Earnings call transcript: Banco Santander Chile Q3 2025 misses revenue forecasts

Banco Santander Chile reported its Q3 2025 financial results, revealing a slight miss on earnings per share (EPS) and a more significant shortfall in revenue compared to forecasts. The bank posted an EPS of 1.35, falling short of the anticipated 1.39, while revenue reached 709.39 billion USD, below the forecasted 774.14 billion USD. Despite these misses, the stock experienced a modest pre-market increase of 1.37%, closing at 67.9 USD.

Key Takeaways

• Banco Santander Chile’s EPS of 1.35 missed the forecast by 2.88%.
• Revenue fell short of expectations by 8.36%.
• The stock rose by 1.37% in pre-market trading.
• Net income increased by 37% year-over-year.
• The bank maintained a strong return on average equity (ROE) of 24%.

Company Performance

Banco Santander Chile demonstrated robust performance in Q3 2025, with net income rising by 37% year-over-year. The bank’s return on average equity stood at an impressive 24%, underscoring its profitability. The efficiency ratio was reported at 35.9%, reflecting effective cost management. Despite these positive indicators, the bank’s revenue and EPS did not meet analysts’ expectations.

Financial Highlights

• Revenue: 709.39 billion USD, down from the forecast of 774.14 billion USD.
• Earnings per share: 1.35 USD, compared to a forecast of 1.39 USD.
• Net income: 798 billion CLP, a 37% increase year-over-year.
• Net interest income: Up 17% year-over-year.
• Net interest margin: Maintained at 4%.

Earnings vs. Forecast

Banco Santander Chile’s EPS of 1.35 represented a 2.88% miss compared to the forecast of 1.39. The revenue shortfall was more pronounced, with actual revenue of 709.39 billion USD falling 8.36% below expectations. This performance marks a deviation from the company’s historical trend of meeting or exceeding forecasts, highlighting potential challenges in the current economic environment.

Market Reaction

Despite the earnings miss, Banco Santander Chile’s stock rose by 1.37% in pre-market trading, closing at 67.9 USD. This increase may reflect investor confidence in the bank’s long-term strategy and operational efficiency. The stock remains within its 52-week range, with a high of 68.49 USD and a low of 46 USD.

Outlook & Guidance

Looking forward, Banco Santander Chile expects mid-single-digit loan growth and aims to maintain net interest margins around 4%. The bank projects fee and financial transactions to grow in the mid to high single digits, with a cost of credit improvement to approximately 1.3%. The ROE target for 2026 is set between 22% and 24%.

Executive Commentary

Cristian Vicuña, Head of Strategy and IR, stated, "Our target is to maintain an efficiency ratio in the mid-30s or better," emphasizing the bank’s focus on cost efficiency. CFO Patricia Pérez added, "We are well prepared in our targets and guidance," indicating confidence in achieving future objectives. An unspecified speaker also noted, "We are favorable of the upcoming quarters in 2026," suggesting optimism for continued growth.

Risks and Challenges

• Potential political changes could influence commercial loan growth.
• External macroeconomic scenarios present ongoing uncertainty.
• The potential reduction in interchange fees remains under review.
• Market saturation in certain segments may limit growth opportunities.
• Inflationary pressures and interest rate changes could impact financial performance.

Q&A

During the earnings call, analysts raised questions about the potential impact of political changes on commercial loan growth. Management acknowledged the uncertainty but expressed confidence in their strategic positioning. Concerns about the external macroeconomic environment were also discussed, with the bank highlighting its preparedness to navigate potential challenges.

Full transcript - Banco Santander Chile (BSANTANDER) Q3 2025:

Speaker 1: Ladies and gentlemen, thank you for standing by. Now, I’d like to welcome you to Banco Santander-Chile’s third quarter 2025 earnings conference call on the 5th of November, 2025. Please note that at this point, all participant lines are in listen-only mode. After the call, there will be an opportunity to ask questions. With this, I would now like to pass the line to Patricia Pérez, the Chief Financial Officer. Please go ahead.

Patricia Pérez, Chief Financial Officer, Banco Santander-Chile: Good morning, everyone. Welcome to Banco Santander-Chile’s third quarter 2025 results webcast and conference call. This is Patricia Pérez, CFO, and I’m joined today by Cristian Vicuña, Head of Strategy and IR, and Lorena Paloméquez, our economist. Thank you, everyone, for joining us today for the review of our performance and results in the third quarter. Today, Lorena will start with an overview of the economic environment, and then Cristian will go through the key strategy points and the results of the bank in the third quarter of the year. After that, we will have a Q&A session where we will be happy to answer your questions. Let me hand over to Lorena.

