FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Report of Foreign Private Issuer

 

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

 

For the month of October, 2012

 

Commission File Number 001-15266

 

BANK OF CHILE
(Translation of registrant’s name into English)

 

Ahumada 251  
Santiago, Chile

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F x   Form 40-F o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(1):
o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(7):
o

 

Indicate by check mark whether by furnishing the information contained in this Form, the
registrant is also thereby furnishing the information to the Commission pursuant to Rule 
12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes o  No x

 

If “Yes” is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-       

 

 

 



 

BANCO DE CHILE
REPORT ON FORM 6-K

 

Attached Banco de Chile’s Financial Statements with notes for the Third Quarter of 2012.

 



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: October 31, 2012

 

 

 

Banco de Chile

 

 

 

 

 

/S/ Arturo Tagle Q.

 

By:

Arturo Tagle Q.
CEO

 



Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

 

Index

 

 

I.

Interim Condensed Consolidated Statements of Financial Position

 

II.

Interim Condensed Consolidated Statements of Comprehensive Income

 

III.

Interim Condensed Consolidated Statements of Changes in Equity

 

IV.

Interim Condensed Consolidated Statements of Cash Flows

 

V.

Notes to the Interim Condensed Consolidated Financial Statements

 

 

 

 

 

Ch$ or CLP

=

Chilean pesos

 

 

MCh$

=

Millions of Chilean pesos

 

 

US$ or USD

=

U.S. dollars

 

 

ThUS$

=

Thousands of U.S. dollars

 

 

JPY

=

Japanese yen

 

 

EUR

=

Euro

 

 

MXN

=

Mexican pesos

 

 

HKD

=

Hong Kong dollars

 

 

U.F. or CLF

=

Unidad de Fomento

 

 

 

 

(The Unidad de Fomento is an inflation-indexed, Chilean peso denominated monetary unit set daily in advance on the basis of the previous month’s inflation rate).

 

 

 

 

 

 

 

IFRS

=

International Financial Reporting Standards

 

 

IAS

=

International Accounting Standards

 

 

RAN

=

Compilation of Norms of the Chilean Superintendency of Banks

 

 

IFRIC

=

International Financial Reporting Interpretations Committee

 

 

SIC

=

Standards Interpretation Committee

 

 

 

 

 

 



Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

 

INDEX

 

 

 

Page

Interim Condensed Consolidated Statement of Financial Position

3

Interim Condensed Consolidated Statements of Comprehensive Income

4

Interim Condensed Consolidated Statement of Changes in Equity

6

Interim Condensed Consolidated Statements of Cash Flows

7

1.

Company Information:

8

2.

Legal provisions, basis of preparation and other information:

8

3.

New Accounting Pronouncements:

11

4.

Changes in Accounting Policies and Disclosures:

16

5.

Relevant Events:

16

6.

Segment Reporting:

19

7.

Cash and Cash Equivalents:

22

8.

Financial Assets Held-for-trading:

23

9.

Repurchase Agreements and Security Lending and Borrowing:

24

10.

Derivative Instruments and Accounting Hedges:

27

11.

Loans and advances to Banks:

31

12.

Loans to Customers, net:

32

13.

Investment Securities:

36

14.

Investments in Other Companies:

38

15.

Intangible Assets:

40

16.

Property and equipment:

43

17.

Current Taxes and Deferred Taxes:

45

18.

Other Assets:

49

19.

Current accounts and Other Demand Deposits:

50

20.

Savings accounts and Time Deposits:

50

21.

Borrowings from Financial Institutions:

51

22.

Debt Issued:

53

23.

Other Financial Obligations:

55

24.

Provisions:

55

25.

Other Liabilities:

59

26.

Contingencies and Commitments:

60

27.

Equity:

64

28.

Interest Revenue and Expenses:

69

29.

Income and Expenses from Fees and Commissions:

71

30.

Net Financial Operating Income:

72

31.

Foreign Exchange Transactions, net:

72

32.

Provisions for Loan Losses:

73

33.

Personnel Expenses:

74

34.

Administrative Expenses:

75

35.

Depreciation, Amortization and Impairment:

76

36.

Other Operating Income:

77

37.

Other Operating Expenses:

78

38.

Related Party Transactions:

79

39.

Fair Value of Financial Assets and Liabilities:

84

40.

Maturity of Assets and Liabilities:

93

41.

Subsequent Events:

95

 



Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

For the periods ended September 30, 2012 and 2011

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

Notes

 

September
2012

 

December
2011

 

September
2011

 

 

 

 

 

MCh$

 

MCh$

 

MCh$

 

ASSETS

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

7

 

610,396

 

881,146

 

866,149

 

Transactions in the course of collection

 

7

 

409,937

 

373,639

 

461,081

 

Financial assets held-for-trading

 

8

 

341,668

 

301,771

 

343,940

 

Receivables from Repurchase agreements and Security Borrowing

 

9

 

46,830

 

47,981

 

72,865

 

Derivative instruments

 

10

 

381,177

 

385,688

 

636,664

 

Loans and advances to banks

 

11

 

793,033

 

648,425

 

665,290

 

Loans to customers, net

 

12

 

17,964,344

 

16,993,303

 

16,363,952

 

Financial assets available-for-sale

 

13

 

1,514,891

 

1,468,898

 

1,304,220

 

Financial assets held-to-maturity

 

13

 

 

 

 

Investments in other companies

 

14

 

15,368

 

15,418

 

15,007

 

Intangible assets

 

15

 

33,681

 

35,517

 

35,065

 

Property and equipment

 

16

 

207,655

 

207,888

 

207,397

 

Current tax assets

 

17

 

1,629

 

1,407

 

384

 

Deferred tax assets

 

17

 

127,511

 

116,282

 

113,420

 

Other assets

 

18

 

290,885

 

263,584

 

348,364

 

TOTAL ASSETS

 

 

 

22,739,005

 

21,740,947

 

21,433,798

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Current accounts and other demand deposits

 

19

 

5,001,775

 

4,895,426

 

4,601,815

 

Transactions in the course of payment

 

7

 

211,450

 

155,424

 

290,720

 

Payables from Repurchase Agreements and Security Lending

 

9

 

309,049

 

223,202

 

230,292

 

Savings accounts and time deposits

 

20

 

