Banco de Credito e Inversiones · BCS:BCI
Banco de Credito e Inversiones — Q2 2023 Earnings Presentation
56 slides from Banco de Credito e Inversiones's earnings presentation, August 2023
Slide 1: 2Q 2023 Conference Call
2Q 2023 This presentation includes references to certain non-GAAP measures. We believe these non-GAAP measures provide useful information to both management and investors. These non-GAAP measures should not be considered in isolation or as a substitute for measures of performance prepared in accorda
Slide 2: Contents
Contents. 1. Macro Scenario 2. Digital Ecosystem 3. Key Financial Results 4. City National Bank of Florida
Slide 3: Key Calls for the US, Peruvian & Chilean Economy
Key Calls for the US, Peruvian & Chilean Economy ● Global risks remain high. In addition to greater inflation persistence, geopolitical risks are rising again. Besides the war in Ukraine, the complex relation between China and the United States takes the spotlight again. ● The US economy is still no
Slide 4: US GDP grew 2.4% in 2Q23 and unemployment stays at historical lows
US GDP grew 2.4% in 2Q23 and unemployment rate keeps at minimum historical levels. Florida figures remains fairly positive. US & Florida GDP Growth by Quarter US & Florida Unemployment Rate (annualized QoQ, %) (%) Source: BEA, BLS, Bci Research
Slide 5: Prices are falling but core components sticky; Fed raised FFR to 5.50%
Prices are falling but core components looked more sticky. Fed increased the FFR to 5.50%. US Total & Core CPI US Fed Funds Rate (yoy, %) (%) Source: BEA, BLS, Federal Reserve, Bci Research
Slide 6: US yield curve increased in 2Q23
US yield curve increased in 2Q23 after better economic conditions US Yield Curve 2Q23 vs 1Q23 US Real Broad Effective Exchange Rate (%) (index 2010=100) Source: Bloomberg, Federal Reserve, Bci Research
Slide 7: In Peru, economic activity was hit by the social crisis
In Peru, economic activity was hit by the social crisis. Prices started to drop. Perú. GDP Growth by Quarter and Forecast Perú. Total CPI & Monetary Policy Rate (yoy, %) (%) Source: BCRP, Bci Research
Slide 8: In Chile, economic activity is adjusting
In Chile, economic activity is adjusting. Labour figures continued to deteriorate. Chile. Quarterly GDP Growth and Forecast Chile. Employed versus Unemployed (YoY, %) (Thousands of workers) Source: INE, Central Bank of Chile, Bci Research
Slide 9: Inflation would finish at 3.8% yoy; Central Bank started easing
Inflation would finish at 3.8% yoy at the end of the year. Central Bank started an easing cycle. Chile. Inflation by Components and Forecast Chile. Monetary Policy Rate & Projections (yoy, %) (yoy, %) Source: INE, Central Bank of Chile, Bci Research
Slide 10: The Chilean Peso has been under pressure
The Chilean Peso has been under pressure the last couple of weeks Cumulative performance of selected group of Chile. Yield Curve 4Q22 vs 1Q23 currencies against US Dollar (%) (Jan22:0%) Source: Bloomberg, Bci Research
Slide 11: Executive Summary
Executive Summary • Integrated ESG factors at the top of our strategy, strengthening teams and investing in processes and technology to measure the impacts of our initiatives environmental, social, and corporate governance Key ○ Chilean private bank to join the Net Zero Banking Alliance. Initiatives
Slide 12: Digital Ecosystem
Digital Ecosystem
Slide 13: Bci is building a Digital Ecosystem based on 4 pillars
Bci is building a Digital Ecosystem based on 4 pillars Build the first open loyalty program in Chile to engage merchants and Other value- Deepen individuals, expand the scale of the Build the first One Stop added relationship with ecosystem and increase Shop platform for small & services individuals
Slide 14: Developing the biggest platform in Chile, +10MM clients by 2026
…developing the biggest platform in Chile, reaching out to an audience of +10MM Clients by 2026 5,8 MM Gas Station Supermarket Jan 2023 1,1 MM Telco 1,1 MM +10 MM 4 MM 2026 14
Slide 15: Turning MACH into Chile's leading digital bank
We are on track to turn MACH, the leading P2P/P2M wallet, into Chile’s leading & largest digital bank Ecosystem Checking Account Productos financieros Loyalty Program Pagos Pago a cuotas Cuenta futuro Payroll Prepaid Debit Card Savings account Remittances Remesas Fondos mutuos Mi Tarjeta Peer to Pee
Slide 16: Evolving prepaid debit card into checking account and BciPlus+
