Q3 2023 Banco Santander-Chile Earnings Call
[music].
Okay.
Ladies and gentlemen, thank you for standing by and I would like to welcome you to Banco Santander, Chile, <unk> 2023 results conference call on the third of November 2023 at this time all participant lines are in listen only mode. The format of the call today will be a presentation by the management team sold by a question and answer session.
No further Ado I would like to pass the line to Mr. Emiliano Muratore CFO of the company. Please go ahead Sir.
Good morning, everyone welcome to Banco Santander, Chile's third quarter 2023 results webcast and conference call there.
This is emiliano muratore, CFO and I'm joined today by Tim Bequia, Chief of strategic planning and Investor Relations and malaria filled up our economist.
First I want to express my gratitude for your presence on this quarterly meeting today, our primary focus.
Is to discuss our performance during the third quarter, we faced challenges such as lower inflation on elevated interest rates. Despite of all this our steadfast commitment to digital strategies and customer centric product.
I will ask to deliver on customer experience and business growth.
The Central Bank of Chile has continued a rate with actually a strategy that's kind of nordea will elaborate on shortly.
We anticipate this move will have a positive impact on our funding cost and margins in the quarters to come.
We look forward to a more in depth discussion of this development at without into the specifics of our quarterly results.
Thank you Amy.
Likewise I present, a summary of the material that you are in.
The country.
Economic activity remains weak.
Cycle initiated last year after a strong overheating in 2020 one.
Yeah.
Private consumption has had a sharp decline.
All of liquidity and a weak labor market.
On the Labor force participation has been increasing since the pandemic, it's still below it.
Okay.
And then Glenn win rate remains high levels around 9%.
Investment on the other hand has tended to remain flat.
The progress of flats project in mining and energy sectors.
Okay.
Construction and we have taken.
In the first half the economy contracted by 1%.
And we expect it to.
And.
Variation of minus <unk>, 5%.
In 2020 for economic activity will again.
Although at a moderate pace, reaching around 2% driven by less stringent financial conditions.
The declining consumption has allowed the countless external let thomas to improve.
The current account deficit was 9% of GDP in 2022.
We project it will be 3% of GDP at the end of this year.
Inflation has decreased rapidly.
After reaching a maximum 14% in August 2022.
And it's at five 1% last September.
This reduction has been reduced to three main factors first.
The fall in international commodity prices second the appreciation of the exchange rate during the first half of the year.
The construction of domestic demand because restricted financial condition.
When solar inflation will continue to decrease.
Lower base.
Do more demanding comparison basis.
<unk> exhibited by oil prices, because middle east tensions.
The sharp depreciation of the peso since the beginning of July.
Even beyond its fundamentals.
We estimate that inflation with those in 2023 with a variation of close to $4 seven.
7% in U S tariffs.
2024, the process of compare against to the Central Bank, 3% targets we continue.
So the CPI will be around that figure in the last quarter of next year.
The Central Bank, we can good morning, Perry normalization cycle.
100 basis point decrease in July.
By another cut in September and October, bringing the monetary policy rate to 9%.
The board has decided to slow the pace of rate cuts.
Taking into account.
Duration of external financing conditions.
It also.
And that's both the foreign exchange reserve accumulation plan and the unwinding of its forward Ashish.
After this decision the exchange rate appreciation appreciated significantly.
And in our basic scenario it will continue to fall to close this year around 875.
For the next meeting in December the Central Bank will continue with the normalization process.
Although the pace in the rate cuts will be contingent to the evolution of external risks.
If volatility decreases the monetary policy rate will end.
At 825%.
In 2024.
Our expected with TD.
However, if the scenario of higher pointed out.
And there is no change in U S monetary policy.
The difficult part the central bank of Chile to lowered the interest rate beyond five 5% due to our limited interest rate differential.
The country's fiscal accounts have deteriorated.
This year, we will see an increase in public expenses of around two 2%.
In our construction and readiness.
This will lead to a fiscal deficit close to two 5% of GDP and the public debt will be around 40% of GDP.
Well below other economies in the region.
In Montana in more general terms.
Medium term economic growth is crucial.
This will require agreement that allowed implementation of.
Ruth agenda, and reduce current political and economic <unk>.
N D.
Closure of the constitutional process.
Well as the progress of the structure on a refinery that promote savings and productivity are essential in this regard.
Thank you Carmen.
Turning our attention to slide nine let me begin by reiterating our commitment to our four key strategic pillars encapsulated under the umbrella to the first.
First we're seeing a transformative journey towards becoming a diesel back. This evolution is not just about embracing cutting edge technology, it's about maintaining a physical presence who is now working for US. This is basis will serve more than just customer touch points they will be.
That mix helps clustering connectivity.
