Good day, ladies and gentlemen and welcome to the Quarter Four 2014 Banco Santander-Chile Earnings Conference call. My name is Caspian and I will be your operator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Mr. Raimundo Monge, Corporate Director of Strategic Planning. Please proceed sir.

Thank you very much. Good morning ladies and gentlemen, once again welcome Banco Santander-Chile’s fourth quarter 2014 results conference call. My name is Raimundo Monge, Corporate Director of Strategic Planning, and I'm joined today by Robert Moreno, Manager of Investor Relations. Thank you for attending today’s conference call in which we will discuss our performance in the 4Q 2014 and for the year 2014 as a whole. Following the webcast presentation, we will answer your questions. Before we get into more detail regarding our results, we will briefly give our latest update on the outlook for the Chilean economy in 2015 and 2016. We expect the economy to rebound in 2015 and 2016 with the GDP growth of around 2.5% up to 2.7% in 2015 and around 3.5 in 2016. Internal demand at the same time should expand 2.3 in 2015 and close to 3.8 in 2016. Inflation rates measured by the variation of the UF and inflation-linked unit and the most relevant indicator for the Bank should increase between 2% and 2.5% in 2015 as international food prices have dropped considerably in recent months. We expect inflation to return to more normal levels of around 3% in 2016, given this inflation outlook we’d expect the Central Bank to cut interest rates further 50 basis points in 2015. The expected rebound of the economy should be driven by various factors. First of all the outlook of Chile’s main trade partners especially in U.S. continues to strengthen, extra growth as mentioned in GDP figures should expand at around 4% in all 2015 and 2016. At the same time, the fall in international oil prices is another possible event for the Chilean economy as Chile imports most of this oil. Regarding investment, in 2015 and 2016 we are expecting a recovery following…

Thank you. [Operator Instructions] First one to begin, and please stand-by for your first question which is from the line of Thiago Batista. Please go ahead.

I have two questions, the first one is regarding the down rates you did in the SME and Middle Market segment, could you give to us some additional color about those down rates and if those two segments could present some deterioration in the ratio during coming quarters? And the second question is about the U.S. GAAP is it possible to try to reduce at least slightly the GAAP you have especially in the first Q as the pressure will be really very low?

Okay, well in terms of positions both in the SMEs and the Middle Market, as you know these are -- the Bank really for especially larger clients they has to be conservative at all time, but especially now that we have seen softer growth trends and accordingly given that we have had a very strong quarter and year and the expectations are that economy will have assorted growth also in 2015, we prefer to downgrade proactively positions that are fine to be. But you never know what to expect in the future. So, you think the reflection of our prudent approach as we have seen actually non-performing loans has been improving in the last say 12 months, but given that we have a strong year we prefer to be more prudent than not going forward. So there are simply positions that in the margin make us believe that some deterioration could be seen and therefore we prefer to have a completely balance sheet to start the year 2015 without any pending renewals something say that. In terms of the U.S. GAAP, as we mentioned in the call we have been in the process of reducing it, but again remember that our approach is medium term and although we know that inflation will be negative in the 1Q as we have already stated, we think the inflation is positive and if you take a two year perspective, we will be making money with what we got, so remember that we tend not to manage the Bank having a quarter-on-quarter view but a more medium term view and this gap is beneficial to some extent to our results but of course it reduces for a period, the business position that is open by the commercial activity of the Bank which is what we’re trying handle. So it’s fact of the market that sometimes you will have a higher than normal inflation, lower than normal inflation in the following quarter, but we refer to manage the Bank from a medium terms perspective and try not to open or close gaps simply because of the expectation of the following month or following quarter in inflation. And given the relevant large size of the Bank compared to the size of the market, the process cannot be done quickly enough because we will be to some extent sort of dicing or changing the thesis of the papers or contracts that you can use to hedge that. So that’s why we tend to be medium turn oriented and as we mentioned in the medium term, we will be making money with this mismatch which again is not a gap that we opened on purpose but it’s simply the way the market is structured.

Thank you. The next question is from the line of Philip Finch from UBS. Please go ahead.

First of all in terms of your tax rate in the fourth quarter obviously came down, could you explain what drove it down, and what were the key drivers for that but also going forward what we should assume for tax rate for 2015? And secondly, just to go back to what you were saying in the presentation about the sensitivity to inflation, you were saying that for every 100 basis points for or change in inflation your NII change in Chilean peso would be 43 billion just given that what is your expectations for inflation in the first quarter, you gave us guidance for your forecast for the full year of 2015 but for Q1 specifically what you are looking for there? Thank you.

