Q4 2023 Banco Santander-Chile Earnings Call

Okay.

Operator: Ladies and gentlemen, thank you for standing by. And I would like to welcome you to the Bco Sntndr Chile results conference call on the 2nd of February 2024. At this time, all participant lines are in listen-only mode.

Ladies and gentlemen, thank you for standing by and I would like to welcome you to Banca Banco Santander, Chile results conference call on the second of February 2024 at this time all participant lines are in listen only mode.

Operator: The format of the call today will be a presentation by the management team, followed by a question and answer session. So without further ado, I would now like to pass the line to Mr. Emiliano Muratori, the CFO. Please go ahead.

The format of the call today will be a presentation by the management team followed by a question and answer session. So without further Ado I would now like to pass the line to Mr. Indiana, but I told him. The CFO. Please go ahead Sir.

Emiliano Muratori: Good morning, everyone. Welcome to Banco Santander Chile's fourth quarter 2023 results webcast and conference call. This is Emiliano Muratore, CFO, and I'm joined today by Cristian Vicua, Chief of Strategic Planning and Investor Relations, and Captain Gloria Silva, our economist. First, I want to express my gratitude for your presence at this quarterly meeting. Now, let's get down to business.

Good morning, everyone welcome to Banco Santander, Chile's fourth quarter 2023 results webcast and conference call.

This is and we've got one would've thought as CFO and Im joined today by Chris Tell me Gonya chief of strategic planning and Investor Relations and capital LLC our economist.

First I want to express my gratitude for your presence of this quarterly meeting, let's go down to business.

Emiliano Muratori: We are here to discuss our performance during the fourth quarter. The macro conditions were more favorable, as we anticipated in our last call, which helped our margins and net income recover. The central bank of Chile has continued its rate reduction strategy, which has had a positive impact on funding costs. We'll delve into the specifics of our quarterly results in a moment. Now, I pass the line to Carmen Gloria on macro.

We are here to discuss our performance during the fourth quarter.

The macro conditions were more favorable as we anticipated in our last call.

Which helped our margins and net income recover.

The Central Bank of Chile has continued its rates with actually a strategy, which has had a positive impact on funding costs.

We'll delve into the specifics of our quarterly results in a moment.

Now I pass the line to come and Gloria for the macro update.

Carmen Gloria: Thank you, Emiliano. On slide 5, I present a summary of the macro review in the After a necessary process of macroeconomic and macroeconomy, 2023 was marked as a year of global economic volatility. Global Financial Conditions and Emerging Geopolitical Risks All of this occurred in a context where the process of inflationary convergence was consolidated, which would have facilitated the end of the cycle of rate hikes by the main monetary authorities. In this global environment, economic activity in Chile continued its deceleration during 2023. Its investment persisted in the adjustment process of previous years, and private consumption presented year-on-year reductions in response to elevated interest rates and the continually deteriorating labor market. Indeed, the labor force participation rate showed virtually no progress, hovering around 61% for nearly the entire year, below pre-pandemic levels, and the unemployment rate escalated to 8.5%.

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Matt.

Hello.

Thank you.

And the large political tensions.

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What is the process.

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What date.

What else.

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In this current environment.

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In the process of previous year.

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The response rate.

Great.

Labour market.

Indeed.

Labor force participation rate.

There's really no progress well there in that route.

At 1%.

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Okay.

Great.

5%.

Carmen Gloria: Despite this weakness, economic activity was bolstered by transient effects emanating from specific supply factors. On the one hand, the added value of electricity generation received an additional impetus due to increased rainfall in the country. On the other hand, the mining sector displayed improved performance due to the start of new projects. The level of activity could have contracted marginally in 2023, exhibiting an annual variation of minus 0.2%, less than the figure previously estimated. For the current year, economic activity is projected to grow at a rate of around 2%, propelled by a less restrictive financial environment, increased labor market dynamism during the latter half of the year, and the surge in mining products. This process will persist through 2025, culminating in an expansion of 2.5%. Domestic inflation continues its descent at a faster pace than anticipated.

Despite this weakness.

So when it gets to eat what well buy.

Emanating from strategic supply partners.

On Wednesday, the added value of it.

Generation.

Yeah, the English grateful.

On the other hand, the mining sector.

This performance.

This new project.

The level of activity.

Back in early 2023.

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Our ratio of minus <unk>, 2% less than previously estimated.

For the time here.

Predicted to grow at a rate of around 2%.

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Our natural environment.

With labor market dynamic.

The latter half of the year and in line.

This process.

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One 5%.

Domestic inflation continued at this bank.

Based on anticipated.

Carmen Gloria: The CPI concluded 2023 with an annual variation of 3.9%, falling below what was projected, and the US variation closed at 4.8%. The adjustment in national energy prices, the weakness in domestic demand, a contractionary monetary policy, and the appreciation of the exchange rate in the first half of the year were crucial factors for due supply. In the next month, inflation will persist in this downward trend until we can see 3% at the onset of the second quarter, and it will hover with some temporary increases around that value until the year's end. As of January 2024, a new customer basket was considered in the CPA calculation. According to our preliminary analysis, this new basket would not introduce any bias to the crisis dynamics. Thank you.

At CPI.

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With our kind of our Asia grew by 9%.

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And the expiration of close.

Or by 8%.

Yeah, just meant international and energy prices like weakness in domestic met a contractionary monetary policy.

Appreciation of the exchange rate at the first half of the year.

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In the next months in patients with persistent downward trend as the whiskey.

At the onset of the second quarter.

And it will cover.

With some temporary switch.

Around the body.

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As of January 2024, and we saw similar.

In this calculation.

According to our preliminary.

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Carmen Gloria: Lower inflationary pressures permitted the continuation of the monetary normalization cycle. The central bank accumulated a reduction of 300 basis points in the monetary policy grade during 2023, ending at 8.25%. For the third year in a row, the rejection continues, with a cut of 100 basis points in January.

Now what inflationary pressures.

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The central Bank accumulated a reduction of 300 basis points in the monetary policy rate.

Great.

Okay.

25%.

For the third year, the reduction stickier with a 100 basis points in January.

Carmen Gloria: And for the coming meeting to be held at the beginning of April, a new aggressive decrease is projected, between 100 and 125 by, and it will be sent to 4% at the year's end, close to its mutual value. The exchange rate has recently depreciated again beyond the value explained by its fundamentals. This upward trend exceeded that observed in other regional currents. Responding to the Manual Weight Differential.

And as for the coming meeting to be held in April.

And Youll get a degree.

Thank you.

100, 125 basis points and it would be 4% as of yet.

No.

Mr Botner.

Exchange rate how switching gears.

Again beyond that is explained by fundamental.

This upward trend.

That's exciting that provisional therapies.

Responding to the minor price differential.

Carmen Gloria: In our central scenario, the exchange rate would rectify its deviation and appreciate it towards the year's end to reach $870. This, in response to the anticipated weakening in the dollar globally, the recovery of international copper prices, and adjustments in the global monetary system, particularly by the side, which will impose pressure on the rate.

In our central scenario, the exchange rate with rectify it deviation.

Appreciate it for the year.

We are approaching 817.

In response to the anticipated weakness in the demand globally, the recovery of international prices.

Just maybe the global monetary cycle, particularly.

Thanks Rich.

With SBA pressure on day rates.

Emiliano Muratori: Thank you, Carmen Gloria. Turning our attention to slide 7, let me begin by reminding you of our commitment to our four key strategic pillars that are part of our Chile First strategy. We would like to take the opportunity to highlight some of our main achievements in 2023. Firstly, we are the largest bank in Chile in terms of total volume, the sum of loans and deposits, with a market share of 17.4%. Our place in the Dow Jones Sustainability Index for emerging markets was confirmed, being the only Chilean bank to qualify for this index and emphasizing our leadership in sustainability. In this context, we issued our first green bond for around $50 million under our ESG framework. This session was the first in Chile to state green mortgages as the use of proceeds.

Thank you Cam and Gloria.

Turning our attention to slide seven let me begin by reminding you of our commitment to our four key strategic pillars that are part of our chiller first study.

We would like to take the opportunity to highlight some of our main achievements in 2023.

Firstly, we are the largest bank in Chile in terms of total volume the sum of loans and deposits with a market share of 17, 4%.

Our place in the Dow Jones sustainability index for emerging markets was confer being the only Chilean bank to quantify for this index and emphasizing our leadership and sustainability.

In this context, we shipped our first green bond for our own $50 million under our ESG framework.

<unk> was the first in Chile to state Green mortgage.

Emiliano Muratori: Currently, we have a growing portfolio of approximately 100 billion pesos in green housing that complies with the highest housing energy certifications by the Ministry of Housing and Urban Planning in Chile. We offer preferential interest rates to clients choosing green housing, and we also contribute to conservation and preservation projects in Chile. We continue to remain committed to financial inclusion through our digital initiatives and from their life in Mas Lucas. Just in 2023, we have contributed by facilitating access to a bank account to more than 167,000 people. The advances in our digital initiatives have driven our clients to reduce their cash transactions, allowing us to accelerate the transformation of our branches. By year-end 23, we reached 91 workplaces, including five expressos, which we will hear more about in a few slides.

Use of proceeds.

Currently we have a growing portfolio of approximately 100 billion pixels in greenhouse in that complies with the highest housing energy certifications by the Ministry of housing and urban planning in Cuba.

All for preferential interest rates to clients choosing when housing and we also contribute to conservation presentation projects in Cuba.

We continue to remain committed to financial inclusion through our DW initiatives Santander life of Moss Lucas just in 'twenty to 'twenty three we have contributed by facilitating access to a bank account to more than 167000 people.

The advances in our digital initiatives have driven our clients to reduce their cash transactions, allowing us to accelerate the transformation of our branches by year end 'twenty. Three we reached 91 work effects, including five expresses which we will hear more about in a few slides.

Emiliano Muratori: Thanks to these advances, we have the highest quality service among Chilean banks for the fourth consecutive year, and we have been recognized as the best bank in Chile by Euromoney and The Banker. Our earning potential has been acknowledged by the market, with our total shareholder return reaching an impressive 35.8% in 2023, the highest among our Chilean peers, and doubled the return of the Chilean stock index in 2023. Moreover, we announced our new investment plan for 2023-2026 for $150 million to continue with the modernization of our branch network as well as take initiatives to progress with our strategic pillars. Now moving on to our strategy on page 8.

Thanks to these advances we have the highest quality service among Chilean banks under four for the fourth consecutive year with an NPS of 60, and we have been recognized as best Bank in Chile by Euromoney and the banker.

