BANCO SANTANDER CHILE (SAN) 58.17 $1.63 (2.88%) 02:27PM (15 mins delay)

SANTIAGO, Chile, Feb. 9 /PRNewswire-FirstCall/ -- Banco Santander Chile (NYSE: SAN; SSE: Bsantander) announced today its unaudited results for the fourth quarter of 2008. These results are reported on a consolidated basis in accordance with Chilean GAAP(1),(2),(3) in nominal Chilean pesos.

In 4Q08, net income attributable to shareholders totaled Ch$77,566 million (Ch$0.41 per share and US$0.68 per ADR), increasing 9.6% compared to 4Q07 (from now on YoY). The YoY growth of net income was mainly driven by core revenues, that is, net interest income plus fee income. Core revenue increased 16.0% YoY, led by a 17.7% increase in net interest revenue and a 9.7% rise in fee income. Return on average equity attributable to shareholders reached 20.2% in 4Q08 compared to 19.9% in 4Q07.

In 4Q08, total loans increased 5.9% compared to 3Q08 (from now on QoQ) and 19.1% YoY. During the quarter, loan growth was mainly driven by the corporate segment, in line with our strategy of continuing to expand the loan book, but with a conservative approach to credit risk. Corporate lending increased a record 24.5% QoQ and 26.0% YoY. Total commercial loans increased 8.8% QoQ and 22.6% YoY in 4Q08.

The Bank's selective approach to lending was also apparent in loan growth to individuals in the quarter. Total loans to individuals increased 2.7% QoQ and 16.9% YoY. Residential mortgage lending increased 3.3% QoQ and 19.0% YoY. Consumer loans expanded 0.3% QoQ and 8.0% YoY. By segment, during 2008, loan growth to high income individuals was up 35.6% YoY compared to 4.4% YoY for middle income individuals and a decrease of 11.9% YoY to lower income segments.

The Bank also experienced a favorable evolution of deposit growth in the quarter. In 4Q08, Santander Chile's deposit base increased by a record 10.1% QoQ and 18.1% YoY, outpacing loan growth and reflecting our focus on liquidity and improving the funding mix. The Bank's market share of deposits increased from 20.4% as of September 2008 to 20.8% at year-end 2008. The growth of deposits was led by a 16.0% QoQ increase in time deposits. As of December 31, 2008, Santander Chile's loan to deposit ratio reached a healthy 94.1%, improving from 100.2% as of September 2008 (excluding the portion of mortgage loans funded with long-term bonds).

As mentioned in previous earning releases, since 2007 the Bank has been focusing on spreads in order to sustain profitability in a period of lower economic growth and to compensate for higher funding costs and provisioning levels. Loan spreads to companies and individuals have been increasing as liquidity abroad has become scarcer and more expensive. Spreads earned over commercial loans reached 2.63% in 4Q08 and were up 30 basis points QoQ and 45 basis points YoY. Consumer loan spreads reached 18.78% in 4Q08 and increased 18 basis points QoQ and 75 basis points YoY. Deposit spreads have also benefited from the Bank's higher credit risk ratings.

Despite this positive evolution of spreads, the Bank's net interest margin reached 5.8% in the quarter compared to 6.2% in 4Q07 and 6.9% in 3Q08. This lower net interest margin was mainly due to the lower quarterly inflation in 4Q08 compared to 3Q08 and 4Q07.

The impact of lower net interest margins were offset by the Bank's proactive management of the asset and funding mix, coupled with loan growth and rising spreads. As a result, in 4Q08 net interest income was up 17.7% YoY.

Capitalization ratios continued to improve in 4Q08. The Bank's BIS ratio as of December 31, 2008 reached a solid 13.8% with a Tier I ratio of 10.0%. The Bank has one of the highest BIS ratios among the major players in the Chilean financial system. During the quarter, the Bank issued US$40 million in subordinated bonds in the local market in order to further improve capitalization ratios.

In 4Q08, the Bank's net provision expense increased 14.4% QoQ and 50.6% YoY. As mentioned in previous earning reports, this rise was driven by higher charge-offs in consumer loans due to the economic slowdown, as well as an increase in provisions in the middle-market following negligible levels in the past three years. This rise in risk has been offset by a more selective loan growth towards less risky segments and higher spreads. As a result, net interest income after net provision expense increased 5.1% YoY in 4Q08 and 20.7% YoY in the twelve-month period ended December 31, 2008.

Net fee income increased 3.2% QoQ and 9.7% YoY in 4Q08 in line with the expansion of cross-selling and product usage. Santander Chile has the largest client base in Chile (excluding the state owned bank). The total number of cross-sold clients increased 7.9% YoY. Fees from credit, debit and ATM cards increased 13.1% QoQ and 11.0% YoY.

The growth rate of operating expenses was curbed in the quarter as the Bank focused in cost control and limited the opening of new branches in order to maximize the profitability of the existing network. Operating expenses decreased 1.7% QoQ and increased 6.1% YoY in 4Q08. Administrative expenses in 4Q08 decreased 7.5% QoQ and increased 1.7% YoY. In 4Q08, the efficiency ratio reached 38.8% compared to 42.4% in 4Q07. We have the highest level of efficiency among the larger banks in Chile and among the best in emerging markets.

In the twelve-month period ended December 31, 2008 (12M08), net income attributable to shareholders increased 6.3% YoY and totaled Ch$328,146 million (Ch$1.74 per share and US$2.82 per ADR). Growth was led by a 22.8% increase in core revenues. Net interest income increased 25.9% and fee income 11.8% YoY. The net interest margin in 12M08 reached a record level of 6.1% compared to 5.8% in 12M07. The efficiency ratio reached 38.0% in 12M08 compared to 39.4% in 12M07. Net operating income increased 11.4% in the same period. These higher operating results were partially offset by a 33.9% rise in non- operating losses, net that were negatively affected by higher losses from price level restatement. ROAE reached 23.0% in 12M08 compared to 23.7% in 12M07.

Institutional Background

As per the latest public records published by the Superintendency of Banks of Chile for December 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.

Banco Santander, S.A., (SAN.MC, STD.N), headquartered in Madrid, engages primarily in commercial banking with complementary activities in global wholesale banking, cards, asset management and insurance. Santander had over EUR 1.168 trillion in funds under management at the close of 2008 from more than 80 million customers served through 13,390 offices -- more branches than any other international bank. Founded in 1857, Santander is the largest financial group in Spain and Latin America and has a significant presence in Western Europe and in the United Kingdom. In 2008, Santander registered EUR 8,876 million in attributable net profit, an increase of 9% from 2007, excluding capital gains.

In Latin America, Santander manages over US$200 billion in business volumes (loans, deposits, mutual funds, pension funds and managed funds) through 6,089 branches. In 2008, Santander reported EUR 2,945 million in net attributable income in Latin America, up 10% from the previous year.

For more information, see http://www.santander.com.

(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$641.25 per US$ dollar. All figures presented are in nominal terms. Historical figures are not adjusted for inflation.

(3) As of January 1, 2008, and following the guidelines of the Superintendency 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 do involve a change in total equity as banks 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.

    CONTACT INFORMATION
    Robert Moreno
    Manager, Investor Relations Department
    Banco Santander Chile
    Bandera 140 Piso 19,
    Santiago, Chile
    Tel: (562) 320-8284
    Fax: (562) 671-6554
    Email: rmorenoh@santander.cl
    Website: http://www.santander.cl

SOURCE Banco Santander Chile