Banco Santander Chile (BSAC) 2008 Q3 法說會逐字稿

Please stand by, we are about to begin. Good day everyone, and welcome to our third quarter 2008 earnings release conference call. Today's call is being recorded.

At this time for opening remarks and introduction, I would like to turn the call over to Mr. Raimundo Monge. Please go ahead, sir.

Thank you very much. Good morning, ladies and gentlemen. Welcome to Banco Santander-Chile's third quarter 2008 results conference call. This is Raimundo Monge, Director of Strategic Planning, and with me today is Robert Moreno, Manager of Investor Relations.

Thank you for attending today's conference call, in which we will discuss the Bank's recent results and strategy. Afterwards, we will be happy to answer your questions.

Next two slides, you should be in page 3 of the webcast. In the third quarter of 2008, net income attributable to shareholders totaled CLP96,497 million, that is CLP0.51 per share, and $0.96 per ADR, increasing 23% quarter-on-quarter, and 13.3% year-on-year.

Core revenues, that is net interest income plus fee income, increased 11.5% Q-on-Q and 24% year-on year. These strong operational results were partially offset by a larger loss from price level restatement and higher operating costs compared to 3Q '07, which were negatively impacted by high inflation.

In the nine-month period ended September 30, 2008, net income attributable to shareholders increased 5.3% year-on-year, that is CLP1.33 per share, and $2.5 per ADR.

Year-to-date growth was led by a 25.4% increase in core revenues. Net interest income increased 29.1% and fee income 12.5% year-on-year. The net interest margin in the first nine months of '08 reach a record level of 6.2%, compared with 5.7% in the nine-month period of '07.

The efficiency ratio will reach 37.8% in the nine -- in the first nine months of '08. Net operating income increased 12.3% in the same period.

These higher operating results were partially offset by a 50.4% rise in non-operating losses, which were negatively affected by higher losses from price level restatement.

Next slide, in our previous report we outlined our strategic objective for the second half of 2008 and 2009. Results in 3Q '08 were in line with this strategic objectives, which reflect our continuous focus on expanding profitability through client-driven plain vanilla banking activities, our conservative stance toward risks, and high levels of efficiency.

These four strategic objectives are also concurrent with today's global financial crisis, and its potential effects on the future growth rates of the Chilean economy. The first point of our strategy, as you see in the slide, stresses our focus on balance sheet management as a way to continue extracting value and to drive net interest income and margins.

This is being done through a more selective growth of the loan portfolio, with higher growth in middle and upper income individuals and companies. At the same time, we have placed a special focus in keeping a strong liquidity position, improving our funding mix, and maintaining high capitalization ratios.

Finally, we have been proactive in rising spreads in order to absorb potentially high funding costs, and credit risks. Next slide, the evolution of our loans has also been concurrent with our recent strategy.

In 3Q '06, total loans increased 4.3% on a Q -- quarter-on-quarter basis, and 18.4% year-on-year. Corporate lending increased 4.8% Q-on-Q, and 17.5% year-on-year, and lending to the middle market increased 4.7% Q-on-Q and 20.2% year-on-year.

Lending to SMEs increased 4.5% Q-on-Q and 20.1% year-on-year. The Bank's solid liquidity position has helped to boost lending to corporations at attractive spreads. This is a trend we expect to continue throughout 2009.

Next slide, total loans to individuals increased 4.0% Q-on-Q and 19.3% year-on-year. As mentioned in the previous quarter earnings report, loan growth to individuals has been centered in middle and upper-income segments to improve the Bank's loan book risk profile.

Loans to upper-income individuals increased 43.5% year-on-year and lending to lower-income segments decreased 10.7% year-on-year. Next slide.

The Bank also maintained a strong structural liquidity position. Our funding strategy has also led to an increase in the average duration, which has reached 1.2 years, the duration of the liabilities, compared to 1.5 years for the duration of our assets.

This keeps the Bank from having to attract expensive short-term deposits. In 2008, we have issued more than $470 million in senior and subordinated bonds, with an average duration of 11.4 years.

Finally, our foreign funding from correspondent banks, which worldwide has become scarcer, represents 7.5% of our liabilities, with a comfortable maturity schedule.

Next slide, you should be in page 8 of the webcast. In the third quarter, inflation continued to exceed market expectations, fueling further rises in short-term interest rates, placing pressure on the banking funding costs.

