Q2 2025 Banco Santander-Chile Earnings Call
Ladies and gentlemen, thank you for sending by and I'd like to welcome you Chile second quarter 2025 earnings conference call on the 5th of August 2025.
Please note that at this point, all participant lines are in listen-only mode.
Patricia Perez: Good morning, everyone. Welcome to Banco Santander-Chile's second quarter 2025 results webcast and conference call. This is Patricia Perez, CFO, and I'm joined today by Cristian Vicuna, Head of Strategy and IR, and Andres Anzone, our Chief Economist. Thank you, everyone, for joining us today to review our second quarter performance and results. Today, Andres will start with an overview of the economic environment, and then Cristian will go through the key strategy points and the results of the bank in the second quarter of the year. After that, we will have a Q&A session where we will be happy to answer your questions. So let me hand over to Andres.
After the call, there will be an opportunity to ask questions. So with this, I'll now like to pass the line to Patricia Perez that she Financial Officer. Please go ahead.
Good morning, everyone. Welcome to Vancouver Karter, 2025 results, webcast, and conference calls. This is Patricia, Perez CFO. And I'm joined today by Christian head of strategy and I and and our chief economist.
Thank you, everyone, for joining us today to review our second quarter performance and results.
Today Andres will start with an overview of the economic environment and then Christian will go through the key strategy points and the results of the bank in the second quarter of the year.
Andres Sansone: Thanks, Patricia. On slide four, we have our current outlook. Since our last webcast, the tariff agenda has seen several developments. After postponing the implementation of new tariffs from July 9 to August 1, the US reached trade agreements with multiple economies. This includes tariffs of around 20% on several Asian countries and 15% on the Eurozone. For Chile, the 10% rate will remain in place, which corresponds to the minimum threshold established. Although there were initial threats of a 50% tariff on copper prices, the Trump administration ultimately decided not to apply it to input materials such as concentrates, cathodes, anodes, and copper scraps, all of which were excluded from the final decision. While market reaction has been relatively mute so far, trade and geopolitical uncertainty have increased.
After that, we will have a Q&A session where we will be happy to answer your questions.
So, let me hand over to address.
Thanks Patricia.
on a slide for we have our current Outlook.
Since our last webcast, the Tori agenda has seen several developments.
After postponing, the implementation of new tariffs from United 9 to August 1st, the US which trade agreements with multiple economies.
This include Tariff of around 20% on several Asian countries and 15% on the Euro Zone.
For chile. The 10% rate will remain in place which corresponds to the minimum threshold established.
Although there were initial threats of a 50% tariff on copper prices, the Trump Administration ultimately decided not to upgrade it to input materials such as concentrate. Cathodes are not and corporate scraps all of which were excluded from the final decision.
Andres Sansone: During the quarter, the peso briefly reached 1,000 pesos per dollar following the announcement of the Inauguration Day before returning to the 9.30-9.40 range. However, renewed trade tensions have led to the appreciation of the peso, currently trading around 9.70 pesos per dollar, above our model-based estimate of approximately 9.40. Long-term interest rates in Chilean pesos have declined, narrowing the spread against the US counterparts. On the activity side, preliminary IMASEC figures suggest GDP grew 2.9% year-on-year in the second quarter, or 3% when excluding mining. While we await the full national account report on August 18, which will also include first-quarter revisions, the better-than-expected performance in the first half introduced upward bias to our full-year 2025 growth forecast, currently at 2.1%.
While Market reaction has been relatively mute so far, trade and geopolitical uncertainty has increased.
During the quarter, the peso briefly reached 10,000 pesos per dollar following, the announcement of on, Eurasian day before we returning to the 90 9:30, 9:40 wage.
However, renew trade tensions have led to depreciation of the peso currently trading around 9, 7 0.
Long-term interest rate in peso have declined, narrowing the spread against the US counterparts.
On the activity site preliminary, iMac figures suggest GDP grew 2.9% year on year in the second quarter.
Or 3% on. Excluding mining.
while we await the full national account report on August 18, which will also include
Andres Sansone: In terms of inflation, the second quarter inflation surprised on the downside due to a drop in food prices and discounts associated with Cyberday, with the annual change reaching 4.1% in June. We expect the disinflation process to continue, given the softer demand environment both globally and domestically. Additionally, global trade diversion triggered by tariffs could reduce the prices of imported goods, supporting faster disinflation. We maintain our forecast for the US at 3.6% for the end of 2025 and 3% by year-end in 2026, in line with the central bank expectations, with the risk still to the downside. Last week, the central bank made its first policy rate cut of the year, reducing the benchmark rate from 5% to 4.75% and signaling openness to another cut later this year.
First quarter revisions indicate better-than-expected performance. In the first class, we introduced upward adjustments to our full-year 2025 growth forecast, currently at 2.1%.
In terms of inflation, the second quarter of inflation or price on the downside due to a drop in food prices and discounts associated. With cyber day with the annual change reaching 4.1%.
In June.
we expect the inflation process to continue giving the software demand environment, both globally and domestically
Additionally, global trade, diversion, triggered by Trish could reduce the prices of imported goods supporting faster. This inflation.
We maintain our forecasts for the us at 3.6%, for the end of 2025 and 3% by year, end in 2026, in line with the Central Bank expectation, with the risk due to the knot
Andres Sansone: In our best scenario, the policy rate will close 2025 at 4.5% and reach 4% in 2026, which is close to its neutral level. On slide five, we present recent developments in the regulatory framework. In the context of the fiscal pact, the government announced the submission of a proposal to amend the income tax, with the focus on SMEs. The reform extends most SMEs from the first category tax and also includes benefits for the middle class. The estimated cost of the measures is $1 billion annually, to be offset by higher personal income tax rates for the upper income brackets. The proposal does not include changes to the corporate tax rate for large companies. On the housing front, the mortgage subsidy bill was approved on May 20, 2025. The legislation targets individuals purchasing new homes valued at up to $4,000.
Last week, the Central Bank made, its first policy rate cut of the Year, reducing The Benchmark rate from 5% to 4.75% and signaling openness to another cut later this year.
In our basic scenario, the policy rate will close 2025 at 4.5% and reach 4% in 2026 which is close to its neutral level.
On a slight 5, we present recent developments in the regulatory framework.
In the context of the fiscal pact, the government announced the submission of a proposal to amend the income tax with the focus on SMS.
Summits from the first category tax, and also includes benefits for the middle class.
The estimated cost of the measures is 1 billion dollars annually to be offset by higher personal income, tax rates for the upper income brackets.
The Proposal does not include changes to to the corporate tax rate.
For large companies.
Andres Sansone: It includes a 60-basis point subsidy on mortgages rate as well as a state guarantee of up to 60% for half the loan term, covering up to 50,000 new homes. On June 18, the first auction was held with 12 financial institutions participating and a total of 10 million USD awarded. In this initial auction, Santander secured 18.3% of the total, the highest among our peers and just below our national market share in this product. Finally, regarding the political landscape, 2025 is a presidential election year in Chile. Elections will be held on November 16, with a potential runoff on December 14. Primaries took place on June 29, with only the ruling coalition Unidad por Chile participating. Their candidate, Jeanette Jara, was elected. Right-wing parties chose not to participate in primaries.
