Banco Santander-Chile Q2 FY2025 earnings call

• Completed migrating legacy mainframe service to the cloud under the Gravity project, operating 100% on cloud.
• Launched enhanced smart POS allowing merchants to do banking transactions and open simple digital accounts.
• Launched Santander en tu comuna, a small transactional hub near local district authorities.
• Enabled simple savings account for children from birth.
• Actively issued debt on local and international markets.
• Ranked highly in sustainability, won best bank awards, and Top Employer certification for seventh consecutive year.
• Brokered mutual funds won over 40 awards.
• Client base grew to 4.5 million, with 2.3 million digital clients, and business current accounts increased by 25% in 12 months.

The net interest margin improved to around 4.1% over the last 12 months, with a slight increase in the first half of 2025 compared to 2024. The efficiency ratio reached 35.3%, the best in the Chilean industry in 2025 so far, and the recurrence ratio was 62%. The cost of risk was 1.39% year-to-date, with expectations to improve slightly in the second half to around 1.35%. The loan book growth is expected to be low single digits due to weak demand, but consumer loans show signs of pickup. The mortgage portfolio may be activated by the subsidy bill passed earlier. The consumer loan portfolio has 15% of the total loan book, with credit card loans growing around 10% year-on-year.

• Lowered loan book growth expectations to low single digits due to weak demand and upcoming elections.
• Net interest margin expected to remain within guidance, with Q3 impacted by lower expected inflation and Q4 expected to return to above 4.0% NIM.
• Non-NII guidance to grow high single digits, with no expected interchange fee regulation until end of year.
• Efficiency levels expected to remain around mid-30s.
• Cost of risk expected to improve slightly to around 1.35% by year-end.
• ROEs expected to be in the 21% to 23% range for the rest of the year.

• Trade and geopolitical uncertainty, including U.S. trade agreements affecting Chile's copper tariffs.
• Political polarization in Chile ahead of presidential and parliamentary elections, which could hinder meaningful legislation for boosting GDP growth.
• Sharper-than-expected global slowdown, especially in the U.S., impacting Chile's domestic economic momentum.

Q: On cost of risk and consumer loans' contribution and sustainable cost of risk for Santander-Chile, and long-term sustainable ROE.

A: Cristian Vicuna said consumer lending demands continue to be above average growth, cost of risk expected to gradually go back to closer to 1.2% over a couple of periods, and long-term ROE expected to be above 20% due to efficient structure and expanding customer base.

Q: On loan growth post-elections and fee growth sustainability.

A: Andrés Sansone said fee growth dynamic should continue, with potential impact from interchange fee regulation by year-end; Patricia Perez Pallacan said retail loan growth shows pickup in consumer and SME, but large corporate loan growth is a question mark.

Q: On loan portfolio structure change and initiatives to change it.

A: Andrés Sansone said they will grow consumer lending organically conservatively, and may use securitization if regulation allows.

Q: On main risks around business with upcoming elections and macro side.

A: Andrés Sansone said main risk from abroad is U.S.-China trade dynamics; Cristian Vicuna said political elections have increased tail scenarios but market-friendly environment is positive.

Q: On NPL normalization and reasons behind commercial and mortgage NPLs.

A: Unidentified Company Representative said consumer NPLs are healthy, commercial NPLs are higher due to higher SME lending, and mortgage NPLs are due to higher variable rate mortgages, with gradual improvement expected.

Q: On net interest margin path.

A: Cristian Vicuna explained sensitivity to inflation and interest rates, with Q3 impacted by lower inflation, and expectations for Q4 and 2026 to sustain NIM around current levels.