Banco Santander-Chile 2026 Q2 Earnings Call

Please go ahead. Good morning, everyone, and thank you for joining us today.

I am Patricia Pérez, CFO of Banco Santander-Chile, and I'm joined by Cristián Vicuña, Head of Strategy and Investor Relations, and Andrés Sansone, Chief Economist. This quarter reinforces the strength of our franchise, high profitability, disciplined cost management, and a solid capital position. While we continue to execute our strategy to deliver a simpler and enhanced value proposition to customers with a focus on sustainable growth and shareholder returns. First, Andrés will give you an overview of the economic and regulatory environment. Cristián will then walk you through our strategy, our second quarter results, and our updated view for 2026. Finally, we will conclude with a Q&A session. With that, let me turn it over to Andrés Sansone.

Thanks, Patricia. Let me start with the big picture. Since our last webcast, the global backdrop has remained complex. External inflationary pressures remain, with geopolitical tensions driving oil prices and the inflationary scenario for Chile. At the same time, long-term rates have moved higher, and expectations for monetary policy abroad have shifted upward, leaving global financial conditions less supportive. For Chile, this has translated into a weaker peso, around CLP 930 per dollar during the last month, and renewed pressures on short-term inflation. Locally, the June CPI was flat month-on-month, but still above expectation, bringing annual inflation to 4.3%, with the surprise mainly concentrated on food. Some short-term inflation expectations have increased, and now we expect a variation of 4.4% in 2026 in the U.S., although the two-year expectations remain anchored at 3%. On activity, the economy continued to lose momentum during the first half of the year.

The weakness has been concentrated in three areas. First, supply shocks in natural resources sectors, particularly mining and fishing. Second, the impact of higher oil and fuel prices on household disposable income. Third, a slower-than-expected recovery in construction. Beyond these three factors, the labor market has also weakened, with seasonal adjusted unemployment rising to 9.3%. Looking ahead, activity should improve gradually. Mining production faces a more favorable comparison base in the coming months. The mining and energy investment pipeline remains solid, and the recent fall in fuel prices should help restore part of the disposable income lost during the oil shock. Pro-growth reforms, if approved and effectively implemented, can lift the country's potential growth over the medium term. Based on this information, our economic team has revised down its 2026 growth forecast, with the economy now expected to expand close to 1% this year.

The outlook for 2027 remains more constructive, supported by investment and a low comparison base. In this context, we continue to expect the central bank to keep the policy rate at 4.5% for an extended period. Overall, the message is that inflation risks have increased again, while activity, although improving at the margin, will remain weak this year, making the macro scenario more challenging and calling for a more cautious monetary policy stance. Now turning to the regulatory and policy environment on slide five. The main development is the completion of the National Reconstruction Plan bill passage through Congress. Yesterday, the Senate approved the last outstanding provision. The bill is therefore now ready for enactment. The bill includes several pro-market initiatives aimed at reactivating growth.

On the business and investment side, the most relevant measures are the gradual reduction in the corporate tax rate from 27% to 23% between 2027 and 2029, the reintegration of the tax system, investment incentives and tax stability, faster permitting process, and reconstruction spend. We believe these measures should support private investment, improve business confidence, and strengthen economic activity over time. Moreover, the bill includes household support measures such as the temporary VAT exception on new homes Housing reconstruction programs, and improved housing affordability and employment support. If these are implemented effectively, these measures should support housing demand, mortgage origination, and consumer activity. Complementing this, the government has just submitted a bill to extend and expand the mortgage interest rate subsidy and the FOGAES estate guarantee for first home purchases. The proposal raises the number of subsidies from 50,000 to 80,000.

Also lifts the maximum value of eligible new homes from 4,000 UF to 6,000 UF, and extends the program until May 2026. Combined with the temporary VAT exemption on new homes, this should improve affordability for middle-income households, help absorb the stock of more than 100,000 unsold units, and therefore has the potential to support mortgage origination and a recovery in the construction sector. In addition, we continue to monitor other regulatory relevant changes, including the repos and securitization law, the proposed model for markets risk-weighted assets, and the advances toward internal models for credit risk. With that, let me hand over to Cristián.

