Banco de Chile (BCH) 2013 Q1 法說會逐字稿

Good morning, everyone, and welcome to Banco de Chile's first quarter 2013 results conference call. If you need a copy of the press release issued yesterday, it is available on the Company's website at www.bancodechile.com (sic).

Today with us, we have Mr. Pedro Samhan, Chief Financial Officer, and Mr. Daniel Galarce, Acting Investor Relations Manager.

Before we begin, I would like to remind you that this call is being recorded and that the information discussed today may include forward-looking statements regarding the Company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the Company's press release regarding forward-looking statements.

I will now turn the call over to Pedro Samhan to begin. Please go ahead, sir.

Thanks, Maria. Good afternoon. It is a pleasure for me to share with you our comments of Banco de Chile's first quarter 2013 financial results. Joining me in this call is Mr. Daniel Galarce, Acting Investor Relationship Manager, who will follow me in presenting our quarterly report today.

As a reminder, a link to the slide presentation is available on our web page, www.bancochile.com, within the Investor Relations tab.

To begin, please turn to slide number 2 for a summary of the key highlights of this quarter. First of all, I would like to mention that we have continued to see positive economic figures, however slowing to a level that is closer to long-term rates in terms of GDP, (inaudible) demand, investment, et cetera.

This slowdown has also been seen in loan growth across the banking industry, which has been supplemented by stricter credit lending conditions (inaudible).

As for our results, we reported earnings of CLP121 billion for the first quarter of 2013, or CLP1.32 per share, [and we will see the clear is supported by service reports, the core benefit opportunities, and division costs and risk management].

Also worth noting is that during first quarter 2013, we completed the capital increase that began at the end of 2012. This translated into gross proceeds above $500 million.

Lastly, it is important to mention that we also had an excellent quarter when compared to the largest banks in the industry, by ranking first among others in net income, in total loans, and in return on average capital.

Now, to continue with the presentation, I would like to introduce Daniel, who will show you the key factors explaining our financial performance for the first quarter 2013. Daniel, please go ahead.

Thank you, Pedro.

Please turn to slide number 3 for our economic review. During the first quarter of 2013, the economy reduced its pace of growth, achieving a GDP expansion of 4.4% year over year due to a deceleration in aggregate demand and an [external] scenario that remains weak. This moderate slowdown was [expected by] (inaudible), and this is aligned with long-term growth potential.

Nevertheless, the Chilean economy maintains strong fundamentals, which have led market analysts to possibly review their GDP growth expectations for 2013. According to the last expectation survey conducted by the central bank, Chilean economy could grow around 5.1% this year. We share the optimistic view regarding the Chilean economy, based on the solid trends made by the aggregate demand and positive confidence for the economic outlook held by household and enterprises, as well as excellent conditions in the labor market, reflected by an unemployment rate of 6.2% as of March 31, 2013. We believe these market conditions should not considerably change over the coming quarters.

Regarding inflation, CPI accumulated an increase of [0.7%] during the first quarter 2013, but only 0.13% when measured [as liberation of the US]. On a yearly basis, CPI remained stable, with an annual expansion of 1.5%, mainly as a result of a decline in prices of tradable goods and the one-off effect of the [stamp] tax reduction for lending operations.

As for inflation outlook, we expect that CPI will gradually return to mid-term values, reaching an annual (technical difficulty) of about 2.5% for 2013, [bolstered] by positive figures in private demand and real wages.

Concerning monetary policy, the central bank has set the monetary policy interest rate at 5%, due to a solid expansion of [private] demand, low unemployment rate, and a stable inflation expectation. In this regard, we do not expect significant changes in the coming months.

Going forward to slide number 4, we can see the Chilean banking industry's main figures. As depicted by the first chart on the right, after a strong performance during the fourth quarter 2012, the credit expansion reduced in the first quarter 2013, growing 1.5% quarter on quarter, aligned with GDP deceleration and stricter credit conditions set by the banking industry.

