Company Reports

Narrow-moat-rated Banco Santander Chile reported first-quarter earnings that were a bit weaker than what we had expected, as higher-than-anticipated operating expenses offset good net interest income growth. Net revenue increased 11.3% from last year but fell 2% from last quarter to CLP 547.6 billion. Despite strong annual revenue growth, net income fell 12% from last year to CLP 123 billion, which translates to a return on equity of 11.2%. As we incorporate these results, we do not plan to materially alter our fair value estimate of $19 per ADR share. We view the shares as fairly valued at the current price.

Banco Santander Chile is the largest bank by assets in the Chilean market. This scale has afforded the bank the second-cheapest deposit base in the country, significantly contributing to Santander Chile’s impressive returns on equity, which are typically in the upper teens. The bank has benefited from the introduction of the "Superdigital" and "Santander Life" accounts that are part of a larger trend toward increased adoption of digital banking in Chile. The bank’s digital offerings are tailored to reach an estimated population of 4.5 million unbanked Chilean citizens and have allowed the firm to trim down the size of its branch network.

Narrow-moat-rated Banco Santander Chile reported solid fourth-quarter results as falling interest rates reduced pressure on the bank’s funding costs while a higher inflation adjustment led to higher interest income. Net revenue increased 23.4% from last year and 30.6% from last quarter to CLP 556 billion. Net income increased 73.8% from last year and more than tripled from a weak third quarter to CLP 176.9 billion, which translates to a return on equity of 16.6%. As we incorporate these results, we do not plan to alter our fair value estimate of $18 per ADR share.

We are changing our Morningstar Uncertainty Rating for Banco Santander Chile to Medium from High as economic risks in Chile fall with inflation. After reaching a peak of over 14% in 2022, inflation in Chile has fallen sharply, reaching 4.8% in November. While Banco Santander Chile did benefit from high inflation in 2022, due to a large portion of the bank’s assets being directly indexed to inflation, high interest rates have begun to pressure its net interest margins through a higher cost of funding. With inflation now in the midsingle digits, there is room for the Chilean Central bank to continue to cut interest rates, removing this pressure on the bank’s results and raising prospects that Chile will manage a soft landing from inflation.

Banco Santander Chile is the largest bank by assets in the Chilean market. This scale has afforded the bank the second-cheapest deposit base in the country, significantly contributing to Santander Chile’s impressive returns on equity, which are typically in the upper teens.

Narrow-moat-rated Banco Santander Chile reported weak third-quarter earnings that were in line with our expectations, as falling inflation compressed the bank's profitability. Net revenue fell 21.3% from last year and 10.9% from last quarter to CLP 426 billion. Meanwhile, net income decreased 54% year over year to CLP 334 billion, which translates to a return on equity of 5.4%, well below the bank's historical average. As we incorporate these results, we do not plan to change our fair value estimate of $18 per ADR share, and we see the shares as roughly fairly valued.

We are reducing our fair value estimate for narrow-moat Banco Santander Chile to $18 per share from $21 per ADR share as the bank’s results are being severely impacted by economic conditions in Chile. About $1.70 of the reduction is from exchange rate movements since our last update with our fair value estimate now being based on an exchange rate of CLP 890/$1 as of Sept. 22, 2023.

Banco Santander Chile is the largest bank by assets in the Chilean market. This scale has afforded the bank the second-cheapest deposit base in the country, significantly contributing to Santander Chile’s impressive returns on equity, which are typically in the upper teens.

Narrow-moat-rated Banco Santander Chile reported decent second-quarter results that were in line with our expectations, as rising cost of funds and higher credit costs were partially offset by strong cost management. The bank's revenue decreased 22.7% from last year to CLP 967.7 billion. Net income decreased 48.5% year over year to CLP 272.6 billion, which translates to a return on equity of 13%, modestly below the firm's long-term average. There was nothing in Banco Santander Chile's earnings that changed our thesis on the bank, and as we incorporate these results, we do not plan to alter our $21 fair value estimate per ADR share.

Narrow moat-rated Banco Santander Chile’s first-quarter results showed that the bank’s net interest margin, or NIM, remains under heavy pressure from lower inflation and rising funding costs, though profitability did materially improve from last quarter thanks to strong noninterest income. Net revenue was down 16% year over year but up 8.5% sequentially to CLP 489.2 billion. Meanwhile, earnings per ADR share fell 42.4% from last year and rose 33.3% from last quarter to $0.36, which translates to a return on equity of 10.1%. As we incorporate these results, we do not plan to materially alter our $21 per ADR share fair value estimate for Banco Santander Chile.

Banco Santander Chile is the largest bank by assets in the Chilean market. This scale has afforded the bank the second-cheapest deposit base in the country, significantly contributing to Santander Chile’s impressive returns on equity, which are typically in the upper teens.

Narrow-moat-rated Banco Santander Chile reported weak fourth-quarter earnings as lower inflation and higher cost of funds compressed the bank’s net interest margin materially in the fourth quarter. Net revenue was down 27.5% year over year and 16.8% sequentially to CLP 451 billion. As a result, earnings per share fell 56.2% from last year to CLP 0.54, which translates to a average return on equity of 10.1%. As we incorporate these results, we do not plan to materially alter our fair value estimate for Banco Santander Chile of $20 per ADR share.