Equipped with state of the art technology and applications exceptional service.
Work across our desk to redefine the banking experience.
Our second pillar is centered on providing specialized value added service tailored to our corporate middle market and private banking clients. Our commitment is to deliver premium transactional foreign.
Foreign exchange an advisory votes on services.
Our clients received top notch skus.
In our third pillar, we are committed to fostering innovation, coupled and growth we are not content with the status quo. We aim to lead the change and redefining arthroplasty.
We actively seek out new business opportunity.
Earlier in the sustainable transformation of our clients.
Challenging convention, we aim to drive growth with great success.
We place great importance on the role of our organization to realize our objectives. We are dedicated to building on a collaborative and high performance.
We recognize that diversity is our strength and individuals with Florida based on Merit, we are constructing driving community where talent is hard nurture and innovative idea for highly button.
On slide 10.
We have witnessed a remarkable success in our diesel quotes exemplified by our ability to consistently grow our digital client base.
Key initiatives, such as Santander life and more recently Lucas has been instrumental in achieving our Santander life account has now attracted over 1 million clients. It offers a simple current accounts, while also providing the opportunity to access.
Digital products through our depot platforms, including time deposits and mutual funds.
<unk> disclaims meet our risk criteria, they can access credit lines and loans.
Lucas introduced in March of this year has exceeded our expectations. It currently accounts for over 30% of our new account openings third mall.
Notably the Onboarding process for new gas diesel tightened diesel featuring facial recognition technology and no possible requirements. These accounts come with no fixed or variable costs on excess deposits of up to $5 million, Texas.
The success of our diesel study has also allowed us to enhance our branch innovations. Many of you have experienced our Waterford branches diesel branches equipped with co working spaces. Furthermore, we have fortified our branch network with work ethics Pretzel branches a format that focuses on consolidating.
Cash operations into transaction counts, while maintaining a work ethic.
Yes.
This includes a state of the art technology behind the scenes to ensure our customers and Joe.
And our secure banking experience. We are pleased to announce that we have already opened four work ethics referral centers and Daniela Gallois. Some general sense on let's call. It with three more expressive launches planned for the end of the year.
On slide 11, our ongoing commitment to deepen station on simplification is evident in the significant reduction of our branch footprint.
September our total branch network Stumped us 245 to.
254 branches, representing a 17% reduction compared to September 2022.
Notably 31% of our branches no longer have human tellers.
The third of business centers, the prioritized advisory services, new business opportunities and a superior customer experience.
Simultaneously, our Protiviti has seen posted gains with loan and deposit volumes per branch, increasing by 23% year over year, 6% licensed the same metric per employee during the same period.
Moving to slide 12, our commitment to Smes remains robust bolstered by our joint offerings with getting them, our Eagle life accounts for us and he continues to drive a 17% year over year increase in total SME clients with more than 370000 is at least twice in our call.
Moreover, there has been 16% year over year increase in our SMB clients when considering current accounts for businesses as reported by the CMA, we haven't seen a remarkable 33% increase cap rate.
Almost 35% of the market as of July 2023.
GAAP net or acquiring business also made significant contributions and attracting more SME clients.
<unk> continues to focus on compliance of data scientists and Hudson customer experiences through integrated payment solutions. Currently operates more than 148000 point of sales terminals across the country with substantial demand from SME clients.
Recently, given this has expanded into larger clients required hospital solution, thereby offering a more integrated paper system also clientele in the first nine months of the year that will generate fees totaling 32 billion and a net income of almost 6 billion peso.
Slide 13 with a.
Straight to the results of our commitment to productivity through a dedicated and skilled workforce are studying as resulted in our cost structure that is more efficient than our competitors.
Enabling us to serve our clients are the lower costs.
In terms of records are fees generated by customers now cover over 55% of our expenses and a notable increase compared to the industry average of 41%.
Our cost represent only one 1% of our auctions compared to one 6% of this pause in the industry the operating cost to serve while our loan is two 3%.
Our cost of our branches are 3000 216 million peso significantly lowered the interest you have reps.
<unk> thousand 296 6 million.
Brian.
The cost per current accounts is of <unk> 4 million for account less than half.
The industry outlook of 800000 pistols per accounts. These key performance indicators underscore our organization's transformation towards agility collaboration and high performance.
On Slide 14, we are pleased to report the progress in our net promoter score NPS in the last quarter, we achieve a score of 58 points, creating a quick one lead over our closest competitor our NPS scores based on feedback from more than 60000 survey measuring over 30 MTS.
Metrics across various search channels on a daily basis. This embargo feedback allows us to proactively manage and improve our client service.