On the housing front, the mortgage subsidy bill was approved in May 2025. The legislation targets individuals purchasing new homes valued at up to $400,000. It includes a 60 basis point subsidy on mortgage rates, as well as a state guarantee of up to 60% for half the loan, covering up to 50,000 new homes.
On June 19th. The first auction was held with 12 financial institutions participating and a total of 10 million us. Awarded
In this initial Auction Center, secure 18.3% of the total, the highest among the our peers and just below our national market share in this product.
Finally, regarding the political landscape. 2035 is a presidential election year in Chile.
Elections will be held on November 16th with a potential runoff on December 14th.
Primary took place on June 29th, with only the ruling Coalition in the opportunity participating.
There can be a Janet, Kara was selected.
Andres Sansone: According to the latest Cadern Poll, right candidate José Antonio Cas leads the race with 30% support, followed closely by left-wing candidate Jeanette Jara and center-right candidate Evelyn Mattei with 14%. While the presidential race has gained visibility, we must not overlook the parliamentary elections, where the entire lower house and nearly half of the Senate will be renewed. Polls show that the Chileans remain highly concerned with crime, security, and the business environment. Simulations suggest the right-wing candidates may gain ground in Congress, driven by local campaigns emphasizing security. This implies that even if the left-wing candidate wins the presidency, Congress could lean right, potentially moderating more radical policy initiatives. As such, while some electoral-related volatility is likely in the near term, we believe the longer-term market impact will be limited.
Right wing parties choose not to participate in primaries.
According to the latest Kaden Paul, right? Candidate, Jose Antonio, kast leads the race with 30% support.
Follow closely by left-wing candidate and center, right? Candidate early in my day with 14%
While the presidential rate the race has gained visibility, we must not Overlook the Parliamentary elections where the entire lower house and nearly half of the Senate will be renewed.
Paul showed that the Chilean remained highly concerned with crime security, and the business environment.
Simulation suggests the right wing candidates May gain ground in Congress driven by local campaigns emphasizing security.
This implies that even if the left wing candidate wins, the presidency Congress could know, right? Potentially moderating more radical policy initiatives.
Andres Sansone: However, rising political polarization will likely continue to hinder the possibility of reaching meaningful agreements on legislation aimed at boosting long-term GDP growth. And with that, I will now hand it over to Cristian.
As such while some electoral related volatility is likely in the near term. We believe the longer term Market impact will be limited
However, Rising political polarization will likely continue to hinder the possibility of reaching meaningful agreements on legislation aimed at boosting long-term GDP growth.
Cristian Vicuña: Thanks, Andres. During the year, we have continued to make important advances in achievements in 2025 that we are very proud of, as we can see on slide seven. As we mentioned in our last call, we completed the milestone of migrating our legacy mainframe servers to the cloud in the project that we have named Gravity within Santander. So since the first quarter, we are now operating 100% on the cloud, an important stepping stone for the digital part of our strategy to become a digital bank with branches or worker fest in Cuba. In this line, we have launched some interesting initiatives in recent months. Firstly, we have enhanced the functionality of our smart POSs, allowing merchants to carry out banking transactional services such as receiving deposits and cash withdrawals, top-ups, and payments of utility bills.
And with that, I will now hand it over to Christian.
Thanks Andres.
During the year, we have continued to make important advances in achievements, in 2025 that we are very proud as we can see on slide 7.
As we mentioned, in our last call, we completed the Milestone of migrating our Legacy Mainframe service to the cloud in the project that we have named gravity within Samsung there.
So since the first quarter, we are now operating 100% on the cloud and important, stepping stone for digital part of our strategy, to become a digital bank with branches or work Assets in chip. In this line, we have launched some interesting initiatives in recent months
Cristian Vicuña: It is even possible to open a simple digital account through these points of sales. We have also launched Santander en tu Comuna, a small transactional hub near local district authorities where we can offer financial services to the community. These efficient service points are extending our footprint in communities, coming even closer to our clients in their day-to-day life. With a longer-term view of expanding our client base, we have enabled a simple savings account for children from birth, looking to compete in this product that, up until now, has been mainly centralized through the state bank in Chile. Overall, these initiatives aim to increase transactionality and strengthen our funding base going forward. During the first semester of 2025, we have continued to issue debt actively on the local and international market, issuing in Swiss, France, Japanese yen, and the US dollar.
Firstly, we have enhanced, the functionality of our smart PSS, allowing Merchants to carry out, banking transactional services, such as receiving, deposits and cash withdrawals, top-ups, and payments of utility bills, it is even possible to open a simple digital account uh, through these points of sales.
We have also launched something a small transactional, have near Local District authorities where we can offer Financial Services to the community.
This efficient service points are extending our footprint in communities coming even closer to our clients in their day-to-day life.
With a longer-term view of expanding our client base, we have enabled a simple savings account for children from birth. We are looking to compete in this product that up until now has been mainly centralized through the State Bank in Chile.
During the first semester of 2025, we have continued to issue debt actively on the locals and international market.
Cristian Vicuña: We have also been highly recognized on several fronts. We continue to be highly ranked in terms of sustainability, with an A grade in the MSCI Sustainability Index and 19.2 points in Sustainalytics, with low risk. We are proud to have won the best bank in Chile by Euromoney and Best Private Bank, and we also won the Top Employer certification for the seventh consecutive year. Furthermore, the mutual funds that we broker won over 40 awards in different categories. On slide eight, we can see that yet again, the bank produced impressive results, reaching an ROE of 25.1% in the first six months of 2025, with a net income of 550 billion pesos and an ROE of 24.5% in the second quarter of the year, with a net income of 273 billion pesos. This is the fifth consecutive quarter with an ROE above 20%.
Issuing in Swiss Francs, Japanese Yen and US dollar.
We have also been highly recognized on several fronts. We continue to be highly ranked in terms of sustainability with an a grade in the msei sustainability, index. And 19.2 point in sustainability with low risk,
we are proud to have won the best bank in Chile by Euro money and best private bank.
And we also want the top employer certification for the 7 consecutive year.
Furthermore, the mutual funds that we broker 1 over 40 Awards, in different categories.
On, slide 8. We can see that yet again. The bank produced, impressive results.
Cristian Vicuña: As we will see on the coming slides, this is a result of sustained, strong profitability in our main income lines, good cost control thanks to our strategy focused on a digital bank with worker fest. On slide nine, we can see how our rapidly expanding client base is leading to higher fee generation. We currently have 4.5 million clients, of which around 60% actively engage with us, and some 2.3 million are digital, accessing the online platforms on a monthly basis. The number of current accounts is increasing 10% year-on-year, driving the 7% and 8% growth of our active clients and digital clients respectively. With this increase in the client base, we are seeing a 12% yearly increase in credit card transactions and a 19% increase in mutual funds that we broker. Overall, our clients maintain high satisfaction levels with the bank and our product offering.