Banco Santander Chile is the largest bank by assets in the Chilean market. This scale has afforded the bank the second-cheapest deposit base in the country, significantly contributing to Santander Chile’s impressive returns on equity, which are typically in the upper teens. The bank has benefited from the introduction of the "Superdigital" and "Santander Life" accounts that are part of a larger trend toward increased adoption of digital banking in Chile. The bank’s digital offerings are tailored to reach an estimated population of 4.5 million unbanked Chilean citizens and led Banco Santander Chile to receive more new demand deposit accounts in 2020 than the rest of the Chilean banking system combined. As a result, Santander has benefited from a lower cost of deposits, seeing more noninterest-bearing deposit accounts than time deposits for the first time in the bank's history in 2020. Moreover, the bank benefits from high inflation Chile through its inflation-indexed loans, though this tailwind has been offset in recent quarters by higher funding costs, which have risen as Chile's central bank rapidly increased interest rates to fight inflation.

Narrow-moat-rated Banco Santander Chile reported weak second-quarter results, as windfall profits from higher inflation waned and higher interest rates pressured the bank's cost of funds. Net revenue was down 2.0% year over year and 19.2% sequentially to CLP 541.8 billion. Earnings per share increased 5.4% from last year to CLP 0.98, which translates to a return on average equity of 20.4%. While this rate of return is down substantially from 31.7% last quarter, and 21% in the year-ago period, it was still a strong result and above the firm's long-term average. As we incorporate these results, we do not plan to make any material changes our fair value estimate of $19.50 per ADR for Banco Santander Chile.

Narrow-moat-rated Banco Santander Chile reported solid decent second-quarter results, as the bank continues to grow its loan book at an impressive rate. Net revenue was up 20.5% to CLP 670,307 million, while earnings per share increased to CLP 1.52 from CLP 1.00 last year. These results translate to a return on average equity of 31.7%, which is well above the bank’s long-term average. As we incorporate these results, we do not plan to make any material changes to our fair value estimate $19.50 per ADR share for Banco Santander Chile. At current market prices we do see Banco Santander Chile as modestly undervalued, though we note that the bank must navigate a period of economic and political uncertainty in Chile.

As we incorporate recent exchange rate movements and increased economic uncertainty in Chile, we are reducing our fair value estimate for narrow-moat Banco Santander Chile from $23 per ADR share to $19.50. The bulk of this decrease comes from a change in our assumed exchange rate from CLP 784 per U.S. dollar to CLP 942 as of June 30, 2022. Our fair value estimate decreased an additional $0.50 due to higher near-term credit costs, as the Chilean economy cools in the face of rapid interest rate increases.

Banco Santander Chile is the largest bank by assets in the Chilean market. This scale has afforded the bank the second-cheapest deposit base in the country, significantly contributing to Santander Chile’s impressive returns on equity, which are typically in the upper teens. The bank has benefited from the introduction of the "Superdigital" and "Santander Life" accounts that are part of a larger trend toward increased adoption of digital banking in Chile. The bank’s digital offerings are tailored to reach an estimated population of 4.5 million unbanked Chilean citizens and led Banco Santander Chile to receive more new demand deposit accounts in 2020 than the rest of the Chilean banking system combined. As a result, Santander has benefited from a lower cost of deposits, seeing more noninterest-bearing deposit accounts than time deposits for the first time in the bank's history in 2020. Moreover, with rising interest rates and high inflation in Chile, the bank will likely benefit from multiple tailwinds to its net interest income in the near term.

Narrow-moat-rated Banco Santander Chile reported decent first-quarter results as rising noninterest income and strong cost management were offset by a drop in net interest margin and lower loan growth. Banco Santander Chile reported earnings per share of $1.25 CLP, 29.5% higher than the prior-year quarter. These results translate to an impressive return on average equity of 25.6% for the quarter. While the bank continues to enjoy the benefit of high inflation on the value of its inflation indexed assets, the economic impact of rising interest rates and slowing growth is starting to appear in the bank’s results. As we incorporate these results, we do not expect to change our fair value estimate of $23 per ADR share though we do note that Banco Santander Chile is entering a period of increased economic uncertainty.

Banco Santander Chile is the largest bank by assets in the Chilean market. This scale has afforded the bank the second-cheapest deposit base in the country, significantly contributing to Santander Chile’s impressive returns on equity, which are typically in the upper teens. The bank has benefited from the introduction of the "Superdigital" and "Santander Life" accounts that are part of a larger trend toward increased adoption of digital banking in Chile. The bank’s digital offerings are tailored to reach an estimated population of 4.5 million unbanked Chilean citizens and led Banco Santander Chile to receive more new demand deposit accounts in 2020 than the rest of the Chilean banking system combined. As a result, Santander has benefited from a lower cost of deposits, seeing more noninterest-bearing deposit accounts than time deposits for the first time in the bank's history in 2020. Moreover, with rising interest rates and high inflation in Chile, the bank will likely benefit from multiple tailwinds to its net interest income in the near term.

Narrow-moat rated Banco Santander Chile posted solid fourth-quarter earnings as net interest margin expansion benefited the company’s results. Banco Santander Chile reported earnings per share of $1.23 CLP and net revenue grew 21.4% from the prior-year quarter to $742.5 million CLP. These results translate to a return on average equity of 28% for the quarter. While political uncertainty in Chile remains high with the constitutional rewrite that is expected to be finished this year, the combination of strong economic output and high inflation is a potent one for the bank and we see the current macro environment in Chile as favorable to the company. As we incorporate these results, we do not expect to change our fair value estimate of $21.70 per ADR share.