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  • We have the largest retal franchise in Chile. In order to be successful in retail banking size is of the essence. We rank number 1 in almost every market and product in Chile...
  • 1 Another important factor which distinguishes this Bank form its main competitors is our strong capital base. Of the top banks in Chile, Santander has the highest BIS ratio to support growth. We are also the highest rated private company in Latin America. A part form the benefits of being in Chile, being part of Santander’s franchise has definitely been a positive factor for our ratings given strong banking culture we have inherited. We have paid 100% payout the last three years, our average dividend yield has been 6%. No decir payout 2006!!! Dar indicación de que no será 100%, pero será alto y que aunque retendremos capital, el ROE aumentará el 2006.

Transcript

  • 1. Banco Santander Santiago: Leading performance in retail banking May 2006
  • 2. Banco Santander Chile caution that this presentation contains forward looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. These forward looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance. While these forward looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: (1) general market, macro-economic, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates, and interest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. The risk factors and other key factors that we have indicated in our past and future filings and reports, including those with the Securities and Exchange Commission of the United States of America, could adversely affect our business and financial performance. Note: the information contained in this presentation is not audited. Nevertheless, the consolidated accounts are prepared on the basis of generally accepted accounting principles Important information
  • 3. Main points
    • Chile: a sound and fast growing economy
    • A financial system with high growth potential, especially in retail banking
    • Santander Santiago: Chile’s leading retail franchise
    • Strategic focus: increase profitability by expanding retail banking activities. 2005 & 1Q06 results in line with this goal
    • Positive 2006-07 outlook
  • 4.
    • Solid fundamentals : high growth, low interest and inflation rates, fiscal surplus, balanced current account and high savings rate
    • Stability: fiscal and monetary policy based on transparent rules and policies
    • Open economy: (average tariff < 2%); Free trade agreements with USA, Europe, China, Canada, Korea and New Zealand. Talks with India and Japan
    • Some risk factors : deceleration of the world economy; unexpected downward shifts in prices of commodities; overheating of local economy
    Healthy environment for banks Stability of the rules helps to sustain economic growth Macroeconomic scenario
  • 5. Source: Bloomberg, JP Morgan & Standard & Poor’s SPREAD OVER U.S. T-BILLS (Basis points) SOVEREIGN RATINGS Low country risk reflects Chile’s stability and strengths Macroeconomic scenario EMBI index CHILE index 68 191 A Chile BBB- Russia BBB Mexico BBB+ Poland A- Czech A Santander Santiago AA- Italy AA Portugal AAA Spain AAA UK AAA USA
  • 6.  
  • 7. Main points
    • Chile: a sound and fast growing economy
    • A financial system with high growth potential, especially in retail banking
    • Santander Santiago: Chile’s leading retail franchise
    • Strategic focus: increase profitability by expanding retail banking activities. 2005 & 1Q06 results in line with this goal
    • Positive 2006-07 outlook
  • 8. Total loans, constant US$ billion as of 1Q 2006 Loans to individuals growing above 22% per annum * Loans to individuals = Consumer + residential mortgage Source: Superintendence of Banks Financial System Volume Annual growth, %
  • 9. Customer funds, constant US$ billion as of 1Q 2006 Healthy growth of deposits and assets managed Source: Superintendence of Banks Financial System Volume Annual growth, %
  • 10. Loans / GDP, % High potential to increase bank penetration levels... Source: National Central Banks, European Intelligence Unit and FED. As of 12-31-05 except US as of 09-30-05 Financial System CHILE
  • 11. * Consumer + mortgage. Source: Superintendency of Banks, Central Banks & European Intelligence Unit. Figures as of Dec. 2005 except USA 09/2005 ** Source: Banco Central de Chile, Informe de Estabilidad Financiera, 2º Semester 2005 Household debt** / Disposable income Loans to individuals* / GDP, % Loans to individuals* / Total loans … especially in retail banking Financial System
  • 12. Source: Merrill Lynch MUTUAL FUNDS / GDP, % NON-LIFE INSURANCE / GDP, % High potential in non-lending products Financial System Figures as of December 2005
  • 13.
