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Chile Best Bank: Banco de Chile

Nov 1, 2012

In a market peppered with other well-positioned banks, Banco de Chile remains one of the country¹s strongest, with a 432-branch network and 1.7 million customers ­ some 22% of the Chilean workforce ­ along with a solid funding structure and asset quality.

It is the country¹s largest bank by a host of measures including net income, return on average capital, total loans. Though it is not the country¹s largest bank by assets, with total assets of $44.9 billion, Banco de Chile is the most profitable, with a return on equity of 23% as of June, and return on assets of 2.1%.

Like many countries in the region, Chile has maintained robust economic growth against the backdrop of slowing global output. GDP expectations of between 4.8% and 5.0% for 2012, and levels of growth seen around 4.5% for the next year paint an encouraging picture says Pedro Samhan, Banco de Chile¹s CFO.

Cooling economic growth, will mean that ³the banking sector will continue growing, but at a slower pace than it has grown during the last four months,² Samhan says.

Banco de Chile is focused on expanding its retail business via new product offerings, a new internet delivery platform and updated mobile banking application. Meanwhile, the small and medium enterprise segment has also been an area of competitive advantage for the bank, says Samhan, as it looks to strengthen customer loyalty to maintain market leadership.

In the first half of 2012, Banco de Chile led in development agency-backed Corfo (Chilean Economic Development Agency) guarantees, with 190 billion pesos in funding. Credit cards and retail mortgage loans are an emphasis as well, as they are key to relationship building with customers, the bank says.

Banco de Chile¹s commercial strategy is to keep growing its retail business and increasing its profitability in the wholesale segment, while on the retail side, it will continue to expand in consumer loans and fee products, he says. And on the wholesale side, the bank will look to increase cross-selling as it looks to grow in areas such as foreign trade letter of credit, cash management, and treasury products.

³Our focus will continue to be to expand in the consumer segment, because we still have some room to grow,² Samhan says. ³This is the most profitable business.² The bank will keep looking for new customer segments in retail and wholesale and establish metrics for measuring quality, and seek to provide competitive service, inclusive of best practices.

As it grows, the bank¹s funding has become more diversified. It registered a bond line for $720 million-equivalent in Mexican pesos, becoming one of the few foreign banks to tap the Mexican bond market, raising $110 million-equivalent in pesos at the end of last year. It will continue watching the market for the right environment to issue debt, Samhan says.

The bank took advantage of international interest in Chilean debt to place $50 million-equivalent in 2027 bonds trading on the Hong Kong market in September.

It recently announced plans for an equity capital increase of $530 million-equivalent, aimed at solidifying the capital structure. LF



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