Reaching an Roe of 25.1% in the first 6 months of 2025, with a net income of 550 billion pesos and a narrow e of 24.5 in the second quarter of the year, with a net income of 273 billion pesos. This is the fifth consecutive quarter with an Roe above 20%.
As we will see on the coming slides, this is a result of sustained strong profitability in our main income lines. Good cost control. Thanks to our strategy focused on a digital brand with workers.
On slide 9, we can see how our rapidly expanding client base. Is leading to higher fee, generation.
We currently have 4.5 million clients of which around 60% actively engage with us and some 2.3 million Rd dog, accessing the online platforms on a monthly basis.
The number of current accounts is increasing 10% year on year.
Driving the 7% and 8% growth of our acting clients and deal. Clients are respected.
With this increase in the client base, we are seeing a 12% yearly increase in credit card transactions and a 19% increase in mutual funds that we broker.
Cristian Vicuña: Furthermore, we continue to expand our footprint among companies, where we have increased the number of business current accounts by 25% in the last 12 months. This is explained by the simple business accounts we offer to smaller companies and the integrated payments offered through GetNet. We now have more than 212,000 GetNet clients, representing an annual increase of 21%, and GetNet now has a market share of 20% in terms of numbers of transactions. As we can see in the table on the right, the increase in our client base and proud usage is translating into high fees and results from financial transactions, growing 16.3% year-on-year. Our main products, such as account fees, mutual fund fees, and GetNet, continue to show strong results in the quarter, while card fees follow similar trends to the first quarter this year.
overall, our clients maintain High satisfaction levels with the bank and our product offering
Furthermore, we continue to expand our footprint among companies where we have increased the number of business, current accounts by 25% in the last 12 months.
This is explained by the simple business accounts we offer to smaller companies, and they integrated payments offered through Ginette. We now have more than 212,000 Ginette clients, representing an annual increase of 21%. As a result, we now have a market share of 20% in terms of the number of transactions.
as we can see in the table, on the right,
The increase in our client base and proud usage is translating into high fees and results from Financial transactions growing 16.3% year on year.
Cristian Vicuña: On slide 10, we can see how our net interest margin has been improving over the last 12 months to stabilize in levels of around 4.1%. In the last year, our NIM has improved some 100 basis points. Firstly, when we compare the first six months of 2025 to those of 2024, we have a slightly higher UF variation, which, as you know, directly affects our readjustment income. The first half of 2024, our net interest margin was negatively affected by our balance sheet position related to the FCIC, the credit order item given to us by the central bank. However, after the final payment of debts in July 2024, we have seen a marked improvement, representing 60 basis points of NIM in the period. Our tight control of our cost of funds has led to a further 50 basis point improvement in our net interest margin.
Our main products, such as account fees, mutual fund fees, and getnet continue to show us from results in the quarter. While card fees follows similar Trends to the first quarter this year.
On slide 10. We can see how our net interest margin has been improving over the last 12 months to stabilize in levels of around 4.1%.
In the last year, our name has improved some 100 basis points.
Firstly, when we compare the first 6 months of 2025 to those of 2024 we have a slightly higher UF variation which as you know, directly affects our Readjustment income.
The first half of 2024, our net interest margin was negatively affected by our balance sheet position related to the FCIC and the credit line given to us by the central bank.
However, after the final payment of this in July 2024, we have seen a market Improvement representing 60 basis points of naming the period.
Cristian Vicuña: This has been compensated by a contraction of interest earned on our assets related to the decrease in our available for sale portfolio due to the payment of the FCIC and a stable loan book year-on-year. In the quarter, our net interest margin remains stable, following the solid trends of the first quarter of the year. On slide 11, we can see how our recovery of income generation and tight cost control has improved our key performance metrics. Our efficiency ratio reached 35.3%, the best in the Chilean industry in 2025 so far, and our recurrence ratio reached 62%, meaning that over 60% of our expenses were financed by our fee generation.
Our tax on 12th of our cost of funds has led to a further. 50 basis, point improvement in our net, interest margin
This has been compensated by a construction of interest earned on our assets related to the decreased in our available for same portfolio, due to the payment of the fcic.
Trends of the first quarter of the year.
On slide 11.
We can see how.
Our recovery of income generation and tight cost control has improved, our keeping performance metrics.
Cristian Vicuña: During the first half of 2025, we have seen an increase in our operating expenses related to the migration of our mainframe server to the cloud, leading to an increase in administrative expenses, mainly in the first quarter of the year. However, overall, our cost grew below inflation in the year so far. In the quarter, we continue to look for efficiencies in our branch network, closing some traditional branches while we remodel and refurbish to ensure a more efficient usage of space while upgrading aesthetic appearance in line with our work at Palo Loco and Field. It is thanks to these adjustments to our contact points with clients, along with the evolution of our digital platforms, that we have been able to achieve these impressive levels of operating efficient performance. On slide 12, we show an overview of our cost of risk and asset quality.
Our efficiency ratio reached 35.3%, the best in latitude, and Industry in 2035, so far and our reference ratio reached 62%, meaning that over 60% of our expenses were financed by our fee generation.
During the first half of 2025, we have seen an increase in our operating expenses related to the integration of our Mainframe server. To the cloud, leading to an increase in administrative expenses, mainly in the first quarter of the year. However, overall our cost group below inflation in the year so far,
In the quarter. We continue to look for efficiencies in our Branch Network closing. Some traditional branches while we removal and refurbished to ensure a more efficient usage of space while upgrading aesthetic appearance in line with our workflow look and feel.
It is thanks to this adjustment to our contact points with clients along with the evolution of our ebook platforms that we have been able to achieve this impressive levels of operating efficiency performance.
Cristian Vicuña: As we have seen in the previous quarter, our cost of trade has been higher than our historical levels due to an increase in non-performing loans in the recent quarter. Also, it is important to note that in June 2025, similar to the previous year, we adjusted the evaluation of guarantees in the commercial loan portfolio as part of our review of the provisioning models. This year, we mitigated this impact by using 20 billion pesos of bonus trade provisions established in previous years. From the graph on the right, you can see that our NPL and impaired portfolio showed a reduction in absolute value and also a ratio in terms of total loans despite a stable loan book, demonstrating tangible improvements in our asset quality and early signs of asset quality recovery. On slide 13, we can follow the improvements by product.
On slide 12, we show an overview of our cost of risk and asset quality.
As we have seen in previous quarter, our cost of credit has been higher than our historical levels due to an increase in non-performing loans in recent quarter. Also, it is important to note that in June 2025, similar to the previous year, we adjusted the evaluation of guarantees in the commercial loan portfolio. As part of our review of the provisioning models,
This year, we mitigated this impact by using 20 billion pesos of golden. Try provision established in previous years.
