Good day, ladies and gentlemen, and welcome to the Banco Santander-Chile First Quarter 2017 Earnings Conference Call. At this time, all phone participants are in a listen-only mode. [Operator Instructions] Later, we'll conduct a question-and-answer session and instructions will follow at that time. I would now like to introduce your host for today's conference to Mr. Raimundo Monge, Director of Strategic Planning. Please go ahead.

Thank you, very much and good morning, everybody. Welcome to Banco Santander-Chile’s first quarter 2017 results, webcast and conference call. My name is Raimundo Monge, Director of Strategic Planning, and I’m joined today by Emiliano Muratore, our CFO; and Robert Moreno, our Manager of Investor Relations. Thank you for attending today’s conference call in which we will discuss our performance in the first quarter, which is starting to reflect the thorough execution of our strategy as we see throughout the call. First of all, let us start our call with a brief update of the outlook for Chilean economy. In the quarter, we had seen mix signals on the macro front. The year started a little lower than expected even though towards the end of the quarter economic activity began to gain momentum especially driven by the external sector. For this reason we have not significantly modified our economic outlook for 2017. We're expecting GDP growth of around 1.8% to 2% this year, a little bit head of 2016. We have also included our forecast for GDP growth in 2018 at 2.7% and 3% in 2019. Unemployment continues to be resilient even though job creation has not been of the highest quality. After a slow start, inflation expectations rebounded and we are expecting a U.S. inflation rate of 2.7% in 2017 similar to the level reached in 2016. Therefore inflation should not longer be a negative factor on the bank margins going forward. The central bank has been easing its monetary policy, rates cut have been 50 basis point in the quarter and an additional 25 basis points in April, these also brightens the outlook for margins as liability repriced quicker than loans. Consumer expectations are improving which is also another positive sign to the economy - should that the…

[Operator Instructions] Our first question comes from the line of Guilherme Costa with ‎Itaú.

Hi, good morning guys. This is Guilherme Costa from Itaú BBA. First of all congratulations on the results and thank you for the opportunity. My first question is about your coverage ratio, I’d like to ask you how comfortable you are with your current coverage ratio, I remember from the last conference call you mentioned that we were probably going to see contractions in the coverage ratio throughout 2017 but given this contraction we have already seen in the first Q, due to expect to see further contractions on the coverage ratio going forward and then I have my second question?

Okay. In terms of coverage ratio as we’ve been saying, the rise we saw in the last two years or so was a combination of more demanding a provision and guideline set by the superintendence of banks our regulator. And secondly that we we're trying to get rid of our exposure to the very low end by provisioning and trying to get rid of that exposure from our profit and losses point of view where we have seen to some extent this quarter in part is because to seasonality given that the first quarter in the thousand hemisphere is holiday period, people tend to be a little bit less update in terms the pain. But also that according to our predictions, clients that were expected to have problems effectively have faced a problem and as a consequence the non-performing loans have risen but that was already taking care by the excess provision or the anticipated provisioning that we have done last year especially and the year before to some extent as well. So we foresee that our coverage ratio should be moving between 130% and 140% basically because we already anticipate a part of that - the duration in the low end. But it shouldn't be coming much lower than that given that some of the provisions that we have, have nothing to do with the non-performing levels are more concerned about future provisioning or future regulations that is moving in line or bottle free which allows internal models to predict the falls and provisioning level. So the level should be higher than historically but probably has already peaked.

Okay, perfect. Thank you. And regarding the cost of risk, I just remember do you said that you expect the cost of risk between 1.1 and 1.2 for 2017, I’m asking this because when we see your provisions we can say that provisions declined a lot quarter-over-quarter both the provisions for the consumer segment has increased somewhat. Do you expect that possible the duration in the consumer loans could lead to port revision in your cost of risk guidance or are you comfortable with the provisions you have right now?

