Table of Contents

 

 

 

FORM 6-K
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Report of Foreign Private Issuer

 

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

 

For the month of April, 2019

 

Commission File Number 001-15266

 

BANK OF CHILE

 (Translation of registrant’s name into English)

 

Ahumada 251  
Santiago, Chile

 (Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F  x  Form 40-F  o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

 

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes  o  No  x

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-   

 

 

 


Table of Contents

 

BANCO DE CHILE
REPORT ON FORM 6-K

 

Attached Banco de Chile’s Consolidated Financial Statements with notes as of March 31, 2019.

 


Table of Contents

 

 


Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

 

(Free translation of consolidated financial statements originally issued in Spanish)

 

INDEX

 

I.

Interim Consolidated Statements of Financial Position

II.

Interim Consolidated Statements of Income

III.

Interim Consolidated Statements of Other Comprehensive Income

IV.

Interim Consolidated Statements of Changes in Equity

V.

Interim Consolidated Statements of Cash Flows

VI.

Notes to the Interim Consolidated Financial Statements

 

MCh$

=

Millions of Chilean pesos

ThUS$

=

Thousands of U.S. dollars

UF or CLF

=

Unidad de Fomento

 

 

(The UF is an inflation-indexed, Chilean peso denominated monetary unit set daily in advance on the basis of the previous month’s inflation rate).

Ch$ or CLP

=

Chilean pesos

US$ or USD

=

U.S. dollar

JPY

=

Japanese yen

EUR

=

Euro

HKD

=

Hong Kong dollar

CHF

=

Swiss Franc

 

 

 

IFRS

=

International Financial Reporting Standards

IAS

=

International Accounting Standards

RAN

=

Compilation of Standards of the Chilean Superintendency of Banks (“SBIF”)

IFRIC

=

International Financial Reporting Interpretations Committee

SIC

=

Standards Interpretation Committee

 


Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

 

INDEX

 

 

 

Page

 

 

Interim Consolidated Statement of Financial Position

1

Interim Consolidated Statements of Income

2

Interim Consolidated Statements of Other Comprehensive Income

3

Interim Consolidated Statement of Changes in Equity

4

Interim Consolidated Statements of Cash Flows

5

1.

Company information:

6

2.

Legal regulations, basis of preparation and other information:

7

3.

New Accounting Pronouncements:

10

4.

Changes in Accounting policies and Disclosures:

15

5.

Relevant Events:

16

6.

Business Segments:

17

7.

Cash and Cash Equivalents:

20

8.

Financial Assets Held-for-trading:

21

9.

Cash collateral on securities borrowed and reverse repurchase agreements:

22

10.

Derivative Instruments and Accounting Hedges:

24

11.

Loans and advances to Banks:

30

12.

Loans to Customers, net:

31

13.

Investment Securities:

36

14.

Investments in Other Companies:

38

15.

Intangible Assets:

40

16.

Fixed assets, leased assets and lease liabilities:

42

17.

Current Taxes and Deferred Taxes:

46

18.

Other Assets:

50

19.

Current accounts and Other Demand Deposits:

51

20.

Savings accounts and Time Deposits:

51

21.

Borrowings from Financial Institutions:

52

22.

Debt Issued:

53

23.

Other Financial Obligations:

56

24.

Provisions:

56

25.

Other Liabilities:

60

26.

Contingencies and Commitments:

61

27.

Equity:

66

28.

Interest Revenue and Expenses:

70

29.

Income and Expenses from Fees and Commissions:

72

30.

Net Financial Operating Income:

73

31.

Foreign Exchange Transactions, Net:

73

32.

Provisions for Loan Losses:

74

33.

Personnel Expenses:

75

34.

Administrative Expenses:

76

35.

Depreciation, Amortization and Impairment:

77

36.

Other Operating Income:

78

37.

Other Operating Expenses:

79

38.

Related Party Transactions:

80

39.

Fair Value of Financial Assets and Liabilities:

86

40.

Maturity of Assets and Liabilities:

99

41.

Subsequent Events:

101

 


Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

For the periods ended March 31, 2019 and December 31, 2018

(Free translation of interim consolidated financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

 

 

March

 

December

 

 

 

 

 

2019

 

2018

 

 

 

Notes

 

MCh$

 

MCh$

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

7

 

993,892

 

880,081

 

Transactions in the course of collection

 

7

 

824,271

 

580,333

 

Financial assets held-for-trading

 

8

 

1,913,981

 

1,745,366

 

Cash collateral on securities borrowed and reverse repurchase agreements

 

9

 

90,259

 

97,289

 

Derivative instruments

 

10

 

1,168,896

 

1,513,947

 

Loans and advances to banks

 

11

 

914,911

 

1,494,307

 

Loans to customers, net

 

12

 

27,556,290

 

27,307,223

 

Financial assets available-for-sale

 

13

 

1,312,347

 

1,043,440

 

Financial assets held-to-maturity

 

13

 

 

 

Investments in other companies

 

14

 

45,714

 

44,561

 

Intangible assets

 

15

 

53,025

 

52,061

 

Property and equipment

 

16

 

220,372

 

215,872

 

Leased assets

 

16

 

155,502

 

 

Current tax assets

 

17

 

524

 

677

 

Deferred tax assets

 

17

 

276,563

 

277,922

 

Other assets

 

18

 

565,812

 

673,380

 

TOTAL ASSETS

 

 

 

36,092,359

 

35,926,459

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current accounts and other demand deposits

 

19

 

9,600,304

 

9,584,488

 

Transactions in the course of payment

 

7

 

578,260

 

335,575

 

Cash collateral on securities lent and repurchase agreements

 

9

 

281,042

 

303,820

 

Savings accounts and time deposits

 

20

 

11,263,020

 

10,656,174

 

Derivative instruments

 

10

 

1,259,524

 

1,528,357

 

Borrowings from financial institutions

 

21

 

1,375,919

 

1,516,759

 

Debt issued

 

22

 

7,405,294

 

7,475,552

 

Other financial obligations

 

23

 

110,793

 

118,014

 

Lease liabilities

 

16

 

153,896

 

 

Current tax liabilities

 

17

 

30,670

 

20,924

 

Deferred tax liabilities

 

17

 

25

 

 

Provisions

 

24

 

399,679

 

670,119

 

Other liabilities

 