Similarly, total loans show signs of slowdown on a yearly basis, by recording an 11.2% annual nominal growth as of March 2013. This figure is consistent with our expectations set at the end of 2012 and historical average [elasticity] of approximately 2 times the GDP growth.

By product, on a yearly basis, commercial loans grew 11.6%. Residential mortgage loans posted a 10.4% expansion. And, consumer loans increased 11.1%. We expect that total loans will continue expanding, aligned with local economic activity. So, we estimate an annual growth of about 12% for industry total loans at the end of 2013.

As for results in the first quarter, net income decreased 23% and 12% on a quarterly and yearly basis, respectively. The main drivers of this drop were the lower (inaudible) posted in the first quarter 2013, which moderated growth in operating revenues, as well as higher (inaudible) charges that translated into a rate of loan loss provisions to average loans of 1.35% in the first quarter 2013, above the 1.31% and 1.34% shown in the fourth quarter 2012 and the first quarter 2012, respectively. This situation was associated with a (inaudible) in the overall loan portfolio.

Because of the decrease in earnings and also due to the important expansion of 15.4% in equity across the industry, ROE reached 12% in the first quarter 2013, [which was the same as a 378-bps reduction when compared to the first quarter 2012 figures].

In coming quarters, especially during the second half of the year, we expect the banking system net income to [increase] based on normalized inflation, loan growth, and stable credit risk [charges] as a result of positive macroeconomic figures.

On the next slide, number 5, we show a snapshot of Banco de Chile's main figures for the first quarter in comparison with the fourth quarter 2012 and a year earlier.

Although we will analyze these figures in more detail, I would like to highlight the following elements regarding our quarterly performance -- a loan book that grew 8% year on year and fostered the increasing revenues by maintaining a balanced risk-return relationship; total operating revenues that rose 2% annually, despite a scenario of low inflation, measured as (inaudible) variation, and [declining term gapping] opportunities; provision for loan losses that increased 6% year on year and kept consistency with a larger loan portfolio and greater mix of retail loans; operating expenses that remained flat year on year, despite a larger customer base and an increasing (inaudible); a higher effective tax rate due to the increase in the corporate tax rate that was passed by law in 2012.

In summary, our results were flat on a year-on-year basis, demonstrating that a consistent commercial strategy that selectively prioritizes the (inaudible) business segment, along with solid risk and cost control policies, have permitted us to cope with less favorable market variables such as low inflation and flat interest rate (inaudible).

In detail, on slide 6, we show a breakdown on operating revenues. As you can see, our customer revenues, which comprise interest income from loans, deposits, and net fee income, have increased consistently during the last four quarters, from CLP258 billion in the first quarter 2012 to CLP282 billion in the first quarter 2013, representing a 9.3% annual increase.

This annual advance was principally accounted by a 9% annual increase in average loans that was obtained by a careful commercial strategy intended to privilege growth in more profitable segments and then keeping a (inaudible) rich retail relationship in our loan book.

Similarly worth mentioning is the 9% annual increase in average non-interest bearing current accounts and demand deposits, which provided us with an [advantageous] resource. Besides, net fee income offered a condition of a stable income source, by increasing 2% year on year.

Conversely, non-customer revenues which are mainly composed of income from the contribution we generate by managing the Bank's (inaudible) and currency [mix-matches] on our balance sheet, as well as trading activities executed by our Treasury, decreased sharply due to the lower contribution from our net asset position [indexed] to the US, as this [currency recorded an] operation of only 0.13% this quarter, as compared to the 1.1% posted in the first quarter 2012, and also because of a lack of (inaudible) [gapping] opportunities caused by a flat yield curve. And, to a lesser extent, revenues from the management of our investment portfolio also (inaudible) as compared to the first quarter 2012, finally as a result of unfavorable (inaudible) in the (inaudible) that affected our positions in derivatives.

Consequently, non-capital revenues totaled CLP62 billion in the first quarter 2013, which was CLP18 billion less than the same period last year.