From the grasp on the right. You can see that our npl and impaired portfolio, showed a reduction in absolute value and also a ratio in terms of total loans, despite
Stable loan books demonstrate tangible improvements in our asset quality and early signs of asset quality recovery.
Cristian Vicuña: Firstly, in our mortgage loan book, we can see that in absolute value, the non-performing loans have now stabilized, while the impaired loans increased marginally as more delinquent clients renegotiated their mortgage. Overall, we have seen clear signs of a stabilization of the asset quality of this portfolio. Regarding commercial loans, the bank focused efforts on improving the portfolio with several renegotiation initiatives and writing off some individual clients. With this, we have seen an absolute value of non-performing loans and impaired loans fall relevantly, and our NPL ratio is now at 3.6%. On the other hand, our consumer loan books have remained healthy during this cycle, thanks to our positioning of consumer lending to the mid to high-income sectors.
On slide 13. We can follow the improvements by product, firstly, in our mortgage loan book, we can see that in absolute value, the non-performing loans, have now stabilized while the inferred loans, increased marginally as more delinquent clients renegotiated, their mortgage overall. We have seen clear signs of stabilization of the asset quality of this portfolio.
Regarding commercial loans, the bank Focus efforts on improving the portfolio with several renegotiation initiatives and riding up some individual clients with this. We have seen an absolute value of non-performing loans, and in Fair loans for relevantly and our npl ratio is now at 3.6%
On the other hand.
Cristian Vicuña: On slide 14, we can see the CET1 ratio reached 10.9% in June 2025, far above from our minimum requirement of 9.08% for December 2025, and demonstrating some 30 basis points of capital creation in the last 12 months. This was driven by our income generation in 2024 and 2025, and compensated by the 70% dividend payment of our 2024 profits and the current 60% dividend provision of our 2025 profits accumulated so far. As we mentioned in our last call, we have a 25 basis point Pillar 2 charge, of which we have fulfilled the 50% required by our regulator in June 2025. Recently, at the beginning of July, the CMF published the definitive guidelines for Pillar 2 in Chile. The regulation adjusts the metrics related to a market risk in the banking book and the definition of when a bank qualifies to be a prioritized bank.
Our consumer lending in London has remained healthy during this cycle, thanks to our positioning of consumer lending to the mid- to high-income sectors.
On, slide 14. We can see the cet1 ratio reached 10.9% in June 2025 far above from our minimum requirement of 9.08% for December 2025 and demonstrating some 30 basis points of capital Creation in the last 12 months. This was driven by our income generation in 2024 and 25.
And compensated by the 70% dividend, payment of our 2024 profits and the current 60% dividend provision of our 2025 profit accumulated, so far.
As we mentioned in our last call, we have a 25 basis point pillar tool charge of which we have fulfilled.
The 50% required by our regulator in June 2025, recently at the beginning of July, the cmf published, the definitive guidelines for pillar 2, Chile.
Cristian Vicuña: According to the CMF report, 10 banks could be classified as priority banks. This is the same number of banks who currently have a Pillar 2 charge. Banks will have to start reporting the new metrics related to the market risk of the banking book in December 2025, and the other aspects will be implemented starting with the self-assessment of regulatory capital report to be submitted in April 2027. So let's start. Let's look at our outlook for the rest of 2025 on slide 16. Firstly, we are considering a macro scenario of GDP growth of around 2.1, with the US variation of 3.6% and an average monetary policy rate of 4.9%. Given the demand dynamics that we have seen this year so far, we are lowering our expectations for loan book growth to low single digits.
The regulation adjusts the metrics related to the market risk in the banking group and the definition of when a bank qualifies to be a prioritized bank.
According to the CMS report, 10 Banks could be classified as priority Banks. This is the same number of banks Who currently have a pillar to charge.
Banks will have to start reporting the new metrics related to the market risk of the banking book in December, 2025, and the other aspects will be implemented. The starting with the self-assessment of regulatory Capital report to be submitted in April 2027.
Let's look at our outlook for the rest of 2025 on the slide 16.
Firstly, we are considering a micro scenario of GDP growth of around 2.1%, with the U.S. variation of 3.6%. An average monetary policy rate of 4.9%.
Cristian Vicuña: At the beginning of this year, we were expecting a reactivation of the commercial loan book with stronger trends coming from the consumer loan book too. However, now we are starting August, and we continue to see weak demand. And given the upcoming elections and the global uncertainty in the background, we expect our loan book to grow low single digits. On the other hand, our net interest margin should remain within guidance, with the third quarter impacted by the lower expected inflation. We expect our non-NII guidance to grow high single digits, with further interchange fee regulation not expected until the end of the year. Our efficiency levels should remain around the current levels, so mid-30s.
Given the demand dynamics that we have seen this year, we are lowering our expectations for loan book growth to low single digits. At the beginning of the year, we were expecting a reactivation of the commercial loan segment with stronger trends coming from the consumer loan group as well. However, now we are starting in August and we continue to see weak demand. Given the upcoming elections and global uncertainty in the background, we expect our loan book to grow in low single digits.
On the other hand, our net interest margin should remain within Guidance with the third quarter impacted by the lower expected inflation.
We expect our non knee guidance to grow High, single digits with further. Interchange fee regulation, not expected until the end of the year.
Cristian Vicuña: Considering that we now see better trends in terms of asset quality, but the cost of risk was 1.39% year to date, we expect the cost of risk to improve slightly during the second semester to finish the year around the 1.35% area. Overall, we continue to see solid profitability in what remains of the year, so we are expecting ROEs of 21% to 23% range. With this, I finish the presentation, so now we can start the Q&A session.
Our efficiency levels should remain around the current levels. So mid-30s considering that we now see, better terms in terms of asset quality.
But the cost of risk was 1.39% year to date.
We expect the cost of risk to improve slightly during the second semester to finish the year around the 1.35% area.
Overall, we continue to see solid profitability in what remains of the year. So we are expecting Roe's of 21 to 23% range.
Luis (Operator): Thank you very much. We'll now be moving to the Q&A part of this call. If you'd like to ask a question, please press star two on your phone. That is star two. And if you're dialed in by the web, you can also request to ask a voice question. We'll wait a few moments for the questions to come in. Okay, so our first question is from Ernesto Gabilondo from Bank of America. Your line is now open. Please go ahead.
With this, I finished the presentation. So now we can start the Q&A session.
Thank you very much. We'll now be moving to the Q&A part of this call.
If you'd like to ask a question, please press star 2 on your phone. That is star 2. And if you dialed in by the web, you can also request to SK voice. Question or wait, a few moments for the questions to come in.
Ernesto Gabilondo: Thank you. Good morning, everyone. Patricia, Andrés, and Cristian. Thanks for the opportunity to ask questions. I have a couple from my side. The first one will be on your cost to risk. So as of the second quarter, consumer loans represent 15% of the total loan book. So what do you see its contribution in the future, and how would you see the sustainable cost to risk for Santander Chile? And my second question is on your long-term sustainable ROE. As you guided, it could be between 21% and 23% for this year. But how should we think about it in the medium term, and what would be the common equity tier one ratio that you will be assuming under that scenario? Thank you.