Our diesel and remote channels continued to receive very high levels of satisfaction from our clients with our ATP and then website achieving scores of about 70 points. Our contact center is also highly regarded are outperforming our peers.
Slide 16 emphasizes our commitment to responsible banking objectives, highlighting progress made in areas such as diversity in question.
We offer a comprehensive range of sustainable approach to climate change.
The initiatives.
2022, we supported numerous customers with sustainable operations in our business and corporate banking divisions. So far in Q3, we have disbursed over $270 million for Green filings. We believe this will be one of the fastest growing areas in the coming years.
On slide 16, we are delighted to announce the issuance of our first ESG bonds under our ESG framework with a particular focus on green mortgage this insurance marks a milestone as it is the first cheetos each one with green mortgage stated after use.
Proceeds.
The private placement amounted to 8000 Japanese yen.
<unk>.
$53 million for a two year term currently we have a growing portfolio of approximately $86 million 80.
<unk> 86000 million pets in greenhouse and bank complies with the highest housing RV certifications by the Ministry of housing and yoga and climbing in Cuba.
We offer preferential interest rates to clients shifting warehouses.
We also contribute to conservation on personalization project in Chile.
This is Ross reinforces our commitment to advancing our responsible banking goldson green finance, reflecting the growing demand for <unk> from both locally and internationally.
This year the prestigious magazine.
Your money lessening of that funding to the pro forma 2003, and we have extended their recognition for best Bang is in the best Bank for corporate social responsibility and diversity and inclusion in Chile.
Furthermore, our advances in sustainability have been recognized our prominent sustainable indexes with solid really breaking sponsor stimulated RCI.
We're also the sole Chilean bank, including both Jones sustainability index for global emerging markets.
Now, let's talk about the trends in our results and balance sheet.
On slide 18, we show our results this year so far.
Our operating segments, but exclude the corporate centers EMEA continued to perform well with a 33% year over year increase in their net contribution with an important expansion in NII and fees with costs and risks under control demonstrating the results of our study across segments.
The accumulated net income as of September 2050 feet totaled 319 billion peso decreasing 55% year over year on Johan the book value of our equity increased eight 5% year over year with <unk> per share and dividend per share growing 15% with.
Those two effects of net income on equity they accumulated return over our I'd check with you reached 10, 4% and the efforts done months of 2023.
The results of corporate and investment banking or CIB has continued to be impressive increasing 68, 5% year over year net.
Net contribution from the Midland market of corporates increased 27% year over year. Both of these commercial segments experienced an important voice in deposit spreads as well as high growth of pizza pressuring.
The focus of this segment continue to be non lending activities driving profitability.
On slide 20, we can see the retail banking results increased 21, 6% year over year, driven by the greater client base.
Activity by our clients.
Our active individual clients increased two 9% year over year on tea bulk volumes increased two 5%, while our active SME clients up from 15, 7% compared to September last year.
The margin increased 28% year over year due to a better mix of funding and loan growth.
<unk> in this segment increased strongly by 21, 1% year over year, driven by card fees due to greater usage and in the increase in the client base as well after fees generated by getting your provisions increased 60% year over year due to normalization of the liquidity of our clients in recent periods.
Operating cost increasing our control monitor by three 7% as the bank continues its ddos transformation generating rating operating efficiencies.
In terms of loan growth in the third quarter, we started to observe some changes in loans reached.
Retail banking loans grew five 4% year over year, and one 6% on the quarter mortgage loans grew 9% year over year on one 5% quarter on quarter higher than the effect of state U S variation in the quarter and demonstrating a slight pickup in origination of new mortgage consumer lending.
We have seven 8% year over year, mainly due to credit card growth, Oxford, Florida soft construction.
Between the end of $19 21, these loans decreased 7% as clients reduced largest purchases such as problem on the whole dose, which fueled credit card loans at the same time, many slide payoffs credit card debt with the liquidity obtained from Gordon will transfer some pension fund withdrawals.
At the end of 2022.
Also liquidity levels return to normal holiday travel resume credit card loans begin to grow again, increasing total balance compared to pre pandemic levels.
In the recent months credit card growth loan growth has started to decrease while in sponge, a strong bond loans have grown reflecting a better indebtedness mix of hard clients.
SME lending showed signs of a recovery growing 3% quarter on quarter after several quarters of contraction.
For GAAP the loans are now, finishing and therefore, we're seeing a reactivation in demand for loans as well as impacts from the expansion of the SME client base through our deal accounts on getting there.
Our middle market segment decreased four 9% year over year and grew almost 3% on the quarter. This quarterly increase is mainly due to the effect of translation gains on the loans in.
Denomination in dollars, mainly for our input on export clients around 20% of our commercial loans.
In U S dollars and Chilean peso depreciated 11, 1% in the quarter.
