Banco Santander Chile Announces First Half and Second Quarter 2007 Earnings

SANTIAGO, Chile, July 27 /PRNewswire/ --

-- In 2Q 2007, net income increased 11.5% QoQ and 0.2% YoY, totaling Ch$80,487 million (Ch$0.43 per share and US$0.84/ADR). -- ROAE in 2Q 2007 reached 25.8%, compared to 22.4% in 1Q 2007 and 28.7% in 2Q 2006. -- Core revenues up 19.0% QoQ and 12.3% YoY. -- Net interest margin reached a record level of 5.5%, up 50 basis points YoY, as the better earnings mix enhanced margins. Net interest income increased 23.3% QoQ and 10.9% YoY. -- Net fee income increased 4.4% QoQ and 18.5% YoY driven by a rise in product usage and higher asset management fees. -- Solid growth of client base and distribution network. The total number of clients increased 14.5% YoY to 2.6 million and the Bank opened 20 new branches in the 1H 2007, expanding its branch network to 417 offices. -- Total loans increased 2.7% QoQ and 12.4% YoY. Consumer loans increased 18.8% YoY while residential mortgage loans grew 20.2% and lending to SMEs increased 18.7%. -- The funding mix improved in 2Q 2007. Total customer funds increased 3.8% QoQ and 16.1% YoY, led by the 5.2% QoQ and 17.7% YoY rise in average non-interest bearing demand deposits. Assets under management in the Bank's mutual fund subsidiary increased 12.9% QoQ and 42.2% YoY. -- Efficiency ratio reached 36.0% in 2Q 2007. -- Coverage of past due loans reached 200%. QoQ growth of adjusted provision expenses stabilizing. In 2Q 2007, YoY growth of provision expenses reached 107.8%. -- Net income increased 5.5% in 1H 2007 compared to 1H 2006 and totaled Ch$152,676 million (Ch$0.81/share and US$1.60/ADR). Growth was led by a 16.7% increase in core revenue. The net interest margin in 1H 2007 reached 5.1%, compared to 4.7% in 1H 2006. ROAE was 24.1% and efficiency improved to 36.9% in 1H 2007.

Banco Santander Chile (NYSE: SAN) announced today its unaudited results for the first half and second quarter of 2007. These results are reported on a consolidated basis in accordance with Chilean GAAP(1,2) in nominal Chilean pesos.

In the second quarter of 2007, net income totaled Ch$80,487 million (Ch$0.43 per share and US$0.84/ADR), increasing 11.5% compared to 1Q 2007 (QoQ) and 0.2% compared to 2Q 2006 (YoY). Core revenues (net interest income and fees) increased 19.0% QoQ and 12.3% YoY, as the Bank continued to show strong results in its retail banking business.

In the quarter, the Bank focused on increasing its margins and profitability by raising its profitability targets, taking into consideration the different risk levels of the segments attended. As a consequence, Net interest income increased 23.3% QoQ and 10.9% YoY, driven by solid margin expansion, the higher growth of retail lending activities and the positive evolution of non-interest bearing liabilities.

In 2Q 2007, net interest margin reached a record level of 5.5%, increasing 110 basis points QoQ and 50 basis points YoY. Total loans increased 2.7% QoQ and 12.4% YoY, with stronger growth in retail segments. Consumer loans expanded 1.1% QoQ and 18.8% YoY. Residential mortgage loans increased 4.5% QoQ and 20.2% YoY. Commercial loans increased 1.2% QoQ and 5.4% YoY, led by an increase in lending to high yielding Small and Mid-sized companies (SMEs).

The funding mix improved in the 2Q 2007. During the quarter, the economy grew at a faster pace than expected, fuelling an increase in inflation and a rise in short-term interest rates. Despite rising rates, the average balance of non-interest bearing checking accounts increased 5.2% QoQ and 17.7% YoY.

Net fee income increased 4.4% QoQ and 18.5% YoY in 2Q 2007. Insurance brokerage fees increased 3.4% QoQ and 32.8% YoY, reflecting the strength of the Bank's bancassurance business. Assets under management grew 12.9% QoQ and 42.2% YoY, fuelling asset management fee growth, which expanded 17.3% QoQ and 46.1% YoY in the quarter. Credit card fees increased 3.1% QoQ and 13.7% YoY, as usage of credit cards continues to expand. ATM fees increased 2.2% QoQ and 11.2% YoY in line with the growth of the Bank's ATM network.

