Banco de Chile Q2 FY2025 earnings call

• Macroeconomic analysis: Chilean economy shows recovery with GDP revised upward to 2.3% for 2025, inflation trending downward but core inflation stable, Central Bank lowered policy rate to 4.75% with further cuts likely. - Strategic initiatives: Digital enhancements including new authentication tools, payment app integration, credit simulators, and AI adoption (expanded virtual assistant FANi). Efficiency initiatives like IT cost control, productivity gains from digital sales, and centralizing subsidiary functions. Sustainability efforts: Participation in FOGAES programs and issuing international bonds for social initiatives. - Key business achievements: Strong performance in digital accounts, cross-sell rates, and mutual fund management, with cost-to-income ratio focus below 42%.

As of June 2025, Banco de Chile reported a net income of CLP 654 billion, representing a year-to-date growth of 2% and an ROAE of 21.9%. In terms of product segments, customer income growth was driven by a 6.2% year-on-year increase in net income from loans and an 8.1% annual rise in fee income. Loan growth varied by segment: consumer loans rose 4.5% annually, mortgage loans grew 8.1% year-over-year, and commercial loans (including SME portfolio) expanded 4.8% year-on-year. Fee income was led by mutual fund management (up 23.8% year-on-year) and transactional products (checking fees up 11.2% year-on-year, debit account fees up 6.9% year-on-year). Revenue contribution from loans and fees contributed to overall performance, while deposits were affected by declining short-term interest rates.

• Revised GDP forecast for 2025 raised to 2.3% from 2% previously. - Anticipate net interest margin around 4.7% by year-end, supported by inflation and yield curve trends. - Expected credit loss ratio forecasted at approximately 1% for the year, lower than prior projection. - Efficiency ratio revised down to approximately 38% for full year 2025. - Full year return on average capital estimate increased to approximately 21% from 20% prior.

• Political uncertainties: Upcoming presidential and parliamentary elections in November and potential regulatory changes. - Global macroeconomic risks: Downside risk to growth from global factors, impact of copper price and trade/geopolitical tensions. - Regulatory risks: Uncertainty around potential regulation related to taxes, interchange rates, and mortgages.

Q: On political landscape and potential regulation impacts for Banco de Chile.

A: Rodrigo Aravena discussed political scenario with second round likely in December, consensus on growth and fiscal issues, but no material banking-specific regulation yet.

Q: On NIMs and overnight rate next year.

A: Pablo Mejia and Rodrigo Aravena discussed NIM expectations around 4.5%-4.7% depending on mix, inflation, and yield curves, with overnight rate expected to trend towards neutral level around 4%.

Q: On loan growth outlook and fees.

A: Pablo Mejia explained loan growth driven by SMEs, consumer lending, and digitalization, with fees expected to grow mid-to-high single digits due to customer base expansion and cross-selling.

Q: On capital position and dividends.

A: Daniel Galarce discussed strong capital position above regulatory requirements, with potential for extraordinary dividends under specific circumstances related to financial performance and economic reactivation.