-- Net income for the first quarter 2010 reached Ch$26 billion, similar
to the Ch$26.2 billion when compared to the prior quarter.
-- Provision for loan losses during 1Q10 amounted to Ch$14.8 billion,
an increase of Ch$3.5 billion when compared to the prior quarter.
-- Total operating expenses decreased 11.7% when compared to the prior
quarter.
-- Total Loans (excluding excluding interbank and contingent loans)
reached Ch$5,053.1 billion as of March 31, 2010, leaving CorpBanca with
a market share of 7.29%.
Management's Discussion and Analysis
I) Financial Performance Review
Net income for the first quarter of 2010 was Ch$26 billion, when compared
to Ch$26.2 billion for the fourth quarter of 2009. Total operating revenues
reached Ch$76.9 billion, almost the same when compared to the fourth
quarter of 2009, while provisions for loan losses increased by Ch$4
billion, an increase of 36% when compared to Ch$11.3 billion for the fourth
quarter of 2009.
Our condensed income statement for the three-month periods ending
December 31, 2009 and March 31, 2010 expressed in millions of Chilean
nominal pesos, is as follows:
For three-month period ended
----------------------------
Dec - 09 Mar - 10 Change
Net interest revenue 59,247 53,884 (5,363)
Fees and income from services, net 12,253 15,121 2,868
Treasury business 4,694 6,363 1,669
Other revenue 752 1,547 795
Total operating revenue 76,946 76,915 (31)
Provision for loan losses (11,316) (15,341) (4,025)
Operating expenses (34,633) (30,573) 4,060
Income attributable to investments in other
companies 11 23 12
Net Income before taxes 31,008 31,024 19
Income taxes (4,742) (5,008) (266)
Net Income 26,266 26,016 (247)
Net interest revenues Net interest revenues decreased quarter-on-quarter by Ch$5.3 billion or 9% when compared to the prior quarter. This is mainly a result of a smaller increase in the UF during the first quarter of 2010 of 0.27%, compared with an increase in the fourth quarter of 2009 of 0.52%. It's also important to mention that the opportunity of restructuring our funding at a lower cost has been reduced during this year. Although our net interest revenues and provision for loan losses are less than last quarter, our net income was only 0.7% lower than the prior quarter due to an increase in fees and lower costs in personnel salaries and administration expenses. We had an 89% growth in net income in the first quarter of 2010 as compared to the first quarter of 2009. The average growth of the industry in the same period was 63%. Fees and income from services Net fees and income from services for the first quarter of 2010 amounted to Ch$15.1 billion, a Ch$2.8 billion increase when compared to the prior quarter. The following table is a summary of our fees and income from services for the three-month periods ended December 31, 2009 and March 31, 2010:
For three-month period ended
----------------------------
Dec - 09 Mar - 10 Change
Bank(*) 6,706 7,957 1,598
Mutual Fund Management and Securities
Brokerage Services 2,519 2,964 445
Insurance Brokerage 1,776 1,737 (39)
Financial Advisory Services 804 2,104 1,300
Legal Advisory Services 448 359 (89)
Total 12,252 15,120 2,868
(*) includes consolidation adjustments
The increase of Ch$2.8 billion in fee revenues from banking operations
during the first quarter of 2010 as compared to the prior quarter was
mainly a result of higher fees from overdrafts.
Fee based revenue from our mutual fund management area remained relatively
unchanged. Despite a 16% increase in total assets under management, flows
to money market funds prevented an increase in fees. Our securities
brokerage areas increased Ch$521 million during the first quarter of 2010
due to an increase in the number of clients helped by the technology we
used in our process, which is one of the best in the industry.
Our financial advisory services, which provide services to a variety of
corporations, including those related to debt restructuring, mergers and
acquisitions, privatizations and company valuation, increased by Ch$1,300
million during the first quarter of 2010 due the completion of seven large
operations, some of them over USD 200 million. This increase is a result of
our strategy to focus on clients in a global way and studying the potential
industries were our Financial Advisory Service team could achieve increased
profits.