This also explaining part the seven 6% increase in the CIB in the quarter.
Overall loans have grown three 1% year over year and next year, we expect the re estimation of the common data for the economy to help loan growth, which mid single digits.
Liquidity levels remained strong in the quarter. The bank's total deposits increased one 4% in the quarter on <unk>, 9% year over year. The increase was driven by time deposits that increased five 1% quarter on quarter on.
36% year over year, mainly due to an increase in large corporate deposits after high interest rates remain attractive to clients.
While our demand deposits have decreased 11% on the year.
Our market share in demand deposits have increased from 18, 9% to 19, 7%.
Bonds issued increased 11% year over year and two 5% in the quarter during the year. The bank has issued bonding.
<unk> vessels U S dollars and yes, yes, taking advantage of attractive opportunities.
In the various fixed income markets locally and abroad.
The banks liquidity coverage ratio, LCR, which measures the percentage of liquid assets over net cash outflows.
September 32023 was 192% well above the minimum at the same date, the banks net stable funding ratio, which measures the percentage of illiquid assets final through stable funding sources, which is 104, 4% also well above the current regulatory minimums.
Set for the switch.
On slide 23.
Have a simplified balance sheet to help explain the different sensitivities on our structural balance.
On the asset side, we have around $45 billion in loans of which nearly 60% linked to inflation.
On the liability side the bank does have some deposits and bonds in the US However, we also use derivatives to control our exposure to inflation.
At the beginning of the pandemic.
The bank received a fixed rate credit line from the Central Bank Aspire PFC IC program, which we swapped to viral load rate in 2020.
The FDIC has to be paid in two installments during 2024 on April 1st on July one.
And so the Central Bank has announced a liquidity deposit program, but offer central bank instruments at floating monitory policy rates with maturities on the FDIC payment dates this.
These instruments, which we have recently started producing in October will be classified as held to collect this.
This measure will have the Chilean banks to better manage their liquidity in the lead up to the FDIC payments for us.
Payment of CIC will not have a significant impact on our NII as we will be replacing a variable rate liability with funding of the current market rates in.
In terms of our net interest margin ratio, we should see an improvement as the denominator our interest earning assets decreased as we use our liquid assets or the payments.
Lastly, it is important to mention that our time deposits.
Some $17 billion have a maturity of 30 to 60 60 days in general this means but with the rate decreases the cost of funding decreases quickly.
Now that the rates got started we expect the pass through of our cost of funding to happen quickly.
In terms of margins the bank's NIM in the quarter reached one 6% and 2% year to date.
As shown on this slide this is mainly a phenomenon.
Our non client NIM or the net interest margin from our ALLL activities, including the U S GAAP on our liquidity.
Client NIM, which is the final the NII from our business segments over interest, earning assets has increased deposit and loan spreads have risen.
The bank is well positioned for a falling real rates the sensitivities to inflation and interest rates remain stable to the previous quarters, we had a 100 basis points drop in inflation pressure down our nims by 15 basis points and 100 basis drop in the average interest rates will increase our NIM by 30 <unk>.
<unk> points over a 12 month period.
The variation of the U S. In the third quarter was very low at two 3% compared to one 4% in the second quarter of 2003 or three 4% in the same quarter last year. This pass through of the lower lower permission in the U S where our margin is immediate.
Im pushed our margins downwards.
Meanwhile.
The Central Bank of Chile started to reduce the monetary policy rate first.
First at the end of July by 100 basis points to 10, 25% and then September to nine.
5%. This net 20 mediate improvement on our interest income. However, this was not enough to mitigate the negative impact from the low inflation.
The Central Bank cut the rate a further 50 basis points last week to 9%.
In our time deposit base with prices.
With higher expected U S variation in the fourth quarter, our Nims will shown signs of recovery in the fourth Q and into next year for 2024, we expect our NIM to rebound towards 3% three 5% depending on the evolution of rate cuts and achievement.
Moving on to asset quality on slide 25.
The NPL ratio rose to two 3% slightly above pre pandemic levels, a household liquidity levels return to normal in the economy feels the squeeze from the high interest rates.
The coverage of Npls as of September 2023 reached 158% and there has been no revolt.
The voluntary provisions.
Our impaired loan ratio, which includes the npls and restructured loans reached five 5% still below pre pandemic levels, but showing the same upward trends.
On slide 26.
We showed the asset quality by loan product over the last four years at least.
We now have higher coverage for all of our products, while the NPL ratio has been rising.
Third ratio remains under control for consumer and mortgage loans.
Our commercial loan book is showing more signs of deterioration with npls, reaching 3% on the payout ratio of seven 7%.
You can see on the graph on the right.