Okay. So our first question is from Ernesto gabilondo from Bank of America. Your line is now open. Please go ahead.
Thank you. Hi. Good morning, everyone, Patricia and dreads and Christian in. Thanks for the opportunity to ask questions.
Um, I know a couple of for my side, the first 1 will be on your culture risk. Um, so as of the second quarter, consume alone to present 15% of the total loan book. Um so what do you see its contribution in the future? And how you would you see the sustainable cost to risk for for sent on their children?
Cristian Vicuña: Hi, Ernesto. Thank you for your questions. So regarding the cost of risk and the consumer part of the portfolio, so we are seeing some healthy growth demand from credit cards that will translate into consumer loans in the medium horizon. So we expect that the consumer lending demands continue to be a little bit above our average growth of loans, right? So with that in mind, we are seeing very healthy metrics from our cost of risk of the consumer lending portfolio. And this is what makes us believe that we will be in this 1.35 range, so a slight improvement in the second half of the year for the full portfolio. And we expect to increase slightly the contribution of the consumer portfolio within the total loan book.
Um, and then my second question is on your long-term sustainable ROE, as you guided, it would be between 21% and 23% for this year. But how should we think about it in the medium term? And what would be the common equity Tier 1 ratio that you will be assuming in that scenario? Thank you.
Hi Ernesto. Uh, thank you for your questions. So, um, regarding the cost of risk and the consumer part of the portfolio. So we are seeing some healthy uh growth uh, demand from um from uh credit cards that will translate into Consumer loans, uh in in the in the medium Horizon. So we we we expect that the the consumer lending demands continue to be uh little bit above our uh average growth of loans, right?
So, um, with that in mind, we are seeing very healthy, uh, metrics from our cost of risk of the consumer lending portfolio.
And uh, This Is What Makes Us believe that we will be in this 1.35 range. So a slight Improvement in the second half of the year for the full portfolio.
Cristian Vicuña: So regarding your long-term ROE, so we reviewed our long-term ROE recently, about a couple of quarters ago, from a range of 17% to 19% to about 20%. So what we have seen after the pandemic period and the high-interest rate environment is that most of the transformation decisions that we have implemented in terms of our structure and the evolution of our digital stack are allowing us now to deliver very, very efficient levels for our retail universal banks, so mid-30s. With having that in mind and allowing us our fees and non-NII income to grow constantly as we are expanding our customer base, we're confident we're going to be above 20% ROE for the long term.
And, um, and we expect to increase slightly the contribution of the consumer portfolio within the total loan.
um, so regarding your long-term, Roe
So, uh, we reviewed our long-term arrow. We recently, uh, about a couple of quarters ago, from a range of 17% to 19%, to about 20%.
Meant that in terms of our structure and the evolution of our details stack are allowing us now to deliver very very efficient uh levels for our retail Universal Banks. So mid-30s uh with having that in mind and allowing us our our
Ernesto Gabilondo: Excellent. No, thank you very much. Just to follow up in terms of the cost to risk, so yeah, I understand 1.35 that area for this year, but looking maybe to the next years, are you expecting this ratio to remain relatively at that level considering this slightly higher contribution in consumer loans, or how should we think about this ratio in the same medium term?
Our fees are not an AI income to grow, uh, handsomely. As we are expanding our customer base, we're confident we are going to be above 20% for the long term.
Cristian Vicuña: As we mentioned in the call, we are going slightly above our long-term average, so we should have a normalization. It's not going to be a fast normalization as if the issues were coming from the consumer lending portfolio. Those issues tend to solve faster. Issues in the mortgage portfolio tend to digest more slowly. So we are going to gradually go back to levels closer to 1.2% cost of risk. So that's going to take a couple of periods. I'm missing the part of your CET1 assumptions, so that should be closer to 11% area. So where we are now, we are in, we feel like comfortable.
Excellent. No, thank you very much just to follow up in terms of the customer risk. So yeah, I understand 1.35, but area for this year but looking maybe to the next years, uh, are you expecting to remain relatively at at that level considering this slightly higher contribution in Consumer loans or or how should we think about this? This ratio as, as we mentioned in the call, we are going slightly above our long term average.
So, we should have a normalization. It's not going to be, uh, uh, a fast normalization as if it's the the, the the issues were coming from the consumer. Lending portfolio. Those issues tend to solve faster issues in the mortgage portfolio. You can to digest more slowly. So we are going to gradually go
Ernesto Gabilondo: Okay. Excellent. That was super helpful. Thank you very much.
Go back to levels closer to 1.2% cost of risk. Uh, that that's going to take a couple of periods. Uh, uh, I'm missing. I'm missing the part of your ct1 assumptions, so that should be closer to 11% area. So, where we are now we are we are we, are we feel like comfortable,
Cristian Vicuña: Thank you, Ernesto.
Okay, excellent. Now super helpful. Thank you very much.
Luis (Operator): Thank you very much. Our next question is from Tito Labarta from Goldman Sachs. Your line is now open. Please go ahead.
Thank you.
Thank you very much.
Tito Labarta / Andrew Gary: Hi. Good morning. Thank you for the call and taking my question. A couple of questions also. Again, first on your loan growth, as you mentioned, it seems mostly weakness in the commercial book, maybe partly going into the elections as well. So I mean, do you think going into next year, once you're past the elections, do you expect the loan growth to potentially accelerate? And if so, how much? And you know the consumer, you mentioned, you know auto credit cards are doing fairly well, but should the rest of the consumer portfolio also accelerate sort of after elections? Just to think about what kind of loan growth we could think about for 2026. And then a second question on fees. You know good performance there continues to grow at a fairly healthy pace.
Our next question is from tto labart. From Goldman Sachs, your line is now open. Please go ahead.
Hi, good morning. Thank you for the call and taking my questions, a couple questions. Also again, first on your loan growth as you mentioned and it seems mostly weakness in the commercial book. Maybe partly going into the elections as well. So I mean do you think going into next year once you're past the elections? You expect the, the loan growth to potentially accelerate and if so how much and you know, the consumer, you mentioned. Yeah. Auto credit cards are doing fairly well, but should the rest of the consumer portfolio. Also, accelerate sort of after elections. Just just to think about, you know, what kind of loan growth we could think about for 2026.
Tito Labarta / Andrew Gary: Yeah, also kind of thinking more beyond 2025 since you have your guidance for this year. But is this high single-digit growth that you're seeing, do you think that can sustain as well into next year? I know you said that there shouldn't be any impact, I guess, on fees until year-end, but do you expect some new regulation to potentially impact '26 as well, just to think about longer-term fee growth? Thank you.
Cristian Vicuña: Thank you, Tito. Let me take the fee question, and I'll pass the award to Patricia for the loan books expansion. Well, first, it's a little too early for us to start into the 2026 guidance, but let me try to give you some clues of what to expect. So this year, performance has been driven by the increasing fees explained by the expansion of our customer base. So that dynamic should continue, and that's why we are aiming, as part of our core strategy, to grow the non-NII lines handsomely and above our asset growth. So that's something that should be expected.