Well in terms of the tax rate in the fourth quarter what we saw was a combination of two elements that drag the effective tax, as we put in our first release inflation, it tends to reduce the effective rate because for tax purposes. The capital of the Bank is adjusted by the inflation so the higher the rate the lower the effective rate we tend to pay simply because of the inflation, it’s a little a bit fainter but we have a chart or a chart in the press release that hopefully will help you to understand what we’re talking about. The second element is linked to the new tax bills that by increasing the rate that we prevail in the future make more valuable the tax loss carry forwards the Bank’s going to have yes. And in the third quarter we have been this even more color of what to settle this is the calculation that depends on the criteria set for the integrity of that or the presentation of new tax bill. So what’s why we saw some non-cash positive impact in this quarter, so it’s simply something that is not repeated and as we pulled that it helped, but of course it was contemplated by other provisions that we have been taking throughout the quarter to try to have relevant between a quarter. Going forward unfortunately we still don’t have full clarity of what to expect because there are some probabilities that the effective rate will be and traditionally in the recent years we were able to reduce the rate from the statutory rate about the 100 basis point on average. But today we don’t have clarity, we are not clarify because the internal revenue service we are providing is effected on a daily basis and themes of what to expect, so it’s difficult to know. But definitely we will be a little bit lower than the statutory rate, how low, whether it’s consistent with that 300 basis point reduction or not it’s difficult to say now. So it’s for practical purposes -- it's unfortunate that calculation that we’re every moment trying to understand. And in terms of the sensitivity to inflation, as we stated in the call, our expectation for this first Q is a negative inflation of something close to 0.5% up to 0.7% of the U.S. variation which is what is relevant for the Bank.

Thank you. The next question is from the line of Tito Labarta from Deutsche Bank. Please go ahead.

There is a couple of questions also just on the provision in addition to the downgrade with SME and Middle Market you also mentioned you were calibrating a little bit the consumer loan model reduce that also to CH$10 billion in additional provisions, just can you tell us a little bit more about what you were changing and do you expect any more changes that staff had also issued some switching I think more to the mortgage provisioning models, do you expect any changes from that, just wanted to understand a little bit what drove that and do you expect any more provisions or just this new models going forward? And then the second question is in terms of fee income, we saw a descent increase in fees, which have increased flat most of the year. Could you tell us a little bit more what you expect for fees going forward? Now I think a lot of the regulatory pressures are little bit behind you, so how much do you think you can sustainably grow in fee income going forward? Thank you.

Okay, in terms of the provision, as we stated in the previous quarter, we were -- we’re calibrating the mortgage -- which is a process that we do every other year more or less without fail of course dependent and drawn under specific conditions. So this process we have balanced in the third Q and it was not fully finished, today it has been fully finished and that’s why we should expect a relevant impact going forward at least for the voluntary 2015 due to these regularization given that it is almost, but included. In terms of -- and simply these are fairly complex models that have a number of parameters that if you do have changes on them you have positive and negative and the net-net for this quarter was a negative of close to CLP 10,000 billion. But at the same time what is relevant at the end of the day is how your provision expenses, sorry excuse me, how you’re non-performing loans levels are performing and that as we mentioned in the call to be relatively cyclical or we have a positive view about asset quality going forward. In terms of fees, fees are starting to bounce and basically because of what we have hinted in the previous quarter that at the end the best correlation is between a number of clients and fees after a large offering nine-12 months. Once you start, you are increasing your client base as we started last year it tends to diminish that in terms of fee growth but with a lag. And that’s why we think that in 2015, we should maintain a growth in the high single-digit, middle single-digit level given that our client base has been growing at around 6% on a yearly basis. So that unless you have other rounds of regulation as you correctly point, we haven’t seen that for almost three years, it could be possible to achieve that kind of getting to high single-digit growth in 2015.

Thank you. The next question is from the line of José Barria from Bank of America. Please go ahead. José Barria: Hi Raimundo, Robert thanks for the opportunity, I have a few questions. The first one going back to asset quality and what happened in the quarter, you mentioned downgrading certain clients or certain loan positions in SME and Middle Market segments. Can you tell us if that was in a sector or country and what specific sector or was it across the board, any clarity on that would be great? And I’ll stop here and then I’ll ask the second and third question I have afterwards.

No, particularly what is our specific sector is simply you review the positions, you are continuously monitoring a specific clients in different sectors, and in the margins you prefer to be more conservative given that you have a very solid quarter. Anyway, so that’s why it’s not a reflection of any season wide or sector wide, the duration simply specific positions in different sectors of the economy. José Barria: What drove the -- and going back to fee income, and we saw very good evolution in two items one was insurance brokerage fees and the other one was other fees which we have a lot less visibility in. But could you tell us what drove the significant increase in both of those lines in 4Q?

In insurance it is well have been monitoring on our campaign -- a larger campaign of especially open market insurance which are not related with greater operation, but also create related insurance especially on the mortgage side and that has been growing very fast has also been fueling that line. In terms of the others, well others is number of things are moving there, but they are mostly is related to in the corporate side, a medium sized vehicle on large sized plans. But it's difficult to predict how that line will evolve, so it's a -- we’re not still growing or actually if you see the growth of the business sector it has been growing faster than what I mentioned, but we think that that can stabilize going forward, so still it is difficult to know there are many things in that line and therefore it’s difficult to predict. José Barria: And going back to your macro slides, you guys are forecasting a 50% reduction in Central Bank rates what should we expect the impact of that to be on your margins to that specifically just the change in Central Bank rates?