Most of this fact is concentrated on the small and medium companies. As a reminder, this SME loans account for around 9% of our total loans.
As we can see on slide 27 overall, our cost of credit has stayed in line with guidance at one 2% year to date in.
In the graph on the bottom left we can see how the cost of risk per segment is now similar to where we were before the pandemic impact in 2019.
On slide 28, we move on to non interest income revenue sources, which continues showing exceptional growth trends income from <unk> and <unk> rose, 24% compared to third quarter in 2022 and decreased eight 2% quarter on quarter after a particularly strong second quarter.
Three strong financial advisory in dealer lines, which was not repeated to the same extent in general our fee income is benefiting from higher usage of products in all segments.
We expect these trends to continue in 2022.
The gradual implementation of the new interchange fee regulation started in October.
And we'll reduce fee growth in the fourth quarter, we estimate a negative impact in fees in 2024 of about 25 billion pesos and 47 billion pesos in 2025, considering this impact for 2024, we expect this line items to grow around 10% with strong growth from.
Clients from products mitigating deemed to things change fee impact.
As shown on slide 29, we also can see a bank efforts to continue increasing productivity and to control costs operating expenses decreased seven 7% year over year on increased four 1% quarter on quarter.
The quarterly decrease in personal expenses is due to the slower rate that we have been closing some branches. We trust reduces severance costs in the in the quarter. Meanwhile, our administrative expenses grew eight 4% mainly due to increased expenses related to technological developments in the quarter.
Minder the bank.
<unk> continues ahead with $260 million of technology investment plans for the year, 23% to 25.
Because of this investments, we're expecting cost to fall in absolute terms in 2023.
Moving on to Slide 30, we observed a positive evolution of our capital ratios at the end of the third quarter of 23, the bank reported a core equity ratio of 10, 7% on our bis ratio of 17, 1%. After the digital distribution of annual dividend amounted to 60% with 22 earnings in May.
The regulator announced that from the next year, the Chilean banks will need to occur.
A counter cyclical buffer of two 5% this together with the conservation buffer of two 5% on the systemic buffer of one 5% means that our minimum fully loaded CET one will be nine zero percent in December 2025.
Below on the right with summarized our requirement levels by our regulators, including the potential buffer requirements and additional capital.
On slide 32, we conclude with some guidance.
Yes. The diesel bundled work are first we will continue to provide us with a greater diebold client base with solid fee growth and impressive with the right operating efficiencies.
For the fourth quarter of this year, we expect a higher inflation compared to Q, reaching around one 6% compared to a <unk>, 3% and we expect an average monetary policy rate of nine 1% compared to 10, 4% in the third quarter with this our margins will start to show signs of.
Recovery, along with robust client nims.
After several quarters of impressive growth, our non NII will finish the year slightly dampen in the us due to the initial impacts of the lower interchange fees on card businesses.
Our cost of risk should remain around one 2% with our npls continue to trend upward slightly.
Cost will remain under control with all of these we should reach an ROE of high teens in the fourth quarter.
For 24, our macro expectations are more positive when our estimated GDP of two 2% with inflation around 3% on a monetary policy rate ending the year 24 up five 5% with this we expect loan growth to reach mid single digit.
Economy reactivate.
As rates continue to fall our margins will continue to recover reaching a range of 3% to three 5% in 2020, depending on the evolution of rate cuts.
Non NII it should be growing around 10% with good customer trends, but impacted by lower interchange fees.
Of risk should be stabilizing during the year around one 2% with asset quality following the economic cycle.
Costs should be growing in line with inflation, while maintaining best in class levels and the effective tax rate will be normalizing.
With all of this our ROE for 2024 will be recovering towards normalized levels on our guidance for long term ROE remains between 17 and 19%.
With this I finish my presentation and now we will gladly answer any answer any questions you may have.
Thank you very much for the presentation, we will now be moving to the Q&A part of the call. If you have any questions. Please press star two on your keypad start to when you keep that for any voice questions. You May also ask a voice or text question. If you are dialed in via the web.
We will now give a moment with software any questions to come in.
Thank you. Our first question comes from Mr. Luis Fernandez from JP Morgan. Please go ahead, Sir your line is open.
Hello, I have a question regarding <unk>.
<unk> been doing a very good job on the season and we all know that ships can be very good for ROE in the long run like you don't allocate a lot of capital for most of those businesses right.
So what is the auto book forces here.
For sure not the 30% base at least this is not what we believe youll have the interchange when you discuss this in the presentation, but both for 2020 for 2025, reducing fees should continue to grow well above loans any any soft guidance you can provide for that line and then I can ask a second question. Thank you.
Hi, Yuri this is christie on so thank you for the question. So yes, we are.
Convinced that.
We can continue.
