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, 2015

 

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 Consolidated Financial Statements with notes as of September 30, 2015.

 



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:

11

4.

Changes in Accounting policies and Disclosures:

15

5.

Relevant Events:

16

6.

Segment Reporting:

19

7.

Cash and Cash Equivalents:

22

8.

Financial Assets Held-for-trading:

23

9.

Cash collateral on securities borrowed and reverse repurchase agreements:

24

10.

Derivative Instruments and Accounting Hedges:

26

11.

Loans and advances to Banks:

31

12.

Loans to Customers, net:

32

13.

Investment Securities:

38

14.

Investments in Other Companies:

40

15.

Intangible Assets:

42

16.

Property and equipment:

45

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:

56

23.

Other Financial Obligations:

61

24.

Provisions:

61

25.

Other Liabilities:

65

26.

Contingencies and Commitments:

66

27.

Equity:

72

28.

Interest Revenue and Expenses:

76

29.

Income and Expenses from Fees and Commissions:

78

30.

Net Financial Operating Income:

78

31.

Foreign Exchange Transactions, net:

79

32.

Provisions for Loan Losses:

80

33.

Personnel Expenses:

81

34.

Administrative Expenses:

82

35.

Depreciation, Amortization and Impairment:

83

36.

Other Operating Income:

84

37.

Other Operating Expenses:

85

38.

Related Party Transactions:

86

39.

Fair Value of Financial Assets and Liabilities:

92

40.

Maturity of Assets and Liabilities:

106

41.

Subsequent Events:

108

 



Table of Contents

 

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

For the periods ended September 30, 2015 and December 31, 2014

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

 

 

September
2015

 

December
2014

 

 

 

Notes

 

MCh$

 

MCh$

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

7

 

982,340

 

915,133

 

Transactions in the course of collection

 

7

 

579,892

 

400,081

 

Financial assets held-for-trading

 

8

 

570,562

 

548,471

 

Cash collateral on securities borrowed and reverse repurchase agreements

 

9

 

36,890

 

27,661

 

Derivative instruments

 

10

 

1,416,203

 

832,193

 

Loans and advances to banks

 

11

 

1,563,739

 

1,155,365

 

Loans to customers, net

 

12

 

23,446,019

 

21,348,033

 

Financial assets available-for-sale

 

13

 

1,241,722

 

1,600,189

 

Financial assets held-to-maturity

 

13

 

 

 

Investments in other companies

 

14

 

27,570

 

25,312

 

Intangible assets

 

15

 

25,984

 

26,593

 

Property and equipment

 

16

 

212,585

 

205,403

 

Current tax assets

 

17

 

3,104

 

3,468

 

Deferred tax assets

 

17

 

238,524

 

202,869

 

Other assets

 

18

 

476,732

 

355,057

 

TOTAL ASSETS

 

 

 

30,821,866

 

27,645,828

 

LIABILITIES

 

 

 

 

 

 

 

Current accounts and other demand deposits

 

19

 

7,292,658

 

6,933,679

 

Transactions in the course of payment

 

7

 

386,559

 

96,945

 

Cash collateral on securities lent and repurchase agreements

 

9

 

267,548

 

249,482

 

Savings accounts and time deposits

 

20

 

10,308,250

 

9,721,246

 

Derivative instruments

 

10

 

1,344,472

 

859,752

 

Borrowings from financial institutions

 

21

 

1,569,095

 

1,098,716

 

Debt issued

 

22

 

5,978,984

 

5,057,956

 

Other financial obligations

 

23

 

153,508

 

186,573

 

Current tax liabilities

 

17

 

23,048

 

22,498

 

Deferred tax liabilities

 

17

 

33,391

 

35,029

 

Provisions

 

24

 

545,465

 

601,714

 

Other liabilities

 

25

 

251,069

 

247,082

 

TOTAL LIABILITIES

 

 

 

28,154,047

 

25,110,672

 

 

 

 

 

 

 

 

 

EQUITY

 

27

 

 

 

 

 

Attributable to Bank’s Owners:

 

 

 

 

 

 

 

Capital

 

 

 

2,041,173

 

1,944,920

 

Reserves

 

 

 

390,640

 

263,258

 

Other comprehensive income

 

 

 

42,870

 

44,105

 

Retained earnings:

 

 

 

 

 

 

 

Retained earnings from previous periods

 

 

 

16,060

 

16,379

 

Income for the period

 

 

 

418,897

 

591,080

 

Less:

 

 

 

 

 

 

 

Provision for minimum dividends

 

 

 

(241,823

)

(324,588

)

Subtotal

 

 

 

2,667,817

 

2,535,154

 

Non-controlling interests

 

 

 

2

 

2

 

TOTAL EQUITY

 

 

 

2,667,819

 

2,535,156

 

TOTAL LIABILITIES AND EQUITY

 

 

 

30,821,866

 

27,645,828

 

 

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, 2015 and 2014

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

 

 

 

September
2015

 

September
2014

 

 

 

 

Notes

 

MCh$

 