25

 

332,983

 

412,524

 

TOTAL LIABILITIES

 

 

 

32,791,409

 

32,622,306

 

 

 

 

 

 

 

 

 

EQUITY

 

27

 

 

 

 

 

Attributable to Bank’s Owners:

 

 

 

 

 

 

 

Capital

 

 

 

2,418,833

 

2,418,833

 

Reserves

 

 

 

703,453

 

617,597

 

Other comprehensive income

 

 

 

(32,140

)

(39,222

)

Retained earnings:

 

 

 

 

 

 

 

Retained earnings from previous years

 

 

 

170,188

 

17,481

 

Income for the period

 

 

 

101,537

 

594,872

 

Less:

 

 

 

 

 

 

 

Provision for minimum dividends

 

 

 

(60,922

)

(305,409

)

Subtotal

 

 

 

3,300,949

 

3,304,152

 

Non-controlling interests

 

 

 

1

 

1

 

TOTAL EQUITY

 

 

 

3,300,950

 

3,304,153

 

TOTAL LIABILITIES AND EQUITY

 

 

 

36,092,359

 

35,926,459

 

 

The accompanying notes 1 to 41 are an integral part of these interim consolidated financial statements

 

1


Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF INCOME

For the three-month ended March 31, 2019 and 2018

(Free translation of interim consolidated financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

 

 

March

 

March

 

 

 

 

 

2019

 

2018

 

 

 

Notes

 

MCh$

 

MCh$

 

Interest revenue

 

28

 

430,654

 

469,878

 

Interest expense

 

28

 

(129,684

)

(153,361

)

Net interest income

 

 

 

300,970

 

316,517

 

 

 

 

 

 

 

 

 

Income from fees and commissions

 

29

 

134,223

 

122,505

 

Expenses from fees and commissions

 

29

 

(30,813

)

(33,344

)

Net fees and commission income

 

 

 

103,410

 

89,161

 

 

 

 

 

 

 

 

 

Net financial operating income

 

30

 

8,566

 

2,106

 

Foreign exchange transactions, net

 

31

 

16,117

 

25,483

 

Other operating income

 

36

 

15,533

 

11,652

 

Total operating revenues

 

 

 

444,596

 

444,919

 

 

 

 

 

 

 

 

 

Provisions for loan losses

 

32

 

(89,156

)

(70,945

)

 

 

 

 

 

 

 

 

OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES

 

 

 

355,440

 

373,974

 

 

 

 

 

 

 

 

 

Personnel expenses

 

33

 

(113,555

)

(107,766

)

Administrative expenses

 

34

 

(78,994

)

(79,348

)

Depreciation and amortization

 

35

 

(17,203

)

(9,171

)

Impairment

 

35

 

(6

)

(11

)

Other operating expenses

 

37

 

(11,066

)

(7,951

)

 

 

 

 

 

 

 

 

TOTAL OPERATING EXPENSES

 

 

 

(220,824

)

(204,247

)

 

 

 

 

 

 

 

 

NET OPERATING INCOME

 

 

 

134,616

 

169,727

 

 

 

 

 

 

 

 

 

Income attributable to associates

 

14

 

1,110

 

1,157

 

Income before income tax

 

 

 

135,726

 

170,884

 

 

 

 

 

 

 

 

 

Income tax

 

17

 

(34,189

)

(28,233

)

 

 

 

 

 

 

 

 

NET INCOME FOR THE PERIOD

 

 

 

101,537

 

142,651

 

Attributable to:

 

 

 

 

 

 

 

Bank’s Owners

 

27

 

101,537

 

142,651

 

Non-controlling interests

 

 

 

 

 

 

 

 

 

 

Ch$

 

Ch$

 

Net income per share attributable to Bank’s Owners:

 

 

 

 

 

 

 

Basic net income per share

 

27

 

1.01

 

1.41

 

Diluted net income per share

 

27

 

1.01

 

1.41

 

 

The accompanying notes 1 to 41 are an integral part of these interim consolidated financial statements

 

2


Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF

OTHER COMPREHENSIVE INCOME

For the three-month ended March 31, 2019 and 2018

(Free translation of interim consolidated financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

 

 

March

 

March

 

 

 

 

 

2019

 

2018

 

 

 

Notes

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

NET INCOME FOR THE PERIOD

 

 

 

101,537

 

142,651

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gains (losses) on available-for-sale instruments valuation

 

13

 

8,836

 

(1,206

)

Net gains (losses) on derivatives held as cash flow hedges

 

10

 

889

 

(15,249

)

Subtotal Other comprehensive income before income taxes

 

 

 

9,725

 

(16,455

)

 

 

 

 

 

 

 

 

Income tax relating to the components of other comprehensive income that are reclassified in income for the period

 

 

 

(2,643

)

4,789

 

 

 

 

 

 

 

 

 

Total other comprehensive income items that will be reclassified subsequently to profit or loss

 

 

 

7,082

 

(11,666

)

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustment for defined benefit plans

 

24

 

 

 

 

 

 

 

 

 

 

 

Subtotal other comprehensive income before income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax relating to the components of other comprehensive income that will not be reclassified to income for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income items that will not be reclassified subsequently to profit or loss

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED COMPREHENSIVE INCOME FOR THE PERIOD

 

 

 

108,619

 

130,985

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Bank’s Owners

 

 

 

108,619

 

130,985

 

Non-controlling interests

 

 

 

 

 

 

The accompanying notes 1 to 41 are an integral part of these interim consolidated financial statements

 

3


Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the three-month ended March 31, 2019 and 2018

(Free translation of interim consolidated financial statements originally issued in Spanish)

(Expressed in millions of Chilean pesos)

 

 

 

 

 

 

 

Reserves

 

Other comprehensive income

 

Retained earnings

 

 

 

 

 

 

 

 

 

 

 

Paid-in
Capital

 

Other
reserves

 

Reserves
from
earnings

 

Unrealized
gains (losses)
on available-
for-sale

 

Derivatives
cash flow hedge

 

Income

 

Retained
earnings
from
previous
periods

 

Income
(losses) for
the period

 

Provision for
minimum
dividends

 

Attributable
to equity
holders of
the parent

 

Non-
controlling
interest

 

Total equity

 

 

 

Notes

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

Tax

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2017

 

 

 

2,271,401

 