Once we have achieved the proper volume of clients, transaction and merchants, we evolved our prepaid debit card into a checking account and launched a new loyalty program called “BciPlus+” Financial BciPlus+ Checking Account products Payroll In-app use Remittances (Savings, cases Mutual funds BNPL)
Slide 17: We have launched a checking account with significant success
We have launched a checking account with significant success 1 Universal Acceptance ● Checking Account For the daily economy of our clients ● Debit Card ● ATM withdrawal 2 The product is gaining traction +80K The checking account was launched April for new Checking customer Accounts¹ Balance ($K/ Us
Slide 18: 3.8 million customers have a free MACH account
3,8 million customers already have a free MACH account and 30% are active users who make monthly value transactions 3,8 million Registered clients +80k Checking Account opting for a free account +310k clients have already paid with P2M in 2023 +1 million active clients making value transactions ~28k
Slide 19: Chile's largest cashback loyalty program for individuals
Our Digital Ecosystem will host Chile’s largest and most innovative cashback loyalty program for individuals… BciPlus+ Cash-back is received directly in Universal Access MACH account Anyone can join BciPlus loyalty program and receive benefits with any payment method, even those who do not bank with
Slide 20: BciPlus+ provides merchants marketing and analytical tools
BciPlus+ will also provide merchants with marketing and analytical tools to boost their sales and customer engagement Marketing as a service Automated and personalized campaigns according to the moment of the user's journey CLIENT Advanced segmentation using descriptive and predictive models PAY Use
Slide 21: ~700k clients enrolled in BciPlus+
~700k clients have already enrolled in BciPlus+ Individuals Merchants ~700k Enrolled clients in +200 merchants being part the loyalty program BciPlus+ of the program ~83k Clients have used ~75% active merchants in BciPlus+ since its launch. (to June. Jun'23) 55% growth in active clients Q2 * Informa
Slide 22: Most desired platform for individuals and merchants
…making it the most desired platform to be in for individuals and merchants due to its complete value proposition Individuals Merchants Wide network of merchants to satisfy Payment acceptance daily needs solutions powered by Bci Pagos and MACH Access to seamless payment and cashback experience Acces
Slide 23: Contents
Contents. 1. Macro Scenario 2. Digital Ecosystem 3. Key Financial Results 4. City National Bank of Florida
Slide 24: Financial Results Consolidated
Financial Results Consolidated Operations Note: Figures are converted to US$ using an FX of 801.66 (July 3rd 2023) *2021 and 2022 under new version Compendium of accounting standards for banks
Slide 25: Loan growth driven by mortgage & commercial loans
Loan growth driven by mortgage & commercial loans Local Total loans (US$mm) Commercial & Interbank loans (US$mm) Operations CAGR CAGR Consumer lending loans (US$mm) Mortgage loans (US$mm) CAGR CAGR Source: Financial Market Commission (CMF) as of March 2023 Note: Figures are converted to US$ using an
Slide 26: Evolution of NIM and Fees
Evolution of NIM and Fees Local Operations Annual Quarterly NIM** (%) Net Fees (US$mm) *2022 under new version Compendium of accounting standards for banks ** Average of the last 7 months for interest-earning assets. Interest-earning assets include total loans, trading portfolio financial assets, in
Slide 27: Operating Expenses
Operating Expenses Local Operations Efficiency Ratio** Annual Quarterly as of June 2023 Operating Expenses Expense Breakdown US$ million as of June 2023 2H22 2H23 as of June 2023 Quarterly *2021 - 2022 under new version Compendium of accounting standards for banks ** Efficiency ratio as calculated b
Slide 28: Sound Liquidity and Capital Ratios
Sound Liquidity and Capital Ratios Local Liabilities Breakdown BIS Ratio Basel III Capital Ratios CET 1 capital has seen an increase of 51 basis points compared to the same period last year. Additionally, there was a 34 bps increase compared to the previous quarter. The main contributing factor to t
Slide 29: Main objectives of the proposed capital increase
Main objectives of the proposed capital increase “Support our local and international growth strategy, that has positioned Bci among the top 10 largest banks in Latin America in terms of assets, and strengthen the Company’s financial position to comply with the latest required regulatory capital rat
Slide 30: Since 2015, Bci has almost triplicated its consolidated assets
