Banco Santander-Chile(BSAC) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net income in Q3 2020 increased by 23.9% quarter-on-quarter, totaling CLP 105 billion, despite additional voluntary provisions of CLP 30 billion due to COVID-19 uncertainties [11][12] - Return on equity improved to 11.5% from 9.5% in the previous quarter [12] - Net interest income (NII) grew by 10.5% year-to-date, with net interest margins (NIM) at 3.7% in Q3 [13][14] Business Line Data and Key Metrics Changes - Loan growth decelerated in Q3, particularly in FOGAPE COVID lines, with approximately CLP 1.9 trillion disbursed, representing about 10% of the commercial loan book [18] - Consumer lending continued to decline, but payment behavior remained healthy, with non-performing loan (NPL) ratios steady at 1.2% [19][21] - Noninterest-bearing demand deposits grew by 47% year-on-year and 12% quarter-on-quarter, surpassing time deposits for the first time [15][16] Market Data and Key Metrics Changes - Retail sales exceeded pre-coronavirus levels, and business confidence reached its highest since October 2019 [7] - The economy is expected to contract between 5% and 6% in 2020 but is projected to recover in 2021 [8] Company Strategy and Development Direction - The company is focusing on digital transformation, with a US$380 million investment plan and a significant increase in digital client transactions [36][35] - The bank's strategy includes maintaining a strong balance sheet and managing costs effectively, with operational expenses increasing only 3.1% year-on-year [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic recovery, citing improved asset quality and a potential decline in the cost of credit to around 1% in Q4 [27][44] - The company anticipates a rebound in loan growth in 2021, contingent on economic conditions and consumer demand [42][95] Other Important Information - The bank's core capital ratio reached 10.7%, and the total BIS ratio was 15.1%, the highest in a decade [31][32] - The board proposed a dividend payout of CLP 0.88 per share, totaling 60% of 2019 earnings [33][88] Q&A Session Summary Question: Political and economic outlook regarding pension fund withdrawals and constitutional process - Management noted uncertainty around a potential second pension fund withdrawal, which could provide additional liquidity to households but may complicate pension system reforms [45][49] Question: Provisions and cost of risk comparison with previous crises - Management explained that the current cost of risk is lower due to higher coverage ratios and proactive government measures, contrasting with the 2009 crisis [47][60] Question: Provisions expectations for 2021 - Management refrained from providing specific guidance for 2021 but indicated a positive outlook based on current asset quality trends [63][66] Question: Loan growth expectations and mix - Management expects a rebound in loan growth next year, with a focus on improving the mix to enhance NIM [95]