Lorena Paloméquez, Economist, Banco Santander-Chile: Thanks, Patricia. During the third quarter of 2025, we observed positive economic indicators in the Chilean economy. Preliminary asset figures suggest GDP growth around 2% year-on-year in Q3, or almost 3% when excluding mining. While we await the full national accounts report on November 18, which will also include Q1 and Q2 revisions, we estimate GDP growth of 2.4% by the end of this year and close to 2% for next year. We are now just a few days away from the presidential and congressional elections in Chile. Although the outcome is still uncertain, polls suggest that a change in the government administration with an opposition candidate is the most likely scenario, which could generate stronger tailwinds for the economy next year. In terms of inflation, although moderation is already evident, it remains above the 3% target, with core inflation now below 4%.

Limited second round effects and higher expectations and a narrow output gap will allow inflation to converge to below 4% by the end of this year. We expect that this inflation process to continue given the softer demand environment both globally and domestically. In this context, we maintain our forecast for the U.S. of 3.6% for the end of this year, converging to 3% next year. Regarding the monetary policy rate, during the third quarter, the Central Bank of Chile maintained a policy rate at 4.75%, responding to an inflation environment that continues to ease. Nevertheless, the bank’s board emphasized that it will closely monitor the evolution of core inflation, which remains higher than expected, as well as domestic demand, before considering a new rate cut.

We expect another reduction in the last quarter of the year, bringing the rate to 4.5% by year-end and followed by an additional cut during the course of next year. On slide five, we present recent developments in the regulatory framework. Regarding the mortgage subsidy law, which was approved in May of this year, its implementation has continued within the framework of the location of the funds awarded in the first action held in June. Under the law, 50,000 subsidies will be provided, with almost 18,000 already authorized by banks. This has provided some momentum to the housing sector, whose growth is expected to become increasingly evident in the coming months. With respect to the interchange fee, the second rate cap reduction remains on hold and under review by the Commission, and we are awaiting further updates on this matter.

Open Finance System of the FinTech Lab established an implementation schedule that begins with a gradual submission of information that banks and payment card issuers must share in July 2026. However, the system’s technical definition remains under consultation, while costs and other operational details are still pending. This has prompted calls to review the implementation timelines, a request the FMC is currently analyzing. During September, the framework law on sectoral authorization for permits related to productive energy and mining initiatives was approved. This will enable the development of tools for the simultaneous processes of permits, streamlining the approval of low-risk projects, which should, in turn, accelerate investment in these sectors. As we mentioned before, there are only a few days left until the presidential and congressional elections in Chile, which will be held on November 16, with a potential runoff on December 14.

According to the latest CADEM poll, left-wing candidate Janet Jara leads the presidential race with 27% support, followed by right candidate José Antonio Castro with 20%. While the presidential race has gained visibility, we must not overlook the parliamentary elections, where the entire lower house and nearly half of the Senate, 23 out of 50 seats, will be renewed. Polls show that Chileans remain highly concerned with crime, security, and the economic growth. Simulations suggest that right-wing candidates may gain ground in Congress, driven by local campaigns emphasizing security. This implies that even if the left-wing candidate wins the presidency, Congress could lean right, potentially moderating more radical policy initiatives. As such, while some electoral-related volatility is likely in the near term, we believe the longer-term market impact will be limited. As we judge, I will now pass over to Cristian.

Cristian Vicuña, Head of Strategy and IR, Banco Santander-Chile: Thanks, Lorena. On slide seven, we show our value creation strategy for our stakeholders through our vision to become a digital bank with work access. Our focus is on attracting and activating new clients, understanding their needs, and deepening engagement. We aim to surface 5 million clients by 2026 while continuing to grow our base of active customers. Next, we are building a global platform that leverages artificial intelligence and process automation to scale efficiently. It’s about reducing the cost per active client and driving operational excellence. Our target is to maintain an efficiency ratio in the mid-30s or better, a reflection of a bank that is both digital and disciplined. We are focusing on broadening transactional and non-credit fee-generating services. Through this, we aim to grow our fee generation in double digits and ensure investing plus in recurrence, our income fees divided by our structural operating expenses.

A growing client base means more activity, and we are seeing increasing transactional volumes, especially on payments. Our digital ecosystem encourages clients to transact more frequently and seamlessly, driving engagement and loyalty. Finally, this is underpinned by strong CET1 levels, ensuring that our expansions remain sound, responsible, and aligned with regulatory expectations. All of this leads to a strategy where we are capable of attracting value creation with ROEs above 20% and a dividend payout of 60%-70%. On slide eight, we can already see how our strategy over the last few years has succeeded in changing our income mix and creating a more efficient and profitable bank. Our key measure of value creation has been the strong growth in ROE, achieved while maintaining solid capital ratios during the implementation of Basel III.

