PRESS RELEASE

S&P: Outlook on 10 Chilean financial institutions revised to stable

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Thursday, August 23, 2018

Press Release from S&P (Please note that this is an abridged version. Read the full release)

23 August, 2018

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• The continued moderate growth of credit and a softening of real estate prices are relieving pressure on Chile's slightly weaker capacity to face external shocks, while reducing the risk of a cyclical credit-fueled asset price bubble.

• We're keeping our Banking Industry Country Risk Assessment (BICRA) on Chile at group '3' and revising the economic risk trend to stable from negative. The industry risk trend remains stable.

• As a result, we're revising our outlook on 10 domestic financial institutions to stable from negative, reflecting diminished pressures on economic imbalances. We're affirming the ratings on these entities. At the same time, we're affirming and maintaining the stable outlook on three other entities.

NEW YORK (S&P Global Ratings) Aug. 22, 2018--S&P Global Ratings revised its outlook on the following entities to outlook to stable from negative and affirmed its ratings:

• Banco Santander-Chile S.A. (BSCh);

• Banco de Credito e Inversiones;

• Itau CorpBanca;

• Banco BICE;

• Banco Bilbao Vizcaya Argentaria Chile y Filiales (BBVA Chile);

• Banco Security;

• Cooperativa Del Personal de La Universidad de Chile Ltda-Coopeuch Ltda (Coopeuch);

• Tanner Servicios Financieros S.A. (Tanner);

• LQ Inversiones Financieras S.A. (LQIF); and

• Larrain Vial S.A. Corredora de Bolsa (LVCB).

At the same time, we affirmed the ratings and maintained a stable outlook on the following entities:

• Banco del Estado de Chile (Banco Estado);

• Banco del Estado de Chile Sucursal New York; and

• Banco de Chile.

The rating actions reflect our view of diminished risks of potential cyclical credit fueled asset price bubbles. This stems from continued moderate growth of credit, despite the higher projected economic growth of Chile starting in 2018, and softer increases in real estate property prices. These factors are partly compensating for the sovereign's slightly lower capacity to face external shocks, while reducing the risks of credit losses and capital deterioration among domestic financial institutions. Also, we believe the following one-off factors have influenced real estate prices in the past few years that didn't result in higher risks of asset bubbles:

• The earthquake in 2010 that raised construction costs;

• The hike in properties' purchases in 2014-2016 before the implementation of value-added tax (VAT) on properties; and

• Tax benefits that were removed after the last tax reform and that incentivized the investment in real estate properties.

Nevertheless, dynamics in Chile's real estate prices depend on the following factors:

• Inventories of available units;

• Interest rates on mortgages, which are currently at historically low levels;

• The number of unrealized house purchases; and

• Construction regulations in Santiago, which is one of the biggest real estate markets in the country.