Table of Contents

 

 

 

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, 2013

 

Commission File Number 001-15266

 

BANK OF CHILE

(Translation of registrant’s name into English)

 

Paseo 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-   

 

 

 



Table of Contents

 

BANCO DE CHILE
REPORT ON FORM 6-K

 

Attached Banco de Chile’s Financial Statements with notes for the Third Quarter of 2013.

 



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 for the Period

 

III.

 

Interim Condensed Consolidated Statements of Other Comprehensive Income for the Period

 

IV.

 

Interim Condensed Consolidated Statements of Changes in Equity

 

V.

 

Interim Condensed Consolidated Statements of Cash Flows

 

VI.

 

Notes to the Interim Condensed Consolidated Financial Statements

 

MCh$

 

=

 

Millions of Chilean pesos

ThUS$

 

=

 

Thousands of U.S. dollars

UF 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).

Ch$ or CLP

 

=

 

Chilean pesos

US$ or USD

 

=

 

U.S. dollars

JPY

 

=

 

Japanese yen

EUR

 

=

 

Euro

MXN

 

=

 

Mexican pesos

HKD

 

=

 

Hong Kong dollars

PEN

 

=

 

Peruvian nuevo sol

CHF

 

=

 

Swiss franc

 

 

 

 

 

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.

Corporate information:

8

2.

Legal provisions, basis of preparation and other information:

8

3.

New Accounting Pronouncements:

12

4.

Changes in Accounting Policies and Disclosures:

15

5.

Relevant Events:

15

6.

Segment Reporting:

20

7.

Cash and Cash Equivalents:

23

8.

Financial Assets Held-for-trading:

24

9.

Cash collateral on securities borrowed and reverse repurchase agreements:

25

10.

Derivative Instruments and Accounting Hedges:

28

11.

Loans and advances to Banks:

33

12.

Loans to Customers, net:

34

13.

Investment Securities:

39

14.

Investments in Other Companies:

41

15.

Intangible Assets:

43

16.

Property and equipment:

46

17.

Current Taxes and Deferred Taxes:

48

18.

Other Assets:

53

19.

Current accounts and Other Demand Deposits:

54

20.

Savings accounts and Time Deposits:

54

21.

Borrowings from Financial Institutions:

55

22.

Debt Issued:

57

23.

Other Financial Obligations:

60

24.

Provisions:

60

25.

Other Liabilities:

64

26.

Contingencies and Commitments:

65

27.

Equity:

69

28.

Interest Revenue and Expenses:

73

29.

Income and Expenses from Fees and Commissions:

75

30.

Net Financial Operating Income:

76

31.

Foreign Exchange Transactions, net:

76

32.

Provisions for Loan Losses:

77

33.

Personnel Expenses:

78

34.

Administrative Expenses:

79

35.

Depreciation, Amortization and Impairment:

80

36.

Other Operating Income:

81

37.

Other Operating Expenses:

82

38.

Related Party Transactions:

83

39.

Fair Value of Financial Assets and Liabilities:

88

40.

Maturity of Assets and Liabilities:

97

41.

Subsequent Events:

99

 



Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

For the periods ended September 30, 2013 and 2012

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

Notes

 

September
2013

 

December
2012

 

 

 

 

 

MCh$

 

MCh$

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

7

 

998,770

 

684,925

 

Transactions in the course of collection

 

7

 

513,900

 

396,611

 

Financial assets held-for-trading

 

8

 

365,892

 

192,724

 

Cash collateral on securities borrowed and reverse repurchase agreements

 

9

 

20,501

 

35,100

 

Derivative instruments

 

10

 

290,487

 

329,497

 

Loans and advances to banks

 

11

 

676,953

 

1,343,322

 

Loans to customers, net

 

12

 

19,957,386

 

18,334,330

 

Financial assets available-for-sale

 

13

 

1,784,353

 

1,264,440

 

Financial assets held-to-maturity

 

13

 

 

 

Investments in other companies

 

14

 

16,697

 

13,933

 

Intangible assets

 

15

 

30,947

 

34,290

 

Property and equipment

 

16

 

198,797

 

205,189

 

Current tax assets

 

17

 

3,018

 

2,684

 

Deferred tax assets

 

17

 

135,961

 

127,143

 

Other assets

 

18

 

259,656

 

296,878

 

TOTAL ASSETS

 

 

 

25,253,318

 

23,261,066

 

LIABILITIES

 

 

 

 

 

 

 

Current accounts and other demand deposits

 

19

 

5,927,692

 

5,470,971

 

Transactions in the course of payment

 

7

 

314,489

 

159,218

 

Cash collateral on securities lent and repurchase agreements

 

9

 

223,409

 

226,396

 

Savings accounts and time deposits

 

20

 

10,332,890

 

9,612,950

 

Derivative instruments

 

10

 

375,028

 

