Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Banco Itau Chile (XSGO:ITAUCL, Financial) achieved a strong position in investment banking, ranking third in M&A deals and second in both equity and debt capital markets.
- The bank's investment business showed market-leading growth, with a notable increase in assets under management and a high Net Promoter Score (NPS) of 78.
- Banco Itau Chile (XSGO:ITAUCL) maintained a solid return on tangible equity of 15.2% in Chile, demonstrating resilience in its financial performance.
- The bank's efficiency ratio was 42.7%, better than the industry average, indicating effective cost management.
- Banco Itau Chile (XSGO:ITAUCL) made significant progress in its ESG initiatives, achieving 100% coverage in measuring financed carbon emissions and improving its PCAF score by 6%.
Negative Points
- Recurring net income decreased by 3.7% quarter-on-quarter and 32.8% year-over-year, impacted by lower financial margins and increased cost of credit.
- The bank experienced a significant decrease in financial margins with the market, primarily due to lower gains from fixed income instruments.
- Non-interest expenses increased by 12.1% year-over-year, driven by cost growth in Colombia and the appreciation of the Colombian peso.
- Loan growth in Chile was slower than the industry average, with a nominal increase of only 0.7% compared to the previous quarter.
- The cost of credit rose by 36.6% year-over-year, reflecting challenges in managing credit risk and recoveries.
Q & A Highlights
Q: Can you explain the long-term strategy on Colombia?
A: Gabriel Amado de Moura, Chief Executive Officer, explained that Banco Itau Chile is focusing on the corporate investment banking side in Colombia due to its subscale operations. The strategy involves leveraging the profitable wholesale business and treasury operations, while the retail segment will focus on the affluent market. The bank aims to improve returns by enhancing its corporate investment and sales trading businesses, although achieving desired returns will take time.
Q: What is the expected growth for loans for the whole bank this year, and can you segregate them between segments?
A: Gabriel Amado de Moura noted that growth has been challenging, particularly in consumer loans due to high interest rates and credit cycle stabilization. Mortgages have shown resilience, while commercial loan demand has been lower than expected. The bank is focusing on sustainable risk-return relationships rather than aggressive growth. The second half of the year is expected to be better, with more optimism for 2025.
Q: With the new CPI levels in Chile and low loan growth, what is your expected or target ROE for the bank this and next year?
A: Gabriel Amado de Moura stated that the bank aims to maintain a return on tangible equity between 14% and 16% for its Chile operations. This target considers macroeconomic variables and the bank's capital levels, and it remains the potential range for the bank's returns.
Q: How do you see the current balance sheet structure in the context of high inflation and interest rates in Chile?
A: Gabriel Amado de Moura acknowledged that while high inflation has benefited the bank, the Central Bank's decisions are influenced by global monetary cycles and local economic factors. The bank is prepared for a transition to a more normal macroeconomic scenario, expecting lower nominal interest rates and inflation, which should lead to higher loan growth and lower credit costs.
Q: What are the implications of the Central Bank's decision not to cut rates further in Chile?
A: Gabriel Amado de Moura explained that the Central Bank's decision is influenced by global monetary policies and local economic conditions, including energy tariffs and economic activity. The bank anticipates a normalization of inflation and interest rates, which should positively impact loan growth and credit costs, aligning with the bank's return targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