32,053

 

531,135

 

1,851

 

(12,551

)

2,660

 

16,060

 

576,012

 

(312,907

)

3,105,714

 

1

 

3,105,715

 

Capitalization of retained earnings

 

 

 

147,432

 

 

 

 

 

 

 

(147,432

)

 

 

 

 

Retention (release) of profits according to bylaws

 

 

 

 

 

54,501

 

 

 

 

 

(54,501

)

 

 

 

 

Dividends distributions and paid

 

27

 

 

 

 

 

 

 

 

(374,079

)

312,907

 

(61,172

)

 

(61,172

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives cash flow hedge, net

 

27

 

 

 

 

 

(15,249

)

4,117

 

 

 

 

(11,132

)

 

(11,132

)

Valuation adjustment on available-for-sale instruments (net)

 

27

 

 

 

 

(1,206

)

 

672

 

 

 

 

(534

)

 

(534

)

Income for the period 2018

 

 

 

 

 

 

 

 

 

 

142,651

 

 

142,651

 

 

142,651

 

Provision for minimum dividends

 

 

 

 

 

 

 

 

 

 

 

(72,513

)

(72,513

)

 

(72,513

)

Balances as of March 31, 2018

 

 

 

2,418,833

 

32,053

 

585,636

 

645

 

(27,800

)

7,449

 

16,060

 

142,651

 

(72,513

)

3,103,014

 

1

 

3,103,015

 

Defined benefit plans adjustment

 

 

 

 

(92

)

 

 

 

 

 

 

 

(92

)

 

(92

)

Equity effect change in accounting policy

 

 

 

 

 

 

 

 

 

1,421

 

 

 

1,421

 

 

1,421

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives cash flow hedge, net

 

 

 

 

 

 

 

(15,694

)

4,237

 

 

 

 

(11,457

)

 

(11,457

)

Valuation adjustment on available-for-sale instruments

 

 

 

 

 

 

(10,581

)

 

2,522

 

 

 

 

(8,059

)

 

(8,059

)

Income for the period 2018

 

 

 

 

 

 

 

 

 

 

452,221

 

 

452,221

 

 

452,221

 

Provision for minimum dividends

 

 

 

 

 

 

 

 

 

 

 

(232,896

)

(232,896

)

 

(232,896

)

Balances as of December 31, 2018

 

 

 

2,418,833

 

31,961

 

585,636

 

(9,936

)

(43,494

)

14,208

 

17,481

 

594,872

 

(305,409

)

3,304,152

 

1

 

3,304,153

 

Retention of profits

 

 

 

 

 

 

 

 

 

 

152,705

 

(152,705

)

 

 

 

 

Retention (release) of profits according to bylaws

 

 

 

 

 

85,856

 

 

 

 

 

(85,856

)

 

 

 

 

Dividends distributions and paid

 

27

 

 

 

 

 

 

 

 

(356,311

)

305,409

 

(50,902

)

 

(50,902

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives cash flow hedge, net

 

27

 

 

 

 

 

889

 

(240

)

 

 

 

649

 

 

649

 

Valuation adjustment on available-for-sale instruments

 

27

 

 

 

 

8,836

 

 

(2,403

)

 

 

 

6,433

 

 

6,433

 

Equity effect change in accounting policy

 

 

 

 

 

 

 

 

 

2

 

 

 

2

 

 

2

 

Income for the period 2019

 

 

 

 

 

 

 

 

 

 

101,537

 

 

101,537

 

 

101,537

 

Provision for minimum dividends

 

27

 

 

 

 

 

 

 

 

 

(60,922

)

(60,922

)

 

(60,922

)

Balances as of March 31, 2019

 

 

 

2,418,833

 

31,961

 

671,492

 

(1,100

)

(42,605

)

11,565

 

170,188

 

101,537

 

(60,922

)

3,300,949

 

1

 

3,300,950

 

 

The accompanying notes 1 to 41 are an integral part of these interim consolidated financial statements

 

4


Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three-month ended March 31, 2019 and 2018

(Free translation of interim consolidated financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

 

 

March

 

March

 

 

 

 

 

2019

 

2018

 

 

 

Notes

 

MCh$

 

MCh$

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income for the period

 

 

 

101,537

 

142,651

 

Items that do not represent cash flows:

 

 

 

 

 

 

 

Depreciation and amortization

 

35

 

17,203

 

9,171

 

Impairment

 

35

 

6

 

11

 

Provision for loans and accounts receivable from customers and owed by banks

 

32

 

100,412

 

82,902

 

Provision of contingent loans

 

32

 

884

 

630

 

Fair value adjustment of financial assets held-for-trading

 

 

 

(1,029

)

(1,289

)

Changes in assets and liabilities by deferred taxes

 

17

 

(1,019

)

2,545

 

(Gain) loss attributable to investments in companies with significant influence, net

 

14

 

(1,110

)

(1,144

)

(Gain) loss from sales of assets received in lieu of payment,net

 

36

 

(4,503

)

(1,537

)

(Gain) loss on sales of property and equipment, net

 

36

 

(31

)

(3,536

)

Charge-offs of assets received in lieu of payment

 

37

 

2,623

 

776

 

Other charges (credits) to income that do not represent cash flows

 

 

 

2,669

 

2,275

 

Change in the exchange rate of assets and liabilities

 

 

 

(8,673

)

8,065

 

Net interest variation, readjustment and accrued fees on assets and liabilities

 

 

 

27,035

 

24,575

 

 

 

 

 

 

 

 

 

Changes in assets and liabilities that affect operating cash flows:

 

 

 

 

 

 

 

(Increase) decrease in loans and advances to banks, net

 

 

 

578,924

 

(28,609

)

(Increase) decrease in loans to customers

 

 

 

(413,306

)

(484,553

)

(Increase) decrease in financial assets held-for-trading, net

 

 

 

(78,625

)

129,256

 

(Increase) decrease in other assets and liabilities

 

 

 

85,193

 

(18,549

)

Increase (decrease) in current account and other demand deposits

 

 

 

16,786

 

(115,279

)

Increase (decrease) in payables from repurchase agreements and security lending

 

 

 

(11,677

)

55,324

 

Increase (decrease) in savings accounts and time deposits

 

 

 

602,676

 

297,479

 

Sale of assets received in lieu of payment or adjudicated

 

