Welcome to the Banco de Chile's Fourth Quarter 2014 Results Conference Call. If you need a copy of the press release issued on Tuesday, it is available on the company's website. Today with us, we have Mr. Rodrigo Aravena, Chief Economist and Senior VP of Institutional Relations, Mr. Pablo Mejia, Head of Investor Relations, Mr. Victoria Gabens, Investor Relations Officer and Daniel Galarce, Head of Research. Before we begin, I would like to remind you that this call is being recorded, and that 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 Ms. Victoria Gabens. Please go ahead. Ms. Gabens, your line is open.

Good morning, everyone. It's a pleasure for me to share with you our comments on Banco Chile's fourth quarter 2014 financial results. Please turn to slide number 2. To begin, we'll discuss the development in the economic environment and the results of the banking industry, followed by a review of Banco de Chile's results. Please turn to slide number 3, which contains the economic highlights. We'll start with the upper left graph. You can see that Chile's activity remained weak in the last quarter as shown by the monthly economic activity indicator on the upper left, although there was a recovery in the last month of the year. Available data suggests that the activity posted a 1.7% expansion in 2014 due to the expected 1.6% expansion in the fourth quarter from 0.8% in the previous quarter. Therefore the economy achieved is second consecutive year with the below trend growth. Several indicators demonstrate the domestic demand led to slowdown, specifically the 4.5% contraction in capital goods imports in the fourth quarter. This indicated that growth faced stayed in negative territory although there was a moderation of its pace of reduction. You can also see a moderation in private consumption growth as both the retail and super market sales reduced their annual growth in the last quarter to 0.8% and 1.2% respectively. On the other hand, there was a significant improvement in the contribution from net exports, which is led by the high dynamism of exports mainly due to the positive impact of the weaker exchange rates. It is also worth mentioning that the unemployment rate was 6% in the fourth quarter confirming that labor conditions remained tight in spite of the weak economic growth. Please continue to slide number 4. As you can see on the other left hand chart, headline…

Hi, thanks for joining us. Please turn to slide number 8, where you can see our quarterly and yearly results for Banco de Chile. In spite of non-recurring operating expenses, Banco de Chile reached an excellent result of 128 billion pesos for the fourth quarter of 2014 as you can see on the chart on the left, which actually was the average quarterly net income achieved in 2013. Average quarterly net income for 2014 was 148 billion pesos. On an annual basis, net income increased 15% year-on-year and reached $591 billion pesos as you can see on the chart on the right. Proactive management of our net asset position in U.S. and accounting benefit from the tax [inaudible] deferred tax assets played a fundamental growth and it's exceptional results. However, these factors were complemented with important programs and improvements in various aspects of the bank including important developments in effect in technology and innovation in online platform and the implementation of business intelligence tools, which also drove the retail segment. Additionally, we've maintained the prudent risk management focus which kept loan loss provisions under control and recorded good levels of efficiency and if we move on to slide number nine. There is a review of our operating income. For the fourth quarter of 2014, operating income amounted to 440 billion pesos, a 12% increase from the fourth quarter of 2013 and this result was mainly due to Europe structural gap, thanks to the Europe variation that rose from 0.95% in the fourth quarter of 2013 to 1.9% in the fourth quarter of 2014 and also higher income from loans, which prevented a 5.9% year-on-year growth. For 2014 full year results, operating income totaled 1.6 trillion pesos a 13% increase from 2013. The main drivers for the increase were first, a…

[Operator Instructions]. And your first question comes from line of Thiago Batista from Itau.

I have two questions, the first one I got in the loan growth. In Banco de Chile during last year with relatively weak loan portfolio expansion. So my question - I think because of the economic slowdown. So my question is how much do you believe that the loan portfolio could expand during this year. And of the segments could lead to these expansions. And my second question is about the earnings in 2015. I know that during this year, we'll see many different trends. So much volume inflation probably evaluated by their fees higher tax. So it's really very tough to predict the earnings of the Bank. In my numbers have low single-digit expansion. I want to see, if it is really feasible to see some expansion there of the bank during this year.

Can you repeat the second question, please?

Yes, I know. The second question is about the earnings. It's quite difficult to predict the earnings of Banco de Chile during the year because of the different trends. In my module, I've low single-digit earnings growth for this year. I want to see if it is really feasible to Banco de Chile to show some EPS growth.

Well, thank you for your questions, for the first question for the expansion in 2015 of loan volume. I think it's important to mention that we're seeing loan growth for the industry somewhere around 5% in real terms where mortgage loans will lead that growth followed by commercial loans and consumer loans. Where we don't see much growth is in the lower income segment, which is an area that has been, which was affected by the lower interest and maximum interest rate, caps and certain things that occurred in 2012 if you recall regarding how individuals, how you can use negative information in Chile basically making the lower income segments more risky. For Banco de Chile, we expect to grow in 2015 at a level slightly above the industry. We expect that it should be a more balanced growth for 2015, not so concentrated like we had in 2014 in retail. We shouldn't - we're expecting that this shouldn't be repeated where we should see market share in commercial loans and in consumer loans there should be more centered in the middle-income and upper-income segments. Mortgage loans, we should grow somewhere more in line with the industry as we're very comfortable with our market share if you look back three or four years ago, we had the market share that was closer to 14% and we put a strategy to grow in mortgage loans because the customer at the mortgage loan is the much more loyal customer with a higher retention rate. Today we're much more comfortable with the level that we have, which is around 70.5%. So, we don't expect to grow much higher than the average in the industry. In terms of earnings, I think it's important to say that for 2015 we're expecting that inflation should return…

[Operator Instructions]. Our next question comes from the line of [inaudible] from Bank of America.