In order to control funding costs, the banks actively manage -- the Bank actively managed its funding base in the quarter by extending the maturity of liabilities by issuing bonds in the market, and avoided raising expensive short-term inflation index deposits.

As a result, time deposits increased 0.2% Q-on-Q, and 15.6% year-on-year, while senior bonds issued have increased 56.7% year-on-year, and subordinated bonds 34.5% on a year-on-year basis.

Next page, the Bank also continued to maintain a healthy loan-to-deposit ratio. As of September 30, 2008, Santander-Chile loan-to-deposit ratio reached 100.2%.

This ratio excludes the portion of long-term mortgage loans [that are] funded with long-term bonds, and foreign trade loans funded through correspondent banks.

As you know, banks usually fund mortgages with issuing long-term bonds and not by funding through deposits, and secondly, most of our trade finance is a finance with a direct line from correspondent banks. So it's -- again it's not funding through deposits.

Next page, this would be on page 10. In terms of capitalization, the Bank's Basel ratio remains solid. During the quarter, the Bank issued in the local market a 117 million in subordinated bonds to further improve its capitalization ratios.

These bonds were priced at an attractive yield of 70 basis points over the Chilean Central Bank's 30-year rate. As of September 30, 2008, the Bank Basel ratio reached a solid 13.1% with a core capital ratio of 9.7%.

Next slide, it is also important to show that our high capitalization ratios are accompanied with a high return. ROE in 3Q 2008 reached 28.6%, compared to 23.2% in 2Q '08, and 26.1% in 3Q '07.

ROE reached 24.2% in the first nine months of '08, on a pre-tax basis, because we have the highest pre-tax return in the Chilean financial system, and among the largest banks, we have the healthiest capitalization ratios.

Next slide. A key point of the Bank's strategy since 2007 has been to focus on spreads in order to sustain profitability in a period of lower economic growth and to compensate for higher funding costs and provisioning levels. Loan spreads to company have also been increasing as liquidity abroad has been scarcer and more expensive.

The banks proactive management in its funding mix, despite adverse financial conditions in the market, can be observed in the evolution of the spread earns earned over deposits. These have been consistently rising since 2007, reflecting the strength of the Bank's core retail deposit base, its high credit ratings and ample long-term funding on behalf of institutional investors.

Going forward, margins could begin to descend as inflation moderates, funding cost rises, and asset mix shifts towards a higher -- a lower-risk, lower-yielding assets. As mentioned above, this is being confronted by increasing spreads and actively managing the asset and the liability mix.

Next slide, as a result of the Bank management of the assets and funding mix, coupled with rising spreads and higher inflation, in the third Q of 2008, net interest income was up 14.3% Q-on-Q and 28% year-on-year.

The Bank's net interest margin reached a record level of 7.1% in the 3Q '08 compared to 6.2% in 2Q '08 and 6.4% in 3Q '07.

Next slide. Page 14, our second strategic objective is to proactively manage all of our risks. The Bank has been taking a number of actions in order to stabilize provision expense growth in the coming quarters, following the growth in provision expense in the first half of the year.

Next slide. In the third quarter of 2008, the Bank's net provision expense increased 2.5% Q-on-Q and 52.8% year-on-year. The year-on-year rise was driven mainly by the growth of retail banking activities, higher charge-off in consumer loans due to the economic slowdown, and high inflation levels since -- in the last 12 months, and by increase in the risk of middle market segments, following [middle] levels in the past three years.

The past due loan ratio as of September 2008 reached 1.08% compared to 1.12% in 2Q '08 and 0.96% in 3Q '07. Coverage of the past due loans ratio reached 181% as of September 2008, compared to 173.2% at June 2008, and 197.2% as of September 2007.

In 3Q '08, the Bank continued to focus on loan growth in lower-risk segments in order to reduce the growth of this expense. Spreads have also been increased to cover for this higher requirement.

As a result of these measures, net interest income, after provision expense, increased 20.2% year-on-year in 3Q '08 and 27% year-to-date in September, compared to the nine month period ended on September 30, 2007, reflecting that the Bank has up to now been able to offset the rise in risks.

Next slide. The third strategic objective is to increase cross-selling. This is obviously a strategy many banks seek, but we have two very important advantages compared to our main competitors.

First of all, Santander has the largest client-base in Chile. Secondly, we have strong IT systems that are unparalleled in Chile, and that allow us -- our account -- allow our account executives to more easily cross-sell their client-base.

