Q3 2025 Banco Santander Chile Earnings Call
Speaker #4: Ladies and gentlemen , thank you for standing by . And I'd like to welcome you to Banco Santander-Chile Third quarter 2025 Earnings Conference call .
Speaker #4: On the 5th of November , 2025 . Please note that at this point , all participant lines are in listen only mode . After the call , there will be an opportunity to ask questions .
Speaker #4: So with this, I'd now like to pass the line to Patricia Pallacan, the Chief Financial Officer. Please go ahead.
Speaker #5: Good morning everyone . Welcome to Banco Santander-Chile third 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 .
Speaker #5: And Lorena Palomeque , our economist . Thank you everyone for joining . Joining us today for the review of our performance and results in the third quarter .
Speaker #5: Today we will start with an overview of the economic environment . And then Christine will go through the key strategy points and the results of the bank in the third quarter of the year .
Speaker #5: After that , we will have a Q&A session where we will be happy to answer your questions . So let me hand over to Lorena .
Speaker #5: Thanks . During the third quarter of 2025 , we observed positive economic indicators in the Chilean economy . Preliminary figures suggest GDP grew around 2% year on year in Q3 , or almost 3% when excluding mining .
Speaker #5: While we await the full national account report on November 18th , which will also include Q1 and Q2 revisions , we estimate GDP growth of 2.4% by the end of this year , and close to 2% for next year .
Speaker #5: We are now just a few days away from the presidential and congressional elections in Chile . Also , the outcome is still uncertain .
Speaker #5: Polls suggest that a change in the government administration with an opposition candidate is the most likely scenario, which could generate stronger tailwinds for the economy next year.
Speaker #5: In terms of inflation , also , moderation is already evident . It remains above the three target . The 3% target with inflation now below 4% .
Speaker #5: Limited second round effects anchor expectations and a narrow output gap will allow inflation to converge to below 4% by the end of this year .
Speaker #5: We expect the disinflation process to continue given the softer demand environment . Both globally and domestically . In this context , we maintain our forecasts for the US of 3.6% .
Speaker #5: For the end of this year , converging to 3% next year . Regarding the monetary policy rate during the third quarter , the central Bank of Chile maintaining the policy rate at 4.75% , responding to an inflation environment that continues to ease .
Speaker #5: Nevertheless , the bank's board emphasized that it will closely monitor the evolution of core inflation , which remains higher than expected , as well as domestic demand before considering a new rate cut .
Speaker #5: We expect another reduction in the last quarter of the year , bringing the rate to 4.5% by year end and followed by an additional cost during the course of next year .
Speaker #5: On slide five , we present recent developments in the regulatory framework regarding the mortgage subsidy law , which was approved in May of this year .
Speaker #5: It implementation has continued within the framework of the location of the funds awarded in the first action held in June . Under the law , 50,000 subsidies will be provided with almost 18,000 already authorized by banks .
Speaker #5: This has provided some momentum to the housing sector , whose growth is expected to become increasingly evident in the coming months . With respect to the interchange fee , the second rate cap reduction remains on hold and under review by the Commission , and we are awaiting further updates on this matter .
Speaker #5: Open Finance system of the Fintech Law established an implementation schedule that begins with a gradual submission of information that banks and payment card issuers must share .
Speaker #5: In July 2026 . However , the system's technical definition remains under consultation , while costs and other operational details are still pending . This has prompted calls to review the implementation timelines .
Speaker #5: A request the FMC is currently analyzing during September . The Framework Law on Sectoral Authorization for permits related to Productive Energy and Mining Initiatives was approved .
Speaker #5: This will enable the development of tools for the simultaneous processes of permits, streamlining the approval of low-risk projects, which should in turn accelerate investment in these sectors.
Speaker #5: As we mentioned before , there are only a few days left until the presidential and congressional elections in Chile , which will be held on November 16th with a potential runoff on December 14th .