Our earnings potential has been acknowledged by the market with our total shareholder return, reaching an impressive 35, 8% in 2023, the highest among our peers and doubled the return of the Chilean sporting goods in 2023.

Moreover, we announced our new investment planned for 23 to 26 $4 million to $150 million to continue with the modernization of our branch network as well as take initiatives to progress with our strategic pillars.

Now moving on to our strategy to the first on page eight.

Emiliano Muratori: First and foremost, we are steering a transformative journey towards becoming a digital bank with Brent. Our transformation into a digital bank is not only about adopting the latest technology but also about creating a physical presence through our innovative work spaces. These spaces are more than just places to interact with customers. They are dynamic hubs that promote connectivity.

First and foremost we are steering our transformative journey towards becoming a digital bank with branches.

Our transformation into a digital bank is not only adopting the latest technology, but also about creating a physical presence through our innovative work effects. These are spaces are more than just places to interact with customers.

Dynamic helps us promote connectivity with advanced with technology and our commitment to excellent service. Our work efforts are designed to redefine the banking experience.

Emiliano Muratori: With advanced technology and a commitment to excellent service, our work is designed to redefine the banking experience. Our second pillar is centered on providing specialized value-added services tailored to our corporate, middle market, and private banking clients. Our commitment is to deliver premium transactional trade, foreign exchange, and advisory products and services, ensuring our clients receive a top-notch experience. In our third pillar, we are committed to fostering innovation and propelling growth. We are not content with the status quo.

Our second pillar is centered on providing specialized value added services tailored to our corporate middle market and.

Private banking clients, our commitment is to deliver premium transactional freight foreign exchange and advisory products and services, ensuring our clients receive a topnotch experience.

In our third pillar, we are committed to fostering innovation on propylene growth, we are not content with the status quo. We aim to lead the change in redefining the banking landscape, we actively seek out new business opportunities pioneering the sustainable transformation of our clients by challenging convention.

Emiliano Muratori: We aim to lead the change in redefining the banking landscape. We actively seek out new business opportunities, pioneering the sustainable transformation of our clients. By challenging conventions, we aim to drive growth and cultivate success. Lastly, we place great importance on the role of our organization. To realize our objectives, we are dedicated to building an agile, collaborative, and high-performance culture. We recognize that diversity is our strength, and individuals will flourish based on merit.

We aim to drive growth and cultivate success.

Lastly, we place great importance on the role of our organization to realize our objectives.

Dedicated to building, an agile agile collaborative and high performance culture, we recognize that diversity is our strength and individuals will flourish based on merit, we are constructing a thriving community where talents are nurtured.

Emiliano Muratori: We are constructing a thriving community where talents are nurtured, and innovative ideas are highly valued. The outstanding success of our digital products has been firmly established in 2023 with the continuous growth of our digital client base. Key initiatives such as Santander Live and, more recently, Más Lucas have been instrumental in achieving this. The MassLucas account was launched in March 2023 and is the first 100% digital site-on-saving account for the mass market. It now has over 117,000 clients, exceeding our initial expectations for the year, and it currently accounts for more than 30% of our new account openings per month. Notably, the onboarding process for Maslucas is entirely digital, featuring facial recognition technology and no password requirements.

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So standing success of our diesel products has been firmly established during 2023 with the continued growth of our depot client base key initiatives, such as Santander life and more recently much Luka.

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100% diesel sites on saving account for the mass market.

It now has over 117000 clients exceeding our initial expectations for the year and it currently accounts for more than 30% of our new account openings third most.

Notably the Onboarding process for MS. Lucas is entirely digital <unk> facial recognition technology no possible requirements. These account comes with no fixed or variable cost on our.

Emiliano Muratori: This account comes with no fixed or variable cost and has accepted deposits up to 5 million pesos. On slide 10, we can see how the advances of our digital strategy are allowing us to continue the transformative transformation of the branch network through work-at-risk to improve productivity. Our bank's WorkCafe branches are expanding to cater to the specific needs of our clients. We have launched three new types of WorkCafe formats, including the WorkCafe Expresso, which consolidates cash operations into transaction hubs while maintaining a WorkCafe ambience.

Deposits up to 5 million vessels.

On slide 10, we can see how the balances of our Ddos strategy is allowing us to continue the transformer.

Since formation of the branch network through work, our best to improve productivity.

Our banks work at our branches are expanding to cater to their specific needs of our clients. We have launched three new types of work after formats, including the work of espresso, which consolidates cash operations into transactions while.

While maintaining our work on.

Emiliano Muratori: This is a great initiative as it provides an efficient and secure banking experience for our customers. We have already opened five of these branches in 2023, and since its launch, the MPS of the World Cafe Espresso has 74 points, which has helped improve the overall opinion of the bank by 13 points. We also have our WorkFS startup, which offers a comprehensive solution to all the needs of entrepreneurs and especially to increase banking usage, carry out pilot programs with the bank, and even offer finance. This is a great way to support entrepreneurs and help them grow their businesses. Finally, we have the large WorkCafe Inversiones, a dedicated asset management WorkCafe designed especially for investment advice for clients and non-clients, independent of their income situation.

This is a great initiative as it provides an efficient more secure banking experience for our customers.

We have already opened five of these branches in 2023 and since its launch the NPS of the World Cup expressly 74 points. We trust helped improve the overall opinion of the bank by 30 points.

We also have our work after startup which offers a comprehensive solution to all the needs of entrepreneurs and especially to increased banking usage caveat pilot programs with the bank and even offer financing. This is a great way to support entrepreneurs and help them grow their business. Finally, we have launched <unk> and <unk>.

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Lines are not clients independent of their income situation.

Emiliano Muratori: In this branch, we offer weekly talks about different investment products or economic trends to provide advice and services and, in this way, support financial education. At the bottom of the page, you can see how the use of digital channels and the transformation of our branch network is leading to a strong decrease in our branch footprint, decreasing 24% in 2022 and a further 14% in 2023, reaching a total of 247 branches by year-end. Notably, 31% of our branches no longer have human sellers, with this branch providing value-added services like our traditional work assets.

And this branch we offer weekly talks about different investment products or economic trends.

Provide advice service and in this way support financial education.

At the bottom of the page you can see how the use of digital channels on the transformation of our branch network is leading to a strong decrease in our branch footprint decreasing 24% in 2022 on a further 14% in 'twenty three.

Reaching a total of 247 branches by year end.

Notably 31% of our branches no linker.

Q1 seller.

With this branches providing value added services like our traditional work effects at the same time, our productivity has continued to improve with loan and deposit volumes per branch, increasing by 24% year over year.

Emiliano Muratori: At the same time, our productivity has continued to improve, with loan and deposit volumes per branch increasing by 24% year-over-year and an 8.9% rise in the same metric per employee during the same period. On slide 311, we can see how our key initiatives with SMEs are driving impressive growth in this segment. Our digital life account for SMEs continues to drive a 19% year over year increase in total SME clients, with more than 386,000 SME clients. Moreover, there has been a 21% year over year increase in active SME clients. When considering current account for businesses as reported by the CMF, we see a remarkable 35% increase capturing close to 35% of the total market loss in October of 2025. GetNet, our acquiring business, continues to be an important driver for capturing new SME clients, as well as expanding into larger clients requiring a hospital solution for more sophisticated clients requiring, I'm warning, the greatest payments. Currently, GetNet operates more than 163,000 active points of sale, POS terminals across the country. During 2023, GetNet will get generated fees totaling 45 billion pesos and a net income of 11 billion pesos.

Eight 9% rise in the same metric per employee during the same period.

On slide 11, we can see how our key initiatives with Smes are driving an impressive growing this segment our diesel life accounts for Smes continues to drive a 19% year over year increase in total SME clients with more than 386000 SME clients. Moreover, there has been a 21% year over year.

We are increasing active SME clients when considering current account for businesses as reported by the CMA.

We see a remarkable 35% increase capturing close to 35% of the total market as of October of 2023.

GAAP net our acquiring business continues to be an important driver for capturing new SME clients as well as expanding into larger claims requiring a holistic solution for more sophisticated clients requiring.

A more integrated payments system currently getting it operates more than 163000 active point of sale Pos terminals across the country. During 2023 gives us generated fees totaling 45 billion vessels on a net income of $11 billion vessels.

Emiliano Muratori: Slide 12 illustrates how we have the best cost dynamics in the industry and the tight cost control supported by our digital transformation that we have been able to exercise during 2020. As you can see, with our growing client base and the launch of various child-affirmed initiatives such as Mas Lucas and Workafe Expresso, we managed to reduce our costs by 57 billion Chilean pesos. This was thanks to proactively implementing higher standards for passwords for the online account and our dynamic CBD on credit cards. This, among other initiatives, enabled us to renegotiate our pro and silver security. Furthermore, we are in the process of implementing Gravity, the Sntndr Group's home-grown digital cloud-native core-barking platform.

Slide 12 illustrates how we have the best cost dynamics in the industry and the tight cost controls supported by our diesel transformation that we have been able to exercise during 2023.

As you can see with our growing client base and launch of various Ciena first initiatives such as much Lucas on work of espresso, we managed to reduce our cost in 57 billion Tdm vessels. This was thanks to proactively implementing higher standard forecast portfolio line account and Adena.

Ohmic CVD on credit cards. This among other initiatives enable us to renegotiate our.

Security assurance. Furthermore, we are in the process of implementing gravity the Santander group's homegrown Ddos cloud native core Bard Kings platform. This technology is unique in the industry and has helped Santander become the first major bank in the world with in House software that the the licensed.

Emiliano Muratori: This technology is unique in the industry and has helped Sntndr become the first major bank in the world with in-house software that digitalizes core banking, allowing the bank to serve our customers faster, better, more efficiently, and reliably. We are in Chile in the finishing stage of the implementation of Gravity, with Sntndr Consumer already implemented in 2023 and the rest of Sntndr Chile in the first half of 2024. Our recurrence ratio, that is, our net fees divided by total expenses, is currently at 58%, substantially higher than the rest of the Chilean... Therefore, the fees generated by our clients through current accounts and value-added products such as cards, insurance, and mutual funds are covering 58% of our costs. Our cost represents only 1.1% of our assets compared to 1.5% in the industry.

Core banking, allowing the bank to serve our customers faster better more efficiently and reliably.

We are in Chile in the finishing stage of implementation Ravi with Santander consumer already implemented in 2023, and the rest of Santander, Chile in the first half of 2024.

Our records ratio that is our next <unk> divided by total expenses is currently up 58% substantially higher than the rest of the Chilean system.

Therefore, the fees generated by our clients through current accounts and value added products such as cards insurance mutual funds.

