Edgar Filing: BANK OF CHILE

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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of July, 2013

Commission File Number 001-15266

BANK OF CHILE

(Translation of registrant’s name into English)

Ahumada 251

Santiago, Chile

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F x Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(7): o

Indicate by check mark whether by furnishing the information contained in this Form, the
registrant is also thereby furnishing the information to the Commission pursuant to Rule
12g3-2(b) under the Securities Exchange Act of 1934.

Yes o No x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

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BANCO DE CHILE
REPORT ON FORM 6-K

Attached Banco de Chile’s Financial Statements with notes for the Second Quarter of 2013.

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BANCO DE CHILE AND SUBSIDIARIES

Index

	I.	Interim Condensed Consolidated Statements of Financial Position
	II.	Interim Condensed Consolidated Statements of Comprehensive Income for the Period
	III.	Interim Condensed Consolidated Statements of Other Comprehensive Income for the Period
	IV.	Interim Condensed Consolidated Statements of Changes in Equity
	V.	Interim Condensed Consolidated Statements of Cash Flows
	VI.	Notes to the Interim Condensed Consolidated Financial Statements

MCh$	=	Millions of Chilean pesos
ThUS$	=	Thousands of U.S. dollars
UF or CLF	=	Unidad de Fomento
		(The Unidad de Fomento is an inflation-indexed, Chilean peso denominated monetary unit set daily in advance on the basis of the previous month’s inflation rate).
Ch$ or CLP	=	Chilean pesos
US$ or USD	=	U.S. dollars
JPY	=	Japanese yen
EUR	=	Euro
MXN	=	Mexican pesos
HKD	=	Hong Kong dollars
PEN	=	Peruvian nuevo sol
CHF	=	Swiss franc

IFRS	=	International Financial Reporting Standards
IAS	=	International Accounting Standards
RAN	=	Compilation of Norms of the Chilean Superintendency of Banks
IFRIC	=	International Financial Reporting Interpretations Committee
SIC	=	Standards Interpretation Committee

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BANCO DE CHILE AND SUBSIDIARIES

INDEX

		Page
Interim Condensed Consolidated Statement of Financial Position		3
Interim Condensed Consolidated Statements of Comprehensive Income		4
Interim Condensed Consolidated Statement of Changes in Equity		6
Interim Condensed Consolidated Statements of Cash Flows		7
1.	Corporate information:	8
2.	Legal provisions, basis of preparation and other information:	8
3.	New Accounting Pronouncements:	12
4.	Changes in Accounting Policies and Disclosures:	15
5.	Relevant Events:	15
6.	Segment Reporting:	19
7.	Cash and Cash Equivalents:	22
8.	Financial Assets Held-for-trading:	23
9.	Cash collateral on securities borrowed and reverse repurchase agreements:	24
10.	Derivative Instruments and Accounting Hedges:	27
11.	Loans and advances to Banks:	32
12.	Loans to Customers, net:	33
13.	Investment Securities:	37
14.	Investments in Other Companies:	39
15.	Intangible Assets:	41
16.	Property and equipment:	44
17.	Current Taxes and Deferred Taxes:	46
18.	Other Assets:	51
19.	Current accounts and Other Demand Deposits:	52
20.	Savings accounts and Time Deposits:	52
21.	Borrowings from Financial Institutions:	53
22.	Debt Issued:	55
23.	Other Financial Obligations:	58
24.	Provisions:	58
25.	Other Liabilities:	62
26.	Contingencies and Commitments:	63
27.	Equity:	67
28.	Interest Revenue and Expenses:	71
29.	Income and Expenses from Fees and Commissions:	73
30.	Net Financial Operating Income:	74
31.	Foreign Exchange Transactions, net:	74
32.	Provisions for Loan Losses:	75
33.	Personnel Expenses:	76
34.	Administrative Expenses:	77
35.	Depreciation, Amortization and Impairment:	78
36.	Other Operating Income:	79
37.	Other Operating Expenses:	80
38.	Related Party Transactions:	81
39.	Fair Value of Financial Assets and Liabilities:	85
40.	Maturity of Assets and Liabilities:	94
41.	Subsequent Events:	96

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BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

For the periods ended June 30, 2013 and 2012

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

	Notes	June 2013		December 2012
		MCh$		MCh$
ASSETS
Cash and due from banks	7	1,186,226		684,925
Transactions in the course of collection	7	775,311		396,611
Financial assets held-for-trading	8	388,921		192,724
Cash collateral on securities borrowed and reverse repurchase agreements	9	25,371		35,100
Derivative instruments	10	367,417		329,497
Loans and advances to banks	11	313,541		1,343,322
Loans to customers, net	12	19,063,627		18,334,330
Financial assets available-for-sale	13	1,613,767		1,264,440
Financial assets held-to-maturity	13	—		—
Investments in other companies	14	14,848		13,933
Intangible assets	15	32,202		34,290
Property and equipment	16	202,235		205,189
Current tax assets	17	4,608		2,684
Deferred tax assets	17	118,949		127,143
Other assets	18	297,051		296,878
TOTAL ASSETS		24,404,074		23,261,066
LIABILITIES
Current accounts and other demand deposits	19	5,567,606		5,470,971
Transactions in the course of payment	7	438,056		159,218
Cash collateral on securities lent and repurchase agreements	9	495,812		226,396
Savings accounts and time deposits	20	9,564,872		9,612,950
Derivative instruments	10	431,162		380,322
Borrowings from financial institutions	21	1,157,728		1,108,681
Debt issued	22	3,763,946		3,273,933
Other financial obligations	23	160,253		162,123
Current tax liabilities	17	261		25,880
Deferred tax liabilities	17	26,211		27,630
Provisions	24	374,342		504,837
Other liabilities	25	256,628		301,066
TOTAL LIABILITIES		22,236,877		21,254,007

