Banco Santander-Chile Announces Second Quarter 2024 Earnings

Rhea-AI Summary

Banco Santander Chile (NYSE: BSAC) reported strong Q2 2024 results, with net income attributable to shareholders reaching $217,724 million ($1.16 per share), an 81.1% increase from the previous quarter. The bank achieved an impressive ROAE of 20.7% in Q2 and 15.8% for the first half of 2024. Key highlights include:

- Net interest margin (NIM) recovery to 3.6% in Q2
- Net interest income up 54.5% year-over-year
- Net fees increased 6.5% quarter-over-quarter
- Cost of credit stable at 1.25%
- Solid capital levels with a BIS ratio of 17.4% and CET1 of 10.6%
- Upgraded 2024 guidance: ROAE 17%-18%, NIM 3.3%-3.5%

The bank's performance reflects strong income growth, improved efficiency, and stable asset quality despite economic challenges.

Positive

• Net income increased by 81.1% quarter-over-quarter, reaching $217,724 million
• ROAE improved to 20.7% in Q2 2024
• Net interest margin recovered to 3.6% in Q2 2024
• Net interest income increased by 54.5% year-over-year
• Net fees grew by 6.5% quarter-over-quarter
• Efficiency ratio improved to 42.1% from 45.4% year-over-year
• Solid capital levels with BIS ratio of 17.4% and CET1 of 10.6%
• Upgraded 2024 guidance: ROAE 17%-18%, NIM 3.3%-3.5%

Negative

• Total loans decreased 1.8% quarter-over-quarter and 0.7% since December 31, 2023
• Commercial loan portfolio contracted due to slower economic dynamism
• Total deposits decreased by 3.7% quarter-over-quarter
• Time deposits decreased by 5.0% in response to lower interest rates
• Non-performing loan ratio increased to 2.7%
• Impaired loan ratio reached 6.2% in June 2024

Insights

Financial Analyst

Banco Santander Chile's Q2 2024 results demonstrate a robust financial performance, with several key metrics showing significant improvement. The 81.1% quarter-over-quarter increase in net income to $217,724 million is particularly noteworthy, driven by a strong recovery in net interest margin (NIM) to 3.6% in Q2. This NIM improvement, up from 2.7% in Q1, reflects the bank's ability to benefit from lower funding costs as the monetary policy rate decreased.

The bank's ROAE of 20.7% in Q2 is impressive and well above industry averages, indicating efficient use of shareholder equity. The upgrade in full-year ROAE guidance to 17%-18% suggests management's confidence in sustaining this performance.

On the asset quality front, the NPL ratio of 2.7% and impaired loan ratio of 6.2% are slightly elevated, reflecting the current economic conditions. However, the stable cost of credit at 1.25% indicates that the bank is managing risk effectively.

The efficiency ratio improvement to 42.1% from 45.4% year-over-year is positive, showing the bank's ability to control costs while growing revenues. The strong capital position with a BIS ratio of 17.4% and CET1 of 10.6% provides a solid foundation for future growth and regulatory compliance.

Overall, Santander Chile's Q2 results paint a picture of a well-managed bank successfully navigating a challenging economic environment, with strong profitability and a solid balance sheet.

Market Research Analyst

Santander Chile's Q2 2024 results offer intriguing insights into the broader Chilean banking sector and economic trends. The bank's performance serves as a barometer for the country's financial health and consumer behavior.

The recovery in net interest margin (NIM) to 3.6% is particularly telling. This improvement, driven by lower funding costs, suggests that the Central Bank's monetary policy easing is effectively trickling down to the banking sector. The MPR cuts from 8.25% at the end of 2023 to 5.75% in June 2024 have clearly benefited Santander's bottom line.

However, the slight contraction in the loan portfolio, particularly in commercial loans, hints at ongoing economic challenges. The 1.8% quarter-over-quarter decrease in total loans reflects softer demand and potentially cautious lending practices. This trend aligns with the bank's observation of "slower dynamism of the economy."

The 5.0% decrease in time deposits during the quarter is an interesting development. This shift suggests that customers are seeking alternative investment options as interest rates decline, potentially signaling increased risk appetite or a search for yield in other asset classes.

Lastly, the bank's continued investment in digital transformation and the restructuring of its branch network towards Work/Café concepts indicate a broader trend in the banking industry towards more efficient, technology-driven operations. This shift may have long-term implications for employment in the sector and customer interaction models.