When we talk about provisions, we are actually combining three lines. One is provisions, the other is charge off, and the other is recoveries. So the favor is a net favor. That rise in provision is a combination of the three elements and each linked to elements such as the fact that this sale especially low end consumers will start facing difficulties, but you have already taken care of that. So you finance to some extent the charge off release in provision previously said and then the other element is seasonality, which is the lower you go, the more the chances of not being paying on time. That usually happens in the first quarter, happens to the rest of the market as well. So we foresee that in the second quarter, the situation should normalize. All in, as long as the job market, especially the people that work and their salary and their contract that a theory going further we don’t foresee a greater deterioration in asset quality conditions because remember that we have been moving to the upper third of the working population, which shouldn’t have big difficulties especially because the macro-conditions should be similar to 2016 or slightly better this year. So of course, it’s a concern and we’ve been a retail bank. Of course, you have a more risk when the macro-conditions deteriorate, but to date the kind of the central scenario that most economies give us is that the macro conditions will be similar or a little bit better than what we saw last year.

Okay, perfect. Thank you.

[Operator Instructions] Our next question comes from the line of Sebastian Gallego with Credicorp Capital.

Good morning everyone. Thanks for the opportunity. I have two questions. Could you comment on the management changes that you’re expecting and as a result you’ll be recording some severance expenses? And the second question is regarding fees. We’re seeing a very good performance on fees and I was just wondering if that is sustainable and is that kind of growth should be seen during the rest of 2017? Thank you.

In terms of the management changes, they are very much in the line of what we did last year. There’ve been some very profound changes both in the regulation and in the consumer behavior and in just the way the bank are run and people expect the banks to be behaving. That means that you have to do every once in a while, restructuration to take into account that situation. Last year we did it and very rapidly our year-on-year growth rate slowed down very quickly as you get rid of random positions etcetera. This year we foresee something in the same line and that’s why as we claim in our report, the idea is to do it once and then sustain cost growth, that could be lower than our previous forecast that we were talking about cost growth within 4% to 5% could be lower than that. 3%, 4% or even lower. So in line of inflation -- a little bit ahead of inflation. So it’s simply a way to reflect that the change in business conditions, we need to act and that’s it. In terms of fees, this first quarterly probably overstayed our year-on-year growth rate in part because we had very good results in our wholesale unit, which not necessarily you can repeat it every single quarter. In retail, it’s more recurring because they’re ready to use. Going forward, as we’ve stated in previous calls, the best kind of correlation is between loyal customers and fee growth, besides that we are growing between 8% and 9% more or less in the most relevant segment, make us believe that fees in a kind of moving average basis should be growing around deadline.

All right. And if you allow me just one additional question on branches and the Work/Cafés. Could you provide us a guidance on what you expect to close the regular or standard branches? And how you expect to increase the Work/Café?

The Work/Café are expected to close in around 20 by the end of this year. In terms of absolute number of branches to be closed, it’s a little bit tricky because what you try to do is on a case by case basis try to see whether you have enough surface to merge two branches that are close by under light. So it’s a little bit more difficult. There’s no specific target to close. But of course, the process of changing format and the process of kind of alienating of what our clients are expecting is what drives that. So the more transactions that are done outside the branches, the more clients prefer to do things, as to obligations in the website or mobile, there’s no room to close branches. So it’s a little bit the other way around where the clients are requesting what we providing branches is what leads the process. So it’s difficult to give a hard favor. But the thing that is easier to evaluate is the average surface. And therefore, the average cost of running the branch network definitely will come down given that more and more of a space in the branch is dedicated to commercial activities. And as a consequence, where you're getting REIT is basically by coffees, tellers, and sales and all the supporting areas that operate in a branch. So the extreme case is the Work/Café branches where they simply have no bulk office, no physical human tellers. And as a consequence, 70% of the surface is dedicated to sales and other sales activity. So we think that we will be streamlining our branch network especially in terms of cost going forward. But I don’t feel that we have an accurate number of how many points we’ll be closing.

Thank you so much. Very strong result.

I’m not showing any further questions at this time.

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.