Moving forward to slide 7, we can see the evolution of our loan loss provisions broken down by business segment. As depicted by the chart on the left-hand side, loan loss provisions amounted to CLP50 billion in the first quarter 2013, versus CLP47 billion reported a year earlier. This CLP3 billion increase, or 6%, has mainly to do with our strategic priority of growing in retail loans. This [final] increase was partially offset by better than usual wholesale provisions related to an upgrade in credit qualifications of a specific customer, which resulted in an allowance relief of CLP8.6 billion during this quarter.

As for our credit risk indicators, as shown by the chart on the right-hand side, we have continued to record good asset quality. Actually, our ratio of loan loss provisions to average loans decreased from 1.08% to 1.05%, which continues to compare us favorably to [our Chilean 11 peers].

This improving trend can also be seen in our total past-due loans ratio which moved from 1.15% in the first quarter 2012 to 1.06% in the first quarter in 2013. The improvement in delinquent loans was pointed out by all major product lines and allowed us to post a coverage ratio above 200% that significantly outperforms the levels posted by all of our peers.

It is important to mention that on a quarter-to-quarter basis, NPLs increased due to seasonal effects, as customers generally have worse payment behavior during summer months than other months of the year.

Our outstanding asset quality figures, which reflect the Bank's prudent and effective risk approach, are the result of well-designed risk policies and processes that combine strict admission criteria, close (inaudible) monitoring, and effective and reinforced collection processes. Without a doubt, the financial resources that we have invested in this area together with increased staff have allowed us to achieve the highest operating margin net of credit risk expenses within our peer group. This topic along with our strong earnings generating capacity, [strength of] capital adequacy, and diversified loan portfolio are the basis for our excellent international credit rating which, among others, has been a key element in our aim of [product] diversification.

Our slide number 8 provides with an overview of our operating expenses. As demonstrated by the chart on the right-hand side, our operating expenses have recorded a flat trend over the last five quarters, also posting a slight 0.5% annual decrease as compared to the first quarter 2012. The trend in operating expenses is explained by controlled personnel expenses in spite of a mild rise in headcount in our commercial and collection areas. This is especially significant if you know that our loan book has grown by 8% year over year, while our customer base has enlarged by 7% within the same period.

Administrative and non-operation expenses also grew quite controlled, increasing only CLP2 billion year over year, largely due to greater expenses on collection duties, terminations, and other general expenses.

Also, we recorded a year-on-year drop of 32% in other operating expenses, mainly due to (inaudible) provisions of CLP5.3 billion set in the first quarter 2012.

Regarding efficiency, our cost-to-income indicator improved from 46% in the first quarter 2012 to 44.9% in the first quarter 2013. This figure also compares very favorably to the 50.8% posted by the industry, on average. We [can detect] two positive forces benefitting our efficiency ratio, namely our income generating capacity and our cost control discipline. The former is the result of a focused business growth oriented to increase our penetration of profitable segments while maintaining a [strict] risk-return relationship.

In the same line, we have been able to build a robust and stable fee income base that relies on comprehensive financial service offerings.

This strategy is also backed by a significant competitive advantage in terms of funding costs.

Regarding our cost control discipline, we can mention -- the economies of scale that have arisen from our growth in the retail business segment, which has permitted us to take advantage of available capacity in our branch network and back office procedures; [profitability] gains in sales based on a consolidated CRM system; as well as implementation of a prudent management information system for expenses; and a culture oriented to cost control that has been gradually adopted across the corporation.

During the first quarter 2013, as we're moving on to slide number 9, you will see the evolution of our loan portfolio. During the first quarter 2013, we surpassed the threshold of CLP19 trillion, a figure that permitted us to retake the leading position in the Chilean banking industry in total loans, with a market share of 19.1%, excluding operation of subsidiaries abroad.

Expansion of our loan book has been [driven by] a long-term strategy which focuses on profitable growth and compels us to conduct a selective commercial approach in order to ensure a balanced risk-return relationship in all of our lending activities. So, although our loan expansion of 8% year over year may seem modest, we think it is completely consistent with our strategy to privilege the retail segment and carry out commercial transactions that are in line with our net operating margins.

