Banco de Chile profits rise as economy improves

SANTIAGO Oct 20 (Reuters) - Banco de Chile CHI.SN said on Tuesday that it had a 40 percent increase in net income in September compared with August due to a gradual economic recovery and lower loan loss provisions.

Chile's second largest bank said its net income rose to 28.24 billion pesos ($52 million) in September and profits totaled 191.23 billion pesos ($350 million) in the January-September period.

The numbers are not comparable to 2008 figures due to changes to accounting rules this year.

Profits in the Chilean banking system have been hit this year by disinflationary pressures, which pinch the interest margins on transactions linked to inflation fluctuations.

However, the improved economy has allowed banks to resume more lending at low rates as well as lower provisions, reflected in a slight growth in loan portfolios.

System-wide banking profits for the year to September are due to be released by the banking superintendency in coming days. ($1 = 546.07 pesos at end September) (Reporting by Antonio de la Jara; Writing by Louise Egan)