MCh$

 

A,

CONSOLIDATED STATEMENT OF INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest revenue

 

28

 

1,396,266

 

1,480,538

 

 

Interest expense

 

28

 

(489,714

)

(577,679

)

 

Net interest income

 

 

 

906,552

 

902,859

 

 

 

 

 

 

 

 

 

 

 

Income from fees and commissions

 

29

 

320,520

 

286,153

 

 

Expenses from fees and commissions

 

29

 

(97,361

)

(85,663

)

 

Net fees and commission income

 

 

 

223,159

 

200,490

 

 

 

 

 

 

 

 

 

 

 

Net financial operating income

 

30

 

36,923

 

23,551

 

 

Foreign exchange transactions, net

 

31

 

44,598

 

61,561

 

 

Other operating income

 

36

 

20,742

 

17,488

 

 

Total operating revenues

 

 

 

1,231,974

 

1,205,949

 

 

 

 

 

 

 

 

 

 

 

Provisions for loan losses

 

32

 

(229,051

)

(210,362

)

 

 

 

 

 

 

 

 

 

 

OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES

 

 

 

1,002,923

 

995,587

 

 

 

 

 

 

 

 

 

 

 

Personnel expenses

 

33

 

(278,386

)

(255,519

)

 

Administrative expenses

 

34

 

(214,171

)

(201,230

)

 

Depreciation and amortization

 

35

 

(21,999

)

(20,897

)

 

Impairment

 

35

 

(144

)

(1,771

)

 

Other operating expenses

 

37

 

(23,591

)

(18,402

)

 

 

 

 

 

 

 

 

 

 

TOTAL OPERATING EXPENSES

 

 

 

(538,291

)

(497,819

)

 

 

 

 

 

 

 

 

 

 

NET OPERATING INCOME

 

 

 

464,632

 

497,768

 

 

 

 

 

 

 

 

 

 

 

Income attributable to associates

 

14

 

2,705

 

1,927

 

 

Income before income tax

 

 

 

467,337

 

499,695

 

 

 

 

 

 

 

 

 

 

 

Income tax

 

17

 

(48,439

)

(36,747

)

 

 

 

 

 

 

 

 

 

 

NET INCOME FOR THE PERIOD

 

 

 

418,898

 

462,948

 

 

Attributable to:

 

 

 

 

 

 

 

 

Bank’s Owners

 

 

 

418,897

 

462,947

 

 

Non-controlling interests

 

 

 

1

 

1

 

 

 

 

 

 

Ch$

 

Ch$

 

 

Net income per share attributable to Bank’s Owners:

 

 

 

 

 

 

 

 

Basic net income per share

 

27

 

4.36

 

4.82

 

 

Diluted net income per share

 

27

 

4.36

 

4.82

 

 

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, 2015 and 2014

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

 

 

September
2015

 

September
2014

 

 

 

Notes

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

NET INCOME FOR THE YEAR

 

 

 

418,898

 

462,948

 

 

 

 

 

 

 

 

 

Other comprehensive income that will be reclassified subsequently to profit or loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses):

 

 

 

 

 

 

 

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

 

13

 

3,527

 

7,589

 

Gains and losses on derivatives held as cash flow hedges

 

10

 

(5,122

)

(5,446

)

Cumulative translation adjustment

 

 

 

1

 

79

 

Subtotal Other comprehensive income before income taxes

 

 

 

(1,594

)

2,222

 

 

 

 

 

 

 

 

 

Income tax

 

 

 

359

 

(1,381

)

 

 

 

 

 

 

 

 

Total other comprehensive income items that will be reclassified subsequently to profit or loss

 

 

 

(1,235

)

841

 

 

 

 

 

 

 

 

 

Other comprehensive income that will not be reclassified subsequently to profit or loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss in defined benefit plans

 

 

 

 

(290

)

 

 

 

 

 

 

 

 

Subtotal other comprehensive income before income taxes

 

 

 

 

(290

)

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

75

 

 

 

 

 

 

 

 

 

Total other comprehensive income items that will not be reclassified subsequently to profit or loss

 

 

 

 

(215

)

 

 

 

 

 

 

 

 

TOTAL CONSOLIDATED COMPREHENSIVE INCOME

 

 

 

417,663

 

463,574

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Equity holders of the parent

 

 

 

417,662

 

463,573

 

Non-controlling interest

 

 

 

1

 

1

 

 

 

 

Ch$

 

Ch$

 

Comprehensive net income per share from continued operations attributable to equity holders of the parent:

 

 

 

 

 

Basic net income per share

 

4.34

 

4.82

 

Diluted net income per share

 

4.34

 

4.82

 

 

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, 2015 and 2014

(Translation of financial statements originally issued in Spanish)

(Expressed in millions of Chilean pesos)

 

 

 

 

 

 

 

Reserves

 

Other comprehensive income

 

Retained earnings

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

Notes

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2013

 

 

 

1,849,351

 

32,125

 

181,511

 

29,372

 

(13,421

)

(23

)