Thank you, Andrés. I will now walk you through our strategy, our second quarter 2026 results, and our outlook for the rest of the year. Let me start with the strategy. At the center of what we do is a clear ambition: to become a digital bank with a physical presence, leveraging our Work Café branches to combine the convenience of scale and the digital banking with advice, service, and proximity for our customers, leveraging the support of the Santander Group and its global platforms. We organize this around three pillars. First, think customer. We aim to offer the best value proposition to all our customer segments, grow active customers, increase transactionality, and deepen loyalty. We aim to serve over 3.5 million active customers, and we continue to see room to improve the customer experience, raise NPS, and capture a greater share of wallet, especially in higher value segments.

Second, think global. We are accelerating our digital transformation through global platforms and an AI-enabled operating model. These allow us to simplify processes, improve the digital experience, deploy capacities faster, and operate with greater agility, productivity, and efficiency in an increasingly dynamic environment. Third, think value. Our goal here is to translate the strong customer franchise and an efficient operating model into recurring high-quality profitability. This means continuing to diversify revenues, leveraging other income streams while maintaining a strong focus on returns and capital discipline. Overall, our strategy is designed to grow customers and loyalty, increase transactionality, improve the quality of revenues, and as a result, deliver sustainable returns and an attractive payout to shareholders. This strategy is supported by a diversified platform with five complementary business lines.

Retail and commercial remains the core of the franchise, where we are simplifying products and processes and continuing to build on the Work Café model. Corporate and investment banking adds strength in advisory, FX, and transactional banking capabilities with a clear focus on sustainable solutions and capital optimization. Wealth management and insurance strengthens our advisory-led model, renews our private banking proposition, and reinforces our position in insurance and mutual funds. Consumer banking supports our leadership in auto financing, including new and electric vehicles, while also expanding our presence in used car financing. Through Getnet, our payment business is helping us reach new client segments with value-added services and simple bundled solutions. Retail remains the backbone of the balance sheet, representing 66% of loans, 48% of deposits, and 69% of the margin. At the same time, we have meaningful contributions from CIB payments wealth into the fee business.

The Santander global platforms are helping us connect this business effectively, improve efficiency, and diversify revenues. That supports stable profitability through the cycle and reinforces our ability to deliver attractive shareholders' returns. Before we move on, I want to pause for a moment on something we are generally proud of, the external recognition our work has earned over the past year. It is a strong reflection of the progress we have made for our customers. Starting on the left with our awards and recognitions. Recently, Euromoney named us Best Bank in Chile, Best Bank for ESG, and Best Bank for SMEs for 2026, three of their most important categories in a single year. This is in addition to the recognitions last year from LatinFinance and The Banker, where we were awarded the Best Bank in Chile for 2025, and Global Finance awarded us Best Bank for SMEs in 2025.

On the right, our ESG ratings and index inclusions tell a complementary story. For the first time this year, we were included in the Dow Jones Best-in-Class World Index. This is an outstanding achievement, being the only Chilean bank to qualify for the World Index. Furthermore, we hold an MSCI ESG rating of AA and a Sustainalytics risk rating of 15.4 of low risk. These are independent, rigorous assessments, but they confirm that the way we grow matters to us. We also wanted to briefly comment on an announcement we made last week. Santander is taking the naming rights of one of Chile's most iconic venues. From September, the 15,000-seat arena at the Parque O'Higgins becomes Santander Arena. This venue is ranked by Pollstar among the top three venues in the world by annual attendance.

More than just brand recognition, this move allows us to connect with clients and potential clients in a highly engaging setting. We can leverage our payment capabilities with simple services and easy digital onboarding, offering concertgoers relevant, accessible solutions on the spot. This is a current example of the different ways we're implementing our strategy to become a digital bank and focusing on our customer needs and value creation. Let me now move to our financial performance on Slide 11. The second quarter showed exceptionally strong profitability, supported by the particularly high inflation in the quarter and continued execution of our strategy. Net income attributable to shareholders reached over CLP 382.6 billion in the quarter, increasing 40% quarter-over-quarter and also 40% year-over-year. This translated into a return of average equity of 31.5% in the quarter and 27.2% year to date.