Good day, ladies and gentlemen, and welcome to the Q2 2010 Banco Santander-Chile earnings conference call. My name is Veronica and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session towards the end of today’s conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Mr. Raimundo Monge, Corporate Director of Strategy. Please proceed.

Thank you very much. Good morning, ladies and gentlemen. Welcome to Banco Santander-Chile’s second quarter 2010 results conference call. I am Raimundo Monge, Director of Corporate Strategic Planning, and I am joined today by Robert Moreno, Manager of Investor Relations. Thank you for attending today’s conference call in which we will discuss recent developments of the Chilean economy as well as our performance in the second quarter. Afterwards, we will be happy to answer your questions. The Chilean economy showed positive trends in the second quarter. The effect of the earthquake had been lower than expected and the rest of the economy has been rebounding. Our expectations for GDP’s growth for this year have increased to 4.9% and to 6.2% in 2011. The growth of GDP has been led by internal demand, which is expected to grow 12.2% this year with a 31.6% rise in total investments and a 6.8% growth in internal consumption. The salary pool, defined as the average wage times the number of people employed, which is key indicator for retail activities and asset quality issues, is expected to grow around 6.5% both this and the next year in real terms, led by better-than-expected trends in unemployment and to a lesser extent wages. Finally, inflation is normalizing after a deflation recorded in 2009 and we expect it to be around 3.7% in 2010 while the short term Banco Central reference rate should stand at around 3% by the end of this year. During the quarter, Moody’s upgraded Chile’s sovereign rating from A1 to AA3. We believe this reflects the country’s solid fundamentals due to prudent macroeconomic policies and the positive outlook we foresee, once the impact due to the recession of 2009 and the earthquake are full absorbed. Yesterday, for example, a US$1.5 billion sovereign bond was…

(Operator instructions) And your first question comes from the line of Saul Martínez from JP Morgan. Please proceed. Saul Martínez – JP Morgan: Hi, good morning, guys, and congratulations on the results again. But, I guess more of a big picture question. And I would like for you guys to comment on the sustainability – the profitability that you’ve been generating in the first half. Your ROEs have been in the neighborhood of 30% and it seems like the macro environment is very positive, loan returning, inflation is helping the margin. Asset quality and provisioning is fairly low right now, (inaudible) percent of average loan. Can you just – I mean is there any reason why you shouldn’t be able to sustain this type of ROE, which is in the high 20%, 30% range, which, obviously from a global standpoint, as you pointed on your presentation is very, very high. And I am just wondering if you could just comment as you look out over the next year to kind of how you see your profitability evolution, I guess on a more normalized basis.

Okay, first of all about the macro picture, we believe that still we are in the recovery stage of this cycle in terms of overall macro activity and in terms also of the sentiment of people and the growth of the industry. As you see in the chart that was included in the webcast, in the previous cycle we saw growth of 23%, 24% and this cycle we expect to grow this year expected [ph] to expand 14%, but currently we are growing at 10% on a year-on-year basis. So we think that we haven’t seen all of the macro recovery. That’s element number one. But element number two, and given that we mentioned the fundamental, at the end it’s related with client activity. As in any business, we rely on our customers and therefore what you have to start looking more closely today is clients and how they are growing, how they are using your product and that’s why we think we are optimistic because we have a relatively large client base, but as we comment in the presentation, it’s still relatively untouched. According to our cross-selling standards, which are related with use more than having the product – you can have many products, but if you don’t use it – use it. So, in terms of actual use of product, only 20% of our clients we feel with this standard. So, therefore, we need to do internal homework to allure our clients and to offer incentives for them to use and be preferring our products compared to other competitors that we have, many of them are very good. So, the – going forward, at the end fundamental of any business is how your clients are coming and as we have seen we have increased the growth of the…

Yes. The decision took by the superintendency is to delay any decision until the early 2011. The only thing that they are requesting banks is to have kind of a counter cyclical policy of 0.5 of all corporate positions. So, we will have to – as all banks, we’ll have to have a minimum 0.5% provision levels for all the corporate book, which in our case will mean a minor one-time adjustment because we have lower than that. And going forward we think that well, given that the government is fully involved in jumpstart or promoting SMEs, which are of course more risk and therefore the ones that provisions are more required, probably there will be a provision scheme [ph] that take into consideration the macro outlook, which is much more optimistic and therefore provisions, which should be less demanding. And secondly, the fact that the higher the provisions standard you set, the smaller the chances that the new SME companies can tap the market. So, it will be something in – remember that in this downturn Chile banking sector went very well and secondly that most of the deterioration was on the consumer side and on the corporate side, not even in the SMEs we see very little deterioration. So, we expect the superintendency taking into consideration those elements will bring sensible regulation. We don’t foresee unpleasant surprises. Saul Martínez – JP Morgan: And then – thank you – and the minor one-time adjustment. Do you – can you give us a sense of when and how much is that?

