Banco Santander-Chile (NYSE:BSAC) Q2 2019 Earnings Conference Call Transcript

Jul 29, 2019 • 11:00 am ET

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Banco Santander-Chile (NYSE:BSAC) Q2 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Q2, 2019 Banco Santander-Chile Earnings Conference Call. [Operator Instructions]

I would now like to introduce your host for today's conference Emiliano Muratore, CFO. You may begin.

Executive
Emiliano Muratore

Good morning, everyone. Welcome to Banco Santander-Chile's Second Quarter 2019 Results Webcast and Conference Call. This is Emiliano Muratore, CFO and I'm joined today by Robert Moreno, Manager of Investor Relations, and our Chief Economist Claudio Soto. Thank you for attending today's conference call. As you will see in the rest of the presentation, after a challenging start of the year, the second quarter showed a solid growth and good results. Here at the bank, we are excited with the recent and upcoming initiatives and new product launches. First, Claudio will give us some insight into the macro environment on our expectation for the rest of the year.

Executive
Claudio Soto

Thank you, Emiliano. After a strong 2018, the economy decelerated in the first part of this year. Activity grew only 1.6% in 2019, the first quarter and percent indicators point toward 2.2% year-on-year expansion in the second quarter. Local activity has suffered the impact of the trade tensions between the US and China, which have lowered the copper price and external demand for non-mineral exports. The labor market remains relatively weak. And business confidence has deteriorated reflecting the more challenging external outlook as well as the slow progress in the reform agenda of the government.

As a result, global goods consumption and [Indecipherable] investment have receded. Going forward, we expect a more variegated [Phonetic] speed up pushed by the modernization of large investment projects mostly in mining, infrastructure and forestry. We expect investment will grow at around 4% in 2019 slightly below last year. Export will expand only at 1.5% reflecting the slow global demand and a limited capacity for mining expansion. Consumption in turn, will expand at around 3% as a labor market gain some momentum in the months ahead. Overall, the soft first semester has led us to further reduce our growth perspective for this year, from 3% to 2.7%.

During the second part of the year, annual growth will increase not only because of our rebound in investments, but also due to favorable base effects. The suspect that inflation has remained low reflecting the still open output gaps and a muted pass-through from the exchange rate depreciation. We expect US inflation to gradually pick up in the coming months to reach 2.3% by the end of this year.

This figure implies 0.6 average for the next two quarters. In this context, the Central Bank of Chile has modified its policy strategy introducing above its guidance. In an unexpected move it lowered its monetary policy rate by 50 basis points in June and market rates point were up 50 basis point for further easing in the second part of the year. The rationale for such a change in strategy was an upward revision of potential output due to the recent integration, a downward revision in the