Uh, and then the second question on fees, you know, good performance. There continues to grow at a fairly healthy Pace. Um, yeah. Also kind of thinking, more Beyond 2025 since you have your guidance for this year but is this High single digit growth that you're seeing? Do you think that can sustain as well into next year? Do you? I know you said that there shouldn't be any um, impact, um, I guess on feed until year end, but do you expect some new regulation in to potentially impact 26 as well? Just to think about longer term free growth. Thank you.
Thank you, do let me take the fee question and I'll pass the word to Patricia for the long books expansion. Well, first first it's it's it's a little too early for us to start into the the 2026 guidance. But let me, let me try to give you some clues of what to expect. So, um, this year, uh, performance has been driven by the increasing fees explained by the expansion of our customer base, so that Dynamic should continue. And that's why we are aiming. As part of our course, strategy to grow the non nii lines,
Cristian Vicuña: There are a couple of moving parts that we are seeing for next year, and the first one, and maybe the most important one, is the impact that can come from a further interchange fee limit on prices that we might suffer in the final quarter of this year, right? So there are some studies being done by the Ministry of Finance and the commission that is assigned for this decision, and we expect that to come to a ruling by year-end. So if you remember our initial assessment of this two-movement interchange fee cap, it was about 50 billion pesos of total impact, and we only have seen half of that. So that's one thing to consider moving on to 2026. Having said that, we are still expecting that our non-NII income grows faster than the loan book. And with that, I'll pass the word to Patricia.
Constantly and above our asset growth. So that's something that that should be expected. There are a couple of moving parts that we are seeing for next year and the first 1 and maybe the most important 1 is the impact that can come from, uh, further interchange fee, uh, limits on prices that, uh, we, uh, might suffer in the final quarter of this year, right? So there are some studies being done, uh, by the Ministry of Finance and the commission that is assigned for this decision. And we expect that to come to our ruling by year end.
so, if you remember our
Initial assessment of, uh, of this 2 movement. Uh,
Pickup.
Patricia Perez: Thanks, Tito, for your question. Regarding the loan growth, we are seeing, like on the retail part of our portfolio, as Cristian already mentioned, quite healthy growth on the consumer loan. Consumer lending shows already have shown signs of a pickup, with credit card loans growing around 10% year-on-year, and this should lead to more demand for installment loans. And regarding SMEs, we continue to grow strongly. On the mortgage portfolio, we are seeing that this subsidy bill that was passed on May should help to activate the real estate market and mortgage loans as well going forward. And as you already mentioned, large corporate has grown lower than we were expecting at the beginning of the year, and this is our big question mark.
Uh it was about 50 billion pesos of total impact and we all on only have seen half of that. So that's uh 1 thing to consider moving on to 2026 26. Having said that we are still expecting that our non Nye income grows faster than the loan group. Uh and with that I'll pass it over to Patricia.
Thanks Peter for your question uh regarding the loan growth. Um we are seeing like on the retail part of the of our portfolio, as Christian already mentioned um quite Healthy Growth uh on the like
Consumer loan and consumer Landing shows. Um, already have shown signs of a pickup, uh, with credit card, loans growing around 10% year on year, and this should lead to more demand for installment loans.
And regarding SMS, uh, we continue to grow uh, strongly.
On the mortgage portfolio. We are seeing that this subsidy bill that was passed on. May should help to activate the real estate market and a mortgage to announce as well going forward.
and um, as you already mentioned large, corporate has been um,
Patricia Perez: We think that this is too early to say something regarding loan growth for next year, but obviously, the political landscape could help to reactivate all the investment projects and projects and demand from larger corporates.
Tito Labarta / Andrew Gary: Okay. That's very clear. Thanks, Cristian. Thanks, Patricia.
Has grown, um, lower than we were expected. We're expecting at the beginning of the, of the year. And this is our big, uh, question mark. We, uh, think that this is too early to say, something, regarding Long growth for next year. But obviously the political landscape could help to reactivate and all the investment project and and projects and demand from large larger corporates.
Cristian Vicuña: Thank you, Tito.
Okay, that's very clear. Thanks Christian, thanks Patricia.
Luis (Operator): Thank you very much. Our next question is from Pietro Nobili-Ruz from BTG. Your line is now open. Please go ahead.
Thank you.
Thank you very much.
Pietro Nobili-Ruz: Hi. Thank you all for the presentation. My question is very related to the last one, but I would like to know, given that the situation, the economic situation in the last years, your total loan portfolio changed the structure and the proportions, and what are your initiatives to change this and, for example, come back to a 17% in the commercial, no, sorry, consumer portfolio? And how long can it take this to come back to the numbers of the eight years before?
Our next question is from, Petro know, Billy RSE from btg. Your line is now open. Please go ahead.
Hi, thank you all for the presentation. My question is very related to the the last 1 but I would like to know given that the situation economic situation in the last year, your total loan portfolio, changed the structure and what are your initiatives to change this? And for example, come back to a 17% in the
Commercial. No. Sorry consumer portfolio.
And how long can take this to come back to the
Cristian Vicuña: Thanks for the question, Pietro. So organically, we will try to grow our consumer lending book, but without rushing it because nothing good comes from rushing growth in those portfolios. You have to be a very, very smart and conservative lender in that area. So that's what we're trying to do. We're trying to achieve growth with a good deployment of our capital there. There are some other initiatives that we might tap into. We might try to rotate some risk or try to securitize some part of the portfolio if some changes in regulation are implemented that we are currently discussing with the relevant players and regulators in order to reignite the securitization system within the country. So that could help, but it's going to take a while.
Number of days before.
Thanks for the question, petrol. So, um,
Organically. We will try to grow our consumer lending book, but uh, without rushing it because nothing good comes from rushing, growth in the, in those portfolios, right? We, you have to be a very, very smart and, uh, and conservative lender, uh, in that area. So that's what we are trying to do. We are trying to achieve growth, uh, with with, uh,
with, uh, a good deployment of our Capital there.
Cristian Vicuña: It's not going to be a fast movement that we'll, let's say, we are going to converge in 24 months to that ratio. It's something that's going to be gradual, but we're taking the steps one by one.
Um, there are some other initiatives that, um, we might tap into like we might try to rotate some risk or try to secure ties, some part of their portfolio. If uh, some changes in regulation are are implemented that, uh, we are currently, uh, discussing with the relevant players, uh, and Regulators, uh, in order to to reignite, uh, the the security Sation system within within the country, uh, so that could help.
Pietro Nobili-Ruz: Okay. Thank you.
Um but uh it's going to take a while. It's not going to be a fast movement that will. Let's say we are going to convert in 24 months to that ratio. It's something that's going to be gradual but we're we're taking the the, the steps uh, 1 by 1.
Okay, thank you.
Luis (Operator): Thank you. Our next question is from Niha Agarwala from HSBC. Your line is now open. Please go ahead.