Our legal advisory services area was created in January 2007 and its
principal purpose is to provide legal advisory services related to our
businesses. Legal advisory services decreased Ch$89 million during the
first quarter of 2010 as compared to the previous quarter.
Trading and investment income -- Net Foreign exchange gains and losses
Trading and investment income primarily includes the results from our
trading portfolio financial assets (interest, marked-to-market adjustments,
gains and losses from sales), gains and losses from our derivative trading
portfolio, and gains and losses from sales financial investments
available-for-sale.
Net foreign exchange gains and losses include both the results of foreign
exchange transactions as well as the recognition of the effect of exchange
rate fluctuations on assets and liabilities stated in foreign currencies
and loans and deposits in Chilean pesos indexed to foreign currencies.
Derivatives and financial instruments that may provide effective economic
hedges for managing risk positions are generally treated and reported as
trading.
The following table is a summary of our trading and investment income and
net foreign exchange gains and losses for the three-month periods ending
December 31, 2009 and March 31, 2010, expressed in millions of Chilean
nominal pesos:
For three-month period ended
----------------------------
Dec - 09 Mar - 10 Change
Trading and investment income:
Trading instruments (45) 3,849 3,894
Derivatives held-for-trading (10,585) 5,606 16,191
Available-for-sale investments and other (3,247) 1,854 5,100
Total trading and investment income (13,876) 11,309 25,185
Net foreign exchange transactions 18,569 (4,929) (23,498)
Net gains (losses) from treasury business 4,694 6,380 1,688
Total income from our treasury business during the first quarter of 2010 increased by Ch$1.6 billion when compared to the prior quarter. This increase is explained by higher income from our trading and investment portfolio, which was partially offset by losses in our foreign exchange transactions. This is mainly as a result of the change in the exchange rate from CH$07.52 to CH$523.86. Provision for loan losses The following table provides information relating to the composition of our provisions for loan losses for the three-month periods ending December 31, 2009 and March 31, 2010, expressed in millions of Chilean nominal pesos:
For three-month period ended
----------------------------
Dec - 09 Mar - 10 Change
Commercial, net (2,967) (4,997) (2,030)
Mortgage, net (255) (1,233) (978)
Consumer, net (8,104) (8,650) (546)
Net charge to income (11,325) (14,880) (3,563)
Our provision for loan losses during the first quarter of 2010 was Ch$14.9 billion, an increase of Ch$3.6 billion when compared to the prior quarter. The increase in provision for loan losses mainly occurred during February and March a result of a reclassification of certain commercial clients. The Chilean earthquake in the first quarter of 2010 is not a primary factor that explains this increase, since less than 13% of the increase of provisions for loan losses during the first quarter is explained by the earthquake. Operating expenses The following table provides comparative information relating to our operating expenses for the three-month periods ending December 31, 2009 and March 31, 2010, expressed in millions of Chilean nominal pesos:
For three-month period ended
----------------------------
Dec - 09 Mar - 10 Change
Personnel salaries expenses 18,277 16,601 (1,676)
Administrative and other expenses 11,719 10,374 (1,345)
Depreciation, amortization and impairment 1,677 1,735 58
Other operating expenses 2,960 1,863 (1,097)
Total operating expenses 34,633 30,573 (4,060)