Our ROE has increased more than 6 percentage points, more than double the increase in the rest of the industry. This has been supported by a 5 percentage point improvement in our efficiency versus a 2% improvement in the industry, demonstrating our consistent cost control and the success in the implementation of our digital transformation. We are particularly proud of successfully migrating our legacy mainframe systems to the cloud earlier this year under Project Gravity. On the other hand, we have been transforming the composition of our income revenue streams, with fee generation increasing from 15% of our revenues to 20%, reflecting the success of the expansion of our client base and non-credit-related services through our digital accounts and card payments, as well as other services such as asset management brokerage and our acquiring business. Meanwhile, the composition of the industry revenues has remained stable.

This mix is driving our revenues ratio to the best in class in the industry. This ratio, which shows how much of our costs are paid by our fee generation, now stands at above 60%. Far above for the rest of the industry. We are very proud of the success our strategy has had so far, and as you will see later on, we are enthusiastic about the evolution of our results in the coming year. Now, in slide 10, we will take a closer look at the results this year. As of September, the bank generated a net income of CLP 798 billion, a 37% year-over-year increase, resulting in a return on over-average equity of 24% and an efficiency of 35.9%. Growth was supported by an 8% rise in fee income and a 19% increase in financial transactions. Mutual funds grew 15%.

Our recurrence ratio reached 62% year-to-date. Our net interest income, which includes our readjustment income, increased 17% year-over-year, and our net interest margin remained at 4%. Furthermore, currently, we are provisioning a dividend payout of 60% of this year’s income to be paid in April next year. This year, we have also been highly recognized on several fronts. We are proud to have been recognized by several institutions. Euromoney named us best bank in Chile, Latin Finance recognized us as best private bank, and Global Finance awarded us the best bank for SMEs. This year, we have improved our sustainability rankings with our MSCI ESG rating improving from A to AA, and our Sustainalytics rating improving to 15.4 points.

On slide 11, we can see the evolution of our quarterly return over equity, where we can see that we have maintained our ROEs above 21% even in quarters with lower inflation such as this recent quarter, where the UF variation was 0.56% and we reached an ROE of 21.8%. On a yearly basis, our NII has improved 16.6% with a strong increase from net interest income as a result of a lower cost of funding, which improved some 100 basis points year-over-year. With this, our year-to-date NIM reached 4%, and given our current macro expectations, we expect our NIMs to stay around the 4% area for what is left of 2025. On slide 12, we can see how our rapidly expanding client base is leading to a higher fee generation.

We currently have 4.6 million clients, of which around 59% actively engage with us, and some 2.3 million are digital, accessing the online platforms on a monthly basis. The number of current accounts is increasing 10% year-on-year, driving the 5% and 4% growth of our active clients and digital clients, respectively. The growing client base has led to a 12% annual increase in credit card transactions and a 15% rise in mutual fund volumes that we broker. Overall, our clients maintain high satisfaction levels with the bank and our product offering. Furthermore, we continue to expand our footprint among companies, where we have increased the number of business current accounts by 23% in the last 12 months. This is explained by the simple business accounts we offer to smaller companies and the integrated payments offered through GetNet.

As we can see in the table on the right, the increase in our client base and product usage is translating into high fees and results from financial transactions, growing 11.5% year-over-year. Our main products, such as cards, GetNet, account fees, and mutual fund fees, continue to show strong trends, with cards and accounts fees registering a higher expense in the quarter related to certain campaigns in our loyalty programs during the quarter. On slide 13, we can see how our recovery of income generation and time cost control has improved our key performance metrics. Our efficiency ratio reached 35.9%, the best in the Chilean industry in 2025 so far, and our recurrence ratio reached 62%, meaning that over 60% of our expenses were financed by our fee generation. In early 2025.

Operating expenses rose temporarily due to the cloud migration costs, mainly reflected in higher administrative expenses during the first quarter. However, overall, our operating costs grew below inflation in the year so far. In the quarter, our total core expenses decreased 3.4%, mainly due to lower personnel expenses related to the seasonality costs by the winter holidays and national holidays in September. Overall, we have maintained our best-in-class levels of efficiency and recurrence compared to our peers. Furthermore, we continue to innovate in our branch network to align with our work performance, improving both efficiency and customer experience. It is thanks to these adjustments to our contact points with clients, along with the evolution of our digital platforms, that we have been able to achieve these impressive levels of operating performance. On slide 14, we show an overview of our cost of risk and asset quality.