Speaker #5: According to the latest poll . Left wing candidate Janelle Hara leads the presidential race with 27% support , followed by right candidate Jose Antonio cast with 20% , while the presidential race has gained visibility .
Speaker #5: We must not overlook the preliminary elections where the entire lower house and nearly half of the Senate , 23 out of 50 seats , will be renewed .
Speaker #5: Polls shows that Chileans remain highly concerned with crime , security and economic growth . Simulations suggest that right wing candidates may gain ground in Congress , driven by local campaigns emphasizing security .
Speaker #5: This implies that even if the left wing candidate wins the presidency , Congress could lean right , potentially moderating more radical policy initiatives .
Speaker #5: As such , while some electoral related volatility is likely in the near term , we believe the longer term market impact will be limited .
Speaker #5: As we judge . I will now pass over to Christiane .
Speaker #6: Thanks , Lorena . On slide seven , we show our value creation strategy for our stakeholders through our vision to become a digital bank with work , assess .
Speaker #6: Our focus is on attracting and activating new clients , understanding their needs , and deepening engagement . We aim to surpass 5 million clients by 2026 , while continuing to grow our base of active customers .
Speaker #6: Next , we are building a global platform that leverages artificial intelligence and process automation to scale efficiently . It's about reducing the cost per active client and driving operational excellence .
Speaker #6: Our target is to maintain an efficiency ratio . In the mid 30s or better , a reflection of a bank that is both digital and disciplined .
Our key measure of value creation has been the strong growth in our wing achieved while maintaining solid Capital ratios during the implementation of Basel 3.
Our Roi has increased more than 6%, touch points, more than doubled, the increase in the rest of the industry.
This has been supported by a 5 person that you find improvement in our efficiency versus a 2% Improvement, in the industry, demonstrating our consistent goals, and the success in the implementation of our digital transformation. We we grading our Legacy Mainframe systems to the cloud earlier earlier this year under project gravity.
On the other hand, we have been transforming the composition of our income revenue streams with feed generation increasing from 15% of our revenues to 20% reflecting, the success of the expansion of our client base and noncredit related Services, through our digital accounts and card payments as well as other services such as Asset Management brokerage and our acquiring business. Meanwhile, the composition of the industry revenues has remained stated
This mix is driving our regulars ratio to the best in class in the industry. This ratio which shows how much of our costs are paid by our P generation. Now it stands at about 60%
far more for the rest of the industry.
We are very proud of the success of our study has had so far. And as you will see later on we are enthusiastic about the evolution of the Raw results in the coming year.
Now, in slide 10, we will take a closer look at the results this year.
September.
The bank generated a net income of 798 billion, pesos of 37% year-over-year increase resulting in our return on, over our Equity of 24% and an efficiency of 35.9% growth was supported by an 8% rise in fee income and a 19% increase in financial transactions, mutual funds grew 15% and our recurrence ratio reached 62% year to date.
Our net interest income, which includes our Readjustment income increased 17% year-over-year and our net interest margin remain at 4%.
Furthermore currently we are provisioning a dividend payout of 60% of this year's income to be paid in April next year.
This year, we have also been highly recognized on several prompts. We are proud to have been recognized by several institutions. Your money name is as best I can in Chile, Latin Finance recognized us as Best. Buy the bank and Global Finance are large enough to the best time for SMS this year. We have improved our sustainability rankings with our MSC rating improving. From a to double a are, now our sustainability rates improving to 15.4 points
On slide 11.
We can see the evolution of our quarterly return over a week where we can see that we have maintains. Our row is about 21% even in orders with low inflation, s such as this recent quarter, where the UF variation was 0.56% and we reach an Roe of 21.8.
On a yearly basis. Our knee has improved 16.6% with a strong increase from net interest income as a result of a lower cost of funding, which improves some 100 basis points year over year.
With this, our year-to-date limb reached 4% and given our current micro expectations. We expect our names to stay around the 4% area for what is left of 2025.
