Lindsey Shema

Lindsey Shema from Goldman Sachs asked for an update on the initial operations of Banchile Pagos, including its market opportunity and potential contribution to future earnings. She also sought clarification on whether the identified upside risks to local GDP growth were already factored into Banco de Chile's loan growth and overall estimates.

Answer

Pablo Mejia, Head of Investor Relations, reported that Banchile Pagos operations are progressing well, with approximately 4% of SME customers now using the service, targeting 160,000-200,000 SMEs. He noted that Banchile Pagos is a key driver for fee growth and contributes positively to overall evolution despite some increased expenses. Rodrigo Aravena, Chief Economist and Institutional Relations Officer, explained that while there are upward risks to GDP and domestic demand forecasts for 2026 due to factors like copper prices, consumer/business confidence, and capital goods imports, these do not necessarily translate into a sharp, immediate acceleration in total loans for the same year, suggesting a potential delay in the loan cycle.

Lindsey Shema asked for an update on the initial operations of Banchile Pagos, its market opportunity, and potential contribution to earnings. She also sought clarification on whether the identified upside risks to local GDP growth are already factored into the bank's loan growth and overall estimates, or if there's still additional upside potential.

Answer

Pablo Mejia (Head of Investor Relations) reported that Banchile Pagos is performing well, with 4% of SME customers already onboarded and a target of 160,000-200,000 SMEs, contributing positively to fee growth and overall evolution. Rodrigo Aravena (Chief Economist and Institutional Relations Officer) explained that while there are upward risks to GDP forecasts due to factors like copper prices, confidence, and capital goods imports, there's a delay between GDP and loan cycles. Therefore, the upward risk for GDP doesn't necessarily translate to the same immediate upward risk for total loans in the current year, with recovery potentially extending into the next year.

Lindsey Shema asked for details on the specific cost control initiatives that led to lower-than-expected expense growth. She also questioned the future trajectory of expenses and the timeline for the efficiency ratio to approach the bank's stated target of below 42%.

Answer

Head of IR Pablo Mejia attributed the strong cost control to a significant reduction in the branch network, increased digitalization, and optimization of loyalty programs and marketing spend. He clarified that the 'below 42%' efficiency ratio is an upper limit, not a target to return to, and the bank will continue seeking incremental efficiencies. He noted the full-year 2025 guidance is for an efficiency ratio of around 38%.

Lindsey Shema from Goldman Sachs asked about the bank's 2026 guidance for cost of risk, seeking insights into its expected improvement and asset quality projections. She also inquired about the year-over-year decline in expenses in Q4 and the efficiency improvements contributing to a lower efficiency ratio long-term, requesting details on future expense growth.

Answer

Cristián Vicuña, Head of Strategy and Investor Relations, stated that the cost of risk is expected to improve from 1.4% to 1.3% in 2026, driven by NPL improvements in the commercial portfolio and a more controlled outlook, despite some seasonal pickup in December. He noted that mortgage portfolio NPLs are not expected to significantly impact the cost of risk. Regarding expenses, Cristián Vicuña explained the bank aims for inflation + 1% growth, achieved through technological platforms, AI implementation, and network optimization, with Q4's decline partly due to Chilean peso appreciation affecting administrative costs.

Lindsey Shema from Goldman Sachs asked about Banco Santander-Chile's 2026 guidance for cost of risk, seeking insights into its projected slight improvement and overall asset quality. She also requested more color on the efficiency improvements leading to falling year-over-year expenses in Q4 and the outlook for future expense growth.

Answer

Cristián Vicuña, Head of Strategy and Investor Relations, projected an improvement in cost of risk from ~1.4 in 2025 to ~1.3 in 2026, citing NPL improvements in the commercial portfolio and no expected pass-through from mortgage NPLs. Regarding expenses, he outlined a long-term target of inflation or inflation +1% growth, driven by technological platforms, AI implementation, and network optimization. He also noted that Q4 expense improvement was partly due to Chilean peso appreciation affecting administrative costs.

Lindsey Shema from Goldman Sachs inquired about the main upside and downside risks to Banco Santander Chile's 2026 Return on Equity (ROE) estimate, specifically asking if the guidance accounts for potential unfavorable election outcomes.

Answer

Cristián Vicuña, Head of Strategy and Investor Relations, explained that the guidance does not fully factor in potential upside from a favorable political cycle change, which could boost commercial loan growth. He noted that main downside risks stem from external macro volatility. Patricia Pérez, CFO, added that the base case balances lower inflation with lower policy rates and improved loan dynamics, affirming preparedness for various scenarios.

Lindsey Shema asked about the main upside and downside risks for Banco Santander-Chile's 2026 ROE estimate, specifically inquiring if the estimate factors in an unfavorable election result.

Answer

Cristián Vicuña (Head of Strategy and Investor Relations) explained that the guidance does not fully consider the potential benefits of a political cycle change, which could lead to stronger commercial loan growth (7%-8%) in the second half of 2026 and into 2027. He noted that external macro scenarios (asset/commodity price volatility, international trade effects) are the main sources of uncertainty not fully considered. Patricia Pérez (CFO) added that the base case considers lower inflation, partially offset by a lower monetary policy rate and better loan growth dynamics, and that the bank is prepared for both scenarios.

