Bloomberg News

Santander Chile Gives Priority to Profits Over Market Share

February 02, 2012

(Updates with closing share price in third paragraph.)

Feb. 2 (Bloomberg) -- Banco Santander Chile, relegated to second place among Chilean lenders last year, vowed to prioritize profitability over market share as proposed lending restrictions and rising inflation threaten to narrow margins.

“We have been very conservative in terms of loan growth,” Raimundo Monge, director of corporate strategy, said in a conference call today. “Other market players have been more eager to increase their allocation of capital to low-yielding activities. We prefer to allocate capital only to more high- yielding activities.”

Santander expects to increase lending this year at a similar pace to the rest of the industry, which is estimated at 10 percent to 11 percent, Monge said. Since 2003, the bank’s share of total lending shrank 7 percentage points to 20 percent while profitability more than doubled, he said. Santander slumped 4.1 percent to 36.65 pesos in Santiago trading.

Government plans to lower the interest-rate ceiling on some loans would reduce margins, even though Congress is expected to “water down” the proposal over concern it will squeeze borrowers out of the market, he said. Santander forecasts the central bank will continue cutting its key interest rate in 2012, he said.

“Funding costs should continue to stabilize or eventually fall,” Monge said. “On the other hand, the uncertain evolution of inflation and the negative effect of regulations regarding maximum rates that can be charged on loans may have a negative impact on margins.”

Chile’s central bank last month reduced borrowing costs for the first time in more than two years even after December inflation rose to its highest level since April 2009.

Santander had 17.4 trillion pesos ($36.3 billion) in loans at the end of December compared with Banco de Chile’s 17.7 trillion pesos, according to data published by the industry regulator. Santander retained top spot in total assets.

--Editors: James Attwood, Philip Sanders

To contact the reporter on this story: Randall Woods in Santiago at

To contact the editor responsible for this story: David Papadopoulos at

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