Next slide. As seen in this slide, Santander-Chile has the largest client-base excluding the state-owned bank in Chile. The total number of clients increased 7.2% year-on-year to 3 million clients in 3Q '08, and the amount of cross-sold clients increased 7.9% year-on-year in September 2008.

Next slide, page 18 of the webcast. As a result, net fee income increased 8.9% year-on-year in 3Q '08 in line with expansion of cross-selling and product usage. Despite this improvement, around 30% of our clients have two or more products, reflecting the high cross-selling potential of the Bank's client-base.

Going forward, the Bank is focusing on expanding cross-selling over increasing the total client-base as a way to grow efficiently and in order to keep risks under control.

Next slide. Given the pressure on cost linked to higher inflation rates, the Bank has -- keep a very tight control over recurring costs, and we plan to keep it that way in the coming quarters.

At the same time, greater focus will be given to maximizing the profitability of the existing branch networks through cross-selling vis-à-vis further branch expansion.

Next slide. As of September 2008, the Bank's distribution network totaled 472 offices, increasing 0.9% Q-on-Q. As of September 2008, the Bank had close to 2000 ATMs, which have decreased 1.4% Q-on-Q. We have been limiting the growth of the ATMs as well and putting only in locations that are profitable.

Since one-third of the Bank's branches have been opened in the past three years, there is still ample room to sustain growth and improve efficiency by maximizing profitability of the newly opened offices.

Next slide, the tightening of cost controls and reduction in branch expansion has led to slowdown in the growth rate of costs that increased 4% Q-on-Q, and it has resulted in improvement in efficiency levels.

In 3Q, the efficiency ratio reached 35.9% improving from 38.8% the previous quarter, and 39 -- 37.9% in 3Q '07.

Next slide, page 22 of the webcast. In summary, 3Q '08 results were of high quality, especially considering the more challenging environment that affected the global financial industry.

Our high margins, high liquidity, improving funding mix, conservative asset quality policies, fee income growth, and world-class efficiency, give us a clear competitive advantage in the local market.

Going forward, we will continue to focus strongly on profitability as detailed throughout this presentation. This should continue to boost our net interest income and fees. We have also taken actions to reduce the growth of provision expense.

Finally we will keep a tight control of our costs. At this time we will gladly answer any questions you might have.

Thank you, sir. The question and the answer session will be conducted electronically. (Operator Instructions).

We will take our first from Saul Martinez with JPMorgan.

Hi, good morning Raimundo and Robert. A couple -- two questions. One is just on the sustainable level of profitability that you're kind of thinking about.

Obviously, the third quarter was a very good quarter from an ROE profitability standpoint, given the positive impact of inflation on your financial margin, but obviously we're heading into perhaps a more difficult environment from a profit standpoint.

The economy is growing at less than potential. Inflation probably will come down in the coming quarters as well, but given that and given all of the things you outlined in terms of balance sheet management, the expense efficiency, asset-liability management and what not, how do you think about your profitability, the sustainable ROEs that you can generate in the coming 2009 and 2010?

I'm not looking for a specific guidance, but just how does management -- what targets do you set in terms of returns on equity and returns on capital?

Okay. Well, as you know, among the ultimate performance metrics that we use is to maximize the gap between ROE and the cost of capital, and that's why we have been taking a number of actions to sustain high ROEs, and at the same time reduce our cost of capital by means of taking a lot of actions to be very conservative, not only on the credit risk management, but also liquidity, high capital ratios et cetera.

So we think that going forward we will be facing a more challenging environment and to give an idea of how we're perceiving the profit and loss statement, we think that we will see a lower growth on the top-line going forward, basically because the economy is being -- is reducing its growth rate, because inflation also is expected to start going down.

And so we expect a reduce -- a lower growth rate as compared to this year, which actually has been very high by historical standards and especially taking into consideration the overall slowdown of the Chilean economy and the world economy in general.

Secondly, we expect provisions to start moderating the growth rate -- moderating going forward, because as we mentioned in the presentation, we have been focusing our growth mostly on the high-end of the consumer market and corporations.

Corporations -- Chilean corporations, especially the larger ones, are facing some constraints in terms of foreign funding and they're coming back to the market. And given our overall strategy towards corporation, which is biased towards the non-lending side of the relationship, we are increasing the cross-selling we can do with those companies, and at the same time lending at much higher spreads than before.

So fee income also should be benefited from these change in the growth trend with the corporations. So the combination of high growth in the high-end of the retail market with larger corporations, make us believe that provision expense should start to moderate.

