Banco De Chile · BCS:CHILE
Banco De Chile — Q4 2022 Earnings Presentation
51 slides from Banco De Chile's earnings presentation, Feb 3, 2023
Slide 1: Corporate Presentation 2022
CORPORATE PRESENTATION 2022
Slide 2: Contents
CONTENTS 1. Chilean Macro Environment 2. Chilean Financial System 1. 3. Banco de Chile: 2. - Business Model & Key Metrics - Competitive Strengths & Strategy - Financial Performance 2018 - 2022 4. Full Year 2022 & 4Q22 Financial Results
Slide 3: Chilean Macro Environment
Chilean Macro Environment
Slide 4: A successful growth story…
A successful growth story… Per capita GDP PPP, USD Per capita GDP 35,000 PPP, 1980 = 100 Argentina Brazil Chile Colombia 30,000 Mexico Peru Venezuela 25,000 900 20,000 800 Argentina Brazil Chile Colombia 15,000 10,000 Mexico Peru Venezuela 700 5,000 600 0 1980 1982 1984 1986 1988 1990 1992 1994 1996
Slide 5: … which led to a strong improvement in social development
… which led to a strong improvement in social development People using safely managed drinking Life expectancy at birth Human Capital Index Total years Scale 0-1 water services % of population 79 0.652 99 76 86 75 74 74 0.613 0.605 0.604 0.602 73 51 70 43 0.552 Chile Argentina Colombia Brazil Peru M
Slide 6: Key reforms behind Chile's success
Key reforms behind Chile’s success Headline CPI YoY, % 40 35 Chile implemented a deep transformation in its economic 30 model between late 70 and early 80, including: 25 20 15 10 5 i. To integrate Chile into the global economy. Today, there are 0 free trade agreements with almost 90% of global GDP.
Slide 7: A well diversified and open economy
A well diversified and open economy Exports and Imports Capital Inflows to Chile An Economy Open to the World USD Bn USD Bn • Free Trade Agreements with almost 120 Exports Imports 90% Global GDP 104.4 100 94.6 • Foreign Direct Investment 3.5% of GDP 100 97.5 in the last 3 years* 80 80 • Trade Volume
Slide 8: Challenges and economic forecast
Challenges and economic forecast Chile: Baseline Scenario Economic Politics Social (YoY, %) 2019 2020 2021 2022f 2023f Potential growth has Social crisis in 2019, Risks of the middle GDP 0.8 -6.0 11.7 2.7 -1.4 declined to nearly and its impact in income trap. Chile is Consumption 0.7 -7.2 18.2 2.5 -
Slide 9: Chilean Financial System
Chilean Financial System 9
Slide 10: Chilean Financial System: Main Financial Sectors
Chilean Financial System Main Financial Sectors As of September 2022, as a percentage of LTM GDP Players 86% (#) Commercial Mortgage Consumer Loans Loans Loans Total Banks 48% 28% 10% Loans(1) 17 Assets Under Pension Funds 63% Management(2) 7 Assets Under Mutual Funds 19% 16(3) Management Insurance
Slide 11: Banking Industry: Key Figures
Banking Industry: Key Figures As of December 2022 Total Loans¹ Total Deposits¹ 17 Banks Operating in Chile Billions of USD and CAGR of Loans in % Billions of USD and CAGR of Deposits % 8 Locally controlled banks 8 Foreign controlled banks 8.8% 262 7.5% 1 State owned bank 238 211 216 187 198 192 172
Slide 12: Growth Potential in Personal Banking
Growth Potential in Personal Banking Latam Total Loan Penetration1 Latam Commercial Loan Penetration1 % of GDP % of GDP 86.0 48.0 53.3 52.5 29.2 27.3 47.6 22.0 19.7 11.1 14.0 6.9 Chile Colombia Brazil Perú Mexico Argentina Chile Perú Colombia Brazil Mexico Argentina Latam Consumer Loan Penetration1
Slide 13: Banco de Chile: Ownership, Governance, Business Model & Key Metrics
Banco de Chile Ownership, Governance Business Model & Key Metrics 13
Slide 14: History of Success since 1893
History of Success since 1893 Market Capitalization of Banco de Chile Millions of US$ 5x US$10 Bn LQIF Secondary ~US$430 Offering Chilean MM Full Social Equity Repayment Crisis ~US$530 of Central Offering 1 MM BCH joins BCH islisted Bank Debt Equity DJSI Chile 14,000 US$2 Bn onNYSE Offering 2 Index
Slide 15: Banco de Chile at a glance
