BancoEstado to invest US$110mn this year to boost efficiency, ROE

- Friday, February 4, 2011

BancoEstado to invest US$110mn this year to boost efficiency, ROE

Chilean state bank BancoEstado will invest US$110mn this year to boost its efficiency and profitability levels, chairman Segismundo Schulin-Zeuthen told BNamericas.

This compares to the US$78mn the bank invested last year.

The majority of the amount will be put into technology in all the bank's areas, and a minor part will be used to relocate and refurbish some branches, Schulin-Zeuthen said.

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The bank's social role - to offer banking services to all Chileans - requires big investments in technology to attain better efficiency and profitability indicators, the executive noted. In many poor and remote locations, BancoEstado is the only bank with a presence.

BancoEstado improved its ROE to 14.8% last year from 11.2% in 2009, when it sacrificed profitability to ensure that loans were available to companies and individuals during the global crisis and the economic downturn.

The bank also made slight progress on the efficiency front in 2010, closing the year with an efficiency ratio of 58% compared with 58.9% the year before.

BancoEstado's is aiming to improve its ROE and efficiency ratios this year to 18.5% and 54.9%, respectively. And in 2014, the bank wants its efficiency ratio to be at 50%, said Schulin-Zeuthen.

LOAN GROWTH, FINANCIAL INCLUSION GOALS

BancoEstado expects to increase lending by 12-14% this year with the mortgage and SME segments being the main growth drivers, the executive said, adding that the bank's loan growth would be in line with that of the financial system.

Its loan portfolio expanded only 0.6% last year after growing 21.7% in 2009, when the rest of the financial system saw lending contract as private sector banks tightened their loan requirements due to the crisis and the economic downturn.

In terms of financial inclusion goals for 2011, Schulin-Zeuthen said the bank plans to increase the number of people who has its Cuenta Rut debit card to 3.5mn from some 2.91mn last year.

As part of its efforts to make basic banking services available to low-income individuals, BancoEstado launched Cuenta Rut in 2007, which is a commission-free card with an electronic account for all Chilean residents - even for those blacklisted in the country's Dicom credit bureau.

The bank also aims to have at least 6,500 CajaVecina POS terminals at the end of the year, Schulin-Zeuthen said.

BancoEstado introduced the CajaVecina model in 2005 to bring basic financial services to the poor, as well as to owners of small and micro enterprises in remote locations, through the installation of POS terminals at small grocery stores. The bank closed 2010 with 4,560 CajaVecina terminals.

BancoEstado had 343 branches and 1,810 ATMs at the end of last year.