Analysts see loan growth speeding up to 13-15% by year-end

- Tuesday, May 31, 2011

Analysts see loan growth speeding up to 13-15% by year-end

The growth trend shown by the Chilean banking system's loan book in the year ended April will likely translate into a 13-15% annual expansion by end-2011, as it is being underpinned by a better economic outlook and strong domestic demand, analysts told BNamericas.

Loans grew 9.37% in the 12 months through April to 77tn pesos (US$170bn), according to a report published Tuesday by banking regulator SBIF, confirming a rising trend since the beginning of the year.

Consumer lending was the fastest-growing segment in the year ended April 30, expanding 12.1% compared to the same time in 2010 and inching up 0.77% from March 31, to 10.3tn pesos.

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Growth in this segment is mainly explained by some banks' aggressive strategies to gain market share, such as the system's largest player, Santander Chile (NYSE: SAN), through its consumer finance unit Banefe, CorpResearch analyst Jorge Ríos told BNamericas.

Corporate loans, the system's biggest segment, grew 8.74% at the end of April compared to the same time in 2010, to 48.4tn pesos. And mortgage lending rose 9.51% to 20.3tn pesos.

Local financial services firm Banchile is forecasting loans to end 2011 with 15% annual growth, given the country's improved macroeconomic prospects and lower unemployment rates, Banchile banking analyst Claudia Benavente said.

Lending will likely keep gaining pace through the end of this year, with an increase of at least 13% thanks to growth in all the major loan segments, Raúl Barros, senior analyst at stock brokerage BBVA Chile's research department, told BNamericas.

Asset quality kept improving in the period, with the system's non-performing loan ratio hitting 1.20% as of April 30 compared to 1.46% at the same time in 2010.

EARNINGS UP 8.25% IN JANUARY-APRIL

Chilean banks' net profits grew 8.25% in January-April compared to the same period in 2010 to 620bn pesos, mainly thanks to lower provisions and stronger revenues.

Net interest income rose 5.94% in the four months to 1.31tn pesos, and was up 5.99% in April compared to March, according to SBIF's report. Provision expenses were slashed by 30.1% to 300bn pesos compared to January-April 2010.

Santander Chile remained the system's top profit generator in January-April with earnings of 169bn pesos.

The second and third largest private banks - Banco de Chile (NYSE: BCH) and BCI - posted earnings of 161bn pesos and 85.1bn pesos, respectively.

Banks had 116tn pesos in combined assets and 68.8tn pesos in deposits as of April 30.