Thank you.
Our next question is from Niha agarwala from HSBC. Your line is now open. Please go ahead.
Neha Agarwala: Hi. Congratulations on the results. Very quickly, what are the main risks that you see around the business with the upcoming elections? We are definitely seeing muted loan growth. But beyond that, do you see any other risks from the macro side or from any other risks on the asset quality that we should be mindful of for the rest of the year? Thank you so much.
Cristian Vicuña: Thanks for the question, Niha. Maybe Andreas, do you have to have something to say here?
With the upcoming elections. Uh, we are definitely seeing muted, uh, loan growth, but beyond that, do you see any other risks? Uh, from the macro side or from any, uh, other risks on the uh, asset quality. Um, that we should be mindful of for the rest of the year. Thank you so much.
Andres Sansone: Yes. From the macro perspective, the main risks to Chile's outlook continue to stem from abroad, particularly US-China trade dynamics. And in that sense, a sharper than expected global slowdown, especially in the US, could have a meaningful negative impact on Chile's domestic economic momentum.
For the question Niha. Uh, maybe unless you have to say you? Yes, yes. Uh, from the macro perspective, the main ways to see the how look continue to estimate from abroad.
Particularly the US. China trade Dynamics.
Cristian Vicuña: So as Andreas mentioned, most of our risks, Niha, are currently being assessed from abroad. We are seeing a relatively positive scenario for the political elections, given the surveys that we are seeing that suggest a more market-friendly environment. But having said that, the results from the primary rounds of elections actually increase the central scenario, but also increase the tail scenarios, right? So a more extreme probability. So that's also something to monitor.
And in that sense, a sharper-than-expected global slowdown, especially in the U.S., will have a meaningful negative impact on domestic economic momentum.
So so as as of this mentioned, most of our risk Nina are are are currently being assessed by by from abroad.
um, we are
we are seeing, uh,
A relatively positive, uh, scenario for the political elections, giving the surveys that we are seeing that uh, suggest some more markets currently environment.
But having said that, the results from the primary rounds of election, actually increase the central scenario, but also increase the, the tail scenario, right? So a more extreme probability. So that's also something to to monitor
Luis (Operator): Okay. Thank you. Our next question is from Daniel Mora Ardila from Credit Corp. Your line is now open. Please go ahead.
Okay, thank you.
Daniel Mora Ardila: Hi. Good morning. Thank you for the presentation. I have just one question regarding the NPLs. I would like to understand where should the NPL normalize in the coming quarters or tiers? Because if you compare to the industry level, Santander's NPL is quite high. And due to this situation, I would like to understand what exactly are the reasons behind having a commercial LPL well above the industry level and also a mortgage NPL well above also the industry level. I would like to understand if this was related to the bank's strategy, just the loan mix. I would like to clarify that situation. Thank you so much.
Our next question is from Danielle Ma Ardila from Credit Corp. Your line is now open. Please go ahead.
Hi, good morning, thank you for the presentation. I have just 1 question regarding to the mpls. I would like to understand. Um, where should the MPL normalizing in the coming quarters or 2 years? Because if you compared to the industry levels and and P is quite high and due to this, uh, situation, I would like to understand what exactly are the reasons behind having a commercial LPL?
Well, above the industry level.
Cristian Vicuña: Thank you, Andrian. So let's take this part by part. So regarding our NPLs in our consumer lending portfolio, actually, those NPLs are really above the average of our peers and show a very healthy performance. This is the most asset part of the portfolio. So a deterioration here is what impacts the NPLs, also the P&L, the most. Then regarding why our commercial portfolio shows some structurally higher NPLs compared to the peers and industry, this is mostly because we have a higher penetration of SME lending within our total commercial loan book. So about a third of our total loan book is concentrated on SME lending. And this is something that is very related to our strategy to become a universal bank. We cater to the regional customer. That's our specialization.
And also uh mortgage MPL, well above also the the industry level. I would like to understand if this was related to uh, the banks strategy. Uh, just the loan mix. I I would like to clarify that
Thank you so much for that situation.
Thank you Anna. So, uh, let's take this part by part. Uh, so regarding our npls in our consumer lending portfolio. Actually, those npls are, are really above the average of our peers on, on a show, a very healthy performance. Uh, this is the most, uh, acid part of the portfolio. So, a deterioration here is what impacts the npls, also, the pnl, the most
uh, then, uh
Our commercial portfolio shows some structural higher npls compared to the peers and Industry. This is mostly because we have a higher penetration of SME, lending within our total commercial loan group. So about a third of our total loan book is concentrated on SME lending uh and this is something that is very related to our strategy to become
Cristian Vicuña: And that's expected to continue structurally, right, to having a higher NPL ratio, but that's mostly explained by how we view ourselves as a more retail-oriented operation. And finally, regarding the situation on the mortgage portfolio, we have explained this in the past, but we have about a 30% of our mortgage book that reprices on a variable rate. And this is higher than the average of the industry, right? So the typical lending mortgage will be originated on a 20 to 25-year fixed UF product. And we have about a 30% that is lent on a yearly UF rate portfolio. That's the part that suffered the most during 2023 and early 2024, where real rates in UF were high, and that repricing damaged the payment capability of some of our customer base. And that's reflecting in the 2.7% NPL that we are seeing as of now.
A universal Bank, we cater to the retail customer. Uh, that's our specialization and that's, that's expected to continue structurally right to having a higher end, kill ratio. But, that's mostly explained by how we we with you ourselves as a more retail oriented operation.
And uh, finally regarding the, the situation on, uh, the mortgage portfolio.
Uh, we have explained this uh, in uh, in the past. But uh we have about a 30% of our mortgage group that uh reprises on a variable rate.
And this is, uh, uh, higher than the average of the industry, right? So the typical lending.
Cristian Vicuña: The good news is that that real rate scenario of US is now below 2%. So the repricing problem, it's not happening anymore. And we are now focused on providing solutions to our customers so they can renegotiate and start paying again. So what we're seeing now is that that part of the portfolio is going to remain stable at levels of 2.7%. And you can see that in absolute terms, it has remained for the last six months pretty much stable. And that's what we expect to start improving on the next quarters. But that's going to be a very gradual recovery. So all in all, we are still expecting some better improvement of the total NPLs for the portfolio in the second half of the year. Most of the improvement will come from the commercial portfolio further improvements that we are expecting.
Great portfolio. That's the part that suffered the most during 2023 and early. 2024 were real rates in us where, um, were high and not repricing, uh, damage the payment capability of some, uh, of our customer base and that reflecting in the, uh, 2.7% npl that we are seeing. As of now, the good news, is that that real rates scenario of us of us is now below 2%. So the repricing problem, it's not happening anymore and we are now focused on providing solutions to our customers so they can renegotiate and start paying again. So, what we are seeing now is that, that part of the portfolio is going to remain stable at levels of 2.7%. And you can see that in absolute terms is it has remained for the last 6.