 

 

9,115

 

5,103

 

Total cash flows from operating activities

 

 

 

1,025,090

 

106,267

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

(Increase) decrease in financial assets available-for-sale, net

 

 

 

(264,952

)

94,170

 

Payments for lease agreements

 

16

 

(6,116

)

 

Purchases of property and equipment

 

16

 

(12,950

)

(2,522

)

Sales of property and equipment

 

 

 

31

 

67

 

Acquisition of intangible assets

 

15

 

(3,799

)

(5,187

)

Dividends received from investments in companies

 

 

 

 

13

 

Total cash flows from investing activities

 

 

 

(287,786

)

86,541

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Redemption of letters of credit

 

 

 

(981

)

(1,255

)

Issuance of bonds

 

22

 

281,884

 

557,947

 

Redemption of bonds

 

 

 

(316,050

)

(169,570

)

Dividends paid

 

27

 

(356,311

)

(374,079

)

Increase (decrease) in borrowings from foreign financial institutions

 

 

 

(141,254

)

(182,188

)

Increase (decrease) in other financial obligations

 

 

 

(6,596

)

14,372

 

Increase (decrease) in other obligations with Central Bank of Chile

 

 

 

 

(1

)

Other long-term borrowings

 

 

 

 

15

 

Payment of other long-term borrowings

 

 

 

(532

)

(847

)

Total cash flows from financing activities

 

 

 

(539,840

)

(155,606

)

 

 

 

 

 

 

 

 

TOTAL NET (NEGATIVE) POSITIVE CASH FLOWS FOR THE PERIOD

 

 

 

197,464

 

37,202

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes

 

 

 

8,673

 

(8,065

)

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

 

2,256,375

 

2,079,398

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

7

 

2,462,512

 

2,108,535

 

 

 

 

March

 

March

 

 

 

2019

 

2018

 

 

 

MCh$

 

MCh$

 

Operational Cash flow interest:

 

 

 

 

 

Interest received

 

489,275

 

452,877

 

Interest paid

 

(161,270

)

(111,785

)

 

The accompanying notes 1 to 41 are an integral part of these interim consolidated financial statements

 

5


Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

1.                           Company information:

 

Banco de Chile is authorized to operate as a commercial bank since September 17, 1996, being, in conformity with the stipulations of article 25 of Law No. 19,396, the legal continuation of Banco de Chile resulting from the merger of the Banco Nacional de Chile, Banco Agrícola and Banco de Valparaiso, which was constituted by public deed dated October 28, 1893, granted before the Notary Public of Santiago, Mr. Eduardo Reyes Lavalle, authorized by Supreme Decree of November 28, 1893.

 

Banco de Chile (or the “Bank”) is a Corporation organized under the laws of the Republic of Chile, regulated by the Superintendency of Banks and Financial Institutions (“SBIF” or “Superintendency”). Since 2001, it is subject to the supervision of the Securities and Exchange Commission of the United States of America (“SEC”), in consideration of the fact that the Bank is registered on the New York Stock Exchange (“NYSE”), through a program of American Depositary Receipt (“ADR”).

 

Banco de Chile offers a broad range of banking services to its customers, ranging from individuals to large corporations. The services are managed in the areas of corporations and large companies, medium and small companies and personal and consumer banking. Additionally, the Bank offers international as well as treasury banking services, in addition to those offered by subsidiaries that include securities brokerage, mutual fund and investment management, insurance brokerage, financial advisory services and securitization.

 

Banco de Chile’s legal address is Ahumada 251, Santiago, Chile and its website is www.bancochile.cl.

 

The Interim Consolidated Financial Statements of Banco de Chile, for the period ended March 31, 2019 were approved by the Directors on April 25, 2019.

 

6


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

2.                           Legal regulations, basis of preparation and other information:

 

(a)                       Legal regulations:

 

The General Banking Law empowers the Chilean Superintendency of Banks and Financial Institutions (“SBIF”) to issue accounting standards of general application for entities it supervises. The Corporations Law, in turn, requires following the generally accepted accounting principles.

 

Based on the aforementioned laws, banks should use the criteria provided by the Superintendency in accordance with the Compendium of Accounting Standards (“Compendium”), and any matter not addressed therein, as long as it does not contradict its instructions, should adhere to generally accepted accounting principles in technical standards issued by the Chilean Association of Accountants, that coincide with international accounting standards and international financial reporting standards agreed upon by the International Accounting Standards Board (“IASB”). Should there be discrepancies between these generally accepted accounting principles and the accounting criteria issued by the SBIF, the latter shall prevail.

 

(b)                       Basis of preparation:

 

(b.1)             These Interim Consolidated Financial Statements are presented according to Chapter C-2 of the Compendium of Accounting Standards, issued by the Superintendency of Banks and Financial Institutions (“SBIF”).

 

(b.2)             The following table details the entities in which the Bank has control and are part of this consolidated financial statements:

 

 

 

 

 

 

 

 

 

Interest Owned

 

 

 

 

 

 

 

 

 

Direct

 

Indirect

 

Total

 

 

 

 

 

 

 

 

 

March

 

December

 

March

 

December

 

March

 

December

 

 

 

 

 

 

 

Functional

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

RUT

 

Subsidiaries

 

Country

 

Currency

 

%

 

%

 

%

 

%

 

%

 

%

 

96,767,630-6

 

Banchile Administradora General de Fondos S.A.

 

Chile

 

Ch$

 

99.98

 

99.98

 

0.02

 

0.02

 

100.00

 

100.00

 

96,543,250-7

 

Banchile Asesoría Financiera S.A.

 

Chile

 

Ch$

 

99.96

 

99.96

 

 

 

99.96

 

99.96

 

77,191,070-K

 

Banchile Corredores de Seguros Ltda.

 

Chile

 

Ch$

 

99.83

 

99.83

 

0.17

 

0.17

 

100.00

 

100.00

 

96,571,220-8

 

Banchile Corredores de Bolsa S.A.

 

Chile

 

Ch$

 

99.70

 

99.70

 

0.30

 

0.30

 

100.00

 

100.00

 

96,932,010-K

 

Banchile Securitizadora S.A.

 

Chile

 

Ch$

 

99.01

 

99.01

 

0.99

 

0.99

 

100.00

 

100.00

 

96,645,790-2

 

Socofin S.A.