16,379

 

513,602

 

(324,582

)

2,284,314

 

2

 

2,284,316

 

Capitalization of retained earnings

 

27

 

95,569

 

 

 

 

 

 

 

(95,569

)

 

 

 

 

Income retention (released) according to law

 

27

 

 

 

49,913

 

 

 

 

 

(49,913

)

 

 

 

 

Dividends distributions and paid

 

27

 

 

 

 

 

 

 

 

(368,120

)

324,582

 

(43,538

)

(1

)

(43,539

)

Equity adjustment investment in other companies

 

 

 

 

4

 

 

 

 

 

 

 

 

4

 

 

4

 

Defined benefit plans adjustment

 

 

 

 

(215

)

 

 

 

 

 

 

 

(215

)

 

(215

)

Other comprehensive income:

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

79

 

 

 

 

79

 

 

79

 

Derivatives cash flow hedge, net

 

 

 

 

 

 

 

(4,302

)

 

 

 

 

(4,302

)

 

(4,302

)

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

 

 

 

 

 

 

5,064

 

 

 

 

 

 

5,064

 

 

5,064

 

Income for the period 2014

 

 

 

 

 

 

 

 

 

 

462,947

 

 

462,947

 

1

 

462,948

 

Provision for minimum dividends

 

27

 

 

 

 

 

 

 

 

 

(266,044

)

(266,044

)

 

(266,044

)

Balances as of September 30, 2014

 

 

 

1,944,920

 

31,914

 

231,424

 

34,436

 

(17,723

)

56

 

16,379

 

462,947

 

(266,044

)

2,438,309

 

2

 

2,438,311

 

Defined benefit plans adjustment

 

 

 

 

(81

)

 

 

 

 

 

 

 

(81

)

 

(81

)

Equity adjustment investment in other companies

 

 

 

 

1

 

 

 

 

 

 

 

 

1

 

 

1

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

1

 

 

 

 

1

 

 

1

 

Cash flow hedge adjustment, net

 

 

 

 

 

 

 

27,809

 

 

 

 

 

27,809

 

 

27,809

 

Valuation adjustment on available-for-sale instruments, net

 

 

 

 

 

 

(474

)

 

 

 

 

 

(474

)

 

(474

)

Income for the period 2014

 

 

 

 

 

 

 

 

 

 

128,133

 

 

128,133

 

 

128,133

 

Provision for minimum dividends

 

 

 

 

 

 

 

 

 

 

 

(58,544

)

(58,544

)

 

(58,544

)

Balances as of December 31, 2014

 

 

 

1,944,920

 

31,834

 

231,424

 

33,962

 

10,086

 

57

 

16,379

 

591,080

 

(324,588

)

2,535,154

 

2

 

2,535,156

 

Capitalization of retained earnings

 

27

 

96,253

 

 

 

 

 

 

 

(96,253

)

 

 

 

 

Retention (released) earnings

 

27

 

 

 

127,383

 

 

 

 

 

(127,383

)

 

 

 

 

Dividends distributions and paid

 

27

 

 

 

 

 

 

 

 

(367,444

)

324,588

 

(42,856

)

(1

)

(42,857

)

Definedvest benefit plans adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital increase investment in other companies

 

 

 

 

(1

)

 

 

 

 

 

 

 

(1

)

 

(1

)

Other comprehensive income:

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

1

 

 

 

 

1

 

 

1

 

Cash flow hedge adjustment, net

 

 

 

 

 

 

 

(3,970

)

 

 

 

 

(3,970

)

 

(3,970

)

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

 

 

 

 

 

 

2,734

 

 

 

 

 

 

2,734

 

 

2,734

 

Income for the period 2015

 

 

 

 

 

 

 

 

 

 

418,897

 

 

418,897

 

1

 

418,898

 

Equity adjustment investment in other companies

 

 

 

 

 

 

 

 

 

(319

)

 

 

(319

)

 

(319

)

Provision for minimum dividends

 

27

 

 

 

 

 

 

 

 

 

(241,823

)

(241,823

)

 

(241,823

)

Balances as of September 30, 2015

 

 

 

2,041,173

 

31,833

 

358,807

 

36,696

 

6,116

 

58

 

16,060

 

418,897

 

(241,823

)

2,667,817

 

2

 

2,667,819

 

 

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, 2015 and 2014

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

 

 

 

 

 

September
2015

 

September
2014

 

 

 

Notes

 

MCh$

 

MCh$

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income for the period

 

 

 

418,898

 

462,948

 

Items that do not represent cash flows:

 

 

 

 

 

 

 

Depreciation and amortization

 

35

 

21,999

 

20,897

 

Impairment of intangible assets and property and equipment

 

35

 

144

 

1,771

 

Provision for loan losses

 

32

 

232,686

 

227,938

 

Provision of contingent loans

 

32

 

5,055

 

4,111

 

Fair value adjustment of financial assets held-for-trading

 

 

 

215

 

467

 

Income attributable to investments in other companies

 

14

 

(2,337

)