9,947,950

 

9,282,324

 

8,935,977

 

Derivative instruments

 

10

 

453,291

 

429,913

 

621,140

 

Borrowings from financial institutions

 

21

 

1,124,497

 

1,690,939

 

1,850,774

 

Debt issued

 

22

 

2,978,444

 

2,388,341

 

2,332,053

 

Other financial obligations

 

23

 

147,554

 

184,785

 

222,455

 

Current tax liabilities

 

17

 

26,222

 

4,502

 

7,340

 

Deferred tax liabilities

 

17

 

21,329

 

23,213

 

18,382

 

Provisions

 

24

 

416,987

 

457,938

 

373,920

 

Other liabilities

 

25

 

265,914

 

265,765

 

251,184

 

TOTAL LIABILITIES

 

 

 

20,904,462

 

20,001,772

 

19,736,052

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

27

 

 

 

 

 

 

 

Attributable to Bank’s Owners:

 

 

 

 

 

 

 

 

 

Capital

 

 

 

1,509,994

 

1,436,083

 

1,436,083

 

Reserves

 

 

 

177,574

 

119,482

 

119,482

 

Other comprehensive income

 

 

 

17,570

 

(2,075

)

683

 

Retained earnings:

 

 

 

 

 

 

 

 

 

Retained earnings from previous periods

 

 

 

16,379

 

16,379

 

16,379

 

Income for the period

 

 

 

327,910

 

428,805

 

329,218

 

Less:

 

 

 

 

 

 

 

 

 

Provision for minimum dividends

 

 

 

(214,885

)

(259,501

)

(204,100

)

Subtotal

 

 

 

1,834,542

 

1,739,173

 

1,697,745

 

Non-controlling interests

 

 

 

1

 

2

 

1

 

 

 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

 

1,834,543

 

1,739,175

 

1,697,746

 

TOTAL LIABILITIES AND EQUITY

 

 

 

22,739,005

 

21,740,947

 

21,433,798

 

 

The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements

 

3



Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the nine-month ended September 30, 2012 and 2011

 (Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

A.    CONSOLIDATED STATEMENT OF INCOME

 

 

 

Notes

 

September
2012

 

September
2011

 

 

 

 

 

MCh$

 

MCh$

 

Interest revenue

 

28

 

1,182,658

 

1,060,319

 

Interest expense

 

28

 

(497,974

)

(424,430

)

Net interest income

 

 

 

684,684

 

635,889

 

 

 

 

 

 

 

 

 

Income from fees and commissions

 

29

 

275,326

 

278,084

 

Expenses from fees and commissions

 

29

 

(48,089

)

(42,895

)

Net fees and commission income

 

 

 

227,237

 

235,189

 

 

 

 

 

 

 

 

 

Net financial operating income

 

30

 

15,766

 

60,974

 

Foreign exchange transactions, net

 

31

 

24,829

 

(11,648

)

Other operating income

 

36

 

16,341

 

19,262

 

Total operating revenues

 

 

 

968,857

 

939,666

 

 

 

 

 

 

 

 

 

Provisions for loan losses

 

32

 

(137,584

)

(108,388

)

 

 

 

 

 

 

 

 

OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES

 

 

 

831,273

 

831,278

 

 

 

 

 

 

 

 

 

Personnel expenses

 

33

 

(231,632

)

(240,720

)

Administrative expenses

 

34

 

(176,048

)

(167,956

)

Depreciation and amortization

 

35

 

(23,267

)

(22,985

)

Impairment

 

35

 

(648

)

(4

)

Other operating expenses

 

37

 

(39,862

)

(25,705

)

 

 

 

 

 

 

 

 

TOTAL OPERATING EXPENSES

 

 

 

(471,457

)

(457,370

)

 

 

 

 

 

 

 

 

NET OPERATING INCOME

 

 

 

359,816

 

373,908

 

 

 

 

 

 

 

 

 

Income attributable to associates

 

14

 

857

 

2,763

 

Income before income tax

 

 

 

360,673

 

376,671

 

 

 

 

 

 

 

 

 

Income tax

 

 

 

(32,762

)

(47,453

)

 

 

17

 

 

 

 

 

NET INCOME FOR THE PERIOD

 

 

 

327,911

 

329,218

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

327,910

 

329,218

 

Bank’s Owners

 

 

 

1

 

 

Non-controlling interests

 

 

 

 

 

 

 

 

 

 

Ch$

 

Ch$

 

Net income per share attributable to Bank’s Owners:

 

 

 

 

 

 

 

Basic net income per share

 

27

 

3.72

 

3.85

 

Diluted net income per share

 

27

 

3.72

 

3.85

 

 

The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements

 

4



Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the nine-month ended September 30, 2012 and 2011

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

B.    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

Notes

 

September
2012

 

September
2011

 

 

 

 

 

MCh$

 

MCh$

 

NET INCOME FOR THE PERIOD

 

 

 

327,911

 

329,218

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses):

 

 

 

 

 

 

 

Net change in unrealized gains (losses) on available-for-sale instruments

 

13

 

23,294

 

(6,561

)

Gains and losses on derivatives held as cash flow hedges

 

 

 

1,294

 

 

Cumulative translation adjustment

 

 

 

(65

)

62

 

Other comprehensive income before income taxes

 

 

 

24,523

 

(6,499

)

 

 

 

 

 

 

 

 

Income tax related to other comprehensive income

 

17

 

(4,880

)

1,312

 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 

 

19,643

 

(5,187

)

 

 

 

 

 

 

 

 

TOTAL CONSOLIDATED COMPREHENSIVE INCOME

 

 

 

347,554

 

324,031

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Bank’s owners

 

 

 

347,553

 

324,031

 

Non-controlling interest

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ch$

 

Ch$

 

Comprehensive net income per share attributable to Bank’s owners:

 

 

 

 

 

 

 

Basic net income per share

 

 

 

3.95

 

3.79

 

Diluted net income per share

 

 

 

3.95

 

3.79

 

 

The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements

 

5


 


Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the nine month ended September 30, 2011 and 2012

 (Translation of financial statements originally issued in Spanish)

(Expressed in millions of Chilean pesos)

 

 

 

 

 

 

 

Reserves

 

Other comprehensive income

 

Retained earnings

 