On slide 12. We can see how our rapidly expanding client. Dates is leading to a higher fee generation. We currently have 4.6 million car ions of, which around 59% actively engage with us and some 2.3 million Ardo accessing the online platforms, on a monthly basis.
The number of current accounts is increasing 10% year on year, driving the 5 and 4% growth of our active clients and the evil clients respectively.
The real, the growing client base has led to a 12% annual increase in credit card transactions and a 15% rise in. Mutual fund volumes that. We broker 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 23% in the last 12 months.
This is explained by the simple business accounts. We offer to smaller companies and they integrated payments offered through. Get net.
as we can see in the table, on the right,
The increasing our client base. On Project usage is translating into high fees and results from Financial transactions growing 11.5% year-over-year.
Or month's main products such as cards, getting this account fees, and mutual funds is continued to show, strong, friends with cards on accounts fees, registering a higher expense in the quarter related to certain campaigns in our loyalty programs during the court.
On slide 13.
We can see how our recovery your income generation and time cost control as improved. Our key performance metrics, our efficiency ratio reached, 35.9% the best in the Tian industry in 2025 so far and our recurrence ratio. Reached 62% meaning that over 60% of our expenses were financed by our fee generation.
In early 2025 operating expenses Rose temporarily due to the cloud. Migration costs mainly reflected in higher administrative expenses during the first quarter.
However, overall, our operating costs were below inflation in the year so far.
In the quarter, our total expenses decreased 3.4%, mainly due to lower personnel expenses related to the seasonal costs associated with the winter holidays and national holidays in September.
Overall, we have maintained our destiny plus levels of efficiency and recurrence compared to our peers.
You know, our brunch Network to align with our work and performance improving, both efficiency and customer experience. 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 this impressive levels of operating performance,
On, slide 14, we show an overview of our cost of risk and asset quality.
As in Prior quarter quarters cost of credit has remained above historical, average reflecting elevated non-performance loans earlier in the year.
From the graphs, you can see that our MPL and in per portfolio, have showed some improvement in recent quarters with a slight pick up in September due to some seasonality related to collections in in the month caused by the national holidays. However, our initial data for October is showing better performance and over the last few months, we have seen practical improvements in our
As a quality that we expect these trans to continue in the coming quarters.
Most like 16. We can see that the ct1 ratio reached 10.8% in September 25th.
All of our minimum requirement of 9.08% for December 2025.
and demonstrating some 45 basis points of capital creation since December 2024
This was driven.
By our income generation in 2025 and caused serious of 60% dividend provision for our 2025 profits accumulated. So far and a 4% increase in Risk weighted assets.
As noted in our previous call, we have a 25 basis point pillar 2, Capital charge of which 50% was made by June 2025 in line with regulatory requirements.
So on slide 16, we show our guidance for what's left of 2025 and our initial guidance for 2026.
Regarding our 2025 forecast, we are well on track to making our Guidance with names around 4% and efficiency and batteries overall. We expect are now row to finish the year slightly above 23%.
for next year, we're expecting GDP growth of 2% with a year variation, just below 2.9% and an average monetary policy rate of around 4.4%
With the upcoming elections in Just 2 weeks. We expect a more favorable business environment. Next year, supporting this single deed long road despite the slightly lower inflation, the long growth and slightly lower rates, should help to sustain our limbs around 4%.
While our fees and financial transactions should grow mid to high single digits.
This does not include any impact for a further interchange fee reduction, which is just to be defined by The Interchange fee Commission.
Our efficiencies should remain around the mid-30s while our cost of credit should continue to improve gradually to reach around 1.3% for the year.
With all of this.
Our initial expectations for 2026 are for a narrow week within the range of 22 to 24%. I'm scoring the high Roi potential of sometime there, too.
With this. I finish my presentation and we can start the Q&A session.
Thank you very much.
We'll now move to the Q&A part of the call.