Our covering 58% of our expenses.

Our cost represent only one 1% of our assets compared to one 5% in the industry. These key performance indicators underscore our organizational strengths formation Torps agility collaboration high performance.

Emiliano Muratori: These key performance indicators underscore our organization's transformation toward agility, collaboration, and high performance. On slide 13, we're pleased to show that we have maintained our leadership in terms of our NPS net promoter score, creating a four point lead in the fourth quarter with our closest peer and reaching a total of 60 points. Our NPS score is based on feedback from more than 60,000 surveys measuring over 30 NPS metrics across our various service channels on a daily basis.

On Slide 13, we're pleased to show that we have maintained our leadership in terms of our NPS net promoter score, creating a four point lead in the fourth quarter with our closest peer and reaching a total of 60 points. Our NPS score is based on feedback from more than 60.

<unk> service measuring over 30, NPS metrics across our various service channels on a daily basis.

Emiliano Muratori: This invaluable feedback allows us to proactively manage and improve our client service. Our digital and remote channels continue to receive very high levels of satisfaction from our clients, with our app and website reaching scores of above 70 points. Our contact center is also highly rated, outperforming our peers. On slide 14, we can see how we are moving forward with our employees. For the fifth consecutive year, we obtained the Top Employer Certificate. During the year, we carried out three employee surveys called Your Voice, where we measured commitment, leadership, and SPS, simple, personal, and firm.

This invaluable feedback allows us to proactively manage and improve our client service our.

These are on remote channels continued to receive very high levels of satisfaction from our clients with our App and website, reaching scores above 70 points or contact center. You saw also highly rated outperforming our peers.

On slide 14, we can see how we are moving forward with our employees for the fifth consecutive year, we obtained the top employer certificate during the year, we carried out three employee service called your voice, where we measured commitment and leadership.

Sps simple perfect.

Emiliano Muratori: We can see in the graph how these indicators have been steadily improving. We also want to highlight that in January, we reached a new collective agreement with our 23 employee unions, including further employee benefits and the adjustment of the working week to 40 hours, reaching the country's regulatory target years in advance. In terms of diversity, we continue to steadily increase the number of women in higher positions and senior management, and with our board elections on April 23, we became the listed Chilean company with the highest participation of female directors in the board. Slide 15, shows our impressive progress with our 10 responsible banking goals. As you can see, a number of our regional goals have already been met, such as being among the top employers in Chile, 100% of our energy coming from renewable sources thanks to our solar plant, the elimination of 100% of single-use plastic, the granting of more than 19,000 scholarships and internships since 2019, far surpassing the regional goal and reaching 100% carbon neutrality.

We can see in the graph how these indicators have been steadily improving.

I also want to highlight that in January we reached a new collective agreement with our 23 employee unions with inclusion of further employee benefits and the adjustment of the working week to 40 hours, reaching the country's regulatory target using our pumps in.

In terms of the diversity, we continue to steadily increase the number of weakening higher precision and senior management with our board of elections in April 23, we became the Mr. Chilean company with the highest participation of female directors and the board.

Slide 15.

Shows are impressive progress with our turns are also a banking goals as you can see.

Number of our original goals have already been met such as being among the top employers in Chile are 100% of our energy coming from renewable sources towards solar plant the elimination of 100% of single use plastic the granting of more than 19000 scholarships and interesting since 2019 fourth store.

In the regional goal and reaching a 100% travel neutrality all.

All remaining goals are progressing along nicely and are well on their way to meeting their targets for 2025, we have either a mixed for our goal to have 40% to 60% of women on boards of directors something we achieved in 2003 with 44% going forward, we will be reviewing where our challenges lie.

Emiliano Muratori: Our remaining goals are progressing along nicely and are well on their way to meeting their targets for 2025. We have added an extra goal to have 40 to 60% of women on the board of directors, something we achieved in 23 with 44%. Going forward, we will be reviewing where our challenges lie for the coming years, setting ourselves more ambitious targets that I'm positive we will meet. On slide 16, we can see how our efforts are translating into recognitions of our leadership in the Chilean banking industry. In 23, the Banker awarded us the Best Bank in Chile, while Euromoney recognized us as the Best Bank in Chile and the Best Bank in the world, for SMEs, Corporate Social Responsibility, Diversity and Inclusion, and Furthermore, Global Finance also earned the Best Bank for SMEs award, and we gained recognition for our commitment to sustainability in the Latin Trade Index America Sustainability Awards 2023. Furthermore, our advancements in sustainability have been recognized by prominent sustainability indexes with solid ratings from Sustainalytics and MSCI.

The coming years on setting ourselves more ambitious targets that I am positive we will meet.

On slide 16, we can see how our efforts are translating into recognition of our leadership in the Chilean banking industry.

In 2003, the bunker awarded US Best Bank in Chile, while Euromoney recognized us as the best Bank in Chile on best parts for SME corporate social responsibility diversity and inclusion on ESG. Furthermore, loan finance also awarded best Bank for Smes and we wait.

<unk> recognition for our commitment to sustainability in the Latin Trade Index America Sustainability Awards 2023.

Furthermore, our advancements in sustainability have been recognized by prominent sustainability indices with solid ratings from sustained related from MSCI or more recently, we work on terms of the only Chilean bank to qualify for the Dow Jones sustainability index for global emerging companies.

Now, let's talk about the printing our results and balance sheet in 2023 on the fourth quarter.

On Slide 18, we show our results for 2023.

Emiliano Muratori: More recently, we were confirmed as the only Chilean bank to qualify for the Dow Jones Sustainability Index for Global Emerging Markets. Now, let's talk about the impact on our results and balance sheet in 2023 and the fourth quarter. On slide 18, we show our results for 2023. As you can see on the quarterly graph, the net income attributable to shareholders rebounded very strongly, producing the highest quarterly ROE in the year of 16.6%. With this accumulated net income for 2023 totaling 496 billion pesos, decreasing 39% year over year, impacted by the pressure on margins from the higher cost of living.

See on the quarterly Ross the net income attributable to shareholders rebounded very strongly producing their highest quarterly ROE in the year of 16, 6% with this accumulated net income for 2023 totaled 496 billion vessels decreasing 39% year over year impacted by.

The pressure on margins from the higher cost of coffee.

Our operating segments that excludes the corporate centers.

<unk> performed well with 34, 7% year over year, increasing their net contribution with an important expansion in NII mt's with costs demonstrate demonstrating the results of our strategy across the segments. Furthermore, the book value of our equity increased five 8% year over year.

Our <unk> per share dividends per share growing 12% overall, the accumulated return over our at JBT for the year reached 11, 9%.

Emiliano Muratori: Our operating segments, which excludes the corporate centers and ALM, continue to perform well, with a 34.7% year-over-year increase in their net contribution, with an important expansion in NII and BCO, with costs, demonstrating the results of our strategy across the sector. Furthermore, the book value of our equity increased 5.8% year over year, with our PNAP per share and dividend per share growing 12%. Overall, the accumulated return over our activity for the year, which 11.9. The results of our Corporate and Investment Banking, or CIB, have continued to be impressive, increasing by 65% year-over-year growth. Net contribution from the middle market of corporates increased 27.9% year-over-year. Both of these commercial segments experienced an important rise in deposit spreads as well as high growth in fees and treasury income. The focus of this segment continues to be on our non-learning activities driving profitability.

The results of our corporate and investment banking North CIB have continued to be impressive increasing 65% year over year growth net contribution from the new market corporates increased increased 777, 9% year over year.

Both of these commercial segments experienced an important voice in deposit spreads as well as high growth piece and treasury.

The focus of this segment continues to be on our non lending activities driving profitability.

On slide 20, we don't see that retail banking results increased 25, 6% year over year.

By the greater client based on more activity by our clients are active individual clients include eight 8000, private banking and wealth management clients from 62, 7000, Santander consumer clients.

On total individual artist clients increased eight 1% year over year. Meanwhile, our active SME clients have grown 29% compared to December last year the.

The margin in this segment increased 22, 3% year over year due to a better mix of funding and loan growth.

Peace in the segment increased strongly by 21, 1% year over year, driven by card fees due to a greater usage and the increase in the client base as well as the fee generated by get net provisions increase.

Emiliano Muratori: On slide 20, we can see that retail banking results increased 25.6% year-over-year, driven by a greater client base and more activity by our clients. Our active individual clients include 8.8 thousand private banking and wealth management clients and 62.7 thousand Santander consumer clients, and total individual active clients increased 8.1% year-over-year. Meanwhile, our active SME clients have grown 20.9% compared to December last year. The margin in this segment increased 22.3% year-over-year due to a better mix of funding and loan growth. The revenue in this segment increased strongly by 21.1% year-over-year, driven by car fees due to greater usage and the increase in the client base, as well as the fee generated by get-back. Provisions increased 56.7% year-over-year due to the growth of the portfolio, slowing economic growth, and the normalization of asset quality of our retail loans after historically low levels of non-performing loans due to the increase in liquidity of our clients in recent periods. Operating costs increased in a controlled manner by 4.1% year over year as the bank continues its digital transformation generating greater operating efficiency.

56, 7% year over year due to a growth of the portfolio of slowing economic growth and the normalization of asset quality of our retail loans up towards the low levels of nonperforming loans due to the increase of liquidity of our clients in recent periods.

Operating cost increasing our control monitor by four 1% year over year of the bank continues its deeper transformation generating greater operating efficiency.

Okay.

Yes.

On slide 21 in the fourth quarter loan growth was driven by retail lending retail banking loans grew three 1% Q on Q and.

Seven 3% year over year, driven by growth in mortgage with in recent periods. The origination of new mortgage loan has decreased due to high inflation and rates. However in the second half of the year mortgage loans once again to grow stronger in that inflation, reaching a growth of two 5% in the quarter up eight 5%.

Year over year in the way the clients adjust to market conditions.

Consumer lending grew six 6% year over year, mainly due to credit card growth our third quarter subsequent function.

In the end of 2019 and 2021 these loans decreased 7%.

<unk> reduced large purchases such as probable in wholesales, which fueled credit card loans at the same time, many clients paid off credit card debt with deal accretive thing from Goldman transfers and pension fund withdrawals at.

Emiliano Muratori: On slide 21, in the fourth quarter, loan growth was driven by Rita Landis. Retail banking loans grew 3.1% year-on-year and 7.3% year-over-year, driven by growth in mortgages. In recent periods, the origination of new mortgage loans has decreased due to high inflation and rates.

At the end of 2022 as household liquidity levels return to normal and holiday probably assume credit card loans began to grow again retail banking loans grew three 1% in the quarter of seven 3% since December 31, 2022, driven by growth in mortgage in recent periods we originate.