 

 

 

 

 

 

 

 

Notes

 

Paid-in
Capital

 

Other
reserves

 

Reserves
from
earnings

 

Unrealized
gains
(losses) on
available-
for- sale

 

Derivatives
cash flow
hedge

 

Cumulative
translation
adjustment

 

Retained
earnings

from
previous
periods

 

Income for
the year

 

Provision
for
minimum
dividends

 

Attributable
to equity
holders of
the parent

 

Non-
controlling
interest

 

Total
equity

 

 

 

 

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2010

 

 

 

1,158,752

 

32,256

 

55,130

 

5,974

 

 

(104

)

16,091

 

378,529

 

(242,503

)

1,404,125

 

2

 

1,404,127

 

Capitalization of retained earnings

 

27

 

67,217

 

 

 

 

 

 

 

(67,217

)

 

 

 

 

Retention (released) earnings

 

27

 

 

 

32,096

 

 

 

 

 

(32,096

)

 

 

 

 

Dividends distributions and paid

 

27

 

 

 

 

 

 

 

 

(279,216

)

242,503

 

(36,713

)

(1

)

(36,714

)

Other comprehensive income:

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

62

 

 

 

 

62

 

 

62

 

Valuation adjustment on available-for-sale instruments, net

 

 

 

 

 

 

(5,249

)

 

 

 

 

 

(5,249

)

 

(5,249

)

Equity adjustment in subsidiary

 

 

 

 

 

 

 

 

 

288

 

 

 

288

 

 

288

 

Capital increase

 

27

 

210,114

 

 

 

 

 

 

 

 

 

210,114

 

 

210,114

 

Income for the period 2011

 

 

 

 

 

 

 

 

 

 

329,218

 

 

329,218

 

 

329,218

 

Provision for minimum dividends

 

27

 

 

 

 

 

 

 

 

 

(204,100

)

(204,100

)

 

(204,100

)

Balances as of September 30, 2011

 

 

 

1,436,083

 

32,256

 

87,226

 

725

 

 

(42

)

16,379

 

329,218

 

(204,100

)

1,697,745

 

1

 

1,697,746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2011

 

 

 

1,436,083

 

32,256

 

87,226

 

(1,644

)

(395

)

(36

)

16,379

 

428,805

 

(259,501

)

1,739,173

 

2

 

1,739,175

 

Capitalization of retained earnings

 

27

 

73,911

 

 

 

 

 

 

 

(73,911

)

 

 

 

 

Retention (released) earnings

 

27

 

 

 

58,092

 

 

 

 

 

(58,092

)

 

 

 

 

Dividends distributions and paid

 

27

 

 

 

 

 

 

 

 

(296,802

)

259,501

 

(37,301

)

(2

)

(37,303

)

Other comprehensive income:

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

(65

)

 

 

 

(65

)

 

(65

)

Cash flow hedge adjustment, net

 

 

 

 

 

 

 

1,044

 

 

 

 

 

1,044

 

 

1,044

 

Valuation adjustment on available-for-sale instruments (net)

 

 

 

 

 

 

18,666

 

 

 

 

 

 

18,666

 

 

18,666

 

Income for the period 2012

 

 

 

 

 

 

 

 

 

 

327,910

 

 

327,910

 

1

 

327,911

 

Provision for minimum dividends

 

27

 

 

 

 

 

 

 

 

 

(214,885

)

(214,885

)

 

(214,885

)

Balances as of September 30, 2012

 

 

 

1,509,994

 

32,256

 

145,318

 

17,022

 

649

 

(101

)

16,379

 

327,910

 

(214,885

)

1,834,542

 

1

 

1,834,543

 

 

The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements

 

6


 


Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine-month ended September 30, 2012 and 2011

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

Notes

 

September
2012

 

September
2011

 

 

 

 

 

MCh$

 

MCh$

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income for the period

 

 

 

327,911

 

329,218

 

Items that do not represent cash flows:

 

 

 

 

 

 

 

Depreciation and amortization

 

35

 

23,267

 

22,985

 

Impairment of intangible assets and property and equipment

 

35

 

648

 

4

 

Provision for loan losses

 

32

 

164,370

 

131,262

 

Provision of contingent loans

 

32

 

2,909

 

7,651

 

Fair value adjustment of financial assets held-for-trading

 

 

 

626

 

(932

)

Income attributable to investments in other companies

 

14

 

(648

)

(2,577

)

Income from sales of assets received in lieu of payment

 

36

 

(5,246

)

(4,809

)

Net gain on sales of property and equipment

 

 

 

(224

)

(1,274

)

(Increase) decrease in other assets and liabilities

 

 

 

(6,244

)

(58,678

)

Charge-offs of assets received in lieu of payment

 

37

 

1,974

 

2,865

 

Other charges (credits) to income that do not represent cash flows

 

 

 

(67,496

)

78,645

 

Net changes in interest and fee accruals

 

 

 

20,639

 

(17,636

)

Changes in assets and liabilities that affect operating cash flows:

 

 

 

 

 

 

 

(Increase) decrease in loans and advances to banks, net

 

 

 

(144,957

)

(314,201

)

Increase in loans to customers

 

 

 

(1,116,529

)

(2,396,279

)

Increase in financial assets held-for-trading, net

 

 

 

123,829

 

(112,555

)

Decrease in deferred taxes, net

 

17

 

(13,113

)

(10,171

)

Increase in current account and other demand deposits

 

 

 

107,096

 

155,397

 

Increase in payables from repurchase agreements and security lending

 

 

 

56,397

 

159,487

 

Increase in savings accounts and time deposits

 

 

 

673,172

 

1,198,428

 

Proceeds from sale of assets received in lieu of payment

 

 

 

7,074

 

6,526

 

Total cash flows from operating activities

 

 

 

155,455

 

(826,644

)

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

(Increase) decrease in financial assets available-for-sale, net

 

 

 

(81,974

)

(126,380

)

Purchases of property and equipment

 

16

 

(15,285

)

(16,418

)

Proceeds from sales of property and equipment

 

 

 

119

 

1,662

 

Purchases of intangible assets

 

15

 

(6,001

)

(6,276

)

Investments in other companies

 

14

 

(71

)

 

Dividends received from investments in other companies

 

14

 

915

 

746

 

