Corporate Presentation Investor Relations September 2012
Chilean Economy and Financial System
Why invest in Chile? A low risk, open and diversified economy 3 Chile is the highest rated country in Latin America Moody s S&P s Fitch As a result of: Chile Sovereign Long-term Rating Aa3/Stable A+/Positive A+/Stable Conservative macroeconomic policy Countercyclical fiscal policy Strong institutional foundation Large international reserves Strong resilience to recent international events An open and diversified economy 20% The highest number of free trade agreements: 58 countries Foreign Trade Distribution 17% 5% Asia 20% 38% (% as of December 2011) Latin America North America Europe Rest Gross Domestic Product Distribution (Avg. 2008-2011 under 2008 prices) Services 17.9% Manufacturing 10.8% Retail, Restaurants, Hotels 10.0% Construction 7.0% Mining 13.4% Agriculture & Forestry 2.8%
Why invest in Chile? Solid fundamentals and important growth opportunities 4 Solid Fundamentals Chilean Structural Surplus Rule, permits accumulation of reserves during years of extraordinary revenues Total reserves of 26% of GDP Low government debt in comparison to other countries Strong Recovery after financial crisis Growth Opportunities GDP per Capita in Chile: GDP per capita (ppp) 2011 ( 000 USD) Chile Mexico Brazil Colombia Peru 17.2 14.6 11.8 10.2 10.0 Source: International Monetary Fund (IMF) 2011 GDP Evolution by Country: Total Gov. Debt (Debt / GDP) 11% 11% 9% 6% International Reserves (Reserves / GDP) 28% 26% 20% 19% 18% 15% 13% 12% 6.1 6.0 4.8 5.5 3.9 3.7 7.5 2.7 1.7 5.9 4.0 4.3 8.8 6.9 5.9 2009 2010 2011 Jun-12 7% 7% 10% 11% 2009 2010 2011 Ago-12 Sovereign Funds Central Bank Reserves 2010 2011 2012e Source: Chilean Central Bank, IMF, Consensus Forecast
Chilean Economy Recent Performance 5 Gross Domestic Product Consumption Investment Rate (Real Growth Rate, %) (Real Growth Rate, %) (Investment / GDP, %) Local economy achieved an important GDP growth in 2011 of 6%, despite the international tensions in the developed economies. As of Sep-12 data shows a growth which still remains above 5%. The positive evolution of employment and real wage has increased the purchasing power of families maintaining the strong momentum of private consumption. During 2011, investment grew by 18% YoY, steered by Construction and Machinery increasing its relative weight over GDP. This growth responds to positives expectations of enterprises. 9.0% 7.9% 3.3% 6.1% 6.0% 5.0% LT GDP 5.0% 4.4% 5.2% 25% 22% 24% 26% 27% -1.0% 0.8% 2008 2009 2010 2011 2012E 2008 2009 2010 2011 2012E 2008 2009 2010 2011 2012E Source: Chilean Central Bank under 2008 prices
Chilean Economy Recent years Performance 6 4.5% 5.3% Inflation and Monetary Policy Interest Rate (Real Growth Rate, %) 6.0% 8.3% 7.8% 7.1% 3.7% 2.6% 0.5% 3.0% 4.4% 2.0% -1.4% 2005 2006 2007 2008 2009 2010 2011 2012e IPC CPI Var. 12mths Tasa Monetary Política Policy Monetaria Interest (Cierre) Rate Unemployment Rate (%) 3.3% 5.3% 5,0% 9.2% 7.8% 7.1% 7.8% 10.8% 8.2% 7.2% 6.6% 2005 2006 2007 2008 2009 2010 2011 2012e
Denmark Spain Netherlands USA UK Switzerland China Australia France Malaysia Germany Finland Chile Brazil Colombia Peru Mexico Argentina 219.8% 205.7% 202.0% 197.5% 194.0% 174.6% 133.3% 126.6% 114.8% 113.3% 105.3% 93.9% 74.2% 60.7% 47.3% 27.1% 26.2% 16.1% Chilean Financial Industry Important growth potential 7 Chilean Financial System As of December 31, 2011 Bank Loans by Country As of December 31, 2011 ( % of GDP) ( % of GDP) ( % of GDP) Total Loans 74% 46% 58% 21% AUM Commercial Mortgage Consumer Foreign Local 18% 10% 37% 15% 5% 10% 19% 2% 17% Banks Pension Funds Mutual Funds Insurance Source: Chilean Central Bank, SBIF, SAFP, y SVS. Source: Fitch Ratings Sovereign data Comparator & Banco de Chile