Banco de Chile at a glance As of December 2022 Leading the Chilean Financial Industry Loans by Segment (% Market Share) % of Total, December 2022 16% Total Loans1 (USD42.7 bn) 20.0% Demand Deposit1 (USD15.8 bn) Retail Wholesale Credit Ratings 26% Net Income 63% 37% Foreign Currency Long-Term 17% Tot
Slide 16: Comprehensive Multi-Channel Distribution
Comprehensive Multi-Channel Distribution ATM Network1 Overview Total transactions in millions of USD ▪ Banco de Chile’s distribution network provides integrated financial services and 120 products to its customers through a wide range of channels # of Transactions (millions) ▪ Professional and highl
Slide 17: Strong Corporate Governance
Strong Corporate Governance Solid Corporate Governance Practices Six monthly Five risk committees, Best Practices in 11 Board Members including weekly Active Board business pursuant to NYSE (two of the sessions of Credit Involvement committees and SEC standards independent) Committee • Julio Figuero
Slide 18: Ownership and Board of Directors
Ownership and Board of Directors Shareholder Structure Experienced Board of Directors As of December 2022 Ergas Group Chairman and Pablo GranifoL. AndrónicoLuksic C. Julio Figueroa Vice-Chairmans Chairman Since 2007 Vice-Chairman Since 2002 Vice-Chairman Since 2018 3.0% 50.0% Jean Paul LuksicF. Hern
Slide 19: Committees and Senior Management
Committees and Senior Management Leading the Chilean Financial Industry Banco de Chile y Subsidiaries Committees Senior Management (% Market Share) 16% Total Loans² Board Committees 21% Demand Deposit² Eduardo Ebensperger Orrego 24% Net Income Chief Executive Officer Since 2016 • Directors’ and Audi
Slide 20: Diversified Business Model
Diversified Business Model Retail Banking Wholesale Banking Treasury & Money Market Subsidiaries Personal & SME Banking Large Companies Treasury Mutual Funds Management Individuals. Local companies with Institutional counterparties. Securities Brokerage Banchile annual turnover between Small
Slide 21: Competitive Strengths & Business Strategy
Banco de Chile Competitive Strengths & Business Strategy
Slide 22: Our Key Strategic Guidelines
Our Key Strategic Guidelines STRATEGIC PILLARS CORE PRIORITIES MID-TERM TARGETS CUSTOMER CENTRICITY ✓ Net Promoter Score Target: >70% Customers first and at the centre of Accelerate Boost Dec-22: 75.3% everything we do. digital business solutions activity ✓ Market Share in Total Loans1 Target: >Top
Slide 23: Main Focus and Competitive Advantages
Main Focus and Competitive Advantages Market-Leading Position Leader in Service Quality and Strongest Brand Premium Customer Base Proven Digital Banking and Business Intelligence Solid Funding and Capital Prudent Risk Management Efficiency & Productivity Strong ESG Management 23
Slide 24: Leader in Service Quality and Strongest Brand; Market-leading Position
Leader in Service Quality and Market-leading Position Strongest Brand Net Income Net Fees and Commissions Top of Mind and Service Quality² Market Share, as of December 2022 Market Share, as of December 2022 Dec-22 Top of Mind Service Quality 25.6% 21.5% 46.0% 31% 31.2% 16.5% 22.4% 14.8% 17% 15.0% 14
Slide 25: Premium Customer Base
First-Class Retail Customers1 Premium Customer Base Accounts Held by Individuals, as of November 2022 Customers Breakdown Debtors¹ Avg. Balance per Customer As of December 2022 6,000 Debtors in % and number in ‘000. Thousands of US$ As of November 2022 1,126 1,060 Current Accounts Balances (USD Bill
Slide 26: Proven Digital Banking and Business Intelligence
Proven Digital Banking and Business Intelligence New BCH Digital Accounts CUENTA FAN Comprehensive investment app • Launched in 2020. App Mi Inversión that permits users to invest worldwide. 1,047,304 Accounts (Stock as of Dec-22) App Upgrades to Mi Banco App: consumer Digital Current Account Mi Ban
Slide 27: Solid Funding and Capital