(1,609

)

Income from sales of assets received in lieu of payment

 

36

 

(2,568

)

(2,450

)

Net gain on sales of property and equipment

 

36-37

 

(124

)

(82

)

(Increase) decrease in other assets and liabilities

 

 

 

(216,911

)

(80,895

)

Charge-offs of assets received in lieu of payment

 

37

 

1,220

 

1,231

 

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

 

 

 

30,048

 

10,064

 

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

 

 

 

(519,370

)

(183,601

)

Net changes in interest and fee accruals

 

 

 

178,213

 

(40,580

)

Changes in assets and liabilities that affect operating cash flows:

 

 

 

 

 

 

 

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

 

 

 

(406,619

)

384,944

 

(Increase) decrease in loans to customers

 

 

 

(2,202,521

)

(492,848

)

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

 

 

 

57,098

 

23,628

 

(Increase) decrease in deferred taxes, net

 

17

 

(37,985

)

(36,211

)

(Increase) decrease in current account and other demand deposits

 

 

 

357,618

 

360,826

 

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

 

 

 

21,018

 

(10,771

)

(Increase) decrease in savings accounts and time deposits

 

 

 

601,165

 

(814,068

)

Proceeds from sale of assets received in lieu of payment

 

 

 

5,775

 

4,362

 

Total cash flows from operating activities

 

 

 

(1,457,283

)

(159,928

)

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

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

 

 

 

98,172

 

321,738

 

Purchases of property and equipment

 

16

 

(23,098

)

(21,807

)

Proceeds from sales of property and equipment

 

 

 

191

 

122

 

Purchases of intangible assets

 

15

 

(5,751

)

(3,263

)

Investments in other companies

 

14

 

(314

)

(6,608

)

Dividends received from investments in other companies

 

14

 

632

 

195

 

Total cash flows from investing activities

 

 

 

69,832

 

290,377

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Repayment of mortgage finance bonds

 

 

 

(10,248

)

(13,107

)

Proceeds from bond issuances

 

22

 

1,839,964

 

1,580,224

 

Redemption of bond issuances

 

 

 

(788,049

)

(839,362

)

Proceeds from subscription and payment of shares

 

 

 

 

 

Dividends paid

 

27

 

(367,444

)

(368,120

)

(Increase) decrease in borrowings from financial institutions

 

 

 

(45,226

)

(50,524

)

(Increase) decrease in other financial obligations

 

 

 

(31,205

)

(23,896

)

(Increase) decrease in borrowings from Central Bank of Chile

 

 

 

 

 

Borrowings from Central Bank of Chile (long-term)

 

 

 

28

 

18

 

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

 

 

 

(30

)

(19

)

Long-term foreign borrowings

 

 

 

1,904,913

 

623,695

 

Payment of long-term foreign borrowings

 

 

 

(1,389,885

)

(758,143

)

Proceeds from other long-term borrowings

 

 

 

13,764

 

6,669

 

Payment of other long-term borrowings

 

 

 

(16,255

)

(10,927

)

Total cash flows from financing activities

 

 

 

1,110,327

 

146,508

 

TOTAL NET POSITIVE CASH FLOWS FOR THE PERIOD

 

 

 

(277,124

)

276,957

 

Net effect of exchange rate changes on cash and cash equivalents

 

 

 

67,539

 

33,538

 

Cash and cash equivalents at beginning of year

 

 

 

1,825,578

 

1,538,618

 

Cash and cash equivalents at end of period

 

7

 

1,615,993

 

1,849,113

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

Interest received

 

 

 

1,255,570

 

1,273,145

 

Interest paid

 

 

 

(170,805

)

(410,866

)

 

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

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

1.                           Corporate information:

 

Banco de Chile is authorized to operate like a commercial bank since June 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” or “Superintendency”). 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 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, 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, 2015 were approved for issuance in accordance with the directors on October 22, 2015.

 

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 (“Compendium”), 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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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 has controlling interest and that are therefore consolidated in these financial statements:

 

 

 

 

 

 

 

 

 

Interest Owned

 

 

 

 

 

 

 

 

 

Direct

 

Indirect

 

Total

 

 

 

 

 

 

 

Functional

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

RUT

 

Subsidiaries

 

Country

 

Currency

 

%

 

%

 

%

 

%

 

%

 

%

 

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

 

96,571,220-8

 

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$

 

99.01

 

99.00

 

0.99

 

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

 

 

(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.                          Contingencies and Commitments (Note No. 26);

6.                          Provision for loan losses (Note No. 11, No. 12 and No. 32);

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

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

 

Estimates and relevant assumptions are regularly reviewed by the management of the Bank, according to quantify certain assets, liabilities, gains, loss and commitments. Estimates reviewed are registered in income in the period that the estimate is reviewed.

 

During the period of September 30, 2015, there have not been significant changes in the estimates.

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

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

 

(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, 2015.

 

(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.

 

(f)                       Reclassifications:

 

There have not been significant reclassifications at the end of this period 2015.