Total cash flows from investing activities

 

 

 

61,651

 

(146,666

)

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Repayment of mortgage finance bonds

 

 

 

(20,791

)

(28,896

)

Proceeds from bond issuances

 

22

 

815,989

 

692,578

 

Redemption of bond issuances

 

 

 

(244,075

)

(119,371

)

Proceeds from subscription and payment of shares

 

 

 

 

210,114

 

Dividends paid

 

 

 

(296,802

)

(279,216

)

Increase in borrowings from financial institutions

 

 

 

19,285

 

27,861

 

Decrease in other financial obligations

 

 

 

(33,206

)

47,146

 

Decrease in borrowings from Central Bank of Chile

 

 

 

(22,793

)

 

Proceeds from borrowings from Central Bank (long-term)

 

 

 

15

 

68

 

Payment of borrowings from Central Bank of Chile (long-term)

 

 

 

(48

)

(80

)

Long-term foreign borrowings

 

 

 

336,103

 

779,561

 

Payment of long-term foreign borrowings

 

 

 

(815,838

)

(368,478

)

Proceeds from other long-term borrowings

 

 

 

666

 

944

 

Payment of other long-term borrowings

 

 

 

(4,270

)

(7,472

)

Total cash flows from financing activities

 

 

 

(265,765

)

954,759

 

 

 

 

 

 

 

 

 

TOTAL NET POSITIVE CASH FLOWS FOR THE PERIOD

 

 

 

(48,659

)

(18,551

)

Net effect of exchange rate changes on cash and cash equivalents

 

 

 

(34,148

)

1,800

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of year

 

7

 

1,429,908

 

1,447,695

 

Cash and cash equivalents at end of period

 

7

 

1,347,101

 

1,430,944

 

 

The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements

 

7



Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine-month ended September 30, 2011 and 2012

 (Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 


 

1.                   Company Information:

 

Banco de Chile, resulting from the merger of Banco Nacional de Chile, Banco Agrícola and Banco de Valparaíso, was formed on October 28, 1893 in the city of Santiago, in the presence of the Notary Eduardo Reyes Lavalle.

 

Banco de Chile (“Banco de Chile” or the “Bank”) is a Corporation organized under the laws of the Republic of Chile, regulated by the Superintendency of Banks and Financial Institutions (“SBIF”), Since 2001, - when the bank was first listed on the New York Stock Exchange (“NYSE”), in the course of its American Depository Receipt (ADR) program, which is also registered at the London Stock Exchange — Banco de Chile additionally follows the regulations published by the United States Securities and Exchange Commission (“SEC”), Banco de Chile’s shares are also listed on the Latin American securities market of the Madrid Stock Exchange (“LATIBEX”).

 

Banco de Chile offers a broad range of banking services to its customers, ranging from individuals to large corporations. The services are managed in large corporate banking, middle and small corporate banking, personal banking services and retail.  Additionally, the Bank offers international as well as treasury banking services. The Bank’s subsidiaries provide other services including securities brokerage, mutual fund and investment management, factoring, insurance brokerage, financial advisory and securitization.

 

Banco de Chile’s legal domicile is Ahumada 251, Santiago, Chile and its Web site is www.bancochile.cl.

 

2.                   Legal provisions, basis of preparation and other information:

 

(a)                        Legal provisions:

 

The General Banking Law in its Article N° 15 authorizes the Chilean Superintendency of Banks (SBIF) to issue generally applicable accounting standards for entities it supervises. The Corporations Law, in turn, requires generally accepted accounting principles to be followed.

 

Based on the aforementioned laws, banks should use the criteria provided by the Superintendency in accordance with the Compendium of Accounting Standards, and any matter not addressed therein, as long as it does not contradict its instructions, should adhere to generally accepted accounting principles in technical standards issued by the Chilean Association of Accountants,  that coincide with international accounting standards and international financial reporting standards agreed upon by the International Accounting Standards Board (IASB). Should there be discrepancies between these generally accepted accounting principles and the accounting criteria issued by the SBIF, the latter shall prevail.

 

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Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

2.                           Legal provisions, basis of preparation and other information, continued:

 

(b)                        Basis of consolidation:

 

(b.1)            The current Interim Condensed Consolidated Financial Statements for the nine-months period ended September 30, 2012 are presented based on the same accounting principles described in the Bank’s audited Consolidated Financial Statements at December 31, 2011 and for the year then ended (audited financial statements), and have been prepared according to the Compendium of Accounting Standards, Chapter C-2 issued by the Superintendency of Banks and Financial Institutions and the International Financial Reporting Standard N°34 (“NIC 34”) “Intermediate Financial Information”.

 

According to NIC 34, the intermediate financial information is prepared solely with the intention of updating the content of the last annual Consolidated Financial Statements, putting emphasis on the new activities, events and circumstances occurred during the nine-month period after period end and not duplicating the previous published information in the last Consolidated Financial Statements. Consequently, the Interim Consolidated Financial Statements do not include all the complete information and notes required for the complete Consolidated Financial statements according to the International Accounting Standards and International Financial Information issued by the IASB, reason by which for a suitable understanding of the information that is included in these Interim Condensed Consolidated Financial Statements, they must be read along with the annual Consolidated Financial statements of Banco de Chile, corresponding to the year ended December 31, 2011. However, in the opinion of the Bank’s management, all the adjustments (consisting of normal recurring provisions) that were considered necessary for a reasonable presentation have been included.  The results of operations for the nine-month periods ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

 

(b.2)            The following table details the entities in which the Bank —directly or indirectly— owns a controlling interest and that are therefore consolidated in these financial statements:

 

 

 

 

 

 

 

 

 

Interest Owned

 

 

 

 

 

 

 

 

 

Direct

 

Indirect

 

Total

 

 

 

 

 

 

 

Functional

 

September

 

September

 

September

 

September

 

September

 

September

 

Rut

 

Subsidiaries

 

Country

 

Currency

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

%

 

%

 

%

 

%

 

%

 

%

 

44,000,213-7

 

Banchile Trade Services Limited

 

Hong Kong

 

US$

 

100.00

 

100.00

 

 

 

100.00

 

100.00

 

96,767,630-6

 

Banchile Administradora General de Fondos S.A.

