Itau CorpBanca

Good morning, my name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the IPAO Corp Banca first quarter 2022 financial results conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, please press star one again. Thank you. Claudia LeBay, Head of Investor Relations. You may begin.

Thank you. Good morning. Thank you for joining our conference call for our first quarter 2022. I would like to remind you that our remarks may include forward-looking information and our actual results could differ materially from what is discussed in this presentation. I would also like to draw your attention to the financial information included in this management discussion and analysis presentation, which is based in our managerial model that we adjust for non-recurring events and we apply managerial criteria to disclose our income statement. Please remind us beginning the first quarter of 2019, we are disclosing our income statement in the same manner as we creating additional P&L reclassification. This managerial financial model reflects how we measure, analyze, and discuss financial results by segregating commercial performance, financial risk management, credit risk management, and cost efficiency. We believe this form of communicating our results will give you a clearer and better view of how we under these different perspectives. Please refer to pages 11 to 14 of our report for further details. Now I will pass the floor to Gabriel. He will continue with the presentation.

Thank you very much, Claudia. Good morning, everyone. Thank you for joining us on this first quarter of 2022 conference call. Today we will be teaching on our progress present the highlights of our first popular results. Starting on slide four, as a result of the implementation of customer centric initiatives, we have reached the highest levels of NPS for the bank, moving from 20% in June 2020 to 68% in March 2022, a 48 percentage points increase. Both our wholesale and retail segments have had similarly large As a result of our improved digital offering for our wholesale customers, we have reached the number one position for medium-sized companies in Chile and the second place for corporate clients according to the latest safety test survey by Ipsos. We remain committed to providing a distinctive customer experience, pursuing NPS levels comparable to those of the leading players of the industry. not only banking, but of any industry. On slide six, we show our progress in our mobile first strategy, through which we have achieved a 30% increase in app users in the last 12 months, and a 140% increase in transactions in the same period. This has been achieved through continuously enhancing with new features and improving customer experience. While we have decided to center our strategy in our app, we have also rolled out new features for our website. Leveraging state-of-the-art technology used by leading companies, we have not only modernized the look and feel of our website, but have also implemented a content manager that will enable us to operate it much faster, to keep it always fresh and add new functionality for our clients. Moving on to slide eight, we would like to provide an update on our digital branches, one of the key aspects of our service model. I would like to remind you that the main strengths of our digital branches model, which provides more convenience to customers through extended hours, more personalized service, and exclusive benefits. As a result, digital branches have a higher NPS than physical branches. Digital branches are also more efficient. Our experience during the past few years has shown us that the cost of serving clients is 50% lower in this model compared to a physical branch. Therefore, we are rapidly scaling our digital branch model, expecting them to meet with 25% of our customers in digital branches, up from 12% in December 2021. On slide 9, we show that in addition to provide simple and digital channels, we are also engaging customers through social media. Our Vision Deliveries YouTube Livestream is now entering its third year, with Steve Chin, the co-founder of YouTube, as our guest speaker. With our social media presence, we are strengthening our position as a modern and innovative bank. creating content that interests our current and potential customers in different platforms such as LinkedIn, Instagram, YouTube, and TikTok. As a result, we now rank first or second among Chilean banks in number of followers in each of the four platforms. On slide 11, we are happy to be recognized by UTP as the second best company to work for in Chile, which shows that we are in a leading position in the competition for talent in Chile. On the last few quarters, we have managed to attract top talent at all levels, beginning with the first and second line executives, as I mentioned in our last call, and extending to less senior roles. we have now attracted fresh talent to about 30% of our positions reporting to our executive committee members, bringing the required skills and energy to accelerate our transformation into being the fastest growing banking shield. On slide 13, we show that we've been moving closer to this goal of becoming the fastest growing banking shield. On this slide, we see growth ratings on a 12-month basis as of March 2022. During this period, we were the fastest-growing bank in mortgages and consumer installment loans, and the second in factoring and credit cards. We have also achieved the number three position in current account for businesses and have been improving our position in the ranking for commercial loans, achieving the fourth position over the last 12 months. On the ESG front on July 14, we have taken an important step by representing that S&P do an ESG evaluation for the bank, which was announced yesterday by S&P. This step demonstrates our long-term commitment to the ESG agenda as well to transparency regarding our progress. We were the first bank in Latin America to disclose our ESG evaluation by S&P, joining a group of over 125 companies globally, most of them large caps. Our score, 70 over 100, was above the global average and the average for financial institutions, as well as significantly above the Latin average. While these results reflect positives on our progress so far, we understand how important it is to advance even more rapidly in the environmental, social, and governance agenda, and we are commuting to doing so. Now, moving forward to slide 15, let's talk about the bank's financial performance in the first three months of 2022. Our consolidated net income reached 110.8 billion Chilean pesos, growing 16.5% year over year. Net income in Chile grew even more, by 33.2% to 111.9 billion pesos, the highest figure in our history. Consolidated return on tangible equity was 16.9%, while return on tangible equity in Chile reached 20.9% in this quarter. Both of those figures incorporate the impact of a $1 billion capital increase finalized last December. Consolidated financial margin decline grew 27%. boosted by higher volumes, especially on credit and shield, as well as higher interest rates, which positively impacted margins in liabilities and capital. Consolidated speed in income grew by 15.5% due to higher results in insurance, brokerage, and current account services and overdraft fees, especially in shield. Consolidated non-interest expenses decreased 1.4% year-over-year as a result of efficiency initiatives in line with the