Our total operating expenses decreased during the first quarter of 2010 by 11.7% when compared to the last quarter. Personnel salaries expenses decreased by Ch$1.6 billion as a result of a reduction of 75% in compensation payments compared to last quarter. Administrative and other expenses also decreased by Ch$1.3 billion, or 11.4% quarter-on-quarter, mainly as a result of a decrease in outsourcing expenditures and higher efficiency in technological processes. As part of our strategy, we continue to maintain our efficiency leadership through our cost control culture. Our consolidated efficiency ratio (operating expenses / operating revenues) for the first quarter of 2010 was 36.8% as compared to 39.0% for the previous quarter. II) Financial Condition Loan portfolio Our total loan portfolio (excluding loans and receivables to banks) totalled Ch$5,053 billion as of March 31, 2010, representing an increase of 0.8% when compared to the prior quarter. The following table provides comparative information related to our loan portfolio for December 31, 2009 and March 31, 2010, expressed in millions of Chilean nominal pesos:
Dec - 09 Mar - 10 Change
--------- --------- --------
Wholesale 3,776,870 3,822,183 45,313
Commercial 3,193,987 3,240,901 46,914
Foreign trade 233,478 234,967 1,489
Leasing and factoring 349,405 346,315 (3,090)
Retail 1,234,786 1,230,947 (3,839)
Consumer 428,051 414,081 (13,970)
Housing mortgages 806,735 816,866 10,131
Total loans 5,011,656 5,053,130 41,474
On a quarter-on-quarter basis our wholesale portfolio increased by 1.1%. This increase is primarily a result of commercial operations, which increased from Ch$3,194 billion to Ch$3,240 billion. Most of the commercial loans increase was in the local market. Our market share increased 2bps during the quarter, from 7.27% in December 2009 to 7.29% in March 2010. If we consider only commercial loans, our market share at the end of March 2010 was 8.95%, 10 bps higher than our market share in December 2009. The quarter-on-quarter decrease in retail loans was due to consumer loans, besides the mortgage loan increase of Ch$10 billion. The decrease in consumer loans is related to Banco Condell, our low income bank division, and is consistent with our strategy of increasing our profits in a controlled portfolio. This strategy is the reason why we experienced an increase in profits despite a decrease in consumer loans. Our market share in consumer loans decreased from 4.92% in December 2009 to 4.72% in March 2010, as we explained before, this is explained by Banco Condell. On the other hand our market share in mortgage loans decreased 2bps during the quarter, ending the first quarter of 2010 at 4.58%. Financial investments Our financial investments totalled Ch$972, 1 billion as of March 31, 2010, representing an increase of 19.5% quarter-on-quarter. The following table provides comparative summary of our investment portfolio for the periods ended December 31, 2009 and March 31, 2010, expressed in millions of Chilean nominal pesos:
Dec - 09 Mar - 10 Change
--------- --------- ---------
Trading portfolio financial assets 76,156 91,153 14,997
Financial investments available-for-sale 737,162 880,956 143,794
Financial investments held-to-maturity - - -
Total financial investments 813,318 972,109 158,791
Our investment portfolio consists of trading and available-for-sale assets. Trading instruments correspond to financial instruments acquired to generate gains from short-term price fluctuations, brokerage margins, or that are included in a portfolio with a pattern of gaining profit in the short-term. Trading instruments are stated at fair value. Investment instruments are classified in two categories: held-to-maturity investments and instruments available-for-sale. Held-to-maturity investments include only those instruments which the Bank has the capacity and intent to hold until maturity. We currently do not have held-to-maturity investment. All other investment instruments are considered available-for-sale. Investment instruments are initially recognized at cost, which includes transaction costs. Instruments available-for-sale at each subsequent period-end are valued at their fair value according to market prices or based on valuation models. Unrealized gains or losses arising from changes in the fair value are charged or credited to equity accounts. A quarter-on-quarter 20% increase is due to our view of good opportunities for financial investments. We have a positive view on the UF. This increase was mostly financed by repurchase agreements. Funding strategy The International and Treasury Division is responsible for providing liquidity, determining the financing structure, managing the investment portfolio and foreign currency positions. The following table summarizes our funding as of December 31, 2009 and March 31, 2010, in millions of Chilean nominal pesos:
Dec - 09 Mar - 10 Change
--------- --------- --------
Checking accounts 328,078 327,037 (1,041)
Other non-interest bearing deposits 168,192 147,651 (20,541)
Time deposits and savings accounts 3,316,045 3,590,544 274,499
Repurchase agreements 465,513 736,041 270,528
Mortgages bonds 271,430 261,231 (10,199)
Banking bonds 410,473 415,909 5,436
Subordinated bonds 253,316 252,213 (1,103)
Domestic borrowings 32,162 43,401 11,239
Foreign borrowings 357,094 352,548 (4,546)
Our current funding strategy is to continue to utilize all sources of funding in accordance with their costs, their availability and our general asset and liability management strategy. During the fourth quarter of 2009 we increased our amount of subordinated bonds. During the first quarter of 2010 our funding strategy was mainly driven by increasing our time deposits and repurchase agreements, and it's possible to add other funding sources during the rest of the year. The increase in repurchase agreements was mainly used for the financial investments explained above, and the increase in time deposits was mainly used to finance the increase in commercial loans. During 2009 we increased our subordinated bonds until we reached the Basel limit, so we don't expect another increase during this year. Shareholders' Equity We are the 4th largest private bank in Chile, based on our shareholders' equity of Ch$ 490 billion and our loans of Ch$ 5,053 billion as of March 31, 2010. We have 226,906,772 thousand shares outstanding and a market capitalization of Ch$984.5 billion (based on a share price of Ch$4.339 pesos per share). During the first quarter of 2010, we paid dividends totalling 100% of 2009 net income. III) Other Related Information Dividend Distribution At the annual shareholders' meeting held in February 2010, we distributed dividends amounting to Ch$85,109 million, representing 100% of 2009 fiscal year net income. This is $Ch 0,375082130 per share. CorpBanca's Conference Call on First Quarter 2010 Results You are invited to participate in CorpBanca's (
Consolidated Statements of Income (unaudited)
For the three months ended
--------------------------
(Expressed in millions of Chilean pesos) Dec-09 Mar-10
OPERATING INCOME
Interest revenue 87,848 83,368
Interest expense (28,601) (29,484)
Net interest revenue 59,247 53,884
Fees and income from services, net 12,253 15,121
Trading and investment income, net (13,875) 11,310
Foreign exchange gains (losses), net 18,569 (4,947)
Other operating revenue 752 1,547
Operating revenues 76,946 76,915
Provisions for loan losses (11,316) (15,341)
Net operating revenues 65,630 61,574
Personnel salaries and expenses (18,277) (16,601)
Administration expenses (11,719) (10,374)
Depreciation, amortization and impairment (1,677) (1,735)
Other operating expenses (2,960) (1,863)
Net operating income 30,997 31,001
Income attributable to investments in other
companies 11 23
Net loss from price-level restatement 0 0
Income before income taxes 31,008 31,024
Income taxes (4,742) (5,008)
Income for the period 26,266 26,016
Consolidated Balance Sheets (unaudited)
(Expressed in millions of Chilean pesos) Dec-09 Mar-10
Assets
Cash and due from banks 110,331 149,179
Items in course of collection 95,796 171,188
Trading portfolio financial assets 76,156 91,153
Financial investments available-for-sale 737,162 880,956
Financial investments held-to-maturity - -
Investments purchased under agreements to resell 51,970 107,277
Derivative financial instruments 126,140 129,014
Loans and receivables to banks 86,220 289,559
Loans and receivables to customers 5,011,655 5,053,129
Allowance for loan losses (95,949) (97,400)
--------- ---------