I have a couple questions, the first one on asset quality, from the comments in your release you get the impression, it's very clear actually that you guys are taking a very conservative approach tightening underwriting standards moving to the upper levels of the different segments that you serve. And in general, the other market has also been doing the same. Do you think in addition to that you guys have been building extra reserves with the additional provisions that you've been booking, I presume, taking advantage of higher than expected inflation in revenues. So it just points to a very conservative approach, are you guys worried that we're going to see some significant deterioration in asset quality in 2015 and is that why you guys are taking this sort of more conservative stance. That's the first question. And the second question is what is, what should we look at as the impact form, potentially lower central bank rates on your results. Is it going to lead to pressure on loan spreads or should it be positive for loan spreads? Thank you.

Okay. In terms of asset quality, I think I have mentioned it a little bit, our base scenario expects unemployment to remain relatively strong at the 7% and 7.5% level, which is still good for Chile, but there is still a lot of incentives in these figures. So that's the main risk that we could see. So if you look at the quality of job as first job quality than there was in the past, because the job creation is more concentrated in staff employees and salary employees, and obviously with the lower GDP growth that we've had this isn't positive scenario together with all the new regulations that have been happening in Chile for companies. So you have the regulations regarding the tax changes, you have the regulations for the labor loss, so there is a lot of still uncertainties in Chile, which have caused us to take more conservative steps. And we're still waiting to see how companies will react to this in order to have better understanding of risks. So there is still a lot of uncertainties. And I would say additionally that additional provisions have been booked, generally they're booked in near the end of the year when we evaluate that we have sufficient levels of provisions and the risks that we're assuming. This year was a little bit more of an exception that there was in the beginning and the end of the year, because there was a lot of uncertainties building up. If we look at the end of 2013, we were expecting a year that was strong growing about 4% and we ended up the year at 1.7 and that started to become more apparent when we book the first additional provision. So, there is still a lot of uncertainties. In terms of your second question, the impact of Central Bank rate [ph], in the short-term, it's positive, but I would say in the medium term - in the short term it's positive, something around 10 basis points of net interest margin, but in the medium term, it's negative for us because we have a large position in non-interest bearing liabilities. So the margin that we received from these non-interest bearing liabilities is flat. So in the medium term, it's negative.

In the short term, you said 10 basis point impact on them, that is what if rate move by how much?

1%, 100 basis point change.

Okay. I'll follow-up on the first one, do you think that or is it reasonable to assume that you will be continuing to book these additional reserves. I know you guys said that these are determined by the Board in the past, and we just have very little visibility into when and the magnitude of what is to be expected. But when I look at the provisions that you posted for the quarter, if I back out those additional reserves your provisions actually were very good, improving like 13% quarter-on-quarter. So is this - should I take that adjusted for provisions as what we could expect on a recurring basis going forward? It's roughly about 1.2% of average loans?

Really, we think the countercyclical provisions are marginal amount of the total provisions that we book, and in general in the past, in the history of Banco de Chile, [inaudible] levels that range around the 0.5% to 0.6%. So that is the growth in our loan book. You can do that. For next year, it's difficult to - we can't give that information, because we don't know what the view will be in six months from now.

Okay. So going back to what you think the recurring level of provisions area, we've heard about the additional provisions, do you expect that in 2013, you'll be able to maintain a roughly 1.2% of average loans as your provision level, which is the number that you posted in the fourth quarter.

In that base economic scenario, if what occurs actually happens. And then there is no surprises, there is no downturn and unemployment or GDP dropped, we expect something around the range of 1.2% to 1.25%.

Okay, if I may just one final question on taxes, have you decided which the tax sort of regime you're going to go with, and if so what is the expected effective tax rate that we should work with for Banco de Chile in the next two years.

The definition will be made in the general shareholders' meeting in 2017. So the effective tax rate for accounting purposes and only for accounting purposes until 2016 and for accounting purposes it's 27% but that can change based on what we decide [ph] at the Annual General Shareholders' Meeting in 2016.

I see. But in terms of what we could expect to see in your results. Do you have any guidance on what the effective tax rate should be or we should be working for with for 2015.

2015, it depends on the inflation. Big effect, so one second, please. So the income of core increments is about one - because the tax rate will go from 21% to 22.5% so the core increment is something like 1.5% so increase from the normal rate that we had prior to 2014.

We have no further questions. This concludes the question and answer section. At this time I would like to turn the floor back to Banco de Chile for any closing remarks.

Okay, thank you for listening and participating in our call. We look forward to sharing with your our next quarter results. Bye.

Thank you. This does conclude the presentation. You may disconnect your lines at this time. Have a nice day.