As for our retail segment, as seen on the chart on the left-hand side, during the first quarter 2013, we have continued to grow at double-digit rates in individual loans by recording a 13% annual expansion. This positive outcome is the result of a consistent and focused business strategy that is sustained by competitive advantages that we have been to build and preserve over time. In this regard, we believe that our corporate reputation and well respected brand, our large customer base and distribution network, proven risk management policies, and a large business scale are key attributes that allow us to suitably compete in personal and SME banking segments.

As for the latter, our total loans granted to SMEs grew well above the average of the total loan [growth] by recording an annual expansion of 14%, reflecting the Bank's consistent focus on this segment through the implementation of innovative financial solutions that comprise a specialized area into the corporation, specific account officers and sales force, as well as improved and tailored credit [processes]. Also, we have been very proactive in taking advantage of government-backed guarantees for SMEs, which reduce the credit risk exposure to this segment. As a result, SME loans have become increasingly important in our portfolio of commercial loans, rising from 17% share three years ago to 21% in the first quarter 2013.

Overall, during the last 12 months, we have increased the retail segment proportion from 49% to 51% of our total loan portfolio. We estimate a similar growing trend for the future given the positive outlook in consumption fundamentals and private and public policies oriented to strengthen entrepreneurship through the creation of new SMEs.

In terms of our wholesale segment, after a moderate slowdown in total loans during the last year, the segment returned to an upward trend in business activities, which is reflected by a loan book growing 4% year over year in the first quarter 2013 and, more importantly, by a 2% increase quarter on quarter. The lower pace in the wholesale segment in relation with the dynamism displayed by the retail segment was the result of our commercial decisions made in order to pursue a suitable risk-return (technical difficulty) in our wholesale portfolio, in our whole portfolio.

In this regard, worth noting are the forces behind the wholesale market, where banks are facing significant competition from public and private debt markets that have become attractive funding sources for Chilean large companies and corporations, given the international financial environment. As a result, lending spreads in this segment, especially among corporations, have turned narrower, which has led us to focus on [being a] loan growth center in medium and large companies with annual sales between [CLP1.06 billion] and CLP30 billion, in which we have grown 11% in the last 12 months.

On slide number 10, we show a breakdown on liabilities and importance that we assign to our leadership in current account deposits, which provide us with a strong competitive advantage over our peers.

Regarding our funding, worth mentioning are the changes experienced by our financial structure, particularly in terms of the large increases of (inaudible) in terms of our total liability, which turned from 11% into 15% in the last 12 months. As we have commented in previous quarters, we have been very active in this market, placing bonds [of $3.2 billion] locally and $1.1 billion internationally since December 2010. These actions have [generated] to diversify our funding sources and maintain a competitive course of funding and improve our liquidity ratios by (inaudible) of our liabilities.

More importantly, these initiatives have been executed within favorable market factors, as we have taken advantage of the liquidity present in the international markets that have translated into low interest rates, all of which has been amplified by our excellent business model and top-tier credit rating from Standard & Poor's and Moody's that have permitted us to be subject to very attractive risk premiums.

As for our funding from non-interest bearing current account deposits, as you can see on the right-hand side, we continue to rank first in the Chilean banking industry, and well above our peers, by holding a 24% market share. Another important aspect to note is that we have by far the largest mix of individuals in this [matter], representing 38% of our total current account deposits, substantially above all of our competitors.

On slide 11, we show the main highlights of the equity offering that we recently completed. As mentioned in previous calls, this equity offering began late 2012 and, after two preemptive right offering periods, it was completed during the month of March 2013. Therefore, we successfully placed all of the shares offered, equivalent to approximately 3.9 million Banco de Chile (inaudible) shares that permitted us to raise capital for an amount of approximately CLP253 billion, equivalent to about $530 million.