Since 2015, Bci has almost triplicated its consolidated assets Total Assets in Ch$ Billion 9.0% CAGR ’15 – ‘22 Local System Excl. Bci Bci Cons. (Inc. M&A)(1) 15.2% CAGR ’15 – ‘22 2.7x % of Local System’s Consolidated Assets 14% 15% 15% 17% 17% 18% 19% 20% Net Income 13.9% 330,823 340,165 371,425 395
Slide 31: Capital increase fundamental to position Bci above Basel III ratios
The intended capital increase is fundamental to position Bci above the capital ratios imposed by Basel III Basel III implementation - Projected scenarios for Bci: +4.64% +1.80% Estimated Impact of Capital Increase 11.00% Internal 9.75% Target • Bci’s capital management policies CET1 Internal Counter
Slide 32: Diversified Loan Distribution
Diversified Loan Distribution Local Operations Local Loan Book Distribution* Local Commercial Loan Book Distribution* as of June 2023 (Excludes all subsidiaries*) Source: Financial Market Commission (CMF). Note: Figures are converted to US$ using an FX of 801.66 (July 3rd 2023) - *Excludes all subsi
Slide 33: Trend of Risk Indicators: Total Loans
Trend of Risk Indicators Local Operations Total Loans Nota: Excludes City National Bank of Florida and Bci Peru Figures are converted to US$ using an FX of 801.66 (July 3rd 2023). *2022 under new version Compendium of accounting standards for banks **LLP = Loan loss provisions
Slide 34: Trend of Risk Indicators: Commercial Loans
Trend of Risk Indicators Local Operations Commercial Loans Nota: Excludes City National Bank of Florida. Figures are converted to US$ using an FX of 801.66 (July 3rd 2023) * LLP = Loan loss provisions *2022 under new version Compendium of accounting standards for banks
Slide 35: Trend of Risk Indicators: Mortgage Loans
Trend of Risk Indicators Local Operations Mortgage Loans Nota: Excludes City National Bank of Florida. Figures are converted to US$ using an FX of 801.66 (July 3rd 2023) *2022 under new version Compendium of accounting standards for banks * LLP = Loan loss provisions
Slide 36: Trend of Risk Indicators: Consumer Loans
Trend of Risk Indicators Local Operations Consumer Loans Nota: Excludes City National Bank of Florida. Figures are converted to US$ using an FX of 801.66 (July 3rd 2023) * LLP = Loan loss provisions *2022 under new version Compendium of accounting standards for banks
Slide 37: City National Bank of Florida
City National Bank of Florida
Slide 38: Strengthened liquidity and capital; CRE portfolio well managed
We strengthened our liquidity position during the first half of 2023, increased our capital ratios & our CRE portfolio is well managed Client Deposits Liquidity Insured Deposits Capital Investments CRE We generated We maintained We reduced our Our CET 1 ratio 98% of our Our commercial client deposit
Slide 39: Client deposits have grown $387MM YTD
Despite turmoil and deposits shrinking in the banking system, our client deposits have grown $387MM (+2%) YTD Client Deposits ($MM) – Excludes Brokered Deposits +$387 (+2%) $17,669 $18,056 Dec 31st, 2022 June 30th, 2023 39
Slide 40: CNB total deposits increased $1.7B YTD
CNB total deposits have increased $1.7B (+9%) YTD while overall industry deposits have decreased Total Deposits ($MM) Banking Industry - Total Deposits ($B) QoQ change: -$87MM -0.4% QoQ change: +$48B +0.3% +$1,741 (+9%) ($383) $22,081 $21,994 (-2%) $20,253 $17,726 $3,550 $3,939 $17,295 $17,343 Broke
Slide 41: ICS increased insured and collateralized deposits to 65%
We leveraged ICS to increase our insured & collateralized deposits from 49% at 2022 year-end to 65% as of June 30th, thereby reducing our uninsured and uncollateralized deposits to 35% ICS remaining capacity of ~$6B Deposits breakdown ($MM) (total capacity of $10B) Dec 31st, 2022 Mar 31st, 2023 June
Slide 42: Mark-to-market improved $52MM since December
Mark-to-market has improved $52MM (pre-tax) since December & the duration of our investment portfolio has shortened as well Dec 31st, 2022 Mar 31st, 2023 June 30th, 2023 $MM Book value Fair value Unrealized G/L Book value Fair value Unrealized G/L Book value Fair value Unrealized G/L OCI Available-f
Slide 43: Core loans grew $428MM QoQ with strong asset quality
Our core loans grew moderately by $428MM QoQ and $836MM YTD while maintaining strong asset quality Total Assets ($MM) Total Loans & Leases ($MM) QoQ change: +$107MM +0.4% Core loans QoQ change: +$428MM +2.5% Non-owner +$1,094 occupied CRE represents (+4%) 47% of total $17,330 portfolio $26,204 $26,3
Slide 44: CRE loans diversified by property type with low LTVs