EQUITY	27
Attributable to Bank’s Owners:
Capital		1,849,351		1,629,078
Reserves		213,767		177,574
Other comprehensive income		11,783		18,935
Retained earnings:
Retained earnings from previous periods		16,379		16,379
Income for the period		243,334		465,850
Less:
Provision for minimum dividends		(167,418	)	(300,759	)
Subtotal		2,167,196		2,007,057
Non-controlling interests		1		2

TOTAL EQUITY		2,167,197		2,007,059
TOTAL LIABILITIES AND EQUITY		24,404,074		23,261,066

The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements

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BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIOD

For the six-month ended June 30, 2013 and 2012

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

A. CONSOLIDATED STATEMENT OF INCOME

	Notes	June 2013		June 2012
		MCh$		MCh$
Interest revenue	28	781,304		829,313
Interest expense	28	(293,754	)	(354,250	)
Net interest income		487,550		475,063

Income from fees and commissions	29	192,332		183,933
Expenses from fees and commissions	29	(48,438	)	(44,329	)
Net fees and commission income		143,894		139,604

Net financial operating income	30	(2,265	)	11,337
Foreign exchange transactions, net	31	41,980		15,570
Other operating income	36	12,121		10,366
Total operating revenues		683,280		651,940

Provisions for loan losses	32	(103,761	)	(97,235	)

OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES		579,519		554,705

Personnel expenses	33	(155,801	)	(152,403	)
Administrative expenses	34	(121,176	)	(115,830	)
Depreciation and amortization	35	(14,291	)	(15,524	)
Impairment	35	(9	)	(130	)
Other operating expenses	37	(8,473	)	(15,993	)

TOTAL OPERATING EXPENSES		(299,750	)	(299,880	)

NET OPERATING INCOME		279,769		254,825

Income attributable to associates	14	1,591		874
Income before income tax		281,360		255,699

Income tax		(38,026	)	(27,574	)
	17
NET INCOME FOR THE PERIOD		243,334		228,125
Attributable to:
Bank’s Owners		243,334		228,125
Non-controlling interests		—		—

Net income per share attributable to Bank’s Owners:		Ch$		Ch$
Basic net income per share	27	2.62		2.59
Diluted net income per share	27	2.62		2.59

The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements

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BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIOD

For the six-month ended June 30, 2013 and 2012

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

B. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Notes	June 2013		June 2012
		MCh$		MCh$

NET INCOME FOR THE PERIOD		243,334		228,125

OTHER COMPREHENSIVE INCOME THAT WILL BE RECLASSIFIED TO INCOME FOR THE PERIOD

Net unrealized gains (losses):
Net change in unrealized gains (losses) on available-for-sale instruments	13	7,228		10,646
Gains and losses on derivatives held as cash flow hedges		(16,224	)	901
Cumulative translation adjustment		45		(27	)
Other comprehensive income before income taxes		(8,951	)	11,520

Income tax related to other comprehensive income	17	1,799		(2,000	)

Total other comprehensive income that will be reclassified to income for the period		(7,152	)	9,520
Other comprehensive income that will not be reclassified to income for the period		—		—
TOTAL OTHER COMPREHENSIVE INCOME		(7,152	)	9,520

TOTAL CONSOLIDATED COMPREHENSIVE INCOME		236,182		237,645

Attributable to:
Bank’s owners		236,182		237,645
Non-controlling interest		—		—

Comprehensive net income per share attributable to Bank’s owners:		Ch$		Ch$
Basic net income per share		2.54		2.70
Diluted net income per share		2.54		2.70

The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements

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BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the six-month ended June 30, 2013 and 2012

(Translation of financial statements originally issued in Spanish)

(Expressed in millions of Chilean pesos)

			Reserves		Other comprehensive income						Retained earnings
	Notes	Paid-in Capital	Other reserves	Reserves from earnings	Unrealized gains (losses) on available-for- sale		Derivatives cash flow hedge		Cumulative translation adjustment		Retained earnings from previous periods	Income for the year		Provision for minimum dividends		Attributable to equity holders of the parent		Non- controlling interest		Total equity
		MCh$	MCh$	MCh$	MCh$		MCh$		MCh$		MCh$	MCh$		MCh$		MCh$		MCh$		MCh$