It will be reflected throughout 2Q, but it won't be meaningful. As a general, we are expecting total provisions to go down simply that this will put the drop in a lower amount, but we expect the provisions to follow a relatively healthy pattern that we have been following in the last three quarters. Saul Martínez – JP Morgan: Great. Thank you very much.

We still believe that provisions have space to go lower. This will be partial reversal, but we don’t expect provisions to jump because of this element. And they will be recognized throughout the second half. Saul Martínez – JP Morgan: Do you think provisions as a percentage of average loans have room to fall in the second half, so–?

I would say that to some extent, yes, because the – for example, in terms of absolute provision levels, we are still much higher than say pre-crisis levels that we saw in 2007, both in absolute terms and gross provisions and as a proportion of loans. And the fact that we think we have better knowledge about the asset quality issues especially in the low end, which – most of the deterioration usually happen and the fact that we will be growing in a probably in a different way in many aspects make us believe that there is still room for improving and the other thing is that remember is that asset quality usually lag the recovery of the economy, especially in the corporate side, usually have a lag of two, three, four quarters, because companies that were struggling to survive even though the macro picture is better, start getting in more difficulties because the income recovery is not quick enough to allow them to recover. So, usually, when you see better macro picture, retail activities start benefitting very quickly because of better job outlook, better salaries, but corporate tends to lag a little bit. So, you have some room there to – and that’s why, for example, in the first Q and the second Q, we have seen levels of provisioning in corporates are low – higher than what we saw, for example, in many quarters of 2009. It’s not that the macro picture is improving. It’s simply that we see a lag until they start recovering. Saul Martínez – JP Morgan: Great. Thank you very much for that.

(Operator instructions) And your next question comes from the line of Claudia Benavente from Banchile Brazil. Please proceed. Claudia Benavente – Banchile Brazil: Hi, I would like to know how do you expect your (inaudible) to grow in this year and next year in an individual level?

I beg your pardon; I didn’t understand the first part of the question. Claudia Benavente – Banchile Brazil: How do you expect your loans are going to perform and when are – going to be a like a rate for – in an individual level for consumer mortgage and commercial loans for this year and next year?

Okay, well, we expect the, as we pointed in the presentation, the overall growth of the system to be around 14% by the end of the year and a little bit high 16%, 17% next year. Among them, consumer lending and after some period of time mortgage lending should be abating and also as you need to abating. And what should be dragging the overall growth should be corporate lending. In our case, we don’t have specific targets for loan growth because our loan growth is a result of achieving the targets in terms of profitability. So, growth in our case is a consequence of the implementation of the strategy and not the other way round. That’s why having targets, we don’t have specific targets for loan growth because again, when the conditions are sound as we have seen it in the first half, for example, consumer lending, we can accelerate very rapidly and that’s why we have been gaining market share. We have been gaining also market share in the corporate side simply because the returns are correct. But if we see price margin compressions going forward, well, we tend to change the speed. So, but to make a long story short, we expect the system – consumer lending to be growing this year approaching 15%, 16% by the end of the year, probably a little bit high next year. In our case, growing a little faster than the system as a whole. In mortgage, it’s more an open issue because prices have been too low according to our capital requirement return we don’t see in our space. We are only growing in mortgages in those clients that because of other products are profitable, but not because the mortgage itself if profitable. And in corporate side, probably stronger than the market in SME, growing above 15% or 16%. And then in corporate, it’s an open question because sometimes prices are too low and – compared to give up business in that. And remember that in our corporate business, around 60% of our revenues come from non-lending activities. So, lending is only again a consequence of the implementation of the strategy of having higher profitability with corporate clients. Claudia Benavente – Banchile Brazil: And do you see nominal rates in terms–?

Yes. All our figures are nominal. Claudia Benavente – Banchile Brazil: Okay. Thank you very much.

Your next question comes from Tito Labarta from Deutsche Bank. Please proceed. Tito Labarta – Deutsche Bank: Hi, good morning, Raimundo. A couple of questions, first, just a followup on the provision question from before. I just want to get a sense of you said it could come down a bit further. I just want to get since how much more they can come down and I guess also in terms of asset quality, are all the issues from the earthquake already done with. So you don’t think there will be anymore impact from that and how more could asset quality then improve from current levels? And then a second question, just in the quarter you had some – the sale of some branches. So, I just want to get a sense is that just a one-time thing, do you think there will be anymore sale of branches and any other gains as you come from that? Thanks.