 

Chile

 

Ch$

 

99.98

 

99.98

 

0.02

 

0.02

 

100.00

 

100.00

 

96,543,250-7

 

Banchile Asesoría Financiera S.A.

 

Chile

 

Ch$

 

99.96

 

99.96

 

 

 

99.96

 

99.96

 

77,191,070-K

 

Banchile Corredores de Seguros Ltda.

 

Chile

 

Ch$

 

99.83

 

99.83

 

0.17

 

0.17

 

100.00

 

100.00

 

96,894,740-0

 

Banchile Factoring S.A.

 

Chile

 

Ch$

 

99.75

 

99.75

 

0.25

 

0.25

 

100.00

 

100.00

 

96,571,220-8

 

Banchile Corredores de Bolsa S.A.

 

Chile

 

Ch$

 

99.70

 

99.70

 

0.30

 

0.30

 

100.00

 

100.00

 

96,932,010-K

 

Banchile Securitizadora S.A.

 

Chile

 

Ch$

 

99.00

 

99.00

 

1.00

 

1.00

 

100.00

 

100.00

 

96,645,790-2

 

Socofin S.A.

 

Chile

 

Ch$

 

99.00

 

99.00

 

1.00

 

1.00

 

100.00

 

100.00

 

96,510,950-1

 

Promarket S.A.

 

Chile

 

Ch$

 

99.00

 

99.00

 

1.00

 

1.00

 

100.00

 

100.00

 

 

9



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

2.                           Legal provisions, basis of preparation and other information, continued:

 

(c)   Use of estimates and judgment

 

Preparing financial statements requires management to make judgments, estimations and assumptions that affect the application of accounting policies and the valuation of assets, liabilities, income and expenses presented. Real results could differ from these estimated amounts.  Details on the use of estimates and judgment and their effect on the amounts recognized in the Interim Condensed Consolidated Financial Statement are included in the following notes:

 

1.   Goodwill valuation (Note 15);

2.   Useful lives of property and equipment and intangible assets (Notes 15 y 16);

3.   Income taxes and deferred taxes (Note 17);

4.   Provisions (Note 24);

5.   Commitments and contingencies (Note 26);

6.   Provision for loan losses (Note 32);

7.   Impairment of other financial assets (Note 35);

8.   Fair value of financial assets and liabilities (Note 39).

 

During the nine month period ended September 30, 2012 there have been no significant changes to estimations made when preparing the Bank’s 2011 Annual Consolidated Financial Statements, other than those indicated in these Interim Condensed Consolidated Financial Statements.

 

(d)   Reclassification:

 

For comparative purposes, certain line items of the September 30, 2011 Interim Condensed Consolidated Financial Statements have been reclassified.

 

(e)   Comparison of the Information:

 

The information contained in these financial statements corresponding to year 2011 is presented, unique and exclusively, to compare with the information regarding the period of nine month ended September 30, 2012.

 

(f)    Seasonality or Cyclical Character of the Transactions of the Intermediate Period:

 

Due to the nature of its business, the Bank and its subsidiaries’ activities do not have a cyclical or seasonal character. Accordingly, no specific details have been included on the notes to this Interim Condensed Consolidated Financial Statements.

 

(g)   Relative Importance:

 

When determining the information to present on the different items from the financial statements or other subjects, in accordance with NIC 34, the Bank has considered the relative importance in relation to the Interim Condensed Consolidated financial statements of the period.

 

10



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

3.                   New Accounting Pronouncements:

 

The following is a summary of new standards, interpretations and improvements to the International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) but which have not come into effect as of September 30, 2012, as per the following detail:

 

IAS 1 Presentation of Financial Statements

 

The annual improvements to IFRS, issued in May 2012, provide amendments to IAS 1 in order to clarify the requirements to provide comparative information for:

 

a) The requirements comparative of the opening statement of financial position when an entity applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification, according to IAS 8 Accounting policies, changes in accounting estimates and Errors.

 

b) The requirement to provide comparative information when an entity provides additional comparative information beyond the minimum comparative information requirements.

 

The amendment is applicable for annual periods beginning January 1, 2013 and earlier application is permitted.  The amendment is applied retrospectively for any change accordance with the description in a) and b), for which currently has no impact for the Bank of Chile and its subsidiaries in their consolidated financial statements.

 

IAS 16 Property, Plant and Equipment

 

The annual improvements to IFRS, issued in May 2012, provide amendments to IAS 16, to clarify the accounting of spare parts, stand-by equipment and servicing equipment.  The definition of “property, plant and equipment” in IAS 16 is now considered in determining whether these items should be accounted for under that standard.  The amendment proposes to delete if the spare parts and servicing equipment can be used only in connection with an item of property, plant and equipment, they are accounted for as property, plant and equipment.

 

The amendments must be applied retrospectively and are effective for annual periods beginning on or after January 1, 2013, with early application permitted.  In Management’s opinion, the application of this standard will not have a significant effect on the consolidated financial statements of Banco de Chile and its subsidiaries.

 

11



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

3.                           New Accounting Pronouncements, continued:

 

IAS 19 Employee Benefits

 

The amendments to IAS 19 published by the IASB in June, 2011 eliminated the option to defer recognition of gains and losses (the ‘corridor method’), streamline the presentation of changes in assets and liabilities arising from defined benefit plans and enhance the disclosure requirements for defined benefit plans.  Entities are required to apply amendments in the annual periods beginning on or after January 1, 2013, or earlier.  To date, Banco de Chile and its subsidiaries are evaluating the possible impact that the adoption of this standard will have on its consolidated financial statements.

 

IAS 27 Separate Financial Statements

 

This standard amended in May 2011, and supersedes IAS 27 (2008).  The scope of this standard is restricted only for separate financial statements, as the concept related to the definition of control and consolidation were removed and included in IFRS 10.  Entities are required to apply amendments in the annual periods beginning on or after January 1, 2013, and early adoption is permitted in conjunction with IFRS 10, IFRS 11 and IFRS 12 and the amendment to IAS 28.  According to the assessment carried out this policy change has no impact on the consolidated financial statements of Banco de Chile and its subsidiaries.

