Company Reports

Narrow-moat-rated Banco de Chile reported solid second-quarter results as the bank benefits from stable credit conditions and lower cost of funds. Net revenue increased 3.1% from last year, though declined slightly sequentially to CLP 770.9 billion. On the other hand, net income fell 2.6% to CLP 323.6 billion. Despite the year-over-year decrease in net income, these results translate to a return on equity of 24.6%, well above the bank’s peers and better than its historical average. As we incorporate these results, we do not plan to materially alter our fair value estimate of $23 per ADR share. We see the shares as roughly fairly valued at the current price.

Banco de Chile’s reputation and long history in Chile have allowed it to attract a large pool of noninterest-bearing deposits, giving it a lower cost of funds than most of its rivals. This funding advantage has contributed to the bank’s impressive profitability, historically delivering returns on equity in the mid to high teens.

Narrow-moat-rated Banco de Chile reported solid first-quarter results that were largely in line with our expectations, as lower inflation adjustment income was more than offset by rising net interest income and improving economic conditions in Chile. Net revenue increased 11.1% from last year, though it declined 9.6% from a very strong fourth quarter, to CLP 780 billion. Net income increased 11.9% to CLP 297.7 billion. These results translate to a return on equity of 22.6%, well above the bank’s peers and better than its historical average. As we incorporate these results, we do not plan to materially alter our fair value estimate of $21 per ADR share. We see the shares as roughly fairly valued.

Banco de Chile’s reputation and long history in Chile have allowed it to attract a large pool of noninterest-bearing deposits, giving it a lower cost of funds than most of its rivals. This funding advantage has contributed to the bank’s impressive profitability, historically delivering returns on equity in the mid to high teens.

Narrow-moat-rated Banco de Chile reported solid fourth-quarter earnings, though results did benefit from surprisingly high inflation readjustment income, which we do not expect to persist as inflation in Chile has now fallen into the low single digits. The bank’s net revenue increased 7.2% from last year to CLP 805 billion. Meanwhile, net income increased 11% from last year and 48% from last quarter to CLP 386 billion. These results translate to a return on average equity from 30.2%, well above both the bank’s peers and its historical average. However, these strong results did benefit from temporary economic factors, and as we incorporate these results, we do not plan to materially alter our fair value estimate or $21 per ADR share for Banco de Chile.

We are lowering our Morningstar Uncertainty Rating for Banco de Chile to Medium from High as economic risks in Chile fall with inflation. After reaching a peak of over 14% in 2022, inflation in Chile has fallen sharply, reaching 4.8% in November. While Banco de Chile did benefit from high inflation, due to a large portion of the bank’s assets being directly indexed to inflation, high interest rates have pressured its net interest margin in 2023 through higher cost of funding. With inflation now in the midsingle digits, there is room for the Chilean Central bank to continue to cut interest rates, removing this pressure on the bank’s results and raising prospects that Chile will manage a soft landing from inflation.

Banco de Chile’s reputation and long history in Chile have allowed it to attract a large pool of noninterest-bearing deposits, giving it a lower cost of funds than most of its rivals. This funding advantage has contributed to the bank’s impressive profitability, historically delivering returns on equity in the mid to high teens.

Narrow-moat-rated Banco de Chile reported decent third-quarter results, despite falling inflation acting as a headwind to the bank’s earnings. Net revenue decreased 12.4% from last year and 8.8% sequentially to CLP 681.9 billion. Meanwhile, net income fell 23.4% from last year to CLP 260 billion. Despite the decline, these earnings still translate to a return on average equity of 21%, an excellent result as Banco de Chile is coming off a cyclical high in profitability. As we incorporate these results, we do not expect to materially change our $21 fair value estimate for Banco de Chile. We see the shares as roughly fairly valued.

Banco de Chile’s reputation and long history in Chile have allowed it to attract a large pool of noninterest-bearing deposits, giving it a lower cost of funds than most of its rivals. This funding advantage has contributed to the bank’s impressive profitability, historically delivering returns on equity in the mid to high teens.

Narrow-moat-rated Banco de Chile reported solid results despite difficult economic conditions in Chile, as the bank continues to materially outperform its closest peers. Net revenue decreased 11.6% from last year but rose 6.5% sequentially to CLP 748 billion. Net income fell 23% from last year, which translates to a return on average equity of 27.6%. There was little in the results to materially change our thesis behind Banco de Chile, and we do not plan to materially alter our fair value estimate of $21 per ADR share.

Narrow-moat-rated Banco de Chile reported decent first-quarter results as the bank continues to outperform its peers in a difficult economic environment. Net revenue increased 2.6% from last year but decreased 12.3% sequentially to CLP 703 billion. Net income fell 8.8% from last year, which translates to a return on average equity of 21.6%. As we incorporate these results, we do not plan to materially alter our fair value estimate for Banco de Chile of $21 per ADR share.

