Banco de Chile Earnings: Strong Results Benefited From High Inflation Adjustment Income

Narrow-moat-rated Banco de Chile reported solid fourth-quarter earnings, though results did benefit from surprisingly high inflation readjustment income, which we do not expect to persist as inflation in Chile has now fallen into the low single digits. The bank’s net revenue increased 7.2% from last year to CLP 805 billion. Meanwhile, net income increased 11% from last year and 48% from last quarter to CLP 386 billion. These results translate to a return on average equity from 30.2%, well above both the bank’s peers and its historical average. However, these strong results did benefit from temporary economic factors, and as we incorporate these results, we do not plan to materially alter our fair value estimate or $21 per ADR share for Banco de Chile.