Banco de ChileAmerican Depositary Shares (Each representing 200 shares of Common Stock) 2026 Q2 Earnings Call

Please go ahead. Good afternoon, everyone.

Thank you for joining this quarterly conference call, where we will discuss the overall performance of the bank, as well as the main trends observed in the business environment. We have completed an outstanding quarter, performing well in several key strategy areas such as profitability, demand deposit market share in local currency, and asset quality, while maintaining both the largest coverage ratio and the soundest capital adequacy among relevant peers. We also achieve important milestones in non-financial areas, such as the increased adoption of digital tools, the materialization of new commercial alliances, productivity gains, and advances in ESG, which we'll discuss in more detail throughout this presentation. As in previous conference calls, before reviewing our performance during the quarter, I'd like to briefly discuss the macroeconomic environment we are facing. Please turn to slide number three. The Chilean economy has evidenced lower-than-expected dynamism.

As shown in the chart on the upper left, activity declined during the first five months of the year, leading to a weak expansion of 0.1% year-on-year in the second quarter after a 0.5% contraction in the first quarter. As a result, the GDP declined by 0.2% year-on-year in the first half. That said, we expect this negative growth to be temporary and activity to rebound from the third quarter onwards. There are several reasons behind this assessment. The first is the composition of growth, since the contraction activity has been driven mainly by supply-side sectors, which tend to be more volatile and more exposed to temporary factors that reverse faster.

Mining, for instance, has been one of the main contributors to lower activity after contracting 3.1% and 5.2% year-on-year in the first and second quarters, respectively, reflecting how this sector has decoupled from the rest of the economy, as shown in the chart on the other right. Other supply-side sectors, including fishing and manufacturing, have also paused decline, partly offset by sectors more closely linked to demand, such as retail and services, which grew 2.7% and 1.2% in the second quarter respectively. At the same time, we have also seen correction of macroeconomic imbalances.

This is particularly clear in the external accounts, where the evolution of domestic demand, together with positive terms of trade, with copper price reaching record levels and averaging $5.92 per pound in the first half of the year, allowed the trade balance to accumulate a surplus of CLP 30 billion over the last 12 months, contributing to narrow the current account deficit. Despite the temporary slowdown in activity, leading investment indicators continue to contribute to a positive outlook. The chart on the lower right shows the outward trend in investment projects in the country, which, according to the Capital Goods Corporation registry, have continued to rise to their highest level in recent years, with a strong participation from mining, public works, and energy. These sectors should support both growth and employment, reinforcing our expectation of a recovery over the coming quarters.

Please move to slide four to review recent developments in prices and interest rates. After the increase in inflation between March and May, when the CPI accumulated an increase of 2.4%, the June figure showed a significant moderation with a new monthly variation. As shown in the chart on the other left, this was mainly related to energy prices, which accumulated a rise of 15.9% over that period, following the increase in international oil prices. Even though there is no evidence of significant pass-through or second-round effect in core inflation so far, this dynamic has increased annual inflation higher from 2.4% in February to 4.3% in June, broadly in line with development observed in other countries.

Since the main source of short-term inflationary pressures is energy prices, which is a highly unpredictable variable given the uncertainty related to the geopolitical conflict in the Middle East. Inflation expectations in Chile, implied in financial asset prices, have been highly volatile over the last quarter. As the chart on the lower left shows, they have not only moved significantly in recent months but have also remained closely correlated with international oil prices. In this context of high uncertainty, the central bank has maintained a cautious stance, keeping the monetary policy rate unchanged at 4.5%. The central bank board has not provided explicit guidance, this monetary decision was made despite less favorable employment data and weaker local activity figures, reflecting continued concerns about inflationary pressures, mainly from the supply side. Please move to the next slide to review our baseline scenario for the year.

We have revised our economic growth forecast downwards, as you can see on the last column of this table, from 2.1% in the previous quarter's conference call to 1.3%. This revision does not reflect a weaker outlook for activity going forward but instead the impact of subdued GDP growth in the first half of the year, mainly due to the performance of mining. The new forecast is consistent with growth close to 2% in the second half of the year, with domestic demand making a larger contribution than net exports, which would help the economy to gain some momentum. For 2027, we believe GDP growth would approach 3%.

The recovery should be supported by the potential reversal of temporary factors that affected supply-side sectors such as mining, manufacturing, and fishing, as well as by a recovery in disposable income, as inflation is expected to decline in the second half of the year. A further factor that should gradually and sustainably support stronger dynamism in the country will be the implementation of the reconstruction bill. Among the main measures approved by both chambers of Congress are the reduction in the corporate income tax rate from 27% to 23%, which would bring Chile closer to OECD tax rates. The implementation of tax viability regime for investment, reducing future tax uncertainty, and substantial improvements to the permits and licensing framework for investment projects, reducing bureaucracy and shortening the time for implementing new projects, which is particularly positive for long-term investments.

Recent shocks, including the expected higher intensity of El Niño and geopolitical conflict, remain a key source of uncertainty for the inflation outlook. Our 4% estimate for the year assumes a moderate decline in oil prices and no significant additional depreciation of the exchange rate. Under this scenario, we do not expect changes in the central bank policy rate, which currently stands at 4.5%. The main risks to our scenario come from the external environment, particularly the evolution of the geopolitical conflict and its implications for both global GDP growth and inflation. Other factors should also be closely monitored, including growth in China, our main trade partner, which has slowed in recent months, as well as the evolution of tariffs. In Chile, the lagged response of the labor market remains one of the key variables to watch going forward.

Before moving to the bank analysis, I would like to review the main trends observed in the local banking industry. Please move to the next slide, number 6. As illustrated in the chart on the slide, the banking industry recorded net income of CLP 2 trillion in the second quarter and a return on average equity of 21%. This performance continues to reflect the sector's capacity to generate solid profitability, supported by the positive impact of the temporary pickup in inflation on revenues. Turning to asset quality, non-performing loans for the industry remained stable at 2.5%, with a coverage ratio of 159%, including additional provisions, consistent with figures seen in recent quarters. On the credit side, the loans-to-GDP ratio continued at 74% as of June 2026, showing no signs of recovery.

In more detail, industry total loans reached CLP 255 trillion, growing 4.3% in nominal terms and 0.4% in real terms. Commercial loans continue to underperform, decreasing 1.1%, while consumer loans grew 1.7% and residential mortgage loans rose 2% in real terms. Looking forward, we have slightly modified our baseline scenario for the industry. As GDP growth has been revised down and inflation is expected to be at 4%, we now expect industry loan growth to be around 4% in nominal terms by year-end 2026, from the 4.5% forecast last quarter. Also, we maintain the NIM guidance for the industry in the range of 3.6%-3.8%, while NPLs are projected to end the year between 2.3%-2.4%, and credit loss expenses are stable at 1.2%-1.3%. Now, I will turn the call over to Pablo to discuss Banco de Chile results for the quarter.

Thank you, Rodrigo. Please turn to slide eight. This slide summarizes our strategy that is committed to excellence and is proven by results. Our strategy rests on three pillars that we execute consistently: customer centricity, efficiency and productivity, and sustainability. These three pillars shape the way we work, the way we deploy resources, and the way that we generate value for our stakeholders. In the center of the slide, you can see how these pillars translate into six core priorities, and on the right-hand side, we show how all these strengths come together to sustain our solid profitability track record. Our midterm targets are displayed at the bottom of this slide.