 

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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) that it is not effective as of September 30, 2015:

 

IFRS 9 Financial Instruments

 

The July 24, 2014, IASB completed its upgrade project about accounting for financial instruments with the publication of IFRS 9 Financial Instruments.

 

This standard includes new requirements based on new principles for the classification and measurement; it introduces a “prospective” model of expected credit losses on impairment accounting and changes in hedge accounting.

 

Classification and measurement

 

The classification determines how financial assets and liabilities are accounted in financial statements and, in particular, how they are measured. IFRS 9 introduces a new approach for classification of financial assets, based in the business model of the entity for the management of financial assets and the characteristic of its contractual flows. The new model also results in a single impairment model being applied to all financial instruments, removing a source of complexity associated with previous accounting requirements.

 

Impairment

 

The IASB has introduced a new impairment model that will require a timely recognition of expected credit losses.

 

Hedge Accounting

 

IFRS 9 introduces a new model for hedge accounting with enhanced disclosures about risk management activity. The new model represents a substantial overhaul of hedge accounting that aligns the accounting treatment with risk management activities, enabling entities to better reflect these activities in their financial statements. In addition, as a result of these changes, users of the financial statements will be provided with better information about risk management and the effect of hedge accounting on the financial statements.

 

Entity’s Own Credit Risk

 

IFRS 9 removes the volatility in profit or loss originated by changes in the credit risk of designated liabilities at fair value. This change means that the change in the fair value that corresponds to credit risk will be registered in other comprehensive income. IFRS 9 permits early application of this improvement, before any other requirement of IFRS 9.

 

The effective date is beginning on January 1, 2018 and its early application is permitted.

 

Banco de Chile and its subsidiaries are assessing the possible impact of adoption of these changes on the consolidated financial statements.

 

At the date, this rule has not been approved by the Superintendency of Banks and Financial Institutions, event required for its application.

 

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3.                           New Accounting Pronouncements, continued:

 

IFRS 11 — Joint Arrangements

 

In May 2014 the IASB modified IFRS 11, providing guides about the accounting of acquisitions of participations in joint operations, whose activity constitute a business. This standard requires the acquirer of a participation in a joint operation, whose activities constitute a business, to apply all the principles on accounting for business combinations of the IFRS 3.

 

The effective date is beginning on January 1, 2016 and its early application is permitted.

 

Banco de Chile and its subsidiaries have assessed than this rule will be not significant impact in consolidated financial statements.

 

IAS 16 — Property, plant and equipment and IAS 38 — Intangible assets

 

In May 2014 the IASB modified IAS 16 and 38 with purpose of clarifying accepted methods of depreciation and amortization.

 

The amendment of IAS 16 prohibits property, plant and equipment, depreciation based on ordinary income.

 

The amendment of IAS 38 introduces the presumption that ordinary income is not an appropriate base for the amortization of intangible assets.  This presumption only is refuted in two circumstances:  (a) intangible asset is expressed like a unit of ordinary income; and (b) ordinary income and consumption of intangible assets are highly correlated.

 

The effective date is beginning on January 1, 2016 and its early application is permitted.

 

This modification does not impact the consolidated financial statements of Banco de Chile and its subsidiaries, because it is not used as a basis of depreciation and amortization.

 

IFRS 15 — Revenue from Contracts with Customers

 

IFRS 15 was issued in May 2014. The objective is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer.

 

IFRS 15 replaces the following standards and interpretations: IAS 18 Revenue, IAS 11 Construction contracts, IFRIC 13 Customer loyalty programs, IFRIC 15 Agreements for the construction of real estate, IFRIC 18 Transfers of assets from customers and SIC 31 Revenue — Barter transactions involving advertising services.

 

The new model will be applied to all contracts with customers except those contracts are within the scope of another standard.

 

Application of the standard is mandatory for annual reporting periods starting from January 1, 2018 onward, early application is permitted.

 

Banco de Chile and its subsidiaries are assessing the impact of this rule on its consolidated financial statements.

 

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3.                           New Accounting Pronouncements, continued:

 

IAS 27 — Consolidated and Separated Financial Statements

 

In August 2014, the IASB published the amendment that will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements.

 

The effective date is beginning on January 1, 2016 and its early application is permitted.

 

This amendment does not impact the consolidated financial statements of Banco de Chile and its subsidiaries.

 

IAS 28 — Investments in Associates and Join Venture and IFRS 10 - Consolidated Financial Statements

 

In September 2014, the IASB issued this amendment, which clarifies the scope of recognized gains and losses in a transaction involving an associate or joint venture, and this depends on whether the asset sold or contribution is a business. Therefore, IASB concluded that all of the profit or loss should be recognized against loss of control of a business. Likewise, gains or losses resulting from the sale or contribution of a subsidiary that is not a business (definition of IFRS 3) to an associate or joint venture should be recognized only to the extent of unrelated interests in the associate or joint venture.

 

The effective date is beginning on January 1, 2016 and its early application is permitted.

 

This amendment does not impact the consolidated financial statements of Banco de Chile and its subsidiaries.

