KBRA Affirms Ratings for Banco Santander-Chile

KBRA Europe (KBRA) affirms the deposit and senior unsecured debt ratings of A and the short-term deposit and debt ratings of K1 for Banco Santander-Chile (“San Chile” or “the bank”), a subsidiary of Banco Santander S.A. (“Santander”). The Outlook for the long-term ratings is Stable.

Key Credit Considerations

The ratings are based on San Chile’s diversified business model, with strong retail and commercial franchises in Chile, combined with resilient through-the-cycle financial performance supported by the bank’s disciplined risk management, in line with the Santander Group’s prudent practices. The bank has demonstrated solid profitability and low earnings volatility over time, supported by its pricing power, revenue diversification, and strong cost efficiency. San Chile’s focus on the ongoing expansion of its digital banking capabilities in recent years has boosted its historically low fee income and new client acquisition. San Chile’s asset quality remains sound, despite weakening since 2021 in line with the economic cycle and a higher than domestic peers’ exposure to consumer loans. The bank’s asset quality is supported by its conservative underwriting standards and the shift toward lower risk segments in the retail portfolio post 2012. The bank’s capitalisation is reflective of its risk profile and benefits from strong internal capital generation. We note that conservative risk-weightings under Chilean regulations affect many international comparisons. San Chile has a large base of stable deposits and a healthy liquidity position. The bank's reliance on market funds is relatively high, which may expose it to some refinancing risks, but bonds are primarily used to finance long-term mortgage loans with strong daily liquidity and funding management. The ratings also incorporate San Chile’s status of strategically important subsidiary to its parent, Santander, and a high probability of government support, should it be needed, given San Chile’s systemic importance. The likelihood of external support provides further stability to San Chile’s ratings in the event that the standalone credit profile weakens.

Rating Sensitivities

A rating upgrade is not expected in the near term. However, stronger financial position, alongside a positive rating action on the sovereign, could facilitate positive rating momentum over time. A rating downgrade is unlikely in the near team. However, a negative rating action on the sovereign could result in a similar rating action on the bank, as it is subject to the same macroeconomic conditions that contribute to the sovereign’s risk profile. Downward pressure on ratings could also arise from significant and sustained deterioration in asset quality, earnings, or capital.

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Methodologies