Banco Santander-Chile (BSAC) Earnings

Management highlights

### Macroeconomic and Regulatory Update - Global conditions remain complex: persistent external inflationary pressures from geopolitical tensions, higher long-term rates, and less supportive global financial conditions. For Chile, this has led to a weaker peso, renewed short-term inflation pressure (annual inflation reached 4.3% as of June), and slowing economic momentum concentrated in natural resources (mining/fishing), household disposable income (from higher fuel prices), and construction. The labor market has weakened with seasonally adjusted unemployment at 9.3%. - The National Reconstruction Plan bill was approved by Congress; it includes a gradual corporate tax rate reduction from 27% to 23% between 2027 and 2029, investment incentives, faster permitting, and household support measures (temporary VAT exception on new homes, mortgage subsidies) that are expected to boost housing demand, mortgage origination, and private investment over time. - The government has proposed extending and expanding the first home mortgage interest subsidy and Fogaes warranty program, increasing subsidies from 50,000 to 80,000, raising the maximum eligible home value, and extending the program to May 2027. ### Core Strategy - The bank's three-pillar strategy is focused on becoming a leading digital bank with physical proximity: 1) Think Customer: Grow active customers (target over 3.5 million), increase transactionality, deepen loyalty, and capture greater wallet share in higher-value segments; 2) Think Global: Accelerate digital transformation via Santander Group global platforms and an AI-enabled operating model to improve efficiency and agility; 3) Think Value: Deliver high-quality recurring profitability via revenue diversification, strong returns, and capital discipline to support sustainable shareholder returns. ### Operational Highlights - The bank received three top Euromoney 2026 awards: Best Bank in Chile, Best Bank for ESG, and Best Bank for SMEs; it was also the only Chilean bank included in the Dow Jones Best in Class World Index, and holds an MSCI ESG rating of AA. - The bank secured naming rights for Santander Arena (a top 3 global venue by annual attendance) to increase brand engagement and on-site customer onboarding. - The bank maintains strong efficiency and capital: the first half 2026 efficiency ratio was 31.6% (the most efficient bank in Chile as of May 2026), operating expenses decreased 4.3% year-on-year, the BIS capital ratio was 16.4%, and the CET1 ratio was 11.1% (200 bps above the 2026 regulatory minimum). - Asset quality remains stable: year-to-date cost of risk was 1.38%, in line with expected ranges; NPLs reached 3.4% of total loans and impaired loans reached 7.5% of total loans, a moderate increase consistent with the current macro environment.

Guidance

- Loan growth is expected to remain in the mid-single digits for full-year 2026, with management noting full-year growth will land toward the lower end of the initial guidance range (around 4.5% rather than 5.5%). - Full-year 2026 net interest margin (NIM) guidance is revised upward slightly to ~4.1%, compared to the initial guidance of ~4%, driven by higher-than-expected inflation in the first half of the year. - Non-interest income growth is expected to land in the mid-single digits for full-year 2026. - The full-year 2026 efficiency ratio guidance is revised downward to the low 30s, an improvement from the initial mid-30s target. - Full-year 2026 cost of risk guidance is adjusted slightly upward to ~1.35%, from the initial 1.3% target. - Return on average equity (ROE) guidance is revised upward to above 24% for full-year 2026, from the initial 22-24% range. - Long-term normalized ROE (after full implementation of the tax reform) is targeted slightly above 20%, with a range of high teens to low 20s across full economic cycles.