Chilean Banking Industry 8 Total Loans 19.0% (Market Share as of September 2012, %) 18.9% Foreign Banks 13.8% 12.7% 10.0% 7.0% 4.8% 4.2% 3.0% 2.8% 1.1% 2.6% Current Account Deposits The industry consists of 24 local and foreign banks The 5 largest banks represent over 70% of loans Consistent track record: High return-on-average-capital Strong loan growth Healthy asset quality Banking System Total Loans & ROAC 24.4% 21.6% 17.5% 15.8% (Market Share as of September 2012, %) Foreign Banks 122 (US$ Billions & ROAC %) 148 145 158 185 205 4.3% 4.4% 2.6% 3.3% 2.8% 1.7% 1.4% 17.5% 14.8% 16.2% 20.2% 19.6% 15.1% Source: SBIF. 2007 2008 2009 2010 2011 Sept12 LLP: 1.0% 1.4% 1.8% 1.3% 1.2% 1.3% ROAC Loans
Chilean Economic Cycle 9 12.7% Elasticity Loans to GDP = 2x 13.7% 15.0% 13.4% 12,9% 10.6% 10.6% 10.0% 5.9% 5.7% 6.0% 6.1% 6.6% 3.2% 3.4% -0.8% 4.5% 1.6% 3.4% 2.2% 3.3% 3.9% 7.0% 6.2% 5.7% 5.2% 3.3% 0.5% -1.0% 6.1% 6.0% 5.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E GDP, Real Growth (%) Total Loans, Real Growth (%) Pro-cyclical banking industry 10% Real annual growth trend
Banco de Chile A Financial Leader with over 100 years of history 11 Amongst the Largest LATAM Financial Institutions (Ex Brasil) (Market Capitalization in US$ billions) (September 2012) US$48 billion in assets Santander Inbursa 18.7 18.2 US$31 billion in deposits 1.8 million customers 433 Branches 1,958 ATMs Investment Grade (S&P: A+; Moody s: Aa3) Listed locally and internationally Grupo Aval Bancolombia Santander BCH Banorte Credicorp Banco Bogota Source: Bloomberg. As of Oct 29, 2012 13.1 13.3 13.0 12.9 12.7 10.1 8.4
Shareholder Structure LQIF owns directly and indirectly 59.3% of Banco de Chile 12 50% 50% Ergas Group 5,9% 59,3% Banco de Chile (%, Septiembre 2012) Free Float 15,7% Other Shareholders 19,1% 16 14 12 10-8 6 4 2 Stock Liquidity Local Exchanges ADR
Market Capitalization Strong capital gains 13 Market Capitalization (USD mn) US$12.9 bn 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - US$1.1 bn US$4.9 bn Merger Banco de Chile & Banco A. Edwards BCH lists on NYSE Merger Banco de Chile y Citibank Chile
Business Model Universal bank which serves all market segments 14 Loans by Segment Net Income before Tax by Segment (As of Sept 2012) (As of Sept 2012) US$38,712 mn 51% US$760 mn 58% 49% 42% Ac. Sept 12 Ac. Sept 12 *Includes subsidiaries
Why Banco de Chile? 15 Strong Competitive Advantage Attractive Growth Opportunities Consistent Value Creation
Leading Market Position Market leader in a wide range of products and services 16 Total Loans Non-interest Bearing Deposits 19.0% 18.9% (As of September 2012) 23.4% (As of September 2012) 21.5% 12.7% 10.0% 7.0% 15.3% 4.6% 3.5% Fees Assets under Management 24.5% (As of September 2012) 21.9% 14.4% 22.6% (As of September 2012) 16.5% 12.9% 6.2% 3.9% 6.2% 6.0%
Strong Brand Position Consistent track record 17 The bank with the best brand in the industry 33% Top of Mind 20% 14% 5% 1% 26% Service Quality 17% 13% 2% 2% 29% Security / Solvency 11% 9% 2% 2% 21% 8% Bank to Change to? 16% 2% 3% 21% Acquire a Product or Service 13% 12% 3% 3% Note: Banco de Chile includes Banco Edwards Citi Segment ABC1 & C2 Source: Adimark GFK, 3Q12 survey on Bank Brands
