%
Income tax expense		(18,417	)		(20,293	)		(12,296	)		49.8	%		(9.2	)%
Effective tax rate		15.4	%		19.1	%		18.9	%

Other operating income, net, totaled a loss of Ch$11,350 million in 3Q13. The higher loss compared to 2Q13 was mainly due to lower results from repossessed assets of Ch$3,190 million and lower recoveries of non-credit contingencies by Ch$3,412 million compared to 2Q13

The lower income tax rate in 3Q13 was mainly due to the rise in inflation rate in 3Q13 compared to both 2Q13 and 3Q12. Higher quarterly inflation compared to previous periods increases the tax loss from the revaluation of capital due to price level restatement. Below is a summary of our tax expense for the nine-month periods ended September 30, 2012 and 2013.

YTD tax expenses summarized (Ch$ million)	9M13			9M12			Var. (%)
Net income before taxes		321,898			324,093			(0.7	)%
Price level restatement of capital¹		(33,820	)		(31,451	)		7.5	%
Net income before taxes adjusted for price level restatement		288,078			292,642			(1.6	)%
Statutory Tax rate		20.0	%		18.5	%		8.1	%
Income tax expense at statutory rate		(57,616	)		(54,139	)		6.4	%
Tax benefits²		4,669			8,695			(46.3	)%
Income tax		(52,947	)		(45,444	)		16.5	%
Effective tax rate		16.4	%		14.0	%

For tax purposes, Capital is readjusted by CPI inflation.

Includes mainly tax credits from property taxes paid on leased assets

For the remainder of 2013 and 2014, the Bank should be paying an effective tax rate closer to 17-18%.

5 In the quarter, the Bank reclassified various administrative and other operating expenses to net fee income. The historical figures presented here have been adjusted to make them comparable. (Please see Annex 3 for a complete proforma income statement).

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	19
email: rmorenoh@santander.cl

SECTION 4: CREDIT RISK RATINGS

International ratings

The Bank has credit ratings from three leading international agencies with no changes in 3Q13.

Moody’s		Rating
Foreign currency bank deposits		Aa3
Senior bonds		Aa3
Subordinated debt		A1
Bank Deposits in Local Currency		Aa3
Bank financial strength		C+
Short-term deposits		P-1

Standard and Poor’s		Rating
Long-term Foreign Issuer Credit		A
Long-term Local Issuer Credit		A
Short-term Foreign Issuer Credit		A-1
Short-term Local Issuer Credit		A-1

Fitch		Rating
Foreign Currency Long-term Debt		A+
Local Currency Long-term Debt		A+
Foreign Currency Short-term Debt		F1
Local Currency Short-term Debt		F1
Viability rating		a+

Local ratings:

Our local ratings, the highest in Chile, are the following:

Local ratings	Fitch Ratings	Feller Rate
Shares	1CN1	1CN1
Short-term deposits	N1+	N1+
Long-term deposits	AAA	AAA
Mortgage finance bonds	AAA	AAA
Senior bonds	AAA	AAA
Subordinated bonds	AA	AA+

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	20
email: rmorenoh@santander.cl

SECTION 5: SHARE PERFORMANCE

As of September 30, 2013

Ownership Structure:

ADR price⁶ (US$) 9M13

09/30/13:			26.29
Maximum (9M12):			30.59
Minimum (9M12):			21.56

Market Capitalization: US$12,386 million

P/E 12 month trailing*:	16.3
P/BV (09/30/13)**:	2.8
Dividend yield***:	3.7	%

Price as of September 30, 2013 / 12mth. earnings

Price as of September 30, 2013 / Book value as of 09/30/13

***

Based on closing price on record date of last dividend payment.

Average daily traded volumes 9M13

US$ million

Local share price (Ch$) 9M13

09/30/13:			32.94
Maximum (9M12):			36.23
Minimum (9M12):			27.62

Dividends: Year paid	Ch$/share		% of previous year earnings
2009:		1.13		65	%
2010:		1.37		60	%
2011:		1.52		60	%
2012:		1.39		60	%
2013:		1.24		60	%

6 On Oct. 22, 2012, the ratio of common share per ADR was changed from 1,039 shares per ADR to 400 shares per ADR.

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	21
email: rmorenoh@santander.cl

ANNEX 1: BALANCE SHEET

Unaudited Balance Sheet	Sep-13		Sep-13		Dec-12		Sept. 13/ Dec. 12
Assets	US$ths		Ch$ million				% Chg.

Cash and deposits in banks		3,206,770		1,618,457		1,250,414		29.4	%
Cash items in process of collection		1,203,949		607,633		520,267		16.8	%
Trading investment		249,519		125,932		338,287		(62.8	)%
Investment under resale agreements		67,741		34,189		6,993		388.9	%
Financial derivative contracts		2,535,108		1,279,469		1,293,212		(1.1	)%
Interbank loans, net		286,685		144,690		90,527		59.8	%
Loans and accounts receivables from customers, net		39,106,099		19,736,848		18,325,957		7.7	%
Available for sale financial assets		3,304,848		1,667,957		1,826,158		(8.7	)%
Held-to-maturity investments		-		-		-		—	%
Investments in associates and other companies		19,417		9,800		7,614		28.7	%
Intangible assets		129,085		65,149		87,347		(25.4	)%
Property, plant, and equipment		320,610		161,812		162,214		(0.2	)%
Current tax assets		2,661		1,343		10,227		(86.9	)%
Deferred tax assets		364,185		183,804		186,407		(1.4	)%
Other assets		809,107		408,356		655,217		(37.7	)%
Total Assets		51,605,784		26,045,439		24,760,841		5.2	%

	Sep-13			Sep-13			Dec-12			Sept. 13/ Dec. 12
Liabilities and Equity	US$ths			Ch$ million						% Chg.
Deposits and other demand liabilities		10,416,342			5,257,128			4,970,019			5.8	%
Cash items in process of being cleared		773,273			390,271			284,953			37.0	%
Obligations under repurchase agreements		770,668			388,956			304,117			27.9	%
Time deposits and other time liabilities		19,200,254			9,690,368			9,112,213			6.3	%
Financial derivative contracts		2,188,054			1,104,311			1,146,161			(3.7	)%
Interbank borrowings		3,268,591			1,649,658			1,438,003			14.7	%
Issued debt instruments		9,413,652			4,751,070			4,571,289			3.9	%
Other financial liabilities		398,928			201,339			192,611			4.5	%
Current taxes		369			186			525			(64.6	)%
Deferred taxes		30,731			15,510			9,544			62.5	%
Provisions		349,211			176,247			221,089			(20.3	)%
Other liabilities		356,435			179,893			341,274			(47.3	)%
Total Liabilities		47,166,508			23,804,937			22,591,798			5.4	%

Attributable to the Bank's shareholders
Capital		1,766,006			891,303			891,303			0.0	%
Reserves		2,240,860			1,130,962			975,460			15.9	%
Accumulated other comprehensive income		6,515			3,288			(3,781	)		(187.0	)%
Retained Earnings:		371,629			187,561			271,796			(31.0	)%
Retained earnings from prior years		-			-			-			—	%
Income for the period		530,898			267,944			388,282			(31.0	)%
Minus: Provision for mandatory dividends		(159,269	)		(80,383	)		(116,486	)		(31.0	)%
Total Shareholders' Equity		4,385,010			2,213,114			2,134,778			3.7	%
Non-controlling interest		54,266			27,388			34,265			(20.1	)%
Total Equity		4,439,276			2,240,502			2,169,043			3.3	%
Total Liabilities and Equity		51,605,784			26,045,439			24,760,841			5.2	%

In 2013, the Bank has reclassified various administrative and other operating expenses to net fee income. The historical figures presented here have been adjusted to make them comparable.

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	22
email: rmorenoh@santander.cl

ANNEX 2: YTD INCOME STATEMENT

YTD Income Statement Unaudited	Sep-13			Sep-13			Sep-12			Sept '13 / Sept ´12
	US$ths.			Ch$ million						% Chg.

Interest income		2,686,891			1,356,074			1,366,035			(0.7	)%
Interest expense		(1,135,964	)		(573,321	)		(606,292	)		(5.4	)%
Net interest income		1,550,927			782,753			759,743			3.0	%
Fee and commission income		511,474			258,141			270,721			(4.6	)%
Fee and commission expense		(167,317	)		(84,445	)		(75,385	)		12.0	%
Net fee and commission income		344,157			173,696			195,336			(11.1	)%
Net income (loss) from financial operations (net trading income)		106,953			53,979			(32,941	)		(263.9	)%
Foreign exchange profit, net		57,759			29,151			97,106			(70.0	)%
Total financial transactions, net		164,712			83,130			64,165			29.6	%
Other operating income		31,443			15,869			15,128			4.9	%
Net operating profit before provision for loan losses		2,091,239			1,055,448			1,034,372			2.0	%
Provision for loan losses		(546,844	)		(275,992	)		(276,315	)		(0.1	)%
Net operating profit		1,544,395			779,456			758,057			2.8	%
Personnel salaries and expenses		(455,540	)		(229,911	)		(223,115	)		3.0	%
Administrative expenses		(279,705	)		(141,167	)		(130,695	)		8.0	%
Depreciation and amortization		(92,384	)		(46,626	)		(40,321	)		15.6	%
Impairment		(422	)		(213	)		(88	)		142.0	%
Operating expenses		(828,051	)		(417,917	)		(394,219	)		6.0	%
Other operating expenses		(81,503	)		(41,135	)		(40,995	)		0.3	%
Total operating expenses		(909,554	)		(459,052	)		(435,214	)		5.5	%
Operating income		634,841			320,404			322,843			(0.8	)%
Income from investments in associates and other companies		2,960			1,494			1,250			19.5	%
Income before taxes		637,801			321,898			324,093			(0.7	)%
Income tax expense		(104,908	)		(52,947	)		(45,444	)		16.5	%
NET INCOME		532,893			268,951			278,649			(3.5	)%
Net income discontinued operations		-			-			-			—	%
Net income attributable to:
Non-controlling interest		1,995			1,007			3,843			(73.8	)%
Net income attributable to shareholders		530,898			267,944			274,806			(2.5	)%

In 2013, the Bank has reclassified various administrative and other operating expenses to net fee income. The historical figures presented here have been adjusted to make them comparable.

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	23
email: rmorenoh@santander.cl

ANNEX 3: PROFORMA QUARTERLY INCOME STATEMENTS

Unaudited Income Statement	1Q12			2Q12			3Q12			4Q12			1Q13			2Q13			3Q13

Interest income		502,833			455,980			407,222			524,918			425,797			413,671			516,606
Interest expense		(236,761	)		(201,040	)		(168,491	)		(241,927	)		(179,316	)		(165,004	)		(229,001	)
Net interest income		266,072			254,940			238,731			282,991			246,481			248,667			287,605
Fee and commission income		90,935			90,956			88,830			89,747			87,540			85,996			84,605
Fee and commission expense		(24,287	)		(25,671	)		(25,427	)		(27,395	)		(26,919	)		(27,852	)		(29,674	)
Net fee and commission income		66,648			65,285			63,403			62,352			60,621			58,144			54,931
Net income from financial operations (net trading income)		(34,196	)		20,416			(19,161	)		(31,138	)		(16,873	)		15,039			55,813
Foreign exchange profit, net		53,499			5,224			38,383			49,272			39,135			18,214			(28,198	)
Total results from financial transactions, net		19,303			25,640			19,222			18,134			22,262			33,253			27,615
Other operating income		3,982			3,072			8,074			4,630			4,569			7,188			4,112
Net operating profit before provision for loan losses		356,005			348,937			329,430			368,107			333,933			347,252			374,263
Provision for loan losses		(78,281	)		(78,575	)		(119,459	)		(90,387	)		(92,858	)		(86,655	)		(96,479	)
Net operating profit		277,724			270,362			209,971			277,720			241,075			260,597			277,784
Personnel salaries and expenses		(69,400	)		(78,254	)		(75,461	)		(76,784	)		(71,533	)		(79,794	)		(78,584	)
Administrative expenses		(43,098	)		(43,815	)		(43,782	)		(45,188	)		(45,861	)		(46,763	)		(48,545	)
Depreciation and amortization		(12,072	)		(14,198	)		(14,051	)		(16,048	)		(15,653	)		(15,261	)		(15,712	)
Impairment		(54	)		(34	)		0			(2	)		(27	)		(146	)		(40	)
Operating expenses		(124,624	)		(136,301	)		(133,294	)		(138,022	)		(133,074	)		(141,964	)		(142,881	)
Other operating expenses		(15,308	)		(14,042	)		(11,645	)		(18,722	)		(12,801	)		(12,870	)		(15,462	)
Total operating expenses		(139,932	)		(150,343	)		(144,939	)		(156,744	)		(145,875	)		(154,834	)		(158,343	)
Net operating income		137,792			120,019			65,032			120,976			95,200			105,763			119,441
Income from investments in associates and other companies		447			660			143			(983	)		482			667			345
Net income before taxes		138,239			120,679			65,175			119,993			95,682			106,430			119,786
Income tax		(19,093	)		(14,055	)		(12,296	)		(5,730	)		(14,237	)		(20,293	)		(18,417	)
Net income for the period		119,146			106,624			52,879			114,263			81,445			86,137			101,369
Net income attributable to:
Non-controlling interest		791			816			2,236			782			566			245			196
Net income attributable to shareholders		118,355			105,808			50,643			113,481			80,879			85,892			101,173

In 2013, the Bank has reclassified various administrative and other operating expenses to net fee income. The historical figures presented here have been adjusted to make them comparable.

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	23
email: rmorenoh@santander.cl

ANNEX 4: QUARTERLY EVOLUTION OF MAIN RATIOS AND OTHER INFORMATION

	Sep-12			Dec-12			Mar-13			Jun-13			Sep-13
(Ch$ millions)
Loans
Consumer loans		3,039,998			3,115,477			3,165,550			3,266,648			3,423,558
Mortgage loans		5,208,217			5,271,581			5,309,837			5,355,978			5,465,600
Commercial loans		10,254,959			10,489,021			10,625,028			11,149,735			11,434,106
Total loans		18,503,174			18,876,079			19,100,415			19,772,361			20,323,264
Allowance for loan losses		(552,138	)		(550,122	)		(557,564	)		(564,994	)		(586,416	)
Total loans, net of allowances		17,951,036			18,325,957			18,542,851			19,207,367			19,736,848

Loans by segment
Individuals		9,613,857			972,801			9,837,213			9,887,878			10,109,173
SMEs		2,745,928			2,836,695			2,860,666			3,066,396			3,168,804
Institutional lending		355,119			356,465			369,751			385,782			360,276
Companies		3,918,324			4,072,191			4,236,766			4,444,673			4,541,825
Corporate		1,874,749			1,851,127			1,806,957			1,992,933			2,153,343

Customer funds
Deposits and other demand liabilities		4,601,160			4,970,019			4,964,239			5,188,708			5,257,128
Time deposits and other time liabilities		9,487,610			9,112,213			9,151,110			9,426,328			9,690,368
Total deposits		14,088,770			14,082,232			14,115,349			14,615,036			14,947,496
Mutual funds (Off balance sheet)		3,080,130			2,713,776			3,112,174			3,134,760			3,093,053
Total customer funds		17,168,900			16,796,008			17,227,523			17,749,796			18,040,549
Loans / Deposits¹		98.7	%		101.6	%		102.7	%		103.3	%		104.2	%

Average balances
Avg. interest earning assets		20,410,407			20,762,771			20,923,043			21,215,426			21,799,669
Avg. loans		18,546,119			18,666,166			18,942,547			19,384,881			20,047,191
Avg. assets		25,106,544			24,995,250			24,843,979			25,564,757			26,112,158
Avg. demand deposits		4,598,283			4,716,789			5,020,202			5,224,278			5,173,559
Avg equity		2,042,449			2,101,616			2,159,903			2,141,449			2,175,459
Avg. free funds		6,640,732			6,818,405			7,180,106			7,365,726			7,349,018

Capitalization
Risk weighted assets		19,479,092			19,940,416			20,091,878			20,959,977			21,334,180
Tier I (Shareholders' equity)		2,058,231			2,134,778			2,194,025			2,136,835			2,213,114
Tier II		642,650			599,656			596,932			561,047			564,191
Regulatory capital		2,700,881			2,734,434			2,790,957			2,697,882			2,777,305
Tier I ratio		10.6	%		10.7	%		10.9	%		10.2	%		10.4	%
BIS ratio		13.9	%		13.7	%		13.9	%		12.9	%		13.0	%

Profitability & Efficiency
Net interest margin		4.7	%		5.5	%		4.7	%		4.7	%		5.3	%
Efficiency ratio		41.9	%		39.5	%		41.4	%		42.5	%		39.8	%
Avg. Free funds / interest earning assets		32.5	%		32.8	%		34.3	%		34.7	%		33.7	%
Return on avg. equity		9.9	%		21.7	%		15.1	%		16.1	%		18.6	%
Return on avg. assets		0.8	%		1.8	%		1.3	%		1.3	%		1.5	%

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	25
email: rmorenoh@santander.cl

	Sep-12			Dec-12			Mar-13			Jun-13			Sep-13
Asset quality
Non-performing loans (NPLs)²		561,730			597,767			612,379			618,917			618,419
Loan loss allowance⁴		552,138			550,122			557,564			564,994			586,416
NPLs / total loans		3.0	%		3.2	%		3.2	%		3.1	%		3.0	%
Coverage of NPLs (Loan loss allowance / NPLs)		98.3	%		92.0	%		91.0	%		91.3	%		94.8	%
Risk index (Loan loss allowances / Loans)⁴		3.0	%		2.9	%		2.9	%		2.9	%		2.9	%
Cost of credit (prov. expense / loans)		2.6	%		1.9	%		1.9	%		1.8	%		1.9	%

Network
Branches		496			499			497			485			488
ATMs		1,966			2,001			2,011			1,972			1,915
Employees		11,692			11,713			11,679			11,558			11,626

Market information (period-end)
Net income per share (Ch$)		0.27			0.60			0.43			0.46			0.54
Net income per ADR (US$)		0.23			0.50			0.36			0.36			0.43
Stock price		33.55			33.72			33.41			31.25			32.94
ADR price		28.2			28.49			28.47			24.45			26.29
Market capitalization (US$mn)		13,285			13,422			13,413			11,519			12,386
Shares outstanding (million)		188,446.1			188,446.1			188,446.1			188,446.1			188,446.1
ADRs (1 ADR = 400 shares)⁵		471.1			471.1			471.1			471.1			471.1

Other Data
Quarterly inflation rate⁶		-0.16	%		1.11	%		0.13	%		-0.07	%		1.04	%
Central Bank monetary policy reference rate (nominal)		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%
Avg. 10 year Central Bank yield (real)		2.42	%		2.45	%		2.62	%		2.38	%		2.25	%
Avg. 10 year Central Bank yield (nominal)		5.31	%		5.48	%		5.62	%		5.21	%		5.27	%
Observed Exchange rate (Ch$/US$) (period-end)		470.48			478.6			472.54			503.86			502.97

Ratio = Loans - marketable securities / Time deposits + demand deposits

Capital + future interest of all loans with one installment 90 days or more overdue.

Total installments plus lines of credit more than 90 days overdue

Based on internal credit models and SBIF guidelines. Banks must have a 100% coverage of risk index

The rato of ADRs per local shares was modified in Oct. 2012

Calculated using the variation of the Unidad de Fomento (UF) in the period

Investor Relations Department
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,	26
email: rmorenoh@santander.cl

CONTENTS

Unaudited Consolidated Interim Financial Statements

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION	3
UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF INCOME FOR THE PERIOD	4
UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIOD	5
UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY FOR THE PERIOD	6
UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS FOR THE PERIOD	7

Notes to the Unaudited Consolidated Interim Financial Statements

NOTE 01 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	9
NOTE 02 ACCOUNTING CHANGES	38
NOTE 03 SIGNIFICANT EVENTS	42
NOTE 04 BUSINESS SEGMENTS	44
NOTE 05 CASH AND CASH EQUIVALENTS	52
NOTE 06 TRADING INVESTMENTS	53
NOTE 07 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING	54
NOTE 08 INTERBANK LOANS	61
NOTE 09 LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS	62
NOTE 10 LOAN PURCHASES AND SALES	69
NOTE 11 AVAILABLE FOR SALE INVESTMENTS	70
NOTE 12 INTANGIBLE ASSETS	71
NOTE 13 PROPERTY, PLANT, AND EQUIPMENT	73
NOTE 14 CURRENT AND DEFERRED TAXES	77
NOTE 15 OTHER ASSETS	80
NOTE 16 TIME DEPOSITS AND OTHER TIME LIABILITIES	81
NOTE 17 ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES	82
NOTE 18 MATURITY OF ASSETS AND LIABILITIES	88
NOTE 19 OTHER LIABILITIES	90
NOTE 20 CONTINGENCIES AND COMMITMENTS	91
NOTE 21 EQUITY	93
NOTE 22 CAPITAL REQUIREMENTS (BASEL)	96
NOTE 23 NON-CONTROLLING INTEREST	98
NOTE 24 INTEREST INCOME AND EXPENSES	101
NOTE 25 FEES AND COMMISSIONS	104
NOTE 26 OTHER INCOME FROM FINANCIAL OPERATIONS	105
NOTE 27 NET FOREIGN EXCHANGE INCOME	105
NOTE 28 PROVISION FOR LOAN LOSSES	106
NOTE 29 PERSONNEL SALARIES AND EXPENSES	108
NOTE 30 ADMINISTRATIVE EXPENSES	109
NOTE 31 DEPRECIATION, AMORTIZATION, AND IMPAIRMENT	110
NOTE 32 OTHER OPERATING INCOME AND EXPENSES	111
NOTE 33 TRANSACTIONS WITH RELATED PARTIES	113
NOTE 34 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES	118
NOTE 35 SUBSEQUENT EVENTS	122

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

		As of September 30,			As of December 31,
		2013			2012
	NOTE	MCh$			MCh$

ASSETS
Cash and deposits in banks	5		1,618,457			1,250,414
Cash items in process of collection	5		607,633			520,267
Trading investments	6		125,932			338,287
Investments under resale agreements			34,189			6,993
Financial derivative contracts	7		1,279,469			1,293,212
Interbank loans, net	8		144,690			90,527
Loans and accounts receivables from customers, net	9		19,736,848			18,325,957
Available for sale investments	11		1,667,957			1,826,158
Held to maturity investments			-			-
Investments in associates and other companies			9,800			7,614
Intangible assets	12		65,149			87,347
Property, plant, and equipment	13		161,812			162,214
Current taxes	14		1,343			10,227
Deferred taxes	14		183,804			186,407
Other assets	15		408,356			655,217
TOTAL ASSETS			26,045,439			24,760,841

LIABILITIES
Deposits and other demand liabilities	16		5,257,128			4,970,019
Cash items in process of being cleared	5		390,271			284,953
Obligations under repurchase agreements			388,956			304,117
Time deposits and other time liabilities	16		9,690,368			9,112,213
Financial derivative contracts	7		1,104,311			1,146,161
Interbank borrowings			1,649,658			1,438,003
Issued debt instruments	17		4,751,070			4,571,289
Other financial liabilities	17		201,339			192,611
Current taxes	14		186			525
Deferred taxes	14		15,510			9,544
Provisions			176,247			221,089
Other liabilities	19		179,893			341,274

TOTAL LIABILITIES			23,804,937			22,591,798

EQUITY

Attributable to the Bank's shareholders			2,213,114			2,134,778
Capital	21		891,303			891,303
Reserves	21		1,130,962			975,460
Accumulated other comprehensive income	21		3,288			(3,781	)
Retained earnings	21		187,561			271,796
Retained earnings from prior years			-			-
Income for the period			267,944			388,282
Minus: Provision for mandatory dividends			(80,383	)		(116,486	)
Non-controlling interest	23		27,388			34,265
TOTAL EQUITY			2,240,502			2,169,043

TOTAL LIABILITIES AND EQUITY			26,045,439			24,760,841

Financial Statements 2013 / Banco Santander Chile 3

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF INCOME FOR THE PERIOD

		For the three months ended September 30,						For the nine months ended September 30,
		2013			2012			2013			2012
	NOTE	MCh$			MCh$			MCh$			MCh$

OPERATING INCOME

Interest income	24		516,606			407,222			1,356,074			1,366,035
Interest expense	24		(229,001	)		(168,491	)		(573,321	)		(606,292	)