 

Chile

 

Ch$

 

99.00

 

99.00

 

1.00

 

1.00

 

100.00

 

100.00

 

 

7


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

2.                           Legal regulations, basis of preparation and other information, continued:

 

(c)                      Use of estimates and judgments:

 

Preparing the Interim Consolidated Financial Statements requires the Bank’s Management to make judgments, estimations and assumptions that affect the application of accounting policies and the valuation of assets, liabilities, income and expenses presented. Actual results could differ from these estimated amounts. These estimates refer to:

 

1.                           Provision for loan losses (Notes No. 11. No. 12 and No. 32);

2.                           Useful life of intangible and property and equipment (Notes No.15 and No.16);

3.                          Income taxes and deferred taxes (Note No. 17);

4.                          Provisions (Note No. 24);

5.                          Contingencies and Commitments (Note No. 26);

6.                          Fair value of financial assets and liabilities (Note No. 39).

 

Estimates and relevant assumptions are regularly reviewed by the management of the Bank, according to quantify certain assets, liabilities, gains, loss and commitments. Estimates reviewed are registered in income in the period that the estimate is reviewed.

 

As of March 31, there have been no significant changes in the estimates made.

 

(d)                     Seasonality or Cyclical Character of the Transactions of the Intermediate Period:

 

Given the activities to which the Bank and its subsidiaries are engaged, the transactions of the Bank do not have a cyclical or seasonal nature. For this reason, specific breakdowns in these notes to the Interim Consolidated Financial Statements for the three-month period ended March 31, 2019 are not included.

 

(e)                      Relative Importance:

 

In determining the information to be disclosed on the different items of the financial statements or other matters, the relative importance in relation to the financial statements of the period has been taken into account.

 

(f)                       Leases:

 

The Bank acts as a lessor

 

Assets that are leased to clients under contracts that substantially transfer all risks and property recognition, with or without legal title, are classified as a financial lease. When the retained assets are subject to a financial lease, the leased assets are no longer recognized in the financials instead an account receivable is recorded, which is equal to the minimum value of the lease payment, discounted at the interest rate of the lease. The initial negotiation expenses in a financial lease are incorporated into the account receivable through the discount rate applied to the lease. Lease income is recognized on lease terms based on a model that consistently reflects a periodic rate of return on the net investment of the lease.

 

8


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

2.                           Legal regulations, basis of preparation and other information, continued:

 

Assets that are leased to customers under contracts that do not transfer substantially all the risks and benefits of the property are classified as an operating lease.

 

The leased investment properties, under the operating lease modality, are included in “Other assets” in the statement of financial position and depreciation is determined on the book value of these assets, applying a proportion of the value in a systematic way on the economic use of the estimated useful life. Lease income is recognized on a straight-line basis over the lease period.

 

The Bank acts as a lessee

 

A contract is or contains a lease if it has the right to control the use of an identified asset for a period of time in exchange for a consideration.

 

At the start date of a lease, an asset is determined by right of use of the leased asset at cost, which comprises the amount of the initial measurement of the lease liability plus other disbursements made, except lease payments in the short term and those in which the underlying asset is of low value, which are recognized directly in results.

 

The amount of the lease liability is measured at the present value of future lease payments that have not been paid on that date, which are discounted using the incremental interest rate for loans received.

 

The right-of-use asset is measured using the cost model less accumulated depreciation and accumulated impairment losses. The depreciation of the right-of-use asset is recognized in the Income Statement based on the straight-line method of depreciation from the start date and until the end of the term of the lease.

 

After the start date, the lease liability is measured by reducing the carrying amount to reflect the lease payments made and the lease contract modifications.

 

(g)                     Reclassifications:

 

There have not been significant reclassifications at the end of this period 2019.

 

9


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

3.                           New Accounting Pronouncements:

 

3.1 Standards approved and/or modified by the International Accounting Standards Board (IASB) and by the Superintendency of Banks and Financial Institutions (SBIF):

 

3.1.1 Standards and interpretations that have been adopted in these Consolidated Financial Statements.

 

As of the date of issuance of these Interim Consolidated Financial Statements, the new accounting pronouncements issued by both the International Accounting Standards Board and the Superintendency of Banks and Financial Institutions, which have been adopted by the Bank and its subsidiaries, are detailed below:

 

Accounting standards issued by IASB.

 

IFRS 16 Leases.

 

On January 2016 was issued IFRS 16, which has as purpose to establish principles to the recognition, measurement, presentation and disclosure of lease contracts from the point of view of the lessee and lessor.

 

This new rule does not differ significantly from IAS 17 Leases that precedes it, related to the accounting treatment for the lessor. However, related to the lessee, the new rule requires the recognition of assets and liabilities for most lease contracts.

 

The Bank and its subsidiaries, for purposes of the initial application of the standard, took the option to recognize the cumulative effect on the initial adoption date (January 1, 2019), not expressing comparative information, recording an asset for right of use for an amount equal to the lease liability for an amount of Ch$144,529 million, this amount was determined according to the present value of the remaining lease payments, discounted using the financing rate.

 

IFRIC 23 Uncertainty over Income Tax Treatments.

 

In June 2017, the IASB published IFRIC 23, which clarifies the application of the recognition and measurement criteria required by IAS 12 Income Taxes when there is uncertainty about tax treatments.

 

This modification had no impact on the Banco de Chile and its subsidiaries.

 

IAS 28 Investments in associates and joint ventures and IFRS 9 Financial instruments.

 

On October 2017, the IASB published the amendments to IFRS 9 Financial Instruments and IAS 28 Investments in Associated Entities and Joint Ventures.

 

The amendments to IFRS 9 allow entities to measure financial assets, prepaid with negative compensation at amortized cost or fair value, through other comprehensive income if a specific condition is met, instead of at fair value with effect on results.

 

10


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

3.                           New Accounting Pronouncements, continued:

 

Regarding IAS 28, the amendments clarify that entities must account for long-term results in an associate or joint venture, to which the equity method is not applied, using IFRS 9.

 

The IASB also released an example that illustrates how companies should apply the requirements of IFRS 9 and IAS 28 to long-term interests in an associated entity or joint venture.

 

This modification had no impact for Banco de Chile and its subsidiaries.

 

Annual improvements to IFRS.