380,322

 

Borrowings from financial institutions

 

21

 

876,247

 

1,108,681

 

Debt issued

 

22

 

4,056,885

 

3,273,933

 

Other financial obligations

 

23

 

174,967

 

162,123

 

Current tax liabilities

 

17

 

2,043

 

25,880

 

Deferred tax liabilities

 

17

 

36,851

 

27,630

 

Provisions

 

24

 

467,405

 

504,837

 

Other liabilities

 

25

 

239,581

 

301,066

 

TOTAL LIABILITIES

 

 

 

23,027,487

 

21,254,007

 

 

 

 

 

 

 

 

 

EQUITY

 

27

 

 

 

 

 

Attributable to Bank’s Owners:

 

 

 

 

 

 

 

Capital

 

 

 

1,849,351

 

1,629,078

 

Reserves

 

 

 

213,767

 

177,574

 

Other comprehensive income

 

 

 

13,182

 

18,935

 

Retained earnings:

 

 

 

 

 

 

 

Retained earnings from previous periods

 

 

 

16,379

 

16,379

 

Income for the period

 

 

 

380,720

 

465,850

 

Less:

 

 

 

 

 

 

 

Provision for minimum dividends

 

 

 

(247,569

)

(300,759

)

Subtotal

 

 

 

2,225,830

 

2,007,057

 

Non-controlling interests

 

 

 

1

 

2

 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

 

2,225,831

 

2,007,059

 

TOTAL LIABILITIES AND EQUITY

 

 

 

25,253,318

 

23,261,066

 

 

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 PERIOD

For the nine-month ended September 30, 2013 and 2012

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

A.  CONSOLIDATED STATEMENT OF INCOME

 

 

 

Notes

 

September
2013

 

September
2012

 

 

 

 

 

MCh$

 

MCh$

 

Interest revenue

 

28

 

1,272,595

 

1,182,658

 

Interest expense

 

28

 

(503,902

)

(497,974

)

Net interest income

 

 

 

768,693

 

684,684

 

 

 

 

 

 

 

 

 

Income from fees and commissions

 

29

 

288,089

 

275,326

 

Expenses from fees and commissions

 

29

 

(72,239

)

(62,826

)

Net fees and commission income

 

 

 

215,850

 

212,500

 

 

 

 

 

 

 

 

 

Net financial operating income

 

30

 

23,687

 

15,766

 

Foreign exchange transactions, net

 

31

 

36,764

 

24,829

 

Other operating income

 

36

 

17,924

 

16,341

 

Total operating revenues

 

 

 

1,062,918

 

954,120

 

 

 

 

 

 

 

 

 

Provisions for loan losses

 

32

 

(173,817

)

(137,584

)

 

 

 

 

 

 

 

 

OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES

 

 

 

889,101

 

816,536

 

 

 

 

 

 

 

 

 

Personnel expenses

 

33

 

(234,191

)

(231,632

)

Administrative expenses

 

34

 

(184,309

)

(176,048

)

Depreciation and amortization

 

35

 

(21,332

)

(23,267

)

Impairment

 

35

 

(133

)

(648

)

Other operating expenses

 

37

 

(13,789

)

(25,125

)

 

 

 

 

 

 

 

 

TOTAL OPERATING EXPENSES

 

 

 

(453,754

)

(456,720

)

 

 

 

 

 

 

 

 

NET OPERATING INCOME

 

 

 

435,347

 

359,816

 

 

 

 

 

 

 

 

 

Income attributable to associates

 

14

 

2,044

 

857

 

Income before income tax

 

 

 

437,391

 

360,673

 

 

 

 

 

 

 

 

 

Income tax

 

 

 

(56,671

)

(32,762

)

 

 

17

 

 

 

 

 

NET INCOME FOR THE PERIOD

 

 

 

380,720

 

327,911

 

Attributable to:

 

 

 

 

 

 

 

Bank’s Owners

 

 

 

380,720

 

327,910

 

Non-controlling interests

 

 

 

 

1

 

 

 

 

 

 

 

 

 

Net income per share attributable to Bank’s Owners:

 

 

 

Ch$

 

Ch$

 

Basic net income per share

 

27

 

4.10

 

3.72

 

Diluted net income per share

 

27

 

4.10

 

3.72

 

 

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 PERIOD

For the nine-month ended September 30, 2013 and 2012

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

B.  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

Notes

 

September
2013

 

September
2012

 

 

 

 

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

NET INCOME FOR THE PERIOD

 

 

 

380,720

 

327,911

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME THAT WILL BE RECLASSIFIED TO INCOME FOR THE PERIOD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses):

 

 

 

 

 

 

 

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

 

13

 

9,149

 

23,294

 

Gains and losses on derivatives held as cash flow hedges

 

10

 

(16,389

)

1,294

 

Cumulative translation adjustment

 