Delivering fee growth higher than our loan growth and this is mostly because our strategy is structured towards increasing our customer base and focused on transactional products such us.
FX transactions.
Fees. So getting there is also pushing our feast lines toward that goal. So the amount of Smes we are growing on increasing the customer base is also explaining why our fees revenues are.
Our growing consistently.
And I also would add Hello, Judy that.
Our focus on customer satisfaction and NPS.
A lever that as you said in the long run can sustain the the fee growth because at the end you need to be able to provide a service product that the client is willing to pay in and as you saw in our performance. We have been doing right also too in that.
In that front of customer satisfaction.
Perfect. So some like claims growth is reasonable for this line going ahead like mid teens something like that.
It's a good guess for Florida C line growth mid teens, considering the interchange fees pressure luxe tolerance in that well.
We'll try to be in the double digit area and as high as possible.
Super Super clear and like on strong this operating efficiency metrics on the cost side.
Again, you did a very good job.
I know margins, it's harder for you to control but on expenses.
<unk> has been delivering a lot.
What is the outlook here can you continue to grow I think below inflation is officially our speech. If you can provide more color on cost side, what are the big plans for <unk> for 2024 I would appreciate it. Thank you.
Yes, as you said I mean, usually our our cost strategy is to help them grow in a below inflation this year.
Actually like falling significantly below inflation.
And the circumstance that provides some kind of.
No headwind going forward I mean, we still target to be below inflation.
In the guidance.
Cost around inflation bad that our intention is to go in in the low single digit and hopefully below below inflation.
Okay and final one capital are you comfortable with this $10 seven like any any change on the dividend payout policy.
So it's a matter of ROE moving up.
And the LP, helping your true where compounds and capital.
Yes.
<unk>.
We don't see any change in the.
The payout policy.
The $10 seven it's kind of low in the sense that it was pressured by the FX that at Wassa.
It's baked closely big said by the end of September and also some <unk>.
Short term risk weighted asset inflation, both slightly in the quarter and so by the end of the year, we expect to be again above.
11%. So we are comfortable in that area. We think that we can sustain the payout policy we have been having this last few years.
Perfect. Thank you guys.
<unk>.
Okay. Thank you very much. Our next question comes from Mr. Daniel Mora <unk> from <unk> capital. Please go ahead Sir.
Hi, good morning, and thank you for the presentation I have just a couple of questions. The first one is <unk>.
And you mentioned what will be the tapes.
Considering the exploration of the FSC the liquidity line provided by the Central Bank and the deeper and effects on the accounts on the balance sheet and the financial results. These to resolve the negative performance of derivative studies impacting and AI.
In 2023.
Or can we expect.
Quarter impacts after the exploration of the perfect. Thank you so much that will be my first question.
Okay. So hello, Daniela. Thank you for your question so regarding the effects of the majority of the CIC in our balance sheet.
And results.
Roughly speaking would have about like <unk>.
Six trillion vessels in.
Sure.
In that facility.
And also roughly speaking half of that is maturing by the end of March on the other half by the end of June so.
You can expect that at least like.
Three quarters of the total amount will imply a reduction in the balance sheet I mean, basically we will be we already have.
More than half of that money illiquidity light weight into to pay them.
To pay the majority of that liability, we expect to to increase that amount of liquidity absolutely at least two to three quarter of the of the total amount by them by the time that its maturity and so you'll have asset liability falling in roughly speaking around 10% of the.
The current.
Our balance sheet. So in terms of ratios that would imply a reduction in the denominator of four names. So that's in the math will.
Take down.
Our NIM in terms of NII considering that.
Most of that is already flow data.
Right and Thats the same market rates.
That the liquidity on the asset.
Our yielding so in terms of NII for us it will be non material. The majority of the of the CIC. So you.
Expected jump in NII because of the majority.
You do can.
Specced.
An improvement in jump in NII because of rates going down because at the end.
The lower the rate is the better for us because of that liability on the positioning of the of the balance sheet. So that is like like roughly speaking in our case.
The impact of the of that maturity.
And non non relevant impact in NII in either positive or negative and.
A reduction of the.
The balance sheet as a whole and impacting.
The different ratios, where total assets or total liabilities are used.
Perfect. Thank you so much but just to clarify that.
Currently negative position that you have on derivatives that is impacting the net interest margin.
To decrease with the exploration of the efficacy right because you have to show up to variable rates.
Actually it will decrease and is decreasing as interest rates go down so.
That's the main factor for that negative two to.
To phase out or two disappeared I mean like interest rates going down rather than the maturity itself.
Perfect. Thank you so much.
And my second question is regarding the Npls.
The commercial segment, even so would you explain that Smes that just represent 9% of the total loan portfolio.
