Banco de Chile SA :BCH-US: Earnings Analysis: Q2, 2017 By the Numbers : September 8, 2017

Banco de Chile SA reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Banco de Chile SA – Banco Bilbao Vizcaya Argentaria, S.A. Sponsored ADR, Banco Santander-Chile Sponsored ADR, Itau Corpbanca Sponsored ADR, Credicorp Ltd., Citigroup Inc, Bank of Montreal, Banco Santander S.A. Sponsored ADR, Bancolombia S.A. Sponsored ADR Pfd, Unione di Banche Italiane SpA Unsponsored ADR and Banco Macro SA Sponsored ADR Class B (BBVA-US, BSAC-US, ITCB-US, BAP-US, C-US, BMO-US, SAN-US, CIB-US, BPPUY-US and BMA-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 699.00 million, Net Earnings of USD 239.73 million.
  • Net interest income margins widened from 64.13% to 69.50% compared to the same period last year.
  • Year-on-year change in operating cash flow of 134.08% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 699 662.98 678.72 704.99 747.7
Revenue Growth (%YOY) -6.51 -11.09 2.91 -1.42 -0.61
Earnings (mil) 239.73 214.19 186.05 218.5 224.97
Earnings Growth (%YOY) 6.56 11.46 -6.48 11.85 -16.5
Net Margin (%) 34.3 32.31 27.41 30.99 30.09
EPS 1.44 1.28 1.11 1.31 1.34
Return on Equity (%) 5.42 4.94 4.31 5.11 5.38
Return on Assets (%) 1.99 1.8 1.58 1.86 1.93

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Market Share Versus Profits

Revenues History
Earnings History

BCH-US‘s change in revenue this period compared to the same period last year of -6.51% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that BCH-US is holding onto its market share. Also, for comparison purposes, revenues changed by 5.43% and earnings by 11.92% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by the following factors: (1) Year-on-year improvements in net interest income margins from 64.13% to 69.50% and (2) improvement in loan loss provisions. As a result, net interest income after provisions margins improved from 45.61% to 56.18% compared to the same period last year. Loan loss provisions as a percentage of net interest income were 19.17% this period and 28.88% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

BCH-US‘s change in operating cash flow of 134.08% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 32.93% to 38.25% and (2) one-time items. The company’s pretax margins are now 40.58%, compared to 35.33% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

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Company Profile

Banco de Chile SA engages in the provision of banking services. It operates through the following segments: Retail Banking; Wholesale Banking; Treasury and Money Market Operations; and Operations through Subsidiaries. The Retail Banking segment consists of consumer loans, commercial loans, current accounts, credit cards, credit lines and residential mortgage loans. The Wholesale Banking segment includes corporate clients and large companies where the product offering focuses on commercial loans, current accounts, cash management services, debt instruments, foreign trade, derivative contracts and leases, as well as corporate finance transactions. The Treasury and Money Market Operations segment comprises of the securities portfolio, derivatives positions, and currency trading. The Operations through Subsidiaries segment corresponds to companies and corporations controlled by the bank. The company was founded on October 28, 1893 and is headquartered in Santiago, Chile.

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