Banco Santander-Chile — FY2023 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2023; this is an annual report, not a standalone Q4 earnings filing. Financial statements are audited and prepared under IFRS as issued by the IASB, with Chilean peso as the reporting currency. Figures below are in Ch$ billions unless noted.
Business context and financial performance
Santander-Chile is Chile’s largest bank by loans and second-largest by deposits. Its business spans retail banking, middle-market, corporate and investment banking, and treasury/financial management. It reported 247 branches, 2,103 ATMs and 9,229 employees at year-end. The independent auditor issued an unqualified opinion and concluded internal control over financial reporting was effective.
| Metric | FY2023 / year-end | Prior comparable period |
|---|---|---|
| Net operating income | 1,923.9 | 2,218.9 in 2022; down 13.3% |
| Net interest income | 1,093.0 | 1,570.1 in 2022; down 30.4% |
| Net fee and commission income | 502.6 | 407.3 in 2022; up 23.4% |
| Net income | 593.8; attributable to Bank shareholders: 579.4 | 807.5 net income; 792.3 attributable to shareholders in 2022 |
| Net interest margin / return on average equity | 2.0% / 12.3% | 3.1% / 22.5% in 2022 |
| Operating expenses / operating revenue | 47.3% | 43.3% in 2022 |
| Net provision for loan losses | 322.8 | 356.5 in 2022; down 9.5% |
| Total assets / total liabilities | 71,089.4 / 65,746.9 | 68,422.0 / 63,458.1 in 2022 |
| Loans at amortized cost, gross / net | 40,811.9 / 39,661.9 | 38,729.4 / not stated here for 2022 |
| Customer deposits | 29,675.8 | 27,065.0 in 2022 |
2023 operating cash flow was 1,315.8, versus cash used of 359.0 in 2022. Investing activities used 117.9 and financing activities used 515.3. Year-end cash and cash equivalents were 2,760.7, compared with 2,079.9 in 2022.
Material changes and management commentary
- Loan balances grew 5.4%; mortgage loans increased 8.5%, consumer loans 6.0%, and commercial loans 2.2%. Segment net interest income rose 25.6%, but was more than offset by a sharply weaker “Other” financial-management contribution, including lower UF-gap results and losses on liability interest-rate hedges.
- Management attributed lower net interest income and margin to higher funding costs, an inverted yield curve and lower inflation. Average interest paid on interest-bearing liabilities rose to 8.6% from 7.3%, while average interest earned on interest-earning assets edged up to 8.1% from 8.0%.
- Fees benefited from client growth, digital-platform use and cross-selling. Getnet fees increased 81.2%. Operating expenses fell 5.4% overall, though administrative costs and depreciation increased; the efficiency ratio nevertheless worsened.
- Credit quality weakened: non-performing loans were 923.9, or 2.26% of loans, versus 717.4 and 1.85% in 2022. Impaired loans rose to 5.37% of total loans from 4.34%. Allowances were 1,150.0, or 2.82% of loans, compared with 1,153.3 and 2.98%. Consumer-loan write-offs increased 55% to 271.1; mortgage provisions also rose substantially.
- Chile’s CPI inflation ended 2023 at 3.9%, down from 12.8% in 2022; annual UF inflation was 4.8%. Chile’s GDP was expected to contract 0.2% in 2023. The Central Bank policy rate ended 2023 at 8.25%, down from 11.25% at the end of 2022.
Capital, liquidity, debt and contingencies
- At year-end, regulatory capital was 6,978.7, or 17.6% of risk-weighted assets; CET1 was 11.1%, Tier 1 was 12.7%, and Tier 2 was 5.0%. The Bank reported LCR of 212% and NSFR of 106%.
- Liquid assets totaled 8,048.1, including cash and cash equivalents of 1,969.5 and Level 1 liquid assets of 6,072.3. Deposits and other demand liabilities were 13,537.8; time deposits were 16,137.9.
- The Bank had 20,760.3 of borrowings, including 6,048.9 owed to the Central Bank, 7,925.4 of senior bonds and 4,271.4 of foreign borrowings. The FCIC Central Bank facility balance was 6,182.0 and is due during 2024; management described arrangements to support an orderly repayment. The Bank had invested 3,392.6 in Central Bank liquidity deposits intended to support FCIC payments.
- Legal-contingency provisions were 4.5, down from 5.5 in 2022. The filing says the Bank faces ordinary-course legal matters and cannot rule out losses exceeding current reserves, while management does not expect the matters collectively to materially harm consolidated condition or results.
- The Bank paid 485.2 in dividends during 2023, representing 60% of the prior-year earnings used for that distribution. Chilean law generally requires at least 30% of annual net income to be distributed, subject to capital requirements and shareholder approval.
Outlook, risks and unusual items
- The Central Bank’s 2024 GDP growth forecast cited in the filing was 1.25%–2.25%; this is an economic forecast, not Bank earnings guidance. The filing does not provide a clear numerical earnings or margin forecast for Santander-Chile.
- Management expects regulated card interchange-fee reductions to lower card-fee revenue by approximately Ch$25 billion in 2024 and Ch$47 billion in 2025. The filing also describes proposed legislation that could constrain interest rates, fees or commissions, with outcome and impact uncertain.
- Key exposures include Chilean economic and political conditions, inflation and interest-rate movements, deposit concentration and short maturities, credit deterioration, real-estate collateral, regulatory capital changes, currency and fair-value volatility, cyber and operational incidents, climate-related risks, competition and legal proceedings. The Bank notes 99.4% of customer deposits had remaining maturities of one year or less or were payable on demand.
- Year-end FVOCI debt instruments carried cumulative unrealized net losses of 89.7 in equity. Management considered these losses market-related and temporary and reported no impairment conclusion for the securities reviewed.
- Effective tax expense was 97.5, with a 14.1% effective rate versus 10.4% in 2022, despite the 27% statutory corporate tax rate. Management attributed the increase partly to lower inflation reducing the tax-book capital remeasurement loss.
- Subsequent events included a February 2024 IFC senior loan of US$200 million to support a mortgage portfolio for women homebuyers, and a conditional purchase agreement for an automotive loan portfolio of up to Ch$70 billion, subject to competition review.
Most important facts for investors to verify
- Reconcile the 30.4% decline in reported net interest income with 25.6% growth in segment net interest income and the large negative contribution from “Other.”
- Track whether rising NPLs, impaired loans and consumer write-offs lead to higher provisions or further allowance releases, including the effect of overlays and updated IFRS 9 assumptions.
- Confirm repayment and replacement of the 6,182.0 FCIC balance due in 2024, and monitor deposit renewal, concentration and funding costs.
- Assess the effect of interchange-fee reductions on card income, against digital and Getnet fee growth and management’s stated estimates for 2024–2025.
- Review capital headroom as Basel III buffers phase in, including the 0.5% countercyclical buffer scheduled for implementation in 2024, and compare reported ratios with applicable requirements.
- Check subsequent financial disclosures for realized FVOCI losses, legal-contingency developments, and approvals or completion of the disclosed financing and acquisition transactions.