Nationwide Branch Network and Robust Customer Base Significant banking presence throughout Chile Branches September 2012 and a individual customer base that represents 22% of the Chilean workforce Customer Base ( 000) September 2012 18 438 433 346 344 140 Retail Individuals 817 Middle/Upper Lower Income 852 Wholesale Companies 17 Branch expansion focused strategy 147 additional branches in the last five years* SMEs 69 Corporate 5 Source: SBIF *September 2007 to September 2012
Solid Funding Structure Low cost funding structure due to leadership in non-interest bearing deposits and solid credit rating Non-interest Bearing Deposits Y/Y: +8.7% Other Y/Y: -5.8% Time Deposits Y/Y: +11.3% (% of Total Funding and Y/Y Change, September 2012) 23.2% 2.7% 46.2% Market Share:23% 9.4% 13.3% 5.2% Average Cost of Funding* Funding Structure Equity Y/Y: +6.9% Bonds Y/Y: +31.6% Financial Institutions Y/Y: -39.2% Continue to diversify funding and extend durations As of September 2012: Mexico (~US$ 110 mn) Peru (~US$ 52 mn) USA Commercial Paper (~US$220 mn) Local Issuances (~US$ 1,060 mn) Non-interest bearing deposits 23% mksh Solid Cost of Funding of 3.5% Capital Base 19 (As of September 2012) 4.0% 4.0% 11.7% 12.7% 13.4% 12.9% 12.5% 3.5% 8.6% 9.4% 8.5% 8.9% 8.9% BCH Peers System ExBCH * Interest paid over average interest bearing liabilities + non-interest bearing deposits Note: Peers include Santander, BCI and BBVA 2008 2009 2010 2011 Sep-12 Tier 1 / RWA Total Capital / RWA
Superior Asset Quality Effective risk models and prudent policies 20 Loan Loss Provisions / Avg. Loans (%) 1.94 1.55 1.54 1.34 1.57 1.16 1.27 1.51 1.77 1.28 0.89 1.75 1.35 1.09 1.11 0.86 1.23 a 1.02 0.57 0.92 0.45 2006 2007 2008 2009 2010 2011 Sep-12 NPL / Loans Highest credit quality in the Chilean financial system Prudent risk management approach and high coverage ratio Effective risk models which secure low delinquent loans and loan loss provisions Coverage Ratio (Instalments Past-due / Loans, %) 1.54 1.45 1.26 1.08 1.18 0.85 0.88 1.27 0.92 0.90 0.99 1.19 1.29 1.41 0.73 0.59 0.60 0.68 0.51 0.47 0.46 2006 2007 2008 2009 2010 2011 Sep-12 2.3 2.6 2.8 BCH Peers (BSAC, BCI, BBVA) System ExBCH (Allowances for Loan Losses / Instalments Past-due, Times) 3.6 4.9 4.7 4.9 1.9 2.0 1.7 1.6 1.7 1.9 2.0 1.6 1.8 1.7 1.8 2.1 2.1 1.9 2006 2007 2008 2009 2010 2011 Sep-12 (a) Excludes a reduction of ~$44 bn from a release of allowances due to a sale of a loan portfolio which ~$42 bn was recognized as a loss in net Financial Operating Income and counter cyclical provisions
Why Banco de Chile? 21 Strong Competitive Advantage Attractive Growth Opportunities Consistent Value Creation
Strategic Focus 22 Lead the Strengthen Improve Excel at Retail Wholesale Operating Service Market Segment Efficiency Quality
Lead the Retail Market Leveraging competitive strengths 23 12.7 14.4 Retail Loans (Billions of US$) 17.5 19.1 5.4 5.7 4.1 4.5 5.3 6.1 7.6 8.5 3.3 3.8 4.5 4.9 2009 2010 2011 Sep-12 Consumer Mortgage Commercial Avg. Non-int. Deposits per Customer CAGR +12.9% +18.6% +15.2% Mid-term Objectives Expand customer base in middle/upper income individuals Increase usage rates on transactional products Increase presence in SMEs Develop Microenterprise and Cajas Chile Increase productivity of distribution channels Market Share and Potential (Thousands of US$) 2.1 2.3 2.6 2.8 2009 2010 2011 Sep-12 Consumer 20.8% 2.6% Mortgage 17.0% 4.9% Current Acc t (1) 31.1% 31.5% Current Market Share GAP with Leader (1) Deposits in current accounts from individuals