    • Branches per 10,000 Inhabitants
    • Nº Account per Inhabitants
    • Nº ATM per 1,000 Inhabitants
    • Nº Cards per 1,000 Inhabitants
      • Credit Card
      • Debit Card
    • Nº Transactions per Inhabitant
      • Checking
      • Payments with Cards
    5.3 2.4 0.8 1,122 1,055 38 87 6.6 1.4 0.7 529 910 23 45 0.75 0.3 0.2 80 338 6 13 1.3 0.4 0.7 233 607 137 8 1.0 0.1 0.2 176 200 19 4 UK Europe Mexico Brazil Chile Low penetration levels even compared to regional peers Source: División América, Grupo Santander Central Hispano for Chile, EU, Mexico and Brazil. Bank for International Settlements for US and UK 3.6 n.a 1.3 4,384 902 126 126 US Financial System
  • 14. Main points
    • Chile: a sound and fast growing economy
    • A financial system with high growth potential, especially in retail banking
    • Santander Santiago: Chile’s leading retail franchise
    • Strategic focus: increase profitability by expanding retail banking activities. 2005 & 1Q06 results in line with this goal
    • Positive 2006-07 outlook
  • 15. * Time deposits + checking accounts + mutual funds Amount Rank Assets US$ 28.5 bn. 1 Loans US$ 19.1 bn. 1 Client funds* US$ 19.9 bn. 1 Net income (1Q 06) US$ 124mn. 1 Branches 361 1 ATMs 1,395 1 Customers 2.2 mn. 1 Figures as of 3.31.06 A strong competitive position in the Chilean market Santander Santiago’s franchise Santander is leader in profitability, size and efficiency
  • 16. Largest client base with low penetration leveles Figures for middle-upper & upper income individuals, as of 2005
    • 1 out of 3 clients has checking account
    • 1 out of 3 clients has credit card
    • 1 out 10 clients has consumer credit
    • Within clients with checking accounts:
      • 1 out of 10 has a mutual fund
      • 1 out of 5 has a mortgage
    Santander Santiago’s franchise
  • 17. * Core revenue : net interest income + fees ** SMEs includes Institutional Lending Individuals Middle Market SMEs** Corporate & Treasury Strong retail banking activities 56% Individuals + SMEs Individuals Middle Market SMEs** 64% Individuals + SMEs Santander Santiago’s franchise Other 2% Other 8% Corporate & Treasury Figures for 2005
  • 18. BIS RATIO (April 06)* 12.9% TIER I 9.3% TIER II 3.6%
    • Santander Santiago has the best risk rating in Latin America:
        • S&P: “A”, Fitch: “A”, Moody’s: “Baa1”
        • Moody’s Financial Strength: “B-”; Top 5 among emerging banks. Outlook: Positive
    Capital Strong capital base to support growth A unique position to benefit from an expanding retail market * Ex-dividend
  • 19. Main points
    • Chile: a sound and fast growing economy
    • A financial system with high growth potential, especially in retail banking
    • Santander Santiago: Chile’s leading retail franchise
    • Strategic focus: increase profitability by expanding retail banking activities. 2005 & 1Q06 results in line with this goal
    • Positive 2006-07 outlook
  • 20. Strengthening our leadership in retail banking Santander Chile: Strategic Focus 2006-2008
    • Growth above competition in retail banking
    • Increase client base and cross-selling by improving client services and expanding distribution network
    • Improve efficiency through gains in productivity and cost control in order to help finance investments in retail
    • Proactive management of asset quality in order to balance growth in retail banking with normalization of provision expense levels
    Strategy
  • 21. Loans, Ch$ billion 1. Growth above competition in retail banking Strong growth in lending to individuals and SMEs Retail Loans 25.1% Volume Ch$ bn % Chg. YoY Individuals 4,372 23.3% Consumer 1,480 28.0% Mortgage 2,381 26.5% SMEs 1,495 30.7% Retail 5,867 25.1% Institutional 183 16.2% Middle-Market 2,125 14.5% Corporate 1,428 4.3% Total* 10,737 17.8% * Total Loans includes Other non-segmented loans
  • 22. Gaining market share in key products Source: Superintendence of Banks Market share as of 03.31.06, % and YoY change in basis points 1. Growth above competition in retail banking
  • 23. Quarterly net interest income (Ch$ million) and margins*(%) Better asset mix improves the net interest margin * Net interest income + foreign exchange transactions / Average earning assets 1. Growth above competition in retail banking +19.4% 4.15% 4.37% 4.52% 4.74% +22 bp +15.3% +22 bp
  • 24. 2. Increase client base and cross-selling TOTAL CLIENTS 11.9% 29.0% CROSS-SOLD CLIENTS W/ CHECKING* * Clients that use 4 or more products including checking (excludes Santander Banefe) ** Santander Banefe: clients that use 2 or more products including a transactional product CROSS-SOLD BANEFE** 44.2% 16.7% CROSS-SOLD SMEs* Clients, thousand A larger and more profitable client base
  • 25. Larger and more profitable client base drives fee growth 2. Increase client base and cross-selling Fee income, Ch$ billion Fees over cost ratio reached record level of 55.6% in 1Q 2006
  • 26. Costs under control. Growing efficiently 3. Improve efficiency Efficiency ratio, % Record efficiency ratio in 1Q 2006
  • 27. Expanding our distribution network 3. Improve efficiency ATMs BRANCHES +45 (14.2%) +208 (17.5%)
    • Strengthening distribution capabilities
      • Bank: 15-20 new branches a year
      • Banefe: 15-20 new branches a year
      • Complementary channels (Internet, ATMs, Call Center)
  • 28. Sound asset quality Provision expense expected to grow in line with retail activity 4. Proactive management of asset quality Provision expense, Ch$ million
  • 29. ROE 2005 2006 * As reported by the Superintendence of Banks; unconsolidated figures. Peer Group: Banco de Chile, BCI, Corpbanca & BBVA Source: Superintendence of Banks 260 bp -350 bp 20 bp COST / INCOME -290 bp -150 bp -170 pb NET INTEREST MARGIN FEES / COSTS 40 bp 10 bp 20 bp 890 bp -360 bp 320bp Solid ratios compared with competition* Ratios as of 3.31.06. YoY increase in basis points Overall Performance
  • 30. Main points
    • Chile: a sound and fast growing economy
    • A financial system with high growth potential, especially in retail banking
    • Santander Santiago: Chile’s leading retail franchise
    • Strategic focus: increase profitability by expanding retail banking activities. 2005 & 1Q06 results in line with this goal
    • Positive 2006-07 outlook
  • 31. Positive Outlook 2006-07
    • A growing and sound economic environment should sustain growth in 2006-07
    • We will continue to deepen our strong competitive advantages in retail banking in terms of client base, distribution and clients service
    • Growth in retail banking should help to sustain our high margins and push fee income
    • World class efficiency levels should improve . Economies of scale, further productivity initiatives and top of the line systems (Altec-Altair) should allow us to grow efficiently
    • Asset quality should remain under control. Provision expense should move in line with retail activities
  • 32.