If you'd like to ask a question, please press star 2 on your phone. It is star 2. And if you're connected from the web, you can also ask a voice question. We'll give it a few moments for the questions to come in.
Okay. Our first question is from Lindsay Shema from Goldman Sachs, your line is now open. Please go ahead.
Congrats on the results and thank you for taking my question. Uh, looking ahead to 2026, it seems like Roe might be, you know, a little better, a little worse, but somewhat, the same, uh, just wondering here on our end, what are the main upside and downside risks for your Roe estimate? And then, on that note, does it factor in an unfavorable election result? Or could there be further downside there? Thank you so much.
well, so
so,
it's well, it's
To, to, to provide some perspective, we are, we are not considering in, uh, the potential scenario of growth for next year.
The uh benefits of a political change that could trigger further growth in the commercial or part part of the loan portfolio. So we are thinking of single digits but a more
benign scenario will
probably make the commercial portfolio of the minimum Market companies grow stronger than than this maybe even going to figures of 7 to 8%.
Probably very skewed to the second part of next year and more into 2027, because of the delay of some projects to get approved and passed through, uh, to the the, the Practical part of the investment.
so that's 1 of the things that's not actually considered on our Guidance, the main risks that we have seen so far this year and next year are coming
From the external part of the micro scenario.
Um,
You have seen the volatility in terms of assets and commodity prices and all the effects that have come from, all the discussions from International Trade effects of uh, the US policies and uh, and uh, and the consequences of this. Um, those that's the source of uncertainty that's also not considered, uh, in the central part of our scenario, but all in all,
I think that, uh, that we are, um,
favorable of the upcoming quarters in 2026 and um, that in general terms, um, the more
adverse scenarios are considered within our guidance.
Yes. And to maybe to complement the the answer, our base case scenario consider,
Computers are lower inflation.
But partially offset by a lower monetary policy rate on average for next year.
and,
Also offset by a better growth and Dynamics in terms of loans.
So um, that could be better even better depending on the um, political landscape for for next year and we think for both scenarios. We are we are well prepared. And
In our targets and and and guidance.
Thank you.
Our next question is from Danielle ma ardila from Credit corp. Your line is now open. Please go ahead.
Hi, good morning, and thank you for the presentation. I have, um, 2 questions. The first 1 is regarding loan. Growth, can you provide for color of what do you spend about long growth in 2026? Um, by segment? If we can have the, the guidance, my segment will be great.
And I would like also to know if you can comment about the competitive pressures in Long grow, especially considering that, that there is 1 key competitor, that is showing very high figures of of Long Road in, in Chile, I would like to know if you feel the pressure, especially in the commercial segment, that will be my, my first question and the second 1 is regarding mpls and cost of risk. I would like to know,
Considering the slide deterioration of MPL in the consumer segments and mortgage segment. What will be the
the path or the evolution of of asset quality indicators in 2026 given that you are guiding for a reduction of the cost of risk next year. Thank you so much.
And Christina will take the second 1. So regarding the, the composition of long growth for, for next year and we are seeing like a quite homogenic growth and
Composition for in the different segments. So, regarding Consumer loans, um, we continue to to, to, to see growing um um, at a healthy pace and in that in that product, uh, regarding the, the mortgage portfolio. Um, we also um,
During during this, um, um, last quarter, we are seeing better Dynamics leveraged by, um, the government support or stimulus stimulus coming from the, from the subsidies. So, we are we are seeing, um, good Dynamics for next year as well. And regarding the commercial, uh, loans, that that will be the, like, the, the the question mark. But, but we are also, um, seeing, um, better Dynamics for for next year, especially leveraged, by by the political landscape. Right? And, and, and if um, um, we um, have, um,
The the right changes in the, in the regulation that we have already seen part of the change, we will have, um, um, growth, um, like um, our guidance for next year.
So, with, within the, the commercial portfolio to give you a little more flavor. We are, we are expecting for the Retail Partners.
To grow mid-single digits. Uh, uh. So, as within our general guidance.