 

IAS 28 Investments in Associates and Joint Venture

 

This standard was reissued in May 2011, regulates the accounting treatment of application of the equity method to investments in joint ventures.  Entities are required to apply amendments in the annual periods beginning on or after January 1, 2013, and early adoption is permitted in conjunction with IFRS 10, IFRS 11 and IFRS 12 and the amendment to IAS 27.   To date, Banco de Chile and its subsidiaries are evaluating the possible impact that the adoption of this standard will have on its consolidated financial statements.

 

IAS 32 Financial Instruments: Presentation

 

The amendments issued in December 2011, clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous.  The standard is effective for annual periods beginning on or after January 1, 2014 and early adoption is permitted.

 

In May 2012, the amendments removes a perceived inconsistency between IAS 32 and IAS 12 and indicating that the income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12 “Income Taxes”.

 

This amendment shall apply retroactively for annual periods beginning on or after January 1, 2013.  Earlier application is permitted.

 

According to current rules about netting force in Chile, this rule has no impact on the consolidated financial statements of Banco de Chile and its subsidiaries.

 

12



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

3.                           New Accounting Pronouncements, continued:

 

IAS 34 Interim Financial Reporting

 

The annual improvements to IFRS, issued in May 2012, incorporates amendments to IAS 34, in which it is established that requires disclosure of assets and total liabilities for a particular segment, if:

 

a) The total assets and total liabilities for a particular reportable segment would be separately disclosed in interim financial reporting only when the amounts are regularly provided to the chief operating decision-maker.

 

b) There has been a material change from the amounts disclosed in the last annual financial statements for that reportable segment.

 

This amendment shall apply retroactively for annual periods beginning on or after January 1, 2013.  Earlier application is permitted.

 

According to the assessment carried out this policy change has no impact on the consolidated financial statements of Banco de Chile and its subsidiaries.

 

IFRS 7 Financial Instruments: Disclosures

 

In December 2011, amended the required disclosures to include information that will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity’s recognized financial assets and recognized financial liabilities, on the entity’s financial position.  An entity shall apply those amendments for annual periods beginning on or after January 1, 2013.  To date, Banco de Chile and its subsidiaries are working in its disclosures for give compliance to this rule.

 

IFRS 9 Financial Instruments: Financial liabilities

 

In October, 2010, the IASB published the requirements for classifying and measuring financial liabilities were added to IFRS 9.  Most of the added requirements were carried forward unchanged from IAS 39.  However, the requirements related to the fair value option for financial liabilities were changed to address the issue of own credit risk in response to consistent feedback from users of financial statements and others that the effects of changes in a liability’s credit risk ought not to affect profit or loss unless the liability is held for trading.

 

The mandatory effective date to annual periods beginning on or after January 1, 2015.

 

13



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

3.                           New Accounting Pronouncements, continued:

 

IFRS 9 Financial Instruments: Recognition and Measurement

 

In November 2009, the IASB issued IFRS 9, “Financial Instruments,” the first step in its project to replace IAS 39, “Financial Instruments: Recognition and Measurement”.  IFRS 9 introduces new requirements for classifying and measuring financial assets that are in the scope of the application of IAS 39.  This new regulation requires that all financial assets be classified in function of the entity’s business model for the management of financial assets and of the characteristics of the contractual cash flows of financial assets.  A financial asset shall be measured at amortized cost if two criteria are fulfilled: (a) the objective of the business model is to maintain a financial asset to receive contractual cash flows, and (b) contractual cash flows represent principal and interest payments.  Should a financial asset not comply with the aforementioned conditions, it will be measured at fair value.  In addition, this standard allows a financial asset that fulfills the criteria to be valued at amortized cost to be designated at fair value with changes in income under the fair value option, as long as this significantly reduces or eliminates an accounting asymmetry.  Likewise, IFRS 9 eliminates the requirement of separating embedded derivatives from the host financial assets.  Therefore, it requires that a hybrid contract be classified entirely in amortized cost or fair value.

 

IFRS 9 is effective for annual periods commencing as of January 1, 2015, and allows adoption prior to that date.  IFRS 9 must be applied retroactively, however if it is adopted before January 1, 2012, there is no need to reformulate comparative periods.

 

Banco de Chile and its subsidiaries are assessing the possible impact of adoption of these changes on the consolidated financial statements, however, that impact will depend on the assets maintained by the institution as of the adoption date.  It is not practicable to quantify the effect on the issuance of these consolidated financial statements.  To date, neither of these standards has been approved by the Superintendency of Banks, event that is required for their application.

 

IFRS 10 Consolidated Financial Statement

 

In May 2011 the IASB issued IFRS 10 establishes a new definition of control applies to all entities including “special purpose entities” or “structured entities” as they are now referred to in the new standards.  The changes introduced by IFRS 10 will require management to exercise significant judgment to determine which entities are controlled, and therefore are required to be consolidated by a parent.

 

These new standard is effective for annual periods beginning on or after January 1, 2013.  To date, Banco de Chile and its subsidiaries are evaluating the possible impact that the adoption of this standard will have on its consolidated financial statements.

 

14



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

3.                           New Accounting Pronouncements, continued:

 

IFRS 11 Joint Arrangements

 

In May 2011, the IASB issued IFRS 11 which replaces IAS 31 “Interest in Joint Ventures” and SIC-13 “Jointly-Controlled Entities- Non-monetary Contributions by Ventures”.

 

IFRS 11 eliminated the option to record the value of investment in a joint venture using proportionate consolidation or recognize its assets and liabilities its relative shares of those items, if any.  The new standards require using the equity method.

 

These new standard is effective for annual periods beginning on or after January 1, 2013.  To date, Banco de Chile and its subsidiaries are evaluating the possible impact that the adoption of this standard will have on its consolidated financial statements.

 

IFRS 12 Disclosure of Interests in Other Entities

 

In May 2011, the IASB issued IFRS 12 which replaces the disclosure requirements previously included in IAS 27, IAS 31 and IAS 28. This new standard is aimed at concentrating on a single regulatory body disclosure of subsidiaries, joint agreements, associates and structured entities.  One of the most significant changes introduced by IFRS 12 is required for the parent to disclose the judgment that management has made to determine that it has control to consolidate or not different entities. The new disclosures will help users of its financial statement evaluate the nature and risks associated with interests in other entities and the effects of those interests on its financial statements.