He's pushing these indicators up do you feel comfortable with the current performance. This is the normal levels of the Smes.
Considering the strength of our performance of the portfolio or should we expect an improvement in these figures.
Given the improvement of the economy in the next year, what will be the normal level of the NPS score for the commercial segment.
So.
Hi, Anthony this is Joe again.
So regarding your question, we are seeing the impact in our commercial portfolio, mostly in the upper part of the SME market and the lower part of the middle market.
Like a smaller part of the large corporates.
The upper part of the Smbs.
Specifically, we are seeing impacts in <unk>.
Three roughly three sectors, so our growth, especially in the central part of Chile due to the heavy rains.
The associated with their Nino effect between July and September.
Some impact.
<unk> hotels restaurants and casinos.
No.
Software for the last four years.
We are also seeing pain points seen the construction.
Real estate developer market. So those are the three segments that are the main point of concerns the rest of the segments on the rest of the industries are looking quite normal I would say considering.
The current state of the economy and the cycle. So we expect some recovery in.
Particularly in the second half of 2024.
Specialty program office weighted with the weather.
Our growth portfolio.
But.
Subject to further news on two we are going to be very closely the situation in those specific industries.
Perfect. Thank you so much for them to breakeven.
Okay. Thank you very much will not be moving to.
From HSBC Global Research. Please go ahead ma'am your line is open.
Hi, Thank you.
Taking my question just a quick one.
On your loan growth.
There's still be mid single digits for next.
But where do you think that the loan growth is going to come from if you can give us some color regarding the segmental growth. Thank you.
Very helpful and my second question is on the pharmacy data what is the risk in your view.
It's actually Matt Keating pylon half of next year being higher than that.
Is that the risk and bill what would be the impact of that on.
On your bottom line.
Thank you so much.
Hello Nathan.
Thank you for your question.
Regarding loan growth.
Try to give some.
Color on the breakdown of that mid single digit loan growth.
We think that.
Mortgages considering the.
Inflation.
It will be.
Going down to the 3% area and also.
<unk> <unk> less than the rest of the world long term rates.
Gone up significantly this last few months weeks so.
Spec.
At this level of rates demand for for mortgages to to go down a bit. So I would say the mortgages should be let's say kind of below the average of loan growth and then on the.
The consumer side, the kind of the opposite I mean like.
Because we still have.
The liquidity from the pandemic like go in a way so people. It has like a higher borrowing needs. If you want and also rates are going down so in terms of.
Consumer lending is much more linked to short term rates rather than long term rates and we think that also should create.
And negative let's say.
Excuse me a positive.
Elasticity of people like that.
Demand in more loans have shown consumer to be on the upper part and also in SME I mean after.
The phase out of the four rapid brought in that age.
A negative drag on that portfolio.
So in going down after the pandemic you don't have.
The SME portfolio go in.
Above the average then when you go into more.
Middle to large corporates.
That will depend a lot on how investment is progressing and the economy as a whole I mean, we don't expect investment to grow too much and so they are you as you might be more on the average of that mid single digit growth for for next year.
I'm sorry.
Can you hear me.
Yes.
Yes that was super clear. Thank you so much okay and so what are you going to your second question regarding the.
The risk or the path for monetary policy rates.
So yes, we are definitely having a <unk>.
Terminal on an average rate for the our base case scenario gave us an average rate of around six five for the for 2020 forward so that the higher the.
That average the award for US on the opposite if it is.
Lower that's why this.
Guidance of names for 2024 is such a.
The large I mean, we've talked about three to three five base.
Basically with our base case scenario, we should be like in the middle of that range for the industry for the year and then you have that.
Sensitivity, which had some pointed at a 100 basis points higher should impact like 30 basis points that that name I mean so.
Yes, yes.
And rough numbers on average and average monetary policy rates of seven should take us closer to three four.
For the for the year.
And on average closer to six should take us closer to the three 5% NIM for the year.
Okay.
And I believe in the 17 to 19 for next year.
Actually.
That's the long term targets with next year would be moving towards that that range.
To be in that range or not will depend again on the <unk>.
On the back of the monetary policy rate.
Okay.
Great. Thank you very helpful.
Thank you very much. Our next question comes from Tom <unk> from Bank of America. Please go ahead, Sir your line is open.
Thank you hi, good morning, Emiliano Christian Thanks for taking my call.
My question is just a follow up on the ROE expectations Hello.
No.
Yes.
Can you hear me now.
Yes, you bet.
Okay.
We lost two.
Okay, sorry, yes, I can hear you okay.
So my question is a follow up on the ROE.
You were saying that you are expecting these medium ROE guidance of 17, 19% in the medium term.
But would it be reasonable to start getting to the low end of.