Net interest income			287,605			238,731			782,753			759,743

Fee and commission income	25		84,605			88,830			258,141			270,721
Fee and commission expense	25		(29,674	)		(25,427	)		(84,445	)		(75,385	)

Net fee and commission income			54,931			63,403			173,696			195,336

Net income (loss) from financial operations (net trading income)	26		55,813			(19,161	)		53,979			(32,941	)
Foreign exchange profit, net	27		(28,198	)		38,383			29,151			97,106
Other operating income	32		4,112			8,074			15,869			15,128

Net operating profit before provision for loan losses			374,263			329,430			1,055,448			1,034,372

Provision for loan losses	28		(96,479	)		(119,459	)		(275,992	)		(276,315	)

NET OPERATING PROFIT			277,784			209,971			779,456			758,057

Personnel salaries and expenses	29		(78,584	)		(75,461	)		(229,911	)		(223,115	)
Administrative expenses	30		(48,545	)		(43,782	)		(141,167	)		(130,695	)
Depreciation and amortization	31		(15,712	)		(14,051	)		(46,626	)		(40,321	)
Impairment	31		(40	)		-			(213	)		(88	)
Other operating expenses	32		(15,462	)		(11,645	)		(41,135	)		(40,995	)

Total operating expenses			(158,343	)		(144,939	)		(459,052	)		(435,214	)

OPERATING INCOME			119,441			65,032			320,404			322,843

Income from investments in associates and other companies			345			143			1,494			1,250

Income before tax			119,786			65,175			321,898			324,093

Income tax expense	14		(18,417	)		(12,296	)		(52,947	)		(45,444	)

NET INCOME			101,369			52,879			268,951			278,649

Attributable to:
Bank shareholders (Equity holders of the Bank)			101,173			50,643			267,944			274,806
Non-controlling interest	23		196			2,236			1,007			3,843

Earnings per share attributable to Bank shareholders:
(expressed in Chilean pesos)
Basic earnings	21		0.537			0.269			1.422			1.458
Diluted earnings	21		0.537			0.269			1.422			1.458

Financial Statements 2013 / Banco Santander Chile 4

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIOD

		For the three months ended September 30,						For the nine months ended September 30,
		2013			2012			2013			2012
	NOTE	MCh$			MCh$			MCh$			MCh$

CONSOLIDATED NET INCOME			101,369			52,879			268,951			278,649

OTHER COMPREHENSIVE INCOME

Available for sale investments	11		(170	)		(4,869	)		9,436			(7,049	)
Cash flow hedge	21		6,987			(2,234	)		(599	)		1,374

Other comprehensive income before income tax			6,817			(7,103	)		8,837			(5,675	)

Income tax related to other comprehensive income	14		(1,364	)		1,307			(1,767	)		1,070

Total other comprehensive income (loss)			5,453			(5,796	)		7,070			(4,605	)

CONSOLIDATED COMPREHENSIVE INCOME FOR THE PERIOD			106,822			47,083			276,021			274,044

Attributable to:
Bank shareholders (Equity holders of the Bank)			106,631			44,869			275,013			270,146
Non-controlling interest	23		191			2,214			1,008			3,898

Financial Statements 2013 / Banco Santander Chile 5

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY FOR THE PERIOD

For the nine months ended September 30, 2013 and 2012

			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			Retained earnings from prior years			Income for the period			Provision for mandatory dividends			Total attributable to shareholders			Non- controlling interest			Total Equity
	MCh$		MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Shareholders Equity as of December 31, 2011		891,303		803,651		(2,224	)		3,077			394			(639	)		-			435,084			(130,525	)		2,000,121			33,801			2,033,922
Distribution of income from prior year		-		-		-			-			-			-			435,084			(435,084	)		-			-			-			-
Shareholders Equity as of January 01, 2012		891,303		803,651		(2,224	)		3,077			394			(639	)		435,084			-			(130,525	)		2,000,121			33,801			2,033,922
Increase or decrease of capital and reserves		-		-		-			-			-			-			-			-			-			-			-			-
Dividends distributions/ withdrawals made		-		-		-			-			-			-			(261,051	)		-			130,525			(130,526	)		(4,211	)		(134,737	)
Other changes in equity		-		174,033		-			-			-			-			(174,033	)		-			-			-			(3	)		(3	)
Provisions for mandatory dividends		-		-		-			-			-			-			-			-			(82,442	)		(82,442	)		-			(82,442	)
Subtotals		-		174,033		-			-			-			-			(435,084	)		-			48,083			(212,968	)		(4,214	)		(217,182	)
Other comprehensive income		-		-		-			(7,118	)		1,374			1,084			-			-			-			(4,660	)		55			(4,605	)
Income for the period		-		-		-			-			-			-			-			274,806			-			274,806			3,843			278,649
Subtotals		-		-		-			(7,118	)		1,374			1,084			-			274,806			-			270,146			3,898			274,044
Shareholders Equity as of September 30, 2012		891,303		977,684		(2,224	)		(4,041	)		1,768			445			-			274,806			(82,442	)		2,057,299			33,485			2,090,784

Shareholders Equity as of December 31, 2012		891,303		977,684		(2,224	)		(10,041	)		5,315			945			-			388,282			(116,486	)		2,134,778			34,265			2,169,043
Distribution of income from prior year		-		-		-			-			-			-			388,282			(388,282	)		-			-			-			-
Shareholders Equity as of January 01, 2013		891,303		977,684		(2,224	)		(10,041	)		5,315			945			388,282			-			(116,486	)		2,134,778			34,265			2,169,043
Increase or decrease of capital and reserves		-		-		-			-			-			-			-			-			-			-			-			-
Dividends distributions/ withdrawals made		-		-		-			-			-			-			(232,780	)		-			116,486			(116,294	)		(7,871	)		(124,165	)
Other changes in equity		-		155,502		-			-			-			-			(155,502	)		-			-			-			(14	)		(14	)
Provision for mandatory dividends		-		-		-			-			-			-			-			-			(80,383	)		(80,383	)		-			(80,383	)
Subtotals		-		155,502		-			-			-			-			(388,282	)		-			36,103			(196,677	)		(7,885	)		(204,562	)
Other comprehensive income		-		-		-			9,435			(599	)		(1,767	)		-			-			-			7,069			1			7,070
Income for the period		-		-		-			-			-			-			-			267,944			-			267,944			1,007			268,951
Subtotals		-		-		-			9,435			(599	)		(1,767	)		-			267,944			-			275,013			1,008			276,021
Shareholders Equity as of September 30, 2013		891,303		1,133,186		(2,224	)		(606	)		4,716			(822	)		-			267,944			(80,383	)		2,213,114			27,388			2,240,502

Period	Total attributable to Bank shareholders		Allocated to reserves		Allocated to dividends		Percentage distributed		Number of		Dividend per share
	MCh$		MCh$		MCh$		%		Shares		(in pesos)

Year 2012 (Shareholders Meeting April 2013) (*)		387,967		155,187		232,780		60		188,446,126,794		1.235

Year 2011 (Shareholders Meeting April 2012) (*)		435,084		174,033		261,051		60		188,446,126,794		1.385

(*) For presentation purposes this amount has been adjusted to reflect the requirements established by IAS 19 – Revised to initial balances for the first application against reserves retrospectively, however for dividend calculation the adjustment has not been considered. The adjustment amounted Ch$315 million and Ch$1,101 million as of December 31, 2012 and 2011.

Financial Statements 2013 / Banco Santander Chile 6

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS FOR THE PERIOD

		For the nine months ended September 30,
		2013			2012
	NOTE	MCh$			MCh$

A - CASH FLOWS FROM OPERATING ACTIVITIES
CONSOLIDATED INCOME BEFORE TAX			321,898			324,093
Debits (credits) to income that do not represent cash flows			(655,418	)		(653,151	)
Depreciation and amortization	31		46,626			40,321
Impairment of property, plant, and equipment	13		213			88
Provision for loan losses	28		315,086			298,555
Mark to market of trading investments			(9,427	)		(10,228	)
Income from investments in other companies			(1,494	)		(1,250	)
Net gain on sale of assets received in lieu of payment	32		(14,104	)		(7,767	)
Provisions for assets received in lieu of payment	32		1,997			3,586
Net income arising from sale of investment in other companies	32		-			(599	)
Net gain on sale of property, plant and equipment	32		(289	)		(6,208	)
Charge off of assets received in lieu of payment	32		6,751			6,250
Net interest income	24		(782,753	)		(759,743	)
Net fee and commission income	25		(173,696	)		(195,336	)
Debits (credits) to income that do not represent cash flows			(51,130	)		7,281
Changes in assets and liabilities due to deferred taxes	14		6,802			(28,101	)
Increase/decrease in operating assets and liabilities			993,281			(545,130	)
Increase of loans and accounts receivables from customers, net			(1,436,814	)		(955,220	)
(Increase) decrease in foreign investments			370,556			133,784
(Investments in) proceeds from maturity of resale agreements (assets)			(27,196	)		(139,094	)
(Increase) decrease of Interbank loans			54,163			(22,702	)
(Increase) decrease of assets received or awarded in lieu of payment			(7,808	)		33,443
Increase in checking accounts			149,872			65,944
Increase of time deposits and other time liabilities			583,912			421,846
Increase of other demand liabilities or time obligations			137,237			121,431
Decrease of obligations with foreign banks			211,796			(443,304	)
Decrease of obligations with Central Bank of Chile			(140	)		(364	)
Increase (decrease) due to repurchase agreements (liabilities)			84,839			(425,536	)
(Decrease) increase of other financial liabilities			8,729			13,028
Net increase of other assets and liabilities			(305,329	)		(351,872	)
Payments of letters of credit			(29,453	)		(39,587	)
Senior bond issuances			566,711			581,088
Payments of senior bonds and payments of interest			(328,295	)		(446,516	)
Interest received			1,340,365			1,382,224
Interest paid			(502,358	)		(624,425	)
Dividends received from investments in other companies			1,745			810
Fees and commissions received	25		258,141			270,721
Fees and commissions paid	25		(84,445	)		(75,385	)
Income tax	14		(52,947	)		(45,444	)
Net cash flow provided by (used in) operating activities			659,761			(874,188	)

Financial Statements 2013 / Banco Santander Chile 7

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS FOR THE PERIOD

		For the nine months ended September 30,
		2013			2012
	NOTE	MCh$			MCh$

B - CASH FLOWS FROM INVESTMENT ACTIVITIES
Purchases of property, plant, and equipment	13		(16,646	)		(17,474	)
Sales of property, plant, and equipment	13		242			5,152
Purchases from investments in other companies			(1,441	)		(61	)
Sales from investments in other companies			-			401
Purchases of intangible assets	12		(7,765	)		(19,452	)
Net cash flow used in investment activities			(25,610	)		(31,434	)

C - CASH FLOWS FROM FINANCING ACTIVITIES
From shareholders’ financing activities			(270,210	)		(279,861	)
Increase of other obligations			-			77
Payments of subordinated bonds and payments of interest			(37,430	)		(18,887	)
Dividends paid			(232,780	)		(261,051	)
From non-controlling interest financing activities			(7,871	)		(4,211	)
Dividends and/or withdrawals paid			(7,871	)		(4,211	)
Net cash flow used in financing activities			(278,081	)		(284,072	)

D – NET DECREASE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD			356,070			(1,189,694	)

E – EFFECTS OF FOREIGN EXCHANGE RATE FLUCTUATIONS			(5,979	)		(9,712	)

F - INITIAL BALANCE OF CASH AND CASH EQUIVALENTS			1,485,728			2,980,669

FINAL BALANCE OF CASH AND CASH EQUIVALENTS	5		1,835,819			1,781,263

	For the nine months ended September 30,
Reconciliation of provisions for the Unaudited Consolidated Interim Statement of Cash Flows for the period	2013 MCh$			2012 MCh$

Provisions for loan losses for cash flows purposes		315,086			298,555
Recovery of loans previously charged off		(39,094	)		(22,240	)
Provision for loan losses - net		275,992			276,315

Financial Statements 2013 / Banco Santander Chile 8

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CORPORATE INFORMATION

Banco Santander Chile (formerly Banco Santiago) is a corporation (limited company bank) 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 subsidiaries (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 in the presence of the 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 September 6, 2007 of the Superintendency of Banks and Financial Institutions. An extract thereof and the resolution were published in the Official Journal of September 23, 2007 and registered in the Registry of Commerce for 2007 on page 24,064 under number 17,563 of the aforementioned Curator.

By means of this last amendment, Banco Santander Chile, pursuant to its bylaws and as approved by the Superintendency of Banks and Financial Institutions, may also use the names Banco Santander Santiago or Santander Santiago or Banco Santander or Santander.

Banco Santander Spain controls Banco Santander-Chile through its holdings in Teatinos Siglo XXI Inversiones S.A. and Santander-Chile Holding S.A., which are controlled subsidiaries of Banco Santander Spain. As of September 30, 2013 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 S.A. This gives Banco Santander Spain control over 67.18% of the Bank’s shares.

Basis of preparation

These Unaudited Consolidated Interim 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 indicates that, that banks must apply accounting standards established by SBIF. In any other matter, the Bank 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 principles and accounting standards issued by the SBIF (Compendium of Accounting Standards), the latter shall prevail.

For purposes of these financial statements we use certain terms and conventions. References to “US$”, “U.S. dollars” and “dollars” are to United States dollars, references to “EUR” are to European Economic Community Euro, references to “CNY” are to Chinese Yuan or renminbi , references to “CHF” are to Swiss franc, references to “Chilean pesos,” “pesos” or “Ch$” are to Chilean pesos, and references to “UF” are to Unidades de Fomento. The UF is an inflation-indexed Chilean monetary unit with a value in Chilean pesos that changes daily to reflect changes in the official Consumer Price Index (“CPI”) of the Instituto Nacional de Estadísticas (the Chilean National Institute of Statistics) for the previous month.

Financial Statements 2013 / Banco Santander Chile 9

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Basis of preparation for the Unaudited Consolidated Interim Financial Statements

The unaudited consolidated interim financial statements as of September 30, 2013 and December 31, 2012 and for the three-month and nine-month periods ended September 30, 2013 and 2012, respectively, incorporate the financial statements of the Bank and its controlled entities (its subsidiaries). Control is achieved when the Bank meets the following requirements under IFRS 10. Specifically, the Bank controls an investee if and only if the Bank has all the following:

Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

ii.

Exposure, or rights, to variable returns from its involvement with the investee; and

iii.

The ability to use its power over the investee to affect its returns.

When the Bank has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Bank considers all relevant facts and circumstances in assessing whether or not the Bank’s voting rights in an investee are sufficient to give it power, including:

The size of the Bank’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

Potential voting rights held by the Bank, other vote holders or other parties;

Rights arising from other contractual arrangements; and

Any additional facts and circumstances that indicate that the Bank has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous Shareholders’ meetings.

The Bank reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

The financial statements of subsidiaries are consolidated with those of the Bank. Accordingly, when necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Bank’s accounting policies and all the balances and transactions between the consolidated companies are eliminated through the consolidation process.

In addition, third parties’ shares in the Consolidated Bank’s equity are presented as “Non-controlling interests” in the Unaudited Consolidated Interim Statement of Financial Position. Their share in the income for the period is presented under “Attributable to non-controlling interests” in the Unaudited Consolidated Interim Statement of Income.

The following companies are considered entities controlled by the Bank and are therefore within the scope of consolidation:

Entities controlled by the Bank through participation in equity

	Percent ownership share
	As of September 30,						As of December 31,						As of September 30,
Subsidiaries	2013						2012						2012
	Direct %		Indirect %		Total %		Direct %		Indirect %		Total %		Direct %		Indirect %		Total %

Santander Corredora de Seguros Limitada		99.75		0.01		99.76		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		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		99.96		0.02		99.98
Santander Agente de Valores Limitada		99.03		-		99.03		99.03		-		99.03		99.03		-		99.03
Santander S.A. Sociedad Securitizadora		99.64		-		99.64		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		99.90		0.10		100.00

Financial Statements 2013 / Banco Santander Chile 10

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

ii.

Entities controlled by the Bank through other considerations

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. (management of repossessed assets and properties leasing)

iii.

Investments in 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
Associates	As of September 30,		As of December 31,		As of September 30,
	2013		2012		2012
	%		%		%
Redbanc S.A.		33.43		33.43		33.43
Transbank S.A.		25.00		25.00		25.00
Centro de Compensación Automatizado		33.33		33.33		33.33
Sociedad Interbancaria de Depósito de Valores S.A.		29.28		29.28		29.28
Cámara Compensación de Alto Valor S.A.		14.14		14.14		14.14
Administrador Financiero del Transantiago S.A.		20.00		20.00		20.00
Sociedad Nexus S.A.		12.90		12.90		12.90
Servicios de Infraestructura de Mercado OTC S.A.		11.11		-		-

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

The Bank and its subsidiaries have certain investments in share because they are required to obtain such right in order to operate their business. The ownership interest in these companies is less than 1%. These holdings are shown at purchase value.

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 “Attributable to non-controlling interest” separately in the Unaudited Consolidated Interim Statement of Income, and separately from shareholders’ equity in the Unaudited Consolidated Interim Statement of Financial Position.

For entities controlled by the Bank through other considerations, their gains and losses and net assets is completely presented as Attributable to non-controlling interest, due to the Bank exercise control over those entities, but do not have equity participation

Operating segments

The Bank discloses separate information for each operating segment that:

has been identified as such;

ii.

exceeds the quantitative thresholds required for a segment.

Financial Statements 2013 / Banco Santander Chile 11

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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 N°8 “Operating Segments” (IFRS 8) and the segments have similar economic characteristics and are similar in each of the following respects:

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

if applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities.

The Bank reports separately on each operating segment that exceeds any of the following quantitative thresholds:

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 operating segments that reported a loss.

iii.

Its assets represent 10% or more of the combined assets of all the 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 operating segments not separately reported (and not meeting the requirements to report separately) is aggregated 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:

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.

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.”

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 at 1:30 p.m. on the last business day of every month; the rates used were Ch$504.70 and Ch$474.70 per US$1 as of September 30, 2013 and 2012 respectively (Ch$478.85 per US$1 as of December 31, 2012).

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 2013 / Banco Santander Chile 12

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Definitions and classification of financial instruments

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:

Trading investments portfolio (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 investments portfolio, includes 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 under the heading “Other comprehensive income” within equity. When these investments are disposed or become impaired, the cumulative gains or losses previously recognized in “Other comprehensive income” are transferred to the Unaudited Consolidated Interim 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 amortized cost using the effective interest method.

Financial Statements 2013 / Banco Santander Chile 13

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

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. Amounts invested or received as overnight deposits are included in this item.

Cash items in process of collection: This item includes the values of executed transactions which 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.

Financial derivative contracts: Financial derivative contracts with positive fair values are presented in this item. It includes both stand-alone 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 7 to the Unaudited Consolidated Interim 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 classified 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 2013 / Banco Santander Chile 14

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Classification of financial liabilities for presentation purposes

The financial liabilities are classified by their nature into the following line items in the Unaudited Consolidated Interim Statement 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.

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 for 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.

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:

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.

According to IFRS 13 Fair Value Measurement (effective date from January 1, 2013), “fair value” is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (ie an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. A fair value measurement is for a particular asset or liability. Therefore, when measuring fair value an entity shall take into account thecharacteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

Financial Statements 2013 / Banco Santander Chile 15

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

A fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either: (a) in the principal market for the asset or liability; or (b) in the absence of a principal market, in the most advantageous market for the asset or liability. Even when there is no observable market to provide pricing information about the sale of an asset or the transfer of a liability at the measurement date, a fair value measurement shall assume that a transaction takes place at that date, considered from the perspective of a market participant that holds the asset or owns the liability. That assumed transaction establishes a basis for estimating the price to sell the asset or to transfer the liability.

When using valuation techniques, the Bank shall maximise the use of relevant observable inputs and minimise the use of unobservable inputs as available. If an asset or a liability measured at fair value has a bid price and an ask price, the price within the bid-ask spread that is most representative of fair value in the circumstances shall be used to measure fair value regardless of where the input is categorised within the fair value hierarchy (ie Level 1, 2 or 3). IFRS 13 establishes a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

All derivatives are recorded in the Unaudited Consolidated Interim 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 the fair value of derivatives from the trade date are recorded in “Net income from financial operations” in the Unaudited Consolidated Interim 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 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. Also, within the fair value of derivatives are included Credit Valuation Adjustment (CVA), all with the objective that the fair value of each instrument includes the credit risk of its counterparty.

“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 rate 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.

Financial Statements 2013 / Banco Santander Chile 16

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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.

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 September 30, 2013 and 2012 and as of December, 2012 by the Bank’s internal models to determine the fair value of the financial instruments are as follows:

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 Unaudited Consolidated Interim 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 Unaudited Consolidated Interim Statement of Income under “Net income from financial operations.”

Adjustments due to changes in fair value from:

“Available-for-sale instruments” are recorded and accumulated under the heading “Other comprehensive income” within Equity.

Financial Statements 2013 / Banco Santander Chile 17

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

When AFS instruments are disposed of or determined to be impaired, the cumulative gain or loss previously accumulated as “Other comprehensive income” is reclassified to the Unaudited Consolidated Interim Statement of Income.

Hedging transactions

The Bank uses financial derivatives for the following purposes:

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:

The derivative hedges one of the following three types of exposure:

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”);

Changes in the estimated cash flows arising from financial assets and liabilities, commitments and highly probable forecasted transactions (“cash flow hedge”);

The net investment in a foreign operation (“hedge of a net investment in a foreign operation”).

It is effective in offsetting exposure inherent in the hedged item or position throughout the expected term of the hedge, which means that:

At the date of arrangement the hedge is expected, under normal conditions, to be highly effective (“prospective effectiveness”).

There is sufficient evidence that the hedge was actually effective during the life of the hedged item or position (“retrospective effectiveness”).

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:

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 Unaudited Consolidated Interim Statement of Income.

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 Unaudited Consolidated Interim 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 Unaudited Consolidated Interim Statement of Income as a charge or credit, as applicable, to “Net income from financial operations”.

In cash flow hedges, the effective portion of the change in value of the hedging instrument is recorded under the heading “Cash flow hedge” within Equity component “Other comprehensive income”, until the hedged transaction occurs, thereafter being recorded in the Unaudited Consolidated Interim 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.

Financial Statements 2013 / Banco Santander Chile 18

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

The differences in valuation of the hedging instrument corresponding to the ineffective portion of the cash flow hedging transactions are recorded directly in the Unaudited Consolidated Interim Statement of Income under “Net income from financial operations”.

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 Unaudited Consolidated Interim Statement of Income, unless the transaction is no longer expected to occur, in which case any cumulative gain or loss is recorded immediately in the Unaudited Consolidated Interim Statement of Income.

vi.

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 “Trading investments portfolio”.

vii.

Offsetting of financial instruments

Financial asset and liability balances are offset, i.e., reported in the Unaudited Consolidated Interim 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.

viii.

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:

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 transferor does not retain subordinated debt nor grants any credit enhancement to the new holders, and other similar cases, the transferred financial asset is derecognized from the Unaudited Consolidated Interim 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 Unaudited Consolidated Interim 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 2013 / Banco Santander Chile 19

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINEMONTH

PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

If the transferor does not retain control of the transferred financial asset: the asset is removed from the Unaudited Consolidated Interim Statements of Financial Position and any rights or obligations retained or created in the transfer are recorded.

If the transferor retains control of the transferred financial asset: it continues to be recorded in the Unaudited Consolidated Interim 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 Unaudited Consolidated Interim 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 Unaudited Consolidated Interim Statements of Financial Position when the obligations specified in the contract are discharged or cancelled or the contract has matured.

Recognizing income and expenses

The most significant criteria used by the Bank to recognize its revenues and expenses are summarized as follows:

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 Unaudited Consolidated Interim Statement of Income unless they have been actually received.

This interest and these adjustments are generally referred to as “suspended” and are recorded in suspense accounts which are not part of the Unaudited Consolidated Interim Statements of Income. Instead, they are reported as part of the complementary information thereto and as memorandum accounts (Note 24). This interest is recognized as income, when collected.

The resumption of interest income recognition of previously impaired loans only occurs when such loans became current (i.e., payments were received such that the loans are contractually past-due for less than 90 days) or they are no longer classified under the C3, C4, C5, or C6 categories (for loans individually evaluated for impairment).

Dividends received from companies classified as “Investments in associates and 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 Unaudited Consolidated Interim 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 which are measured at fair value through profit or loss are recognized when they are earned.

