Full Transcript: Banco De Chile Q2 2026 Earnings Call

Banco De Chile (NYSE: BCH ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

2%. 3% due to external supply shocks, with the expectation of inflation normalizing to 3% in subsequent years. 6% quarter over quarter, with consumer loan originations up 16% year over year, supported by digital initiatives and improved origination capabilities. 6%, reflecting higher inflation expectations, while the efficiency ratio is targeted to improve to around 38% by year-end 2026.

3% and anticipated benefits from future regulatory changes related to internal models for credit risk. Full Transcript OPERATOR Good afternoon and welcome to Banco De Chile first quarter 2026 results conference call. If you need a copy of the Financial Management Review, it is available on the company's website. Today with us we have Mr.

Rodrigo Aravena, Chief Economist and Institutional Relations Officer, Mr. Pablo Mejia, Head of Investor Relations, and Daniel Galarza, Head of Financial Control and Capital Management. Before we begin, I would like to remind you that this call is being recorded and the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially.

Please refer to the detailed note in the company's press release regarding forward-looking statements. I will now turn the call over to Mr. Rodrigo Aravena. Please go ahead.

Rodrigo Aravena, Chief Economist and Institutional Relations Officer Good afternoon everyone. Thank you for joining this quarterly conference call where we discuss the overall performance of the bank as well as the main trends observed in the business environment. We have completed another positive quarter, performing well in several key areas such as profitability, demand deposits, market share and asset quality, while maintaining the largest coverage ratio among peers and the soundest capital adequacy among relevant peers.

We also achieved important milestones in non-financial areas such as the increased adoption of digital and AI tools, productivity and ESG, which we'll discuss in more detail through this presentation. As usual, I'd like to begin with an analysis of the economic environment. Please turn to slide number three. The beginning of this year has undoubtedly been marked by a significant shift in global conditions driven by the escalation of the geopolitical conflict in the Middle East.

Tensions in global energy markets have led to a significant external supply shock with important consequences across the global economy, particularly in terms of inflation. As we mentioned in previous conference calls, Chile is a small and open economy and therefore vulnerable to external shocks. As shown in the chart on the left, the CPI clearly reflects how these global trends affect our economy, increasing by 1% in March, mainly driven by higher fuel prices during the month. 4% year to date.

5% in March, reflecting the absence of relevant pressures at the core level, at least for now. We expect this pressure to intensify in the short term. 6% for the month of April, driven by further increases in fuel prices in recent weeks and the presence of some second-round effects mainly related to indexed prices. This would significantly raise inflation in the first half of the year.

These developments have contributed to significant adjustments in inflation expectations. As shown in the chart on the top right, breakeven inflation rates implied in swaps have increased by more than 100 basis points, moving above 4% for this year. In fact, a few weeks after the beginning of the war, expectations rose even further, reaching almost 5%. 3% this year.

For longer horizons, expectations remain anchored at the 3% target. In this environment, the Chilean Central Bank has adopted a more cautious monetary policy stance. 5%, but also removed its previous easing bias. Specifically, they pointed out that the war in the Middle East has evolved more negatively than in the baseline scenario, which increases the probability of more adverse impact on global activity and inflation.

Accordingly, it will closely monitor the factors that could increase the pass-through and the persistence of inflation on local prices. Thus, board members noted that future policy decisions will be assessed at each meeting, leaving open the possibility of a rate increase if needed. 25% will likely be postponed until next year. I would now like to turn to recent developments in economic activity.

Please go to slide number four. 5% in 2025. This stronger than expected performance was largely driven by more dynamic domestic demand shown in the top left chart. Specifically, as the chart on the bottom left displays, there has been a clear shift in the composition of growth, with consumption and investment making a larger contribution to overall GDP growth.

6% in 2024. 8% over the same period. 9% increase in machinery and equipment investment. Nevertheless, monthly GDP growth has slowed at the beginning of this year.

This can be explained by weaker performance in sectors such as mining as well as a normalization in commerce, partly reflecting a high comparison base from a year earlier. However, several leading indicators point to growth ahead. As shown in the top right chart, the main confidence figures have shown an upward trend in the last few quarters. These factors support a favorable outlook for economic activity in the coming quarters.

Turning to the labor market, the unemployment rate has remained between 8% and 9% in the first quarter. 7% a year earlier. While unemployment remains elevated compared with previous cycles, we expect stronger investment growth and improved performance in labor-intensive sectors such as construction to gradually translate into lower unemployment going forward. I would now like to share our baseline scenario for 2026.

Please turn to slide number five. In terms of activity, we expect GDP to grow in line with its potential. 1% for 2026 implies a slight slowdown compared with last year, reflecting both weaker global growth expectations and a less expansionary fiscal stance announced by the government. Nevertheless, we continue to expect investment to grow faster than GDP, partially offsetting a weaker contribution from net exports.

3% from 3%. This revision mainly reflects higher oil prices, which are expected to put inflation significantly higher in the first half of the year. Our baseline scenario assumes a gradual normalization in international oil prices during the second half, together with contained second-round effects largely limited to indexed prices, while inflation expectations remain anchored and labor-cost pressures stay moderate. 5% through 2026, postponing interest rate normalization until 2027.