As in prior quarters, cost of credit has remained above historical average, reflecting elevated non-performing loans earlier in the year. From the graphs, you can see that our NPL and impaired portfolio have shown some improvement in recent quarters, with a slight pickup in September due to some seasonality related to collections in the month caused by the national holidays. However, our initial data for October is showing better performance, and over the last few months, we have seen tangible improvements in our asset quality that we expect these trends to continue in the coming quarters. On slide 15, we can see that the CET1 ratio reached 10.8% in September 2025, far above our minimum requirement of 9.08% for December 2025, and demonstrating some 45 basis points of capital creation since December 2024.

This was driven by our income generation in 2025 and considers a 60% dividend provision for our 2025 profits accumulated so far and a 4% increase in risk-weighted assets. As noted in our previous call, we have a 25 basis point pillar two capital charge, of which 50% was made by June 2025, in line with regulatory requirements. On slide 16, we show our guidance for what’s left of 2025 and our initial guidance for 2026. Regarding our 2025 forecast, we are well on track to meet our guidance, with NIMs around 4% and efficiency in the mid-30s. Overall, we expect our ROE to finish the year slightly above 23%. For next year, we’re expecting GDP growth of 2%, with a UF variation just below 2.9% and an average monetary policy rate of around 4.4%.

With the upcoming elections in just two weeks, we expect a more favorable business environment next year, supporting mid-single-digit loan growth. Despite the slightly lower inflation, the loan growth and slightly lower rates should help to sustain our NIMs around 4%. While our fees and financial transactions should grow mid to high single digits. This does not include any impact for a further interchange fee reduction, which is yet to be defined by the Interchange Fee Commission. Our efficiencies should remain around the mid-30s, while our cost of credit should continue to improve gradually to reach around 1.3% for the year. With all of this, our initial expectations for 2026 are for an ROE within the range of 22%-24%, underscoring the high ROE potential of Santander Chile. With this, I finish my presentation, and we can start the Q&A session. Thank you very much.

We’ll now move to the Q&A part of the call. If you’d like to ask a question, please press Star 2 on your phone. It is Star 2. If you’re connected from the web, you can also ask a voice question. We’ll give it a few moments for the questions to come in. Okay. Our first question is from Lindsey Shima from Goldman Sachs. Your line is now open. Please go ahead. Hi. Congrats on the results, and thank you for taking my question. Looking ahead to 2026, it seems like ROE might be a little better, a little worse, but somewhat the same. Just wondering here on our end, what are the main upside and downside risks for your ROE estimate? On that note, does it factor in an unfavorable election result, or could there be further downside there? Thank you so much.

Thank you for the question, Lindsey. I’m going to hand over the first part because we assess that some of the most beneficial potential scenarios of next year are related to the change in political cycle, and we are not actually considering most of those effects into our current guidance. Hello there. To provide some perspective, we are not considering in the potential scenario of growth for next year the benefits of a political change that could trigger further growth in the commercial or part of the loan portfolio. We are thinking of mid-single digits, but a more benign scenario will probably make the commercial portfolio of the middle market companies grow stronger than this, maybe even going to figures of 7%-8%.

Probably very skewed to the second part of next year and more into 2027 because of the delay of some projects to get approved and passed through to the practical part of the investment. That’s one of the things that’s not actually considered on our guidance. The main risks that we have seen so far this year and next year are coming from the external part of the macro scenario. You have seen the volatility in terms of assets and commodity prices and all the effects that have come from all the discussions from international trade effects of the U.S. policies and the consequences of this. That’s the source of uncertainty that’s also not considered in the central part of our scenario. All in all, I think that we are favorable of the upcoming quarters in 2026 and that, in general terms, the more.

Adverse scenarios are considered within our guidance. Yes. Maybe to complement the answer, our base case scenario considers a lower inflation, but partially offset by a lower monetary policy rate on average for next year, and also offset by better growth dynamics in terms of loans. That could be even better, depending on the political landscape for next year. We think for both scenarios, we are well prepared in our targets and guidance. Thank you. Our next question is from Daniel Mara Ardila from Credicorp. Your line is now open. Please go ahead. Hi. Good morning, and thank you for the presentation. I have two questions. The first one is regarding loan growth. Can you provide further color of what do you expect about loan growth in 2026 by segment? If we can have the guidance by segment, it will be great.

