Banco De Chile NYSE: BCH reported second-quarter net income of CLP 391 billion, supported by higher inflation-linked revenue, resilient customer income, fee growth and cost discipline, while the bank also increased additional loan-loss provisions amid a more uncertain macroeconomic backdrop.
The bank said second-quarter operating revenue rose 20.9% year over year to CLP 922 billion. Return on average equity for the quarter was 27.9%, while return on average capital and reserves was 29.1%. For the first half, return on average equity stood at 22.9% and return on average assets reached 2.4%.
Revenue Growth and Margin Support
Head of Investor Relations Pablo Mejía Ricci said the bank’s second-quarter performance reflected a 5.8% net interest margin, higher fee income and continued expense control. Net financial income totaled CLP 736 billion, up 25.3% from a year earlier.
The results benefited from higher inflation during the quarter. The UF variation reached 2.5% in the second quarter, compared with 1% in the same period of 2025, supporting income from the bank’s inflation-indexed balance-sheet position. Banco de Chile’s UF gap in the banking book was approximately CLP 9.1 trillion at the end of June.
Customer income remained resilient at CLP 473 billion, with improved lending spreads contributing to higher income from consumer and commercial loans. Net fee income increased 10.7% year over year, led by a 20.4% increase in transactional-services fees. Credit-card transactions rose 5.7%, while debit-card transactions increased 11.9%.
The bank reported 2.9 million active customers and 2.6 million bank accounts in the second quarter. Current accounts increased 7.1% from a year earlier, and the company’s net promoter score was 77.6%.
Loan Growth, Funding and Capital
Total loans reached CLP 40.3 trillion in June, up 2.3% year over year. The reported figure included a one-time accounting effect from the migration of the bank’s outsourced credit-card processing platform. Under the new process, early card payments are immediately deducted from loan balances rather than remaining in other demand deposits until the billing due date.
Banco de Chile said the migration reduced both credit-card loans and other demand deposits by about CLP 210 billion. Excluding that effect, total loans would have increased 2.9% year over year on a pro forma basis. Consumer loans increased 5.3% on that basis, while mortgage lending rose 3.4% and commercial loans increased 2%.
The bank highlighted its deposit franchise and capitalization as competitive advantages. It held a 19.7% market share of local-currency demand deposits among private banks as of June. Demand deposits represented 26% of total funding, while the ratio of demand deposits to total loans was 36%, which management said was the highest among major peers.
Its Basel III total capital ratio was 17.6%, including a CET1 ratio of 13.9%. Daniel Galarce, head of financial control and capital management, said the bank expects to operate in the long term about 100 to 200 basis points above regulatory capital requirements as it deploys capital for loan and business growth. He reiterated the bank’s long-term assumption of a dividend payout of around 60%.
Provisions and Efficiency
Expected credit losses totaled CLP 165 billion in the second quarter, including CLP 50 billion of additional provisions established in May. As a result, quarterly cost of risk was 1.65%. Excluding the additional provisions, cost of risk was 1.15%, broadly unchanged from the first quarter.
Mejía said the additional allowances reflected a forward-looking and cautious approach rather than observed deterioration in the portfolio. The bank cited geopolitical risks, weaker-than-expected domestic activity and employment conditions as factors supporting the decision.
The total delinquency ratio was 1.6% at June, stable sequentially. Consumer-loan delinquency rose to 2.1% from 1.8% over the prior 12 months, while wholesale commercial credit costs declined as some customers’ financial conditions improved. Allowances represented 2.1% of total loans and covered 127% of past-due loans, or roughly 230% when additional allowances were included.
Expenses rose 2.8% year over year in the second quarter, below inflation, despite continued investments in technology and digital capabilities. The efficiency ratio was 31.3% for the quarter and 34.5% for the first half. The number of branches declined 4.5% year over year, while loans per employee increased 1.7% to CLP 3.6 billion.
Updated Outlook and Strategic Initiatives
The bank reduced its 2026 nominal loan-growth outlook to about 6% from about 7%, citing weaker macroeconomic performance in the first half. It maintained its year-end net interest margin outlook at approximately 4.6% and projected cost of risk between 1.2% and 1.3%. Banco de Chile improved its full-year efficiency-ratio forecast to around 37% from 38% previously and expects return on average capital and reserves of 21% to 22% by year-end.
Chief Economist and Institutional Relations Officer Rodrigo Aravena lowered the bank’s Chile GDP growth forecast for 2026 to 1.3% from 2.1%, largely due to weak first-half activity led by mining. However, he said the bank expects growth near 2% in the second half and close to 3% in 2027. Banco de Chile expects inflation to end 2026 near 4% and does not anticipate changes to the central bank’s 4.5% policy rate under its baseline scenario.
Management also outlined new commercial partnerships, including vehicle-financing integration with Linze, a travel-loyalty alliance with Despegar, and a digital factoring collaboration with Fingo. The bank launched B Startup, a service model for startups and science- and technology-based companies, supported by alliances with UDD Ventures and Amazon Web Services.
Looking ahead, Mejía said improved economic conditions could support stronger loan demand in 2027, particularly among corporate borrowers, SMEs and consumers. He said loan growth of 7% to 8%, or potentially more, could be reasonable next year, while long-term net interest margins could remain in a 4.5% to 4.7% range depending on interest rates and other market conditions.
About Banco De Chile (NYSE:BCH)
Banco de Chile NYSE: BCH is a leading Chilean financial institution headquartered in Santiago. Founded in 1893, the bank is one of the country's oldest and most established banking groups, serving a broad spectrum of individual, corporate and institutional clients. It is publicly listed and operates under Chilean banking regulations while participating in international capital markets.
The bank's core businesses include retail banking, commercial and corporate banking, and investment banking.
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