 

 

39

 

(65

)

Other comprehensive income before income taxes

 

 

 

(7,201

)

24,523

 

 

 

 

 

 

 

 

 

Income tax related to other comprehensive income

 

17

 

1,448

 

(4,880

)

 

 

 

 

 

 

 

 

Total other comprehensive income that will be reclassified to income for the period

 

 

 

(5,753

)

19,643

 

Other comprehensive income that will not be reclassified to income for the period

 

 

 

 

 

TOTAL OTHER COMPREHENSIVE INCOME

 

 

 

(5,753

)

19,643

 

 

 

 

 

 

 

 

 

TOTAL CONSOLIDATED COMPREHENSIVE INCOME

 

 

 

374,967

 

347,554

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Bank’s owners

 

 

 

374,967

 

347,553

 

Non-controlling interest

 

 

 

 

1

 

 

 

 

 

 

 

 

 

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

 

 

 

Ch$

 

Ch$

 

Basic net income per share

 

 

 

4.03

 

3.95

 

Diluted net income per share

 

 

 

4.03

 

3.95

 

 

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, 2013 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, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

7

 

 

 

 

7

 

1

 

8

 

Cash flow hedge adjustment, net

 

 

 

 

 

 

 

385

 

 

 

 

 

385

 

 

385

 

Valuation adjustment on available-for-sale instruments, net

 

 

 

 

 

 

973

 

 

 

 

 

 

973

 

 

973

 

Subscribed and paid shares

 

 

 

119,084

 

 

 

 

 

 

 

 

 

119,084

 

 

119,084

 

Income for the period 2012

 

 

 

 

 

 

 

 

 

 

137,940

 

 

137,940

 

 

137,940

 

Provision for minimum dividends

 

 

 

 

 

 

 

 

 

 

 

(85,874

)

(85,874

)

 

(85,874

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2012

 

 

 

1,629,078

 

32,256

 

145,318

 

17,995

 

1,034

 

(94

)

16,379

 

465,850

 

(300,759

)

2,007,057

 

2

 

2,007,059

 

Capitalization of retained earnings

 

27

 

86,202

 

 

 

 

 

 

 

(86,202

)

 

 

 

 

Retention (released) earnings

 

27

 

 

 

36,193

 

 

 

 

 

(36,193

)

 

 

 

 

Dividends distributions and paid

 

27

 

 

 

 

 

 

 

 

(343,455

)

300,759

 

(42,696

)

(1

)

(42,697

)

Other comprehensive income:

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

39

 

 

 

 

39

 

 

39

 

Cash flow hedge adjustment, net

 

 

 

 

 

 

 

(13,112

)

 

 

 

 

(13,112

)

 

(13,112

)

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

 

 

 

 

 

 

7,320

 

 

 

 

 

 

7,320

 

 

7,320

 

Subscribed and paid shares

 

27

 

134,071

 

 

 

 

 

 

 

 

 

134,071

 

 

134,071

 

Income for the period 2013

 

 

 

 

 

 

 

 

 

 

380,720

 

 

380,720

 

 

380,720

 

Provision for minimum dividends

 

27

 

 

 

 

 

 

 

 

 

(247,569

)

(247,569

)

 

(247,569

)

Balances as of September 30, 2013

 

 

 

1,849,351

 

32,256

 

181,511

 

25,315

 

(12,078

)

(55

)

16,379

 

380,720

 

(247,569

)

2,225,830

 

1

 

2,225,831

 

 

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, 2013 and 2012

 (Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

Notes

 

September
2013

 

September
2012

 

 

 

 

 

MCh$

 

MCh$

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income for the period

 

 

 

380,720

 

327,911

 

Items that do not represent cash flows:

 

 

 

 

 

 

 

Depreciation and amortization

 

35

 

21,332

 

23,267

 

Impairment of intangible assets and property and equipment

 

35

 

133

 

648

 

Provision for loan losses

 

32

 

186,118

 

164,370

 

Provision of contingent loans

 

32

 

10,632

 

2,909

 

Fair value adjustment of financial assets held-for-trading

 

 

 

(282

)

626

 

Income attributable to investments in other companies

 

14

 

(1,792

)

(648

)

Income from sales of assets received in lieu of payment

 

36

 

(3,627

)

(5,246

)

Net gain on sales of property and equipment

 

 

 

(205

)

(224

)

(Increase) decrease in other assets and liabilities

 

 

 

(15,828

)

(6,244

)

Charge-offs of assets received in lieu of payment

 

37

 

1,308

 

1,974

 

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

 

 

 

4,865

 

(466

)

(Gain) loss from foreign exchange transactions of other assets and other liabilities

 

 

 

(55,566

)

(38,070

)

Net changes in interest and fee accruals

 

 

 

28,759

 

21,374

 

Changes in assets and liabilities that affect operating cash flows:

 

 

 

 

 

 

 

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

 

 

 

666,372

 

(144,957

)

(Increase) decrease in loans to customers

 

 

 

(1,799,468

)

(1,146,224

)

(Increase) decrease in financial assets held-for-trading, net

 

 

 

(191,188

)

123,829

 

(Increase) decrease in deferred taxes, net

 

17

 

403

 

(13,113

)

(Increase) decrease in current account and other demand deposits

 

 

 

456,348

 

107,096

 

(Increase) decrease in payables from repurchase agreements and security lending

 

 

 

21,656

 

56,397

 

(Increase) decrease in savings accounts and time deposits

 

 

 

717,671

 

673,172

 

Proceeds from sale of assets received in lieu of payment

 

 

 

5,593

 

7,074

 

Total cash flows from operating activities

 

 

 

433,954

 

155,455

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

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

 

 

 

(532,350

)

81,974

 

Purchases of property and equipment

 

16

 

(8,535

)

(15,285

)

Proceeds from sales of property and equipment

 

 

 

491

 

119

 

Purchases of intangible assets

 

15

 

(3,773

)

(6,001

)

Investments in other companies

 

14

 

(1,440

)

(71

)

Dividends received from investments in other companies

 

14

 

931

 

915

 

Total cash flows from investing activities

 

 

 

(544,676

)

61,651

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds of mortgage finance bonds

 

 

 

 

 

Repayment of mortgage finance bonds

 

 

 

(15,869

)

(20,791

)

Proceeds from bond issuances

 

22

 

1,245,262

 

815,989

 

Redemption of bond issuances

 

 

 

(484,375

)

(244,075

)

Proceeds from subscription and payment of shares

 

27

 

134,071

 

 

Dividends paid

 

27

 

(343,455

)

(296,802

)

(Increase) decrease in borrowings from financial institutions

 

 

 

(392,878

)

19,285

 

(Increase) decrease in other financial obligations

 

 

 

15,731

 

(33,206

)

(Increase) decrease in borrowings from Central Bank of Chile

 

 

 

 

(22,793

)

Borrowings from Central Bank of Chile (long-term)

 

 

 

 

15

 

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

 

 

 

(7

)

(48

)

Long-term foreign borrowings

 

 

 

622,630

 

336,103

 

Payment of long-term foreign borrowings

 

 

 

(460,418

)

(815,838

)

Proceeds from other long-term borrowings

 

 

 

538

 

666

 

Payment of other long-term borrowings

 

 

 

(3,821

)

(4,270

)

Total cash flows from financing activities

 

 

 

317,409

 

(265,765

)

TOTAL NET POSITIVE CASH FLOWS FOR THE PERIOD

 

 

 

206,687

 

(48,659

)

Net effect of exchange rate changes on cash and cash equivalents

 

 

 

33,848

 

(34,148

)

Cash and cash equivalents at beginning of year

 

 

 

1,236,324

 

1,429,908

 

Cash and cash equivalents at end of period

 

7

 

1,476,859

 

1,347,101

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

2013

 

2012

 

Cash paid during the year for:

 

 

 

MCh$

 

MCh$

 

Interest received

 

 

 

1,240,417

 

1,184,733

 

Interest paid

 

 

 

(442,965

)

(478,675

)

 

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

 (Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 


 

1.                   Corporate information:

 

Banco de Chile is authorized to operate like a commercial bank since September 17, 1996, in conformity with the Article 25 of Law No. 19,396.  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”).  As indicate in Note No. 41 “Subsequent Events” since October 18, 2013 the Bank has resolved to exclude its shares of this stock exchange.

 

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 address is Paseo Ahumada 251, Santiago, Chile and its website is www.bancochile.cl.

 

The Interim Condensed Consolidated Financial Statements of Banco de Chile, for the period ended September 30, 2013 were approved for issuance in accordance with the directors on October 24, 2013.

 

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

 

(a)                                 Legal provisions:

 

The General Banking Law in its Article No.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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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

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

 

(b)                                 Basis of preparation:

 

(b.1)            These Interim Condensed Consolidated Financial Statements are presented according to Chapter C-2 of the Compendium of Accounting Standards, issued by the Superintendency of Banks and Financial Institutions (SBIF).

