Good morning, everyone, and welcome to Banco de Chile's Second Quarter 2015 Results Conference Call. If you need a copy of the press release issued on Thursday, 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; Ms. Victoria Gabens, Investor Relations Officer; and Mr. Daniel Galarce, Head of Research. Before we begin, I’d like to remind you that this call is being recorded and that 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’ll now turn the call over to Ms. Victoria Gabens. Please go ahead.

Good afternoon. It's a pleasure for me to share with you our comments on Banco de Chile's Second Quarter 2015 Financial Results. Please turn to Slide #2. We will briefly discuss the macro environment and the banking industry results for this quarter. This will be followed by an announcement of Banco de Chile's strategy and second quarter results. Please turn to Slide #3, which contains the economic highlights. After a slow 1.9% growth rate in 2014, the Chilean economy showed promising signs of a modest recovery during the first quarter of this year but soon began to falter. This seasonally adjusted monthly index of economic activity or also known as, IMACEC, has been flat for the last few months. As you can see in the top left chart, the year-on-year three months average growth shows a downward path of the favorable record over last December to January. According to the economic expectation survey conducted by the Central Bank, analysts now expect the ET to pose a 2.3% in 2015 and 3% in 2016. The main drivers of this modest growth include a mix of international and domestic factors. First, a larger amount of trading partners and also loan commodity prices are hitting investment in the domestic mining sector, where the comps are roughly 35% of total investments. On the other hand, as the top right chart shows, domestic, consumer and business confidence are unique and therefore are delaying the recovery in domestic demand. As the bottom right chart shows, in line of the developments in international commodity markets and stronger pace for the dollar, local currency has depreciated strongly at about 7% since last December, which has positively changed by increasing the contribution from net exports to economic growth. Please continue to Slide #4. Despite the cool down of local…

Please turn to Slide 15, where we will present the quarterly results for Banco de Chile. This was a record quarter for us with a net income of Ch$168 billion, which represents an increase of 9% year-on-year and 44% quarter-on-quarter. Thanks to this historically high results have almost completely closed the gap of 2014 accumulated earnings, which was extraordinarily high as a result of inflation. This was achieved by affective and prudent risk management which has permitted us to record lower levels of provision expenses together with successful implementations and execution of a commercial strategy that consistently generates growth and stable core revenue and customer revenues. In terms of profitability, we posted a 26% return on average equity in this quarter versus the 18% for the first quarter, which consequently results in a 22.3% return on average equity for the first half of this year. Please turn to the next Slide #16. Operating income for this quarter was Ch$419 billion, a 10% increase quarter-on-quarter, a 1.6% increase when compared to the same quarter last year. The strong quarter-on-quarter rise was mainly driven by non-customer income, which increased from Ch$84 billion in the first quarter to Ch$119 billion this quarter. This result was mainly due to our U.S. structural gap, thanks to the variation that rose from 0% to 1.5%. When we compare this quarter to the same quarter last year, the 1.6% growth was driven by customer income, despite the higher inflation posted last year during the same period. The main drivers behind the year-on-year customer income growth were an 8% rise in fees, mainly related to good financial performance from our mutual fund business and debit card administration, in line with customer growth and inflation. Secondly, a 6.1% year-on-year expense in average loans, which was partially compensation by both…

Go ahead.

Sorry, I think we got cut out. I think we got left off. It’s basically we believe that our actions in the last period, for example the purchase of the loan acquisition we had earlier this couple of months provide us with group of a unique skills and capabilities which will allow us to look at the future with confidence despite the weaker economic context. So if you have any questions, we’d be happy to answer them now.

Thank you. The floor is now open for questions. [Operator Instructions] Please wait while we poll for questions. Your first question will come from line of Guilherme Costa with Itaú BBA.

Hi. Good morning guys. This Guilherme Costa from Itaú BBA. So first, congratulation on the results, I have two questions. First, about loan growth. We saw that you showed an increase in the loan expansion during the second Q. Do you expect the loan growth should expanded further this year? Do you believe commercial and customer loans could show a higher growth going forward and to possibly offset the expected decelerations in mortgage during 2016, as a consequence of the increase in taxes for housing market? And then my second question is about asset quality. Could you comment, if you expect a deceleration in your NPL ratio? And if so, from what second do you think it could rise, and what are expectations for the cost of risk going forward? We saw that the cost of risk achieved 1.1% this quarter, and last year it was 1.4%. Do you expect this to increase, or you don't?

