Chile Commercial Banking Report Q3 2007, new business publication announcement from Report Buyer

Dec. 2, 2007 - PRLog -- Report Buyer (http://www.reportbuyer.com) the online destination for business intelligence for major industry sectors, has added a new report called “Chile Commercial Banking Report Q3 2007”

Report Summary

Outlook: Re-acceleration In The Making? The Chilean economy surprised on the upside in Q107, with a stronger-than expected growth rate of 5.8% y-o-y. This out-turn was not only a substantial improvement from the 4.3% y-o-y registered in Q406 when the economy looked as if it was slowing, but also well above the 5.0% y-o-y recorded in Q106. The economy seems to have turned a corner, and this reading is confirmation that the economy is likely to perform well in 2007. The key drivers of growth were consumption, fixed capital formation and the export sector. While we have not yet seen fit to revise our year-end GDP forecast of 4.9% (up from 4.0% in 2005), should the economy continue to expand at such a robust pace throughout the rest of the year, we will revisit our projections. Indeed, our current projections are slightly lower than the Banco Central de Chile (BCC)'s GDP growth forecasts of 5.0-6.0%.

Economic activity was led by the export sector, which expanded by 9.5% y-o-y in Q107, almost double the 5.5% y-o-y recorded in Q106. Considering that exports account for 40% of GDP in nominal terms, strong export growth offered an important fillip to the economy. Mining-related activities were important here as they expanded by 6.5% y-o-y in Q105, a substantial increase from the 0.1% rise in Q106, largely on the back of inflated copper prices. Consumption also played a pivotal role, expanding by 7.3%, slightly above the 7.2% registered a year earlier. The increase came from government consumption, which expanded by 4.7% y-o-y in Q107, up from 3.4% y-o-y the year before, while the growth rate of private consumption remained unchanged from the 7.7% y-o-y increase in Q106. The increase in government consumption is largely in line with the government's decision to increase spending over the next several years, and private consumption has been growing robustly, between 6.0% and 7.0% in the past year, which we believe is a positive signal. We expect these trends to remain in place over the rest of the year, particularly as government spending on social programmes and the high revenues from the export sector feed their way into the economy.

The Commercial Banking Sector The Chilean commercial banking sector's trend of strong growth in 2004 and 2005 has continued to the year ending 2006. In particular, confidence and lending have remained high, and most aspects of the commercial banks' balance sheets have exhibited solid growth. Loans have grown at around 17%, and deposits and assets at around 15%. Nominal GDP growth is close to 7%. Despite being at already high levels, the loan/asset, loan/deposit and loan/GDP ratios have continued their previous trend and have all risen over the last year on the back of growth in the economy and in the commercial banking sector.

Chile's loan/deposit ratio of 124.8% is well above the 100% ratio normally associated with the sophisticated banking systems that characterise stable, developed economies. As has been noted previously, Chile's commercial banking sector is of interest because of its mix of a banking system for the wealthiest part of the population - that is mature, strong and stable - and the system's ongoing drive to exploit the potential of the poorer sections of Chilean society.

Within the Chilean banking sector, total loans grew by about 18% in the year ending 31 December 2006.

The opportunities in the retail sector which Chilean banks have looked for in the past, have continued to drive this growth in loans. This has resulted in Chile being one of the few countries in the Latin American region to have regained the levels of lending to the private sector that existed in the 1960s.

Higher real wages and lower levels of unemployment have buoyed domestic economic activity, and in particular consumption, which has been playing an increasingly important role. Steady investment in the construction sector is indicative of strong domestic demand, and also of government investment, which we expect will continue to fuel this sector. This has presented opportunities which banks in Chile have also recognised, in particular the great potential in the lower-income segments of the population. With the economy expected to continue growing at robust rates, the formal job market strengthening and interest rates still at relatively low levels, consumer lending is expected to continue fuelling total lending growth in Chile, albeit with the caveat that stronger loan growth could lead to asset quality problems due to laxer underwriting standards.

Press Reports Recent reports in the Chilean and international press indicate that the Chilean credit market continues to expand strongly. Large banks have successfully set up specialised - and profitable - consumer finance units to tap a growing middle class eager for credit and compete better with non-bank players like retail stores, supermarkets, mutual entities, insurers and car finance companies, which make up around 32% of total consumer financing in Chile.

There is press interest, for example, in the automotive financial companies. This market, which has added Derco and Gildemeister, Sk Berge with Santander, Forus, GM, Toyota and other companies with their own credit options, has a new member. Scania, the Swedish bus and truck producer, has just launched Scania Finance in Chile, its financing system for new and second-hand units. Chile has been chosen as the first American market where that division will start operations Press reports emphasize that bankers in Chile still complain about an interest rate ceiling for different loan amounts that do not allow them to charge more for riskier loans to low-income individuals and small businesses. Santander Santiago president Mauricio Larran was reported as saying that the rate ceiling is a hurdle for banks' efforts to increase banking penetration, especially among microentrepreneurs, who usually end up in the hands of unregulated lenders or loan sharks.

Contents


Executive Summary
Key Issues
Changes To The Commercial Banking Forecast
Chile Commercial Banking SWOT
Latest Developments - Q307
International Context
Lending Trends And External Accounts
Total Assets, Loans And Deposits
Year-On-Year Growth Rates
Per-Capita Deposits
Macroeconomic Trends And Developments
Economics: BMI Core Scenario
Politics: BMI Core Scenario
Business Environment: BMI Core Scenario
Economic Activity
Industry Forecast Scenario
Comment On The Past
Comment On Forecasts
Comment On Trends
Banks' Bond Portfolios
Competitive Landscape
Market Protagonists

“Chile Commercial Banking Report Q3 2007” is available from Report Buyer. For more information go to: http://www.reportbuyer.com/banking_finance/country_overvi...

Piribo Product ID: BMI00489

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