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 2013 / Banco Santander Chile 20

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

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 deferred and charged to in the Unaudited Consolidated Interim Statement of Income over the term of the loan.

Regarding fees arising as a result of new products, the Bank immediately records within the Unaudited Consolidated Interim Statements of Income the portion that corresponds to direct costs related to loan origination.

Impairment

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 Unaudited Consolidated Interim Statement of Income. Any cumulative loss relating to a financial asset available for sale previously recorded in equity is transferred to profit or loss upon the occurrence of an impairment loss.

The reversal of an impairment loss only occurs if it can be objectively related to an event occurring after the initial impairment loss was recorded. This reversal is always recorded through income.

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 non-financial assets, other than goodwill, impairment losses recorded in prior periods are assessed at each reporting date to determine whether there is an indication that the impairment loss may no longer exist or may have decreased, in which case an estimate of the recoverable amount of the asset is perfomed. 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 amortization or depreciation) had no impairment loss been recognized for the asset in prior years

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 2013 / Banco Santander Chile 21

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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 for assets 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		1,200

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 Unaudited Consolidated Interim 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 2013 / Banco Santander Chile 22

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

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.

Leasing

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 Unaudited Consolidated Interim Statements of Financial Position.

When the consolidated entities act as lessees, they show the cost of the leased assets in the Unaudited Consolidated Interim 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 UnauditedConsolidated Interim 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 Unaudited Consolidated Interim 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 Unaudited Consolidated Interim 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.

Factored receivables

Factored receivables are valued at the amount disbursed by the Bank in exchange of 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 Unaudited Consolidated Interim 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 2013 / Banco Santander Chile 23

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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.

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:

Cash flows: Inflows and outflows of cash and cash equivalents, such as deposits in Central Bank of Chile, deposits in domestic banks and deposits in foreign banks.

ii.

Operating activities: Principal revenue-producing activities performed by banks and other activities that cannot be classified as investing or financing activities.

iii.

Investing activities: The acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.

iv.

Financing activities: Activities that result in changes in the size and composition of the equity and liabilities that are not operating activities.

Allowance for loan losses

The Bank has established allowances to cover probable losses on loans and account receivables in accordance with instructions issued by Superintendency of Banks and Financial Institutions. These models and risk assessment have been approved by the 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:

Consumer loans,

ii.

Mortgage loans, and

iii.

Commercial loans.

The Bank performs an assessment of loans and account receivable from customers to determine their allowance for loan losses in accordance with:

Financial Statements 2013 / Banco Santander Chile 24

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Individual assessment - When the Bank assess 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.

Collective 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 allowances are described below:

Allowance 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, his contingent loans and loans a risk category, after assigning them to one of the following portfolio categories: Normal, Substandard and Impaired. 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:

Normal Portfolio includes debtors with a payment capacity that allows them to comply with their obligations and commitments and there 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 are reasonable doubts about the reimbursement of the capital and interest within the contractual terms, showing low margin to fulfill their short-term financial obligations. The classifications assigned to this portfolio are categories from B1 to B4.

iii.

Impaired Portfolio includes debtors and their loans 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 2013 / Banco Santander Chile 25

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

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 (%)
Normal portfolio	A1		0.04		90.0		0.03600
	A2		0.10		82.5		0.08250
	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
Substandard portfolio	B1		15.00		92.5		13.87500
	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.

Impaired Portfolio

The provisions over impaired portfolio include determining, at first, the expected loss rate, deducting any amount recovered by guarantee execution and the present value of 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 include loans plus contingent loans related to a debtor.

The allowance percentages applied over exposure 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 2013 / Banco Santander Chile 26

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

II.

Allowance for group evaluations

The collective evaluation is relevant to address a large number of smaller balance loans related to individuals and small-size companies.

Levels of required allowances have been established by the Bank, in accordance with loan losses 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 the Bank 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 in an appropriate manner. 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 September 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 September 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 in September 2012. The effect of these improvements was considered as a change of estimate according to International Accounting Standard No 8 “Accounting Policies, Changes in Accounting Estimates and Errors”; therefore, the effect was reported on the Unaudited Consolidated Interim Financial Statements.

According to the Management, it is impracticable to determine the effects of these changes in accounting estimate for future periods.

Financial Statements 2013 / Banco Santander Chile 27

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

III.

Additional provisions

According to SBIF regulation, banks are allowed to establish provisions over the limits described below so as to protect themselves from the risk of non-predictable economical fluctuations that could affect the macroeconomical environment or the situation of a specific economical sector.

According to No. 10 of Chapter B-1 from the SBIF Compendium of Accounting Standards, these provisions will be recorded in liabilities, similar to provisions for contingent loans. For all period presented herein, no additional provisions have been recorded.

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 charge-off these amounts in accordance with Title II of Chapter B-2 of the Compendium of Accounting Standards (SBIF).

These charge-offs consist of derecognition from Unaudited Consolidated Interim Statements of Financial Position of the corresponding loans operations in its entirety, and, therefore, include portions not past-due 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 through the Unaudited Consolidated Interim Statement of Income for the period in accordance with Chapter B-1 of the Compendium of Accounting Standards (SBIF), no matter what causes the charge-off. Subsequent payments obtained from charge-off operations will be recognized at the Unaudited Consolidated Interim Statement of Income as recovery of loan previously charge-off.

Loan and accounts receivable charge-offs are recorded on overdue, past due, and current installments based on the time periods expired since reaching overdue status:

Type of loan	Term

Consumer loans with or without collateral		6 months
Other transactions without collateral		24 months
Business credits with collateral		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 in an impaired status—and the effective payments received when removed from impaired status are accounted as recovery from loans previously charged off.

Renegotiated loans shall recognized as an asset if no longer impaired.

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 Unaudited Consolidated Interim Statement of Income as a reduction of provision for loan losses.

Financial Statements 2013 / Banco Santander Chile 28

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

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 Unaudited Consolidated Interim Statements of Financial Position when the Bank:

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 the occurrence or non-occurrence if 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:

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.

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 interim, as well as 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 2013 / Banco Santander Chile 29

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

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 reporting period and are used to address the specific liabilities for which they were originally recognized. Partial or total reversals are recognized 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

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 is 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.

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 price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When available, quoted market prices in active markets have been used as the basis for measurement. When 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, 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 Unaudited Consolidated Interim 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 7, 8, 9, and 31)

The useful lives of tangible and intangible assets (Notes 12, 13, and 31)

The fair value of assets and liabilities (Notes 6, 7, 11, and 34)

Commitments and contingencies (Note 20)

Current and deferred taxes (Note 14)

Financial Statements 2013 / Banco Santander Chile 30

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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.

As of September 30, 2013 and 2012 and December 31, 2012 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 clients are recognized at their fair value (as determined by an independent appraisal). A price is agreed upon by the parties through negotiation, or, when the parties do not reach an agreement, at the amount at which the Bank is awarded those assets at a judicial auction. In the latter case, an independent appraisal is performed. Any excess of the fair value over the outstanding loan balance, less costs to sell of the collateral, is returned to the client.

These assets are subsequently adjusted to their net recoverable amount less cost to sale (assuming a forced sale). The difference between the fair value of the asset and the estimated net recoverable amount less costs to sell is charged to net income for the period, under “Other operating expenses”. The result obtained in the sale of the asset is subsequently recorded under “Other operating income”.

Independent appraisals are obtained at least every 18 months and fair values are adjusted accordingly. No adjustments have been made between appraisals considering the stability of the real estate market in Chile during past years and the expected stability of the real estate market in the coming years.

At least once a year, the Bank performs the necessary analysis to update these assets’ costs to sell. According to the Bank’s survey, as of September 30, 2013 the average cost to sell was estimated at 5.2% of the appraised value (5.5% as of September 30, 2012).

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 year.

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 September 30, 2013 and 2012 and December 31, 2012 the Bank did not have any instruments that generated diluting effects.

Financial Statements 2013 / Banco Santander Chile 31

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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 Unaudited Consolidated Interim Statements of Financial Position 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.

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 Unaudited Consolidated Interim Statements of Financial Position. Management fees are included in “Fee and commission income” in the Unaudited Consolidated Interim Statement of Income.

Provision for mandatory dividends

As of September 30, 2013 and 2012, and December 31, 2012 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 deducting item, in the “Retained earnings – Provision for mandatory dividends” in the Unaudited Consolidated Interim Statement of Financial Position.

Employee benefits

Post-employment benefits – Defined benefit plan:

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 Group are:

Aimed at the Group’s management

The general requisite to apply is that the employee must be carrying out his duties when turning 60 years old.

The Bank will take on insurance (pension fund) on the employee’s behalf, for which it will pay regularly the respective premium (contribution).

The Bank will be directly responsible for granting benefits.

“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.

Financial Statements 2013 / Banco Santander Chile 32

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

Employee benefits, continued

In accordance with IAS 19 - Revised, for defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations performed at the end of each reporting period. Remeasurement comprising of actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on plan assets (excluding interest) are recognized immediately in the Unaudited Consolidated Interim Statement of Financial Position with a charge or credit to other comprehensive income in the period in which they occur. Remeasurement recorded in other comprehensive income is not recycled. However, the Bank may transfer those amounts recognized in other comprehensive income within equity. Past service cost is recognized in profit or loss in the period of plan amendment. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. Defined benefit cost are split into three categories:

service cost, past-service cost, gains and losses on curtailments and settlements;

net-interest expense or income

remeasurement

The Bank presents the first two components of defined benefit costs in the line “Personnel salaries and expense” in its Unaudited Consolidated Interim Statement of Income. Curtailments gains and losses are accounted for as past-service cost.

Remeasurements are recorded in other comprehensive income.

A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognizes any related restructuring costs.

ii.

Severance provision:

Severance provision 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 Unaudited Consolidated Interim 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).

Reclassification of items

Banco Santander Chile has reclassified some items in the Interim Financial Statements to provide relevant, reliable, comparable and understandable information.

These reclassifications, which did not affect the Bank’s results, have no significant or material impact on the current Unaudited Consolidated Interim Financial Statements.

Financial Statements 2013 / Banco Santander Chile 33

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

aa)

Application of new and revised International Financial Reporting Standards

New and revised 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:

Accounting Standards issued by the SBIF

Circular No. 3548 - On March 19, 2013 the SBIF issued this circular to match the name used in the instructions to the newest amendments to IAS 1 replacing “Statement of Income” and “Statement of comprehensive income” by “Statement of income for the period” and “Statement of comprehensive income for the period”. Management has applied these changes in this financial statements.

New and revised IFRSs issued by the International Accounting Standards Board

New and revised Standards on consolidation, joint arrangements, associates and disclosures

In May 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued comprising IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 (as revised in 2011) Separate Financial Statements and IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures. Subsequent to the issue of these standards, amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to c1arify certain transitional guidance on the first-time application of the standards.

In the current year, the Bank has applied for the first time IFRS 10, IFRS 11, IFRS 12 and IAS 28 (as revised in 2011) together with the amendments to IFRS 10, IFRS 11 and IFRS 12 regarding the transitional guidance.

IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements and SIC-12 Consolidation - Special Purpose Entities. IFRS 10 changes the definition of control such that an investor has control over an investee when a) it has power over the investee, b) it is exposed, or has rights, to variable returns from its involvement with the investee and e) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Additional guidance has been included in IFRS 10 to explain when an investor has control over an investee.

IFRS 11 replaces IAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation, SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers, has been incorporated in IAS 28 (as revised in 2011).

IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be c1assified and accounted for. Under IFRS 11, there are only two types of joint arrangements - Joint operations and joint ventures.

The classification of joint arrangements under IFRS 11 is determined based on the rights and obligations of parties to the joint arrangements by considering the structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement, and, when relevant, other facts and circumstances. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. Previously, IAS 31 contemplated three types of joint arrangements - jointly controlled entities, jointly controlled operations and jointly controlled assets. The classification of joint arrangements under IAS 31 was primarily determined based on the legal form of the arrangement (e.g. a joint arrangement that was established through a separate entity was accounted for as a jointly controlled entity).

The initial and subsequent accounting of joint ventures and joint operations is different. Investments in joint ventures are accounted for using the equity method (proportionate consolidation is no longer allowed). Investments in joint operations are accounted for such that each joint operator recognizes its assets (including its share of any assets jointly held), its liabilities (including its share of any liabilities incurred jointly), its revenue (including its share of revenue from me sale of the output by me joint operation) and its expenses (including its share of any expenses incurred jointly). Each joint operator accounts for the assets and liabilities, as well as revenues and expenses, relating to its interest in the joint operation in accordance with the applicable Standards.

Financial Statements 2013 / Banco Santander Chile 34

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. These amendments did not have a material impact on our consolidated financial statements.

IFRS 13 Fair Value Measurement - The Bank has applied IFRS 13 for the first time in the current year. IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The scope of IFRS 13 is broad; the fair value measurement requirements of IFRS 13 apply 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 for share-based payment transactions that are within the scope of IFRS 2 Share-based Payment, leasing transactions that are within the scope of IAS 17 Leases, and measurements that have some similarities lo fair value but are not fair value (e.g. net realizable value for the purposes of measuring inventories or value in use for impairment assessment purposes).

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions.

Fair value under IFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, IFRS 13 includes extensive disclosure requirements.

IFRS 13 requires prospective application from January 1, 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. In accordance with these transitional provisions, the

Bank has not made any new disclosures required by IFRS 13 for the 2012 comparative period. The application of IFRS 13 has not had any material impact on the amounts recognized in the consolidated financial statements. These amendments did not have a material impact on our consolidated financial statements.

IAS 19 Employee Benefits (as revised in 2011) - In the current year, the Bank has applied IAS 19 Employee Benefits (as revised in 2011) and the related consequential amendments far the first time.

IAS 19 (as revised in 2011) changes the accounting for defined benefit plans and termination benefit. The most significant change relates to the accounting 1m changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in the 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. All actuarial gains and losses are 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. Furthermore, the ¡interest cost and expected return on plan assets used in the previous version of IAS 19 are replaced with a 'net interest' amount under IAS 19 (as revised in 2011), which is calculated by applying the discount rate to the net defined benefit liability or asset These changes have had an impact on the amounts recognized in profit or loss and other comprehensive income in prior years (see the tables below for details). In addition, IAS 19 (as revised in 2011) introduces certain changes in the presentation of the defined benefit cost including more extensive disclosures. Specific transitional provisions are applicable to firs-time application of IAS 19 (as revised in 2011). The Bank has applied the relevant transitional provisions and restated the comparative amounts on a retrospective basis (see Note 2 “Accounting changes” for details).

Amendments to IAS 1 Presentation of items of Other Comprehensive Income - The amendments to IAS 1 Presentation of Items of Other Comprehensive Income introduce new terminology, whose use is not mandatory, for the statement of comprehensive income and income statement. Under the amendments to IAS 1, the ‘statement of comprehensive income' is renamed as the 'statement of profit or loss and other comprehensive income' (and the 'income statement' is renamed as the '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 items of other comprehensive income to be grouped into two categories in the other comprehensive income section: (a) items that will not be reclassified subsequently lo 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. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to IAS 1 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income. These amendments did not have a material impact on our consolidated financial statements.

Financial Statements 2013 / Banco Santander Chile 35

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Amendments to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities - The Bank has applied the amendments to IFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities for the first time in the current year. 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 have been applied retrospectively. These amendments did not have a material impact on our consolidated financial statements.

IAS 27 (2011), Separate Financial Statements - IAS 27 Consolidated and Separated Financial Statements was modified by IFRS 10 but keeps the current guidelines for separate financial statements. These amendments did not have a material impact on our 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. These amendments did not have a material impact on our consolidated financial statements.

ii.

New accounting regulations and instructions issued by the SBIF as well as by the IASB not enforced as of September 30, 2013.

At the end date of these financial statements new IFRS had been published as well as interpretations of these regulations that were not mandatory as of September 30, 2013. Though in some cases, the IASB has allowed for their in-advance adoption, the Bank has not done so up to said date.

Accounting regulations issued by the SBIF

As of September 30, 2013 there are no new accounting regulations issued by SBIF to be implemented.

New and revised IFRSs in issue but not yet effective issued by the International Accounting Standards Board

IFRS 9 Financial Instruments - IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of financial assets.

IFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of IFRS 9:

All recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss.

With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that 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 recognition 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 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 fair value through profit or loss is presented in profit or loss.

The Bank, pursuant to SBIF instructions, will not apply this regulation early. Moreover, it will not be applied until the SBIF establishes it is mandatory for all banks.

Financial Statements 2013 / Banco Santander Chile 36

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities - The amendments to IAS 32 c1arify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments c1arify the meaning of 'currently has a legally enforceable right of set-off' and 'simultaneous realization and settlement'.

Management does not anticipate that the application of these amendments to IAS 32 will have a significant impact on the Bank's consolidated financial statements as the Bank does not have any financial assets and financial liabilities that qualify for offset. Management expects this new standard to be adopted in the consolidated financial statements of the Bank for the period beginning in January 1, 2014.

Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities - The amendments to IFRS 10 define an investment entity and require a reporting entity that meets the definition of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries at fair value through profit or loss in its consolidated and separate financial statements.

To qualify as an investment entity, a reporting entity is required to:

Obtain funds from one or more investors for the purpose of providing them with professional investment management services.

Commit to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both.

Measure and evaluate performance of substantially all of its investments on a lair value basis.

Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure requirements for investment entities. Management is currently evaluating the possible impact this might have.

Amendment to IAS 36, Impairment of Asset Value - On May 29, 2013, IASB published “Information to be disclosed regarding the Recoverable Amount of Non-Financial Assets”. The amendments to IAS 36 remove the requirement to disclose the recoverable amount of each cash-generating unit (group of units) for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit (group of units) is significant when compared to the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives; require an entity to disclose the recoverable amount of an individual asset (including goodwill) or a cash-generating unit for which the entity has recognized or reversed an impairment loss during the reporting period; require an entity to disclose additional information about the fair value less costs of disposal of an individual asset, including goodwill, or a cash-generating unit for which the entity has recognized or reversed an impairment loss during the reporting period, including: a) the level of the fair value hierarchy (from IFRS 13) within which the fair value measurement is categorized, b) the valuation techniques used to measure fair value less costs of disposal, c) key assumptions used in the measurement of fair value measurements categorized within 'Level 2' and 'Level 3' of the fair value hierarchy; require an entity to disclose the discount rate used, where an entity has recognized or reversed an impairment loss during the reporting period and recoverable amount is based on fair value less costs of disposal determined using a present value technique (this amendment originated in the 2010-2012 cycle of annual improvements in the exposure draft published in May 2012).

The overall effect of the amendments is to reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. Management is currently assessing the potential impact of the adoption of these amendments.

Amendments to IAS 39 'Financial Instruments: Recognition and Measurement' - On 27 September 2013 the International Accounting Standards Board (IASB) issued 'Novation of Derivatives and Continuation of Hedge Accounting'. Under the amendments there would be no need to discontinue hedge accounting if a hedging derivative was novated, provided certain criteria are met. The amendments are effective for annual periods beginning on or after January 1, 2014, with earlier application being permitted. Management is currently assessing the potential impact of the adoption of this regulation.

Financial Statements 2013 / Banco Santander Chile 37

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 02

ACCOUNTING CHANGES AND OTHER RECLASSIFICATIONS

a) Accounting changes

On January 1, 2012, the IASB published an amended to IAS 19 “Employee benefits”, modifying the accounting for defined benefit plans and termination benefits (effective from January 1, 2013).

The most significant change requires the recognition of changes in defined benefit obligations and value of plan assets when they occur, and therefore eliminates the ‘corridor approach’ allowed under the previous version of IAS 19 and accelerates the recognition of past service costs. The amendments required must be applied retrospectively following IAS 8 “Accounting policies, changes in accounting estimates and errors”.

The adjustments required by amendments to IAS 19 as of December 31, 2012 are as follows:

	Closing balance as of December 31,						Adjusted balance as of December 31,
Consolidated Statement of Financial Position	2012			Adjustments			2012
	MCh$			MCh$			MCh$
Assets
Deferred taxes		186,210			197			186,407
Other assets		656,200			(983	)(*)		655,217
Total Assets		842,410			(786	)		841,624

Liabilities
Provisions		220,993			96			221,089
Total Liabilities		220,993			96			221,089

Equity
Reserves		976,561			(1,101	)(**)		975,460
Income for the year		387,967			315	(***)		388,282
Minus: Provision for mandatory dividends		(116,390	)		(96	)		(116,486	)
Total Equity		1,248,138			(882	)		1,247,256

(*) Corresponds to decrease in pension plan, which was pending of deferral

(**) Corresponds to pension plans amount pending of deferral as of December 31, 2011 (net of income tax)

(***) Corresponds to pension plans amount pending of deferral as of December 31, 2012 (net of income tax)

The adjustments required by amendments to IAS 19 as of January 1, 2012 are as follows:

	Opening balance as of January 1,					Adjusted balance as of January 1,
Consolidated Statement of Financial Position	2012		Adjustments			2012
	MCh$		MCh$			MCh$
Assets
Deferred taxes		147,754		281			148,035
Other assets		546,470		(1,382	)(*)		545,088
Total Assets		694,224		(1,101	)		693,123

Equity
Reserves		802,528		(1,101	)(**)		801,427
Total Equity		802,528		(1,101	)		801,427

(*) Corresponds to decrease in pension plan, which was pending of deferral

(**) Corresponds to pension plans amount pending of deferral as of December 31, 2011 (net of income tax)

Financial Statements 2013 / Banco Santander Chile 38

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 02

ACCOUNTING CHANGES AND OTHER RECLASSIFICATIONS, continued

The Bank has performed the necessary adjustments to present the comparative Consolidated Statement of Financial Position as of December 31, 2012, in accordance with amendment to IAS 19:

	Closing balance as of December 31,						Adjusted balance as of December 31,
	2012			Adjustments			2012
	MCh$			MCh$			MCh$
Assets
Cash and deposits in banks		1,250,414			-			1,250,414
Cash items in process of collection		520,267			-			520,267
Trading investments		338,287			-			338,287
Investments under resale agreements		6,993			-			6,993
Financial derivative contracts		1,293,212			-			1,293,212
Interbank loans, net		90,527			-			90,527
Loans and accounts receivables from customers, net		18,325,957			-			18,325,957
Available for sale investments		1,826,158			-			1,826,158
Held to maturity investments		-			-			-
Investments in associates and other companies		7,614			-			7,614
Intangible assets		87,347			-			87,347
Property, plant, and equipment		162,214			-			162,214
Current taxes		10,227			-			10,227
Deferred taxes		186,210			197			186,407
Other assets		656,200			(983	)		655,217
TOTAL ASSETS		24,761,627			(786	)		24,760,841

Liabilities
Deposits and other demand liabilities		4,970,019			-			4,970,019
Cash items in process of being cleared		284,953			-			284,953
Obligations under repurchase agreements		304,117			-			304,117
Time deposits and other time liabilities		9,112,213			-			9,112,213
Financial derivative contracts		1,146,161			-			1,146,161
Interbank borrowings		1,438,003			-			1,438,003
Issued debt instruments		4,571,289			-			4,571,289
Other financial liabilities		192,611			-			192,611
Current taxes		525			-			525
Deferred taxes		9,544			-			9,544
Provisions		220,993			96			221,089
Other liabilities		341,274			-			341,274

TOTAL LIABILITIES		22,591,702			96			22,591,798

Equity

Attributable to the Bank's shareholders		2,135,660			(882	)		2,134,778
Capital		891,303			-			891,303
Reserves		976,561			(1,101	)		975,460
Valuation adjustments		(3,781	)		-			(3,781	)
Retained earnings		271,577			219			271,796
Retained earnings from prior years		-			-			-
Income for the period		387,967			315			388,282
Minus: Provision for mandatory dividends		(116,390	)		(96	)		(116,486	)
Non-controlling interest		34,265			-			34,265

TOTAL EQUITY		2,169,925			(882	)		2,169,043

TOTAL LIABILITIES AND EQUITY		24,761,627			(786	)		24,760,841

Financial Statements 2013 / Banco Santander Chile 39

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 02

ACCOUNTING CHANGES AND OTHER RECLASSIFICATIONS, continued

The Bank has performed the necessary adjustments to present the comparative Consolidated Interim Statements of Income for the nine month and the three-month periods ended September 30, 2012 in accordance with amendments to IAS 19:

	Closing balance for the three months ended September 30,						Adjusted balance for the three months ended September 30,			Closing balance for the nine months ended September 30,						Adjusted balance for the nine months ended September 30,
	2012			Adjustments			2012			2012			Adjustments			2012
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
OPERATING INCOME

Interest income		407,222			-			407,222			1,366,035			-			1,366,035
Interest expense		(168,491	)		-			(168,491	)		(606,292	)		-			(606,292	)
Net interest income		238,731			-			238,731			759,743			-			759,743

Fee and commission income		88,830			-			88,830			270,721			-			270,721
Fee and commission expense		(25,427	)		-			(25,427	)		(75,385	)		-			(75,385	)
Net fee and commission income		63,403			-			63,403			195,336			-			195,336

Net income from financial operations (net trading income)		(19,161	)		-			(19,161	)		(32,941	)		-			(32,941	)
Foreign exchange profit, net		38,383			-			38,383			97,106			-			97,106
Other operating income		8,074			-			8,074			15,128			-			15,128
Net operating profit before loan losses		329,430			-			329,430			1,034,372			-			1,034,372

Provisions for loan losses		(119,459	)		-			(119,459	)		(276,315	)		-			(276,315	)

NET OPERATING PROFIT		209,971			-			209,971			758,057						758,057

Personnel salaries and expenses		(75,561	)		100			(75,461	)		(223,416	)		301			(223,115	)
Administrative expenses		(43,782	)		-			(43,782	)		(130,695	)		-			(130,695	)
Depreciation and amortization		(14,051	)		-			(14,051	)		(40,321	)		-			(40,321	)
Impairment		-			-			-			(88	)		-			(88	)
Other operating expenses		(11,645	)		-			(11,645	)		(40,995	)		-			(40,995	)
Total operating expenses		(145,039	)		100			(144,939	)		(435,515	)		301			(435,214	)

OPERATING INCOME		64,932			100			65,032			322,542			301			322,843

Income from investments in associates and other companies		143			-			143			1,250			-			1,250
Income before tax		65,075			100			65,175			323,792			301			324,093
Income tax expense		(12,276	)		(20	)		(12,296	)		(45,384	)		(60	)		(45,444	)

NET INCOME FOR THE PERIOD		52,799			80			52,879			278,408			241			278,649

Attributable to:
Bank shareholders		50,563			80			50,643			274,565			241			274,806
Non-controlling interest		2,236			-			2,236			3,843			-			3,843

Financial Statements 2013 / Banco Santander Chile 40

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 02

ACCOUNTING CHANGES AND OTHER RECLASSIFICATIONS, continued

b) Other reclassifications

For purposes of improving the information presented in Consolidated Interim Statements of Income, the Bank has made some reclassification during the current year, that have been made retroactively

The Bank has made certain reclassifications in current period, arising from a review of our financial statements and agreements made at the industry level; for presentation purposes those reclassifications had been applied to prior period with the purposes of made comparative information in accordance with IAS 1 “Presentation of Financial Statements”.