 

On December 2017, the IASB issued the Annual Improvements to IFRS Cycle 2015-2017, which includes amendments to the following regulations:

 

· IFRS 3 Business Combinations. Interests previously held in a joint operation.

 

The amendment provides additional guidance for applying the procurement method to particular types of business combinations.

 

The amendment states that when a party to a joint arrangement obtains control of a business, which is a joint arrangement and had rights over the assets and liabilities for the liabilities related to this joint arrangement, immediately before the acquisition date, the transaction it is a business combination achieved in stages.

 

Therefore, the acquirer will apply the requirements for a business combination achieved in stages, including re-measuring its previously held interest in the joint operation. By doing so, the acquirer will re-measure its total value that it previously had in the joint operation.

 

This modification had no impact for Banco de Chile and its subsidiaries.

 

· IFRS 11 Joint Arrangements.

 

The amendments to IFRS 11 relate to the accounting for acquisitions of interests in Joint Agreements.

 

The amendment establishes that a party that participates, but does not have control, in a joint agreement, can obtain control of the joint agreement. Given the above, the activity of the joint agreement would constitute a Business Combination as defined in IFRS 3, in such cases; the interests previously held in the joint agreement are not remeasured.

 

This modification had no impact for Banco de Chile and its subsidiaries.

 

11


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

3.                           New Accounting Pronouncements, continued:

 

· IAS 23 Costs for loans. Costs for loans that can be capitalized.

 

The amendment to the standard is intended to clarify that, when an asset is available for use or sale, an entity will treat any outstanding loan taken specifically to obtain said asset, as part of the funds it has taken as current loans, from that moment on the interest will not be included as part of the cost of the asset.

 

This modification had no impact for Banco de Chile and its subsidiaries.

 

· IAS 19 Employee Benefits.

 

On February 2018 the IASB issued amendments to IAS 19 “Employee Benefits”, which relate to:

 

· If there is a modification, reduction or liquidation of a plan, it is now mandatory that the current service cost and net interest for the period after the new measurement be determined using the assumptions used for the new measurement.

 

· In addition, amendments have been included to clarify the effect of a modification, reduction or liquidation of a plan on the requirements with respect to the asset roof.

 

This modification had no impact for Banco de Chile and its subsidiaries.

 

Accounting standards issued by the Superintendency of Banks and Financial Institutions.

 

· Circular No.3,645.

 

On January 31, 2019, the SBIF published this circular, which introduces changes to the Compendium of Accounting Standards in order to apply the criteria defined in IFRS 16.

 

The main changes are for the valuation for the right to use of assets under lease being applied as a measurement after initial recognition, the cost methodology less accumulated depreciation / amortization and accumulated impairment.

 

In the statement of financial position are introduced the items “Leased assets” and “lease liabilities”, which also modify the Notes “Fixed assets” and “Leased assets and lease liabilities”.

 

Additionally, banks and their subsidiaries must record any effect due to the first application of this standard in the equity item “Retained earnings from previous periods”.

 

Banco de Chile and its subsidiaries have incorporated the amendments established in these Consolidated Interim Financial Statements.

 

12


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

3.                           New Accounting Pronouncements, continued:

 

3.1.2 New standards and interpretations that have been issued but its date of application have not yet come into force:

 

The following is a summary of new standards, interpretations and improvements to the International Financial Reporting Standards issued by the International Accounting Standards Board and Superintendency of Banks and Financial Institutions that are not yet effective as of March 31, 2019, are detailed below:

 

IAS 28 Investments in Associates and Join Venture and IFRS 10 - Consolidated Financial Statements.

 

In September 2014, the IASB issued this amendment, which clarifies the scope of recognized gains and losses in a transaction involving an associate or joint venture, and this depends on whether the asset sold or contribution is a business. Therefore, IASB concluded that all of the profit or loss should be recognized against loss of control of a business. Likewise, gains or losses resulting from the sale or contribution of a subsidiary that is not a business (definition of IFRS 3) to an associate or joint venture should be recognized only to the extent of unrelated interests in the associate or joint venture.

 

During December 2015 the IASB agreed that the amendments should apply in the future, allowing its immediate application.

 

This amendment will not impact on the Interim Consolidated Financial Statements of Banco de Chile and its subsidiaries.

 

Conceptual Framework.

 

On March 29, 2018, the IASB issued a “Reviewed” Conceptual Framework. Changes to the Conceptual Framework may affect the application of IFRS when no rule applies to a particular transaction or event.

 

The Conceptual Framework introduces mainly the following improvements:

 

·             It incorporates some new concepts of measurement, presentation and disclosure and derecognition of assets and liabilities in the Financial Statements.

 

·             Provides updated definitions of assets, liabilities and includes criteria for the recognition of assets and liabilities in the financial statements.

 

·             Clarifies some important concepts such as background on form, prudential criteria and measurement of uncertainty.

 

The Conceptual Framework enters into force for periods beginning on January 1, 2020. Early adoption is permitted.

 

13


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

3.                           New Accounting Pronouncements, continued:

 

· IFRS 3 Business Combinations. Definition of a Business.

 

The amendments clarify the definition of business, with the objective of helping entities determine whether a transaction should be accounted for as a business combination or as the acquisition of an asset.

 

(a)         clarify that, to be considered a business, an acquired set of activities and assets must include, as a minimum, an input and a substantive process that together contribute significantly to the ability to produce outputs;

 

(b)         eliminate the assessment of whether market participants can substitute missing processes or inputs and continue to produce outputs;

 

(c)          add guides and illustrative examples to help entities assess whether a substantial process has been acquired;

 

(d)         restrict definitions of a business or products by focusing on goods and services provided to clients and eliminate reference to the ability of reducing costs; and

 

(e)          add an optional concentration test that allows a simplified assessment of whether an acquired set of activities and businesses acquired are not business.

 

Companies are required to apply the modified definition of a business to acquisitions made from January 1, 2020. Early application is allowed.

 

This amendment has no impact on the Interim Consolidated Financial Statements of Banco de Chile and its subsidiaries.

 

· IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Definition of Materiality or relative importance.

 

The IASB issued changes to IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, to clarify the definition of materiality and align these standards with the Revised Conceptual Framework issued in March 2018, to facilitate companies to make materiality judgments.