SANTIAGO, Chile, July 31, 2024 (GLOBE NEWSWIRE) -- Banco Santander Chile (NYSE: BSAC; SSE: Bsantander) announced today its results¹ for the six-month period ended July 31, 2024, and second quarter 2024 (2Q24).

ROAE² of 20.7% in 2Q24³ and 15.8% in 6M24⁴.

In the second quarter of 2024 (2Q24), the Bank's net income attributable to shareholders totaled $217,724 million ($1.16 per share and US$ 0.49 per ADR), reflecting an increase of 81.1% compared to the previous quarter, with an ROAE of 20.7%.

As of June 30, 2024, the Bank's net income attributable to shareholders totaled $337,976 billion ($1.79 per share and US$0.76 per ADR), reflecting an increase of 28.6% compared to the same period of the previous year, along with an ROAE of 15.8%.

The increase in results in the quarter is explained by an increase in the Bank's main income lines, with operating income increasing by 19.4% in the quarter, driven by a better interest margin and adjustments.

Strong recovery in MIN⁵ to 3.6% in 2Q24 and 3.1% in 6M24.

Net interest and readjustment income (NII) as of June 30, 2024 increased by 54.5% compared to the same period in 2023. This increase in NII was due to higher interest income due to the effect of the lower monetary policy rate on our funding cost and partially offset by lower readjustment income due to lower inflation in the period.

In 2Q24, total net interest and readjustment income increased by 26.4% compared to 1Q24. This is explained by higher interest income due to lower funding costs and also by higher net income from readjustments due to the greater variation of the UF in the quarter.

It is important to mention the first payment of the FCIC, a line of credit granted by the Central Bank during the pandemic, which was made on April 1. This generated a 4.8% decrease in interest-generating assets in the last quarter. With these dynamics of funding costs, inflation and decrease in interest-generating assets in the last quarter, the NIM increased from 2.1% in 6M23 to 3.1% in 6M24 and from 2.0% in 2Q23 and 2.7% in 1Q24 to 3.6% in 2Q24.

Net commissions increase 6.5% in the quarter, with recurrence⁶ levels of 55%.

Net fees increased 6.5% QoQ⁷ due to increased customer numbers and greater use of products such as mutual funds, cards and current accounts. As a result, the recurrence ratio (total net fees divided by total expenses) is 55.0% in 2Q24, with more than half of the Bank's expenses being financed by the fees generated.

In the first half of 2024, fees decreased by 1.4% compared to the same period in 2023, mainly due to lower card fees due to the impact of interchange fee regulation and lower fees earned on financial advisory services. However, fees on our other core products continue to trend well.

Cost of credit of 1.25% in 6M24, in line with the evolution of asset quality given the economic scenario.

During the Covid-19 pandemic, asset quality benefited from state aid and pension fund withdrawals, which led to a positive evolution of assets during that period, and then began to normalize in line with the economy and the drainage of excess liquidity from households. Currently, the behavior of our clients is reflecting the state of the economy and the labor market, where non-performing loans (NPL) are slightly higher than usual, with the non-performing loan ratio (NPL) reaching 2.7% and the impaired loan ratio reaching 6.2% at June 2024. Overall the cost of credit remained stable at 1.25% in the quarter.

Core support expenses increase 4.2% in 6M24 in line with guidance

Core support expenses (salaries, administration and amortization) grew 4.2% in 6M24 compared to 6M23 and 4.7% compared to 1Q24, in line with the growth of the inflation, as we mentioned in our previous guidance. Total operating expenses (which includes other expenses) increased 15.2% in 6M24 compared to the same period in 2023 driven by higher other operating expenses, related to a provision for the restructuring of our branch network and the transformation to Work/Café and also the progress in Digital Banking.

The Bank's efficiency ratio reached 42.1% as of June 30, 2024, better than the 45.4% of the same period last year, with a quarterly efficiency ratio of 37.6%, explained by the recovery of revenues in the quarter.

Solid capital levels with a BIS⁸ ratio of 17.4% and a CET1⁹ of 10.6%.

Our total BIS ratio reached 17.4% as of June 30, 2024 and the CET1 ratio remains solid at 10.6%, even considering that we increased the dividend provision for the 2024 income from 30% to 60% in June 2024. Risk-weighted assets (RWA) increased 0.5% since December 31, 2023 and decreased 1.9% QoQ, explained by a decrease in credit risk-weighted assets. Additionally, in January 2024, the CMF announced the Pillar II charges for six banks in the Chilean system, and we highlight that, on this occasion, they did not assign a Pillar II charge to the Bank.