Additionally, IAS 19 Pension Plans – Revised has been effective from January 1, 2013 with retroactive effect over 2012, generating an adjustment of $241 income:

	Closing balance for the three months ended								Pro-Forma balances for the three months ended			Closing balance for the nine months ended									Pro-Forma balances for the nine months ended
OPERATING INCOME	September 30, 2012			Reclassifications		IAS 19 adjustments			September 30, 2012			September 30, 2012			Reclassifications			IAS 19 adjustments			September 30, 2012
Interest income		407,222			-		-			407.222			1,366,035			-			-			1,366,035
Interest expense		(168,491	)		-		-			(168,491	)		(606,292	)		-			-			(606,292	)
Net interest income		238,731			-		-			238,731			759,743			-			-			759,743

Fee and commission income		88,817			13		-			88,830			270,692			29			-			270,721
Fee and commission expense		(21,780	)		3,647		-			(25,427	)		(66,957	)		(8,428	)		-			(75,385	)
Net fee and commission income		67,037		-	3,634		-			63,403			203,735			(8,399	)		-			195,336

Net income from financial operations (net trading income)		(19,161	)		-		-			(19,161	)		(32,941	)		-			-			(32,941	)
Foreign exchange profit, net		38,383			-		-			38,383			97,106			-			-			97,106
Other operating income		8,074			-		-			8,074			15,128			-			-			15,128
Net operating profit before loan losses		333,064		-	3,634		-			329,430			1,042,771			(8,399	)		-			1,034,372

Provisions for loan losses		(119,459	)		-		-			(119,459	)		(276,315	)		-			-			(276,315	)

NET OPERATING PROFIT		213,605		-	3,634		-			209,971			766,456			(8,399	)		-			758,057
Personnel salaries and expenses		(75,561	)		-		100			(75,461	)		(223,416	)		-			301			(223,115	)
Administrative expenses		(46,053	)		2,271		-			(43,782	)		(135,252	)		4,557			-			(130,695	)
Depreciation and amortization		(14,051	)							(14,051	)		(40,321	)		-			-			(40,321	)
Impairment		-			-		-			-			(88	)		-			-			(88	)
Other operating expenses		(13,008	)		1,363		-			(11,645	)		(44,837	)		3,842			-			(40,995	)
Total operating expenses		(148,673	)		3,634		100			(144,939	)		(443,914	)		8,399			301			(435,214	)

OPERATING INCOME		64,932			-		100			65,032			322,542			-			301			322,843

Income from investments in associates and other companies		143			-		-			143			1,250			-			-			1,250
Income before tax		65,075			-		100			65,175			323,792			-			-			324,093
Income tax expense		(12,276	)		-		(20	)		(12,296	)		(45,384	)		-			(60	)		(45,444	)

NET INCOME FOR THE PERIOD		52,799			-		80			52,879			278,408			-			241			278,649
Attributable to:
Bank shareholders (Equity holders of the Bank)		50,563			-		80			50,643			274,565			-			241			274,806
Non-controlling interest		2,236			-		-			2,236			3,843			-			-			3,843

Financial Statements 2013 / Banco Santander Chile 41

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 03

SIGNIFICANT EVENTS

As of September 30, 2013, the following significant events have occurred and had an impact on the Bank’s operations or the Unaudited Consolidated Interim Financial Statements:

a) The Board

A Shareholders’ Meeting of Banco Santander Chile was held on April 29, 2013, 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, Raimundo Monge Zegers (Alternate Director) and Juan Pedro Santa María Perez (Alternate Director). Also, the CEO Claudio Melandri Hinojosa and CAO Felipe Contreras Fajardo attended the meeting.

On August 20, 2013 the regular Board Meeting Nº446 was held, the Vice-President Mr. Jesus Maria Zabalza Lotina resigned to hismposition. In the same instance, Directos members designated to Mr Oscar von Chrismas as a Vice-President and to Mr. Juan Pedro Santa Maria Perez as a Director.

Use of Profits and Distribution of Dividends

According to the information presented in aforementioned meeting, 2012 net income (designated in the financial statements as “Income attributable to equity holders of the Bank”) amounted to Ch$ 387,967 million. The Board approved the distribution of 60% of such net income which divided by the amount of shares issued corresponds to a $ 1.235 dividend per share, which was payable starting on April 30, 2013. Also, it was approved that the remaining 40% of the profits be destined to increase the Bank’s reserves.

b) Issuance of bonds during 2013

In 2013, the Bank issued senior bonds in the amount of CHF 300,000,000, UF 3,500,000 and USD 250,000,000. The placement detail is included in Note 17.

b.1) 2013 Senior Bonds

Series	Amount		Term	Issue rate	Issuance date	Maturity date
Floating rate bond	CHF	150,000,000	4 years	Libor (3 months) +100 bp	03-28-2013	03-28-2017
Floating rate bond	CHF	150,000,000	6 years	1.750 per annum simple	09-26-2013	09-26-2019
Total	CHF	300,000,000
Mortgage bond	UF	1,500,000	15 years	3.2 per annum simple	08-01-2013	01-07-2018
Bono E9	UF	2,000,000	10 years	3.6 per annum simple	01-01-2013	15-25-2018
Total	UF	3,500,000
USD Bond	USD	250,000,000	5 years	Libor (3 months) + 100bp	06-07-2013	06-07-2018
Total	USD	250,000,000

b.2) 2013 Subordinated bonds

During the first nine months of 2013, the Bank has not issued subordinated bonds.

b.3) Repurchase of Subordinated Bonds

The Bank has conducted the following repurchase of subordinated bonds during 2013:

Date	Amount

05-22-2013	USD	45,556,000
06-26-2013	CLP	29,245,000,000

Financial Statements 2013 / Banco Santander Chile 42

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 03

SIGNIFICANT EVENTS, continued

c) Santander Asset Management S.A. Administradora General de Fondos purchase offer received

On May 17, 2013 the Bank received a formal purchase offer from its parent company Banco Santander S.A. (Spain) for its subsidiary, Santander Assets Management S.A. Administradora General de Fondos, which directly or indirectly would acquire the total outstanding shares issued of the subsidiary This purchase offer includes a 10 year service agreement related to placement services to be rendered by the Bank.

The purchases offer is for an amount of Ch$ 130,000 million. The Bank requested independent appraisals to conclude about the reasonableness of the offered price.

On September 23, 2013 the Audit Committee analyzed the facts related to this transaction and concluded, according to the independent appraisal, that the amount offered is a fair value for the subsidiary, and reported its conclusions to the Board of Directors. During the Board of Directors meeting, held on the aforementioned date, the independent appraisal and Audit Committee report were analyzed and the transaction was approved.

On September 30, 2013 the Bank sent a formal letter to the SBIF asking for approval. As of the issuance date of these Financial Statements, the Bank is still awaiting a response from the SBIF.

d) Option to Bonds in Lieu of Loan – La Polar S.A.

During September 2013, the Bank decided to accept an offer from La Polar S.A. to substitute their outstanding loans for bonds. This offer was outlined through the official letter submitted to SBIF on September 7, 2013. This exchange procedure offered creditors to the option to choose the substitution of all their outstanding loan for F Series Bonds (senior) and G Series Bonds (junior). The book value of the loans the Bank held at the date of the exchange amounted to Ch$ 5,399 million. As of September 30, 2013, the Bank sold all aforementioned bonds.

e) Servicios de Infraestructura de Mercado OTC S.A.

On July 19, 2013, Banco Santander Chile, in conjunction with other local banks, incorporated a new entity called “Servicios de Infraestructura de Mercado OTC S.A.”. The Bank made a contribution amounting to Ch$1,439,574,238, equivalent to 1,111 shares at a value of Ch$ 1,295,746.3890 each, which represents 11.11% of equity share of the entity.

The new entity’s aim is to manage the infrastructure for the financial market for over the counter derivatives, providing registration, confirmation, storage, consolidation, and reconciliation services for derivative instruments transactions, as well as facilitate the execution of related and complementary activities.

Between October 01, 2013 and the date on which these Financial Statements were issued (October 22, 2013), no other significant events have occurred which could significantly affect their interpretation.

Financial Statements 2013 / Banco Santander Chile 43

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 04

BUSINESS SEGMENTS

The Bank manages and measures the performance of its operations by operating segment. The information disclosed in this note is not necessarily comparable to that of other financial institutions, since it is based on management’s segment internal information system.

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.

In 2013 the Bank has performed an exhaustive review of their business segments as part of transformation process, which involves structural changes and redefining management strategies besides a customer’s services restructuring, generating a massive segmentation of the client’s database. For comparative puropose we have restated segments informations as of September 30, 2012.

The Bank has the following operating segments:

Individuals

Santander Banefe

Serves individuals with monthly incomes from Ch$150,000 to Ch$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 brokerage.

Commercial banking

Serves individuals with monthly incomes over Ch$400,000. This segment gives customers a variety of services, including consumer loans, credit cards, auto loans, commercial loans, foreign exchange, mortgage loans, debit cards, checking accounts, savings products, mutual funds, and stock and insurance brokerage.

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 brokerage.

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 brokerage.

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:

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 brokerage.

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 Ch$ 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.

Financial Statements 2013 / Banco Santander Chile 44

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 04

BUSINESS SEGMENTS, continued

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.

Global Banking and Markets

The Global Banking and Markets segment is comprised of:

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.

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 manages the Bank’s trading positions.

Corporate Activities (“Other”)

This segment includes Financial Management, which develops global foreign exchange structural position functions, involving the parent company’s structural interest risk and liquidity risk, mainly through bond 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 Chief Operating Decision Maker (CODM) bases his assessment on the segment's interest income, fee and commission income, and expenses.

Financial Statements 2013 / Banco Santander Chile 45

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 04

BUSINESS SEGMENTS, continued

Below are the tables showing the Bank’s results by business segment, for the periods ending as of September 30, 2013 and 2012, and December 31, 2012 in addition to the corresponding balances of loans and accounts receivable from customers:

	For the three months ended September 30, 2013
	Net interest income			Net fee and commission income			ROF (1)			Provisions for loan losses			Support expenses (2)			Segment’s net contribution
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Segments
Individuals		151,562			34,944			2,860			(57,958	)		(84,970	)		46,438
Santander Banefe		23,795			6,064			1,522			(12,037	)		(11,595	)		7,749
Commercial Banking		127,767			28,880			1,338			(45,921	)		(73,375	)		38,689
Small and mid-sized companies (PYMEs)		66,421			9,176			1,411			(29,419	)		(20,102	)		27,487
Institutional		7,607			720			(31	)		255			(3,931	)		4,620

Companies		41,151			6,495			3,334			(8,640	)		(14,315	)		28,025
Companies		18,202			3,436			2,117			(7,815	)		(7,334	)		8,606
Large Corporations		16,059			2,127			1,103			(656	)		(5,297	)		13,335
Real estate		6,890			932			114			(169	)		(1,684	)		6,084
Commercial Banking		266,741			51,335			7,574			(95,762	)		(123,318	)		106,570

Global Banking and Markets		16,399			4,740			11,971			(1,370	)		(9,596	)		22,144
Corporate		16,794			4,798			472			(1,370	)		(4,720	)		15,974
Treasury		(395	)		(58	)		11,499			-			(4,876	)		6,170
Other		4,465			(1,144	)		8,070			653			(9,967	)		2,077
Total		287,605			54,931			27,615			(96,479	)		(142,881	)		130,791

Other operating income																	4,112
Other operating expenses																	(15,462	)
Income from investments in other companies																	345
Income tax																	(18,417	)
Net income for the period																	101,369

(1) Corresponds to the sum of the net income from financial operations and foreign exchange gain.

(2) Corresponds to the sum of personnel salaries and expenses, administrative expenses, depreciation, amortization, and impairment.

Financial Statements 2013 / Banco Santander Chile 46

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 04

BUSINESS SEGMENTS, continued

	For the three months ended September 30, 2012
	Net interest income			Net fee and commission income		ROF (1)			Provisions for loan losses			Support expenses (2)			Segment’s net contribution
	MCh$			MCh$		MCh$			MCh$			MCh$			MCh$

Segments
Individuals		157,497			42,830		3,438			(88,399	)		(85,387	)		29,979
Santander Banefe		30,394			8,200		1,148			(15,309	)		(11,877	)		12,556
Commercial Banking		127,103			34,630		2,290			(73,090	)		(73,510	)		17,423
Small and mid-sized companies (PYMEs)		59,843			9,051		1,022			(23,975	)		(18,616	)		27,325
Institutional		7,024			645		141			148			(4,078	)		3,880

Companies		36,928			6,218		2,725			(10,133	)		(14,241	)		21,497
Companies		17,656			3,265		1,179			(8,769	)		(7,351	)		5,980
Large Corporations		13,912			2,188		1,491			(1,160	)		(5,221	)		11,210
Real estate		5,360			765		55			(204	)		(1,669	)		4,307
Commercial Banking		261,292			58,744		7,326			(122,359	)		(122,322	)		82,681

Global Banking and Markets		10,377			4,104		14,457			2,584			(8,622	)		22,900
Corporate		12,959			3,697		24			2,584			(4,055	)		15,209
Treasury		(2,582	)		407		14,433			-			(4,567	)		7,691
Other		(32,938	)		555		(2,561	)		316			(2,350	)		(36,978	)
Total		238,731			63,403		19,222			(119,459	)		(133,294	)		68,603

Other operating income																8,074
Other operating expenses																(11,645	)
Income from investments in other companies																143
Income tax																(12,296	)
Net income for the period																52,879

(1) Corresponds to the sum of the net income from financial operations and foreign exchange gain.

(2) Corresponds to the sum of personnel salaries and expenses, administrative expenses, depreciation, amortization, and impairment.

Financial Statements 2013 / Banco Santander Chile 47

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 04

BUSINESS SEGMENTS, continued

Segments information in accordance with the old segmentation basis is as follows:

	For the three months ended September 30, 2012
	Net interest income			Net fee and commission income			ROF (1)			Provisions for loan losses			Support expenses (2)			Segment’s net contribution
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Segments
Individuals		157,237			41,609			1,311			(90,779	)		(88,837	)		20,541
Santander Banefe		30,426			8,200			39			(17,404	)		(17,218	)		4,043
Commercial Banking		126,811			33,409			1,272			(73,375	)		(71,619	)		16,498
Small and mid-sized companies (PYMEs)		59,849			10,064			908			(21,599	)		(18,346	)		30,876
Institutional		7,028			646			141			146			(3,132	)		4,829

Companies		36,978			6,442			2,702			(10,501	)		(12,883	)		22,738
Companies		17,695			3,471			1,173			(8,771	)		(6,511	)		7,057
Large Corporations		13,908			2,200			1,476			(1,512	)		(4,947	)		11,125
Real estate		5,375			771			53			(218	)		(1,425	)		4,556
Commercial Banking		261,092			58,761			5,062			(122,733	)		(123,198	)		78,984

Global Banking and Markets		12,748			3,787			14,480			2,458			(8,528	)		24,945
Corporate		15,557			4,500			81			2,458			(3,796	)		18,800
Treasury		(2,809	)		(713	)		14,399			-			(4,732	)		6,145
Other		(35,109	)		855			(320	)		816			(1,568	)		(35,331	)
Total		238,731			63,403			19,222			(119,459	)		(133,294	)		68,603

Other operating income																	8,074
Other operating expenses																	(11,645	)
Income from investments in other companies																	143
Income tax																	(12,296	)
Net income for the period																	52,879

Financial Statements 2013 / Banco Santander Chile 48

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 04

BUSINESS SEGMENTS, continued

	As of September 30, 2013		For the nine months ended September 30, 2013
	Loans and accounts receivable from customers (1)		Net interest income			Net fee and commission income			ROF (2)		Provisions for loan losses			Support expenses (3)			Segment’s net contribution
	MCh$		MCh$			MCh$			MCh$		MCh$			MCh$			MCh$

Segments
Individuals		10,109,173		456,417			112,266			5,649		(174,630	)		(262,646	)		137,056
Santander Banefe		717,840		76,122			19,627			1,522		(43,933	)		(35,858	)		17,480
Commercial Banking		9,391,333		380,295			92,639			4,127		(130,697	)		(226,788	)		119,576
Small and mid-sized companies (PYMEs)		3,168,804		194,729			28,210			3,522		(74,618	)		(59,554	)		92,289
Institutional		360,276		22,762			1,968			220		33			(11,989	)		12,994

Companies		4,541,825		120,027			20,160			9,952		(22,177	)		(39,998	)		87,964
Companies		1,729,125		55,028			10,668			5,681		(15,125	)		(20,709	)		35,543
Large Corporations		1,861,860		45,713			6,895			4,049		(6,660	)		(14,832	)		35,165
Real estate		950,840		19,286			2,597			222		(392	)		(4,457	)		17,256
Commercial Banking		18,180,078		793,935			162,604			19,343		(271,392	)		(374,187	)		330,303

Global Banking and Markets		2,153,343		42,030			13,670			41,207		(5,297	)		(28,371	)		63,239
Corporate		2,153,343		46,292			12,420			592		(5,297	)		(14,484	)		39,523
Treasury		-		(4,262	)		1,250			40,615		-			(13,887	)		23,716
Other		134,604		(53,212	)		(2,578	)		22,580		697			(15,359	)		(47,872	)

Total		20,468,025		782,753			173,696			83,130		(275,992	)		(417,917	)		345,670

Other operating income																		15,869
Other operating expenses																		(41,135	)
Income from investments in other companies																		1,494
Income tax																		(52,947	)
Net income for the period																		268,951

(1) Corresponds to Loans and accounts receivable from customers plus the interbank loans balances, shown in a gross basis.

(2) Corresponds to the sum of the net income from financial operations and foreign exchange gain.

(3) Corresponds to the sum of personnel salaries and expenses, administrative expenses, depreciation, amortization, and impairment.

Financial Statements 2013 / Banco Santander Chile 49

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 04

BUSINESS SEGMENTS, continued

	As of December 31, 2012		For the nine months ended September 30, 2012
	Loans and accounts receivables from customers (1)		Net interest income			Net fee and commission income			ROF (2)			Provisions for loan losses			Support expenses (3)			Segment’s net contribution
	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Segments
Individuals		9,723,801		467,756			133,506			6,705			(203,592	)		(252,866	)		151,509
Santander Banefe		799,412		93,394			26,071			1,186			(52,113	)		(39,931	)		28,607
Commercial Banking		8,924,389		374,362			107,435			5,519			(151,479	)		(212,935	)		122,902
Small and mid-sized companies (PYMEs)		2,836,695		172,797			28,700			3,893			(56,833	)		(55,867	)		92,690
Institutional		356,465		22,212			1,859			499			(543	)		(11,768	)		12,259

Companies		4,072,191		111,441			19,401			8,531			(17,482	)		(38,105	)		83,786
Companies		1,632,276		53,063			10,216			3,940			(17,020	)		(20,118	)		30,081
Large Corporations		1,668,828		42,598			6,695			4,301			(1,576	)		(13,538	)		38,480
Real estate		771,087		15,780			2,490			290			1,114			(4,449	)		15,225
Commercial Banking		16,989,152		774,206			183,466			19,628			(278,450	)		(358,606	)		340,244

Global Banking and Markets		1,858,116		34,333			13,707			50,321			2,583			(26,213	)		74,731
Corporate		1,851,127		40,907			11,957			409			2,583			(12,934	)		42,922
Treasury		6,989		(6,574	)		1,750			49,912			-			(13,279	)		31,809
Other		119,384		(48,796	)		(1,837	)		(5,784	)		(448	)		(9,400	)		(66,265	)

Total		18,966,652		759,743			195,336			64,165			(276,315	)		(394,219	)		348,710

Other operating income																			15,128
Other operating expenses																			(40,995	)
Income from investments in other companies																			1,250
Income tax																			(45,444	)
Net income for the period																			278,649

(1) Corresponds to Loans and accounts receivable from customers plus the interbank loans balances, shown in a gross basis.

(2) Corresponds to the sum of the net income from financial operations and foreign exchange gain.

(3) Corresponds to the sum of personnel salaries and expenses, administrative expenses, depreciation, amortization, and impairment.

Financial Statements 2013 / Banco Santander Chile 50

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 04

BUSINESS SEGMENTS, continued

Segments information in accordance with the old segmentation basis is as follows:

	As of December 31, 2012		For the nine months ended September 30, 2012
	Loans and accounts receivables from customers (1)		Net interest income			Net fee and commission income			ROF (2)			Provisions for loan losses			Support expenses (3)			Segment’s net contribution
	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Segments
Individuals		9,723,801		466,692			132,244			4,571			(208,729	)		(258,380	)		136,398
Santander Banefe		799,412		93,482			26,071			77			(57,330	)		(51,121	)		11,179
Commercial Banking		8,924,389		373,210			106,173			4,494			(151,399	)		(207,259	)		125,219
Small and mid-sized companies (PYMEs)		2,836,695		172,954			29,757			3,784			(51,700	)		(55,936	)		98,859
Institutional		356,465		22,221			1,859			499			(544	)		(9,456	)		14,579

Companies		4,072,191		111,451			19,620			8,531			(17,851	)		(36,169	)		85,582
Companies		1,632,276		53,187			10,422			3,940			(17,022	)		(18,476	)		32,051
Large Corporations		1,668,828		42,439			6,697			4,301			(1,928	)		(13,616	)		37,893
Real estate		771,087		15,825			2,501			290			1,099			(4,077	)		15,638
Commercial Banking		16,989,152		773,318			183,480			17,385			(278,824	)		(359,941	)		335,418

Global Banking and Markets		1,858,116		40,675			11,237			50,322			2,458			(26,009	)		78,683
Corporate		1,851,127		47,946			13,694			445			2,458			(10,793	)		53,750
Treasury		6,989		(7,271	)		(2,457	)		49,877			-			(15,216	)		24,933
Other		119,384		(54,250	)		619			(3,542	)		51			(8,269	)		(65,391	)

Total		18,966,652		759,743			195,336			64,165			(276,315	)		(394,219	)		348,710

Other operating income																			15,128
Other operating expenses																			(40,995	)
Income from investments in other companies																			1,250
Income tax																			(45,444	)
Net income for the period																			278,649

Financial Statements 2013 / Banco Santander Chile 51

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 05

CASH AND CASH EQUIVALENTS

The detail of the balances included under cash and cash equivalents is as follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Cash and deposits in banks
Cash		537,537		435,687
Deposits in the Central Bank of Chile		897,465		520,031
Deposits in domestic banks		313		4,057
Deposits in foreign banks		183,142		290,639
Subtotals – Cash and bank deposits		1,618,457		1,250,414

Cash in process of collection, net		217,362		235,314

Cash and cash equivalents		1,835,819		1,485,728

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.