 

Under the old definition omissions or misrepresentations of elements are important if they could, individually or collectively, influence the economic decisions that users make on the basis of financial statements (IAS 1 Presentation of Financial Statements).

 

The new definition states that information is material if the omission, distortion or concealment of the information can reasonably be expected to influence decisions that primary users of financial statements of general purpose make on the basis of those financial statements, which provide financial information about a specific reporting entity.

 

The date of application of these amendments is January 1, 2020. Early application is allowed.

 

This amendment has no impact on the Interim Consolidated Financial Statements of Banco de Chile and its subsidiaries.

 

14


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

3.                           New Accounting Pronouncements, continued:

 

Accounting standards issued by the Superintendency of Banks and Financial Institutions.

 

· Circular N°3,638.

 

On July 6, 2018, the SBIF published amendments to the standards contained in Chapter B-1 “Provisions for Credit Risk” of the Compendium of Accounting Standards, which incorporates a standard model for the estimation of provisions for credit risk of the commercial portfolio of group analysis.

 

The proposed methods and risk factors considered are the following:

 

·             Commercial Leasing Portfolio: considers default, the type of asset in leasing (real estate or non-real estate) and the current value over value of the asset of the operation.

 

·             Student Portfolio: considers the type of loan granted, the enforceability of the payment and the default that it presents, in case the loan is required.

 

·             Generic Commercial Portfolio: considers default and the existence of real guarantees that guarantee the placement. In the case of guarantees, the relationship between the placement and the value of the security right that covers it is considered.

 

According to the SBIF, the three standardized methods included in the model will constitute a prudential floor for internal methods currently used by the industry.

 

On January 31, 2019, the SBIF supplemented said instructions with the publication of Circular No. 3,647, with the purpose of recognizing the mitigating effect of the credit risk represented by the assignor’s responsibility in the factoring operations, a particular factor is introduced for the component “Loss Given Default” (hereinafter “LGD”) of the standard method for the commercial portfolio of group analysis, for factoring provisions.

 

The new standards will come into force in July 2019.

 

The adoption of this standard will not have material impacts on the Consolidated Financial Statements of Banco de Chile and its subsidiaries.

 

4.                            Changes in Accounting policies and Disclosures:

 

The accounting policies adopted in the preparation of this Consolidated Interim Financial Statements are consistent with those used in the preparation of the annual Consolidated Financial Statements for the year ended December 31, 2018, except for the adoption of new regulations in force at 1 January 2019. See Note No. 3 “Recent Accounting Pronouncements”.

 

15


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

5.                                      Relevant Events:

 

(a)         On January 18, 2019, the subsidiary Banchile Corredores de Bolsa S.A. informed that in the Ordinary Session held that day, the Board became aware and accepted the resignation presented by Mr. Roberto Serwaczak Slowinski to his position as Director of the company.

 

(b)         On January 24, 2019 in the Ordinary Session No. BCH 2,895, the Board of Directors of Banco de Chile agreed to convene an Ordinary Meeting of Shareholders for March 28, 2019, with the purpose of proposing, among other matters, the distribution of the dividend No. 207 of $ 3.52723589646 for each share, corresponding to 70% of the distributable liquid profit, retaining the remaining 30%.

 

(c)          On January 28, 2019, Banco de Chile (the “Bank”) and its subsidiary Banchile Corredores de Seguros Ltda. (“Banchile”) informed that they have entered into a strategic alliance with the insurance companies Chubb Seguros Chile S.A. and Chubb Seguros de Vida Chile S.A. (together the “Companies”). The framework of the strategic alliance establishes the general terms and conditions pursuant to which the Bank will grant, for a period of 15 years, exclusive access to the Companies to provide insurances to clients via face-to-face and digital channels of the Bank, through Banchile (the “Agreement”), subject to the exceptions agreed upon by the parties.

 

The amounts involved include a payment to the Bank of UF 5,367,057 on the date of the signing of the contracts listed below, in accordance with the terms and conditions thereof, and annual payments subject to compliance with insurance sales objectives during the agreement lifetime.

 

The subscription of the contracts referred in the Agreement is subject to the condition that the National Economic Prosecutor’s Office approve the execution of all of them, for which purpose the parties have proceeded to notify the operation in accordance with Chapter IV of the Decree Law No. 211.

 

(d)         On March 14, 2019 in the Ordinary session No. 2,897, the Board of Directors of Banco de Chile agreed to establish a provision for minimum dividends of 60% of the net distributable profit that will be generated during the course of the year. For these purposes, the net distributable profit is defined as net income for the corresponding period minus the value effect of the monetary unit of paid capital and reserves, as a result of any change in the Consumer Price Index (CPI) between to the month prior to the current month and the month of November of the previous year.

 

(e)          On March 28, 2019 at the Ordinary Shareholder’s Meeting, our shareholders approved the distribution of the dividend No. 207 of $3.52723589646 per share, to be charged to the net distributable income obtained during the fiscal year 2018. Additionally, the shareholders agreed to withhold of 30% of the distributable net profit for the year 2018.

 

Additionally, the shareholders approved the definite appointment of Mr. Julio Santiago Figueroa as Director of Banco de Chile, a position which he will hold until the next renewal of the Board of Directors.

 

16


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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

6.                           Business Segments:

 

For management purposes, the Bank is organized into four segments, which are defined based on the types of products and services offered, and the type of client in which focuses as described below:

 

Retail:                                                 This segment focuses on individuals and small and medium-sized companies (SMEs) with annual sales up to UF 70,000, where the product offering focuses primarily on consumer loans, commercial loans, checking accounts, credit cards, credit lines and mortgage loans.

 

Wholesale:                         This segment focused on corporate clients and large companies, whose annual revenue exceed UF 70,000, where the product offering focuses primarily on commercial loans, checking accounts and liquidity management services, debt instruments, foreign trade, derivative contracts and leases.

 

Treasury:                                 This segment includes the associated revenues to the management of the investment portfolio and the business of financial transactions and currency trading.

 

Transactions with customers carried out by the Treasury are reflected in the respective aforementioned segments. These products are highly transaction-focused and include foreign exchange transactions, derivatives and financial instruments in general, among others.

 

Subsidiaries:                 Corresponds to companies and corporations controlled by the Bank, though its management is related to the segments mentioned previously, the income is obtained individually by the respective subsidiary. The companies that comprise this segment are:

 

Entity

 

· Banchile Administradora General de Fondos S.A.