Okay. Well, in terms of asset quality, again, we think that we are in the early stages of the recovery of this cycle and therefore we see room for further improvements in terms of lower provisioning level and lower asset quality indictors. There will some lag, as I mentioned in the corporate but on the retail part, which is for us where we are putting more effort to grow. We have seen very healthy news and we are relatively optimistic. How long you can get, it will be a – there are effects on side or the other. Because the whole portfolio to some extent or the older positions will be improving as compared to say last year, but of course we plan and we have been doing that in the first half. We are growing much rapidly in consumer lending, credit cards, and SME lending, which, of course, have more risk. But they are much more than compensated by higher spreads. And that’s why we kind of – our strategy, our goal is to have a high enough risk adjusted margins going forward and to try to – we are targeting to maintain risk-adjusted margins at a level such that are accretive in terms of capital consumption and profitability. So, again, you cannot see the two sides of the story separate. It is better to– we try to look them combined. In terms of sale of branches, this is something that we do – we have done it opportunistically. Simply, it’s not our core and it’s not something that we have in mind to follow on the future, but sometimes you are approached by real estate funds, et cetera. Given that we have very low risk, because what we do – what we have with these branches a sale…

No, I would say that going forward margins probably are peaking at what we should expect. Remember that when the overall picture start improving and when clients realize that their risk in this is much lower than say 12 months ago, they start demanding lower spread and the competition forces spreads to come down because if you are not lending at that level somebody else would probably do. So, there is a trade-off, which we have to be very careful in handling. There is lowering spreads when you see – loan demand. And therefore at the end what you are trying is to maximize the growth of a client and net interest income by slashing prices selectively and expanding loans. So, we are – again, we are not targeting margins by themselves. We are trying to target growth, healthy growth on the net interest income coming from client activity. Tito Labarta – Deutsche Bank: Okay, great. So – but net, do you think this is kind of like a peak annual policy, a bitter pressure going on just from competition and higher rates?

That’s right. Tito Labarta – Deutsche Bank: Great. Thank you.

Your next question comes from the line of Fabio Zagatti from Barclays Capital. Please proceed. Fabio Zagatti – Barclays Capital: Hi, good morning, Raimundo, Robert, following up on the question related to the macro picture competitive environment and sustainability of profits, are you concerned with competitors in Chile, how they are gearing up in the search for yields may be from those institutions that are now more focused on corporate segments and they need be pooling efforts in expanding their consumer credit books, so that they keep on sustaining the high ROE’s and may be if you could give us some color also on the possibly competitive position of the retailers in Chile? Thanks.

Yes. Well, of course, the Chilean competitive environment is highly competitive. And I would say that one of the few advantages of being to some extent having a dominant position in many markets is that to some extent you can chose the fight [ph] you want to concentrate on and as we have mentioned, we are concentrating today mostly on expanding banking penetration and increasing product use on our client in the retail part. And on the corporate side, mostly on non-lending activities, advisory services, cash management, and the like. So, that means that, for example, on the corporate side, the lending business is only a consequence of trying to grab other more profitable chunks of the business. So, in order to fulfill that focus, you have to take care what competitors are doing, but as we have tried to give the sense in the presentation, we have a lot of internal home work to do first, and the fact that you have an expanding economy, an expanding financial market allows you to not touch prices to call it someway, but to focus on features of your product to allure your clients. And that’s why in the retail, alliances have been very powerful as a source of alluring clients. Today, if you use a co-branded credit card, you can get rebates in your phone bill, in your electricity bill, you can have exclusive promotions with El Mercurio, which is the largest newspaper in Chile. So, I think that people value and have nothing to do with prices or fees you can charge. So, we’ll – although competition is expected to increase, we think that given the market is bringing new opportunities, we can maintain relatively high profitable levels and at the same time growth, simply that the obvious thing that is to slash prices to increase your market share is something that we have not done and probably won't be doing in the coming years, especially because the market is expanding and we are taking a number of actions to expand the size of the market, especially among the second 20%, 25% of the working population and the second 3000, 5000 companies on the corporate side, which are the companies that should benefit by the effort brought by the government to increase the productivity and technology and innovation within those mid-size companies. So, once we have fully tapped that opportunity probably it’s the time to start looking, okay, what’s next? But we think we have enough home work to do with our current clients and with that opening pockets in the market in the next two or three years. Fabio Zagatti – Barclays Capital: Clearly understood. Thanks, Raimundo.

There are no further questions. I will now hand it back to Mr. Raimundo Monge for closing remarks.

Okay, well, thank you all very much for taking the time to participate in today’s call. We look forward to speaking with you again soon. Have a good day.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.