We have seen some of that happening in this quarter and we expect the trend to hopefully sustain. Then the positive force is that we're growing in the less risk segments, the negative force is that the economy is expected to further slow down going forward. So you have positive and negative forces there.

Thirdly, we expect that in terms of [privatized] trading activity et cetera, we shouldn't see bad news going forward, nor a good news. We are reducing our gaps as far as and as much as we can, and therefore that line should be -- in the first half, for example, we have some much lower profitability in that area as compared to the same period of 2007.

This is starting to normalize and that shouldn't be a driving force going forward. Thirdly, we expect cost to be very much under control.

We have the advantage of having one-third of our client-base and close to 40% of our clients are relatively young and are not fully exploited. And that's why we are taking actions to focus cross-selling activities and to rush things in our branches to make it more profitable.

Therefore cost should be growing less rapidly than this year. Inflation also -- the reduced inflation level should be beneficial on that standpoint.

And lastly, the negative impact of the monetary correction of the price level adjustment would be reduced on the 4th Q, and because Chile is moving to IFRS standards, starting January the 1st, '09, that deduction to our profit and loss statement won't be in place. So that should boost further our ROE.

(Inaudible) we think that we should see ROEs in the mid-20s or low 20s as a sustainable trend, and depending on how much the economy managed to grow and how rapidly inflation comes down, you should see movements over there, but we think that the Bank, with a combination of things I have been doing in 2008, and again I'm -- today it's difficult to do forecast because of a great uncertainty coming from abroad.

But if we don't go to the very extreme scenarios, we think we can sustain relatively strong ROEs, especially in a more challenging -- because most of the things that are needed for 2009 have already been established, meaning cost control, meaning growth in the low -- in the less risky assets, meaning keeping the [proprietary] positions at the very low level and things like that.

And that's why we are very dependent today on the Banco outlook, but as long as the economy managed to grow close to the consensus, and inflation starts going down, we think we can sustain ROEs at a relatively healthy level.

Okay, great. Now, that's very helpful. Thank you for the color. And just one more specific question, any concern at all with exposure to Argentina?

And I know your direct exposure is very, very limited, but any concern about potentially indirect exposure through lending to corporate to be may be more exposed to the economic and political uncertainty in Argentina?

Of course, it's not good news that the risk -- the perceived risk of Argentina is going up, as we are very close, but as you know, the Santander-Chile policy has been very strict in terms of lending abroad.

We have very little direct exposure and with that -- the exposure we have is through Chilean companies investing abroad and there -- in Argentina especially -- and there our policy has been to ask those companies that the Chilean cash flows are more than able to pay the debt.

Yes, so we are not relying on the cash flows of the project that were -- are being done with the money. So the means of payment must be with Chilean cash flows. And therefore we don't have direct exposure and the indirect exposure is in very well capitalized companies and very well managed.

So it's bad to have a perceived -- neighbor which is having high perceived risk by the market, but again, we don't expect direct aftershocks because of that situation.

Okay, great. Thank you very much.

And we move on to Tito Labarta with Deutsche Bank.

Hi, good morning, Raimundo. Couple of questions. Loan growth remained pretty strong for the quarter, even if the system remained pretty solid, but have you seen any slowdown in October, in terms of like origination, and how -- what kind of a slowdown do you think had happened for 2009, in terms of loan growth?

And then the second question, the net interest margin has benefited from the high inflation, but once inflation normalizes to lower levels, how much do you think that would impact the margin, like how much lower do you think it would be? Thanks.

Okay. In terms of loan growth, we are seeing a deceleration of loan growth, especially in consumer lending, and there is a mixture of supply and demand conditions.

Customers are more reluctant to ask consumer lending or credit cards and the like, and banks are also putting the brakes into more -- because that is -- the segment that is more risky.

Here the situation is that for those segments, what has been -- especially for the low end of the consumer market -- what has been deteriorating the asset quality has been mostly high inflation level, because those segments are not able to -- are less protected because of indexation than the more wealthy individuals first.

And second, because the actual inflation that they are bearing is much higher, given that the way of the food and energy within their budget is much higher. And therefore the actual inflation bear by those segments is much more higher than for the wealthy individuals, or the top 40% of the population.

And that has been impacted -- impacting asset quality more than unemployment and things like that because the actual figures of employed has been increasing up to now.