In 2Q 2007, the Bank's net provision expenses increased 24.5% QoQ and 107.8% YoY. The QoQ rise in provision expense was mainly due to the one-time net pretax gain of Ch$7,754 million recognized in 1Q 2007 due to the sale of charged-off loans, the implementation of an improved provisioning model for consumer loans and extraordinary provisions in the middle-market. On an adjusted basis, provision expense increased 2.6% QoQ, mainly due to higher provisions in the middle-market. Net provisions in retail banking, on an adjusted basis, decreased 3.3% QoQ. As mentioned in previous releases, provisions were expected to increase due to the growth of lending to higher yielding and riskier retail segments and the upgrading of provisioning models and credit scoring in order to maintain provisioning and coverage standards up to date with the expansion of this profitable business. As a consequence, the Bank continues to display sound asset quality indicators. Coverage of past due loans reached 200% at June 2007. The past due loan ratio as of June 2007 reached 0.84% compared to 0.80% as of March 2007 and 0.79% in 2Q 2007. The expected loan loss ratio (reserves for loan losses over total loans) remained steady at 1.68%, compared to 1.64% in 1Q 2007.

Costs remain under control. In 2Q 2007, operating expenses increased 9.4% YoY. The efficiency ratio reached 36.0% in 2Q 2007, the lowest efficiency ratio among the leading banks in Chile and Latin America.

Net income increased 5.5% in 1H 2007 compared to 1H 2006 and totaled Ch$152,676 million (Ch$0.81/share and US$1.60/ADR). Growth was led by a 16.7% increase in core revenues. The net interest margin in 1H 2007 reached 5.1%, compared to 4.7% in 1H 2006. ROAE was 24.1% in 1H 2007 and the efficiency ratio was 36.9%. The ROAE for the Chilean banking system in the same period was 16.3% and the efficiency ratio reached 51.2%. Net income in the Chilean banking system increased 0.2% in 1H 2007 compared to 1H 2006 (a decrease of 2.2%, excluding Santander).

(1) Safe harbor statement under the Private Securities Litigation Reform Act of 1995: All forward-looking statements made by Banco Santander Chile involve material risks and uncertainties and are subject to change based on various important factors which may be beyond the Bank's control. Accordingly, the Bank's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Such factors include, but are not limited to, those described in the Bank's filings with the Securities and Exchange Commission. The Bank does not undertake to publicly update or revise the forward-looking statements even if experience or future changes make it clear that the projected results expressed or implied therein will not be realized. (2) The exchange rate used for translating Ch$ to US$ was Ch$527.55 per US$ dollar. All figures presented are in nominal terms. Historical figures are not adjusted by inflation.

INSTITUTIONAL BACKGROUND

As per latest public records published by the Superintendency of Banks for June 2007, Banco Santander Chile was the largest bank in Chile in terms of loans and deposits. The Bank has the highest credit ratings among all Latin American companies with an A rating from Standard and Poor's, A+ by Fitch and an A2 rating from Moody's, which are the same ratings assigned to the Republic of Chile. The stock is traded on the New York Stock Exchange (NYSE: SAN) and the Santiago Stock Exchange (SSE: Bsantander). The Bank's main shareholder is Santander, which controls 76.71% of Banco Santander Chile.

Santander (SAN.MC, STD.N) is the largest bank in the euro zone by market capitalization and seventh in the world by profit. Founded in 1857, Santander has EUR 833,873 million in assets and EUR 1,000,996 million in managed funds, 67 million customers, 10,852 branches and a presence in 40 countries. It is the largest financial group in Spain and Latin America, and is the sixth largest bank in the United Kingdom, through its Abbey subsidiary, and is the third largest banking group in Portugal. Through Santander Consumer Finance, it also operates a leading consumer finance franchise in Germany, Italy, Spain and nine other European countries. In 2006, Santander registered EUR 7,596 million in net attributable profits, an increase of 22% from the previous year.

In Latin America, Santander manages over US$250 billion in business volumes (loans, deposits, mutual funds, pension funds and managed funds) through 4,370 offices. In 2006, Santander reported US$2.866 million in net attributable income in Latin America, 29% higher than the prior year.

CONTACT INFORMATION Robert Moreno Manager Investor Relations Department Banco Santander Chile Bandera 140 Piso 19, Santiago, Chile Tel: [phone] Fax: [phone] New Email: [e-mail] Website: http://www.santander.cl

Web site: http://www.santander.cl