digital transformation in our strategy in Colombia, resulting in a consolidated efficiency ratio of 49%. Consolidated cost of credit increased by 10.7% year-over-year. Broadly not in line with consolidated credit portfolio growth on a comparable basis. In constant currency, our credit portfolio grew by 8.9% in Chile and 4.4% in Colombia, with retail loans in Chile and consumer loans in Colombia as the biggest contributors. These first quarter results represent a strong start to the year, with consolidated returns and equity above our target of 13%, 14%. While recognizing that our bottom line has been positively impacted by the current macroeconomic environment, we see our growth in credit volumes and commissions, as well as a declining expense, as a clearly positive operating trend. On slide 16, we see how our loan portfolio mix evolved in the last quarter and two. The overall portfolio grew by almost 9% year-over-year, with mortgage loans growing by 19.1% and consumer lending going by 17.5%, consistent with our strategy and in line with our guidance of high single-digit loan growth for 2022. The share of retail loans in our portfolio increased by 317 basis points, from 35.2 to 38.3 year over year. Since the merger in 2016, the share of our retail in our loan portfolio increased by almost 10%. We have been persistent in our strategy of pursuing faster-than-market growth in retail, knowing all along that we will take time for our share in retail loans in our portfolio to change significantly, and we believe we have made meaningful progress. We still see more attractive returns for growing retail, so we expect our share of retail of our portfolio to continue to expand. Nevertheless, we are confident that our wholesale banking strategy and leadership team will enable us to grow in wholesale with attractive returns. Moving to slide 17. we see that our financial margins with clients grew by 30.8% year-over-year, while remaining nearly stable on absolute value in analyzed average rate terms relative to the last quarter. The slight 2.4% decline is explained by lower number of calendar days of the first quarter, as well as by the seasonal positive effect of the sales season loans that happened in the first quarter of last year. On slide 18, we see that our financial margins with the market was 33 billion pesos in the first quarter, in line with last year's average of 33.6 billion. Compared to the fourth quarter, financial margins with the market was 27% lower, largely explained by the 20% lower inflation valuation in the period. On slide 19, we see that our total commissions and fees grew by 17.3% year-over-year, with double-digit growth in all lines. The graph on the right-hand side of the page shows fee growth in some key business lines. Year-over-year growth in insurance brokerage was 18%. In cash management, it was 27.5%. And in credit cards, it was 47%, which gives you some color about the bank's commercial performance. Here on slide 20, we can see our main credit risk indicators. In the first quarter, our cost of credit was $31.3 billion. which corresponds to 0.6% of our average loan portfolio, partly explained by the $6.6 billion in additional provisions. NPLs in NPL coverage were stable. The 0.6% cost of credit was in line with the first quarter of 2021 and with the full year of 2021, as well as slightly below our guidance of 0.7% to 1% for 2022. On slide 21, we show non-interest expenses for the quarter, which have remained very much under control, decreasing 10.5% quarter over quarter as a result of decreasing personal expenses, mainly due to higher provision for bonuses established in the previous quarter. In the last two years, we have reduced the bank's total headcount by 7.5%, while increasing technology and digital business headcount by 53.4%. That is in line with our strategy of investing in technology and digital, while capturing efficiency from physical footprint optimization. Consistently with our strategy in long-term commitment to efficiency, significantly below inflation over the last 12 months, and our efficiency ratio in Chile has improved to 43.4%. Let's move to July 22, where we can see that in Colombia, we are falling through with our strategy of improving efficiency while prudently managing risk. Expenses declined in nominal terms by 8% year-over-year and 11.2% relative to the last quarter. In the first quarter, we executed an important phase of our footprint optimization program, ending the quarter with 18 keyword branches compared to the first prior quarter, and totaling a 21% decrease in our physical footprint year-over-year. That count has decreased 14% year-over-year. Credit quality has continued to improve in the fourth quarter, with NPL ratio decline from 3.21% in the fourth quarter to 2.92% in the last quarter. In addition, NPL corporate ratio continued to rise in the quarter to 173%. We will continue with the implementation of the transformation plan in Colombia, which has efficiency as a very strong driver. On July 23, we report our progress in the capital fund, which along with the improvements in profitability and other factors, has led to a net rate of our S&D rating to triple B+. Our settlement ratio increased 40 basis points in the first quarter, totaling 291 basis points relative to the first quarter of 2021. as a result of the $1 billion capital increase and improvement in profitability. It is worth noting that we completed the acquisition of the additional space in Colombia during the first quarter, so the impact of that transaction is incorporated in the March 22 figures as well as in the December 22 pro forma figures that we are presenting for comparability purposes. The rating upgrade signals the success of our cap and increase process, which happened according to the plan and expectation we communicated to all stakeholders, despite the significant market turbulence of the peak. On July 24, we recapped the key messages from this presentation. We had a strong start of the year with a consolidated return on payable equity, top and 21.9% in terms of electric chill, all considering our newly increased capital base. We have made progress in efficiency in Colombia, reducing our fiscal footprint by 21% and our headcount by 14% year over year. We are in the progress of implementing the transformation there, and we are beginning to see tangible signs of growth. sustainability, our progress has been recognized not only in the financial front with the rating upgrade, but also in the ESG front with a positive first evaluation. Finally, we are focused on proactively managing the potential effects of the current cycle of high inflation and high interest rates on our businesses going forward. While this cycle has positively impacted the earnings of the banking industry, we understand it might generate pressure on credit growth, cost of credit, and expenses going forward. So we are analyzing scenarios and taking the necessary measures to position our business for the likely next stages of the cycle. While managing the cycle is important, what will ultimately determine the success is our ability to deliver on our strategy and become the fastest-growing bank in Chile, as well as turn around our performance in Colombia. That remains our main focus, and we will continue to push forward and keep you posted on our progress. This is pretty much the presentation that we have for you today, and we will gladly take any questions that you might have.