Strengthen Wholesale Segment Providing effective and high service quality solutions 24 Wholesale Loans (Billions of US$) 14.5 15.1 18.3 18.7 2009 2010 2011 Sep-12 Avg. Non-int. Deposits per Customer (Thousands of US$) 139 165 186 202 2009 2010 2011 Sep-12 Mid-term Objectives Increase customer wallet market share through innovative service models which improve productivity Increase penetration of treasury products Consolidate participation in areas outside Santiago Generate commercial synergies between retail and wholesale divisions Assist customers with their regional growth plans, building synergies with the Citi network Commercial 1 Foreign Trade Factoring Leasing Market Share and Potential 18.7% 19.5% 24.5% 21.6% 4.0% Part. de Mercado Diferencial con #1
Improve Operating Efficiency Increasing productivity and synergies in processes 25 Cost to Income Mid-term Objectives 50.7% 48.3% 46.9% 46.5% a 50.2% 49.9% 53.0% 48.7% Automate operating processes Strengthen Remote Channels Sustainable growth under a controlled expense environment 46.7% 47.5% 45.0% 47.1% Developing a disciplined expense management culture through compensation incentives aligned with corporate targets 39.7% 37.4% 37.6% 2008 2009 2010 2011 3Q12 BCH System Ex BCH Peers Evolution of Branches & Employees (# of Branches & # of Employees in thousands) 14.6 14.0 14.0 14.1 371 400 422 441 433 14.6 (a) Adjusted Efficiency Ratio reaches 46.3% when excluding Ch$28 billion in 2011 expenses related to collective bargaining agreement and excluding $45 billion in losses in Operating Revenues from a sale of a corporate loan portfolio. Note: Peers include Santander, BCI and BBVA 2008 2009 2010 2011 Sep-12 Branches Employees
Excel at Service Quality Consolidate excellent service, with plans for improvement in all our business segments 26 Net Promoter Score Mid-term Objectives 52% (Annual Average) 65% 68% 58% 59% Development of quality procedures for each business segment Formalization and standardization of customer contact protocols Improvements in product and service satisfaction Ensure high levels of transparency 2008 2009 2010 2011 Sep-12
Why Banco de Chile? 27 Strong Competitive Advantage Attractive Growth Opportunities Consistent Value Creation
History of Consistent Growth Based on a profitable and sustainable strategy 28 Loans (US$ Billions, %) Net Income (US$ Millions, %) 22 29 28 30 37 39 510 574 543 796 903 921 30.9% 30.7% 33.8% 35.4% 35.5% 36.7% 25.1% 27.4% 21.0% 23.9% 25.1% 29.2% Note: Total Loans 2007 includes information before merger with Citibank Chile. Beginning 2009 under new Chilean accounting standards System figures do not include operations in Colombia Individuales 2007 2008 2009 2010 2011 Sep-12 Annualized Net Income MkShare
Superior Profitability Continue posting above average returns 29 Return on Average Capital Return on Average Assets 32.1% 29.7% 25.2% 23.9% 21.9% 16.7% 15.2% 12.9% 22.6% 19.2% 15.4% 28.7% 27.7% 24.7% 25.5% 23.2% 18.4% 17.7% 2.0% 24.7% 1.7% Peers 17.5% 12.8% 1.3% 2.1% 1.6% 1.2% 1.7% 1.5% 1.7% 1.4% 1.2% 0.9% 2.2% 2.1% 1.8% 1.6% 1.4% 1.3% 2.0% 1.3% 1.0% System ExBCH 2006 2007 2008 2009 2010 2011 Sep-12 2006 2007 2008 2009 2010 2011 Sep-12 Note: 2006 to 2007 includes information before merger with Citibank Chile. Beginning 2009 under new Chilean accounting standards Merger BCH y Citibank Chile