So the concern about inflation impacting the low end of the consumer market, we think it will be less relevant going forward, because inflation is expected to go down. So we have seen some deceleration in the consumer side, we have seen very stable growth levels in mortgage lending, and acceleration of corporate lending, because of what we were telling before, many companies that used to fund abroad now are facing more difficulties, even because of lack of funds, or because the cost of borrowing abroad has been increasing very much.

So we think that all in all the market today, in nominal terms we're speaking, is growing at around 17%-18% all in all. We expect that level to be decelerating close to 12%-11% with a further deceleration in consumer and some stabilizing or slight growth -- of the growth rate that we have seen in 2008 for corporations.

So the system will be reducing the growth going forward, especially for 2009 and that is our basic expectation. But we don't see a big deceleration because corporate lending has been picking up lately and we think that trend can be sustained at lower levels than the year, but positive levels anyway.

Due to inflation?

And on -- about inflation, inflation -- it's important to take into account that it's impacting the Bank's figures by four sides.

One is in the net interest margin, which is positive. Second, there are three negative forces. One is because inflation is increasing the provision levels for the low end of the consumer market, and therefore the lower inflation that should be at a reduced pressure over provisions.

Thirdly, the inflation is also affecting your cost base which has been growing much faster than -- in our case than by historical standards because a 100% of our labor costs are linked to inflation and more or less 50% of our administrative expense are also linked to inflation.

So two-thirds of our total costs are linked to inflation. When you see inflation going down, that also reduced the pressure of our costs. And thirdly, monetary correction has been a drag in our bottom-line performance, wiping a big chunk of what you get in the net interest margin.

So net inflation is positive for banks, but is less positive that if you simply look at the net interest margin or net interest income figures.

The other thing that we're doing is that we have been closing our inflation sensitive gap by issuing long-term bonds which are linked to inflation and by reducing the assets that are linked to inflation.

So that's why we will have an impact in the net interest margins, but it would be less relevant that because you are taking actions to be prepared for that case.

In the first half we saw losses in some of those hedges that we were taking and now with inflation stabilizing or starting to reduce, those hedges will be having the negative effect and compensating, and that's why inflation being relevant, we think it won't be that dramatic going forward, because again you take actions to reduce the exposure to inflation.

So a quick and dirty calculation is to deduct the -- correct the monetary -- the price level adjustment, sorry, from the net interest income that gives you -- that our net interest income is growing at around 22%-23%.

We think that that is the kind of real growth of our net interest income. The rest is mostly linked to inflation. When you deduct monetary correction, you have a kind of clean level of growth of our net interest income.

Great, thank you, that's very helpful. Just one follow-up, given that you mentioned how the high inflation impacts the asset quality, particularly for the lower income consumers.

I know you've been improving the mix (inaudible) corporates and higher-end, but I mean overall, what do you think the impact would be to your non-performing loans going forward? Will you be able to offset that or do you expect some deterioration going forward? Thanks.

No, we expect deterioration. As we have been mentioning in the last -- I don't know five or six earnings reports, there were two or three process going on in our loan book that has to be taken into consideration.

One was that the mix of our growth had been up to now very much biased towards retail activities and therefore the more those loans are mature you should see a -- some further deterioration of asset quality.

That trend, we believe, is mostly completed in the sense that given that now we're not growing very much in that area, that process of mix affecting your asset quality is pretty much under way.

But as we mentioned in this press release, we are starting to see a normalization in the provision levels in corporations. For many years, corporations had zero net provision levels, which is completely unsustainable, because again we have been very growing in a --- not only in the large corporations but also in SMEs et cetera.

So we have been facing more provision requirements on the middle income, I mean in the mid-sized corporations and in the SMEs as well.

That trend should prevail in the coming years, because again it's unrealistic to expect that no provisions will be [fit] in the whole corporate book, and that's why that is a normalization process that has been starting and we expect to follow in the coming quarters.

And the third, which in the short term has been the most negative driving force, has been a high inflation as highlighted before.

Therefore, we expect that inflation will be less relevant going forward as a negative driver in the lower end of the consumer market, but the normalization of companies, especially small and mid-sized companies and the fact that in our book we still have a mix that is much more biased towards retail than before, will have an effect of deteriorating our asset --- state of assets quality indicator.

But at the same time we haven't been inactive and that's why we have been raising our spreads starting in the first quarter of 2007. So I mean we are in a risky industry and there's nothing wrong as long as you face it, and secondly you start taking actions in terms of your prices to reflect the higher cost of doing business and the higher cost of funding.