Evolution of Deposits Solid Funding and Capital Deposits in Billion of USD Demand Deposits (Left Axis) Time Deposits (Left Axis) Liability Structure Overnight Rate (Right Axis) % Over Total Assets, as of December 2022 25.00 11.25% 12% 20.00 10% 16.47 8% 15.00 15.57 6% 10.00 4% 5.00 2% - 0% Dec-19 Ju
Slide 28: Prudent Risk Management Best Coverage
Prudent Risk Management Best Coverage Delinquency Ratio¹ Additional Provisions % Past Due Loans (>90d) / Total Loans Millions of USD, stock as of December 2022 1.9% 2.1% 1.7% 815 1.6% 1.3% 1.4% 1.1% 1.0% 1.1% 0.84% 483 341 2018 2019 2020 2021 2022 204 191 Coverage Ratio Allowances for Loan Losses /
Slide 29: Efficiency and Productivity: Focus on increase productivity and continuous cost improvements
Efficiency and Productivity: Focus on increase productivity and continuous cost improvements Cost Reduction Productivity Improvement • Corporate Sourcing Team achieved Retail Banking maturity in early 2022. • Current focus on sustaining +45% • Implementation of New Electronic improvements from 2021-
Slide 30: ESG at Banco de Chile
ESG at Banco de Chile Customers Sustainable Finance • Best NPS among peers.¹ • Sustainability Financing Framework aligned with SDGs. • Best Service Quality.² • “Blue Commitment” program to promote ESG-related • Digital accounts free of maintenance fees for adults, products. teenagers and SMEs. • C-L
Slide 31: Financial Performance 2022
Banco de Chile Financial Performance 2022
Slide 32: Financial Performance: Loans and Funding Sources
Financial Performance Total Loans Funding Sources (Millions of USD and % CAGR ) (Millions of USD and % CAGR) CAGR CAGR 10.2 % 49,105 42,693 47,825 7.6 % 39,856 35,994 10,783 41,237 9,961 34,927 5,809 32,477 4,943 36,846 8,967 29,598 4,602 33,213 5,657 6,280 5,273 30,217 13,282 9,219 5,161 4,270 12,0
Slide 33: Financial Performance
Operating Revenues Financial Performance (Millions of USD) 3,625 Net Income Millions of USD 2,338 2,594 1,982 2,174 2,243 1,639 2017 2018 2019 2020 2021 2022 Loan Loss Provisions (Millions of USD) 923 540 506 406 436 272 327 670 692 690 539 2017 2018 2019 2020 2021 2022 Operating Expenses (Millions
Slide 34: Financial Performance: NIM, ROAE, Cost of Risk, Efficiency
NIM Financial Performance Net Interest Income/Avg. Interest Earnings Assets BCH Santander BCI 5.5% ROAE¹ 4.3% Return on Average Equity 4.2% 4.0% 3.2% 3.3% BCH Santander BCI 31.4% 2017 2018 2019 2020 2021 2022 Adj. Cost of Risk Provision for loan losses (Excludes additional provisions) / Avg.Loans 21
Slide 35: Consistent Track Record above the Industry
Consistent Track Record above the Industry Return on Average Equity Leader in Profitability and Capital Net income attributable to equity holders to average equity Size of circle is Net Income in Millions of USD, as of December 2022* 31.4% 40% 18.7% 20.1% 17.5% 12.8% 35% 21.1% 16.7% BCH 12.8% 12.4%
Slide 36: ESG Highlights of 2022
ESG Highlights of 2022 • Implementation of a Sustainability Financing Framework aligned with SDGs. • Creation of a C-Level Sustainability Committee that aims to boost our ESG strategy and initiatives. • “Blue Commitment” program, which promotes electro-mobility, use of renewable energy and ESG inves
Slide 37: Full Year 2022 & 4Q22 Financial Results
Banco de Chile Full Year 2022 & 4Q22 Financial Results
Slide 38: Consistent and Superior Value Generation
Consistent and Superior Value Generation ROAE¹ Adjusted ROAE¹,² Return on Average Equity Return on Average Equity adjusted by inflation BCH Santander BCI BCH Santander BCI 31.4% 21.6% 19.1% 18.7% 17.8% 19.3% 16.4% 13.6% 16.0% 10.9% 8.7% 6.3% 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 1. Data
Slide 39: The Best Investment for our Shareholders with Superior Net Income Growth vs Peers
The Best Investment for our Shareholders with Superior Net Income Growth vs Peers Quarterly and Full Year Net Income¹ Net Income Growth¹ Billions of CLP Variation 2022 vs 2021 1,409 78% +78% 58% 792 432 340 347 287 292 +21% 5% 4Q21 1Q22 2Q22 3Q22 4Q22 2021 2022 Santander BCI BCH ROAE ¹ 27.9% 27.1% 3
Slide 40: Revenue Generation Outpacing Peers