Thanks. I think it’s important to mention that what we expect for the systems to grow this year. We believe that the loan growth for the system should be around 8% to 9% nominal, with growth being led by mortgage loans, thanks to customers anticipating a home purchases because of this new tax law that is been implemented beginning 2016, followed by commercial and upper income consumer loans. I think that the loan income will probably loan growth as you see in past regulations on provisions for the maximum interest rates as well for the segment. For us, we believe we should end this year with a growth in line, with this probably it could be slightly above or in that range, due to the above portfolio repurchase from another bank in Chile, which is equivalent to 3% of our loans outstanding and between 2% and 3%. And your second question on asset quality. This first quarter - this first half of the year was very good, much better than last year, with better than expected. We think that for the second half of this year, we see economies of Chile isn't growing as far as anticipated and that employment rates is increasing. So there could be figures more in line with the figure that we had in line with the prior quarter for the full-year of 1.2%. For the second half of the year, so that would mean probably a full-year result somewhere below that 1.2% if everything goes in line with our base economic scenario.

Okay. Perfect. Thank you.

Your next question will come from the line of Catalina Araya with JP Morgan.

Hi. Thanks for taking my question, and congrats on the great quarter. My question is related to expenses. We saw a significant improvement quarter-over-quarter and a slow growth year-over-year. So I just wanted to get your thoughts, how do you see expenses growing through the second half? And then my second question would be I just want to know what’s on - under a normalized inflation environment, what's your ROE expectations? Thanks.

In terms of expenses I think something that frank to mention is the stability that we’ve had in expenses over the last couple of quarters. The first quarter of this year was still one-time risk which increased expenses, as you can see in the press release I’m sure you’re well aware, but if you look at the year-over-year figures you mentioned, the expenses are growing somewhere around 8% range and that’s what we’re expecting for year-end, taking into considerations or excluding the negotiations with the trade union that took place at December and in June of last year. So if we take that into consideration which is above Ch$45 billion. You should expect similar levels of operating expense growth for year-end. And the reason for that increase which is around 8% to 9% is both still growing and there is a higher inflation last year as mentioned earlier in the call that the inflation effect salaries and different expenses as most expenses are indexed to inflations. Also exchange rates affected operating expenses for IT. And your second question was?

ROE under a normalized - yes.

I would say ROE at a normalized range is between 20% to 22%, and then if you think of long-term ROE including the tax reforms and what we know, during discussions being taken right now and based on what we know. And without having the subordinate debt payments of one of our shareholders, it should be around 20% ROE as well in the long-term.

Great, thank you.

[Operator Instructions] Your next question will come from the line of Victor Galliano with Barclays.

Hi there. Congratulations on the quarter. Just really following up on credit quality. There is a lot of talk out there clearly about an economy that's softening. It looks like the cycle maybe turning here, maybe bottoming out. How do you look at this now, say looking 12 months hence? You've made your comments about where you think NPL ratio could be. Could you give us a sense here about, Pablo, where we might be in terms of cost of risk on an annualized basis looking by the year end. Do you expect any sort of significant pick-up in terms of cost of risk, and where do you see the biggest risks on credit quality. Would you say that's in the SME portfolio, in the consumer portfolio? Thank you.

Well, I think something I’m trying to say is that the copper prices been falling for a while now. So mining companies [indiscernible] costs over the last couple of years, put these investments on hold. So the cost of risk and credit quality you mentioned this has affected companies providing products and services to the mining industry, but this is already taken place. So really the large effectiveness has already taken place. It’s difficult to quantify but the buyers with largest amount has already taken place and we don’t expect that this should have significant impact of provisions. Obviously it depends on how long it’s expected that this figure should - these levels of copper prices should be maintained, but if you look at what’s foreseen in the coming years, it’s a recovery in the copper price as seen by many private analysts. So government spending should be higher, higher government participation should be expected as well as investment in the medium-term should pick-up. So we don’t expect us to have a significant impact in terms of risk. And for the second half of this year, as I mentioned, we should probably be more in line with the level of 1.2% or a figure as we mentioned earlier for the full-year. Mainly I would say unemployment is probably going to rise and that should - that’s always has an effect or generally has an effect on the operating expenses.

Okay.

And third on the risk area, there isn't any particular area where we’re concerned about. So the biggest concern which is just what every analyst would think of Chile is more macro, more what’s happening in China and how that affects Chile.

Okay. Thank you.

You’re welcome. Thanks.

That will conclude the question-and-answer session. At this time, I’ll turn the call back over to Banco de Chile for closing remarks.

Thank you for listening to our call and participating. We look forward to sharing our next quarter results. Thank you. Bye.