These medium term guidance range in 2024.
So for example, if any.
You were mentioning the names now if you go to a level of.
7% in the interest rates, our nims at 3%.
At that level would it be reasonable to start getting into the 17% or are we all you will need to get more into the interest rate of 6% and our NIM of three 5% to start getting into the IRR of 17% next year.
So iron FY 16, so we're expecting.
Somehow lower first half of the year, especially the first quarter it should not be.
As positive as the second half of the of the year. So.
In order to get to the levels of ROE that you are mentioning.
We are probably going to be requiring to being in the in the 3.5 ish.
Nims.
Sure.
And that probably could happen in some of the final quarters of the year, but not for the complete year.
Perfect and then just a second question.
Can you remind us if you have.
Steel than an existing provision charges.
Where do you see your reserve coverage ratio for the next years.
Yes.
Regarding.
The voluntary provisions, yes, we still have like 295 billion pesos.
Volatile provisions the total balance.
Remember that part of that will be used to cover the new regulation regard then.
Provision for consumer loans, and the new standard model.
Regulator is.
His promotion I mean, there were news.
Regarding that.
At least like the second proposal is the second draft focus foundation, which is let's.
Let's say softer than the first one.
Basically we received the comment from the industry on the market and so.
The first draft, we were expecting an impact between like 100 or 150 billion pesos in provisioning now we see that like much.
Much lower I mean like around like $90 million will be the impact.
Yes, I mean, we still have this almost 300 billion of voluntary provisions a third of that will.
It will be used by 2025 to cover this.
This new provisionally model from the for the consumer portfolio.
And the rest is they are basically to cope with.
With that let's say potential further deterioration of our cost of risk or our npls.
One point of clarification is that our coverage will not be impacted by this.
New consumption.
<unk> also know consumption provisional measure because it's will.
General provision that we allocated to outcomes tumor loan portfolio. So no no deterioration in the congratulation for this.
Okay. So would you expect to keep the same coverage ratio for the next years.
Yep Yep Yep.
Perfect.
Thank you very much.
Thank you very much our final question today comes from Nicolas Riva from Bank of America. Please go ahead Sir.
Thanks, very much 10 million accretion for taking my question.
Question regarding your expected.
Bond issuance.
International market for 2024, you have a senior bond maturity in January 2025.
Or about $750 million or one of them for me would be to refinance that in the.
International market and also if you were to come from international market in 2024.
It would be.
Specifically in the senior format given that you have already placed 81, coupled with your parent company on especially also.
If you expect that maybe additional dollar funding needs in 2024, given the expected pickup in economic and working on in Chiller next year. Thanks.
Hello, Nicola Thank you Paul for your question.
Regarding the format definitely would be like <unk> senior I mean, we don't plan any hybrid with US we have already hours to one hour.
Dana initially like the groups the group's policy to two plays hybrids, especially the ones with the parents so it would be.
I'm, the senior format and regarding that potential.
Ill go into the public market in the U S.
Something we follow closely on a regular basis.
Even though the credit markets.
And in general the spreads and.
In the U S are not bad, let's say are not.
Too high but then when you do the math considering the basis swaps to local currency, which is again our ending.
Currency.
You can see that the pilot markets abroad have been.
Around 100 basis points more expensive than domestic market domestic market.
Hassle lost some let's.
Let's say liquidity and depth in the last few years, but it's still available we have been able to to issue.
With amounts in the last.
A few quarters, so I think it's a possibility.
Don't see is us.
Forgiven because.
When you look at the other markets, maybe the Swiss market in some markets in Asia. They are more favorable than the in the U S. Definitely the U S has the size the benefit where you can you can get.
Let's say higher size.
Yes.
Without more without much difficulty bad.
So something that might happen during the next year, but I wouldn't put it as a as a given I mean, it will depend on the market prices.
Our liquidity position a loan growth progresses.
Thanks, very much for letting me know very clear one just a follow up. So you said right now you should have a differential of about 100 basis points in February.
Issuing locally rather than issuing offshore in minutes dropping back to Chilean peso right, yes, yes, factoring in all of the cost expenses withholding on everything when you look at it on an early basis, where it fluctuates like every day because the basis swaps have been quite.
I'll buy that but recently yesterday and in the last few days, we have seen the swaps the basis swaps Owen going down and Thats lets say create.
Pressure upwards on the synthetic cost of funding abroad.
Thanks, very much bye now.
Thank you.
Okay. Thank you very much we see no further questions at this point I'll pass the line back to the management team for concluding remarks.
So thank you all very much for taking the time to participate in today's call. We look forward to speaking with you again soon.
Thank you very much. This concludes today's conference call will now be closing online. Thank you and good night.
Okay.