Cash in process of collection and in process of being cleared:

Cash items in process of collection and in process of being cleared are transactions in which only settlement remains pending, which will increase assets or decrease liabilities 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 September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Assets
Documents held by other banks (documents to be cleared)		228,022		238,714
Funds receivable		379,611		281,553
Subtotals		607,633		520,267
Liabilities
Funds payable		390,271		284,953
Subtotals		390,271		284,953

Cash in process of collection, net		217,362		235,314

Financial Statements 2013 / Banco Santander Chile 52

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 06

TRADING INVESTMENTS

The detail of the instruments deemed as financial trading investments is as follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Chilean Central Bank and Government securities:
Chilean Central Bank Bonds		60,715		267,008
Chilean Central Bank Notes		126		3,397
Other Chilean Central Bank and Government securities		63,391		48,160
Subtotals		124,232		318,565

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		1,406		-
Other Chilean securities		-		-
Subtotals		1,406		3,531

Foreign financial securities:
Foreign Central Banks and Government securities		-		-
Other foreign financial instruments		294		-
Subtotals		294		-

Investments in mutual funds:
Funds managed by related entities		-		16,191
Funds managed by others		-		-
Subtotals		-		16,191

Total		125,932		338,287

As of September 30, 2013 and December 31, 2012 there are no securities sold with repurchase agreement to clients and financial institutions.

As of September 30, 2012 and December 31, 2012 under the “Chilean Central Bank and Government securities” item there are no securities sold under repurchase agreement to customers and financial institutions.

As of September 30, 2012 and December 31, 2011 there are no securities sold with repurchase agreement to clients and financial institutions included under “Other Chilean Securities” and “Foreign financial securities” items.

Financial Statements 2013 / Banco Santander Chile 53

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 07

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

As of September 30, 2013 and December 31, 2012 the Bank holds the following portfolio of derivative instruments:

	As of September 30, 2013
	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		25,000		-		407,557		432,557		8,854		1,594
Cross currency swaps		-		77,055		786,320		863,375		27,504		1,751
Call currency options		-		-		-		-		-		-
Call interest rate options		-		-		-		-		-		-
Put currency options		-		-		-		-		-		-
Put interest rate options		-		-		-		-		-		-
Interest rate futures		-		-		-		-		-		-
Other derivatives		-		-		-		-		-		-
Subtotals		25,000		77,055		1,193,877		1,295,932		36,358		3,345

Cash flow hedge derivatives
Currency forwards		-		-		-		-		-		-
Interest rate swaps		-		-		-		-		-		-
Cross currency swaps		486,845		1,016,056		543,664		2,046,565		51,686		14,643
Call currency options		-		-		-		-		-		-
Call interest rate options		-		-		-		-		-		-
Put currency options		-		-		-		-		-		-
Put interest rate options		-		-		-		-		-		-
Interest rate futures		-		-		-		-		-		-
Other derivatives
Subtotals		486,845		1,016,056		543,664		2,046,565		51,686		14,643

Trading derivatives
Currency forwards		17,181,199		9,562,773		1,705,142		28,449,114		166,825		167,364
Interest rate swaps		3,787,475		10,658,254		21,371,656		35,817,385		190,860		204,550
Cross currency swaps		1,684,650		3,921,881		12,747,988		18,354,519		829,952		711,964
Call currency options		99,398		53,836		6,056		159,290		1,866		1,050
Call interest rate options		4,403		-		10,009		14,412		-		-
Put currency options		86,556		48,161		2,524		137,241		1,466		1,362
Put interest rate options		-		-		-		-		-		-
Interest rate futures		-		-		-		-		-		-
Other derivatives		133,882		-		-		133,882		456		33
Subtotals		22,977,563		24,244,905		35,843,375		83,065,843		1,191,425		1,086,323

Total		23,489,408		25,338,016		37,580,916		86,408,340		1,279,469		1,104,311

Financial Statements 2013 / Banco Santander Chile 54

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 07

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued

	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 2013 / Banco Santander Chile 55

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 07

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued

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 September 30, 2013 and December 31, 2012 classified by term to maturity:

	As of September 30, 2013
	Within 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$

Hedged item
Senior bonds		-		-		-		25,000		25,000
Yankee Bond		-		-		-		66,116		66,116
Time deposits		-		-		-		-		-
Mortgage loans		-		-		-		3,739		3,739
Time deposits		-		-		-		27,709		27,709
Senior bonds		-		322,289		104,526		543,558		970,373
Subordinated bonds		-		100,940		-		-		100,940
Interbank borrowings		77,055		-		-		-		77,055
Short-term loans: Corfo		25,000		-		-		-		25,000
Totales		102,055		423,229		104,526		666,122		1,295,932
Hedging instrument
Cross currency swap		77,055		271,819		104,526		409,975		863,375
Interest rate swap		-		151,410		-		66,116		217,526
Call money swap		25,000		-		-		190,031		215,031
Total		102,055		423,229		104,526		666,122		1,295,932

	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

Financial Statements 2013 / Banco Santander Chile 56

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 07

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, and modify uncertain cash flows.

Below is the nominal amount of the hedged items as of September 30, 2013 and December 31, 2012 and the period when the cash flows will be generated:

	As of September 30, 2013
	Within 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$

Hedged item
Available for sale investments (deposits)		288,168		34,286		-		28,265		350,719
Mutual mortgage loans		-		111,517		-		-		111,517
Variable rate bonds		308,291		98,265		209,919		-		616,475
Bonds		-		41,224		-		-		41,224
Interbank loans		906,442		20,188		-		-		926,630
Total		1,502,901		305,480		209,919		28,265		2,046,565

Hedging instrument
Cross currency swap		1,502,901		305,480		209,919		28,265		2,046,565
Total		1,502,901		305,480		209,919		28,265		2,046,565

	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
Available for sale investments (deposits)		33,502		11,328		-		-		44,830
Mutual mortgage loans		-		44,649		-		-		44,649
Time deposits and other time liabilities		51,008		-		-		-		51,008
Variable rate bonds		52,780		239,425		93,232		-		385,437
Bonds		57,102		106,942		-		28,265		192,309
Interbank loans		754,673		165,204		-		-		919,877
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

Financial Statements 2013 / Banco Santander Chile 57

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 07

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) Forecast cash flows of hedged items and its corresponding hedging instruments for interest rate risk:

	As of September 30, 2013
	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		(14,342	)		(10,814	)		(3,040	)		-		(28,196	)
Net flows		(14,342	)		(10,814	)		(3,040	)		-		(28,196	)


Hedging instrument
Inflows		14,342			10,814			3,040			-		28,196
Outflows		(15,198	)		(309	)		(7,976	)		-		(23,483	)
Net flows		(856	)		10,505			(4,936	)		-		4,713

	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	)

Financial Statements 2013 / Banco Santander Chile 58

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 07

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued

b.2) Forecast cash flows of hedged items and its corresponding hedging instruments for inflation risk:

	As of September 30, 2013
	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		341,544			122,668			-			-			464,212
Outflows		(60,063	)		(31,246	)		(3,539	)		(3,381	)		(98,229	)
Net flows		281,481			91,422			(3,539	)		(3,381	)		365,983

Hedging instrument
Inflows		60,063			31,246			3,539			3,381			98,229
Outflows		(341,544	)		(122,668	)		-			-			(464,212	)
Net flows		(281,481	)		(91,422	)		3,539			3,381			(365,983	)

	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	)

Financial Statements 2013 / Banco Santander Chile 59

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 07

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued

The results generated by cash flow hedges whose effect was recorded in the Unaudited Consolidated Interim Statement of Changes in Equity for the period as of September 30, 2013 and December 31, 2012, is shown below:

	As of September 30, 2013			As of December 31, 2012
	MCh$			MCh$

Bonds		365			(1,925	)
Interbank loans		2,102			2,943
Time deposits and other time liabilities		-			(551	)
Variable rate bonds		2,142			4,393
Available for sale investments (deposits)		(341	)		321
Mortgage loans		448			134

(Debits) credits		4,716			5,315

Since the variable flows for both the hedged element and the hedging element mirror each other, the hedges are nearly 100% effective. As of September 30, 2013 and December 31, 2012, Ch$ 69 million and Ch$ 23 million loss respectively, were recognized in profit and loss for the ineffective portions.

During the period, the Bank did not enter into any cash flow hedge accounting of forecasted transactions.

Below are the reclassification adjustments of cash flow hedges from other comprehensive income to profit and loss during the period:

	For the three months ended September 30,				For the nine months ended September 30,
	2013 MCh$		2012 MCh$		2013 MCh$			2012 MCh$

Bond hedging derivatives		1		14		(34	)		(777	)
Interbank loans hedging derivatives		390		387		1,159			1,067

Cash flow hedge net income		391		401		1,125			290

Hedges of net investment hedges in foreign operations:

As of September 30, 2013 and 2012, the Bank does not present foreign net investment hedges in its hedge accounting portfolio.

Financial Statements 2013 / Banco Santander Chile 60

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 08

INTERBANK LOANS

The balances in the “Interbank loans” item are as follows:

	As of September 30,			As of December 31,
	2013			2012
	MCh$			MCh$

Domestic interbank loans
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 - Domestic		104			27
Overdrafts in checking accounts		-			-
Non-transferable domestic bank loans		-			-
Other domestic bank loans		-			-
Provisions and impairment for domestic bank loans		-			-

Foreign interbank loans
Interbank loans - Foreign		144,657			90,546
Overdrafts in checking accounts		-			-
Non-transferable foreign bank deposits		-			-
Other foreign bank loans		-			-
Provisions and impairment for foreign bank loans		(71	)		(46	)

Total		144,690			90,527

The amount in each period for provisions and impairment of interbank loans, which are included in the “Provisions for loan losses” item, is shown below:

	As of September 30,								As of December 31,
	2013								2012
	Domestic banks		Foreign banks			Total			Domestic banks			Foreign banks			Total
	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$

As of January 1		-		46			46			1			146			147
Charge-offs		-		-			-			-			-			-
Provisions established		-		88			88			-			299			299
Provisions released		-		(63	)		(63	)		(1	)		(399	)		(400	)

Total		-		71			71			-			46			46

Financial Statements 2013 / Banco Santander Chile 61

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 09

LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS

Loans and accounts receivables from customers

As of September 30, 2013 and December 31, 2012 the composition of the loan portfolio is as follows:

As of September 30, 2013	Assets before allowances								Allowances established
	Normal portfolio		Substandard portfolio		Impaired portfolio		Total		Individual allowances		Group allowances		Total		Total portfolio, net
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Commercial loans
Commercial loans		6,783,388		203,774		561,630		7,548,792		118,496		81,606		200,102		7,348,690
Foreign trade loans		1,735,388		45,908		49,351		1,830,647		34,319		826		35,145		1,795,502
Checking accounts debtors		270,572		3,178		11,544		285,294		3,171		4,971		8,142		277,152
Factoring transactions		341,717		2,290		3,276		347,283		4,003		673		4,676		342,607
Leasing transactions		1,191,314		68,561		43,636		1,303,511		14,273		5,044		19,317		1,284,194
Other loans and accounts receivavle		98,438		716		19,425		118,579		4,964		7,511		12,475		106,104
Subtotals		10,420,817		324,427		688,862		11,434,106		179,226		100,631		279,857		11,154,249

Mortgage loans
Loans with mortgage finance bonds		73,601		-		3,102		76,703		-		493		493		76,210
Mortgage mutual loans		38,286		-		2,073		40,359		-		349		349		40,010
Other mortgage mutual loans		5,034,166		-		314,372		5,348,538		-		42,489		42,489		5,306,049
Leasing transactions		-		-		-		-		-		-		-		-
Subtotals		5,146,053		-		319,547		5,465,600		-		43,331		43,331		5,422,269

Consumer loans
Installment consumer loans		1,766,890		-		325,291		2,092,181		-		221,645		221,645		1,870,536
Credit card balances		1,109,870		-		23,254		1,133,124		-		35,874		35,874		1,097,250
Leasing transactions		3,368		-		91		3,459		-		73		73		3,386
Other consumer loans		189,943		-		4,851		194,794		-		5,636		5,636		189,158
Subtotals		3,070,071		-		353,487		3,423,558		-		263,228		263,228		3,160,330

Total		18,636,941		324,427		1,361,896		20,323,264		179,226		407,190		586,416		19,736,848

Financial Statements 2013 / Banco Santander Chile 62

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 09

LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued

As of December 31, 2012	Assets before allowances								Allowances established
	Normal portfolio		Substandard portfolio		Impaired portfolio		Total		Individual allowances		Group allowances		Total		Total portfolio, net
	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 receivavle		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 2013 / Banco Santander Chile 63

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 09

LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued

Portfolio characteristics

As of September 30, 2013 and December 31, 2012, the portfolio before allowances has the following detail by customer’s economic activity:

	Domestic loans (*)				Foreign Interbank loans (**)				Total loans				Distribution percentage
	As of September 30,		As of December 31,		As of September 30,		As of December 31,		As of September 30,		As of December 31,		As of September 30,		As of December 31,
	2013		2012		2013		2012		2013		2012		2013		2012
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		%		%
Commercial loans
Manufacturing		1,220,699		1,014,777		-		-		1,220,699		1,014,777		5.96		5.35
Mining		489,705		292,217		-		-		489,705		292,217		2.39		1.54
Electricity, gas, and water		322,009		337,269		-		-		322,009		337,269		1.57		1.78
Agriculture and livestock		819,241		770,558		-		-		819,241		770,558		4.00		4.06
Forest		162,217		120,002		-		-		162,217		120,002		0.79		0.63
Fishing		211,641		188,803		-		-		211,641		188,803		1.03		1.00
Transport		718,499		511,407		-		-		718,499		511,407		3.51		2.70
Communications		238,621		179,544		-		-		238,621		179,544		1.19		0.95
Construction		1,308,782		1,130,194		-		-		1,308,782		1,130,194		6.39		5.96
Commerce		2,399,362		2,396,428		144,657		90,546		2,544,019		2,486,974		12.43		13.11
Services		384,211		400,716		-		-		384,211		400,716		1.88		2.11
Other		3,159,223		3,147,133		-		-		3,159,223		3,147,133		15.45		16.59

Subtotals		11,434,210		10,489,048		144,657		90,546		11,578,867		10,579,594		56.57		55.78

Mortgage loans		5,465,600		5,271,581		-		-		5,465,600		5,271,581		26.70		27.79

Consumer loans		3,423,558		3,115,477		-		-		3,423,558		3,115,477		16.73		16.43

Total		20,323,368		18,876,106		144,657		90,546		20,468,025		18,966,652		100.00		100.00

(*)

Includes domestic interbank loans for Ch$ 104 million as of September 30, 2013 (Ch$ 27 million as of December 31, 2012), see Note 8.

(**)

Includes foreign interbank loans for Ch$ 144,657 million as of September 30, 2013 (Ch$ 90,546 million as of December 31, 2012), see Note 8.

Financial Statements 2013 / Banco Santander Chile 64

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 09

LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued

Impaired portfolio (*)

As of September 30, 2013 and December 31, 2012 the composition of the impaired loans portfolio is as follows:

	As of September 30,								As of December 31,
	2013								2012
	Commercial		Mortgage		Consumer		Total		Commercial		Mortgage		Consumer		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Individual impaired portfolio		298,998		-		-		298,998		298,868		-		-		298,868
Non-performing loans		383,024		157,885		77,510		618,419		320,461		159,802		117,504		597,767
Other impaired portfolio		115,696		161,662		275,977		553,335		96,793		69,228		275,481		441,502
Total		797,718		319,547		353,487		1,470,752		716,122		229,030		392,985		1,338,137

(*) Impaired portfolio includes loans classified as substandard in groups B3 and B4, as well as the impaired portfolio.

ii)

The impaired portfolio with or without guarantee as of September 30, 2013 and December 31, 2012 is as follows:

	As of September 30,								As of December 31,
	2013								2012
	Commercial		Mortgage		Consumer		Total		Commercial		Mortgage		Consumer		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Secured debt		389,330		298,147		49,817		737,294		377,169		208,616		51,549		637,334
Unsecured debt		408,388		21,400		303,670		733,458		338,953		20,414		341,436		700,803
Total		797,718		319,547		353,487		1,470,752		716,122		229,030		392,985		1,338,137

iii)

The portfolio of non-performing loans as of September 30, 2013 and December 31, 2012 is as follows:

	As of September 30,								As of December 31,
	2013								2012
	Commercial		Mortgage		Consumer		Total		Commercial		Mortgage		Consumer		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Secured debt		172,555		138,521		7,153		318,229		154,675		143,814		8,293		306,782
Unsecured debt		210,469		19,364		70,357		300,190		165,786		15,988		109,211		290,985
Total		383,024		157,885		77,510		618,419		320,461		159,802		117,504		597,767

Financial Statements 2013 / Banco Santander Chile 65

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 09

LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued

Allowances

The changes in the allowance balances during 2013 and 2012 are as follows:

Changes in allowances balance during 2013	Commercial loans						Mortgage loans			Consumer loans
	Individual			Group			Group			Group			Total
	MCh$			MCh$			MCh$			MCh$			MCh$

Balances as of December 31, 2012		154,935			95,938			35,990			263,259			550,122
Allowances established		53,847			28,179			19,480			127,422			228,928
Allowances released		(15,599	)		(7,190	)		(8,430	)		(32,038	)		(63,257	)
Allowances removed due to loans charge-offs		(13,957	)		(16,296	)		(3,709	)		(95,415	)		(129,377	)
Balances as of September 30, 2013		179,226			100,631			43,331			263,228			586,416

Changes in allowances balance during 2012	Commercial loans						Mortgage loans			Consumer loans
	Individual			Group			Group			Group			Total
	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	)
Allowances removed due to loans charge-offs		(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

In addition to credit risk allowances, there are allowances held for:

Country risk to cover the risk taken when holding or committing 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 Compilation of Rules, issued by the SBIF. The balance of allowances as of September 30, 2013 and December 31, 2012 is Ch$ 528 million and Ch$ 88 million, respectively.

ii)

According to Circular letter N°3489 issued by the SBIF on December 29, 2009 the Bank has established allowances related to the unused balances of lines of credit with free disposal. The balances of allowances as of September 30, 2013 and December 31, 2012 are Ch$ 17,857 million and Ch$ 17,850 million, respectively.

Allowances established on customer and interbank loans

	As of September 30,		As of December 31,
	2013		2012

Allowances established - Customers loans		228,928		330,865
Allowances established - Interbank loans		88		299
Allowances established on customer and interbank loans		229,016		331,164

Financial Statements 2013 / Banco Santander Chile 66

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 09

LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued

Current and overdue portfolio by their impaired and non-impaired status

	As of September 30, 2013
	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 portfolio		10,346,112			4,844,455			2,866,133			18,056,700			286,648			94,575			160,725			541,948			10,632,760			4,939,030			3,026,858			18,598,648
Overdue for 1-29 days		190,804			113,911			139,240			443,955			46,279			25,124			63,228			134,631			237,083			139,035			202,468			578,586
Overdue for 30-89 days		99,472			187,687			64,698			351,857			81,402			50,946			57,346			189,694			180,874			238,633			122,044			541,551
Overdue for 90 days or more		-			-			-			-			383,389			148,902			72,188			604,479			383,389			148,902			72,188			604,479

Total portfolio before allowances		10,636,388			5,146,053			3,070,071			18,852,512			797,718			319,547			353,487			1,470,752			11,434,106			5,465,600			3,423,558			20,323,264

Overdue loans (less than 90 days) presented as portfolio percentage		2.73	%		5.86	%		6.64	%		4.22	%		16.01	%		23.81	%		34.11	%		22.05	%		3.66	%		6.91	%		9.48	%		5.51	%

Overdue loans (90 days or more) presented as portfolio percentage		-			-			-			-			48.06	%		46.60	%		20.42	%		41.10	%		3.35	%		2.72	%		2.11	%		2.97	%

Financial Statements 2013 / Banco Santander Chile 67

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 09

LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS, continued

Current and overdue portfolio by their Impaired and non-impaired status, continued

	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 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
Overdue for 1-29 days		195,667			202,142			132,475			530,284			63,868			18,391			60,055			142,314			259,535			220,533			192,530			672,598
Overdue for 30-89 days		77,001			114,454			78,148			269,603			75,659			34,240			68,316			178,215			152,660			148,694			146,464			447,818
Overdue for 90 days or more		-			-			-			-			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

Overdue 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	%

Overdue loans (90 days or more) presented as portfolio percentage		-			-			-			-			42.33	%		58.03	%		26.50	%		40.37	%		2.89	%		2.52	%		3.34	%		2.86	%

Financial Statements 2013 / Banco Santander Chile 68

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 10

LOAN PURCHASES AND SALES

a) Sales of loans

As of September 30, 2013 the following loan sale transactions have been made:

	As of September 30, 2013
	Book value		Selling price			Other income from financial operations			Allowances for loan losses		Net profit (loss)
	MCh$		MCh$			MCh$			MCh$		MCh$

Charged-off		-		1,579			1,579			-		1,579
Current loans		109		23			(86	)		38		(48	)
Losses from charged-off loans sold in previous years (*)		-		(80	)		(80	)		-		(80	)

(*)

Differences in selling price of written-off portfolios from previous years Ch$ 80 million loss.

(1)

Sale of previously charged-off loans

In 2013, Banco Santander Chile signed assignment agreements of loans previously charged off with “Matic Kart S.A.”. As of September 30, the following portfolio sales have been performed:

	Nominal portfolio sale		Selling price
Date of contract	MCh$		MCh$

03-01-2013 (a)		2,035		81
09-27-2013 (b)		72,915		1,498
Total		74,950		1,579

Sale of loans previously charged-off. In the first quarter, the Bank sold loan portfolio for an amount of Ch$81 million, however, there was a refund of Ch$11 million, therefore the Bank record a net income amount of Ch$70 million related to sale of loans previously charged-off. In the third quarter, the Bank sold a loan portfolio for an amount of Ch$1,839, however, the Bank recorded a provision related to future refund for Ch$250 million, resulting a net income of Ch$1,579, which was recorded as gains arising from sale of loan portfolio previously charged-off

(2)

Sales of current loans

In 2013, Banco Santander Chile signed assignment agreements of loans previously charged off with “Matic Kart S.A.”. As of September 30, the following portfolio sales have been performed:

	Nominal portfolio sale		Selling price
Date of contract	MCh$		MCh$

03-01-2013		109		23
Total		109		23

Sales of current loans totaled Ch$ 109 million; this amount generated a loss from sale of Ch$ 86 million approximately.

Financial Statements 2013 / Banco Santander Chile 69

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 10

LOAN PURCHASES AND SALES, continued

Purchase of portfolios

During 2012, the Bank did not perform any purchase of loan portfolio

ii.

On September 12, 2013 the Bank purchased a loan portfolio to Corpbanca for an amount of Ch$ 24,317 million, which correspond to Sociedad Nacional de Oleoductos S.A. and Colbun for Ch$ 10,741 million and Ch$ 13,576 million, respectively. Given rise a price difference of Ch$ 79 million.

