Good afternoon and welcome to Banco de Chile's Third Quarter 2024 Results Conference Call. If you need a copy of the management financial review, it is available on the company's website. With us today we have Mr. Rodrigo Aravena, Chief Economist and Institutional Relations Officer; Mr. Pablo Mejia, Head of Investor Relations; and Daniel Galarce, Head of Financial Control and Capital. 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 pass the call over to Mr. Rodrigo Aravena. Please go ahead, sir.

Good afternoon everyone. Thanks for joining this conference call today. We are pleased to present the performance of Banco de Chile during the third quarter of this year. Once again, our bank demonstrated its unquestionable leadership and consistency over the time. Some of the main achievements of this period includes: we continue leading the industry in profitability after posting a net income of CLP288 billion equivalent to 21.3% return on average equity in the quarter and 22.8% year-to-date. We also outperform our peers in terms of NIM, fees and operating margins. In addition, our customer income continues to grow on an annual basis, primarily stirred by income from loans on the ground of improved lending spread. Despite the low industry business growth environment, we grew faster than the market in loans, gaining market share in all the segments in line with our main long-term strategic goals. We also had positive advances on efficiency, posting a cost-to-income ratio of 36.5% year-to-date, outperforming our main peers and our long-term target. On the non-financial side, we were distinguished by external entities due to our excellent service quality and corporate reputation and also, we also continue carrying out several initiatives aligned with our strategic pillars, which will be presented later in this presentation. As usual, we will begin this webcast with a brief analysis of the macro environment. Please go to Slide number 3. The Chilean economy continues posting signs of recovery as you can see in the chart on the left of this slide. In the second quarter, the GDP increased by 1.6% year-on-year following the 2.5% year-on-year expansion seen in the previous quarter. It's important to mention that in 2023 the economy grew only 0.2% as a consequence of the normalization after the several imbalance set that we had during the pandemic.…

Thank you, Rodrigo. Let’s begin by reviewing our strategic progress. Please go to Slide number 8. We are steadily achieving strong results in executing our strategy, which emphasizes customer satisfaction, efficiency and long-term sustainability. This strategy is driven by six main priorities, illustrated at the center of this slide. On the right are our mid-term targets. Our primary goal is to lead as the most profitable bank among our peers. In summary, this translates into a long-term return on average equity of around 18%, assuming a positively sloped yield curve and the Central Bank inflation rate that targets are met. Regarding cost to income, our performance continues to exceed our long-term targets. While this is partly due to a robust top line growth that has stemmed up from both increased revenue and extraordinary FX that have temporarily remained after the pandemic. We are confident that our productivity levels will continue to improve through current and upcoming efficiency initiatives, which we’ll discuss later in the presentation. For market share, our goal is to lead in commercial and consumer loans as well as demand deposits in local currency. In this regard, over the year, we have gained market share in high margin lending products such as consumer loans by maintaining an adequate risk return relationship on the grounds of responsible credit risk management practices. In addition, we have retaken the leadership in local currency demand deposits, which has been a traditional competitive advantage for us that provide us not only with a competitive funding but also with a very stable funding source. Lastly, we remain committed to delivering exceptional customer experience and positively impacting society. This commitment is reflected in their high Net Promoter Scores and a corporate reputation that ranks among top three in Chile. These accomplishments are achieved by evaluations…

Thank you so much.

You're all welcome.

Thank you very much. Next question comes from Mr. Yuri Fernandes from JPMorgan. Please go ahead.

Hey guys, good morning. Good afternoon. Just some color on loan growth for 2025, I remember in the previous call you mentioned that politics could be affecting some wholesale demand. I know you still have elections next year for president, but at least the regional elections, I guess it's a little bit more clear now. So just asking if you won, you are seeing an uptick in volumes. And Chu [ph], if you can provide any color on the outlook for the next year for loan growth. Thank you.

Hi Yuri, thank you very much for the question. This is Rodrigo Aravena. Yes, our focus for growth for the industry for the next year is around 5% in nominal terms. There are different aspects to consider in that that focus. First of all, we're expecting an organization from the current level of activity towards more sustainable electricity between launch and GDP. In the past we used to see a loan growth of around two times the growth of the GDP. Today we think that given the state of development of Chile, the banking penetration in the economy, et cetera. So they would think that it's more reasonable to expect elasticity or multiplier around 1.5 times in the very long term. For the next year, we're expecting a normalization with positive growth in different segments in real terms. And when we consider the inflation expectation for the next year, which is 3.5%, given that number, it's reasonable to expect a loan growth around 5%, something like that for the next year. Looking forward, we have different forces. As you mentioned, politics will be an important project to monitor. The elections held two weeks ago showed an important shift in the support of different political coalition in the country. When we compare to the elections held four years ago, there was a great support to parties from the center right and rights coalition which makes important change in terms of the political support to the country. Historically, the municipal elections has been a very important leading indicator to the Congress election. It's important to remember that next year, in Chile, there will be election for President of the country, for the Senate and the half of the lower House as well. So given the results of the municipal election, it's reasonable…

No. Super, clear Rodrigo. If I may, just a follow-up on this lower contribution from inflation. Can't you have like a book case for inflation also like higher global tariffs, like a stronger dollar? And then I don't know, maybe solution is more resilient than we think and we make more money on the [indiscernible]?

