Banco Santander-Chile — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022, with comparisons to FY2021 and FY2020. This is an annual report, not a standalone 2022 Q4 earnings filing. Financial statements are audited and prepared under IFRS as issued by the IASB; amounts below are Chilean pesos (Ch$), generally in millions unless stated otherwise.
Business context and financial performance
Banco Santander-Chile is a leading Chilean commercial and retail bank and the country’s largest lender by loans. It reported total assets of Ch$68,422,026 million, gross loans at amortized cost of Ch$38,729,401 million, total deposits of Ch$27,065,016 million and total equity of Ch$4,963,947 million at year-end.
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Total operating income | Ch$2,218,926 million | Ch$2,266,614 million | -2.1% |
| Net interest income | Ch$1,570,112 million | Ch$1,794,774 million | -12.5% |
| Net fees and commission income | Ch$407,269 million | Ch$349,328 million | +16.6% |
| Net income from financial operations | Ch$217,178 million | Ch$119,028 million | +82.5% |
| Operating expenses | Ch$961,326 million | Ch$901,294 million | +6.7% |
| Provision for loan losses, net | Ch$356,494 million | Ch$291,228 million | +22.4% |
| Net income | Ch$807,482 million | Ch$852,428 million | -5.3% |
| Net income attributable to Bank shareholders | Ch$792,276 million | Ch$842,467 million | -6.0% |
- Profitability and efficiency: Net interest margin was 3.1% (3.13% in the detailed table), versus 3.9% in 2021. Return on average equity was 22.5%, up from 20.7%; return on average assets was 1.2%, down from 1.5%. The operating expense-to-revenue ratio increased to 43.3% from 39.8%.
- Loans and asset quality: Gross loans grew 6.0% year over year. The allowance for loan losses was Ch$1,153,267 million, or 3.0% of loans, versus 2.9% in 2021. The IFRS table reports non-performing loans at 0.81% of loans, down from 1.23%; other filing sections report higher ratios using Chilean regulatory definitions.
- Liquidity and funding: The Bank reported a liquidity portfolio of Ch$6,885,783 million, an LCR of 175.2% and an NSFR of 116.0%. Customer deposits declined to Ch$27,065,016 million from Ch$28,031,993 million. Almost all customer deposits were payable on demand or had remaining maturities of one year or less. The Bank had Ch$5,584,084 million outstanding under Central Bank FCIC credit lines and no LCL debt.
- Capital and liabilities: Regulatory capital was Ch$6,759,047 million, or 17.8% of risk-weighted assets; core capital was 11.1% and Tier 1 capital 13.2%. Total liabilities were Ch$63,458,079 million. The filing reports total liabilities at 18.2 times equity, versus 13.2 times in 2021.
- Cash flow: Operating activities used Ch$358,988 million, investing activities used Ch$94,602 million and financing activities used Ch$384,323 million. Cash and cash equivalents ended the year at Ch$2,079,886 million.
Material changes versus FY2021
- Rising policy rates and inflation drove funding costs sharply higher: average interest expense rates rose, while net interest income and net interest margin fell despite loan growth and higher asset yields.
- Net fee income improved, supported by checking-account growth, card usage, insurance brokerage and Getnet. The filing says Chile’s interchange fee caps reduced card-fee income by about Ch$17 billion in 2022; a separate estimate in the financial-statement notes puts the effect at approximately Ch$29 billion.
- Credit-loss provisions increased as pandemic-era household liquidity normalized and economic conditions weakened. Consumer-loan provisions rose 49.9%; the Bank recorded Ch$91,351 million of residual ECL overlays for future macroeconomic updates and selected exposures.
- Operating costs rose faster than income, with inflation-related salary, rent and outsourced IT costs contributing. Headcount declined 6.0% to 9,389 and branches fell 12.3% to 286; ATMs increased 23.1% to 1,647.
- Cash-flow hedge and inflation-gap results were volatile: the loss on swaps used mainly to hedge inflation and interest-rate risk was Ch$680,403 million in 2022, compared with a Ch$449,122 million gain in 2021. The filing also reports an unrealized net loss of Ch$109,392 million on FVOCI debt instruments in equity.
Outlook, risks and unusual items
- Outlook: The filing provides no specific Santander-Chile earnings or balance-sheet guidance. Management cites the Central Bank’s then-current outlook for Chilean GDP contraction of about 1.75% in 2023 and growth of 2%–3% in 2024. Inflation was 12.8% at year-end 2022, and the Central Bank’s policy rate reached 11.25%.
- Key risks: Chilean recession, inflation and interest-rate movements; credit deterioration and loan-loss estimation uncertainty; short-term deposit funding and asset-liability maturity mismatches; market, foreign-exchange and fair-value volatility; regulatory and capital changes; competition from fintechs; cybersecurity and operational disruption; climate risks; political and constitutional uncertainty; and legal or tax proceedings.
- Contingencies and other items: Legal-contingency provisions were Ch$5,533 million, compared with Ch$3,035 million in 2021. Off-balance-sheet contingent loans and commitments totaled about Ch$11,915,297 million. The 2022 dividend payment of Ch$464,977 million related to the prior-year earnings distribution; shareholders approved a 60% payout of FY2021 profits.
- Reporting and controls: The auditor issued unqualified opinions on the IFRS financial statements and internal control over financial reporting. The audit identified the collective expected-credit-loss allowance for commercial, mortgage and consumer loans as a critical audit matter because of management judgment and model assumptions.
Most important facts for investors to verify
- Reconcile the differing reported non-performing-loan ratios, including the IFRS figure of 0.81% and Chilean regulatory figures elsewhere in the filing.
- Confirm the card interchange-fee impact: the filing cites both approximately Ch$17 billion and approximately Ch$29 billion for 2022.
- Review the drivers, duration and potential reversal of the Ch$680,403 million hedge loss, the Ch$109,392 million FVOCI unrealized loss and the Ch$91,351 million ECL overlays.
- Assess deposit trends, the short maturity of funding, FCIC repayment timing and liquidity buffers against the reported LCR and NSFR.
- Check loan-loss trends, especially consumer lending, Stage 2 and Stage 3 exposures, and the assumptions underlying the ECL models.
- Confirm the effective tax-rate and income-tax figures against the audited statements; the narrative contains inconsistent tax-expense amounts.
- Track Chilean macroeconomic conditions, regulatory proposals, capital-buffer implementation and the Bank’s ability to sustain margins as rates and inflation change.