NOTE 11

AVAILABLE FOR SALE INVESTMENTS

As of September 30, 2013 and December 31, 2012 the detail of instruments designated as available for sale instruments is as follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Chilean Central Bank and Government securities
Chilean Central Bank Bonds		483,462		712,278
Chilean Central Bank Notes		1,346		8,270
Other Chilean Central Bank and Government securities		122,251		296,010
Subtotals		607,059		1,016,558
Other Chilean securities
Time deposits in Chilean financial institutions		935,566		756,136
Mortgage finance bonds of Chilean financial institutions		34,599		37,319
Chilean financial institution bonds		-		-
Chilean corporate bonds		-		-
Other Chilean securities		-		321
Subtotals		970,165		793,776
Foreign financial securities:
Foreign Central Banks and Government securities		65,496		-
Other foreign financial securities		25,237		15,824
Subtotals		90,733		15,824
Total		1,667,957		1,826,158

In the “Chilean Central Bank and Government securities” item are included securities sold with repurchase agreement to clients and financial institutions for Ch$ 92,774 million and Ch$156,340 million as of September 30, 2013 and December 31, 2012, respectively.

As of September 30, 2013 there are no “Other Chilean Securities” and as of December 31, 2012 are included instruments sold to customers and financial institutions under repurchase agreements totaling Ch$ 148,277 million.

As of September 30, 2013 available for sale investments included unrealized net losses of Ch$ 581 million, recorded as part of the “Accumulated other comprehensive income” in Equity, distributed between Ch$ 606 million loss attributable to Bank shareholders and Ch$ 25 million profit attributable to non-controlling interest.

As of December 31, 2012 available for sale investments included unrealized net losses of Ch$ 10,017 million, recorded as a part of the “Accumulated other comprehensive income” in Equity, distributed between Ch$ 10,041 million losses attributable to Bank shareholders and Ch$ 24 million profit attributable to non-controlling interest.

Financial Statements 2013 / Banco Santander Chile 70

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 12

INTANGIBLE ASSETS

As of September 30, 2013 and December 31, 2012 the composition of the item is as follows:

							As of September 30, 2013
	Years of		Average remaining		Net opening balance January 1, 2013		Gross balance		Accumulated amortization			Net balance
	useful life		useful life		MCh$		MCh$		MCh$			MCh$

Licenses		3		2		2,621		9,687		(7,529	)		2,158
Software development		3		2		84,726		232,078		(169,087	)		62,991

Total						87,347		241,765		(176,616	)		65,149

							As of December 31, 2012
	Years of		Average remaining		Net opening balance January 1, 2012		Gross balance		Accumulated amortization			Net balance
	useful life		useful life		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

The activity in intangible assets during periods ended September 30, 2013 and December 31, 2012 is as follows:

b.1) Gross balance

	Licenses		Software development			Total
Gross balances	MCh$		MCh$			MCh$

Balances as of January 01, 2013		9,329		224,671			234,000
Acquisitions		358		7,407			7,765
Disposals		-		-			-
Other		-		-			-
Balances as of September 30, 2013		9,687		232,078			241,765

Balances as of January 01, 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

Financial Statements 2013 / Banco Santander Chile 71

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 12

INTANGIBLE ASSETS, continued

b.2) Accumulated amortization

	Licenses			Software development			Total
Accumulated amortization	MCh$			MCh$			MCh$

Balances as of January 01, 2013		(6,708	)		(139,945	)		(146,653	)
Period's amortization		(821	)		(29,142	)		(29,963	)
Other changes		-			-			-
Balances as of September 30, 2013		(7,529	)		(169,087	)		(176,616	)

Balances as of January 01, 2012		(5,589	)		(105,890	)		(111,479	)
Year's amortization		(1,119	)		(34,055	)		(35,174	)
Other changes		-			-			-
Balances as of December 31, 2012		(6,708	)		(139,945	)		(146,653	)

As of September 30, 2013 and December 31, 2012, the Bank does not have any restrictions on intangible assets. Additionally, intangible assets have not been pledged as security for liabilities. Also, the Bank has no debt regarding property, plant, and equipment on those dates.

Financial Statements 2013 / Banco Santander Chile 72

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 13

PROPERTY, PLANT, AND EQUIPMENT

a) As of September 30, 2013 and December 31, 2012 the composition of the item is as follows:

			As of September 30, 2013
	Net opening balance January 1, 2013		Gross balance		Accumulated depreciation			Net balance
	MCh$		MCh$		MCh$			MCh$

Land and buildings		120,425		174,940		(54,441	)		120,499
Equipment		28,625		73,330		(44,441	)		28,889
Ceded under operating leases		3,935		4,477		(542	)		3,935
Other		9,229		30,808		(22,319	)		8,489
Total		162,214		283,555		(121,743	)		161,812

			As of December 31, 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

Financial Statements 2013 / Banco Santander Chile 73

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 13

PROPERTY, PLANT, AND EQUIPMENT, continued

The activity in property, plant, and equipment during 2013 and 2012 is as follows:

b.1) Gross balance

	Land and buildings		Equipment			Ceded under an operating leases		Other			Total
2013	MCh$		MCh$			MCh$		MCh$			MCh$

Balances as of January 01, 2013		167,760		66,170			4,477		28,957			267,364
Additions		7,180		7,567			-		1,899			16,646
Disposals		-		(194	)		-		(48	)		(242	)
Impairment due to damage (i)		-		(213	)		-		-			(213	)
Other		-		-			-		-			-
Balances as of September 30, 2013		174,940		73,330			4,477		30,808			283,555

(i)

Banco Santander Chile recognized on its financial statements as of September 30, 2013 Ch$ 213 million impairment from damages to ATMs. Compensation received from insurance totaled Ch$ 621 million, which is presented in “Other operating income” (Note 32).

	Land and buildings			Equipment			Ceded under an operating leases		Other			Total
2012	MCh$			MCh$			MCh$		MCh$			MCh$

Balances as of January 01, 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	)
Other		-			-			-		-			-
Balances as of December 31, 2012		167,760			66,170			4,477		28,957			267,364

(i)

As stated in Note 32 “Other operating income and expenses”, in 2012 Banco Santander Chile sold 17 branches which, at the time of sale, had a net book value of Ch$ 6,367 million.

(ii)

Banco Santander Chile recognized on its financial statements as of December 31, 2012 a Ch$ 90 million impairment charge from damage to ATMs. Compensation received from insurance totaled Ch$ 262 million, which is presented in the “other operating income” line (Note 32).

Financial Statements 2013 / Banco Santander Chile 74

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 13

PROPERTY, PLANT, AND EQUIPMENT, continued

b.2) Accumulated depreciation

	Land and buildings			Equipment			Ceded under an operating leases			Other			Total
2013	MCh$			MCh$			MCh$			MCh$			MCh$

Balances as of January 01, 2013		(47,335	)		(37,545	)		(542	)		(19,728	)		(105,150	)
Depreciation charges in the period		(7,123	)		(6,931	)		-			(2,609	)		(16,663	)
Sales and disposals in the period		17			35			-			18			70
Other		-			-			-			-			-
Balances as of September 30, 2013		(54,441	)		(44,441	)		(542	)		(22,319	)		(121,743	)

	Land and buildings			Equipment			Ceded under an operating leases			Other			Total
2012	MCh$			MCh$			MCh$			MCh$			MCh$

Balances as of January 01, 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	)

Operational leases – Lessor

As of September 30, 2013 and December 31, 2012, the future minimum lease inflows under non-cancellable operating leases are a follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Due within 1 year		632		626
Due after 1 year but within 2 years		677		1,163
Due after 2 years but within 3 years		308		502
Due after 3 years but within 4 years		269		294
Due after 4 years but within 5 years		261		258
Due after 5 years		1,974		2,148

Total		4,121		4,991

Financial Statements 2013 / Banco Santander Chile 75

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 13

PROPERTY, PLANT, AND EQUIPMENT, continued

Operational leases – Lessee

Certain Bank’s premises and equipment are leased under various operating leases. Future minimum rental payments under non-cancellable leases are as follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Due within 1 year		18,439		16,266
Due after 1 year but within 2 years		16,714		14,845
Due after 2 years but within 3 years		14,557		12,960
Due after 3 years but within 4 years		13,587		11,443
Due after 4 years but within 5 years		12,503		10,465
Due after 5 years		62,079		63,035

Total		137,879		129,014

As of September 30, 2013 and December 31, 2012, the Bank has not entered into financial leases which cannot be unilaterally rescinded.

As of September 30, 2013 and December 31, 2012, 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 2013 / Banco Santander Chile 76

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 14

CURRENT AND DEFERRED TAXES

Current taxes

At the end of each reporting period in 2013 and 2012 the Bank recognizes an income tax provision, which was determined based on the currently applicable tax legislation. This provision is recorded net of recoverable taxes, as shown below:

	As of September 30,			As of December 31,
	2013			2012
	MCh$			MCh$

Summary of current tax liabilities (assets)
Current tax (assets)		(1,343	)		(10,227	)
Current tax liabilities		186			525

Total tax payable (recoverable)		(1,157	)		(9,702	)

(Assets) liabilities current taxes detail (net)
Income tax, tax rate 20%		58,779			83,381
Minus:
Provisional monthly payments (PPM)		(54,251	)		(84,940	)
Credit for training expenses		(963	)		(1,505	)
Land taxes leasing		(2,162	)		(2,939	)
Grant credits		(970	)		(2,534	)
Other		(1,590	)		(1,165	)

Total tax payable (recoverable)		(1,157	)		(9,702	)

Effect on income

The effect of tax expense on income during the periods from January 1 to September 30, 2013 and 2012 is comprised of the following items:

	For the three months ended September 30,					For the nine months ended September 30,
	2013		2012			2013			2012
	MCh$		MCh$			MCh$			MCh$

Income tax expense
Current tax		17,293		50,709			58,779			60,502

Credits (debits) for deferred taxes
Origination and reversal of temporary differences		910		(39,084	)		(6,802	)		(15,172	)
Subtotals		18,203		11,625			51,977			45,330
Tax for rejected expenses (Article No 21)		101		89			277			47
Other		113		582			693			67
Net charges for income tax expense		18,417		12,296			52,947			45,444

Financial Statements 2013 / Banco Santander Chile 77

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 14

CURRENT AND DEFERRED TAXES continued

Effective tax rate reconciliation

The reconciliation between the income tax rate and the effective rate applied in determining tax expenses as of September 30, 2013 and 2012, is as follows:

	As of September 30,
	2013						2012
	Tax rate			Amount			Tax rate			Amount
	%			MCh$			%			MCh$

Income tax using statutory rate		20.00			64,380			20.00			64,819
Permanent differences		(2.89	)		(9,307	)		(2.75	)		(8,912	)
35% single penalty tax		0.09			277			0.01			47
Real estate taxes		(0.67	)		(2,162	)		(2.11	)		(6,824	)
Other		(0.08	)		(241	)		(1.13	)		(3,686	)
Effective rates and expenses for income tax		16.45			52,947			14.02			45,444

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.

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, as of September 30, 2013 and December 31, 2012, which includes of the following items:

	As of September 30,			As of December 31,
	2013			2012
	MCh$			MCh$

Deferred tax assets
Available for sale investments		116			2,004
Cash flow hedges		164			389
Total deferred tax assets affecting accumulated other comprehensive income		280			2,393

Deferred tax liabilities
Available for sale investments		-			(1	)
Cash flow hedges		(1,107	)		(1,452	)
Total deferred tax liabilities affecting accumulated other comprehensive income		(1,107	)		(1,453	)

Net deferred tax balances in equity		(827	)		940

Deferred taxes in equity attributable to Bank shareholders		(822	)		945
Deferred tax in equity attributable to non-controlling interests		(5	)		(5	)

Financial Statements 2013 / Banco Santander Chile 78

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 14

CURRENT AND DEFERRED TAXES continued

Effect of deferred taxes on income

In 2013 and 2012, the Bank has recorded deferred tax assets and liabilities in its financial statements.

	As of September 30,			As of December 31,
	2013			2012
	MCh$			MCh$
Deferred tax assets
Interest and adjustments		6,898			7,854
Non-recurring charge-offs		10,331			12,046
Assets received in lieu of payment		782			1,265
Exchange rate adjustments		444			43
Property, plant and equipment		3,527			3,654
Allowance for loan losses		88,169			96,071
Provision for expenses		18,250			17,903
Derivatives		21			54
Leased assets		45,928			39,168
Subsidiaries tax losses		5,809			5,232
Other		3,365			724
Total deferred tax assets		183,524			184,014

Deferred tax liabilities
Valuation of investments		(13,842	)		(6,555	)
Depreciation		(288	)		(261	)
Other		(273	)		(1,275	)
Total deferred tax liabilities		(14,403	)		(8,091	)

Summary of deferred tax assets and liabilities

The summary of deferred taxes is presented below, with their cumulative effect both on equity and income:

	As of September 30, 30,			As of December 31,
	2013			2012
	MCh$			MCh$

Deferred tax assets
Recognized through other comprehensive income		280			2,393
Recognized through profit or loss		183,524			184,014
Total deferred tax assets		183,804			186,407

Deferred tax liabilities
Recognized through other comprehensive income		(1,107	)		(1,453	)
Recognized through profit or loss		(14,403	)		(8,091	)
Total deferred tax liabilities		(15,510	)		(9,544	)

Financial Statements 2013 / Banco Santander Chile 79

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 15

OTHER ASSETS

Other assets item is as follows:

	As of September 30,			As of December 31,
	2013			2012
	MCh$			MCh$

Assets for leasing (*)		29,500			42,891

Assets received or awarded in lieu of payment (**)
Assets received in lieu of payment		11,486			15,058
Assets awarded at judicial sale		5,738			9,974
Allowances for assets received in lieu of payment or awarded		(1,713	)		(3,091	)
Subtotals		15,511			21,941

Other assets
Guarantee deposits		32,257			256,854
Gold investments		396			464
VAT credit		6,679			10,337
Income tax recoverable		45,499			28,274
Prepaid expenses		38,909			50,870
Assets recovered from leasing for sale		643			3,335
Pension plan assets		1,882			1,989
Accounts and notes receivable		93,621			82,378
Notes receivable through brokerage and simultaneous transactions		65,644			89,314
Other receivable assets		24,609			29,883
Other assets		53,206			36,687
Subtotals		363,345			590,385
Total		408,356			655,217

(*)

Assets available to be granted under 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, 20% of the Bank’s effective equity. These assets currently represent 0.44% as of September 30, 2013 (0.55% as of December 31, 2012) of the Bank’s effective equity. Assets acquired through judicial auction are considered in the above mentioned limit, those are classified as available cor sale assets. The Bank is expected to complete the sale within one year from the date on which the asset are received or acquired. When are not sold within that period of time, the Bank must to write-off those assets.

Additionally, the Bank record a provision for the difference between the initial award value plus any additions and its estimated realizable value (appraisal), when the first is greater,

Assets received in lieu of payment correspond to assets received as payment of overdue debts.

Financial Statements 2013 / Banco Santander Chile 80

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 16

TIME DEPOSITS AND OTHER TIME LIABILITIES:

As of September 30, 2013 and December 31, 2012 the composition of the item is as follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Deposits and other demand liabilities
Checking accounts		4,156,015		4,006,143
Other deposits and demand accounts		495,466		455,315
Other demand liabilities		605,647		508,561

Total		5,257,128		4,970,019

Time deposits and other time liabilities
Time deposits		9,585,418		9,008,902
Time savings account		102,686		101,702
Other time liabilities		2,264		1,609

Total		9,690,368		9,112,213

Financial Statements 2013 / Banco Santander Chile 81

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 17

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES

As of September 30, 2013 and December 31, 2012 the composition of the item is as follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Other financial liabilities
Obligations to public sector		95,402		96,185
Other domestic obligations		101,489		93,653
Foreign obligations		4,448		2,773
Subtotals		201,339		192,611
Issued debt instruments
Mortgage finance bonds		106,882		128,086
Senior bonds		3,955,629		3,717,213
Subordinated bonds		688,559		725,990
Subtotals		4,751,070		4,571,289

Total		4,952,409		4,763,900

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 September 30, 2013
	Current		Non-current		Total
	MCh$		MCh$		MCh$

Mortgage finance bonds		6,951		99,931		106,882
Senior bonds		779,393		3,176,236		3,955,629
Subordinated bonds		14,448		674,111		688,559
Issued debt instruments		800,792		3,950,278		4,751,070

Other financial liabilities		111,567		89,772		201,339

Total		912,359		4,040,050		4,952,409

Financial Statements 2013 / Banco Santander Chile 82

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 17

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

	As of December 31, 2012
	Current		Non-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

Mortgage finance bonds

These bonds are used to finance mortgage loans. 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 6.00% as of September 30, 2013 (5.95% as of December 31, 2012).

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Due within 1 year		6,951		6,863
Due after 1 year but within 2 years		10,083		7,595
Due after 2 years but within 3 years		9,621		14,752
Due after 3 years but within 4 years		9,401		11,026
Due after 4 years but within 5 years		13,743		11,923
Due after 5 years		57,083		75,927
Total mortgage bonds		106,882		128,086

Senior bonds

The following table shows senior bonds by currency:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Santander bonds in UF		2,032,878		2,025,105
Santander bonds in USD		1,340,987		1,269,454
Santander bonds in CHF		264,040		90,249
Santander bonds in Ch$		275,996		293,933
Santander bonds in CNY		41,728		38,472
Total senior bonds		3,955,629		3,717,213

Financial Statements 2013 / Banco Santander Chile 83

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 17

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

Placement of senior bonds:

During 2013 the Bank has placed bonds for UF 10,962,000; CLP 32,500,000,000; CHF 300,000,000 and USD 250,000,000; detailed as follows:

Series	Amount		Term	Issuance rate	Issuance date	Series issued amount		Maturity date
E1	UF	2,742,000	5 years	3.5% per annum simple	02-01-2011	UF	4,000,000	02-01-2016
E2	UF	900,000	7 years	3,0% per annum simple	01-01-2012	UF	4,000,000	07-01-2018
E3	UF	2,100,000	8.5 years	3.5% per annum simple	01-01-2011	UF	4,000,000	07-01-2019
E6	UF	3,720,000	10 years	3.5% per annum simple	04-01-2012	UF	4,000,000	04-01-2022
BH	UF	1,500,000	15 years	3.2% per annum simple	07-31-2013	UF	3,000,000	07-31-2028
Total UF	UF	10,962,000
E4	CLP	7,500,000,000	5 years	6.75% per annum simple	06-01-2012	CLP	7,500,000,000	06-01-2016
E8	CLP	25,000,000,000	10 years	6.6% per annum simple	11-01-2012	CLP	25,000,000,000	11-01-2022
Total CLP	CLP	32,500,000,000
Floating bond	CHF	150,000,000	4 years	Libor (3 months) + 100 bp	03-28-2013	CHF	150,000,000	03-28-2017
Floating bond	CHF	150,000,000	6 years	1.75% per annum simple	09-26-2013	CHF	150,000,000	09-26-2019
Total CHF	CHF	300,000,000
USD Senior bonds	USD	250,000,000	5 years	Libor (3 months) + 100 bp	06-07-2013	USD	250,000,000	06-07-2018
Total USD Senior bonds	USD	250,000,000

Financial Statements 2013 / Banco Santander Chile 84

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 17

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

In 2012, the Bank placed bonds for UF 698,000; CLP 55,600,000,000; USD 1,085,990,000; and CNY 500,000,000 detailed as follows:

Series	Amount		Term		Issuance rate	Issuance date	Series issued 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	04-01-2013	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 semester of 2012, 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.

ii.

Nominal bonds to be placed:

As of September 30, 2013 the balance for each bond series to be placed is as follows:

Series	Amount		Term	Issuance rate	Maturity date
FD	UF	110,000	5 years	3.00% per annum simple	08-01-2015
E2	UF	52,000	7.5 years	3.50% per annum simple	07-01-2018
E3	UF	144,000	8.5 years	3.50% per annum simple	07-01-2019
E9	UF	2,000,000	10 years	3.60 % per annum simple	12-25-2018
BH	UF	1,500,000	15 years	3.20% per annum simple	07-31-2028
Total	UF	3,806,000

Financial Statements 2013 / Banco Santander Chile 85

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 17

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

The maturities of senior bonds are as follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Due within 1 year		779,393		534,852
Due after 1 year but within 2 years		388,412		600,723
Due after 2 years but within 3 years		983,115		643,791
Due after 3 years but within 4 years		299,153		610,817
Due after 4 years but within 5 years		407,097		323,474
Due after 5 years		1,098,459		1,003,556
Total senior bonds		3,955,629		3,717,213

Subordinated bonds

The following table shows senior bonds by currency:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Subordinated bonds denominated in USD		138,154		174,285
Subordinated bonds denominated in UF		550,405		551,705
Total subordinated bonds		688,559		725,990

i. Placement of subordinated bonds

During de current year and during 2012, the Bank has not issued any subordinated bonds.

Financial Statements 2013 / Banco Santander Chile 86

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 17

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

The maturities of subordinated bonds, is as follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Due within 1 year		14,448		16,037
Due after 1 year but within 2 years		145,565		182,844
Due after 2 years but within 3 years		6,478		9,535
Due after 3 years but within 4 years		2,394		5,760
Due after 4 years but within 5 years		-		-
Due after 5 years		519,674		511,814
Total subordinated bonds		688,559		725,990

d) Other financial liabilities

The composition of other financial obligations, by maturity, is detailed below:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Non-current portion:
Due after 1 year but within 2 years		3,579		3,897
Due after 2 years but within 3 years		3,005		2,501
Due after 3 years but within 4 years		3,098		3,090
Due after 4 years but within 5 years		8,100		2,937
Due after 5 years		71,990		78,851
Non-current portion subtotals		89,772		91,276

Current portion:
Amounts due to credit card operators		80,292		70,410
Acceptance of letters of credit		1,698		1,683
Other long-term financial obligations, short-term portion		29,577		29,242
Current portion subtotals		111,567		101,335

Total other financial liabilities		201,339		192,611

Financial Statements 2013 / Banco Santander Chile 87

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 18

MATURITY OF ASSETS AND LIABILITIES

As of September 30, 2013 and December 31, 2012 the detail of maturities of assets and liabilities is as follows:

As of September 30, 2013	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		1,618,457		-		-		-		1,618,457		-		-		-		1,618,457
Cash items in process of collection		607,633		-		-		-		607,633		-		-		-		607,633
Trading investments		-		20		51,366		373		51,759		14,398		59,775		74,173		125,932
Investments under resale agreements		-		34,189		-		-		34,189		-		-		-		34,189
Financial derivative contracts		-		96,687		102,822		294,369		493,878		423,349		362,242		785,591		1,279,469
Interbank loans (*)		8,256		-		136,505		-		144,761		-		-		-		144,761
Loans and accounts receivables from customers (**)		750,838		1,932,882		2,090,883		3,378,299		8,152,902		6,084,134		6,086,228		12,170,362		20,323,264
Available for sale investments		-		197,024		261,094		605,221		1,063,339		287,636		316,982		604,618		1,667,957
Held to maturity investments		-		-		-		-		-		-		-		-		-

Total assets		2,985,184		2,260,802		2,642,670		4,278,262		12,166,918		6,809,517		6,825,227		13,634,744		25,801,662

Liabilities
Deposits and other demand liabilities		5,257,128		-		-		-		5,257,128		-		-		-		5,257,128
Cash items in process of being cleared		390,271		-		-		-		390,271		-		-		-		390,271
Obligations under repurchase agreements		-		258,797		129,963		196		388,956		-		-		-		388,956
Time deposits and other time liabilities		101,424		5,729,600		2,396,620		1,344,727		9,572,371		64,274		53,723		117,997		9,690,368
Financial derivative contracts		-		85,722		69,125		239,296		394,143		419,649		290,519		710,168		1,104,311
Interbank borrowings		12,443		13,746		368,425		1,070,778		1,465,392		184,266		-		184,266		1,649,658
Issued debt instruments		-		3,517		202,764		594,511		800,792		2,275,062		1,675,216		3,950,278		4,751,070
Other financial liabilities		80,292		1,617		27,092		2,566		111,567		17,782		71,990		89,772		201,339

Total liabilities		5,841,558		6,092,999		3,193,989		3,252,074		18,380,620		2,961,033		2,091,448		5,052,481		23,433,101

(*) Interbank loans are presented on a gross basis. The amount of allowance is Ch$ 71 million.

(**) Loans and accounts receivables from customers are presented on a gross basis. Provisions amounts according to type of loan are detailed as follows: Commercial loans Ch$ 279,857 million; Mortgage loans Ch$ 43,331 million; and Consumer loans Ch$ 263,228 million.

Financial Statements 2013 / Banco Santander Chile 88

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 18

MATURITY OF ASSETS AND LIABILITIES, continued

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 More than 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 resale 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 on a gross basis. The amount of allowances is Ch$ 46 million.