This equity offering allowed us to increase our total capital ratio by about 1.2%, all things equal, which will enable us to support our expected business growth within the mid-term under the current regulatory standards.

This capital increase is part of a comprehensive capital strategy that also comprises earnings retention and recognition of inflation effects on our shareholders' equity. In this regard, this offering has been recently supplemented by the retention of approximately CLP86 billion, corresponding to 30% of our 2012 distributable net income.

As a result, in the first quarter 2013, we significantly improved our capital adequacy (inaudible) by adding 122 bps to our Tier I ratio and 74 bps to our BIS ratio, as compared to the figures recorded a year earlier. Also, the mentioned capital increase process allowed us to augment the free float of our stocks by almost 200 bps, which permit us to deepen their liquidity and make them more attractive to Chilean and foreign investors.

Now, to finish up, Pedro Samhan will go over the solid and consistent business strategy that has permitted us to outperform our peers in many different indicators, as demonstrated on the next slide, number 12.

Pedro, please go ahead.

Thank you, Daniel. Let me summarize the main factors that explain our successful financial performance. First of all, as shown by this chart on the upper-left hand, our net operating margin, measured as operating revenue over average interest earning assets, reached 6.3% at the end of the quarter, above all of our competition.

Nevertheless, [it is clear that at present] that we still have space to [continue] becoming a more retail-focused bank and, therefore, there is room to consider increasing this figure.

In loan loss provisions to average loans, upper right-hand chart, we obtained the best figures among our peers, reaching 1.05%. Thus, our net interest margin, net of loan losses, is significantly higher than all of our main competitors, thanks to a sound business model and a prudent credit risk approach.

In terms of cost to income, we significantly closed the gap with our main competitor this quarter, posting a figure of 44.9%, or 60 bps higher than their ratio. This ratio has been achieved through projects that aim [at our] objective to increase productivity in our branches, (inaudible), (inaudible), and (inaudible).

More importantly, as mentioned earlier, this also has to do with a notable commercial strategy that has resulted in unparalleled income generation capacity based on selective loan growth, (inaudible) risk-return relationship, a comprehensive portfolio of prepaid services, and a very favorable (inaudible).

As a result, the net income reached (inaudible) of our peers, with an impressive market share of 32% and a return on average equity of 20% in the first quarter 2013.

All these indicators clearly demonstrate our ability to effectively [implement] our business strategy by growing our retail portfolio, increasing profitability of our wholesale segment, controlling operating expenses effectively, and maintaining a prudent risk approach.

Now, if you have any questions, we would be happy to answer them.

Thank you. The floor is now open for questions. (Operator Instructions)

Jose Barria, Bank of America.

Daniel, thank you for hosting this call. I have two questions with regards to the performance, two lines in the outlook. The first one is with regards to loan growth. 8% year on year is slower than the system growth for the same period, and I'm wondering why that's the case and what your expectation is by year-end?

And, the second question is with regards to fee income growth. That 2% year-on-year, it seems low. I just want to understand what's driving this more muted growth in fees and what the outlook is on that line, as well?

Thank you.

Hello?

Hold on, please.

Sure.

Thank you very much for your question. Let me talk about loans first. In terms of loans, we mentioned we want to grow, and we [are ready to continue] gaining some market share, but always with a very reasonable risk-return equation, because we don't want to grow just for growing. It's not an objective by itself. So, in terms of loans, we expect the nominal [sale] for this year to be in the range of 11% to 12%.

During the last period of time, if you compare our growth with some period before, we don't -- we not necessarily are in the first place in terms of the growth for the whole year. However, we were able to retain the number first, in terms of total market share in lending.

In terms of (inaudible), it [didn't] the last time. One of the things that has affected our growth is the (inaudible) our book in the different (inaudible), like the (inaudible), like the (inaudible). So, (inaudible), we have suffered the impact of the clients going on to take more, for example, fixed-income mutual fund service. That's [already] impacted our [revenue].

