Banco de Chile — 2023 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing; separate Q4 results are not provided. Banco de Chile is a Chilean full-service bank whose core business is commercial banking in Chile. Its consolidated financial statements are prepared under IFRS as issued by the IASB and presented in Chilean pesos.
Key financial metrics
Amounts below are Ch$ billions unless otherwise stated. Year-end balance-sheet figures are as of December 31.
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Operating income before expected credit losses | 3,016.6 | 3,142.6 | -4.0% |
| Net interest and UF indexation income | 1,920.8 | 2,266.1 | -15.2% |
| Net fees and commissions | 534.0 | 522.1 | +2.3% |
| Other income, net | 561.8 | 354.4 | +58.4% |
| Expected credit losses | 201.9 | 412.1 | -51.0% |
| Operating expenses | 1,118.5 | 995.5 | +12.4% |
| Income before tax | 1,696.1 | 1,735.0 | -2.2% |
| Net income | 1,374.0 | 1,445.8 | -5.0% |
| Net interest margin | 4.57% | 5.40% | -0.83 percentage points |
| Total assets | 55,718 | 55,109 | +1.1% |
| Gross customer loans | 37,651 | 36,726 | +2.5% |
| Deposits | 29,209 | 27,951 | +4.5% |
| Equity | 6,082 | 5,431 | +12.0% |
Gross loans increased 2.5% nominally, or contracted 2.2% after inflation. Commercial loans decreased 1.4%; residential mortgage loans grew 7.8%; and consumer loans grew 6.3%. Year-end loan-loss allowances were Ch$710.2 billion, down 13.6%; the allowance-to-loans ratio fell to 1.89% from 2.24%.
Profitability and margins: Net income attributable to shareholders was Ch$1,374.0 billion, or Ch$13.60 per share. IFRS net interest margin declined to 4.57% from 5.40%. Separately, under Chilean GAAP, reported ROAE was 26.3% versus 31.5%, operating margin was 6.4% versus 6.9%, and the efficiency ratio was 37.3% versus 31.9%. These Chilean GAAP indicators are not directly comparable to IFRS figures.
Cash flow: Net cash provided by operating activities was Ch$1,725.8 billion, compared with Ch$128.6 billion in 2022. Investing activities used Ch$346.5 billion, versus Ch$847.8 billion; financing activities used Ch$1,556.0 billion, versus Ch$161.8 billion. Cash and cash equivalents ended the year at Ch$2,991.0 billion, down from Ch$3,152.1 billion.
Debt and liquidity: At year-end, borrowings from financial institutions were Ch$5,360.7 billion, including Ch$4,348.6 billion of Central Bank FCIC funding at a 0.5% nominal rate. Debt securities issued were Ch$9,360.1 billion, with Ch$1,039.8 billion of subordinated bonds reported separately as regulatory capital instruments. LCR was 289% and NSFR 127%, above applicable year-end regulatory limits. The bank reported full compliance with capital requirements; its CET1 ratio was 13.73%, total capital ratio 17.45%, and leverage ratio 9.04%.
Material changes versus 2022
- Net interest income fell 15.2%, principally because inflation-linked UF income declined as inflation normalized. Chilean CPI inflation was 3.9% in 2023, versus 12.8% in 2022.
- Lower credit-loss expense supported earnings, but this improvement occurred alongside rising delinquencies and charge-offs. Past-due loans of 90 days or more rose to Ch$592.0 billion from Ch$432.8 billion; the IFRS past-due ratio increased to 1.57% from 1.17%. Charge-offs rose to Ch$434.4 billion from Ch$265.5 billion, particularly in consumer lending.
- Other income increased 58.4%, including stronger trading-security income and a smaller loss on sales of FVTOCI securities than in 2022. Operating expenses rose 12.4%, reflecting personnel costs, technology spending, maintenance and other operating costs.
- Commercial-loan demand was weak amid subdued economic activity. The Chilean economy grew 0.2% in 2023, while household consumption fell 5.2%, private investment fell 1.1%, and average unemployment increased to 8.7% from 7.9%.
Outlook, risks and unusual items
- Outlook: The filing gives no formal company earnings or loan-growth guidance. Management describes an expected improvement in Chile’s economic environment in 2024, with inflation moving toward the Central Bank’s 2%–4% target and interest rates expected to continue declining, subject to economic conditions. The bank budgeted Ch$94.9 billion of 2024 capital expenditures, 81.5% for IT investments, principally supporting digitalization, infrastructure and cybersecurity.
- Capital and funding developments: The Central Bank’s 0.5% countercyclical capital buffer was scheduled to begin in May 2024. A 0.5% Pillar 2 capital requirement was scheduled to phase in from June 2024; the bank’s 1.25% systemic buffer is scheduled to complete its phase-in in December 2025. The remaining Ch$1,423.6 billion FCIC repayment was scheduled for July 2024 after a Ch$2,924.8 billion installment was repaid on March 31, 2024.
- Credit and market risk: Further deterioration in the Chilean economy, particularly for households, SMEs, real estate and construction, could increase delinquencies and provisions. Results are sensitive to interest rates and inflation; fair-value securities also expose earnings and equity to market movements. Management reported a net asset position indexed to inflation.
- Operational and regulatory risk: The bank reported net operational losses from external fraud of Ch$18.1 billion in 2023, versus Ch$10.4 billion in 2022. It also identifies cyber incidents, competition, consumer-protection rules, potential new capital or liquidity requirements, and Chilean political and tax reforms as material risks. A new standardized consumer-loan provisioning rule was expected to affect Chilean GAAP results by Ch$60–65 billion before tax from 2025; management planned to reduce additional allowances by an equivalent amount. The filing says the rule will not affect IFRS results.
- Unusual items and comparability: 2023 other operating income included a release of non-credit provisions of approximately Ch$23.4 billion and income reclassified from collection services following an accounting presentation change. The filing also reports higher fraud-related operational losses. These items, and the changing treatment of collection-service income, affect year-over-year comparisons.
- Contingencies and controls: The bank faces a SERNAC consumer-protection lawsuit for which the amount and potential impact could not be estimated clearly. A separate Banchile securities-law fine appeal remains pending; the prior court reduced the fine to UF 7,500. The Spanish court matter described in the filing was definitively dismissed. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded disclosure controls were effective.
Important facts for investors to verify
- Confirm the audited IFRS net income: the financial statements report Ch$1,374.0 billion; one passage in the filing’s discussion contains an inconsistent figure.
- Reconcile IFRS delinquency metrics with Chilean GAAP/CMF and internal-management ratios; the filing presents different ratios on different bases.
- Assess whether lower 2023 credit-loss expense is sustainable given the rise in 90-day past-due loans, charge-offs and renegotiated loans.
- Review the FCIC repayment schedule and post-year-end funding, capital-buffer phase-ins and their possible effects on liquidity and margins.
- Distinguish recurring earnings from inflation-linked income, trading and fair-value gains, provision releases, and the collection-income reclassification.
- Check the final status and potential financial effect of the SERNAC claim, the Banchile appeal, and pending Chilean banking, consumer and tax reforms.