<unk> of new mortgage loans has decreased due to high inflation rates.

SME loans grew two 4% in the quarter on after several quarter of construction.

Emiliano Muratori: However, in the second half of the year, mortgage loans once again grew stronger than inflation, reaching a growth of 2.5% in the quarter and 8.5% year-over-year. In the way that clients adjust to market conditions, consumer lending grew 6% year-over-year, mainly due to credit card growth after quarters of control. Between the end of 2019 and 2021, these loans decreased 7% as clients reduced large purchases, such as travel and hotels, which fueled credit card loans. At the same time, many clients paid off credit card debt with the liquidity obtained from government transfers and pension fund withdrawals.

<unk> got the loans are now, finishing and therefore, we are seeing a reactivation and demand for loans as well as the impact from the expansion of the SME client base through our depot accounts and getting them.

Our middle market segment increased two 1% year over year and grew one.

About one 5% in the quarter. This increase is mainly due to the effect of translation gains on the loans in dollars mainly for our input on export claims around 21% of our commercial loans are in U S and the Chilean peso depreciated two 9% in 2023.

Also explained in part by the three 3% year over year increase in CIB and the one slight decrease.

In the quarter overall loans have grown by 3% year over year, and we expect loan growth to remain around mid single digits in 2024.

Slide 22.

Liquidity levels remained strong in the quarter the banks total deposit decreased three 9% quarter on quarter and nine 6% year over year. The increase was driven by time deposits increased three 1% quarter on quarter or 24, 3% year over year, mainly due to an increase in large corporate deposits.

Emiliano Muratori: At the end of 2022, as household liquidity levels returned to normal and holiday travel resumed, credit card loans began to grow again. Retail banking loans grew 3.1% in the quarter and 7.3% since December 31, 2022, driven by growth in mortgages. In recent periods, the origination of new mortgage loans has decreased due to high inflation and rates. SME loans grew 2.4% in the quarter after several quarterly constructions.

High interest rates remain attractive to clients.

Our demand deposits have decreased three 9% year over year due to a shift to term deposits the year and saw a strong increase of four 9% Q on Q in demand deposits as our clients maintaining higher liquidity levels.

Emiliano Muratori: The COVID-19 forgotten loans are now ending, and therefore, we are seeing a reactivation in demand for loans as well as the impact from the expansion of the SME client base through our digital accounts and get back. Our middle market segment increased 2.1% year-over-year and grew 1.5% in the quarter. This increase is mainly due to the effect of translation gains on loans in dollars, mainly for our import and export clients. Around 21% of our commercial loans are in the U.S., and the Chilean peso depreciated by 2.9% in 2021. This is also explained in part by the 3.3% year-over-year increase in CIV and the 1.5% decrease in the quarter. Overall, loans have grown 5.3% year-over-year, and we expect loan growth to remain around mid-single digits in 2024. Right when he took over, The Bank's total deposit increased 3.9% quarter-on-quarter and 9.6% year-over-year.

Our client investments through mutual funds intermediate by the bank also grew in the quarter, reaching an increase of five 4% Q on Q on 25% during the year.

<unk> issued increased nine 8% year over year on one 1% for the quarter during the year. The bank has issued bonds U S. GM peso dollar and Japanese yen, taking advantage of attractive opportunities in the various fixed income markets locally and abroad.

In the first days of 2020 for the bank issued a senior bond for a total of two 125 million Swiss francs, and the Swiss markets with a term of three years on a rate of 244, 5%. It had been a while since we talked to this market and we saw great interest and demand from investors.

The banks liquidity coverage ratio, which measures the personal touch of liquid assets over net cash outflows as of December 31, 2023 was 202% well above the minimum at the same date, the banks net stable funding ratio and asset which measures the percentage of illiquid assets financed through a stable.

Funding sources reaches 106, 5% also well above the current regulatory minimums set for this ratio.

On slide three we have simplified balance sheet to help explain the different sensitivities on our structural balance sheet in terms of inflation on the asset side, we have around $45 billion in loans.

Emiliano Muratori: The increase was driven by time deposits that increased 3.1% quarter-on-quarter and 24.3% year-over-year, mainly due to an increase in large corporate deposits, as the high-interest rating remained attractive to clients. While our demand deposits have decreased 3.9% year-over-year due to a shift to time deposits, the year-end saw a strong increase of 4.9% QonQ in demand deposits as our clients maintained higher liquidity levels. Our client investments through mutual funds intermediated by the bank also grew in the quarter, reaching an increase of 5.4% in Q1Q and 25% during the year. Bonds issued increased 9.8% year-over-year and 1.1% for the quarter.

Which nearly 60% is linked to inflation on the liability side the bank desktops on deposits on bonds and US However, we also use derivatives to control our exposure to inflation.

In terms of interest rates, our time deposits some $18 billion have a maturity of 30 to 60 days in general this means that with the rates increases the cost of funding increases quickly. However, now that the rate cuts have started the pass through to our cost of funding is relatively quickly.

We also have interest sensitivity to due to the FDIC line from the Central Bank at the beginning of the pandemic. The bulk receives a fixed rate credit line from the Central Bank as part of the FDIC program, which we swapped to variable rates in 2020.

The FDIC is to be paid in two installments during 2024 on April the first in July the first.

Emiliano Muratori: During the year, the bank has issued bonds in U.S. dollars, Chilean pesos, dollars, and Japanese yens, taking advantage of attractive opportunities in the various fixed income markets locally and abroad. In the first days of 2024, the bank issued a senior bond for a total of 1225 million Swiss francs on the Swiss markets with a term of three years and a rate of 2.445%. It had been a while since we tapped this market, and we saw great interest and demand from investors. The Bank's Liquidity Coverage Ratio, which measures the percentage of liquid assets over net cash outflows as of December 31, 2023, was 202%, well above the minimum. At the same day, the Bank's Net Stable Funding Ratio, NSFR, which measures the percentage of illiquid assets financed through stable funding sources, reached 106.5%, also well above the current regulatory minimum set for this ratio. On slide 23, we have a simplified balance sheet to help explain the different sensitivities on our structural balance sheet. In terms of inflation, on the asset side, we have around $45 billion in loans, of which nearly 60% is linked to inflation. On the liability side, the bank does have some deposits and bonds in the U.S.

Over 2023, the Central Bank launched a liquidity deposit program that offers central bank instruments.

Floating monitory policy rates with maturities on the FDIC payment dates.

The bank began to replace part of the central banks papers that were in the available for sale portfolio with this liquidity deposits recognized in the held to collect portfolio.

As of December 31, 2023, the bond cash invested.

$3 9 billion and this instrument.

For us the payment of the <unk> will not have a significant impact in our NII.

We'll be paying a variable rate liability with the variable rates, we previewed deposit from the central Bank.

In terms of our net interest margin ratio, we should see an improvement as the denominator our interest earning assets decreases as we use our liquidity assets for the payments.

In terms of margins the bank's NIM in the quarter rich.

Reached two 9% and two 2% for the year are shown on this slide we separate our planning from our ALM activities declined NIM, which is the final NII from our business segments over interest, earning assets has increased as the <unk>.

On loan spreads up recently.

However, our non quiet NIM shows the effects of the U S gap between our assets and liabilities on our liquidity management in general the bank is well positioned for a fall in real rates, where our liabilities repricing faster than our assets.

Emiliano Muratori: However, we also use derivatives to control our exposure to inflation, and BVA some $18 billion have a maturity of 30 to 60 days in general. This means... but with the rate increases, because of funding increases quickly. However, now that the rate wraps up, the cut through costs have started. We also have interest sensitivity due to the FCIC line from the Central Bank. At the beginning of the pandemic, the bank received a fixed-rate credit line from the Central Bank as part of the FCIC program, which we swapped to a variable rate in 2020. The FCIC is to be paid in two installments during 2024, on April 1 and July 1. In October 2023, the Central Bank launched a liquidity deposit program that offers central bank instruments at a floating monetary policy rate with maturities on the FCIC payment date. The bank began to replace part of the central bank paper that was in the available for sale portfolio with these liquidity deposits recognized in the help-to-collect portfolio.

The variation of the U S. In the fourth quarter was very high at one 6%. However, we're expecting a very low inflation for the first quarter of 2020 for.

These pass through of the lowering variation in the U S to our merger is immediate and will pressure our margin gains downward at the beginning of this year.

Meanwhile, the central Bank of Chile cut interest rates again by 100 basis points in January and we expect further cuts in the coming quarters for 2024, we expect our nims to start weaker.

In the fourth quarter, however, recovering strongly of the year goes on to reach total NIM of 3% to three 5% for 2024, depending on the evolution of great clubs in Chile.

Moving on to asset quality on slide 25.

The NPL ratio reached two 3% a little below current trends due to our commentary effective December 31.

The coverage of Npls of December 2023 reached 157% and there has been no reversal of voluntary provision.

Our impaired loan ratio, which includes the npls and restructured loans reached five 6% still below pre pandemic levels, but showing the same upward trends, we believe that npls should continue to increase slightly.

Emiliano Muratori: As of December 31, 2023, the bank has invested $3.9 billion in this investment. For us, the payment of the FCIC will not have a significant impact on our NII as we will be paying a variable rate liability with the variable rate liquidity deposit from the central bank. In terms of our net interest margin ratio, we should see an improvement as the denominator of our interest earning assets decreases as we use our liquidity assets for the payment. In terms of margins, the bank's NIM in the quarter reached 2.9% and 2.2% for the year. As shown on this slide, we separate our client NIM from our LALM activities.

With quality follows the economic cycle unbeliever market.

On slide 36, we show how the asset quality of the loan growth was far over the last four years. Our displays we now have higher coverage for all our products.

The NPL ratio has been recent pricing the incurred ratio remains under control for consumer on mortgage loans. Our commercial loan book is showing more signs of deterioration with npl's, reaching 3%.

The pay ratio of seven 6% as.

As we can see on the graph on the right. Most of the effect is concentrated on the small and medium sized companies.

Reminder, these SME loans account for around 9% of our total loans.

Emiliano Muratori: The client NIM, which is defined as NIA from our business segments over interest-earning assets, has increased as deposit and loan spreads have risen. However, our non-client NIM shows the effects of the US gap between our assets and liabilities and our liquidity management. In general, the bank is well positioned for a fall in real rates where our liabilities are repricing faster than our assets. However, the variation of the U.S. in the fourth quarter was very high, at 1.6%.

As we don't see on slide 27 overall, our cost of credit remained in line with our guidance of one 2% 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.