(**)

Loans and accounts receivables from customers are presented on a gross basis. Allowances amounts according to type of loan are detailed as follows: Commercial loans Ch$ 250,873 million, Mortgage loans Ch$ 35,990 million and Consumer loans Ch$ 263,259 million.

Financial Statements 2013 / Banco Santander Chile 89

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 19

OTHER LIABILITIES

The other liabilities item is as follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Accounts and notes payable		103,663		89,034
Unearned income		1,400		426
Guarantees received (threshold)		3		179,820
Other payable obligations		62,233		59,824
Other liabilities		12,594		12,170

Total		179,893		341,274

Financial Statements 2013 / Banco Santander Chile 90

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 20

CONTINGENCIES AND COMMITMENTS

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 September 30, 2013, the Banks and its subsidiaries have Provisions for this item for Ch$ 1,411 million (Ch$ 428 million as of December 31, 2012) which are under “Contingency Provisions” in the Unaudited Consolidated Interim Statements of Financial Position. In addition, there are other lawsuits for UF 26,763.64, mainly the litigation between Santander Corredores de Seguros Limitada for leasing assets.

Contingent loans

The following table shows the Bank’s contractual obligations to issue loans:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Letters of credit issued		202,684		199,420
Foreign letters of credit confirmed		104,422		113,878
Guarantees		1,147,254		1,046,114
Personal guarantees		145,783		139,059
Subtotals		1,600,143		1,498,471
Available on demand credit lines		5,328,591		4,933,335
Other irrevocable credit commitments		47,300		63,828
Total		6,976,034		6,495,634

Held securities

The Bank holds securities in the normal course of its business as follows:

	As of September 30,		As of December 31,
	2013		2012
	MCh$		MCh$

Third party operations
Collections		259,440		287,128
Assets from third parties managed by the Bank and its affiliates		942,471		821,080
Subtotals		1,201,911		1,108,208
Custody of securities
Securities held in custody		265,434		227,554
Securities held in custody deposited in other entity		537,547		573,129
Issued securities held in custody		15,305,029		14,931,587
Subtotals		16,108,010		15,732,270
Total		17,309,921		16,840,478

(1) In 2013, portfolios managed by private banking were classified as third party resources managed by the Bank and its subsidiaries so, at the end of September 2013, the balance was Ch$ 942,436 million (Ch$ 821,045 million as of December 31, 2012).

Guarantees

Banco Santander Chile has a comprehensive officer fidelity insurance policy, No. 2823611, with Chilena Consolidada S.A. 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, 2013 to June 30, 2014.

Financial Statements 2013 / Banco Santander Chile 91

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 20

CONTINGENCIES AND COMMITMENTS, continued

Contingent loans and liabilities

To satisfy its clients’ needs, the Bank took on several contingent loans and liabilities, yet these were not recognized, as per accounting standards, in the Unaudited Consolidated Interim Statements of Financial Position; these contain loan risks and they are, therefore, part of the Bank-s global risk.

Santander Asset Management S.A. Administradora General de Fondos

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$6,804 million and time deposits for UF 1,514,551.8566 as a guaranty of Private Investment Funds (P.I.F.), as of September 30, 2013.

Santander Agente de Valores Limitada

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

The Company has given guarantees to the Bolsa de Comercio de Santiago for a current value of Ch$ 18,549 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 Ch$ 3,000 million and an additional guaranteed entered at the Electronical Stock Market for Ch$ 996 million as of September 30, 2013.

iii)

As of September 30, 2013, the following legal situations are in process:

Complaint procedures before the 27th Civil Court of Santiago, labeled “Nahum con Santander Investment S.A. Corredores de Bolsa” predecessor of Santander S.A. Corredores de Bolsa, File No. 16.703-2010 for Ch$ 200 million. Regarding its current state, the ruling granted the appeal and it is currently pending the review of the Court of Appeals. There are no provisions recorded 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 Ch$ 107 million, approximately. We are currently waiting for a conciliation meeting.

Case of “Bilbao vs. Santander Investment S.A. Corredores de Bolsa”, predecessor to Santander S.A. Corredores de Bolsa, followed in Santiago 20^th Civil Court, File No. 15549-2012. As of September 30, the period to show proofs has expired and probatory diligences are pending.

Santander Corredora de Seguros Limitada

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.10023615), covering UF 500 and professional liability policy (No.10023624 ) for its insurance brokers, covering UF 60,000; from the Seguros Generales Consorcio Nacional de Seguros S.A. The policies are valid from April 14, 2013 through April 15, 2014.

iii)

There are lawsuits for UF 26,763.64; which corresponds mainly to goods given in leasing. Our lawyers have estimated a loss of Ch$51.3 million. The estimated loss amount was recorded as provisions.

Financial Statements 2013 / Banco Santander Chile 92

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 21

EQUITY

Capital

As of September 30, 2013 and December 31, 2012 the Bank had 188,446,126,794 authorized subscribed fully paid and no par value shares. All shares have the same rights, and have no preferences of restrictions.

The activity with respect to shares during 2013 and 2012 was as follows:

	SHARES
	As of September 30,		As of December 31,
	2013		2012

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 period end		188,446,126,794		188,446,126,794

As of September 30, 2013 and December 31, 2012 the Bank does not have any of its own shares in treasury, nor do any of the consolidated companies.

As of September 30, 2013 the shareholder composition was as follows:

Corporate Name or Shareholder's Name	Shares		ADRs		Total		% of Equity holding

Teatinos Siglo XXI Inversiones S.A.		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		-		29,462,467,671		29,462,467,671		15.63
Banks and stock brokers on behalf of third parties		11,224,599,135		-		11,224,599,135		5.96
AFP on behalf of third parties		3,851,115,204		-		3,851,115,204		2.04
Other minority holders		3,752,500,821		13,562,442,695		17,314,943,516		9.19
Total						188,446,126,794		100.00

Financial Statements 2013 / Banco Santander Chile 93

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 21

EQUITY, continued

As of December 31, 2012 the shareholder composition was as follows:

Corporate Name or Shareholder's Name	Shares		ADRs		Total		% of Equity holding

Teatinos Siglo XXI Inversiones S.A.		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

American Depository Receipts (ADR) are certificates issued by a U.S. commercial bank to be traded on the U.S. securities markets.

Dividends

The distribution of dividends is detailed in the chart of the Unaudited Consolidated Interim Statements of Changes in Equity.

As of September 30, 2013 and 2012 diluted earnings and basic earnings per share were as follows:

	As of September 30,
	2013		2012
	MCh$		MCh$

a) Basic earnings per share
Total attributable to Bank shareholders		267,944		274,806
Weighted average number of outstanding shares		188,446,126,794		188,446,126,794
Basic earnings per share (in Ch$)		1.422		1.458

b) Diluted earnings per share
Total attributable to Bank shareholders		267,944		274,806
Weighted average number of outstanding shares		188,446,126,794		188,446,126,794
Assumed conversion of convertible debt		-		-
Adjusted number of shares		188,446,126,794		188,446,126,794
Diluted earnings per share (in Ch$)		1.422		1.458

As of September 30, 2013 and 2012 there are no potential shares with dilutive effect.

Financial Statements 2013 / Banco Santander Chile 94

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 21

EQUITY, continued

Other comprehensive income of available for sale investments and cash flow hedges:

	As of September 30,			As of December 31,
	2013			2012
	MCh$			MCh$

Available for sale investments
As of January 1,		(10,017	)		3,043
Gain (losses) on remeasuring available for sale investments, before tax		4,548			(15,131	)
Reclassification adjustments on available for sale investments, before tax		-			-
Realized losses		4,888			2,071
Subtotals		9,436			(13,060	)
Total		(581	)		(10,017	)

Cash flow hedges
As of January 1,		5,315			394
Gains (losses) on remeasuring cash flow hedges, before tax		(1,724	)		4,326
Reclassification adjustments on cash flow hedges, before tax		1,125			595
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		(599	)		4,921
Total		4,716			5,315

Other comprehensive income, before taxes		4,135			(4,702	)

Income tax related to other comprehensive income components
Income tax relating to available for sale investments		116			2,003
Income tax relating to cash flow hedges		(943	)		(1,063	)
Total		(827	)		940

Other comprehensive income, net of tax		3,308			(3,762	)
Attributable to:
Bank shareholders (Equity holders of the Bank)		3,288			(3,781	)
Non-controlling interest		20			19

Financial Statements 2013 / Banco Santander Chile 95

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 22

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.

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	%
i) Other contingent loans		100	%

Financial Statements 2013 / Banco Santander Chile 96

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 22

CAPITAL REQUIREMENTS (BASEL), continued

	Consolidated assets				Risk-weighted assets
	As of September 30,		As of December 31,		As of September 30,		As of December 31
	2013		2012		2013		2012
	MCh$		MCh$		MCh$		MCh$
Balance-sheet assets (net of allowances)
Cash and deposits in banks		1,618,457		1,250,414		-		-
Cash items in process of collection		607,633		520,267		81,955		75,429
Trading investments		125,932		338,287		8,040		21,713
Investments under resale agreements		34,189		6,993		10,993		6,993
Financial derivative contracts (*)		929,069		937,291		756,508		830,133
Interbank loans, net		144,690		90,527		28,938		18,105
Loans and accounts receivables from customers, net		19,736,848		18,325,957		17,542,407		16,205,004
Available for sale investments		1,667,957		1,826,158		238,838		200,285
Investments in associates and other companies		9,800		7,614		9,800		7,614
Intangible assets		65,149		87,347		65,149		87,347
Property, plant, and equipment		161,812		162,214		161,812		162,214
Current taxes		1,343		10,227		134		1,023
Deferred taxes		183,804		186,407		18,380		18,641
Other assets		408,356		655,217		384,967		402,547
Off-balance-sheet assets
Contingent loans		3,448,173		3,201,028		2,026,259		1,903,368
Total		29,143,212		27,605,948		21,334,180		19,940,416

(*)

“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 September 30,		As of December 31,		As of September 30,		As of December 31,
	2013		2012		2013		2012
	MCh$		MCh$		%		%
Basic capital		2,213,114		2,134,778		7.59		7.73
Effective net equity		2,777,305		2,734,434		13.02		13.71

Financial Statements 2013 / Banco Santander Chile 97

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 23

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 and the entities controlled through other considerations is summarized as follows:

								Other comprehensive income
For the nine months ended	Non- controlling		Equity		Income			Available for sale investments		Deferred tax		Total other comprehensive income		Comprehensive income
September 30, 2013	%		MCh$		MCh$			MCh$		MCh$		MCh$		MCh$

Subsidiaries:
Santander Agente de Valores Limitada		0.97		451		67			1		-		1		68
Santander S.A.Sociedad Securitizadora		0.36		2		-			-		-		-		-
Santander S.A.Corredores de Bolsa		49.00		19,482		1,436			-		-		-		1,436
Santander Asset Management S.A. Administradora General de Fondos		0.02		5		3			-		-		-		3
Santander Corredora de Seguros Limitada		0.24		148		2			-		-		-		2
Subtotals				20,088		1,508			1		-		1		1,509

Entities controlled through other considerations:
Bansa Santander S.A.		100.00		2,475		348			-		-		-		348
Santander Gestión de Recaudación y Cobranzas Limitada		100.00		721		(1,785	)		-		-		-		(1,785	)
Multinegocios S.A.		100.00		426		183			-		-		-		183
Servicios Administrativos y Financieros Limitada		100.00		1,612		202			-		-		-		202
Servicios de Cobranzas Fiscalex Limitada		100.00		482		266			-		-		-		266
Multiservicios de Negocios Limitada		100.00		1,584		285			-		-		-		285
Subtotals				7,300		(501	)		-		-		-		(501	)

Total				27,388		1,007			1		-		1		1,008

Financial Statements 2013 / Banco Santander Chile 98

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 23

NON CONTROLLING INTEREST, continued

							Other comprehensive income
For the nine months ended	Non- controlling		Equity		Income		Available for sale investments		Deferred tax			Total other comprehensive income		Comprehensive income
September 30, 2012	%		MCh$		MCh$		MCh$		MCh$			MCh$		MCh$

Subsidiaries:
Santander Agente de Valores Limitada		0.97		631		60		1		-			1		61
Santander S.A. Sociedad Securitizadora		0.36		3		-		-		-			-		-
Santander S.A. Corredores de Bolsa		49.00		25,108		1,880		67		(13	)		54		1,934
Santander Asset Management S.A. Administradora General de Fondos		0.02		10		4		-		-			-		4
Santander Corredora de Seguros Limitada		0.24		147		5		-		-			-		5
Subtotals				25,899		1,949		68		(13	)		55		2,004

Entities controlled through other considerations:
Bansa Santander S.A.		100.00		2,170		1,141		-		-			-		1,141
Santander Gestión de Recaudación y Cobranzas Limitada		100.00		2,435		101		-		-			-		101
Multinegocios S.A.		100.00		185		35		-		-			-		35
Servicios Administrativos y Financieros Limitada		100.00		1,387		303		-		-			-		303
Servicios de Cobranzas Fiscalex Limitada		100.00		191		39		-		-			-		39
Multiservicios de Negocios Limitada		100.00		1,218		275		-		-			-		275
Subtotals				7,586		1,894		-		-			-		1,894

Total				33,485		3,843		68		(13	)		55		3,898

Financial Statements 2013 / Banco Santander Chile 99

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 23

NON CONTROLLING INTERESTS, continued

The non-controlling interest in equity and the subsidiaries and entities controlled through other considerations income as of September 30, 2012 is summarized as follows:

						Other comprehensive income
For the three months ended	Non- controlling		Income			Available for sale investments			Deferred tax		Total other comprehensive income			Comprehensive income
September 30, 2013	%		MCh$			MCh$			MCh$		MCh$			MCh$

Subsidiaries:
Santander Agente de Valores Limitada		0.97		21			(1	)		-		(1	)		20
Santander S.A. Sociedad Securitizadora		0.36		-			-			-		-			-
Santander S.A. Corredores de Bolsa		49.00		373			(5	)		1		(4	)		369
Santander Asset Management S.A. Administradora General de Fondos		0.02		1			-			-		-			1
Santander Corredora de Seguros Limitada		0.24		-			-			-		-			-
Subtotals				395			(6	)		1		(5	)		390

Entities controlled through other considerations:
Bansa Santander S.A.		100.00		(27	)		-			-		-			(27	)
Santander Gestión de Recaudación y Cobranzas Limitada		100.00		(555	)		-			-		-			(555	)
Multinegocios S.A.		100.00		64			-			-		-			64
Servicios Administrativos y Financieros Limitada		100.00		72			-			-		-			72
Servicios de Cobranzas Fiscalex Limitada		100.00		141			-			-		-			141
Multiservicios de Negocios Limitada		100.00		106			-			-		-			106
Subtotals				(199	)		-			-		-			(199	)

Total				196			(6	)		1		(5	)		191

					Other comprehensive income
For the three months ended	Non- controlling		Income		Available for sale investments			Deferred tax		Total other comprehensive income			Comprehensive income
September 30, 2012	%		MCh$		MCh$			MCh$		MCh$			MCh$

Subsidiaries:
Santander Agente de Valores Limitada		0.97		18		2			-		2			20
Santander S.A. Sociedad Securitizadora		0.36		-		-			-		-			-
Santander S.A. Corredores de Bolsa		49.00		502		(29	)		5		(24	)		478
Santander Asset Management S.A. Administradora General de Fondos		0.02		1		-			-		-			1
Santander Corredora de Seguros Limitada		0.24		1		-			-		-			1
Subtotals				522		(27	)		5		(22	)		500

Entities controlled through other considerations:
Bansa Santander S.A.		100.00		1,219		-			-		-			1,219
Santander Gestión de Recaudación y Cobranzas Limitada		100.00		236		-			-		-			236
Multinegocios S.A.		100.00		23		-			-		-			23
Servicios Administrativos y Financieros Limitada		100.00		114		-			-		-			114
Servicios de Cobranzas Fiscalex Limitada		100.00		19		-			-		-			19
Multiservicios de Negocios Limitada		100.00		103		-			-		-			103
Subtotals				1,714		-			-		-			1,714

Total				2,236		(27	)		5		(22	)		2,214

Financial Statements 2013 / Banco Santander Chile 100

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 24

INTEREST INCOME AND EXPENSES

This item refers to interest earned in the period from 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 effects arising from as a consequence of hedge accounting.

For the three month and nine month periods ended September 30, 2013 and 2012, composition of income from interest and inflation adjustments, not including income from hedge accounting, is as follows:

	For the three months ended September 30,
	2013								2012
	Interest		Inflation adjustments		Prepaid fees		Total		Interest		Inflation adjustments			Prepaid fees		Total
Items	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$			MCh$		MCh$

Repurchase agreements		819		-		-		819		1,810		2			-		1,812
Interbank loans		19		-		-		19		4		-			-		4
Commercial loans		183,609		36,143		1,094		220,846		180,738		(5,498	)		913		176,153
Mortgage loans		58,931		54,332		3,517		116,780		57,614		(7,301	)		2,709		53,022
Consumer loans		153,536		1,020		820		155,376		153,963		(99	)		695		154,559
Investment instruments		17,888		3,925		-		21,813		19,292		(207	)		-		19,085
Other interest income		776		270		-		1,046		5,469		(3,046	)		-		2,423

Interest income		415,578		95,690		5,431		516,699		418,890		(16,149	)		4,317		407,058

	For the nine months ended September 30,
	2013									2012
	Interest		Inflation adjustments			Prepaid fees		Total		Interest		Inflation adjustments			Prepaid fees		Total
Items	MCh$		MCh$			MCh$		MCh$		MCh$		MCh$			MCh$		MCh$

Repurchase agreements		1,636		-			-		1,636		3,280		(10	)		-		3,270
Interbank loans		172		-			-		172		746		-			-		746
Commercial loans		543,589		38,776			3,560		585,925		519,880		45,584			3,677		569,141
Mortgage loans		173,495		57,846			9,499		240,840		170,067		67,518			8,493		246,078
Consumer loans		457,941		1,275			2,268		461,484		458,062		1,593			2,144		461,799
Investment instruments		59,386		3,513			-		62,899		70,787		1,084			-		71,871
Other interest income		3,113		(1,407	)		-		1,706		14,527		(1,594	)		-		12,933

Interest income		1,239,332		100,003			15,327		1,354,662		1,237,349		114,175			14,314		1,365,838

Financial Statements 2013 / Banco Santander Chile 101

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 24

INTEREST INCOME AND EXPENSE, continued

As stated in letter i) of Note 01, suspended interests and adjustments corresponding to operations with default equal or greater than 90 days, are recorded in off-balance sheet accounts (out of the Unaudited Consolidated Interim Statement of Financial Position), as long as these are not effectively collected.

As of September 30, 2013 and December 31, 2012 the accumulated suspended interest income is as follows:

	As of September 30,						As of December 31,
	2013						2012
	Interest		inflation adjustments		Total		Interest		inflation adjustments		Total
Items	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Commercial loans		17,790		3,942		21,732		16,907		3,688		20,595
Mortgage loans		4,028		3,959		7,987		3,962		4,882		8,844
Consumer loans		5,646		751		6,397		7,825		917		8,742

Total		27,464		8,652		36,116		28,694		9,487		38,181

For the three month and nine month periods ended September 30, 2013 and 2012, the composition of interest and adjustments expense, excluding expense from hedge accounting, is as follows:

	For the three months ended September 30,
	2013									2012
	Interest			Inflation adjustments			Total			Interest			Inflation adjustments		Total
Items	MCh$			MCh$			MCh$			MCh$			MCh$		MCh$

Demand deposits		(1,387	)		(287	)		(1,674	)		(803	)		39		(764	)
Repurchase agreements		(4,178	)		-			(4,178	)		380			-		380
Time deposits and liabilities		(105,703	)		(12,033	)		(117,736	)		(121,552	)		3,242		(118,310	)
Interbank loans		(4,978	)		(3	)		(4,981	)		(6,425	)		1		(6,424	)
Issued debt instruments		(43,507	)		(27,619	)		(71,126	)		(41,062	)		4,236		(36,826	)
Other financial liabilities		(1,215	)		(338	)		(1,553	)		(1,238	)		58		(1,180	)
Other interest expense		(585	)		(1,820	)		(2,405	)		(600	)		184		(416	)
Interest expense total		(161,553	)		(42,100	)		(203,653	)		(171,300	)		7,760		(163,540	)

	For the nine months ended September 30,
	2013									2012
	Interest			Inflation adjustments			Total			Interest			Inflation adjustments			Total
Items	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Demand deposits		(3,823	)		(298	)		(4,121	)		(2,083	)		(319	)		(2,402	)
Repurchase agreements		(9,169	)		-			(9,169	)		(9,796	)		9			(9,787	)
Time deposits and liabilities		(323,647	)		(13,044	)		(336,691	)		(337,850	)		(26,911	)		(364,761	)
Interbank loans		(16,162	)		(3	)		(16,165	)		(20,512	)		(9	)		(20,521	)
Issued debt instruments		(127,445	)		(28,855	)		(156,300	)		(127,839	)		(34,948	)		(162,787	)
Other financial liabilities		(3,583	)		(356	)		(3,939	)		(3,663	)		(491	)		(4,154	)
Other interest expense		(1,750	)		(1,945	)		(3,695	)		(1,798	)		(2,054	)		(3,852	)
Interest expense total		(485,579	)		(44,501	)		(530,080	)		(503,541	)		(64,723	)		(568,264	)

Financial Statements 2013 / Banco Santander Chile 102

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 24

INTEREST INCOME AND EXPENSE, continued

d) For the three month and nine month periods ended September 30, 2013 and 2012, the composition of net interest income is as follows:

	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Items	MCh$			MCh$			MCh$			MCh$

Interest income		516,699			407,058			1,354,662			1,365,838
Interest expense		(203,653	)		(163,540	)		(530,080	)		(568,264	)

Net interest income		313,046			243,518			824,582			797,574

Loss from hedge accounting (net)		(25,441	)		(4,787	)		(41,829	)		(37,831	)

Total net interest income		287,605			238,731			782,753			759,743

Financial Statements 2013 / Banco Santander Chile 103

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 25

FEES AND COMMISSIONS

This item includes the amount of fees earned and paid in the period, except for those which are an integral part of the financial instrument’s effective interest rate:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
	MCh$		MCh$		MCh$		MCh$

Fee and commission income
Fees and commissions for lines of credits and overdrafts		1,479		2,228		5,198		7,095
Fees and commissions for guarantees and letters of credit		7,649		7,222		22,681		21,066
Fees and commissions for card services		30,235		31,347		94,092		95,349
Fees and commissions for management of accounts		6,920		7,143		20,996		21,731
Fees and commissions for collections and payments		10,839		14,816		33,643		47,077
Fees and commissions for intermediation and management of securities		2,352		2,427		8,138		8,921
Fees and commissions for investments in mutual funds or others		8,446		8,270		25,376		25,367
Insurance brokerage fees		8,005		8,670		23,374		25,945
Office banking		3,853		3,386		11,192		9,921
Other fees earned		4,827		3,321		13,451		8,249
Total		84,605		88,830		258,141		270,721

	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
	MCh$			MCh$			MCh$			MCh$

Fee and commission expense
Compensation for card operation		(22,027	)		(19,606	)		(64,461	)		(57,431	)
Fees and commissions for securities transactions		(1,086	)		(74	)		(3,429	)		(1,283	)
Office banking and other fees		(6,561	)		(5,747	)		(16,555	)		(16,671	)
Total		(29,674	)		(25,427	)		(84,445	)		(75,385	)

Net fees and commissions income		54,931			63,403			173,696			195,336

The fees earned in transactions with letters of credit are recorded in the line item “Interest income” in the Unaudited Consolidated Interim Statement of Income.

Financial Statements 2013 / Banco Santander Chile 104

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 26

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.

For the three month and nine month periods ended September 30, 2013 and 2012, detail of income (loss) from financial operations is as follows:

	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
	MCh$			MCh$			MCh$			MCh$

Net income from financial operations
Trading derivatives		46,730			(30,093	)		18,760			(66,272	)
Trading investments		5,855			9,592			22,628			30,101
Sale of loans and accounts receivables from customers
Current portfolio (Note 10)		(156	)		(12	)		(86	)		317
Charged-off portfolio (Note 10)		1,718			-			1,579			2,607
Available for sale investments		180			1,400			6,613			(498	)
Other income from financial operations		1,486			(48	)		4,485			804
Total		55,813			(19,161	)		53,979			(32,941	)

NOTE 27

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.