 

These new standard is effective for annual periods beginning on or after January 1, 2013.  To date, Banco de Chile and its subsidiaries are evaluating the potential impact that its adoption will have on its consolidated financial statements.

 

IFRS 13 Fair Value Measurement

 

In May 2011, the IASB issued IFRS 13 Fair Value Measurement.  This new standard establishes a new definition of Fair Value.  This new standard does not change when an entity must or may use fair value, but changes the way how to measure the fair value of financial assets and liabilities and non-financial.

 

These new standard is effective for annual periods beginning on or after January 1, 2013.  According the assessment, this policy change has no impact on the consolidated financial statements of Banco de Chile and its subsidiaries, however the Bank is working in its disclosures for comply with the further information requests of this rule.  This rule will be applicable if Superintendency of Banks and Financial Institutions allow its adoption.

 

15



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

4.                   Changes in Accounting Policies and Disclosures:

 

During the period ended September 30, 2012, have not occurred significant accounting changes that affect the presentation of consolidated financial statements.

 

5.                   Relevant Events:

 

a.                                     In an ordinary meeting held on January 26, 2012, the Bank’s Board of directors decided to call an ordinary shareholders meeting to be held on March 22, 2012 with the objective of proposing, among other matters, the increase the Banks capital through the capitalization of 30% of the Bank’s net income for the fiscal year 2011, by means of the issuance of shares without nominal value, set at the value of $67.48 per share and distributed among shareholders, without charge, at the rate of 0.018956 new shares per each paid for and subscribed share and to adopt all necessary resolutions subject to the options contemplated in Article 31 of Law N°19,396.

 

In an ordinary meeting held on March 22, 2012, its shareholders’ approved the distribution and payment of dividend No.200, in the amount of CLP$2.984740 per Banco de Chile common share, which represents 70% of the Bank’s net income for year 2011.

 

b.                                    On February 16, 2012 and pursuant to Article 116 of Law No. 18,045, Banco de Chile in his capacity as representative of the bondholders Series A, issued by Compañía Sud Americana de Vapores S.A., Banco de Chile informed, as an essential information, that because this has occurred the configuration of the disability cause contemplated in the first paragraph of Article 116 of Law No. 18,045, that is, being the representative of the bondholders related to the issuer.

 

Banco de Chile will refrain from further actions as such and will renounce as representative of the bondholders of such issue, for which purpose will proceed to quote in the shortest possible time to a bondholders meeting, to announce the renounce of Banco de Chile as representative and to propose to the assembly the appointment of a new representative.

 

The said bond issue is in the public deed dated August 29, 2001, executed in Santiago on behalf of the Public Notary Mr. René Benavente Cash, together with all the amendments and entered in the Registry of Securities of the Chilean Superintendency of Securities and Insurance under No. 274.

 

16



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

5.                           Relevant Events, continued:

 

c.                                     On March 27, 2012, the Central Bank of Chile communicated to Banco de Chile that in the Extraordinary Session, No. 1666E, held on the same date, the Board of the Central Bank of Chile resolved to request its corresponding surplus, from the fiscal year ended December 31, 2011, including the proportional part of the agreed upon capitalization profits, be paid in cash.

 

d.                                    On April 27, 2012 Banco de Chile informs that in the Ordinary Meeting held on April 26, 2012, the Board of Directors of Banco de Chile accepted the resignation presented by the Director, Mr. Fernando Quiroz Robles.

 

Likewise, the Board of Directors appointed, until the next Ordinary Shareholders Meeting, Mr. Francisco Aristeguieta Silva as Director. Additionally, in the same session, Mr. Francisco Aristeguieta Silva was appointed as Vice Chairman of the Board of Directors of Banco de Chile.

 

e.                                     On June 5, 2012 Banco de Chile informed the capitalization of 30% of the distributable net income obtained during the fiscal year ending the December 31, 2011, through the issuance of fully paid-in shares, of no par value, agreed in the Extraordinary Shareholders Meeting held on March 22, 2012, the Bank informed the following:

 

(i)                                     In the said Extraordinary Shareholders Meeting, it was agreed to increase the Bank´s capital in the amount of CLP$73,910,745,344 through the issuance of 1,095,298,538 fully paid-in shares, of no par value, payable under the distributable net income for the year ended December 31, 2011 that was not distributed as dividends as agreed at the Ordinary Shareholders Meeting held on the same day.

 

The Chilean Superintendency of Banks and Financial Institutions approved the amendment of the bylaws, through resolution N°118 dated May 17, 2012, which was registered on page 33,050, No. 23,246 on the Chamber of Commerce of Santiago, on May 18, 2012 and was published at “Diario Oficial” No. 40,267 on May 22, 2012.

 

The issuance of fully in paid shares was registered in the Securities Register of the Superintendence of Banks and Financial Institutions with No. 4/2012, on June 4, 2012.

 

(ii)                                  The Board of Directors of Banco de Chile, at the meeting No. 2,754, dated May 24, 2012, set June 28, 2012, as the date for issuance and distribution of the fully paid in shares.

 

(iii)                               The shareholders that will be entitled to receive the new shares, at a ratio of 0.018956 fully in paid shares for each Banco de Chile share, shall be those registered in the Registry of Shareholders on June 22, 2012.

 

(iv)                              The titles will be duly assigned to each shareholder. The Bank will only print the titles for those shareholders who request it in writing at the Shareholders Department of Banco de Chile.

 

17



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

(v)                                As a consequence of the issuance of the fully in paid shares, the capital of the Bank will be divided in 88,037,813,511 nominative shares, without par value.

 

f.                                          On July 9, 2012, according to article 19 of Chilean General Banking Act, the Superintendency of Banks and Financial Institutions imposed a fine of CLP$40,000,000 (Chilean pesos) to Banco de Chile, in connection with the forwarding and delivering service by electronic mail corresponding to June 2012 current account statements.

 

g.                                       In the Ordinary Session No. 2,761 held on September 13, 2012, the Board of Directors o Banco de Chile resolve to schedule an Extraordinary Shareholders Meeting to be held on October 17, 2012, with the purpose of proposing a capital increase in the amount of CLP$250,000,000,000 (two hundred and fifty billion Chilean pesos) by means for the issuance of cash shares that must be subscribed and paid at the price, term and other conditions agreed by the Shareholders Meeting as well as to modify the Bank’s by-laws by adopting the other necessary agreements so as to make effective the agreed by-laws reform.  Cash shares to be issued will be ordinary Banco de Chile shares having the same rights as all Banco de Chile’s shares, with the exception that they will not allow its shareholders to receive dividends and/or fully paid-in shares, as the case may be, with respect to the earnings of fiscal year 2012.