 

Annual improvements IFRS

 

In September 2014, the IASB issued Annual improvements to IFRS: 2012 — 2014 Cycle, which include changes to the following standards.

 

·                  IFRS 5 Non-current assets held for sale and discontinued operations

 

Add specific guidelines in cases in which an entity reclassifies an asset from held for sale to held for distribution, or vice versa and cases in which assets held for distribution are accounting like discontinued operations. The effective date is beginning on January 1, 2016 and its early application is permitted.

 

Banco de Chile and its subsidiaries do not register non-current assets held for sale and discontinued operations. Therefore, this modification does not impact the consolidated financial statements of Banco de Chile and its subsidiaries.

 

·                  IFRS 7 Financial Instruments: Disclosures

 

Add guidelines to clarify if a service contract corresponds to a continuing involvement in an asset transfer with the purpose to determine the required disclosures. The effective date is beginning on January 1, 2016 and its early application is permitted.

 

This amendment does not impact the consolidated financial statements of Banco de Chile and its subsidiaries.

 

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3.                           New Accounting Pronouncements, continued:

 

Annual improvements IFRS, continued:

 

·                  IAS 19 Employee Benefits. Discount rate: topic of the regional market

 

Clarifies that corporate bonds with high quality credit used in the estimation of the discount rate for post-employment benefits must be denominated in the same currency as the benefit paid. The effective date is beginning on January 1, 2016 and its early application is permitted.

 

This amendment does not impact the consolidated financial statements of Banco de Chile and its subsidiaries.

 

·                  IAS 34 Interim Financial Reporting

 

Clarifies the meaning of disclose information “in some other part of interim financial information” and the need for a cross-reference. The effective date is beginning on January 1, 2016 and its early application is permitted.

 

This amendment does not impact the consolidated financial statements of Banco de Chile and its subsidiaries.

 

·                  IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interest in Other Entities and IAS 28 Investments in Associates and Join Ventures

 

In December 2014, the IASB has modified IFRS 10, IFRS 12 and IAS 28 related with the application of the exceptions in the consolidation in investment entities.

 

The amendments clarify the requirement for the accounting of investment entities. In addition, these amendments in certain circumstances reduce the cost in the application of these standards.

 

The effective date is mandatory on January 1, 2016 and its early application is permitted.

 

This amendment does not impact the consolidated financial statements of Banco de Chile and its subsidiaries.

 

·                  IAS 1 Presentation of Financial Statements

 

In December, 2014, the IASB published “Disclosure Initiative (Amendments to IAS 1)”. The amendments aim at clarifying IAS 1 to improve the presentation and disclosure of information in the financial reports.

 

These amendments answer requests about presentation and disclosure and have been designed with the finality to allow the entities to apply their professional opinion to determine what information must be disclosed in the financial statements.

 

They are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted.

 

This amendment does not significant impact in the consolidated financial statements of Banco de Chile and its subsidiaries.

 

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3.                           New Accounting Pronouncements, continued:

 

Rules issued by the Superintendency of Banks and Financial Institutions

 

On December 30, 2014 the Superintendency of Banks and Financial Institutions issued Circular No. 3,573, where established changes to the rules which regulate the determination of “Allowances for loan losses”, contained in the Chapter B-1 of Compendium of Accounting standards.

 

The summary of changes is the followings:

 

·        Standard Method of Provisions for Mortgage Loans: It is established a standard method to constitute provisions of mortgage loans, which to consider the amount of past due and the relation between outstanding capital of the credit and the value of mortgage guarantee.  This method establishes a different treatment to credits with state subsidies and state auction insurance.  The effective date is beginning on January 2016.

 

·       Replacing Issuer by Debtor in Factoring Operations: It modifies the instructions to calculate of provisions of factoring operations; permitting that certain conditions, it is considered debtor classification instead grantor for the establishment of provision.

 

·       It complements the instruction related non-complying portfolio of portfolio with related to the compliance that the Board must give of adequacy of provisions, it established that, it must be to refer both, Consolidated and Individual Financial Statements, with its domestic and foreign subsidiaries, as appropriate. Individual evaluation, including certain conditions that must be complying to remove the credits of a debtor of that portfolio.  Also, this instruction was incorporated to group portfolio. The copulative conditions to remove a debtor of this portfolio it must be the following conditions:

 

i.                  Any obligations of the debtor with the bank has left to comply at the time and in the amount that corresponded

 

ii.               It has not delivered new funding to comply its obligations

 

iii.            At least one of the payments made includes amortization of capital

 

iv.           If the debtor had any credit with partial payments in periods less than six months (more than one payment)

 

v.              If the debtor must be to pay monthly installments to one or more credits, it had paid at least six consecutive instalments

 

vi.           The debtor has not direct debts in the information of this Superintendency

 

·        Related to the Compliance that the Board must give of adequacy of provisions, it established that, it must be to refer both, Consolidated and Individual Financial Statements, with its domestic and foreign subsidiaries, as appropriate.