For the three month and nine month periods ended September 30, 2013 and 2012, detail of foreign exchange income is as follows:

	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
	MCh$			MCh$			MCh$			MCh$

Currency exchange differences
Net profit (loss) from currency exchange differences		(31,496	)		134,614			(103,449	)		275,152
Hedging derivatives:		3,478			(91,389	)		128,744			(173,046	)
Income from adjustable assets in foreign currency		(232	)		(5,577	)		4,410			(6,635	)
Income from adjustable liabilities in foreign currency		52			735			(554	)		1,635
Total		(28,198	)		38,383			29,151			97,106

Financial Statements 2013 / Banco Santander Chile 105

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 28

PROVISION FOR LOAN LOSSES

a) The 2013 and 2012 activity in provision for loan losses recorded on the Unaudited Consolidated Interim Statement of Income is as follows:

				Loans and accounts receivables from customers
	Interbank loans			Commercial loans						Mortgage loans			Consumer loans			Contingent loans
For the three months ended	individual			Individual			Group			Group			Group			Individual			Group			Total
September 30, 2013	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off loans, net of provisions:		-			(1,969	)		(17,980	)		(6,655	)		(22,118	)		-			-			(48,722	)
Provisions established		(16	)		(19,551	)		(12,140	)		(4,969	)		(37,271	)		(898	)		(928	)		(75,773	)
Total provisions and charge-offs		(16	)		(21,520	)		(30,120	)		(11,624	)		(59,389	)		(898	)		(928	)		(124,495	)
Provisions released		26			4,568			1,276			1,739			4,730			580			911			13,830
Recovery of loans previously charged off		-			973			2,486			1,203			9,524			-			-			14,186
Net charge to income		10			(15,979	)		(26,358	)		(8,682	)		(45,135	)		(318	)		(17	)		(96,479	)

				Loans and accounts receivables from customers
	Interbank loans			Commercial loans						Mortgage loans			Consumer loans			Contingent loans
For the nine months ended	individual			Individual			Group			Group			Group			Individual			Group			Total
September 30, 2013	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off loans, net of provisions		-			(4,421	)		(46,418	)		(16,678	)		(81,957	)		-			-			(149,474	)
Provisions established		(88	)		(53,847	)		(28,179	)		(19,480	)		(127,422	)		(3,323	)		(2,322	)		(234,661	)
Total provisions and charge-offs		(88	)		(58,268	)		(74,597	)		(36,158	)		(209,379	)		(3,323	)		(2,322	)		(384,135	)
Provisions released		63			15,599			7,190			8,430			32,038			1,904			3,825			69,049
Recovery of loans previously charged off		-			2,712			6,719			3,099			26,564			-			-			39,094
Net charge to income		(25	)		(39,957	)		(60,688	)		(24,629	)		(150,777	)		(1,419	)		1,503			(275,992	)

			Loans and accounts receivables from customers
	Interbank loans		Commercial loans						Mortgage loans			Consumer loans			Contingent loans
For the three months ended	individual		Individual			Group			Group			Group			Individual			Group			Total
September 30, 2012	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off loans, net of provisions		-		(1,424	)		(13,484	)		(3,880	)		(25,562	)		-			-			(44,350	)
Provisions established		-		(10,435	)		(13,607	)		(2,219	)		(80,453	)		(239	)		(1,836	)		(108,789	)
Total provisions and charge-offs		-		(11,859	)		(27,091	)		(6,099	)		(106,015	)		(239	)		(1,836	)		(153,139	)
Provisions released		212		2,837			2,300			934			14,938			1,073			1,637			23,931
Recovery of loans previously charged off		-		383			1,792			677			6,897			-			-			9,749
Net charge to income		212		(8,639	)		(22,999	)		(4,488	)		(84,180	)		834			(199	)		(119,459	)

				Loans and accounts receivables from customers
	Interbank loans			Commercial loans						Mortgage loans			Consumer loans			Contingent loans
For the nine months ended	individual			Individual			Group			Group			Group			Individual			Group			Total
September 30, 2012	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off loans, net of provisions		-			(3,967	)		(36,336	)		(8,409	)		(46,265	)		-			-			(94,977	)
Provisions established		(277	)		(38,228	)		(21,656	)		(8,349	)		(195,054	)		(2,583	)		(3,693	)		(269,840	)
Total provisions and charge-offs		(277	)		(42,195	)		(57,992	)		(16,758	)		(241,319	)		(2,583	)		(3,693	)		(364,817	)
Provisions released		357			14,454			14,753			5,548			26,395			1,593			3,162			66,262
Recovery of loans previously charged off		-			1,202			4,797			1,545			14,696			-			-			22,240
Net charge to income		80			(26,539	)		(38,442	)		(9,665	)		(200,228	)		(990	)		(531	)		(276,315	)

Financial Statements 2013 / Banco Santander Chile 106

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 28

PROVISION FOR LOAN LOSSES, continued

Charged-off loans, net of provisions:

	Loans and accounts receivables from customers
	Commercial loans						Mortgage loans			Consumer loans
	Individual			Group			Group			Group			Total
For the nine months ended September 30, 2013	MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off loans		18,378			62,714			20,387			177,372			278,851
Provisions used		(13,957	)		(16,296	)		(3,709	)		(95,415	)		(129,377	)
Charged-off loans, net of provisions		4,421			46,418			16,678			81,957			149,474

	Loans and accounts receivables from customers
	Commercial loans						Mortgage loans			Consumer loans
	Individual			Group			Group			Group			Total
For the nine months ended September 30, 2012	MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off loans		21,467			48,489			10,080			188,632			268,668
Provisions used		(17,500	)		(12,153	)		(1,671	)		(142,367	)		(173,691	)
Charged-off loans, net of provisions		3,967			36,336			8,409			46,265			94,977

	Loans and accounts receivables from customers
	Commercial loans						Mortgage loans			Consumer loans
	Individual			Group			Group			Group			Total
For the three months ended September 30, 2013	MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off loans		9,410			23,682			8,084			47,531			88,707
Provisions used		(7,441	)		(5,702	)		(1,429	)		(25,413	)		(39,985	)
Charged-off loans, net of provisions		1,969			17,980			6,655			22,118			48,722

	Loans and accounts receivables from customers
	Commercial loans						Mortgage loans			Consumer loans
	Individual			Group			Group			Group			Total
For the three months ended September 30, 2012	MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off loans		1,817			21,755			4,630			68,055			96,257
Provisions used		(4,682	)		(3,983	)		(751	)		(42,491	)		(51,907	)
Charged-off loans, net of provisions		(2,865	)		17,772			3,879			25,564			44,350

Financial Statements 2013 / Banco Santander Chile 107

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 29

PERSONNEL SALARIES AND EXPENSES

Composition of personnel salaries and expenses

	For the three months ended September 30,					For the nine months ended September 30,
	2013		2012			2013		2012
	MCh$		MCh$			MCh$		MCh$

Personnel compensation		51,453		49,050			146,313		139,024
Bonuses or gratifications		17,471		15,774			50,410		50,211
Stock-based benefits		145		494			526		1,424
Seniority compensation		1,450		2,180			6,365		6,673
Pension plans		57		(126	)		90		166
Training expenses		608		495			1,753		1,625
Day care and kindergarten		595		610			1,946		1,847
Health funds		893		930			2,615		2,686
Welfare fund		20		124			59		355
Other personnel expenses		5,892		5,930			19,834		19,104
Total		78,584		75,461			229,911		223,115

Financial Statements 2013 / Banco Santander Chile 108

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 30

ADMINISTRATIVE EXPENSES

As of September 30, 2013 and 2012 composition of the item is as follows:

	For the three months ended September 30,					For the nine months ended September 30,
	2013			2012		2013		2012
	MCh$			MCh$		MCh$		MCh$

General administrative expenses		30,277			27,650		88,978		79,565
Maintenance and repair of property, plant and equipment		3,709			3,320		11,555		9,877
Office lease		6,979			5,967		20,499		18,107
Equipment lease		27			157		135		334
Insurance payments		741			704		2,344		1,829
Office supplies		1,107			1,733		3,199		4,898
IT and communication expenses		8,447			6,946		22,052		18,964
Lighting, heating, and other utilities		928			1,144		2,928		3,387
Security and valuables transport services		4,028			2,656		12,702		8,667
Representation and personnel travel expenses		1,353			1,102		3,875		3,627
Judicial and notarial expenses		314			265		1,118		740
Fees for technical reports and audits		1,470			1,803		4,614		5,447
Other general administrative expenses		1,174			1,853		3,957		3,688
Outsourced services		11,003			9,660		32,318		30,201
Data processing		6,474			6,771		19,585		19,950
Products sale		513			429		1,317		1,197
Other		4,016			2,460		11,416		9,054
Board expenses		301			110		845		812
Marketing expenses		4,437			3,718		11,442		12,283
Taxes, payroll taxes, and contributions		2,527			2,644		7,584		7,834
Real estate taxes		298			364		899		1,182
Patents		441			540		1,386		1,485
Other taxes		(2	)		2		2		11
Contributions to SBIF		1,790			1,738		5,297		5,156
Total		48,545			43,782		141,167		130,695

Financial Statements 2013 / Banco Santander Chile 109

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 31

DEPRECIATION, AMORTIZATION AND IMPAIRMENT

The values of depreciation, amortization and impairment charges during the September 2013 and 2012 periods are detailed below:

	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
	MCh$			MCh$			MCh$			MCh$

Depreciation and amortization
Depreciation of property, plant, and equipment		(5,805	)		(5,040	)		(16,663	)		(15,228	)
Amortizations of intangible assets		(9,907	)		(9,011	)		(29,963	)		(25,093	)
Total depreciation and amortization		(15,712	)		(14,051	)		(46,626	)		(40,321	)
Impairment of property, plant, and equipment		(40	)		-			(213	)		(88	)
Total		(15,752	)		(14,051	)		(46,839	)		(40,409	)

As of September 30, 2013 property, plant, and equipment impairment totals Ch$ 213 million, mainly due to damages to ATMs (Ch$ 88 million as of September 30, 2012).

The reconciliation between the book values and balances as of September 30, 2013 and 2012 is as follows:

	Depreciation and amortization
	2013
	Property, plant, and equipment			Intangible assets			Total
	MCh$			MCh$			MCh$

Balances as of January 01, 2013		(105,150	)		(146,653	)		(251,803	)
Depreciation and amortization charges in the period		(16,663	)		(29,963	)		(46,626	)
Sales and disposals in the period		70			-			70
Other		-			-			-
Balances as of September 30, 2013		(121,743	)		(176,616	)		(298,359	)

	Depreciation and amortization
	2012
	Property, plant, and equipment			Intangible assets			Total
	MCh$			MCh$			MCh$

Balances as of January 01, 2012		(84,230	)		(111,479	)		(195,709	)
Depreciation and amortization charges in the period		(15,228	)		(25,093	)		(40,321	)
Sales and disposals in the period		162			-			162
Other		-			-			-
Balances as of September 30, 2012		(99,296	)		(136,572	)		(235,868	)

Financial Statements 2013 / Banco Santander Chile 110

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 32

OTHER OPERATING INCOME AND EXPENSES

Other operating expenses are comprised of the following components:

	For the three months ended September 30,				For the nine months ended September 30,
	2013		2012		2013		2012
	MCh$		MCh$		MCh$		MCh$

Income from assets received in lieu of payment
Income from sale of assets received in lieu of payment		2,143		620		5,518		2,145
Recovery of charge-offs and income from assets received in lieu of payment		1,210		1,149		5,434		5,614
Other income arising from assets received in lieu of payment		323		3		3,152		8
Subtotals		3,676		1,772		14,104		7,767
Income from sale of investments in other companies
Gain on sale of investments in other companies (*)		-		599		-		599
Subtotals		-		599		-		599
Other income
Leases		27		53		87		115
Income from sale of property, plant and equipment (**)		115		5,637		289		6,208
Recovery of provisions for contingencies		77		-		77		-
Compensation from insurance companies due to damages		155		-		621		241
Other		62		13		691		198
Subtotals		436		5,703		1,765		6,762

Total		4,112		8,074		15,869		15,128

(*) During the third quarter of 2012, the Bank sold part of its investment in TransBank S.A., generating a profit of Ch$ 599 million.

(**) In August 2012, Banco Santander Chile sold 2 branches. At the time of the sale, the book value was Ch$ 361million, and selling price was Ch$ 1,045 million, generating a profit of Ch$ 684 million.

In September 2012, the Bank sold 9 branches. At the time of sale, the book value was Ch$ 4,578 million, and selling price was Ch$ 9,485 million, generating a profit of Ch$ 4,907 million.

As of September 30, 2013, the Bank generated profit from vehicles sales totaling Ch$ 191 million. In addition, the Bank sold a sculpture (called "Un testigo para la violencia”), generation a profit amount of Ch$ 76 million.

Financial Statements 2013 / Banco Santander Chile 111

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 32

OTHER OPERATING INCOMES AND EXPENSES, continued

Other operating expenses are detailed as follows:

	For the three months ended September 30,					For the nine months ended September 30,
	2013		2012			2013		2012
	MCh$		MCh$			MCh$		MCh$
Provisions and expenses for assets received in lieu of payment
Charge-offs of assets received in lieu of payment		2,718		1,745			6,751		6,250
Provisions for assets received in lieu of payment		697		620			1,997		3,586
Expenses for maintenance of assets received in lieu of payment		660		542			1,873		1,884
Subtotals		4,075		2,907			10,621		11,720

Credit card memberships		437		273			1,512		273

Customer services		2,306		2,173			7,862		6,475

Other expenses
Operating charge-offs		1,801		2,020			4,964		4,954
Life insurance and general product insurance policies		1,835		1,884			5,400		5,195
Additional tax on expenses paid overseas		678		784			2,118		2,485
Net loss arising from sale of property, plant, and equipment		-		20			37		20
Provisions for contingencies		2,270		(431	)		2,796		3,661
Other		2,060		2,015			5,825		6,212
Subtotals		8,644		6,292			21,140		22,527
Total		15,462		11,645			41,135		40,995

Financial Statements 2013 / Banco Santander Chile 112

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 33

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 2013 / Banco Santander Chile 113

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 33

TRANSACTIONS WITH RELATED PARTIES, continued

Loans to related parties:

Below are loans and receivables, and contingent loans, corresponding to related entities:

	As of September 30,												As of December 31,
	2013												2012
	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		46,945			634			3,653			50,325			46,790			668			2,910			57,723
Mortgage loans		-			-			15,898			-			-			-			15,089			-
Consumer loans		-			-			1,893			-			-			-			1,513			-
Loans and accounts receivables		46,945			634			21,444			50,325			46,790			668			19,512			57,723

Allowance for loan losses		(345	)		(4	)		(44	)		(48	)		(329	)		(3	)		(39	)		(9	)
Net loans		46,600			630			21,400			50,277			46,461			665			19,473			57,714

Guarantees		-			-			-			-			9			-			17,909			1,349

Contingent loans
Personal guarantees		-			-			-			-			-			-			-			-
Letters of credit		26,137			-			-			103			25,697			-			-			-
Guarantees		146,067			-			-			1,418			34,897			-			-			1,443
Contingent loans		172,204			-			-			1,521			60,594			-			-			1,443

Allowance for contingent loans		(27	)		-			-			(1	)		(15	)		-			-			(2	)

Net contingent loans		172,177			-			-			1,520			60,579			-			-			1,441

The activity of loans to related parties during the years 2013 and 2012 is shown below:

	As of September 30,												As of December 31,
	2013												2012
	Companies			Associated			Key						Companies			Associated			Key
	of the group			companies			personnel			Other			of the group			companies			personnel			Other
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Opening balances as of January 1,		107,384			668			19,512			59,166			52,673			663			19,698			63,081
Loans granted		129,875			376			5,792			3,513			78,586			21			6,132			10,927
Loans payments		(18,110	)		(410	)		(3,860	)		(10,833	)		(23,875	)		(16	)		(6,318	)		(14,842	)

Total		219,149			634			21,444			51,846			107,384			668			19,512			59,166

Financial Statements 2013 / Banco Santander Chile 114

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 33

TRANSACTIONS WITH RELATED PARTIES, continued

Assets and liabilities with related parties

	As of September 30,								As of December 31,
	2013								2012
	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		31,081		-		-		-		5,357		-		-		-
Trading investments		-		-		-		-		-		-		-		-
Investments under resale agreements		-		-		-		-		-		-		-		-
Financial derivative contracts		576,594		-		-		-		526,734		-		-		-
Available for sale investments		-		-		-		-		-		-		-		-
Other assets		2,641		-		-		-		4,339		-		-		-

Liabilities
Deposits and other demand liabilities		7,193		14,404		2,412		7,141		65,386		2,563		2,286		17,211
Obligations under repurchase agreements		87,761		-		-		-		92,862		-		-		-
Time deposits and other time liabilities		54,236		409		4,300		98,536		97,449		373		2,842		39,193
Financial derivative contracts		508,481		-		-		-		387,903		-		-		-
Issued debt instruments		92,623		-		-		-		67,368		-		-		-
Other financial liabilities		50,147		-		-		-		103,207		-		-		-
Other liabilities		884		-		-		-		1,241		-		-		-

Financial Statements 2013 / Banco Santander Chile 115

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 33

TRANSACTIONS WITH RELATED PARTIES, continued

Income (expenses) recorded due to transactions with related parties

	For the three months ended September 30,												For the three months ended September 30,
	2013												2012
	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 adjustments		(2,239	)		8			381			(35	)		(738	)		4			30			(608	)
Income and expenses from fees and services		(20	)		19			27			34			(454	)		12			22			44
Net income from financial operations and foreign exchange transactions (*)		20,285			-			(141	)		(1,339	)		(51,011	)		-			(1	)		(1,267	)
Other operating revenues and expenses		183			-			-			-			159			-			-			-
Key personnel compensation and expenses		-			-			(8,731	)		-			-			-			(7,713	)		-
Administrative and other expenses		(7,565	)		(8,299	)		-			-			(5,905	)		(6,886	)		-			-

Total		10,644			(8,272	)		(8,464	)		(1,340	)		(57,949	)		(6,870	)		(7,662	)		(1,831	)

	For the nine months ended September 30,												For the nine months ended September 30,
	2013												2012
	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 adjustments		(6,637	)		42			735			(1,234	)		(10,876	)		39			614			(1,793	)
Income and expenses from fees and services		(43	)		55			91			132			(916	)		35			84			156
Net income from financial operations and foreign exchange transactions (*)		47,281			-			(20	)		51			(221,669	)		-			1			276
Other operating revenues and expenses		536			-			-			-			476			-			-			-
Key personnel compensation and expenses		-			-			(24,323	)		-			-			-			(24,016	)		-
Administrative and other expenses		(21,188	)		(22,895	)		-			-			(17,630	)		(19,789	)		-			-

Total		19,949			(22,798	)		(23,517	)		(1,051	)		(250,615	)		(19,715	)		(23,317	)		(1,361	)

(*) 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 2013 / Banco Santander Chile 116

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 33

TRANSACTIONS WITH RELATED PARTIES, continued

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 Unaudited Consolidated Interim Statement of Income, corresponds to the following categories:

	For the three months ended September 30,					For the nine months ended September 30,
	2013		2012			2013		2012
	MCh$		MCh$			MCh$		MCh$

Personnel compensation		4,257		4,301			12,813		12,592
Board members’ salaries and expenses		271		252			810		766
Bonuses or gratifications		3,760		2,488			9,406		8,288
Compensation in stock		147		426			526		1,229
Training expenses		11		74			40		131
Seniority compensation		5		-			16		12
Health funds		73		72			219		216
Other personnel expenses		159		123			413		300
Pension plans		57		(24	)		90		482
Total		8,740		7,712			24,333		24,016

Composition of key personnel

As of September 30, 2013 and December 31, 2012 the composition of the Bank’s key personnel is as follows:

	No. of executives
Position	As of September 30, 2013		As of December 31, 2012

Director		12		13
Division manager		17		19
Department manager		81		85
Manager		61		63

Total key personnel		171		180

Financial Statements 2013 / Banco Santander Chile 117

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 34

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Fair value is understood as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (ie an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. A fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place in the principal market for the asset or liability or in the most advantageous market for the asset or liability.

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.

Measurement of fair value and hierarchy

IAS 39 provides a hierarchy of fair 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:

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;

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).

Financial Statements 2013 / Banco Santander Chile 118

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 34

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES continued

The following financial instruments are classified under Level 2:

Type of financial instrument	Model used in valuation	Description

ž 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.

ž 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.

ž Constant Maturity Swaps (CMS), FX and Inflation Forward (Fwd) , Cross Currency Swaps (CCS), Interest Rate Swap (IRS)	Present Value Model	IRR are provided by 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.

ž FX Options	Black-Scholes	Formula adjusted by volatility smile Prices (volatility) are provided by BGC Partners, according to the following criterion: With published market prices, a volatility surface is created by interpolation and then these volatilities are used to value options.

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 Level 3:

Type of financial instrument	Model used in valuation	Description

ž Caps/Floors/Swaptions	Black Normal Model for Cap/Floors and Swaptions	There is no observable input of implicit volatility.

ž UF options	Black – Scholes	There is no observable input of implicit volatility.

ž Cross currency swap with window	Hull-White	Hybrid HW Model for rates and Browning motion for FX. There is no observable input of implicit volatility.

ž CCS (special contracts)	Implicit Forward Rate Agreement (FRA)	Start Fwd unsupported by MUREX (platform) due to the UF forward estimate.

ž 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.

ž Bonds (in our case, low liquidity bonds)	Present Value Model	Valuated by using similar instrument prices plus a charge/off rate by liquidity.

Financial Statements 2013 / Banco Santander Chile 119

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 34

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES continued

The following table presents the assets and liabilities that are measured at fair value on a recurrent basis, as of September 30, 2013 and December 31, 2012:

	Fair value measurement
	2013		Level 1		Level 2		Level 3
As of September 30,	MCh$		MCh$		MCh$		MCh$

Assets
Trading investments		125,932		124,232		1,700		-
Available for sale investments		1,667,957		671,742		995,402		813
Derivatives		1,279,469		-		1,228,302		51,167
Total		3,073,358		795,974		2,225,404		51,980

Liabilities
Derivatives		1,104,311		-		1,102,930		1,381
Total		1,104,311		-		1,102,930		1,381

	Fair value measurement
	2012		Level 1		Level 2		Level 3
As of 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

Financial Statements 2013 / Banco Santander Chile 120

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 34

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, 2013 and 2012:

	Assets			Liabilities
	MCh$			MCh$

As of January 1, 2013		63,149			(1,106	)

Total realized and unrealized profits (losses):
Included in statement of income		(10,623	)		(275	)
Included in other comprehensive income		(546	)		-
Purchases, issuances, and allocations (net)		-			-
As of September 30, 2013		51,980			(1,381	)

Profits or losses included in income for 2013 that are attributable to change in unrealized profits (losses) related to assets or liabilities as of September 30, 2013		(11,169	)		(275	)

	Assets			Liabilities
	MCh$			MCh$

As of January 1, 2012		83,483			(1,369	)

Total realized and unrealized profits (losses):
Included in statement of income		(11,160	)		196
Included in other comprehensive income		(410	)		-
Purchases, issuances, and allocations (net)		-			-
As of September 30, 2012		71,913			(1,173	)

Total profits or losses included in income for 2012 that are attributable to change in unrealized profits (losses) related to assets or liabilities as of September 30, 2012		(11,570	)		196

The realized and unrealized profits (losses) included in income for 2013 and 2012, in the assets and liabilities measured at fair value on a recurrent basis through unobservable market data (Level 3) are recorded in the Unaudited Consolidated Interim Statement of Income in the line item.

The potential effect as of September 30, 2013 and 2012 on the valuation of assets and liabilities measured at fair value on a recurrent basis through unobservable significant market data (Level 3), generated by changes in the main assumptions if other reasonably possible assumptions that are less or more favorable were used, were not considered by the Bank to be significant.

Financial Statements 2013 / Banco Santander Chile 121

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 AND FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 35

SUBSEQUENT EVENTS

Between October 01, 2013 and the date on which these Financial Statements were issued (November 22, 2013), no other events have occurred which could significantly affect their interpretation.

CLAUDIO MELANDRI HINOJOSA
Chief Executive Officer

FELIPE CONTRERAS FAJARDO
Chief Accounting Officer

Financial Statements 2013 / Banco Santander Chile 122