Earnings Analysis November 1, 2026

Banco Santander Chile SA ADR ($BSAC) Q3 2026 Earnings Analysis: EPS Misses Estimates · Net Income Plummets 38%

Earnings Report

Revenue: Total operating income 701 billion CLP (YoY -1.5%, expected 759.535 billion CLP) ❌ Miss

EPS (Earnings Per Share): $0.50 (per 1 ADR share, expected $0.57) ❌ Miss

Guidance: Maintained · Maintained 2026 ROE outlook of approximately 24%; new 2027 outlook projects ROE of 22-24% and loan growth of 6-7%

Stock Reaction: -3.0% (based on BMO closing price for the day)

Strengths

Cumulative Profit Growth: 9-month net profit 892.8 billion CLP, up 11.9% YoY

Improved Cost Efficiency: 9-month efficiency ratio 33.0%, a 2.9 percentage point improvement from 35.9% a year ago

Expanded Shareholder Returns: Raised the dividend payout ratio for 2026 profits from 60% to 70%

The quarterly weakness stemmed from inflation-linked items, while the cost structure and capital of the core business actually improved. The 7.5% increase in customer numbers to 4.93 million and double-digit growth in mutual fund and insurance fees provide a foundation for recurring profits. The decision to increase dividends while maintaining a common equity tier 1 ratio of 10.9% also demonstrates capacity for shareholder returns.

Weaknesses

Sharp Decline in Quarterly Profit: 3Q net profit 237.1 billion CLP, down 38.0% compared to the previous quarter

Increased Credit Loss Expenses: 3Q loan loss provisions 157 billion CLP, up 23.8% compared to the previous quarter

Decreased Fees and Weakened Asset Quality: Net fee income 130.5 billion CLP, down 9.7%, and NPL ratio rose to 3.5%

The 3Q ROE was 19.1%, a significant drop from 31.5% in 2Q. The increase in the loan loss ratio from 1.22% to 1.48% and the decline in NPL coverage to 105.7% signal reduced buffer capacity. The trend of declining fees due to intensifying competition in the payments sector may also continue for the time being.

Management Commentary

The company explained the 3Q weakness as a result of reduced inflation-linked adjusted income, increased loan loss provisions, and decreased fees. By keeping the 2026 outlook unchanged while issuing a new outlook for next year, management appears to judge this weakness as quarterly volatility rather than a structural impairment of earnings.

Market Reaction and Future Key Points

Inflation-adjusted operating profit fell 64.6% quarter-on-quarter, causing both net income and earnings per share to miss expectations simultaneously. This once again reveals a structure where a significant portion of profits is dependent on Chilean inflation.

Whether the Q4 inflation-indexed rate returns to the 2% range as seen in Q2, or remains at 0.6% as seen in Q3, will determine the direction of earnings.

It is necessary to monitor how the approximately 45 billion pesos in deferred tax asset revaluation costs resulting from tax reforms will be reflected in Q4 profit and loss.

Whether the growth in commercial loans (4.0% QoQ) continues and whether the loan loss provision ratio stabilizes will be key to financial soundness.