 

At the date of issuance of this Consolidated Financial Statements and with the available information, the Bank assesses that application of this rule has no significant impact in the income.

 

4.                           Changes in Accounting policies and Disclosures:

 

During the period ended September 30, 2015, there have been no accounting changes that may significantly affect these interim consolidated financial statements.

 

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5.         Relevant Events:

 

(a)         On January 9, 2015 through Resolución Exenta No. 7 the Superintendency of Securities and Insurance approved the reform to the by-laws of Banchile Securitizadora S.A. related to a capital increase of Ch$240,000,000 by means of the issuance of 1,550 shares, as agreed in the fourth Extraordinary Shareholders Meeting of the company held on December 1, 2014. The capital increase was carried out on January 20, 2015.

 

(b)         On January 26, 2015 the board of Banchile Administradora General de Fondos SA accepted the resignation of the director of the company Mr. Jorge Tagle Ovalle.

 

It was also agreed to appoint new director of the company, from the day January 26, 2015 until the next Annual Meeting, Don Eduardo Ebensperger Orrego.

 

(c)          On January 29, 2015 and Ordinary Meeting No. BCH 2,811 the Board of Banco de Chile agreed to call an Ordinary Shareholders for the day March 26, 2015 for the purpose of proposing, among other things, the distribution Dividend No. 203 on $ 3.42915880220, to each of the 94,655,367,544 shares “Banco de Chile”, payable out of distributable net income for the year ended December 31, 2014, corresponding to 70% of such profits.

 

The Board also agreed to call an Extraordinary Shareholders for the same date in order to propose among other matters the capitalization of 30% of the distributable net profit of the Bank for the year 2014, by issuing bonus shares without nominal value, determined at a value of $ 65.31 per share “Banco de Chile”, distributed among the shareholders at the rate of 0.02250251855 shares for each share “Banco de Chile” and adopt the necessary arrangements subject to the exercise of the options provided Article 31 of Law No. 19,396.

 

(d)         On March 23, 2015 the subsidiary Banchile Securitizadora S.A. informed that in ordinary meeting held on March 23, 2015 the Board of Directors accepted the resignation of the Director José Vial Cruz.

 

(e)          On March 24, 2015 the subsidiary Banchile Securitizadora S.A. informed as an Essential Information that in the Tenth Ordinary Shareholders meeting proceeded to the total renovation of the Board of Directors of the society.

 

According to established in seventh and eighth articles of the bylaws, were elected as Directors for a period of three years, the following persons: Pablo Granifo Lavín, Arturo Tagle Quiroz, Eduardo Ebensperger Orrego, Alain Rochette García y José Miguel Quintana Malfanti.

 

(f)           On March 30, 2015 it was reported that the Central Bank of Chile has informed the Bank of Chile that the Council of the Institution, Special Session No. 1894E on the same day, considering the resolutions adopted by the Shareholders Banco de Chile, held dated March 26, 2015, regarding the distribution of dividends and capital increase by issuing bonus shares by the share of 30% of profits for the year ended December 31 2014, decided to opt for the entire surplus that apply, including the part proportional to the agreed cap utility, will be paid in cash, in accordance with the provisions of subparagraph b) of Article 31 of Law 19,396, on modification of the payment of the subordinated obligation, and other applicable standards.

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

5.         Relevant Events, continued:

 

(g)              The Board of Director’s meeting held on April 9, 2015, it was resolved to accept the resignation of the Director Mr. Juan José Bruchou.

 

Also, the Board of Directors appointed Mr. Samuel Libnic as new Director until the next Ordinary Shareholder’s Meeting.

 

(h)             On April 10, 2015 Mr. Samuel Libnic, Acting Director of subsidiary Banchile Corredores de Bolsa S.A. presented its resignation to the Board of Director’s.

 

(i)                 On June 25, 2015 it was informed as Essential Information that, at the Board of Director’s meeting was resolved to accept the resignation of the Director and Vice President of the Board Mr. Francisco Aristeguieta Silva.

 

Also, in the same meeting, the Board of Directors appointed Mrs. Jane Fraser as new Director and new Vice President of the Board, until the next Ordinary Shareholder’s Meeting.

 

(j)                On July 6, 2015, according to the powers conferred by article 19 of the Chilean General Banking Act, the Superintendency of Banks and Financial Institutions imposed a fine of 2,000 (two thousand) Unidades de Fomento to Banco de Chile, in connection with the erroneous delivery to that Superintendency of file D33 contained in the Information System Manual of the Debtors System (“Sistema de Deudores del Manual de Sistemas de Información”), in which a number of credit lines and overdraft in current account operations corresponding to December 2014 and month before, were omitted.

 

(k)             On July 10, 2015 Banco de Chile inform that, on July 3, 2015 Banco Penta informed acceptance of Banco de Chile’s Offer related to Purchase of Portfolio Loan of that institution.  In the same date, Banco Penta informed to the Superintendency of Banks and Financial Institutions, confidentially, acceptance of the offer, and Banco Penta requested to Banco de Chile the refrain its divulgation until its communication to the market.