Loans and receivables to customers, net 4,915,706 4,955,729
Investments in other companies 3,583 3,583
Intangibles 13,630 12,858
Premises and equipment, net 55,212 54,898
Income tax provision - current - -
Deferred income taxes 19,841 17,760
Other assets 87,712 87,415
Total Assets 6,379,459 6,950,569
Liabilities:
Deposits and other sight liabilities 496,270 474,688
Items in course of collection 64,854 144,101
Securities sold under agreements to resell 465,513 736,041
Deposits and other term liabilities 3,316,045 3,590,544
Derivative financial instruments 114,703 112,971
Borrowings from financial institutions 362,403 368,163
Debt instruments 935,219 929,353
Other financial obligations 26,853 27,786
Income tax provision - current 7,831 9,898
Deferred income taxes 15,644 16,087
Provisions 53,118 35,118
Other liabilities 17,471 16,008
Total Liabilities
Shareholders' equity: 5,875,924 6,460,758
Capital
Reserves 326,038 342,371
Valuation gains (losses) 25,054 14,865
Retained earnings: (6,557) 1,123
Retained earnings from prior years 116,445 116,445
Profit for the period 85,109 26,016
Less: Accrual for mandatory dividends (42,554) (13,008)
Minority Interest 1,999
Total Shareholders' Equity 503.535 489.811
Total equity and liabilities 6.379.459 6.950.569
Selected Performance Ratios (unaudited)
As of or for the three month
period ended
----------------------------
Dec-09 Mar-10
Solvency indicators
Basle index(5) 12.53% 13.28%
Shareholders' equity / total assets 7.89% 7.02%
Shareholders' equity / total liabilities 8.57% 7.55%
Credit quality ratios
Risk index (Allowances / total loans ) 1.91% 1.93%
Provisions for loan losses / Total loans(1) 0.90% 1.21%
Provisions for loan losses / Total assets(1) 0.71% 0.88%
Provisions for loan losses / Gross operating
income 14.7% 19.9%
Provisions for loan losses / Net income 43.1% 59.0%
Profitability ratios
Net interest revenue / Interest-earning
assets(1)(2) 4.03% 3.40%
Gross operating income / Total assets(1) 4.82% 4.43%
Gross operating income / Interest-earning
assets(1)(2) 5.23% 4.86%
ROA (before taxes), over total assets(1) 1.94% 1.79%
ROA (before taxes), over interest-earning
assets(1)(2) 2.11% 1.96%
ROE (before taxes)(1) 24.6% 25.4%
ROA, over total assets(1) 1.65% 1.50%
ROA, over interest-earning assets(1)(2) 1.78% 1.64%
ROE(1) 22,79% 21,92%
Efficiency ratios
Operating expenses / Total assets(1) 2.17% 1.76%
Operating expenses / Total loans(1) 2.76%
2.42%
Operating expenses / Operating revenues 45.0% 39.7%
Earnings
Diluted Earnings per share before taxes
(Chilean pesos per share) 0.1367 0.1367
Diluted Earnings per ADR before taxes (U.S.
dollars per ADR) 1.3463 1.3052
Diluted Earnings per share (Chilean pesos per
share) 0.1158 0.1147
Diluted Earnings per ADR (U.S. dollars per
ADR) 1.1405 1.0945
Total Shares Outstanding (Thousands)(4) 226,906,772.0 226,906,772.0
Peso exchange rate for US$1 507.52 523.86
CAUTION REGARDING FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements, Forward-looking information is often, but not always, identified by the use of words such as "anticipate," "believe," "expect," "plan," "intend," "forecast," "target," "project," "may," "will," "should," "could," "estimate," "predict" or similar words suggesting future outcomes or language suggesting an outlook. Forward-looking statements and information are based on current beliefs as well as assumptions made by and information currently available to Corpbanca concerning anticipated financial performance, business prospects, strategies and regulatory developments. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements. Furthermore, the forward-looking statements contained in this press release are made as of the date of this press release and Corp Banca does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
Contact Information: CONTACTS: Eugenio Gigogne CFO Corpbanca Santiago, Chile Phone: (562) 660-2559 investorrelations@corpbanca.cl John Paul Fischer Investor Relations CorpBanca Santiago, Chile Phone: (562) 660-2141 john.fischer@corpbanca.cl Nicolas Bornozis President Capital Link New York, USA Phone: (212) 661-7566 nbornozis@capitallink.com