SOURCE: Corpbanca

CorpBanca

May 25, 2010 08:30 ET

CorpBanca Announces First Quarter of 2010 Results

SANTIAGO, CHILE--(Marketwire - May 25, 2010) - CORPBANCA (NYSE: BCA), a Chilean financial institution offering a wide variety of corporate and retail financial products and services, today announced its financial results for the first quarter ended March 31, 2010. This report is based on unaudited consolidated financial statements and prepared in accordance with Chilean generally accepted accounting principles. Solely for the convenience of the reader, U.S. dollar amounts in this report have been translated from Chilean nominal pesos at our March 31, 2010 exchange rate of Ch$523.86 per U.S. dollar.

Financial highlights

--  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 (NYSE: BCA) (SANTIAGO: CORPBANCA) conference call to discuss the First Quarter 2010 Results and respond to investor questions.

Date and Time: To be confirmed in a separated press release

Chairperson: Mr. Eugenio Gigogne, Chief Financial Officer

Slides and audio webcast:

There will also be a live -- and then archived -- webcast of the conference call with PowerPoint slides through the internet accessible through the website of Capital Link at www.capitallink.com, Please click on the button "FIRST QUARTER 2010 FINANCIAL RESULTS WEBCAST," The webcast will also be available on the company's website at www.corpbanca.cl. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.


             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.

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