Lindsey Shema from Goldman Sachs followed up on the impacts of the eighth pension fund withdrawal, asking for a comprehensive view on how it balances out in terms of asset quality improvements versus slower loan growth, and any effects on Prima. She also requested an update on Yape's unit economics, particularly with the increase in multi-installment loans.

Answer

CFO Alejandro Perez-Reyes explained that the PEN 25 billion withdrawal, with PEN 10 billion potentially retained by Credicorp, would positively impact local funding (1% above expectations) but negatively affect loan growth by about 0.5% next year. For Prima, the impact on fee income is very small this year but could be around 10% of fee income next year. Regarding Yape's unit economics, Alejandro Perez-Reyes stated that multi-installment loans are a very positive business, though still small, and are expected to grow significantly, contributing around 20% of Yape's income. CEO Gianfranco Ferrari added that Yape's lending strategy starts with small, mono-installment loans for unbanked/underbanked clients, gradually increasing tenor and size as data is gathered, with both mono-quota and multi-installment businesses being profitable overall.

Lindsey Shema asked for a comparison of the impacts of the eighth pension fund withdrawal, weighing better asset quality against slower loan growth, and if there were any impacts on Prima. She also requested an update on Yape's unit economics, particularly with the increase in multi-installment loans.

Answer

CFO Alejandro Perez-Reyes estimated the eighth withdrawal at PEN 25 billion, with PEN 10 billion potentially retained by Credicorp, positively impacting local funding by 1% but negatively impacting next year's loan growth by 0.5%. He noted a very small impact on Prima's fee income this year, but an estimated 10% impact next year. CEO Gianfranco Ferrari explained Yape's lending strategy, starting with small mono-installment loans for unbanked clients and gradually increasing tenor and size, confirming both mono-quota and multi-installment loans are profitable, though specific unit economics were not shared. He highlighted the positive impact of providing first-ever formal loans to over 1 million clients.

Lindsey Shema from Goldman Sachs followed up on cost of risk, asking where the ratio is expected to trend in the long term. She also requested a breakdown of the updated loan growth expectations by segment.

Answer

CFO Alejandro Perez-Reyes stated that after reaching a more representative level at year-end, the cost of risk is expected to increase for some years as the company strategically grows its higher-risk, higher-yielding portfolios, which will ultimately improve overall profitability. CEO Gianfranco Ferrari reiterated that the strategy is based on optimizing risk-adjusted NIM. Perez-Reyes also confirmed that the expected 6.5% end-of-period loan growth will be driven primarily by retail segments, specifically mortgages and consumer loans at BCP, as well as by Mibanco.

Lindsey Shema of Goldman Sachs Group, Inc. questioned the timeline for the Fee Related Earnings (FRE) margin to expand to the low-thirties percent range and the specific levers driving this. She also sought clarity on the path of Performance Related Earnings (PRE) realizations leading up to 2027.

Answer

Bruno Zaremba, President of Finance & Operations, projected reaching a low-30s FRE margin by Q2 or Q3 of 2026, driven by cost synergies from the Compass combination, IT optimization, and the cycling off of non-recurring expenses. For PRE, he detailed a multi-stage cycle for closed-end funds: net income impact from appreciation starting 2026, distributable earnings from capital returns around 2027, and full PRE realization beginning circa 2028.

Lindsey Shema of Goldman Sachs asked for a detailed breakdown of the updated loan growth guidance, particularly the dynamics between consumer and commercial segments. She also inquired about the strategy to maintain a sustainable 16% ROE in the future, given expected pressures on NIM and cost of risk.

Answer

VP of Strategy & Finance, Mauricio Botero Wolff, provided the loan growth breakdown: 4.2% for commercial, 7% for consumer, and 7.5% for mortgages, contributing to the 5.4% overall guidance. He explained that the 16% sustainable ROE will be achieved through a combination of operational improvements across all geographies and efficient capital management, including the share buyback program and optimizing the double leverage ratio.

Lindsey Shema asked for a detailed breakdown of the updated, faster loan growth guidance by segment and questioned the pathway to maintaining a sustainable 16% ROE, given expected future pressures on cost of risk and NIM.

Answer

VP of Strategy & Finance Mauricio Botero Wolff provided the loan growth breakdown: commercial loans at 4.2%, consumer at 7%, and mortgages at 7.5%. He explained that the sustainable 16% ROE is achievable through a combination of operational improvements across all geographies and strategic capital management, including the ongoing share buyback program and management of the double leverage ratio, which provides flexibility.

Lindsey Shema of Goldman Sachs requested a segment breakdown of the updated loan growth guidance and asked about the strategy for sustaining a 16% ROE amid expected pressures on margins and cost of risk.

Answer

VP of Strategy & Finance Mauricio Botero Wolff provided the updated 2025 loan growth guidance: 4.2% for commercial, 7% for consumer, and 7.5% for mortgage loans, for an overall growth of 5.4%. He explained that the sustainable 16% ROE is achievable through operational improvements, better asset quality, and efficient capital management, including the ongoing share buyback program and management of the double leverage ratio.