 

(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

 

December

 

September

 

December

 

September

 

December

 

Rut

 

Subsidiaries

 

Country

 

Currency

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

%

 

%

 

%

 

%

 

%

 

%

 

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

 

 

0.25

 

 

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

 

 


(*) See note No.5 (j) of Relevant events

 

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 No. 15);

2.                  Useful lives of property and equipment and intangible assets (Notes No. 15 and No. 16);

3.                  Income taxes and deferred taxes (Note No. 17);

4.                  Provisions (Note No. 24);

5.                  Commitments and contingencies (Note No. 26);

6.                  Provision for loan losses (Note No. 32);

7.                  Impairment of other financial assets (Note No. 35);

8.                  Fair value of financial assets and liabilities (Note No. 39).

 

During period 2013, the Bank has made a modification to the derivatives valuation model.  This consists in the incorporation of “Counterparty Value Adjustment” (CVA) in the valuation of derivatives, to reflect the counterparty risk in determining the fair value. In accordance with IAS 8 “Accounting Policies: Changes in Accounting Estimates and Errors”, this modification has been treated as a change in accounting estimate and its effect recorded in earnings. The effect of this change involved an initial charge of income of Ch$7,821 million.

 

There have been no significant changes to estimates made during period 2013, except for the above.

 

(d)         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 with the information regarding the period of nine-month ended September 30, 2013.

 

(e)          Relative Importance:

 

When determining the information to present on the different items from the financial statements or other subjects, 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

 


 

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

 

(f)      Reclassifications:

 

During this period, the expense that, by their nature is directly related with credit cards was reclassified from “Other operational expenses” to “Expenses from fees and commissions”, in order to relate them better with the revenues from that product.  The effect of this reclassification is the following:

 

 

 

Balance
as of
September 30,
2012

 

Reclassification

 

Reclassified
Balance as of

September 30,
2012

 

 

 

MCh$

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

Expenses from fees and commissions

 

(48,089

)

(14,737

)

(62,826

)

Other operational expenses

 

(39,862

)

14,737

 

(25,125

)

 

This reclassification does not affect any comply of covenants.

 

There are not other significant reclassifications at the end period 2013, different to described above.

 

11



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) and rules issued by the Superintendency of Banks and Financial Institutions (SBIF), as per the following detail:

 

3.1                      Accounting rules issued by IASB:

 

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.

 

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.

 

IAS 36 Impairment assets

 

On May 29, 2013, the IASB issued amendments to IAS 36 respect to disclosures information related to recoverable amount of impaired assets, if this amount corresponded to fair value less disposal cost.  These modifications are related to IFRS 13: “Fair Value measurement”.

 

The amendments will be applied retrospectively to annual periods beginning in January 1, 2014.  Early adoption is permitted for the periods that the entity has applied IFRS 13.

 

The Bank and its subsidiaries appraises that this amendment will not have impact in the consolidated financial statements.

 

IAS 39 Financial Instruments: Recognition and Measurement

 

On June 27, 2013 the IASB issue amendments to IAS 39 related to continuing hedge accounting after novation.  This amendment provides an exception to the requirement to discontinue hedge accounting in situations where over-the-counter (OTC) derivatives designated in hedging relationships are directly or indirectly, novated to a central counterparty (CCP) as a consequence of laws or regulations, or the introduction of laws or regulations.

 

The effective date for annual periods beginning on or after January 1, 2014.  Early adoption is permitted.

 

The Bank will make updates related to documentation that will be required and adjustments in operating process for compliance of novations.  It is important to say that the hedges will not be interrupted for this novation, so there is no impact in financial statements.

 

12



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

3.                           New Accounting Pronouncements, continued:

 

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 for annual periods beginning on or after January 1, 2015.

 

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 requires, mandatory and prospective way, that the entity makes reclassifications of financial assets when the entity modifies the business model.

 

Under IFRS 9, all equity investments of are measured at fair value. However, the Management has the option of present the changes of fair value in the item “Other Comprehensive Income” in equity. This accounting treatment is available for the initial recognition of an instruments and it is irrevocable. The unrealized income (loss) recognized in “Other Comprehensive Income”, derived from the changes of fair value, and must be not included in income statements.

 

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.

 

13



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

3.                           New Accounting Pronouncements, continued:

 

IFRS 10 Consolidated Financial Statement, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements

 

The Amendments to IFRS 10, IFRS 12 and IAS 27 incorporate a definition of an investment entity and also introduce an exception to consolidate certain subsidiaries owned investment entities.  These amendments require an entity to measure investment considered its investments in subsidiaries at fair value through profit or loss in accordance with IFRS 9 instead of consolidating such subsidiaries.

 

Amendments also introduce new disclosure requirements related to investment entities IFRS 12 and IAS 27.

 

If an entity applies these amendments but not applies IFRS 9 yet, any reference in this document to IFRS 9 must be interpreted as a reference to IAS 39 Financial Instruments: Recognition and Measurement.

 

The standard is effective for annual periods beginning on or after January 1, 2014 and early adoption is permitted.

 

3.2                      Accounting rules issued by SBIF:

 

On March 19, 2013 the Superintendency of Banks issued a Circular No. 3,548 that modified the following:

 

(a)         The instructions relative to the presentation of Statements of Income for matching the names used in the Compendium of Accounting Standards issued by the Chilean Superintendency of Banks with last modifications of IAS 1.