Dividend Yield Highest dividend yield amongst LATAM banks 30 (%) Bank País 2008 2009 2010 2011 2012 Avg. #1 Banco de Chile 8.7 6.8 6.9 4.4 3.9 5.8 #2 Banco do Brasil 3.6 8.4 5.4 6.0 6.8 5.7 #3 Banco de Bogotá 4.6 6.5 4.1 2.9 3.3 4.1 #4 Santander Chile 4.5 5.6 3.3 3.4 3.7 4.1 #5 BCP 4.0 3.1 3.4 2.8 2.7 3.6 #6 Bradesco 3.0 4.0 2.6 2.8 3.2 3.0 #7 Itau 3.0 3.2 2.3 2.5 3.2 2.8 #8 Bancolombia 2.9 5.2 2.7 2.2 2.3 2.8 #9 Inbursa 1.3 1.2 1.2 1.0 1.1 1.3 #10 Banorte 1.0 2.5 0.6 0.9 0.9 1.1 Annual Ranking Banco de Chile #1 #2 #1 #2 #2 #1 Note: The methodology used to calculate the dividend yield is the sum of dividends paid during the last 12 months over the share price as of the first quarter of each year Source: Bloomberg.
Why Banco de Chile? 31 1 2 Leading Market Position Strong Image & Brand 3 Superior Asset Quality 4 5 Strategic Alliance with Citigroup 6 High return for our shareholders Growth and Efficiency Opportunities
Forward-Looking Information The information contained herein incorporates by reference statements which constitute forward-looking statements, in that they include statements regarding the intent, belief or current expectations of our directors and officers with respect to our future operating performance. Such statements include any forecasts, projections and descriptions of anticipated cost savings or other synergies. You should be aware that any such forward-looking statements are not guarantees of future performance and may involve risks and uncertainties, and that actual results may differ from those set forth in the forward-looking statements as a result of various factors (including, without limitations, the actions of competitors, future global economic conditions, market conditions, foreign exchange rates, and operating and financial risks related to managing growth and integrating acquired businesses), many of which are beyond our control. The occurrence of any such factors not currently expected by us would significantly alter the results set forth in these statements. Factors that could cause actual results to differ materially and adversely include, but are not limited to: changes in general economic, business or political or other conditions in Chile or changes in general economic or business conditions in Latin America; changes in capital markets in general that may affect policies or attitudes toward lending to Chile or Chilean companies; unexpected developments in certain existing litigation; increased costs; and unanticipated increases in financing and other costs or the inability to obtain additional debt or equity financing on attractive terms. You should not place undue reliance on such statements, which speak only as of the date that they were made. Our independent public accountants have not examined or compiled the forward-looking statements and, accordingly, do not provide any assurance with respect to such statements. These cautionary statements should be considered in connection with any written or oral forward-looking statements that we may issue in the future. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect later events or circumstances or to reflect the occurrence of unanticipated events. Exchange rate for presentation purposes Ch$474.7 for US$1.00 as of 09.30.2012
Contact Pablo Mejia Head of Investor Relations 975 Agustinas, Office 301 Santiago, Chile (T) 562 653 3554 pmejiar@bancochile.cl