Revenue Generation Outpacing Peers NIM1 Net Interest Income/Avg. Interest Earnings Assets, Annualized. Quarterly Operating Revenues Banco de Chile Santander BCI Billions of CLP 5.2% Non-customer Income 4.1% 3.6% 3.8% Customer Income 3,116 +42% 3.4% 2.1% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1,161
Slide 41: Loan Growth and Consumer Loan Origination Supported by Inflation-indexed Loans
Loan Growth and Consumer Loan Origination Supported by Inflation-indexed Loans Nominal Loan Growth by Product Total Loans YoY Trillions of CLP Commercial Mortgage Consumer Total Loans 17.5% +7.2% 11.6% 36.7 10.6% 36.1 10.3% 35.7 10.2% 7.4% 7.2% 34.2 34.2 3.3% 4Q21 1Q22 2Q22 3Q22 4Q22 +1.7% Real Loan
Slide 42: Balance Sheet Structure Well Positioned for Changes In Interest Rates and CPI
Balance Sheet Structure Well Positioned for Changes In Interest Rates and CPI Liability Structure Evolution of Deposits % Over Total Assets, as of December 2022 Deposits in Billion of CLP Demand Deposits (Left Axis) Time Deposits (Left Axis) 20,000 11.25% 12% Overnight Rate (Right Axis) 10% 15,000 1
Slide 43: Superior Capital Levels vs Peers
Superior Capital Levels vs Peers Basel III Ratio Leader in Profitability and Capital December 2022* Size of circle is Net Income in billions of CLP, as of December 2022* CET 1 AT1 + TIER 2 18.0% 17.4% 4.3% 40% 6.6% 13.1% 3.5% 35% 13.7% 10.8% BCH 9.5% 30% 1,409 BCH Santander BCI 25% ROAE Santander CE
Slide 44: Basel III Implementation in Chile
Basel III Basel III Implementation in Chile Applicable for Banco de Chile 44
Slide 45: Credit Quality Continues Normalizing
Credit Quality Continues Normalizing Expected Credit Losses Coverage Ratio Billions of CLP Allowances for loan losses + Additional Provisions to NPLs. December 2022 435 Add Prov Loan Loss Provision 3.7 357 160 2.4 1.9 1.7 220 138 123 15 BCH BCI Santander Itau 80 275 Additional Provisions 108 137 Bil
Slide 46: Diversified Loan Portfolio
Diversified Loan Portfolio Loans by Segment Loans by Economic Sector % of total, December 2022 % of total, as of December 2022 Retail, Hotels, Construction Retail Wholesale Rest. 7% Manufacturing 63% 37% 8% 5% Agriculture Financial 5% Transport 9% 4% Communication 1% Social 17% Loans to Individuals
Slide 47: Cost Initiatives Bearing Fruit
Cost Initiatives Bearing Fruit Total Expenses Billions of CLP +14% 995 Variation in Total Expenses Billions of CLP 871 +32 +14 +77 995 871 +19% 267 225 4Q21 4Q22 2021 2022 2021 Salaries Administrative Dep, Amort & Other 2022 Efficiency Ratio Efficiency vs Peers¹ Cost to Income Operating expenses to
Slide 48: 4Q22 Key Takeaways
4Q22 Key Takeaways • The Chilean economic activity is normalizing post pandemic. We expect a recession until 2Q23 and a recovery beginning in the 2H23. Guideline FY 2023 Aligned with • Central Bank will likely begin an easing cycle in 2Q23 to Loan Growth (Nominal) inflation reach an monetary interes
Slide 49: Appendix: Main Financial Indicators
Appendix: Main Financial Indicators These results have been prepared in accordance with Chilean GAAP on an unaudited, consolidated basis. All figures are expressed in nominal Chilean pesos (historical pesos), unless otherwise stated. All figures expressed in US dollars (except earnings per ADR) were
Slide 50: Appendix: Main Financial Indicators
Appendix: Main Financial Indicators These results have been prepared in accordance with Chilean GAAP on an unaudited, consolidated basis. All figures are expressed in nominal Chilean pesos (historical pesos), unless otherwise stated. All figures expressed in US dollars (except earnings per ADR) were
Slide 51: Forward Looking Information
Forward Looking Information The information contained here in incorporates by reference statements which constitute ‘‘forward-looking statements,’’ in that they include statements regarding the intent, belief or current expectations of our directors and officers with respect to our future operating