Strong treasury gains in March pump up banks' Q1 profits to almost US$1bn

Friday, April 29, 2011

Significantly higher treasury gains in March helped Chilean banks' net profits to grow 6.18% year-on-year in 1Q11, with earnings amounting to 444bn pesos (US$965mn).

Benefiting from the market's rebound in March, banks' revenues from treasury activities were the fastest-growing income generator in 1Q11, rising 33% compared with the same quarter in 2010, CorpResearch analyst Jorge Rios told BNamericas.

Banks' treasury gains soared 261% to 264bn pesos in March compared with February, according to a report published Friday (Apr 29) by banking regulator SBIF.

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Their net interest income rose 2.92% in the quarter to 943bn pesos, and provision expenses were down 32.8% to 225bn pesos.

A 15.7% increase in net interest margin, explained by stronger inflation and loan volume, and a 11% rise in fee income also boosted banks' bottom line in the period, said Claudia Benavente, analyst at financial services firm Banchile.

All in all, Chilean banks had a fairly solid quarter and continued to deliver among the highest ROEs in Latin America, Deutsche Bank (NYSE: DB) said in a report. Banks' average ROE hit 20.5% in the quarter, according to the SBIF report.


The country's largest bank, Santander Chile (NYSE: SAN), regained its status as the system's top profit generator after two consecutive months in second place, booking earnings of 144bn pesos.

Chile's second and third largest private banks - Banco de Chile (NYSE: BCH) and BCI - posted 1Q11 earnings of 137bn pesos and 73.5bn pesos, respectively.


Lending rose for the third consecutive quarter in 1Q11. Loan growth was 7.99% in the 12 months through March to 78.8tn pesos, and climbed 0.94% compared with end-February on the back of strong consumer lending, which rose by 2.56%.

Corporate and mortgage loans grew a respective 0.90% and 0.76% compared with end-February.

The banking system's non-performing loan ratio improved to 1.31% as of March 31 compared to 1.42% at the same time in 2010.

Chilean banks had 114tn pesos in combined assets and 8.69tn pesos in equity at the end of the first quarter.