Banco de Chile’s reputation and long history in Chile have allowed it to attract a large pool of noninterest-bearing deposits, giving it a lower cost of funds than most of its rivals. This funding advantage has contributed to the bank’s impressive profitability, historically delivering returns on equity in the mid to high teens.

Narrow-moat-rated Banco de Chile reported solid fourth-quarter results as it continues to navigate Chile’s economic climate better than some of its peers. Net revenue increased 15.2% year over year and 3.5% sequentially to CLP 805.7 billion. Earnings per share increased 20.8% from last year to CLP 3.43, which translates to a return on average equity of 31.4%, well above the bank’s long-term average. As we incorporate these results, we do not plan to materially alter our fair value estimate of $19.50 per ADR.

Banco de Chile’s reputation and long history in Chile have allowed it to attract a large pool of noninterest-bearing deposits, giving it a lower cost of funds than most of its rivals. This funding advantage has contributed to the bank’s impressive profitability, historically delivering returns on equity in the mid to high teens. Like its competitors, the bank is making a pivot to more digitally integrated offerings and expanding efforts to reach a large population of unbanked Chileans. While the bank’s efforts in these spaces have found initial success, especially the highly successful introduction of "Cuenta Fan," Banco de Chile will need to continue to invest to position itself for success, particularly as it is not the only major bank in Chile looking to bolster its digital deposit base.

Narrow-moat-rated Banco de Chile reported solid results as the company continues to benefit from high inflation in Chile. The bank reported net revenue of CLP 778.2 billion, up 46.5% from last year but down 8.1% from last quarter. Banco de Chile's earning per ADR share of CLP 3.36 fell 21.3% from last quarter but were still up 88.8% year over year. These results translate to a return on equity of 30.09%, still well above the bank's historical average. We had expected Banco de Chile's inflation tailwind to moderate from last quarter and note that the bank had a considerably stronger quarter than its peers. That said, our thesis for the company was not altered by this quarter's results, and we do not plan to change our $18.50 fair value estimate.

Narrow-moat-rated Banco de Chile reported strong second-quarter results as the bank benefits from high inflation and rising interest rates in Chile. Net revenue increased 72.5% from last year and 23.6% from last quarter to 846.8 billion CLP. Additionally, earning per ADR share of $0.93 were 111% higher than last year and translates to a return on average equity of 39.9% for the firm, far above the bank's average performance. We had expected Banco de Chile to produce strong results with inflation as a tailwind, and as we incorporate these results, we do not plan to materially alter our $18.50 fair value estimate for the bank.

As we incorporate recent exchange rate movements and increased economic uncertainty in Chile, we are reducing our fair value estimate for narrow moat Banco de Chile from $23 per ADR share to $18.50. The bulk of this decrease comes from a change in our assumed exchange rate from CLP 784 per U.S. dollar to CLP 942 as of July 5, 2022. Our fair value estimate decreased an additional $0.30 due to higher near-term credit costs, as the Chilean economy cools in the face of rapid interest rate increases.

Banco de Chile’s reputation and long history in Chile have allowed it to attract a large pool of noninterest-bearing deposits, giving it a lower cost of funds than most of its rivals. This funding advantage has contributed to the bank’s impressive profitability, historically delivering returns on equity in the mid to high teens. We anticipate continued profitability for Banco de Chile, especially as the bank stands to benefit from higher inflation and interest rates in Chile. Like its competitors, the bank is making a pivot to more digitally integrated offerings and expanding efforts to reach a large population of unbanked Chileans. While the bank’s efforts in these spaces have found initial success, especially the highly successful introduction of "Cuenta Fan," Banco de Chile will need to continue to invest to position itself for success, particularly as it is not the only major bank in Chile looking to bolster its digital deposit base.

Narrow-moat-rated Banco de Chile reported strong first-quarter earnings as the firm benefited from high inflation and its impact on the bank’s net interest income. On the other hand, a more subdued Chilean economy led to lower loan growth, a trend we expect will persist in 2022. Banco de Chile’s revenue increased 43.5% from last year to $685.2 billion CLP. Earnings per share of $2.89 CLP was up 80.6% year over year and 2.8% sequentially. These results translate to a return on equity of 27.1%, well above Banco de Chile’s historical mid- to high-teens range. While these are good results, they do not materially change our thesis for Banco de Chile, and we are maintaining our $23 fair value estimate.

Banco de Chile’s reputation and long history in Chile have allowed it to attract a large pool of noninterest-bearing deposits, giving it a lower cost of funds than most of its rivals. This funding advantage has contributed to the bank’s impressive profitability, historically delivering returns on equity in the mid to high teens. We anticipate continued profitability for Banco de Chile, especially as the bank stands to benefit from higher inflation and interest rates in Chile. Like its competitors, the bank is making a pivot to more digitally integrated offerings and expanding efforts to reach a large population of unbanked Chileans. While the bank’s efforts in these spaces have found initial success, especially the highly successful introduction of "Cuenta Fan," Banco de Chile will need to continue to invest to position itself for success, particularly as it is not the only major bank in Chile looking to bolster its digital deposit base.