We expect cost of price to remain at those levels for 2024 with a better performance in the second semester.

On slide 28, we moved to non net interest income revenue sources, which continue showing exceptional growth trends income from fees on Treasury rose six 4% compared to the fourth quarter in 2022 and decreased five 2% in the quarter.

The decrease was mainly due to lower insurance brokerage and lower collection fees. However, commissions of ARP products continue with group trends.

Emiliano Muratori: However, we're expecting very low inflation for the first quarter of 2024. This pass-through of the lower variation in the U.S. to our margin is immediate and will pressure our margins downward at the beginning of the year. Meanwhile, the Central Bank of Chile cut interest rates again by 100 basis points in January, and we expect further cuts in the coming quarters.

The gradual implementation of the new interchange fee regulation started in October and will reduce fee growth in the fourth quarter and we estimate a negative impact increase in 2024 of 25 billion vessels 47 billion peso support 2025.

Incidentally this impact for 2024, we expect this lines items to grow around 8% with strong growth from clients of products mitigating the interchange fee impact.

Emiliano Muratori: For 2024, we expect our NIMS to start weaker than in the fourth quarter, but it will recover strongly as the year goes on to reach a total NIMS of 3 to 3.5 percent in 2024, depending on the evolution of rate caps. Moving on to Asset Quality, on slide 25, the NPL ratio reaches 2.3%, a little below current trends due to a calendar effect on December 31st. The coverage of MPLs as of December 2023 reached 157%, and there has been no reversal of voluntary provision.

The results from financial transactions increased 37, 9% year over year, mainly due to higher gains on foreign exchange hedges and decreased 32.

32% quarter over quarter, mainly due to negative results in the inefficiency of hedges of the portfolio managed by financial March and on the sale of portfolios in the period.

As shown on slide 29, we also can see the bank's efforts to continue increasing pro TV to control costs.

Operating expenses decreased by 6% year over year and increased 3% in the quarter. The quarterly decrease in personnel expenses is mainly due to lower spending on short term incentives in fourth quarter in light with the decreasing number of branches. Meanwhile, our administrative expenses grew 18% in the quarter, mainly due to higher IPM communication.

Emiliano Muratori: Our Impaired Loan Ratio, which includes NPLs and restructured loans, reached 5.6%, still below pre-pandemic levels but showing the same upward trends. We believe that NPLs should continue to increase slightly as asset quality follows the economic cycle and the labor market. On slide 26, we show how the asset quality of the loan product has been over the last four years. As shown, we now have higher coverage for all our products. While the NPL ratio has been rising, the impaired ratio remains under control for consumer and mortgage loans. However, our commercial loan book is showing more signs of deterioration, with NPLs reaching 3% and the impaired ratio 7.6%.

Expenses and outsourced services, such as technological developments in the quarter.

During 2023, the bank has focused on advancing in the execution of it.

Investment plan of $450 million for the year 2003 to 2026 with a focus on digital initiatives and the renovation of frontier.

Moving onto slide 30, we observe a positive evolution of our capital ratios.

At the end of the fourth quarter of 2023, the bank reported a core equity ratio of 11, 1%.

And our total ratio of 17, 6% after the distribution of final dividends that amounted to 60% of the 2022 earnings.

In may the regulator announced that from next year. The Chilean banks will need to include a counter cyclical buffer of two 5%.

Emiliano Muratori: As we can see on the graph on the right, most of the effect is concentrated on the small and medium-sized enterprises... As a reminder, these SME loans account for around 9% of our total loans. As we can see on slide 27, overall, our cost of credit remains in line with our guidance of 1.2%. In the graph on the left, we can see how the cost of risk per segment is now similar to where we were before the pandemic. We expect the cost of credit to remain at those levels for 2024 with better performance in the second semester. On slide 28, we move to non-net interest income revenue sources which continue showing exceptional growth trends; income from fees and treasury rose 6.4% compared to a fourth quarter in 2022 and decreased 5.2% in the quarter. This decrease was mainly due to lower insurance brokerage and lower collection fees.

This together with the conservation buffer of two 5% and the systemic buffer of one 5% means that our minimum fully loaded core equity tier one will be 9% in December 2025.

On January 17, 2024, the CMS apply the current recommendation on additional capital requirements.

According to pillar, two which contemplates two main topics credit concentration risks in the market risk of the banking book our pillar two requirement was established four six function material system.

This is not a final China, a charge to Santander, Chile on dislocation. However, the measurement of the marketplace of the banking book will continue to be discussed a couple of charges may be they may be made in the coming years.

On slide 32.

We conclude with some guidance for 2024, our strategy of a diesel bank with work access will continue to provide us with greater diesel client base with Sony three growth in advances in operation efficiencies for.

For 2024 hour macro expectations are more positive with an estimated GDP of close to 2% on a U S operation around two 5% without monetary policy rating ending 2024 up four.

Emiliano Muratori: However, commissions on our products continue with good trends. The gradual implementation of the new interchange fee regulations started in October and will reduce fee growth in the fourth quarter, and we estimate a negative impact on fees in 2024 of 25 billion pesos and 47 billion pesos for 2025. Considering this impact, for 2024, we expect this line's items to grow around 8% with strong growth from client and products mitigating the interchange fee impact. The result from financial transactions increased 37.9% year-over-year, mainly due to higher gains on foreign exchange hedges and decreased 30.2% quarter-over-quarter, mainly due to negative results in the inefficiency of hedges of the portfolio managed by financial management and the sale of portfolios in As shown on slide 29, we also can see the bank's efforts to continue increasing productivity and to control costs. Operating expenses decreased 5.6% year-over-year and increased 3% in the quarter.

4%.

With this we expect loan growth to reach mid single digits as economy reactivation.

As rates continue to fall our margins will continue to recover reaching a range of 3% to three 5% in 2024, depending on the evolution of rate cuts.

Non NII it should be growing around 8% with good customer approach trends, but impacted by lower interchange fees.

Cost 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 rates will not will be normalized.

With all of this our ROE for 2024 will be recovering towards normalized levels around 15% to 17% with.

With the first quarter of 2024 impacted by the low quarter of inflation.

And reaching an ROE in the neighborhood of 10% the first quarter with profitability improving during the year.

Finally, our guidance for long term ROE remains unchanged at between 17% to 19%.

With this I finish my presentation and now we will gladly answer any questions here.

Thank you very much for the presentation, we will now be moving to the Q&A part of the call. If you have a question. Please press star two pad that.

Start to on your key pads for voice question you May all SaaS <unk> question. If you have dialed in via the web.

Emiliano Muratori: The quarterly decrease in personal expenses is mainly due to lower spending on short-term incentives in the fourth quarter, in line with the decrease in the number of branches. Meanwhile, our administrative expenses grew 18% in the quarter, mainly due to higher IT and communication expenses and outsourced services such as technological developments. During 2023, the bank focused on advancing the execution of an investment plan of $450 million for the years 2023 to 2026, with a focus on digital initiatives and the renovation of branches. Moving on to slide 30, we observe a positive evolution of our capital ratio. At the end of the fourth quarter of 2023, the bank reported a core equity ratio of 11.1% and a total ratio of 17.6% after the distribution of final dividends that amounted to 60% of the 2022 earnings.

Our first question comes from Mr. Tito <unk> from Goldman Sachs. Please go ahead Sir.

Hi, Good morning, Thank you for the call and taking my questions. A couple of questions I can just to follow up a little bit on the asset quality and loan growth.

You're seeing a little deterioration there but as.

As you mentioned more normalization.

How much more do you think.

You could expect in terms of asset quality deterioration and in terms of how that could impact the loan growth.

Recover faster than expected do you think there could be upside to your loan growth or any risks.

Getting to that mid single digit loan growth and maybe just some color on the loan growth by the different segments, where you see the bigger opportunities. Thank you.

Thanks, Peter So first on the loan growth part, we we don't see relevant risks regarding our guidance of mid single digits, 5% to 6%, we see different composition in the in the way that growth should happen.

Emiliano Muratori: In May, the regulator announced that from next year, Chilean banks will need to include a counter-cyclical buffer of 0.5%. This, together with the conservation buffer of 2.5% and the systemic buffer of 1.5%, means that our minimum fully loaded core MBTQ1 will be 9% in December 2025. On January 17, 2024, the CMF applied the current regulation on additional capital requirements according to Pillar 2, which contemplates two main topics, credit concentration risk and the market risk of the banking book. A Pillar 2 requirement was established for six banks in the Chilean system.

We see more opportunities in the second half of the year for our consumer loan portfolio due to lower rates lower short term rates that are going to be.

Broadly in the market by by the third quarter.

Apart from that we don't see any any extraordinary risks to our guidance.

Should see a relevant growth through our retail portfolio of Smes and personal loans compared to the larger.

Corporate customers.

And regarding the cost of risk. We are currently at a one 2% cost of credit we see some some.

Pressures are.

Coming along with the cycle unemployment goes to nine 9% to 10% for the country. So so this is pressuring a little.

Emiliano Muratori: They did not assign a charge to Sntndr Chile on this occasion; however, the measurement of the market risk of the banking book will continue to be discussed, and capital charges may be made in the coming years. On slide 32, we conclude with some guidance for 2024. Our strategy of a digital bank with work access will continue to provide us with a greater digital client base with solid free growth and advances in operations. For 2024, our market expectations are more positive, with an estimated GDP of close to 2% and a U.S. variation around 2.5%, without a monetary policy rating ending 2024 at 4%.

The mpls.

So npls should be going up to two five to maybe $2 six levels in the worst part of the period under normal lighting, we see a more favorable second half of the year. So we are thinking of a total year guidance of $1 two for the concentrate.

Okay, that's very clear thank you.

Okay. Thank you very much. Our next question comes from Ernesto <unk> from Bank of America. Please go ahead Sir.

Thank you hi, good morning, I'm Christine Thanks for taking my call.

I have a couple of questions from my side.

The first one will be younger NIM guidance.

So we're making the numbers I believe youre expecting NIM expansion between 100 and 130 basis points.

Emiliano Muratori: With this, we expect long-term growth to reach mid-single digits as the economy reactivates. As rates continue to fall, our margins will continue to recover, reaching a range of 3% to 3.5% in 2024, depending on the evolution of rate caps. Non-NII should be growing around 8% with good customer product strength, but impacted by lower interchange. Cost of Risk should be stabilizing during the year around 1.2% with asset quality following the economic cycle. Costs should be growing in line with inflation while maintaining best-in-class levels, and effective tax rates will be normalized.

Three 5%.

So having said that.

Can you walk us through on how should we expect marine viewing 2024.