 

The expressions: “Statement of Income” and “Statement of Comprehensive Income” must be replaced by “Statement of Income for the Period” and “Statement of Other Comprehensive Income for the Period” respectively.

 

(b)         Accurate presentation of income (loss) that originate in the case of sale portfolio loans, stipulated that the net income (loss) for sale portfolio loans classified in the item “Net financial operating income”, corresponds to differences between the cash perceived (or fair value of the instruments that are received as consideration) and the value net of provisions of the transferred assets, registered at the sale date.

 

Before this regulatory change, the net income (loss) of sale portfolio loans, corresponded to differences between the cash perceived (or fair value of the instruments that are received as consideration) and the gross value of transferred assets, proceeding after to release of the established provisions for that loans, being this last effect recognized in the item “Provisions for loan losses” of the Income Statements of the Periods.

 

14



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

4.                  Changes in Accounting Policies and Disclosures:

 

During the period ended September 30, 2013, there have not been significant accounting changes that affect the presentation of consolidated financial statements.

 

5.                   Relevant Events:

 

(a)         On January 04, 2013 Banco de Chile has concluded the execution process of the insurance agreements between Banco de Chile and its subsidiary Banchile Corredores de Seguros Limitada, with Banchile Seguros de Vida S.A., which were entered into through private instruments dated on December 28, 2012, which are:

 

(1)         Brokerage Agreement entered into by the affiliate Banchile Corredores de Seguros Limitada and the related company Banchile Seguros de Vida S.A.

 

(2)         Agreements entered into by Banco de Chile and Banchile Seguros de Vida S.A.:

 

i)       Collection and Data Administration Agreement.

ii)      Use Agreement for Distribution Channels.

iii)     Banchile’s Trademark License Agreement.

iv)     Credit Life Insurance Agreement.

 

(3)    Framework agreement for Insurance Banking, entered into by Banco de Chile, Banchile Corredores de Seguros Limitada and Banchile Seguros de Vida S.A.

 

All of the agreements have a duration of 3 years effective from January 1, 2013, excluding those insurances, as applicable, that are related to loan mortgages subject to public bid in accordance with article 40 of DFL No. 251 of 1931.

 

It is worth noting that Banchile Seguros de Vida S.A. is a related party to Banco de Chile in accordance with Article 146 of the Chilean Corporations Law. In turn, Banchile Corredores de Seguros Limitada is a subsidiary of Banco de Chile, incorporated pursuant to Article 70 letter a) of the Chilean Banking Act.

 

(b)         On January 17, 2013 the Central Bank of Chile, in session No.1730-02-130117 held on that day, agreed and determined, in accordance with article 30 letter b) of Law No. 19,396, the selling price of the subscription options pertaining the 1,279,502,316 (Banco de Chile-T series) cash shares issued by Banco de Chile as agreed during the Extraordinary Shareholders Meeting held on October  17, 2012. Those shares are owned by Sociedad Administradora de la Obligación Subordinada SAOS S.A. and are pledged as collateral to the Chilean Central Bank.

 

The above referred subscription options shall be preferentially offered to shareholders of series A, B and D of Sociedad Matriz del Banco de Chile S.A. during the so called “Special Preferential Rights Offering Period” which will begin running on January 19, 2013, and shall be elapsed on February 17, 2013.

 

In accordance with the above referred resolution of the Council of the Central Bank of Chile, the price of each option shall be as follows:

 

15



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

5.                           Relevant Events, continued:

 

“The price of the subscription option, hereinafter the “Option Price”, shall correspond to the higher value between Ch$0.1 and the value resulting from the difference obtained after multiplying 0.9752 over the average stock trading price of Banco de Chile´s shares registered in local stock exchanges during the three business trading days preceding the date in which the corresponding option is acquired, hereinafter the “Weighted Average Share Price” (“Precio Promedio Ponderado de la Acción”), and Ch$62.0920.

 

For these purposes, the “Weighted Average Share Price” was determined, for each day, in accordance to the weighted average price of Banco de Chile´s shares traded during the three business trading days preceding the date in which the corresponding option is acquired, having in mind that the value corresponding to the Weighted Average Price, in relation to the beginning of the Special Preferential Rights Offering Period shall be of Ch$71.4. This value considers the resulting prices from the Ordinary Preferential Rights Offering Period referred to in letter a) of article 30 of Law N°19,396, so that, initially, the Option Price shall correspond to Ch$7.5 per each Banco de Chile´s share, and subsequently, he Option Price shall be determined pursuant to the Weighted Average Share Price, as explained before.

 

In any event, and for the purposes of selling the subscription options, the Option Price shall corresponded to Ch$7.5 for each Banco de Chile´s share, as long as the Weighted Average Share Price, determined as described before, does not exceed Ch$76.9 nor be less than Ch$71.3.