Yes, if you achieve that on an unrelated basis then we represent CLP 12 billion to CLP 15 billion, that is part of the hedge that this deterioration has on inflation on time. And that’s why as we have mentioned before the fact of inflation goes at not necessarily is good because usually it’s followed by high rate and now when inflation is coming down, not necessarily is that because it’s also followed by lower rates. And that’s why these kinds of financial components of our profit and loss statement is less relevant on a medium terms perspective than what you would imply simply by seeing short-term quarter figures, that has to be taken into account when looking at Chilean Banks. José Barria: And then in terms of the timing that when you expect this cut first half, second half?

It’s difficult to know because right now inflation is going very low and therefore that gives the Central Bank further breathing space. And I have been running though basically because of oil prices which are starting to bounce back again, so they don’t have any -- the Central Bank has no rush to do it. But we’re certainly that if the core inflation keeps going down with a broad measures of inflation, they will be in a position to lower rates, so not very sure the exact timing probably second quarter on, not in the first Q. José Barria: And just finally very quickly, I’ve seen you guys are forecasting acceleration in growth next year or GDP growth relative to 2014, what does that imply for loans, do you expect loan growth to be higher than what you saw in 2014?

No, what we have seen maybe is a pickup in loan growth but probably it’s better there to expect some slowing down. We finished the year with growth of 10%-11% but because of the one-time increase in mortgaging which has led to tax fee. If you deduct that and you deduct the high inflation level that also fuels that the growth in U.S. loans next year as we stated in the conference growth of 8%-9% can be more reasonable. The economy today that there was a reading of the monthly GDP indicator that also is a very good bank and that’s why it was to jump. And that’s why we think 8% to 9% can be achieved. Tradition in Chile loans have been able to grow two times GDP growth, so if you add inflation then it will be growing 2.6%-02.7% times two plus inflation is very close to 8%-9%.

Thank you. And the next question is from the line of Saul Martínez from JPMorgan. Please go ahead. Saul Martínez: A couple of questions, I apologize if you already addressed some of these questions, I got on the call a little bit late. But first on the expenses which seem to have had a pretty big uptick just sequentially and quarter-on-quarter, can you comment on that and what your expectations are for costs going forward because part of the earnings thesis has been that cost control would remain in place and that that would help drive descent profitability? And then secondly just on a more normalized how you think about a more normalized ROE obviously the deflation, inflation will cause variations in reported ROE on a sequential or on a quarterly basis, but in the more normalized ROE scenario whether that be 2.5%-3% are you still comfortable that a 19%-20% ROE is feasible. When I look at this quarter it seems like there a lot of moving parts not just on inflation, on provisions, on your other OpEx expense line where you had some contingencies cost but it’s hard to kind of decipher how much is it you being conservative and how much is really core or reflects core results, can you -- how comfortable are you that through cycle inflation normalizing higher tax rates and all the moving parts that 19%-20% ROE is sort of the feasible base case to look that over the next couple of years?

Yes, well in terms of expenditures especially during the last quarter, we provisioned for bonuses and special prices given that the Bank in the last three or four years has been close to 20% of our annual remuneration are directly linked to bonuses and tied to performance and as a consequence of the strong year, we have booked more prices for because people are doing, we are doing an outstanding job, and that having fair for to share part with the team. So it shouldn’t be repeated and I would say that looking towards 2015, growth on an annualized basis of 5% to 6% are more reasonable not the level we saw in 2014 specially the end of 2014. And so this group has the culture of cost control and given that we have these tools, these are the enhancing tools, we think we can increase our efficiency and increase our performance simply by getting more revenue out of clients, more than by slashing cost, probably the cost side is very most of you have done, but on the revenue side by using the CRM, by using this new and enhanced growing models we think we can get a high profitability out of our a clients, think by knowing them a little bit better. In terms of ROE, it's a difficult question because up till now we have been hinting ROEs of 19%-20% adjusted by under normalized 3% inflation, we got that level both in 2015 and 2014. Going forward, we have some doubts about the expense of reductions, the using in that stated ROE from a medium-terms respecting in fact we kindly did that from an analyst from an intentional standpoint specially according the best that we see about to follow our shareholder is not that meaningful because although the Bank will be paying more taxes, you will receive a supporting just more credit and therefore your total tax payment which is at the end what we should really deduct from whatever you get it will change for foreigners and it is only for the changing for local investors. That’s why although the stated ROE could be lower from evolution standpoint, that shouldn’t be quite important for shareholders. So end of the story, we think that again if you take the new tax structure probably 20 it's a little bit too high, could be a little bit lower depending on what is the effective rate you use all-in to value the Bank. So, it's the calculation that we still do it’s comfortable but the recent story is that the Bank is doing well in the commercial side which at the end this just create value in apparent way.

Thank you. I would now like to turn the call over to Mr. Raimundo Monge for closing remarks.

Okay. 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.