First of all it considering the maturity of the day.

You bet.

And after paying back the current volume to the Central Bank hub I was wondering if we can divide who we speak named for the first half and maybe for the second.

Second half.

And then my.

Second question will be on Santander life.

Can you talk a little bit more on how profitable is already Santander life I don't know.

You can share like.

<unk> for this segment.

What could be like the efficiency and ROE for the segment.

And I don't know if you have like a medium term target.

Emiliano Muratori: With all of this, our ROE for 2024 will be recovering towards normal life levels, around 15 to 17%. With the first quarter of 2024 impacted by low quarter inflation and reaching an ROE in the neighborhood of 10% in the first quarter, with profitability improving during the year. Finally, our guidance for long-term ROE remains unchanged at between 17 to 19 years.

For this business. Thank you.

Hello.

Thank you for your question.

The first one and I'll leave the second one.

Florida focused John so regarding the NIM profile for the for the year I think that would be useful to see that.

Naeem slide where you see.

The evolution during the quarters in 2023 that definitely.

Fact on Nims is the combination between the level of inflation on the level of rates. So as you saw in the fourth quarter last year, we still had high rates, but the loan inflation was higher.

Operator: With that, I finish my presentation, and now we will gladly answer any questions you have. Thank you very much for the presentation. We will now be moving to the Q&A part of the call. If you have a question, please press star two on your keypad. That's star two on your keypad for a voice question. You may also ask a voice question if you are dialed in via the web. Okay, our first question comes from Mr. Tito Labarda from Goldman Sachs. Please go ahead, sir.

High enough to be able to sustain.

And even close to 3% for the quarter. So.

'twenty 'twenty four will have the first half with a NIM lowered on the total year lower.

Due to two main reasons first that we have this negative CPI in December that its impacting the U S. In the first quarter showed that.

Tito Labarda: Good morning. Thank you for the call and taking my questions. A couple of questions I can just follow up a little bit on asset quality and loan growth. Sorry, I'm seeing a little deterioration there, but I think, you know, as you mentioned, more normalization. Just how much more do you think you could expect in terms of asset quality deterioration and in terms of how that could impact loan growth? If things recover faster than expected, do you think there could be upside to your loan growth or any risk to get into that mid-single-digit loan growth and maybe just some color on the loan growth by the different segments where you see the bigger opportunities? Thanks, Tito.

The NIM for the first quarter will be in that low 2% accretive.

The warrant agreement.

Human data.

Low inflation, but it is true that the.

The rates scenario has been evolving favourable for our balance sheet, because the central bank cut 100 basis points on Wednesday, and also provided.

Quite let's say Dolby.

For forward guidance, then when do you when you go to the rest of the of the year.

The NIM will be going up because the rates will keep going down and inflation. So it will be closing the year in U S variation around.

Emiliano Muratori: So first, on the loan growth part, we don't see relevant risks regarding our guidance of mid-single digits, five to six percent. We see different compositions in the way that growth should happen. We see more opportunities in the second half of the year for our consumer loan portfolio due to lower rates, lower short-term rates that are probably going to be in the market by the third quarter. Apart from that, we don't see any extraordinary risks to our guidance. We should see a relevant growth in our retail portfolio of SMEs and personal loans compared to the larger corporate customers. And regarding the cost of risk, we're currently at a 1.2% cost of credit. We see some pressures that are coming along with the cycle.

Two five to <unk> 700 for them.

For the year and the second half will have named go in north of three five probably because of the combination of rates and inflation and also as you mentioned that the exploration of the FCA will.

Will imply.

Let's say significant reduction on the denominator.

The balance sheet I mean, the total interest bearing assets.

We will go down because basically we will be deleveraging the balance sheet is paying off.

Emiliano Muratori: Unemployment goes to 9% to 10% for the country, so this is pressuring the NPLs a little. So NPLs should be going up to 2.5% to maybe 2.6% levels in the worst part of the period and then normalizing. We see a more favorable second half of the year, so we are thinking of a total year going up to 1.2% for the cost of credit. Okay, that's very clear.

That liability with short term with short term debt securities and so that will make.

I think of the of the need to take it north of three five.

For the second half.

As you said, finishing the year between three and $3 five depending on the on the combination of inflation and rates.

During during the year.

Emiliano Muratori: Thank you. Thank you very much. Our next question comes from Mr. Ernesto Gabilondo from Bank of America. Please go ahead, sir.

Thank you for the life question.

While we are not disclosing yet.

P&L for LIFO continuous on.

Ernesto Gabilondo: Thank you. Hi, good morning Emiliano and Christian. Thanks for taking my call. I have a couple of questions from my side. The first one will be on your NIM guidance. So when making the numbers, I believe you're expecting NIM expansion between 110 and 130 basis points to 3.5%. So, having said that, can you walk us through how we should expect NIMH... bco Sntndr Chile, bco Sntndr Chile, bco Sntndr Chile, bco, And then my second question will be on Sntndr Live. Can you talk a little bit more on how profitable Sntndr Live is already? I don't know if you can share a P&L for this segment. What could be the efficiency and the ROE for this segment? And I don't know if you have a medium-term target for this business. Thank you. Hello Ernesto, thank you for your question. I'll take the first one, and I'll leave the second one for Cristian.

Numbers for your better understanding of.

Initiatives.

Currently we have about $1 $3 billion in customer deposits related to life on about $100 million in consumer loans.

And the lack of account.

Pes for the segment means about $32 million a year in card piece or for ourselves.

<unk> customer base to access the cart that costs about three.

$3.

We are currently having a close to a 100% of our light customers.

These are mobile with no relationship manager assigned to them. So that's very very helpful for us to drive that.

The cost of serving the customer is very low.

The customer acquisition cost for every single life customer is paid within three months that means that on the fourth month.

<unk> customer gets into the bank.

Already profitable.

So those are some figures to give you some flavor of how the right.

Currency reform.

Emiliano Muratori: Regarding the NIM profile for the year, I think it would be useful to see the NIM slide where you see the pollution during the quarters in 2023. Definitely, the effect on NIEMs is the combination between the level of inflation and the level of rates. So, as you saw in the fourth quarter last year, we still had high rates, but the level of inflation was high enough to be able to sustain a NIEM close to 3% for the quarter. So in 2024, we have the first half with a NIEM lower than the total year, lower, due to two main reasons. First, that we have this negative CPI in December that is impacting the U.S. in the first quarter, so that the need for the first quarter will be in the low 2%, if you want, assuming that there is low inflation.

Alright, well. Thank you very much Chris Tim just a follow up on something from our lives.

How many clients do you have clicker.

You have a target.

Note.

Well, a certain amount of clients.

So currently in terms of current accounts total color and cloud customers for the bank, we have about 300000 or.

And even more than 300000 SMB customers.

1.3 million lives.

Current account customers and about 1 million 1 million traditional accounts, so that $2 6 million.

Current accounts total.

Going to get by 2020 speaks to.

In the area of four 5 million customers.

So we are.

Closely monitoring this figures to drive our customer expansion.

Perfect. Thank you very much.

Okay.

Okay. Thank you very much. Our next question comes from Mr. Yue Fernandez from Jpmorgan. Please go ahead Sir.

Hey, guys. Thank you very much for taking my question I have is of course, one regarding the normalization of Texas like in the guidance, what's normalized tax me like if you can provide a range on that.

Emiliano Muratori: But it's true that the rate scenario has been evolving favorably for our balance sheet because the central bank cut 100 basis points on Wednesday and also provided quite, let's say, dovish forward guidance. Then, when you go to the rest of the year, the need will be going up because rates will keep going down and inflation will be closing the year in U.S. variation around 2.5, 2.7 for the year.

Then I would like to ask about the pause its when we I like a lot youre breaking down by by business units right. We'll have the interior of the needle the corporate but when I checked collected deposits growth. It seems that most growth is coming from CIB right like potentially <unk>.

Emiliano Muratori: And the second half will probably have NIMS going north of 3.5, probably because of the combination of rates and inflation. And also, as you mentioned, that the expiration of the FCIC will imply, let's say, a significant reduction in the denominator because the balance sheet, I mean, the total interest-bearing assets will go down because, basically, we will be deleveraging the balance sheet, paying off that liability with short-term And so, that will make the arithmetic of the need to take it north of 3.5 for the second half and, as you said, finishing the year between 3 and 3.5, depending on the combination of inflation and rates during the year. I'm the Thank you for the live question, Ernesto.

Larger like more wholesale kind of funding. So my question is what youre asking on the funding side are you like I don't know maybe households, there sooner a more challenging scenario and you don't sell out of retail deposits, but just.

<unk> got some help to understand a little bit of funding cost on the bank going forward because.

A point of concern is that the wholesale funding may be a little bit more expensive. So I'd like to get your thoughts on this different deposit growth and then I may do a follow up thank you.

Cristian Vicuña: While we are not disclosing yet a specific P&L for Live, I can give you some numbers for your better understanding of the initiative. Currently, we have about 1.3 billion dollars in customer deposits related to Live and about a hundred million dollars in consumer loans in the life cycle. The fees for the segment mean about $32 million a year in car fees for ourselves. So the monthly fees that a customer pays to access the car, that costs about $32 million.

Yeah, I'll take the tax one.

And in General we will address the first one regarding taxes that occur in our statutory tax rate Chilean entities begin preparations and 27%.

Normally.

Our historical tax rate on normal inflation years, and with all the other effects between 23% to 25%.

Cristian Vicuña: We are currently having close to 100% of our live customers on a digital model with no relationship manager assigned to them, so that's very helpful for us to drive the cost of serving the customer very low. And the customer acquisition cost for every single live customer is paid within three months. That means that on the fourth month that a live customer gets into the bank, it's already profitable. So those are some figures to give you some flavor of how life is currently. Thank you very much, Emiliano and Cristian.

We expect inflation will be more more in the two five range this year to be reaching those levels.

The anticipation is anticipating a lidl.

I mean, the analyst answer there is some uncertainty nationality in the last quarter in terms of how corporations display their end of year.

<unk>.

Manager of their deposits solid strikeouts sort of flight to quality and we see interesting.

Those from those companies.

Cristian Vicuña: Just a follow-up on Sntndr Live. How many clients do you have today? I don't know if you have a target to get or approach a certain number of clients. So currently, in terms of current accounts, total current account customers for the bank, we have about 300,000, a little more than 300,000 SME customers, 1.3 million live current account customers, and about 1.1 million traditional current accounts.

December.

More detailed with amigo.

Thank you for your question regarding the cost of funds.

Deposits I think that going forward we have.