Segment performance

Banco Santander Chile operates five complementary business segments: 1) Retail and Commercial Banking: This is the core of the franchise, representing 66% of total loans, 48% of total deposits, and 69% of net interest margin. 2) Corporate and Investment Banking (CIB): Contributes diversified strength in advisory, foreign exchange, and transactional banking, with a focus on sustainable solutions and capital optimization. 3) Wealth Management and Insurance: Strengthens the bank's advisory-led model, renews the private banking offering, and reinforces the bank's position in insurance and mutual funds. 4) Consumer Banking: Maintains the bank's leadership in auto financing (covering new and electric vehicles, with expanding presence in used car financing); auto loans grew 1.8% quarter-on-quarter and 4.9% year-to-date. 5) GetNet (Payments Business): Reaches new client segments with value-added services and bundled solutions. Aggregate bank performance: Total loans reached 41.4 trillion pesos, up 1.2% year-to-date and 1.3% quarter-on-quarter. Mortgages grew 2.0% quarter-on-quarter, commercial loans grew 1.3% quarter-on-quarter, and consumer lending overall was stable quarter-on-quarter. Total deposits reached 32.4 trillion pesos, up 6% year-to-date and 4.5% quarter-on-quarter. Total customer funds reached 48.3 trillion pesos, up 7.1% year-to-date and 4% quarter-on-quarter. Year-to-date net income from interest and readjustments reached 1.11 trillion pesos, up 7.4% year-on-year. First half 2026 fee and financial transaction income totaled 452 billion pesos, up 4.9% year-on-year.

Risks & headwinds

- The current macroeconomic environment remains challenging, with slowing domestic growth, rising unemployment, persistent inflationary pressures, and less supportive global financial conditions that could weigh on loan demand and asset quality. - The proposed regulatory changes to market risk-weighted assets and internal credit risk models have not yet been finalized, and approval timelines are undefined, creating uncertainty around the timing of potential capital relief benefits. - Increased competition in the Chilean payments industry (where GetNet operates) has driven faster-than-expected compression on payment fees and margins, particularly in the mass retail segment. - There is ongoing informal discussion of potential interest rate cap adjustments, but no formal proposal has been released, creating uncertainty around the economics of mass market consumer lending. - While asset quality trends remain manageable, the weaker macro environment has led to a moderate increase in non-performing and impaired loans, which could continue if economic conditions worsen.

Analyst Q&A

• Q: How will the new tax reform change Banco Santander Chile's effective tax rate in a normalized inflation environment, and what will the trajectory be over the next three years? /

  A: The corporate tax rate will decline gradually 1.5 percentage points per year from 27% to 23% between 2027 and 2029, with no immediate impact on the effective tax rate. In 2026, high inflation has pushed the effective tax rate down into the low teens. In a normalized post-reform environment, management expects the effective tax rate to stabilize between 18% and 20%, which will take several years to fully implement.

• Q: What long-term normalized ROE should we expect after 2026, once the impact of this year's high inflation fades, and what is your update on positive regulatory developments for Chilean banks? /

  A: In a normalized economic cycle, management expects to sustain a long-term ROE slightly above 20%, ranging from the high teens to low 20s across full cycles. Key positive regulatory developments include the pro-growth National Reconstruction Plan, the expanded mortgage guarantee program, and proposed updates to the market risk-weighted asset framework that would better recognize hedging benefits and deliver capital efficiency. The proposed market risk changes could cut market risk RWAs by ~36%, adding 75 bps to Santander Chile's CET1 ratio if approved, but timelines remain uncertain. Internal credit risk model approval will unfold gradually over 3-5 years.

• Q: What are your loan growth expectations for 2026 and 2027, which segments will drive growth, and why did GetNet's payment fees decline in Q2? /

  A: Full-year 2026 loan growth will land in the lower end of the guidance range (~4.5%), with improving dynamics emerging in Q3 2026 across commercial, consumer, and mortgage lending, supported by the new government housing programs. For 2027, with 3% GDP growth, management expects industry loan growth to reach the low-to-high single digits, with growth driven by recovering middle-market corporate lending, consumer lending/credit cards, and mortgages. GetNet saw faster-than-expected fee margin compression in Q2 due to heightened competition in mass market retail payments, an expected trend that arrived earlier than management projected; fees are expected to partially recover in H2 2026 as large corporate clients increase platform usage.

• Q: What is your outlook for loan penetration recovery in Chile, and which segments offer the most growth opportunity over the next 5 years? /

  A: After pandemic-era pension withdrawals led to large consumer lending prepayments that cut overall penetration, there is meaningful room for recovery in credit cards and installment loans as consumer confidence and unemployment improve. Mortgage lending also has large upside, as the expanded government housing program will help absorb the 100,000+ unsold new home inventory, and Santander has already captured 17% of existing program originations and expects to maintain that market share. Long-term, growth in private investment projects will drive demand across middle-market and large corporate lending, which Santander is well positioned to capture.