However, we expect that during the rest of the year, it should improve, and we expect the growth closer between 5% and 7% in nominal terms.

OK. Thank you. Can you remind us what percentage of your total fee income is coming from this fund management line?

Sorry. Are you talking about assets under management, like mutual funds?

Yes. I just want to understand what that represents, in terms of the total fees.

In terms of the total, it represents about 8%.

8%. OK. Got it.

So, really, if you look at 25%, for example, you are talking about 2% in terms of the total fees.

Perfect. OK.

[And, they are already in the total] (inaudible), representing a very [insignificant] number. So, really, you take those together is one-sixth of the total fees.

OK. Thank you very much.

You're welcome.

Diego Batista, Itau.

Hi, guys. Good morning. Actually, it's Thiago Batista. Just two questions. The first question is just regarding the [net interest income]. My question is [about the impact of inflation on your net interest income]. Is the Bank considering any measures to reduce the inflation or the US debt that you have nowadays? And, in the current scenario of [inflation this year around] is going to be lower, 2.5% this year, how much of your NII could expand this year?

And, my second question is regarding (inaudible). You have been increasing the share of retail segment in your loan book. Are you expecting any further change in your portfolio mix going forward?

Hold on, please.

Hold on.

Well, thank you for your question. Let me go over your first question, and maybe I will make that you repeat the second question afterward. But, let's start for the inflation. [As you know], inflation, not only in Banco de Chile, in the whole banking system has a very significant impact, because of the [potential] balance sheet of the Bank, where you generally have more long-term assets than long-term liabilities, [doing the gap in profits normally].

(inaudible)

So, the inflation is very, very important for the Bank and not only for Banco de Chile but also for our peers. And, we always try to measure the impact of the inflation not only in absolute terms but also in relative terms.

In terms of the net interest margin, obviously the inflation is very important because --. I cannot tell you exactly [what is] the position that we have [in terms of US is FX], but in general you have to think that the impact in terms of your total operating income of 1% of inflation could be, in a bank like Banco de Chile, because it's a very [volatile potential]. But, 1%, it could have an impact easily between CLP20 billion and CLP45 billion, or CLP40 billion. In other words, you are talking about a very significant (inaudible).

In order to make the [inflation equation] question easier, for each 0.1% of inflation, it has an impact between CLP2000 and CLP4000. So, you can take this into account and make the calculation for the NIM. The NIM, that is a ratio in terms of total interest for the Bank, we are talking about CLP150 million. You estimate about that each 0.1% -- in a yearly basis, you are talking about an impact of 1%. 1% means -- sorry. 1% means 1% of 4.7%. In other words, it's 0.047%.

(inaudible) if you can you repeat, please.

Yes, my second question is about the loan breakdown. In the last 12 months, it increases a lot, the share of individuals, or retail segment, from 48% to 51% of your loan portfolio. And, if you are expecting to continue in this movement, to increase the share of the individual segment?

Yes, we expect to continue growing more in the retail segment. Remember that it depends on the market growth, also. So, it's the market that determines how much we can grow. So, always our strategy is to gain more market share in the retail than in the wholesale market. And, here in the retail, you have the personal lending and you have the SME lending. So, we expect to continue growing as similar to past in both cases, in personal and in SME, to continue to gain market share in the future, especially in these both segments, vis-a-vis the wholesale segment in order to continue increasing our participation of the retail total lending vis-a-vis the total loans.

OK. It makes sense. Thank you.

You're welcome.

(Operator Instructions) [Nicolas Chaum], Santander.

Hi. Thank you for taking my question. I just was wondering if you could maybe share with us your view regarding the change in the regulatory (inaudible) regarding the fees, that basically you can't increase the fees charged to clients if they do not agree with that? Maybe you can share with us the impact of that? Or, maybe whether you -- how are you planning to grow [things] in fees and how are you planning to offset this?

Hold on, please.