Two main like tailwind I mean first is like the rates went down so the cost of time deposits.

And it will go down significantly during the year, we have we have been doing.

Let's say very.

At Brazil.

Tactic in terms of pricing different segments in individuals and Smes train two to increase the margin coming from from time deposits actually when you look at the.

Cristian Vicuña: So that's 2.6 million current accounts total. We're aiming to get to an area of 4.5 million customers by 2026. So we are closely monitoring these figures to attract our customers. Perfect, thank you very much.

<unk> taken the readout.

The average cost of time deposits in pesos for the whole bank compared to the monetary policy rates.

Yuri R. Fernandes: Okay, thank you very much. Our next question comes from Mr. Yuri Fernandes from JP Morgan. Please go ahead, sir.

We were able to take that from 90% to 93% of the rates too.

Cristian Vicuña: Hey guys, thank you very much for taking my question. I have a first one regarding the normalization of taxes, like in the guidance, what normalized taxes mean, like if you can provide a range on that, then I would like to ask about deposits. When we do a lot here, you're breaking down by business units, right to have the retail, the middle, the corporate, but when I check the deposits growth, it seems that most growth is coming from CIB, right, like potentially larger, So my question is, what are you seeing on the funding side? Are you, like, I don't know, maybe households are seeing a more challenging scenario, and you don't see a lot of retail deposits?

Close to 80, 82% I mean, that's because we have been.

Implied as you mentioned some kind of loss of balances from from maybe.

Fluence, our private banking clients that are more price sensitive.

And overall the strategy was very well.

Profitable for us so the cost of time deposits will will be positive going forward and secondly, it makes us as you pointed out.

The wholesale or middle market too bigger corporate.

It has been doing better in terms of liability balance sheet balances, but it's also true that it's at.

Emiliano Muratori: But just want to get some help to understand a little bit about the funding cost of the bank going forward, because a point of concern is that the wholesale funding may be a little bit more expensive. So I'd like to get your thoughts on this different deposit growth. And then I may do a follow up. Thank you. Thank you, Yuri. I'll take the next one, and Emiliano will address the first one. Regarding taxes, the current statutory tax rate for Chilean entities and Chilean corporations is 27%.

It was the first.

It was the first segment to stop.

Pulling in demand deposits.

Este Lauder is stabilizing and now starting to grow demand deposits, which are noninterest bearing so also the mix between.

Timeline.

One deposit that was part of the.

The headwind we had this last few years because of the level of rates and the opportunity cost that the guidance had now going forward, we expect that mix to start to start improving from where we are now and we are relatively optimistic.

Cristian Vicuña: Normally, our historical tax rate on normal inflation years and without other effects, Mr. I'm anticipating a little Emiliano's answer. There is some certain stationality in the last quarter in terms of how corporations play their end of year, deposit manager, so it's like a sort of flight to quality, and we see interesting flows from those companies in December, but more details with him again. Hello, Yuri.

With how the cost of funds will support the nims going forward.

Super Super helpful Emiliano and Christian.

If I may just on a more strategic question here on the on the client mix.

Emiliano Muratori: Thank you for your question. Yeah, regarding the cost of funds or cost of deposits, I think that going forward, we have a tactic in terms of pricing the different segments of individuals in SMEs trying to increase the margin coming from time deposits. Actually, when you look at the beta, the average cost of time deposits in pesos for the whole bank compared to the monetary policy rates, we were able to take that from 92-93% of the rates to close to 80-82%. That's because we have been, as you mentioned, experiencing some kind of loss of balances from maybe affluent or private banking clients that are more price-sensitive. But as an overall strategy, it was very profitable for us. So, the cost of time deposits will be positive going forward. And The second is the mix.

You discuss slides previously and we will have this break Dallas.

Customers buy signification Youre doing gets Mac will have Delta strategy. My question to you is regarding the needs of clients going forward Bright star can you I think your most of your retail clients. The higher income is there any change to that licensing and theyre willing to go more lower income ciena like how should we think about like your.

<unk> on the on the customer on the customer mix and Chile going forward. Thank you.

Yes, I mean definitely as you said.

Compared to the mix in terms of.

Number of clients now our composition.

Much more geared to the middle low part of the <unk> and.

And I would say that the main.

Driver for that.

Switch of the strategy and also going forward.

Emiliano Muratori: As you were pointing out, the wholesale or middle market to bigger corporates has been doing better in terms of liability balances. But it's also true that it was the first segment to stop falling in demand deposits and stabilize, and is now starting to grow demand deposits which are non-interfering. So also the mix between time and demand deposits that was part of the headwind we had in the last few years because of the level of rates and the opportunity cost that the clients had. Now, going forward, we expect that mix to start improving from where we are now, and we are relatively optimistic with how the cost of funds will support the names going forward. Super helpful Emiliano and Christian.

Digitalization right Amanda.

The cost to serve.

Clients with branches and with an account representative for each client and it's very expensive.

Model to serve and that's historically produced only.

Middle to high income individuals.

Well to create enough revenue to sustain.

Such are expensive.

Although two to serve them and now with all the work we have been doing in developing digital solutions, we are able to.

But very efficient cost efficient model to serve any kind of clients.

Emiliano Muratori: If I may just on a more strategic question here on the client mix. You discussed life previously, and you have this breakdown of, you know, customers by segmentation, you are doing get net, you have the auto strategy. My question to you is regarding the needs of clients going forward, right? Historically, I think most of your retail clients are higher income.

Yes.

We're showing the life initiative.

Because of the balance sheet.

It created in terms of deposits and also the presentation we are seeing.

It's a very profitable.

So this is for us so, yes, I mean, I would say that.

The number we have the ambition to grow in number of clients.

Emiliano Muratori: Is there any change to that? Like you said, and they're willing to go more lower income in Chile, like, how should we think about like your positioning on the on the customer on the customer mix in Chile going forward? Thank you. Yeah, I mean, definitely, as you said, if you compare the mix in terms of number of clients, now our composition, it's much more geared to the middle low part of the pyramid. And I would say that the main driver for that, [inaudible] to to grow in number of clients and and in the composition definitely compared to I know five ten years ago that will be much more massive if you want we don't have at this moment of the cycle and a specific high appetite for for lending or for for credit because we are as we are seeing the economy is still going out of the of the recession we we had but but definitely that will provide some raw material going forward to grow sell up to upsell and and and even the the pure transactionality with how efficient we are in the in the digital solutions makes a business case to sustain the client on on their payments on their functionality looking forward to upsell and cross sell them depending on their behavior and their profile. No, no, super clear and makes a lot of sense.

The composition definitely compared to 510 years ago that will be much more massive if you want we don't have.

At this moment of the cycle and a specific high appetite for lending on four credits because we are as we are seeing the economies.

It'll go in out of the recession, we had bad.

But definitely that will provide some raw material going forward to cross sell to upsell.

And even there the pure transactional.

How efficient we are in in additional solutions makes our business scale to sustain the client on their payments on their desk nationality.

Looking forward to upsell.

Most of them.

Pending on that.

Behavior on their providers.

The nominal Super clear and makes a lot of sense. Thank you. Thank you guys for answers.

Thank you our next question comes from.

At <unk> from HSBC. Please go ahead ma'am.

Alright. Thank you for taking my questions go ahead satisfy on.

Neha Agarwala: Thank you. Thank you guys for the answers. Thank you. Our next question comes from Ms. Neha Agarwala from HSBC. Please go ahead, ma'am.

Liquidity after you.

The central Bank bonds.

The middle of this year, you said that session. Your liquidity could you clarify that I think you have deposits to cover for it.

Neha Agarwala: Hi, thank you for taking my question. Could I clarify on liquidity after you repay the central bank bonds during the middle of this year? Should that pressure your liquidity? Could you clarify that?

Any impact on liquidity coming from that and Mike.

Second question is on asset quality, you mentioned that mortgage where youre seeing some worsening as the SME.

Emiliano Muratori: I think you have deposits to cover for it, but could you clarify any impact on liquidity coming from that? And my second question is about asset quality. You mentioned the pocket where you're seeing some worsening is in the SMEs, but any other part of the loan book where you're seeing stress and any extraordinary provisions that you would like to make during the year for any of these segments? Thank you so much. Hello Neha, thank you for your question. I'll take the first one, and I'll leave the second one for Christian.

Any other.

The loan will say youre seeing strength.

And.

Any extraordinary provision that you would like to make.

For any of these segments.

So Mitch.

Hello, and thank you for your question I'll take the first one and I'll leave the second one for Cristiano so regarding.

The majority of the FCA.

We want to create any liquidity pressure because.

As we mentioned in some.

Calls in the past the Central Bank in January of 2023.

Emiliano Muratori: So, regarding the maturity of the FCHC, that won't create any liquidity pressure because, as we mentioned in some calls in the past, the central bank in January of 2023 established a kind of phase-out strategy or regulation for banks that basically forced banks to start buying high-liquid assets starting January 2023 to cover 100% of the maturity of the FCHC. What that means is that, by the date of maturity, we and all the rest of the banks will have 100% of that money in short-term, or maybe not short-term, but highly liquid assets. And that's why, in terms of the calculation or computation of the NIM and any other ratio that uses total assets or interest-bearing assets as a numerator, that will create a problem because, at the end, we have, roughly speaking, like 10% of the assets in that facility that will go away together with the liabilities. So, in terms of liquidity, let's say that we'll reach that maturity with 100% pre-funding on that, and it won't impact. I mean, it has been impacting, if you want, during this last year, and by the date of maturity, we'll have it fully funded. So Neha, regarding a deep dive into our ask quality.

Established.

Phase out strategy or regulation for banks that basically forced banks to start buying highly liquid.

Liquid assets.

Starting January 2023 to cover 100% of the.

The maturity of the ICSC.

What that means is that by the date of the majority.

And in all the the rest of the banks will have 100% of that money in <unk>.

Short term or maybe not short term by highly highly liquid assets.

That's why in terms of the.

Calculation of computation of their name on any other ratio that uses the total assets our interest bearing assets often numerator that will create because at the end we have roughly speaking like 10% of the of the assets in that.

<unk> that will go away together with the liabilities. So in terms of liquidity, let's say that we will.

And we will reach that maturity with a 100% pre funding.

On that and I don't warrant impact I mean, this has been impacting <unk> during this last year.

Date of maturity, we will have it fully funded.

Regarding our deep dive into our asset quality.

Cristian Vicuña: First, we are very happy with the current performance of our consumer loan book. It's actually very, very helpful, regarding mortgage loans. We are monitoring the performance very closely because there are some specific, very specific parts of the portfolio that are suffering due to the higher rates and the relevant inflation of the last years that have increased their monthly payments. That is something that we are very concentrated on.