I would like also to know if you can comment about the competitive pressures in loan growth, especially considering that there is one key competitor that is showing very high figures of loan growth in Chile. I would like to know if you feel the pressures, especially in the commercial segment. That will be my first question. The second one is regarding NPLs and cost of risk. I would like to know, considering the slight deterioration of NPL in the consumer segment and mortgage segment, what will be the path or the evolution of asset quality indicators in 2026, given that you are guiding for a reduction of the cost of risk next year? Thank you so much. Thanks, Daniel, for your question. I will take the first one. Cristian will take the second one.

Regarding the composition of loan growth for next year, we are seeing a quite homogeneous growth composition in the different segments. Regarding consumer loans, we continue to see growing at a healthy pace in that product. Regarding the mortgage portfolio, during this last quarter, we are seeing better dynamics leveraged by the government support or stimulus coming from the subsidies. We are seeing good dynamics for next year as well. Regarding the commercial loans, that will be the question mark, but we are also seeing better dynamics for next year, especially leveraged by the political landscape, right? If we have the right changes in the regulation that we have already seen, part of those changes, we will have growth like our guidance for next year.

Within the commercial portfolio, to give you a little more flavor, we are expecting for the retail part, SMEs, to grow mid-single digits. As within our general guidance. As I mentioned earlier, the question mark is what will happen with the large corporates and the investment decisions that they might trigger because of the political landscape. This is what we are not seeing yet in terms of market dynamics. It is probably related to the part of your question about the competitive pressure, right? I think that in terms of the commercial part of the portfolio, we are seeing some players growing, but we do not assess it on the local part of the portfolio. We believe that this is set to improve by the second half of next year. I am turning to your credit cost of risk and risk in general performance.

So far this year, we are showing closer to 1.4% cost of risk year to date. We had some seasonal effects on September. In terms of the absolute movements of the portfolio, especially in the NPL part, we are seeing, as a previous table, most of the increase in cost of risk is coming from the improvement that we have been displaying in the commercial NPLs. So these commercial NPLs are coming down from levels of 4.1 twelve months ago to levels of 3.4. We have been doing some write-offs of some non-performing loans there, and that is explaining most of the pickup that we are seeing in terms of cost of risk. We know that is not going to continue for the upcoming quarters. That is what makes us believe that the total cost of risk is set to improve in the next periods. Perfect. Thank you so much. Thank you.

Thank you. Thank you. Our next question is from Nia Agarwala from HSBC. Your line is now open. Please go ahead. Hi. Thank you for taking my question. My first question is on the interchange fee. Could you remind us what are the current levels for the interchange fee, and what is the risk that the second caps actually go through next year? What is your expectation in that regard? Just a reminder. We had a committee that was in charge of assessing the rate fees for the card business in general. They implemented the first part of the reduction from levels of around 1.4 in credit to levels of 1.14, which is the current rate, and from levels of 0.6 in debit to levels of 0.5, which is the current rate. The second rate cut, which was suspended, was set to decrease credit.

Fees to levels of around 0.8. Debit to levels of around 0.35. Prepaid also to levels of around similar to credit of 0.8. That is the part of the decision that is being reviewed. The committee is expected to come to a decision by the final months of this year or early next year. Our initial assessment was that the total reform will mean an impact in our credit card fees of around $50 million, half and half in both impacts. The second part is expected to come next year. We do not know, but the impact will be in the neighborhood of the $20 million of dollars in fees in the card impact if the committee comes to the decision to implement the second cut. Very clear. If the.

Second cut actually happens, which is not in your guidance, the impact would be between CLP 20 billion-CLP 25 billion. For 2026. Yeah. Super. My second question is, again, going back to the cost of risk, I know you talked about it, but. This year we saw the NPLs coming down. You had to do some write-offs. There were one-off cases. For 2026, the asset quality should perform better. Than what we had this year. Why is not cost of risk coming down even more in the initial targets? I think. 10 basis points, it is a good range to start because we are still not. Seeing the full. Effects of the. Projects that we have been implementing to improve the collection cycle. We are still, and I agree with you, which might sound a little conservative, but. We are comfortable guiding some. Conservative improvements. And leaving some room. There.

Super clear. Thank you so much. Thank you. Just a reminder, if you’d like to ask a question, it’s START2 on your phone, START2. If you’re connected from the web, you can also ask a voice question. We’ll give it a few more moments for any further questions. Okay. Looks like we have no further questions. I will now hand it back to the Santander Chile team for the closing remarks. Thank you all very much for taking the time to participate in today’s call. We look forward to speaking with you again very soon. That concludes the call for today. Thank you and have a nice day.

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