Finally, we are aware of the unusually high level of uncertainty in the global economy. Domestically, close attention should be paid to the ongoing congressional discussion around the government's proposed reform which aims, among other objectives, to provide additional support to economic activity. Key measures include a proposed gradual reduction in the corporate tax rate from the current 27% to 23% over a three-year period, greater tax certainty for future investment, lower municipal property taxes on housing, and improvements to the permitting and licensing framework. These discussions are expected to take time and implementation is likely to be gradual.

Before moving to the bank analysis, I'd like to review the main trends observed in the local banking industry. Please move to slide number six. 4% in the first quarter of this year. 9% compared to the same period last year, it continues to reflect the sector's capacity to generate stable, solid profitability in a context of lower inflation.

5% with a coverage ratio of 142%, consistent with recent quarters. On the credit side, the bottom left chart shows that the loans-to-GDP ratio rose slightly on a sequential basis to 74% as of March 2026 but still below pre-pandemic levels, confirming the subdued pace of credit growth relative to economic activity in recent years. Consistent with this trend, the bottom right chart highlights the prolonged weakness in real loan growth. 2% over the same period.

5% in nominal terms by year end 2026, driven by a recovery in commercial lending expanding around 4% and supported by improved business sentiment and investment under more favorable market-friendly policies. 5% and 5% nominal, reflecting a moderate rebound in consumption and ongoing support for the housing market. 8%. 3%.

Now I will turn the call over to Pablo to discuss Banco De Chile's results for the quarter. Eduardo Alberto Ebensperger Orrego — Gerente General Thank you, Rodrigo. Please turn to slide 8. This slide summarizes our strategy committed to excellence and proven by results.

At the core, our strategy remains unchanged and well executed: customer centricity, efficiency and productivity, and sustainability. These three pillars guide how we operate, how we allocate resources, and how we create value for our stakeholders. In the center of the slide you can see how these pillars translate into six core priorities. These are not aspirational; they are being actively executed across the organization and the results speak for themselves.

As you can see on the right-hand side, we continue to deliver a solid track record of profitability supported by a high-quality customer base, a well-diversified operating income base characterized by the resilience of customer-related income, leadership in local-currency demand deposits and capital, and a comprehensive digital offering across segments. At the same time, we carry on making structural progress in efficiency and productivity across the organization while maintaining top service quality, low levels of attrition, and a solid ESG foundation reflected in our strong ratings and corporate reputation results.

Our midterm targets, as shown on the bottom of the slide, continue to anchor our execution. We are targeting top positions in returns, DDA balances in local currency, as well as commercial and consumer lending, a cost-to-income ratio below 40%, a net promoter score above 73, and rank among the top three positions in corporate reputation. In summary, we have a strategy that is disciplined, consistent, and resilient, and importantly one that is already reflected in our operating and financial performance. Please turn to slide 9, which provides a summary of our first quarter 2026 highlights.

The list at the top of the slide shows our key financial metrics for the quarter, which we will walk through in detail in the next few slides. 6% quarter over quarter. 2%. 4%.

3%, even after paying dividends above the provisions amount. Some important advances I want to highlight this quarter are listed in the middle of this slide. On the commercial front, loan originations showed a positive trend. Consumer loan originations were up 16% year over year, while SME installment loan originations grew 18% over the same period.

These trends were supported by our digital initiatives and improved origination capabilities across channels in digital banking. For instance, we launched new tools for personal banking and SMEs, while our FAN account base grew 22% year over year in March 2026, and digital current account openings expanded by 35% in the same period, reinforcing our position in digital onboarding and financial inclusion while diversifying our customer base through the attraction of new customers.

On AI adoption, we continued scaling capabilities through our Digital Skill Certification Academy and the application of advanced AI in specific use cases across the organization, which has allowed us to achieve priority productivity gains in several areas including marketing campaigns, service quality, fraud, complex compliance monitoring, and IT internal developments. These initiatives, together with a firm cost-control discipline, delivered 0% real year-on-year cost growth, consistent with our long-standing commitment to efficiency.

And on sustainability, we're proud to report that MSCI upgraded our ESG rating from BBB to A, and we were included in the S&P Global 2026 Sustainability Yearbook. Finally, it's worth mentioning that our 2025 annual report was released in March, aligned with international reporting standards. In terms of our guidance, we have made some adjustments to reflect updated inflation expectations and the latest developments affecting the economic environment. Given the information we have so far, our guidance is based on our baseline scenario and does not incorporate potential impacts from additional geopolitical escalation or other non-recurring events.

Saying that, nominal loan growth is still expected to reach 7% as a result of higher inflation. 6%. 2%. In terms of our efficiency ratio, measured as total operating expenses over total operating revenues, it is expected to improve, reaching a level around 38% by December 2026.

5%, excluding non-recurring events. That said, it's important to acknowledge the risks surrounding this outlook. The escalation of the conflict in the Middle East remains the most significant source of uncertainty, together with domestic factors such as the still-weak recovery in the labour market and the ongoing discussion of proposed reforms by the government. We will continue to monitor these developments closely and adjust our projections if necessary.

Please turn to slide 10 to discuss the evolution of our loan portfolio. 6% compared to December 2025, equivalent to an annualized pace above 10%. The recovery reflects the effort we are making to take back growth, particularly in commercial lending, where we regained market share. From a product perspective, the dynamics across our loan book remain differentiated.

1% year on year, supported by both installment loans and credit card lending, as household consumption continues to recover. 4% as of March 2026. 8% sequentially, a meaningful shift driven by the new corporate lending operations, particularly in public infrastructure and concessions, as well as continued momentum in SME lending once FOGAPE amortizations are set aside.