First we are very happy with the current performance of our consumer loan book, it's actually very very healthy rigor.

Regarding.

The mortgage loan.

Mortgage loan we are monitoring very closely the performance because there are some specific very specific parts of the portfolio that are suffering due to the.

Higher rates.

<unk>.

Whether on inflation over the last years that all have increased their monthly payments, but it's something that's very concentrated on a specific part of the portfolio in the mortgage book and regarding the commercial portfolio. Let me remind you that we have a load up 14% total market share for the commercial portfolio.

Cristian Vicuña: The next slide shows the total portfolio, 13% of the total portfolio. Regarding the commercial portfolio, let me remind you that we have about 14% total market share for the commercial portfolio. When you look at how it's composed, we have about an 11% market share in the single name, like individual large and middle market and corporates, and about 20% market share in the SME portfolio.

When you look at how it's composed we have about an 11.

11% market share in the single name like individual large middle market on corporate and about 20% market share in the SME portfolio. So we are we are actually quite out east.

The larger part a larger part of the portfolio.

Cristian Vicuña: So we are actually quite at ease with the larger part of the portfolio. Bco Sntndr Chile, BSAC, Construction and real estate that is something that's happening worldwide, very, very short-term funding stressed by highways and the increased cost of materials and construction costs that is impacting that segment. Agricultural, particularly in Chile because of the flooding of the El Nino range in the third quarter that has impacted crops and the hotels and restaurants that have been suffering since 2019 and COVID, and there are specific names there in the semi-portfolio that are stressed.

The commercial middle market and corporate in the Smes, we see freshness in three specific industries construction and real estate has been something that is happening worldwide.

Very very short term funding stressed by higher rates on the increased cost of materials cost.

Construction costs, that's impacting that segment.

Agricultural, particularly in key verticals of the flooding of the El Nino range in the third quarter has impacted crops on the hotels and restaurants have been suffering since 2019 on coffee.

There are specific names there exists in the portfolio.

Cristian Vicuña: So, all in all, we see this as a very contained problem, and I expect that I can give you a little more understanding of how this is going to be working. Very helpful. If I could just verify the numbers.

Yes.

So all in all we see the effects of a very contained.

But.

And I expect that I'll give you a little more understanding of how this is going to be working on.

So perhaps if I can just verify the number you mentioned that you have about lenses and market share in the very large corporate and about 20% market share in the SME SME is quite specific cases USP some problems at the larger accounts.

Neha Agarwala: You mentioned that you have about 11% market share in the very large corporates and about 20% market share in the SMEs, and it is in the SMEs where, in specific cases, you are seeing some problems, but the large accounts are okay. Yeah, sure. Bco Sntndr Chile, BSAC. Thank you so much.

Yes.

Okay.

Thank you so much.

Okay. Thank you very much our next question comes from Mr.

Betancourt from <unk>. Please go ahead Sir.

Hello, Thanks for the presentation.

How do you expect to build that the addressable market size of lower income clients and thus the profitability of the digital initiatives.

Ewald Bittencourt: Okay, thank you very much. For our next question, from Mr. Ewald Bittencourt from BcnVisiones, please go ahead, sir. Hello, thanks for the presentation. How do you expect the addressable market size of lower income clients and thus the profitability of digital initiatives to evolve? Considering the regulators' increasing some loan loss provisioning needs, capital needs... Thank you. So, Thomas, can you could explain a little more your question? So, ideally.

Thank you.

Targeting the segments, considering the regulator is increasing.

Loan loss provisioning needs capital.

Thanks.

Yes.

So.

Thomas can you can you.

Explain a little more.

Your question.

Really good.

Well.

My question is.

How would you expect.

Kim.

What's your expectation for the.

Ewald Bittencourt: My question is, how do you expect... What's your expectation for the total market size of a... Lower Income Client to evolve given that the regulator has increased some loan loss provisioning needs, or at least is targeting to increase those loan loss provisioning needs, and my question revolves around that. If you expect to... and Bco Sntndr Chile, BSAC given that the total size of potential clients could decrease. Yeah, so, well, yes, I'll take it. So, yes, your question implies, more on the economics of lending, which definitely is a revenue source for our business, but in that kind of middle to low part of the pyramid, clients, like most of life, also must look at clients. We can make money without lending much. Let's say our customer acquisition cost for those digital clients, I mean, in the best part of the life cycle, it was like close to one or two dollars. I mean, that was, like, maybe too good to maintain.

Total market size.

<unk>.

Flower in compliance.

M to evolve given that the regulator.

We have increased some loan loss provisioning needs.

At least is targeting to increase loan loss provisioning.

My question, we will surround.

Hum.

Do you expect to.

Still be profitable.

Those digital initiatives you're targeting.

Given that the.

Total space.

Potential clients could decrease.

Yeah. So.

I think it's.

So yes your question to say.

Implies.

More on that.

Economics of lending, which definitely is a revenue source for for our business.

Thats kind of middle to low part of the pyramid clients like most.

Most of life Science also look at clients.

We can make money without lending much sale, where our our customer acquisition cost.

The additional guidance.

The best part of the life cycle.

It was like close to one or two the announcement that looks like maybe it's just too good to maintain now we are closer to that.

Emiliano Muratori: Now we are closer to the... $118.29, and when you look at the lifetime value of those clients, mainly viability- and fortune-worthy businesses, you get the payback close to four to five months. I mean, you have some competition, and so we think that we can make a very profitable business with that number of clients despite the fact that when we consider lending and start penetrating them with different products for lending, we have to factor in Ok, thanks very much. Thank you very much. Our final question comes from Mr. Daniel Mora from Credit Core Capital. Please go ahead, sir. Hi, good morning, and thank you for the presentation. I have a couple of questions.

<unk> 10.

But also customer acquisition cost.

You look at.

The lifetime value of those clients, mainly on liabilities fractionality honest.

Businesses.

Youll see youll get the payback close to four five months in that and then you have some accretion.

No.

We think that we can make a profitable business.

The number of clients.

Despite the fact that when we consider lending on a saar to penetrating them with different products for our lending we have to factor in as you said higher cost and provisioning and also in capital.

With respect to keep being profitable in acquiring those kind of clients. Despite the higher <unk>.

We'll have a good ratio.

Okay. Thanks very much.

Okay.

Thank you very much our final question comes from Mr. Daniel Mora from pretty core capital. Please go ahead Sir.

Hi, good morning, and thank you for the presentation I have a couple of questions. The first one is regarding the performance of the new credit card launch.

Daniel Mora: The first one is regarding the performance of the new credit card loans. We saw during the last quarter a strong pace of growth with double-digit growth, even quarterly and annual. And I would like to understand if you are feeling comfortable with the performance of these loans with these new vintages, or should we start to think that the performance is worse than, for example, the loans that were disbursed at the beginning of 2023 or 2022? That will be the first question. And the second one is regarding the guidance on ROE. Just to understand the 15-17 range that you provide in the presentation is the full-year ROE because if we start the first quarter with a 10% ROE, it means that in the second half of the year, we should be close to 20% or even above.

We saw during the last quarter strong pace of growth overall.

Double digit growth, even quarterly on animal and I would like to understand if you're feeling comfortable with the pro.

Four months of these loans with these new vintages or shall we start to think that the performance is worse than the for example, the loans, but the word is force at the beginning of 2023 or 2022.

We'll be the first question and the second one is regarding the guidance of ROE.

Just understand 15 17 range that you provided in the presentation is the full year ROE because if we start with.

The first quarter with a 10% ROE it means that in the second half of the year, we should be close to the 20% or even above thank you so much.

Daniel Mora: Thank you so much. Hello Daniel, thank you for your question. I mean, starting with the second one, yes, that is the full-year guideline for ROE, and as you mentioned, starting at 10% for the fourth quarter, assuming the path of rates that even after the Wednesday meeting that the central bank stated that the neutral rate of 4% would be reached during the second half, you get ROEs close to 20, which let's say give you that average of 15 to 17% for the full year. And regarding asset quality in I mean, what we are seeing when you look at the graph of the evolution of credit cards, you have to factor in also the effect of inflation. I mean, definitely, in terms of nominal pesos, the credit card business has a very tight link to inflation.

Hello, and thank you for your question I mean, the starting with the second one yes that is the full year guidance for <unk> as you mentioned.

Starting at 10% fourth quarter, assuming the path of rates that.

Even after the Wednesday meeting that the Central Bank has stated that neutral rate of 4% will be reached during the second half.

You'll get an ROE of close to 20%.

<unk> gives you that average of.

15% to 70% for the for the full year.

Regarding asset quality.

Currently I mean, we are comfortable.

What we are seeing.

When you look at the graph of the evolution of credit cards.

You have to factor in also the effect of inflation I mean definitely.

In terms of nominal vessels, the grey card business faster.

Very tight linked to inflation and so when you look at the evolution of the balance is in real terms lets say, we are going back to the pre pandemic levels.

Emiliano Muratori: And so when you look at the evolution of the balances in real terms, let's say we are going back to pre-pandemic levels. I mean, in the end, what happened is that households got a lot of liquidity from the pension fund withdrawals and also from the fiscal help during the pandemic. So part of that liquidity was spent, part of that liquidity was invested, and part of the liquidity was used to pay back debt. Basically, households got some delivery during the pandemic, and now they are going back to normal levels of leverage, and we know quite well that the clients have their profiles, and we are not seeing a specific variation of the new vintages on the credit card.

And what's happened is that households get a lot of liquidity from the pension fund withdrawals on also from the physical.

Hubs during the pandemic so part of that liquidity was a.

Spent.

Liquidity was invested in parallel liquidity was used to pay back debt basically households delever.

Got some delivery.

The pandemic and now they are going back to to normal levels of leverage and we know quite well.

<unk> at their profile and we are not we have not seen a specific deterioration of the new vintages in the credit cards business.

Emiliano Muratori: Perfect. Thank you so much. That will be all from my side.

Perfect. Thank you so much and we'll be able from my side. Thank you.

Operator: Thank you very much. It looks like we have no further questions. I'll pass the line back to the management team for the concluding remarks. 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. We'll now be closing all the lines. Thank you and goodbye. Ninh Ly – www.ninh.co

Okay. Thank you very much it looks like we have no further questions I'll pass the line back to the management team for the concluding remarks.

Thank you all very much for taking the time to participate in today's call. We look forward to speaking with you again soon.

Okay.

Thank you very much. This concludes today's conference call will now be closing outlines thank you and goodbye.

Alright.

Okay.