Retail loans grow with soft trends, while commercial loans contract due to lower dynamism

Total loans decreased 1.8% QoQ and 0.7% compared to December 31, 2023. The retail banking portfolio (mortgage and consumer) continued to grow modestly, while the slower dynamism of the economy, together with exchange rate effects, resulted in contractions in the commercial portfolio. In addition, during the quarter, Bansa S.A. was excluded from the Bank's consolidation, reducing commercial loans by approximately Ch$ 219 billion (approximately 0.5% of the total portfolio).

Time deposits decrease 5.0% in the quarter in response to lower rates

The Bank's total deposits decreased by 1.3% since December 31, 2023, explained by the 2.3% decrease since December 31, 2023 in demand deposits and a decrease in time deposits in recent months. Compared to March 31, 2024, total deposits decreased by 3.7%, with demand deposits falling by 2.1%, while time deposits also decreased by 5.0%, as customers responded to lower interest rates. The beginning of the rate cut cycle began at the end of July 2023 and after 5 successive cuts, the MPR ended 2023 at 8.25%. In 2024, the Central Bank has continued to cut the rate, reaching 5.75% in June.

Upgrading guidance for 2024: ROE: 17%-18%

Given the strong recovery of results in the quarter and our current economic estimates, we are upgrading our NIM to 3.3%-3.5% and with this our ROAE guidance from 15%-17% to 17%-18%.

Banco Santander Chile is one of the companies with the highest risk classifications in Latin America with an A2 rating from Moody's, A- from Standard and Poor's, A+ from Japan Credit Rating Agency, AA- from HR Ratings and A from KBRA. All our ratings as of the date of this report have a Stable Outlook.

As of June 30, 2024, we had total assets of $68,262,019 million (US$72,431 million), total outstanding gross loans (including interbank loans) at amortized cost of $40,565,553 million (US$43,043 million), total deposits of$29,297,940 million (US$31,087 million) and shareholders' equity of $4,194,393 million (US$4,451 million). The BIS capital ratio was 17.4%, with a core capital ratio of 10.6%. As of June 30, 2024, Santander Chile employed 8,885 people and had 244 branches throughout Chile.

CONTACT INFORMATION
Cristian Vicuña
Chief Strategy Officer and Head of Investor Relations
Banco Santander Chile
Bandera 140, Floor 20
Santiago, Chile
Email: irelations@santander.cl
Website: www.santander.cl 

___________________________________________________________

¹ _{The information contained in this report is presented in accordance with Chilean Bank GAAP as defined by the Financial Markets Commission (FMC).}
² _{Annualized net income attributable to owners of the bank divided by the average equity attributable to equity holders.}
³ _{The second quarter of 2024.}
⁴ _{The six months accumulated as of June 30, 2024.}
⁵ _{MIN: Net interest margin. Net interest income and annualized adjustments divided by interest-earning assets}
⁶ _{Recurrence: Net commissions divided by operating expenses.}
⁷ _{Quarter versus quarter (2Q24 vs 1Q24)}
⁸ _{Regulatory capital divided by risk-weighted assets, according to CMF BIS III definitions}
⁹ _{Core capital divided by risk-weighted assets, according to CMF BIS III definitions.}

FAQ

What was Banco Santander Chile's (BSAC) net income for Q2 2024?

Banco Santander Chile's net income attributable to shareholders for Q2 2024 was $217,724 million ($1.16 per share and US$0.49 per ADR), representing an 81.1% increase from the previous quarter.

What was BSAC's Return on Average Equity (ROAE) for Q2 2024?

Banco Santander Chile's ROAE for Q2 2024 was 20.7%, showing a significant improvement in profitability.

How did Banco Santander Chile's (BSAC) net interest margin (NIM) perform in Q2 2024?

BSAC's net interest margin (NIM) recovered strongly to 3.6% in Q2 2024, up from 2.7% in Q1 2024 and 2.0% in Q2 2023.

What is Banco Santander Chile's (BSAC) updated guidance for ROAE in 2024?

BSAC has upgraded its ROAE guidance for 2024 from 15%-17% to 17%-18%, reflecting strong performance and improved economic estimates.

How did Banco Santander Chile's (BSAC) loan portfolio perform in Q2 2024?

BSAC's total loans decreased by 1.8% quarter-over-quarter and 0.7% compared to December 31, 2023, with retail loans showing soft growth and commercial loans contracting due to lower economic dynamism.