SANTIAGO Soft inflation in Chile will hurt bank earnings but a mild economic slowdown hasn't harmed demand for loans, said the chief executive of Santander Chile, the nation's largest bank in terms of total assets.
Inflation has progressively moderated since the beginning of last year and in the 12 months through April came in at 1.0 percent, far below the bottom end of the central bank's 2 percent to 4 percent tolerance range.
"Lower inflation will produce lower results and we're likely going to be comparing, if things don't change and everything is pointing for it not to, a year of less inflation in 2013 compared with 2012," Banco Santander Chile's STG.SN CEO Claudio Melandri told the Reuters Latin America Investment Summit.
Melandri estimated Chile would post annual inflation of 2.3 percent this year.
Though Chile's economy has entered a mild slowdown phase, with gross domestic product growing at 4.1 percent during the first quarter following a 5.6 percent expansion in 2012, Santander Chile hasn't seen demand for loans slacken.
"We haven't yet noticed a drop in demand for loans, we had a very good first quarter," Melandri told Reuters last week.
His comments come in stark contrast to those of Santander Chile's closest rival, Banco de Chile CHI.SN, whose CEO told Reuters it sees signs of a slowdown in demand for corporate and consumer loans amid setbacks to mega mining and power projects.
In April, the central bank's quarterly poll on bank credit said that demand for consumer and mortgage loans showed signs of slowing in the first quarter, while the availability of personal credit and financing for construction and real estate firms became more restrictive.
AIMING FOR TOP SPOT IN PROFIT, LOAN GROWTH
Santander Chile, which traditionally reaped the most in profits in the local banking sector, ceded its top spot last year to Banco de Chile.
"We're gearing to soon retake that leadership position in results ... we made some important changes in liquidity, in risk models and in refocusing segments to start growing strongly, and we're doing just that," Melandri said.
The bank will put its emphasis on mortgage loan growth and in expanding its loans to companies and high net worth clients.
"There was a price war in mortgage loans that we weren't willing to participate in ... we grew far less that the rest of the industry (last year) in mortgage loans, something which our recent data shows we're turning around," Melandri said.
Santander Chile is looking to lend up to $4.3 billion this year, an expansion of over 10 percent versus 2012.
Melandri said international conditions were ripe for issuing bonds, though they could improve even further.
He declined to say how much debt Santander Chile was considering issuing, but said the bank could look to do another bond sale in China.
In December, the financial institution issued debt in the Asian giant for 500 million Chinese renminbi.
(Reporting by Anthony Esposito and Felipe Iturrieta; Writing by Anthony Esposito; Editing by Chris Reese and Phil Berlowitz)