A large corporates. And uh,
And, uh, the investment decisions that they might trigger because of the political landscape. Um, this is, uh, what we are not seeing yet in terms of of market dynamics. Um, and uh, it's probably related to the part of your question about the competitive pressure, right? So, I think that, in terms of the commercial part of the portfolio,
uh, we are seeing some players growing, but, uh, we we don't assess, its, uh, on the local part of the portfolio and, uh, um, we believe that, uh, this is set to improve by the second half of next year.
So I'm turning to your MP to your credit cost of risk and, and, and risk in general performance. So, so far this year, we are showing a closer to 1.4
across of risk here today.
We, we have some seasonal effects on September, uh, in terms of the absolute movements of the portfolio especially in the npl parts. We we are seeing it's a previous table,
most of the, um, increase in cost of risk is coming from
The uh Improvement that we have been displaying in the commercial mtls. So this commercial mLs are coming down from levels of 4.1 12 months ago to levels of 3.4.
So uh, we've been doing some write ups of some non-performing loans. There's and that's explained most of the pickup that we are seeing in terms of cost of risk. We know that it's not going to continue for the upcoming quarters. So that's what makes us believe that, uh, the total cost of risk is set to improve, uh, in in the next uh, periods.
Perfect. Thank you so much, very clear.
Thank you.
Thank you.
Our next question is from Niha agarwala from HSBC. Your line is now open. Please go ahead.
Hi. Thank you for taking my question. My first question is on The Interchange fee. Could you remind us what are the current levels for The Interchange fee? And what is the risk that the second caps actually go through next year? What is your expectation in that regard?
so,
just, uh, uh, a reminder like, we, we had, uh,
A committee that, uh, was in charge of assessing the rate fees.
For the card business in general.
Um, so they, uh, implemented the first part of their reduction from levels of...
around, uh, 1.4 in credit to levels of 1.14, which is the current rate and from levels of 0.6, in debit to levels of 0.5, which is the current rate,
so, the second rate cut, which was suspended,
um,
It was set to decrease credit.
Fees to letters of around 0.8.
And debit to levels of around 0.35.
Um, prepaid also to levels of around a similar to create of 0.8.
So that's this. The part of the decision that's being reviewed.
The committee is expected to come to a decision by the final months of this year or early next year.
Um, our initial assessment was that the total reform will mean an impact in our credit card, fees of around 50 million dollars half and half in in both impacts. So the second part uh is expected to come next year. We, we, we don't know. Uh, but uh,
But uh the the impact will be in the neighborhood of the 20 million dollar of dollars in in the in the car impact. If the committee comes to the decision to implement the second cup,
Uh, uh, if the second cut actually happens, which is not in your guidance, uh, the impact would be between 20 to 25 million, uh, billion.
For 2026.
Yeah.
Okay, and my second question is again, going back to the cost of risk? Um, I know you talked about it but, um, this year was, uh, we saw The NPS coming down. You had the, I had to do some write out, they were 1 of cases but 2026, the asset quality should perform better uh that what we had this year. So why isn't cost of risk coming down even more in the initial targets.
Uh, I think, uh, 10 basis points. It's, uh, it's a good range to start because we are still not, uh, seeing the full, the full effects of the projects that we've been implementing to improve the collection cycle. So we are still and and I agree with you with which might sound a little conservative but uh we we are comfortable guiding some somewhere. I conservative improvements. Uh, I'm leaving some room uh there.
Super clear, thank you so much.
Thank you.
Just a reminder. If you'd like to ask a question, its star 2 on your phone, start 2. And if you're connected from the web, you can also ask a voice question. We'll give it a few more moments for any further questions.
Okay look. Looks like we have no further questions. I will now hand it back to the senton. That Chile team for the closing remarks.
Thank you very much for taking the time to participate in today's call.
And we look forward to speaking with you again, very soon.
That concludes the call for today. Thank you. And have a nice day.