 

The credits of that offer, approximately amounted to Ch$588,000 million for capital concept as of May 31, 2015 and corresponds to 95.4% of total portfolio of Banco Penta.

 

The acceptance offer is subject to the compliance of conditions established in it, particularly the legal and financial due diligences over the portfolio loan of this transaction, and other legal terms agreed with the parties.

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

 


 

5.         Relevant Events, continued:

 

(l)                 On July 23, 2015 and regarding the capitalization of 30% of the distributable net income obtained during the fiscal year ending the 31st of December, 2014, through the issuance of fully paid-in shares, agreed in the Extraordinary Shareholders Meeting held on the 26th of March, 2015, it was informed as an essential information:

 

i.                      In the said Extraordinary Shareholders Meeting, it was agreed to increase the Bank´s capital in the amount of $ 96,252,499,241 through the issuance of 1,473,778,889 fully paid-in shares, of no par value, payable under the distributable net income for the year 2014 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°285 dated June 5, 2015, which was registered on page 42,128 N° 24,868 of the register of the Chamber of Commerce of Santiago for the year 2015, and was published at “Diario Oficial” on June 10, 2015.

 

The issuance of fully in paid shares was registered in the Securities Register of the Superintendence of Banks and Financial Institutions with N°2/2015, on July 14, 2015.

 

ii.                   The Board of Directors of Banco de Chile, at the meeting N°2,821, dated July 23, 2015, set August 6, 2015, 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 0.02250251855 fully in paid shares for each Banco de Chile share, shall be those registered in the Register of Shareholders on July 31, 2015.

 

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.

 

v.                  As a consequence of the issuance of the fully in paid shares, the capital of the Bank will be divided in 96,129,146,433 nominative shares, without par value, completely subscribed and paid.

 

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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 Administradora General de Fondos S.A.

 

· Banchile Asesoría Financiera S.A.

 

· Banchile Corredores de Seguros Ltda.

 

· Banchile Corredores de Bolsa S.A.

 

· Banchile Securitizadora S.A.

 

· Banchile Trade Services Limited

 

· 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 applying the following criteria:

 

·                                The net interest margin of loans and deposits is obtained aggregating the net financial margins of each individual operation of credit and uptake made by the bank. For these purposes is considered the volume of each operation and its contribution margin, stemming from the difference between the effective customer rate and the related Bank’s fund transfer price in terms of maturity 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, 2015 and 2014.

 

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

 

20



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 2015 and 2014 for each of the segments defined above:

 

 

 

Retail

 

Wholesale

 

Treasury

 

Subsidiaries

 

Subtotal

 

Consolidation
adjustment

 

Total

 

 

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

September

 

 

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

 

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

MCh$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

623,657

 

611,664

 

264,922

 

273,209

 

21,724

 

23,143

 

(5,048

)

(7,013

)

905,255

 

901,003

 

1,297

 

1,856

 

906,552

 

902,859

 

Net fees and commissions income (loss)

 

105,641

 

98,770

 

37,232

 

30,138

 

(1,580

)

(1,280

)

94,064

 

83,966

 

235,357

 

211,594

 

(12,198

)

(11,104

)

223,159

 

200,490

 

Other operating income

 

17,691

 

21,112

 

48,744

 

45,716

 

19,882

 

15,530

 

19,071

 

24,030

 

105,388

 

106,388

 

(3,125

)

(3,788

)

102,263

 

102,600

 

Total operating revenue

 

746,989

 

731,546

 

350,898

 

349,063

 

40,026

 

37,393

 

108,087

 

100,983

 

1,246,000

 

1,218,985

 

(14,026

)

(13,036

)

1,231,974

 

1,205,949

 

Provisions for loan losses

 

(175,129

)

(170,940

)

(54,033

)

(39,586

)

 

 

111

 

164

 

(229,051

)

(210,362

)

 

 

(229,051

)

(210,362

)

Depreciation and amortization

 

(15,795

)

(14,974

)

(4,014

)

(3,923

)

(265

)

(194

)

(1,925

)

(1,806

)

(21,999

)

(20,897

)

 

 

(21,999

)

(20,897

)

Other operating expenses

 

(341,150

)

(321,548

)

(107,322

)

(91,705

)

(4,253

)

(3,574

)

(77,593

)

(73,131

)

(530,318

)

(489,958

)

14,026

 

13,036

 

(516,292

)

(476,922

)

Income attributable to associates

 

1,955

 

1,293

 

386

 

312

 

15

 

17

 

349

 

305

 

2,705

 

1,927

 

 

 

2,705

 

1,927

 

Income before income taxes

 

216,870

 

225,377

 

185,915

 

214,161

 

35,523

 

33,642

 

29,029

 

26,515

 

467,337

 

499,695

 

 

 

467,337

 

499,695

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(48,439

)

(36,747

)

Income after income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

418,898

 

462,948

 

 

The following table presents assets and liabilities of the period ended September 30, 2015 and December 31, 2014 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

 

 

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

2015