· Banchile Asesoría Financiera S.A.

· Banchile Corredores de Seguros Ltda.

· Banchile Corredores de Bolsa S.A.

· Banchile Securitizadora S.A.

· Socofin S.A.

 

17


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

6.                           Business Segments, continued:

 

The financial information used to measure the performance of the Bank’s business segments is not comparable with similar information from other financial institutions because each institution relies on its own definitions. The accounting policies applied to the segments is the same as those described in the summary of accounting principles. The Bank obtains the majority of the results for: interest, indexation and commissions and financial operations and changes, discounting provisions for credit risk and operating expenses. Management is mainly based on these concepts to evaluate the performance of the segments and make decisions about the goals and allocations of resources of each unit. Although the results of the segments reconcile with those of the Bank at the total level, this is not necessarily the case in terms of the different concepts, given that management is measured and controlled individually and not on a consolidated basis, applying the following criteria:

 

·                                The net interest margin of loans and deposits is obtained aggregating the net financial margins of each individual operation of credit and uptake made by the bank. For these purposes, the volume of each operation and its contribution margin are considered, which in turn corresponds to the difference between the effective rate of the customer and the internal transfer price established according to the term and currency of each operation. Additionally, the net margin includes the result of interest and indexation from the accounting hedges.

 

·                                The capital and its financial impacts on outcome have been assigned to each segment based on the risk-weighted assets.

 

·                                Operational expenses are reflected at the level of the different functional areas of the Bank. The allocation of expenses from functional areas to business segments is done using different allocation criteria, at the level of the different concepts and expense items.

 

Taxes are managed at a corporate level and are not allocated to business segments.

 

For the periods ended March 31, 2019 and 2018, there was no income from transactions with a customer or counterparty that accounted for 10% or more of the Bank’s total revenues.

 

18


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

6.                           Business Segments, continued:

 

The following table presents the income by segment for the periods ended March, 2019 and 2018 for each of the segments defined above:

 

 

 

Retail

 

Wholesale

 

Treasury

 

Subsidiaries

 

Subtotal

 

Consolidation
adjustment

 

Total

 

 

 

March

 

March

 

March

 

March

 

March

 

March

 

March

 

March

 

March

 

March

 

March

 

March

 

March

 

March

 

 

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

 

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

231,023

 

235,594

 

77,737

 

83,722

 

(6,827

)

(2,176

)

(1,698

)

(1,329

)

300,235

 

315,811

 

735

 

706

 

300,970

 

316,517

 

Net commissions income (loss)

 

57,408

 

46,918

 

12,632

 

11,183

 

(720

)

(1,028

)

36,628

 

35,306

 

105,948

 

92,379

 

(2,538

)

(3,218

)

103,410

 

89,161

 

Other operating income

 

9,877

 

8,165

 

11,659

 

10,014

 

9,890

 

14,896

 

10,218

 

7,563

 

41,644

 

40,638

 

(1,428

)

(1,397

)

40,216

 

39,241

 

Total operating revenue

 

298,308

 

290,677

 

102,028

 

104,919

 

2,343

 

11,692

 

45,148

 

41,540

 

447,827

 

448,828

 

(3,231

)

(3,909

)

444,596

 

444,919

 

Provision for loan losses

 

(84,567

)

(65,964

)

(4,559

)

(5,066

)

 

 

(30

)

85

 

(89,156

)

(70,945

)

 

 

(89,156

)

(70,945

)

Depreciation and amortization

 

(14,236

)

(7,201

)

(1,453

)

(1,202

)

(26

)

(23

)

(1,488

)

(745

)

(17,203

)

(9,171

)

 

 

(17,203

)

(9,171

)

Other operating expenses

 

(142,455

)

(134,096

)

(38,214

)

(37,913

)

(1,236

)

(1,308

)

(24,947

)

(25,668

)

(206,852

)

(198,985

)

3,231

 

3,909

 

(203,621

)

(195,076

)

Income attributable to associates

 

949

 

993

 

88

 

92

 

51

 

53

 

22

 

19

 

1,110

 

1,157

 

 

 

1,110

 

1,157

 

Income before income taxes

 

57,999

 

84,409

 

57,890

 

60,830

 

1,132

 

10,414

 

18,705

 

15,231

 

135,726

 

170,884

 

 

 

135,726

 

170,884

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,189

)

(28,233

)

Income after income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101,537

 

142,651

 

 

The following table presents assets and liabilities of the periods ended March 31, 2019 and December 31, 2018 by each segment defined above:

 

 

 

Retail

 

Wholesale

 

Treasury

 

Subsidiaries

 

Subtotal

 

Consolidation
adjustment

 

Total

 

 

 

March

 

December

 

March

 

December

 

March

 

December

 

March

 

December

 

March

 

December

 

March

 

December

 

March

 

December

 

 

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

 

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current and deferred taxes

 

18,524,067

 

16,425,068

 

10,735,490

 

10,592,117

 

6,203,601

 

8,093,850

 

832,395

 

925,440

 

36,295,553

 

36,036,475

 

(480,281

)

(388,615

)

35,815,272

 

35,647,860

 

Total assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

277,087

 

278,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36,092,359

 

35,926,459

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current and deferred taxes

 

12,061,472

 

10,369,534

 

10,157,072

 

9,873,018

 

10,332,374

 

11,982,709

 

690,077

 

764,736

 

33,240,995

 

32,989,997

 

(480,281

)

(388,615

)

32,760,714

 

32,601,382

 

Total liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,695

 

20,924

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,791,409

 

32,622,306

 

 

19


Table of Contents

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of interim consolidated financial statements originally issued in Spanish)

 


 

7.                           Cash and Cash Equivalents:

 

(a)                       The detail of the balances included under cash and cash equivalents and their reconciliation with the statement of cash flows at the end of each period are detailed as follows:

 

 

 

March

 

December

 

 

 

2019

 

2018

 

 

 

MCh$

 

MCh$

 

 

 

 

 

 

 

Cash and due from banks:

 

 

 

 

 

Cash (*)

 

745,703

 

624,862

 

Deposit in Chilean Central Bank (*)

 

92,552

 

121,807

 

Deposits in other domestic banks

 

8,339

 

26,698

 

Deposits abroad