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Banco Santander Chile Announces Second Quarter 2008 Earnings.

SANTIAGO, Chile, July 30 /PRNewswire/ --

Banco Santander Chile (NYSE: SAN; SSE: Bsantander) announced today its unaudited results for the second quarter 2008. These results are reported on a consolidated basis in accordance with Chilean GAAP(1)(2)(3) in nominal Chilean pesos.

In 2Q08, net income attributable to shareholders totaled Ch$78,440 million (Ch$0.42 per share and US$0.83/ADR) decreasing 2.5% YoY. Core revenues increased 24.3% YoY and net operating income increased 6.1% YoY. These strong operating trends in 2Q08 were offset by higher costs and a larger loss from price level restatement compared to 2Q07, both negatively impacted by rising inflation. Net income increased 3.7% QoQ with a 14.4% rise in core revenues and a 14.7% increase in net operating income. ROAE in 2Q 2008 reached 23.2% compared to 21.6% in 1Q08 and 25.8% in 2Q07. We have the highest ROE in the Chilean financial system.

In 2Q08, total loans increased 6.3% QoQ and 19.1% YoY. Loan growth accelerated in the quarter due to the pick up in lending to companies and solid growth in the middle and upper income individual business segment. Corporate lending increased 3.2% QoQ and 14.2% YoY and lending to the middle market increased 7.4% QoQ and 17.4% YoY. Retail lending continued to expand at a steady pace in the quarter, increasing by 5.6% QoQ and 19.7% YoY with all loan growth coming from middle to upper income clients. Lending to lower income individuals decreased 15.2% QoQ and 10.3% YoY.

A key part of the Bank's strategy since 2007 has been to focus strongly on spreads in order to sustain profitability in riskier segments and to compensate for potentially higher funding costs. In 2Q08, the Bank's average loan spread reached 5.5%, increasing 20bp compared to 1Q08 and 30bp compared to 2Q07. The net interest margin increased 60 basis points QoQ and 40 basis points YoY, reaching 6.2% in 2Q08.

In 2Q08, customer funds increased 5.5% QoQ and 16.8% YoY. The average balance of non-interest bearing checking accounts increased 7.6% QoQ and 16.1% YoY. The positive performance of checking account balances reflects our strong growth in checking account holders and the Bank's solid positioning in the cash-management business. This also reduced the negative impact of rising rates on funding costs, as the yield on checking accounts rises with rate hikes. The ratio of free funds (average equity plus average demand deposits over interest earning assets) increased from 30.8% in 1Q08 to 31.9% in 2Q08 and remained flat compared to 2Q07.

The Bank's BIS ratio as of June 30, 2008 reached 12.9% with a Tier I ratio of 9.6%. In July 2008, the Bank issued in the local market US$117 million in subordinated bonds in the local market to further strengthens capital ratios. This bond was issued at an attractive yield of 70bp over the 30 year Chilean Central Bank rate. Following this issue, the Bank's BIS ratio reached a solid level of 13.3%. This is the highest BIS ratio among our main competitors.

As a result of the proactive management of the asset and funding mix coupled with rising spreads and higher inflation, in 2Q08 net interest income was up 17.2% QoQ and 27.1% YoY.

In 2Q08, the Bank's net provision expense increased 15.5% QoQ and 56.7% YoY. This rise was mainly driven by the YoY loan growth in retail banking and higher charge-offs in consumer loans due to the economic slowdown. As mentioned in previous releases, provisions are expected to increase due to the growth of lending to higher yielding and the expected economic slowdown foreseen for 2H 2008. In 2Q08, the Bank continued increasing spreads and tightened admission standards in the middle and lower income segments in order to contain the growth of provision expense. As a result of these measures, the growth rate of new non-performing loans has been descending, especially among individuals.

It is important to point out that despite this rise in provision expense, net interest income including provision expense increased 18.0% QoQ and 16.8% YoY, reflecting that the increase in spreads, the higher inflation rates and the improved funding mix has more than offset the rise in risk.

Net fee income increased 4.4% QoQ and 14.5% YoY in 2Q08 base. The expansion of cross-selling and product usage, especially in retail banking is driving fee income growth. The total number cross-sold clients increased 13.4% YoY in June 2008. In the second half of 2008, the Bank is planning to continue dedicating more resources towards increasing cross-selling instead of expanding the total client base. This should also positively impact the Bank's productivity and efficiency levels in retail banking.