Nicolas, I'm sorry. Let me repeat your question, if I understood well, because we talk about fees in one of the questions that you asked or some person asked before. You are asking for the fees, in what terms? In terms of how do we see the fee market growing in the future? Or, the comparison between us and the competition? I didn't understand very well your question. Will you repeat it, if it's something different to my understanding?

Yes. Basically, I'm asking how do you see your fees growing in the future regarding this new ruling, or this new regulation that you cannot increase commissions without the client basically saying that he agrees with that?

No. Let me answer your question. The fees has been impacted for different reasons during the last year. We see that in the future the fees growth should not be the same that we had before, in terms of the total market fees, because exactly what you are saying, that there are some changes in regulations.

However, if you think about specific regulations and leaving aside what is going on with the different (inaudible) in terms of commission in Banco Estado or in Banco Azul, but if we talk about the specific change in terms of fees regulations, all of this has been included in the number, because the impact in terms of (inaudible) is included, very clearly. So, in terms of the insurance, the same thing.

In other words, for the time being, there is no additional change in terms of fees. However, in the type of -- in terms of the regulation, obviously we expect that it could have some impact in the future in terms of the total fee growth of the market. However, [in that case], we expect to maintain our market share that is between 24% and 25% in (inaudible) business in the market.

OK. Thank you. And, basically, how are you planning to offset this situation, or maybe to compensate in other ways? Do you have any plans for this? Or, it's maybe too early to ask that?

No, the good thing of Banco de Chile, Banco de Chile has a very well diversified business. [We] have [8 legal levels], and most of them are related -- or, some of them are related to fee business. So, there, when something happens, in terms of one concept, you have the possibility to do something different in other concepts. So, in terms of consolidation of the total fee business, we always have the possibility to do something in order to give our position as the leader in the market in terms of fee business.

And, as you can see so far, the impact. [That was not a very low] impact in terms of the change in the regulation for the mortgage loans in terms of the insurance. Even though it has an impact, you can see we continue growing in terms of the fee business.

Thank you for your answers.

(Operator Instructions) Claudia Benavente, Scotiabank.

Hi, Pedro. Hi, Daniel. I just wanted to know if you had measured the impact of the [proposed] change in the measurement of the Consumer Price Index. How this would impact the results of the Bank, which should most probably be positive? That's it.

Well, in general --. Hi, how are you? In terms of the CPI, what we know so far that even though there was a lot of noises in the market in terms of the methodological issues regarding basically the CPI basket, you know that a special commission integrated by different economists from different sectors have realized the problem, and this could have some impact in the future. But, at the same time, they conclude based only in the preliminary analysis that the impact should not be significant, in order not to dramatically affect the inflation growth or target of the Chilean central bank.

So, we are not expecting something so different. It's difficult to think -- Claudia, it will be some sort of catch-up in terms of the CPI index calculation. So, mainly you can see the situation in that (inaudible) way, where the methodology could be changed and obviously it would have an impact in the future, but we don't expect an impact in order to make any catch-up with the problem that the methodology problem that we have in the past.

So, we are not expecting a significant impact in our (inaudible), because it would be an increase -- a significant increase in terms of the CPI.

It could have an impact, maybe, to not be more than 50 bps, at the most.

Thank you.

You're welcome.

(Operator Instructions) I'm showing no further questions at this time. I will now turn the floor back over to Banco de Chile for any closing remarks.

Thank you, Maria. Before leaving this call, I would like to highlight, stress, that we have achieved an excellent result of CLP121 billion this quarter in an unfriendly environment of inflation and interest rate yield curves, (inaudible) which (inaudible) that our strategies are bringing the expected profits.

Accordingly, I am confident that the normalized scenario in terms of the main market variables that affect our performance should permit us to continue achieving superior results in the coming quarters and make profitable our (inaudible) gradually, coming to return ratio of about 25%, but on a gradual basis, which is in line with our track record.

Thank you, again, and we look forward to discussing our second quarter financial results.

Thank you. This does conclude today's presentation. You may disconnect your line at this time, and have a nice day.

Thank you.

Thank you, Maria.