And that's why, as we stated in our second Q report last year, we started increasing our prices to reflect the higher risks of doing business, because of this normalization of some extremely low level of risk that we saw in 2005, 2006, and secondly to take into consideration higher funding costs.

That has nothing to do with the sub-prime crisis. Once the sub-prime crisis came into the scene, it only reaffirmed that our strategy was the correct, to start anticipating a further deterioration of asset quality.

So we expect both provisions and the state of risks index to steady deteriorate that -- we don't see a major deterioration, but a relatively steady deterioration, but at the same time, we think, that we have been able up to now, we are being -- compensating that by higher spreads and higher charges that we are doing to our clients.

And so again few of the challenges, if you are able to compensate the deterioration of your asset quality by means of increasing your spreads over time, a process that up to now we have been able, and that's why our risk-adjusted net interest income is still growing above 20%.

Okay, great. Thank you, Raimundo.

(Operator Instructions). From the lines of Jorge Chang with Euroamerica.

Hello. I have two questions for you. First one is, do you see any growth opportunities during 2009 in both the consumer and corporate segments?

And my second question is, what's the expected effect on margins that you see given that sight deposits are under-performing at this point? Thank you.

Sorry, I didn't hear your first question. Could you repeat it please?

Oh, I'm sorry. Okay, first question is do you see any growth opportunity during 2009 for both corporate and consumer segments?

Okay. And then the second is the impact of margins related to what?

To the deceleration on sight deposits. I see that you are --

Sight deposits, okay.

-- having less sight deposits at this point, so I'm assuming that you are somehow evolving towards interest bearing liabilities in your funding structure.

Okay. In terms of goals, as I mentioned before we don't expect consumer lending and credit cards to be leading the show.

We think that the credit card revenue should still be growing healthily especially in terms of fees. What happened is that spread income is very relevant for the low end of the consumer market.

The people that -- in the low segment that have credit cards are heavy users of the line of credit. Contrary to that, the middle to upper end of the credit card holders usually use the credit card for transactional purposes.

And that's why we expect some deceleration of the growth of net interest income because our low-end consumers will be using less or having --- the growth rate would be more subdued.

But contrary to that, the fee income should be stable or hopefully growing because we have taken a number of actions to increase the usage of our credit cards from the middle to high-end of the consumer pool.

And the second growth area comes from corporations. Corporations are definitively coming back to the market. The clients that were mostly funded abroad et cetera, now are coming back because of the high cost that are being charged or sometimes because they completely -- the market has almost dried for them.

And there we -- our strategy is the same as usual. Try to get first the more profitable parts of the business, cash management, fee-based income et cetera, and then lending to them. We won't be growing as crazy in the segments because still we think that the profitability of that segment is mostly in the non-lending side of the equation.

But we will see growth on the lending side as well. And that's why we don't expect a dramatic deceleration of the growth of the total lending pool, because companies will come to some extent to the rescue.

In terms of spread, what happened is that on the one hand the sight deposits, demand deposits have been more stable, because, again, with high interest -- short-term interest rates and high inflation, the opportunity cost of keeping that money in non-interest bearing checking account is relatively high.

Going forward, as we're expecting, and as anybody is expecting a deceleration of inflation, and at the same time the Central Bank slashing short-term rates, we expect that source of revenue to start growing more rapidly, because the opportunity cost of leaving the money in -- with no -- in a non-interest bearing checking account will be less relevant.

And secondly, in terms of deposits we have seen some -- I don't like to use the word "flight to quality" because simply that clients are looking -- are going to those banks that are -- have a higher rating. As Santander-Chile has the highest rating of any company in Latin America and what was [visibly] puzzling before was that the spreads that we charge -- the rates we paid for our deposits was more or less the same for across the board.

Today we are seeing some differentiations. Clients are willing to pay a premium to operate for -- with more sound players as we are. And that's why we have been able to increase our deposit base -- for example, specifically in October, which has been the most -- the market has been rocking much more heavily, we have seen a very important increase in our time deposits and demand deposit as well.

And we have the feeling that people are starting to differentiate among banks, not only in Chile, but also aboard, and bringing money to more safe institutions and we think Santander is among them.

Okay. Thank you very much.

(Operator Instructions). It appears there's no further question at this time.

Okay. Well, thank you all very much for taking the time to participate in today's call. We look forward to speaking with you again soon. Have a good day.

Once again ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a wonderful day.