 

The Option Price that is determined in accordance with the aforementioned shall be paid up front pursuant to the conditions set forth by Banco de Chile for purposes of the Bank’s capital increase and its calculation procedure shall also be governed by the term established in the final paragraph of letter b) of article 30 of the Law No. 19,396, in accordance to the conditions established by the same legal provision”.

 

In addition, the Central Bank of Chile resolved that Sociedad Administradora de la Obligación Subordinada SAOS S.A. shall preferentially offer the options to the mentioned shareholders at the price singularized before. The price was notified by Sociedad Administradora de la Obligación Subordinada SAOS S.A. to the Central Bank of Chile and also be informed to interested persons at the beginning of each day of the “Special Preferential Rights Offering Period”.

 

(c)          On January 24, 2013 in the Ordinary Meeting No. BCH 2,769, the Board of Directors of Banco de Chile resolved to call an Ordinary Shareholders Meeting to be held on the 21th of March, 2013 with the objective of proposing, among other matters, the distribution of the Dividend number 201 of Ch$3.41625263165 per every of the 88,037,813,511 “Banco de Chile” shares, which will be payable at the expense of the distributable net income obtained during the fiscal year ending the 31st of December, 2012, corresponding to 70% of such income.

 

16



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

5.                           Relevant Events, continued:

 

In the Ordinary and Extraordinary Banco de Chile’s meetings held on March 21, 2013 it was agreed to comply the previous agreements.

 

Likewise, the Board of Directors resolved to call an Extraordinary Shareholders Meeting to be held on the same date in order to propose, among other things, the capitalization of 30% of the distributable net income obtained during the fiscal year ending the 31st of December, 2012, through the issuance of fully paid-in shares, of no par value, with a value of Ch$71.97 per “Banco de Chile “share which will be distributed among the shareholders in the proportion of 0.02034331347 shares for each “Banco de Chile” share, and to adopt the agreements that are necessary in this regard, subject to the exercise of the options established in article 31 of Law 19,396.

 

(d)         On March 21, 2013 Banco de Chile informed that the Ordinary Shareholders Meeting of the Bank held today, agreed to definitely appoint Mr. Francisco Aristeguieta Silva as Director of the Bank, position that he will hold until the next renewal of the Board.

 

(e)          On March 26, 2013 the Central Bank of Chile communicated to Banco de Chile that in the Extraordinary Session, No. 1742E, held today, the Board of the Central Bank of Chile resolved to request its corresponding surplus, from the fiscal year ended on December 31, 2012, including the proportional part of the profits agreed upon capitalization, be paid in cash currency.

 

(f)           On March 27, 2013 Mr. Guillermo Luksic Craig. died, an important member of our Board since 2001 and member of controlling group of our Bank.

 

(g)          According to Note 27 (a) during April concluded the process of subscription and payment of shares of increase capital authorized in the Extraordinary Shareholders Meeting held on October 17, 2012.

 

(h)         On April 11, 2013 in Extraordinary Meeting appointed to Mr. Jean-Paul Luksic Fontbona like Director, until the next Ordinary Shareholders Meeting, replacing to Mr. Guillermo Luksic Craig.

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

5.                           Relevant Events, continued:

 

(i)    On May 13, 2013 and regarding the capitalization of 30% of the distributable net income obtained during the fiscal year ending as of December 31, 2012, through the issuance of fully paid-in shares, agreed in the Extraordinary Shareholders Meeting held on the March 21, 2013, it is informed the following information:

 

a)             In the Extraordinary Shareholders Meeting mentioned above, it was agreed to increase the Bank´s capital in the amount of Ch$86,201,422,505 through the issuance of 1,197,741,038 fully paid-in shares, of no par value, payable under the distributable net income for the year 2012 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 No. 126 dated April 30, 2013, which was registered on page 34,465, No. 23,083 of the register of the Chamber of Commerce of Santiago for the year 2013, and was published at “Diario Oficial” on May 8, 2013.

 

The issuance of fully in paid shares was registered in the Securities Register of the Superintendence of Banks and Financial Institutions with No. 2/2013, on May 10, 2013.

 

b)             The Board of Directors of Banco de Chile, at the meeting No. 2,775, dated May 09, 2013, set May 30, 2013, as the date for issuance and distribution of the fully paid in shares.

 

c)              The shareholders are entitled to receive the new shares, at a ratio of 0.02034331347 fully in paid shares for each Banco de Chile share, shall be those registered in the Register of Shareholders on May 24, 2013.

 

d)             In accordance to the first transitory article of the Bank’s bylaws, Banco de Chile-T shares issued as a consequence of the capital increase agreed on the Extraordinary Shareholders Meeting held on October 17, 2012, do not allow their holders to receive dividends or fully paid-in shares in respect to Banco de Chile’s net distributable earnings for fiscal year 2012.  Once any dividends and/or fully paid-in shares are distributed, the Banco de Chile-T series shares automatically convert to Banco de Chile ordinary shares.

