Banco Santander Chile Earnings: Net Interest Margin Recovery Drives Dramatic Earnings Growth

Narrow-moat-rated Banco Santander Chile reported solid third-quarter results that were largely in line with our expectations as the bank’s net interest margin recovers. Net revenue increased 63% from last year and 6.3% from last quarter to CLP 694.7 billion. Meanwhile, net income increased 330% from a very weak result last year to CLP 243 billion. These results translate to a return on average equity of 23.1%, above the firm’s historical average as the bank completes its recovery from a period of weak performance. While this is a substantial improvement, we had expected a recovery as rates fall. As we incorporate these results, we do not expect to materially alter our $20 per ADR share fair value estimate for Banco Santander Chile.