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

6.                   Segment Reporting:

 

For management purposes, the Bank has organized its operations and commercial strategies into four business segments, which are defined in accordance with the type of products and services offered to target customers. These business segments are currently defined as follows:

 

Retail:                                                    This segment focuses on individuals and small and medium-sized companies with annual sales up to 70,000UF, where the product offering focuses primarily on consumer loans, commercial loans, checking accounts, credit cards, credit lines and mortgage loans.

 

Wholesale:                         This segment focused on corporate clients and large companies, whose annual revenue exceed 70,000UF, where the product offering focuses primarily on commercial loans, checking accounts and liquidity management services, debt instruments, foreign trade, derivative contracts and leases.

 

Treasury and money market operations:

 

This segment includes revenue associated with managing the Bank’s balance sheet (currencies, maturities and interest rates) and liquidity, including financial instrument and currency trading on behalf of the Bank itself.

 

Transactions on behalf of customers carried out by the Treasury are reflected in the respective aforementioned segments. These products are highly transaction-focused and include foreign exchange transactions, derivatives and financial instruments in general.

 

Subsidiaries:                 Corresponds to companies and corporations controlled by the Bank, where income is obtained individually by the respective subsidiary. The companies that comprise this segment are:

 

Entity

 

·  Banchile Trade Services Limited

·  Banchile Administradora General de Fondos S.A.

·  Banchile Asesoría Financiera S.A.

·  Banchile Corredores de Seguros Ltda.

·  Banchile Factoring S.A.

·  Banchile Corredores de Bolsa S.A.

·  Banchile Securitizadora S.A.

·  Socofin S.A.

·  Promarket S.A.

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

6.                           Segment Reporting, continued:

 

The financial information used to measure the performance of the Bank’s business segments is not necessarily comparable with similar information from other financial institutions because it is based on internal reporting policies.   The accounting policies used to prepare the Bank’s operating segment information are similar as those described in “Summary of Significant Accounting Principles”.   The Bank obtains the majority of its income from:  interest, revaluations and fees, discounted the credit cost and expenses. Management is mainly based on these concepts in its evaluation of segment performance and decision-making regarding goals, allocation of resources for each unit individually.  Although the results of the segments reconcile with those of the Bank at total level, it is not thus necessarily concerning the different concepts, since the management is measured and controls in individual form and additionally applies the following criteria:

 

·                                The net interest margin of loans and deposits is measured on an individual transaction and individual client basis, stemming from the difference between the effective customer rate and the related Bank’s fund transfer price in terms of maturity, re-pricing and currency.

 

·                                The internal performance profitability system considers capital allocation in each segment in accordance to the Basel guidelines.

 

·                                Operating expenses are distributed at each area level.  The Bank allocates all of its indirect operating costs to each business segment by utilizing a different cost driver in order to allocate such costs to the specific segment.

 

The Bank did not enter into transactions with a particular customer or third party that exceed 10% or more of its total income during the nine-month period ended September 30, 2012 and 2011.

 

Transfer pricing between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

 

Taxes are managed at a corporate level and are not allocated to business segments.

 

20


 


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

6.                           Segment Reporting, continued:

 

The following table presents the information by segment for the periods ended September 30, 2012 and 2011 for each of the segments defined above:

 

 

 

Retail

 

Wholesale

 

Treasury

 

Subsidiaries

 

Subtotal

 

Adjustment (*)

 

Total

 

 

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

 

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

 

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

481,852

 

430,070

 

181,664

 

180,084

 

9,006

 

15,640

 

4,994

 

3,513

 

677,516

 

629,307

 

7,168

 

6,582

 

684,684

 

635,889

 

Net fees and commissions income (loss)

 

133,637

 

128,104

 

24,445

 

24,820

 

(363

)

(408

)

77,945

 

90,495

 

235,664

 

243,011

 

(8,427

)

(7,822

)

227,237

 

235,189

 

Other operating income

 

10,392

 

11,680

 

20,380

 

32,756

 

11,574

 

12,248

 

23,717

 

19,805

 

66,063

 

76,489

 

(9,127

)

(7,901

)

56,936

 

68,588

 

Total operating revenue

 

625,881

 

569,854

 

226,489

 

237,660

 

20,217

 

27,480

 

106,656

 

113,813

 

979,243

 

948,807

 

(10,386

)

(9,141

)

968,857

 

939,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions for loan losses

 

(138,141

)

(82,253

)

(90

)

(23,923

)

84

 

(942

)

563

 

(1,270

)

(137,584

)

(108,388

)

 

 

(137,584

)

(108,388

)

Depreciation and amortization

 

(15,603

)

(15,925

)

(5,498

)

(4,760

)

(999

)

(1,162

)

(1,167

)

(1,138

)

(23,267

)

(22,985

)

 

 

(23,267

)

(22,985

)

Other operating expenses

 

(299,518

)

(278,519

)

(86,007

)

(93,621

)

(5,387

)

(6,918

)

(67,664

)

(64,468

)

(458,576

)

(443,526

)

10,386

 

9,141

 

(448,190

)

(434,385

)

Income attributable to associates

 

384

 

1,903

 

193

 

599

 

21

 

 

259

 

261

 

857

 

2,763

 

 

 

857

 

2,763

 

Income before income taxes

 

173,003

 

195,060

 

135,087

 

115,955

 

13,936

 

18,458

 

38,647

 

47,198

 

360,673

 

376,671

 

 

 

360,673

 

376,671

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32,762

)

(47,453

)

Income after income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

327,911

 

329,218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

9,192,495

 

8,374,468

 

9,502,575

 

9,060,024

 

3,403,764

 

3,288,521

 

1,175,064

 

1,082,710

 

23,273,898

 

21,805,723

 

(664,033

)

(485,729

)

22,609,865

 

21,319,994

 

Current and deferred taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

129,140

 

113,804

 

Total assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,739,005

 

21,433,798