CRE loans are well diversified across various property types with low LTVs, strong DSC and excellent asset quality CRE by Property Type % % Commitment % Balance % % OF Wavg LTV Wavg Accr Non- % Property Type ($M) Total ($M) Total RBC % DSCR % 30+ DPD Accrual in Florida Retail 2,316 23.9% 2,222 27.2%
Slide 45: Retail is the largest CRE category; office well underwritten
Retail is the largest category within CRE and is well diversified by collateral type. Similarly, our office CRE segment is soundly underwritten and focused on Class A&B properties CRE Retail by Collateral Type CRE Office by Collateral Type Single Non-Credit Tenant 5% Medical Office Single Tenant 18%
Slide 46: 7 of 10 strongest office rent growth markets are in Florida
7 of the 10 office markets with the strongest rent growth are in Florida, highlighting Florida’s economic strength CoStar Office Report on the top 80 office markets as of Mar Florida’s economy is strong and continues to make headlines 31st, 2023 12 Month Market rent US City Growth Rank • 2022 saw mo
Slide 47: Florida gained the most population in 2022
Florida was the state with the most gained population in 2022. Labor market is also booming: lower employment than nationally US States with the most gained and lost population in 2022 Unemployment rate 3.4% 2.6% 1.4% National Florida Miami # of Employees* in MM FL has more jobs than NY for the firs
Slide 48: Operating income in first half 2023 was 9.7% lower
Operating income through the first semester of 2023 was 9.7% lower than 2022 $ Var % Var YTD YTD $ Var % Var INCOME STATEMENT ($ millions) 2Q'22 1Q'23 2Q'23 QoQ QoQ 2022 2023 YoY YoY (+) Net Interest Income $160.8 $144.8 $127.6 -$17.1 -11.8% $304.0 $272.4 -$31.6 -10.4% (+) Non-Interest Income $25.4
Slide 49: Net interest income in Q2'23 decreased $16.5MM vs prior quarter
Net interest income in Q2’23, excluding PPP & MSLP, decreased $16.5MM (-11.5%) vs prior quarter Net interest income ($k) Net interest margin (%) $158,557 2.70 $1,083 $144,753 0.01 2.43 PPP & MSLP Fees PPP/MSLP Impact $1,164 $127,622 0.03 $561 2.07 0.03 Net interest income Core NIM $157,474 2.69 (ex.
Slide 50: Interest rate sensitivity
Interest rate sensitivity: We continue to protect our NIM in the current rate environment, while positioning our balance sheet to benefit from the anticipated rate decreases Standard Model Assumptions (6/30/23) Sensitivity Analysis from Base Case (6/30/23) 100bps instantaneous rise Estimated 12-Mont
Slide 51: Liquidity and capital ratios are strong and improved
Liquidity and capital ratios are strong and have improved across the board since 2022-year end and prior quarter Liquidity and Capital ratios Actual Ratio Var st st th Dec 31 , 2022 March 31 , 2023 June 30 , 2023 (June 30th vs st Dec 31 ) TCE Ratio (excl. HTM) 7.57% 7.72% 7.90% 0.33% TCE Ratio (incl
Slide 52: Conclusions and outlook
Conclusions and outlook While deposits in the industry shrank and others migrated from regional/community banks to the largest US banks, our client deposits grew $387MM as of June (4% annualized growth rate) Our already strong liquidity and capital position improved across the board in the first
Slide 53: Market recognitions of strategic initiatives
Market recognitions of our different strategic initiatives, related to Corporate Reputation, Customer Experience, Innovation, Sustainability… BCI Commitment: -20% reduction of financed emissions by 2030. - Finance USD$ 1.600 million in Sustainable Finance
Slide 54: Guidance 2023
Guidance 2023 Local Guidane ➔Loan growth: Mid-single digit (~5%). ❏ Mortgage Loans: Slowdown is expected due to the macroeconomic conditions. ❏ Consumer Loans: Lower growth than initially expected, due to conservative risk approach. ❏ Commercial Loans: Mid-single digit. ➔Local NIM: Expected to decre
Slide 55: Concluding remarks
Concluding remarks • Digital Ecosystem will host Chile’s largest and most innovative cashback loyalty program and developing the biggest platform in Chile, reaching to an audience of 10MM Clients by 2026 • Integrated ESG factors at the top of our strategy, first Chilean private bank to join the Net
Slide 56: Thank you
● Thank you. This presentation contains forward-looking statements in various places throughout therein, related to, without limitation, our future business development. Forward-looking information is often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “p
Banco de Crédito e Inversiones (Bci) — Q2 2023 Earnings Presentation on 6ix