Months, pretty much stable and that's what we expect to start improving on the next quarters. And but that's going to be a very gradual recovery. So low all in all, we are still expecting some better Improvement of the total MPS for the portfolio in the second half of the year.
Cristian Vicuña: But as a whole, we should still be slightly higher than the average of the industry, especially because of our composition of the commercial loan book and our SME orientation. I don't know if this helps.
Most of the Improvement will come from the commercial. Uh, portfolio further improvements that we are expecting
Daniel Mora Ardila: No, perfect. And very, very, very clear. Just to understand, so the normal level of NPL will be very close to the industry level, just to understand how far are we from a normalized level of NPLs.
Um, but uh, we we are as a whole, we should still be a slightly higher than the average of the industry, especially because of our um, composition of the commercial loan book and our SME orientation. I don't know if this helps
No perfect. I'm very very, very clear. Um, just
Cristian Vicuña: I think it's a little too soon to tell for ourselves where we are seeing the long term, but there are still some improvements to the current levels. We should be below 3% by early 2026. And then that depends on how the evolution of the mortgage and general micro scenario environment evolves, right?
To understand. So the normal level of MPL will be very close to the industry level. Uh, just to understand how far uh we from a normalized level of MPS.
I think it's a little too soon to tell for ourselves.
Daniel Mora Ardila: Perfect. Thank you so much.
Long term, but, uh, there are still some improvements to the current levels. We should be below 3% by by early 2026. And then, uh, that depends on how the evolution of the mortgage and general micro scenario environment uh is evolves, right?
Luis (Operator): Thank you. Our next question is from Andrew Gary from Morgan Stanley. Your line is now open. Please go ahead.
Perfect, thank you so much.
Thank you.
Tito Labarta / Andrew Gary: Thank you for the opportunity to ask questions here. I wanted to drill down on the net interest margin a bit more. And I realize this isn't an easy exercise to do, but can you try to walk us through how you're thinking about the path of NIM, at least directionally, considering your macro expectations for inflation and rates, you know, possible loan mix shifts, and then obviously your deposit beta? I know you said during the call 3Q will be impacted again by lower expected inflation, but how are you thinking about 3Q versus 4Q this year and then 2026 in terms of the direction of NIM? Thank you.
Our next question is from Andrew Gary from Morgan Stanley. Your line is now open. Please go ahead.
Thank you for the uh, opportunity to ask questions here. Um, I wanted to drill down on the net, interest margin a bit more and I realized this isn't an easy exercise to do. But can you try to walk us through how you're thinking about the path of nim at least directionally?
Considering your your macro expectations for inflation and rates.
You know, possible loan mix shifts and then obviously your deposit beta. I, I know you said during the call 3Q will be impacted Again by lower expected inflation. But how are you thinking about?
Cristian Vicuña: Sure. Hi, Andrew. So let's first review our general sensitivity so far balance sheets. So we're still carrying a long inflation, $8.5 billion on our NIM sensitivity to inflation. And regarding our inflation too, so this translates to something about 12 basis points of inflation per 100 percentage points of UF variation. And we have about four to five basis points of sensitivity per 100 percentage points of average monetary policy rate variations on the sensitivity to interest rates. So with that in mind, we in the third quarter saw a negative 0.4 UF and CPI news in July, and that's going to impact the July performance within the quarter. The rest of the quarter looks more normal. So in the end, we should be at very high 3s of NIM for the quarter.
3 Q versus 4 q this year and then 2026 in terms of the direction of of nim, thank you.
Sure. Hi, Andrew. Um, so let's first review our general sensitivity for our balance sheet. So, we’re still carrying.
Along inflation 8.5 billion.
Um, on our n sensitivity to inflation and regarding our inflation to. So this translates of something about 12 basis points of inflation per 100 percentage points of us variation. Uh and then we have about 4 to 5 basis. Points of sensitivity per 100% touch points of average monetary policy rate variations on the sensitivity to interest rates.
Cristian Vicuña: And then we expect to come back to levels of above 4.0% NIM in the final quarter of the year, as the inflation path suggests for the market expectations for year-end. So with that, we will be very close to 4.1% for the full year, so around about 4% for the year. And we expect something similar for next year as there are between one to two interest rate caps to be performed by the Chilean Central Bank in the second half of the year, additional to the one that we saw recently. And we are expecting a monetary policy target reaching 4% by the final part of 2026. So with that and inflation converging to 3%, we should be able to sustain NIMs in the current area.
So, with that in mind, we are in the third quarter. We had a negative 0.4 UF and CPI news in July, and that's going to impact the July performance within the quarter. The rest of the quarter looks more normal, so in the end, we should be at very high threes.
Expect to come back to levels of above 4.0% named in the final quarter of the year as the inflation path suggests for the market expectations for for year end. So, with that, we will be very close to, uh, uh, 4.1% for the full year. So around our world 4% for for the year. Um, and we expect something similar for next year after there are between 1 to 2 interest rate caps to be performed by the Children's Central Bank in the second and a half of the Year, additional to the 1 that we saw recently. And we are expecting, uh, monetary policy Target, uh, reaching 4% by the final part of 2026.
Tito Labarta / Andrew Gary: Okay. That's very helpful. Thank you so much.
So with that, an inflation's converging to 3%, we should be able to sustain limbs in the current area.
Okay. That's that's very helpful. Thank you so much.
Cristian Vicuña: Thank you, Andrew. So we have some feedback questions that we would like for you to answer after the final questions. I don't know if, Luis, we have any other questions?
Thank you, Andrew.
Luis (Operator): Yeah, we have no further questions. So we just shared the survey on your screen, and your feedback will be greatly appreciated. The question and answer section is still open. So just as a reminder, if you'd like to ask a question, please press star two on your phone. And if you're dialed in by the web, you can also request to ask a voice question. We'll wait a few moments for the questions to come in. Okay. It looks like we have no further questions, so I'll now hand it back to the Santander Chile team for the closing remarks.
So we have some uh some uh feedback questions that uh we will uh like for you to answer uh, after the final question. So I don't know if Luis, we have any other questions,
Yeah, we have no no further questions so we we just shared the survey on your screen uh and your feedback will be greatly appreciated. The question and answer section is still open. So just as a reminder, if you'd like to ask a question, please press star 2 on your phone.
And if you're dialed in via the web, you can also request to ask a voice question, with a few moments for the questions to come in.
Cristian Vicuña: Thank you all very much for taking the time to participate in today's call. We thank you also for the answers you provide to our five-question survey, and we look forward to speaking with you soon. Have a great day.
Okay. Looks like we have no further questions, so I'll now hand it back to the scent and their chil team for the closing remarks.
Thank you all very much for taking the time to participate in today's call.
Luis (Operator): That concludes the call for today. Please note that the survey will remain open for a few minutes after the call closes. Thank you and have a nice day.
We thank you also for the answers you provided to our 5-question survey, and we look forward to speaking with you soon. Have a great day.
That concludes the call for today. Please note that the survey will remain open for a few minutes after the call closes. Thank you and have a nice day.