In 2Q08, the efficiency ratio continued to improve, reaching 38.8% compared to 39.1% in 2Q07 and 39.0% in 1Q08. Total operating expenses increased 14.2% QoQ and 19.4% YoY. The YoY increase in operating expenses was due to higher commercial activities, the expansion of the distribution network and the higher inflation. In light of the expected slowdown in economic growth, the Bank has begun to shift its strategic focus by limiting the opening of new branches in order to maximize the profitability of the existing network and to control costs. Since 1/3 of the Bank's branches have been opened in the past three years, there is still ample room to sustain growth by maximizing profitability of the newly opened offices. As of June 2008, the Bank's distribution network totaled 468 offices, increasing 0.4% QoQ and 9.3% YoY. As of June 2008, the Bank had 2,016 ATMs, representing an increase of 15.6% YoY and 1.4% QoQ.

In the first half of 2008 (1H08), net income attributable to shareholders increased 0.9% YoY and totaled Ch$154,083 million (Ch$0.82/share and US$1.63/ADR). Growth was led by a 26.2% increase in core revenues. Net interest income increased 29.8% and fee income 14.4% YoY. The net interest margin in 1H08 reached a record level of 5.9% compared to 5.4% in 1H07. The efficiency ratio reached 38.9% in the same period. Net operating income increased 9.2%. These higher operating results were offset by an 86.2% rise in non-operating losses, net which were negatively affected by higher losses from price level restatement. ROAE reached 22.5% in 1H08.


As per latest public records published by the Superintendency of Banks of Chile for March 2008, Banco Santander Chile was the largest bank in terms of loans and deposits. The Bank has the highest credit ratings among all Latin American companies, with an A+ rating from Standard and Poor's, A+ by Fitch and A2 by Moody's, which are the same ratings assigned to the Republic of Chile. The stock is traded on the New York Stock Exchange (NYSE: SAN) and the Santiago Stock Exchange (SSE: Bsantander). The Bank's main shareholder is Santander, which controls 76.91% of Banco Santander Chile.

Santander (SAN.MC, STD.N) is the largest bank in the euro zone by market capitalization and fifth in the world by profit. Founded in 1857, Santander has EUR 912,915 million in assets and EUR 1,063,892 million in managed funds, 65 million customers, 11,178 branches and a presence in 40 countries. It is the largest financial group in Spain and Latin America, and is the sixth largest bank in the United Kingdom, through its Abbey subsidiary, and is the third largest banking group in Portugal. Through Santander Consumer Finance, it also operates a leading consumer finance company in 12 European countries (Germany, Italy and Spain, among others) and the United States. In 2007, Santander registered EUR 9,060 million in net attributable profits, an increase of 19% from the previous year.

In Latin America, Santander manages over US$200 billion in business volume (loans, deposits, mutual funds, pension funds and managed funds) through 4,498 offices. In 2007, Santander reported $3,648 million in net attributable income in Latin America, 27% higher than the previous year.


 Robert Moreno Tel: +562-320-8284
 Manager Fax: +562-671-6554
 Investor Relations Department Email:
 Banco Santander Chile Website:
 Bandera 140 Piso 19,
 Santiago, Chile

 (1) Safe harbor statement under the Private Securities Litigation Reform
 Act of 1995: All forward-looking statements made by Banco Santander
 Chile involve material risks and uncertainties and are subject to
 change based on various important factors which may be beyond the
 Bank's control. Accordingly, the Bank's future performance and
 financial results may differ materially from those expressed or
 implied in any such forward-looking statements. Such factors include,
 but are not limited to, those described in the Bank's filings with
 the Securities and Exchange Commission. The Bank does not undertake
 to publicly update or revise the forward-looking statements even if
 experience or future changes make it clear that the projected results
 expressed or implied therein will not be realized.

 (2) The exchange rate used for translating Ch$ to US$ was Ch$520.14 per
 US$ dollar. All figures presented are in nominal terms. Historical
 figures are not adjusted by inflation.

 (3) As of January 1, 2008, and following the guidelines of the
 Superintendence of Banks of Chile, SBIF, a re-categorization of
 certain line items in the balance sheet and income statement was
 introduced in line with a gradual shift towards International
 Accounting Standards to be fully adopted in 2009. These changes did
 not involve any changes in accounting principles, but does involve a
 change in total equity as Bank's must provision for mandatory
 dividends and include minority interest as shareholder equity. 2007
 figures have been re-categorized under the new format in order to
 make them more comparable, but the modification regarding minimum
 dividends has not been made to historical shareholders' equity.
 Please note that this information is provided for comparative
 purposes only and that this re-categorization of line items may
 undergo further changes during the year and, therefore, historical
 figures, including financial ratios, presented in this report may
 not be entirely comparable to future figures presented by the Bank.
 Re-classified historical figures have not been audited.

Web site:

Robert Moreno, Manager, Investor Relations Department, Banco Santander Chile, +11-562-320-8284, or fax, +11-562-671-6554,
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Publication:PR Newswire Europe
Article Type:Financial report
Date:Jul 30, 2008
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