 

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

 

f)               As a consequence of the issuance of the fully in paid shares, the capital of the Bank will be divided in 93,175,043,991 nominative shares, without par value, completely subscribed and paid.

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

5.                           Relevant Events, continued:

 

(j)    On July 1, 2013 it is informed that through Public Deed dated June 19, 2013 in Notary´s office Raul Perry Pefaur of Santiago, Banco de Chile has acquired the totally of shares of Banchile Asesoría Financiera S.A. in the entity Banchile Factoring S.A, subsidiary of Banco de Chile, taking over assets and liabilities of such subsidiary.

 

According to Article 103 No. 2 of Law No. 18,046 of Corporate Law, it has elapsed an uninterrupted period of more 10 of days.  Consequently as of 30th. of June, it has dissolved Banchile Factoring S.A., so 100% of shares belong to Banco de Chile, which since 30th. of June is its legal successor.

 

(k)         On August 9, 2013 it was informed that in Ordinary Board Meeting held on 8th. of August, the Board accepted resignation of Director Fernando Concha Ureta, with effective date on August 21, 2013

 

Since August 22, 2013 the Board designated to Juan Enrique Pino Visinteiner like Director until next Ordinary Shareholders Meeting

 

19



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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, and lesser extent in the item “Interest revenue”

 

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.

 

 (*) See Note No. 5 (j)

 

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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 parties that exceed 10% or more of its total income during the nine-month period ended September 30, 2013 and 2012.

 

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.

 

21



Table of Contents

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

6.                            Segment Reporting, continued:

 

The following table presents the income by segment for the periods ended September 30, 2013 and 2012 for each of the segments defined above:

 

 

 

Retail 

 

Wholesale

 

Treasury(1)

 

Subsidiaries

 

Subtotal

 

Consolidation
adjustment

 

Total

 

 

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

 

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

 

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

533,191

 

481,852

 

217,369

 

181,664

 

11,350

 

9,006

 

(288

)

4,994

 

761,622

 

677,516

 

7,071

 

7,168

 

768,693

 

684,684

 

Net fees and commissions income (loss)

 

113,794

 

113,752

 

32,162

 

29,440

 

(371

)

(210

)

78,527

 

77,945

 

224,112

 

220,927

 

(8,262

)

(8,427

)

215,850

 

212,500

 

Other operating income

 

22,535

 

10,392

 

36,837

 

20,380

 

2,996

 

11,574

 

25,134

 

23,717

 

87,502

 

66,063

 

(9,127

)

(9,127

)

78,375

 

56,936

 

Total operating revenue

 

669,520

 

605,996

 

286,368

 

231,484

 

13,975

 

20,370

 

103,373

 

106,656

 

1,073,236

 

964,506

 

(10,318

)

(10,386

)

1,062,918

 

954,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions for loan losses

 

(157,840

)

(138,141

)

(16,628

)

(90

)

(45

)

84

 

696

 

563

 

(173,817

)

(137,584

)

 

 

(173,817

)

(137,584

)

Depreciation and amortization

 

(15,018

)

(15,603

)

(4,225

)

(5,498

)

(765

)

(999

)

(1,324

)

(1,167

)

(21,332

)

(23,267

)

 

 

(21,332

)

(23,267

)

Other operating expenses

 

(287,983

)

(285,074

)

(78,482

)

(85,741

)

(5,623

)

(5,360

)

(70,652

)

(67,664

)

(442,740

)

(443,839

)

10,318

 

10,386

 

(432,422

)

(433,453

)

Income attributable to associates

 

1,060

 

384

 

618

 

193

 

65

 

21

 

301

 

259

 

2,044

 

857

 

 

 

2,044

 

857

 

Income before income taxes

 

209,739

 

167,562

 

187,651

 

140,348

 

7,607

 

14,116

 

32,394

 

38,647

 

437,391

 

360,673

 

 

 

437,391

 

360,673

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(56,671

)

(32,762

)

Income after income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

380,720

 

327,911

 

 


(1)              The Treasury’s income of September 2013 considers effect of Counterparty Value Adjustment described in Note No. 2 (c), equivalent to Ch$7,821 million, of which MCh$6,945 million corresponds to this segment.

 

The following table presents assets and liabilities of the period ended September 30, 2013 and December 31, 2012 by each segment defined above:

 

 

 

Retail 

 

Wholesale

 

Treasury

 

Subsidiaries

 

Subtotal

 

Consolidation
adjustment

 

Total

 

 

 

September

 

December

 

September

 

December

 

September

 

December

 

September

 

December

 

September

 

December

 

September

 

December

 

September

 

December

 

 

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

 

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

10,307,129

 

9,666,888

 

10,394,100

 

9,325,032