Well, in terms of inflation today, we are aware of the asset risk for inflation, considering some sticky prices and persistence of inflation in Chile. We have several prices denominated in U.S. So that's why in the case of our country, the past inflation is important in terms of inflation expectations. We have to pay special attention to the evolution of exchange rate. We have to remember that the pass-through wave is here [ph] in Chile is between 10%, 15%, which means that 10% of weakening of Chilean peso would rise inflation of around 100 basis points. But having said that, it's not very likely that the inflation next year will be higher compared to the inflation that we have now. It's very likely that inflation by the end of this year will be a number – considering the number that was released this morning, it's likely that inflation rate this year will be 4.6% or 4.7%. But also considering the upside risk inflation for the next year, it's not likely that inflation 2025 will be higher compared to the inflation that we're going to have this year. We're aware of the upside risk, but even considering these potential factors we still continue expecting an inflation rate next year lower compared to the prices in 2024.

Super clear. Thank you very much, Rodrigo.

You're welcome. Thank you.

Thank you very much. [Operator Instructions] Our next question comes from Mr. Andres Soto from Santander. Please go ahead.

Good morning, Rodrigo, Pablo. Thank you for the presentation. My question is regarding your coverage level. You have 262% NPL coverage. This is not only significantly above your peers, but also above your own historical levels. What do you see as a normalized coverage level given that some of the negative events that you were expecting to happen actually didn't materialize and you are sharing now a kind of more optimistic outlook for the economy?

Hi Andres. Yes, so today we have a very good level of coverage, as you mentioned, higher than we've had in the past. In the past this level has hovered well below this figure, closer to 200, slightly below that. And the result, maybe to mention a little bit for everyone, the result of these additional provisions was the permanent implementation of our prudent policies in order to take into consideration what was happening over the last four or five years. So because of different events, different inconsistencies in terms of the historically low levels of non-performing loans that occurred during the pandemic, the uncertainties generated by the recession in Chile, as well as the institutional and political uncertainty in Chile began increasing the levels of coverage through the use of additional provisions, which is something at the board level have to implement or are they implemented. So taking all these into consideration, we can't rule out that the level that we have today based on these uncertainties is less than it was before, hence this could result in a release of a portion of these additional provisions in the future. But the triggers of these timings haven't been defined. So it's important to take into consideration we have to still look cautiously at what's occurring. In Chile we don't have the triggers yet defined on when or how these would be released, but it's something that it's taken into consideration at the board level when evaluating the levels of additional provisions or coverage that we have in the bank to cover the risks that we are assuming in Chile.

Thank you, Pablo. And when you look at that possibility of releasing some of those provisions, would you imagine that being in a gradual process and therefore we should assume Banco de Chile to deliver very low levels of cost of risk over the next few years or will be that sort of one off process and at some point we can expect an extraordinary dividend to be paid out of that.

As I mentioned, the triggers and the definition on how this would evolve and when and what would have to occur hasn't been discussed and implemented. So it's something that the board level is evaluating and taking into consideration for the future.

Understood. And talking about asset quality and cost of risk, do you believe that for the system as a whole we are reaching an inflection point and we should see finally improvement? Or what are the trends that you are forecasting for asset quality for the system? I know that you guys have a very good level, but for the system as a whole, what will be the trigger for asset quality to improve?

I think there's many challenges that Chile is facing and at certain points things are getting better. The levels of inflation today is obviously a negative factor because if we look at different times in the history when inflation has been higher around the 2007 period during the pandemic, it's a special case. But normally with higher inflation, this affects the purchasing power of individuals and this can affect the economy and the payment behavior. So it's something to take into consideration and see how this evolves in the future. So it's true that we've seen more of a plateauing and probably in the medium term, as the economy improves and we return back to normal, we should see an improvement. But there's uncertainties based on the level inflation today and how this will continue in the future affecting households.

Got it. Thank you, Pablo.

Thank you.

Thank you very much. It looks like we have no further questions at this point. I'll be passing the line back to the management team for the concluding remarks.

Thanks everyone for joining the call and we look forward to speaking with you for our year end results.

Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you and goodbye.