Balances as of December 31, 2011		1,436,083	32,256	87,226	(1,644	)	(395	)	(36	)	16,379	428,805		(259,501	)	1,739,173		2		1,739,175
Capitalization of retained earnings	27	73,911	—	—	—		—		—		—	(73,911	)	—		—		—		—
Retention (released) earnings	27	—	—	58,092	—		—		—		—	(58,092	)	—		—		—		—
Dividends distributions and paid	27	—	—	—	—		—		—		—	(296,802	)	259,501		(37,301	)	(1	)	(37,302	)
Other comprehensive income:	27
Cumulative translation adjustment		—	—	—	—		—		(27	)	—	—		—		(27	)	—		(27	)
Cash flow hedge adjustment, net		—	—	—	—		741		—		—	—		—		741		—		741
Valuation adjustment on available-for-sale instruments, net		—	—	—	8,804		—		—		—	—		—		8,804		—		8,804
Income for the period 2012		—	—	—	—		—		—		—	228,125		—		228,125		—		228,125
Provision for minimum dividends	27	—	—	—	—		—		—		—	—		(143,791	)	(143,791	)	—		(143,791	)
Balances as of June 30, 2012		1,509,994	32,256	145,318	7,160		346		(63	)	16,379	228,125		(143,791	)	1,795,724		1		1,795,725

Other comprehensive income:
Cumulative translation adjustment		—	—	—	—		—		(31	)	—	—		—		(31	)	1		(30	)
Cash flow hedge adjustment, net		—	—	—	—		688		—		—	—		—		688		—		688
Valuation adjustment on available-for-sale instruments, net		—	—	—	10,835		—		—		—	—		—		10,835		—		10,835
Subscribed and paid shares		119,084	—	—	—		—		—		—	—		—		119,084		—		119,084
Income for the period 2012		—	—	—	—		—		—		—	237,725		—		237,725		—		237,725
Provision for minimum dividends		—	—	—	—		—		—		—	—		(156,968	)	(156,968	)	—		(156,968	)

Balances as of December 31, 2012		1,629,078	32,256	145,318	17,995		1,034		(94	)	16,379	465,850		(300,759	)	2,007,057		2		2,007,059
Capitalization of retained earnings	27	86,202	—	—	—		—		—		—	(86,202	)	—		—		—		—
Retention (released) earnings	27	—	—	36,193	—		—		—		—	(36,193	)	—		—		—		—
Dividends distributions and paid	27	—	—	—	—		—		—		—	(343,455	)	300,759		(42,696	)	(1	)	(42,697	)
Other comprehensive income:	27
Cumulative translation adjustment		—	—	—	—		—		45		—	—		—		45		—		45
Cash flow hedge adjustment, net		—	—	—	—		(12,979	)	—		—	—		—		(12,979	)	—		(12,979	)
Valuation adjustment on available-for-sale instruments (net)		—	—	—	5,782		—		—		—	—		—		5,782		—		5,782
Subscribed and paid shares	27	134,071	—	—	—		—		—		—	—		—		134,071		—		134,071
Income for the period 2013		—	—	—	—		—		—		—	243,334		—		243,334		—		243,334
Provision for minimum dividends	27	—	—	—	—		—		—		—	—		(167,418	)	(167,418	)	—		(167,418	)
Balances as of June 30, 2013		1,849,351	32,256	181,511	23,777		(11,945	)	(49	)	16,379	243,334		(167,418	)	2,167,196		1		2,167,197

The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements

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BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six-month ended June 30, 2013 and 2012

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

	Notes	June 2013		June 2012
		MCh$		MCh$
OPERATING ACTIVITIES:
Net income for the period		243,334		228,125
Items that do not represent cash flows:
Depreciation and amortization	35	14,291		15,524
Impairment of intangible assets and property and equipment	35	9		130
Provision for loan losses	32	114,226		114,978
Provision of contingent loans	32	9,750		2,559
Fair value adjustment of financial assets held-for-trading		(915	)	794
Income attributable to investments in other companies	14	(1,390	)	(715	)
Income from sales of assets received in lieu of payment	36	(2,549	)	(3,966	)
Net gain on sales of property and equipment		(167	)	(95	)
(Increase) decrease in other assets and liabilities		(65,780	)	(5,281	)
Charge-offs of assets received in lieu of payment	37	907		1,052
Other charges (credits) to income that do not represent cash flows		(2,426	)	(831	)
(Gain) loss from foreign exchange transactions of other assets and other liabilities		(52,486	)	21,110
Net changes in interest and fee accruals		56,674		(2,733	)
Changes in assets and liabilities that affect operating cash flows:
(Increase) decrease in loans and advances to banks, net		1,029,201		316,933
(Increase) decrease in loans to customers		(898,090	)	(1,055,958	)
(Increase) decrease in financial assets held-for-trading, net		(158,232	)	(52,653	)
(Increase) decrease in deferred taxes, net	17	6,775		2,166
(Increase) decrease in current account and other demand deposits		97,074		200,097
(Increase) decrease in payables from repurchase agreements and security lending		279,345		38,233
(Increase) decrease in savings accounts and time deposits		(37,250	)	40,278
Proceeds from sale of assets received in lieu of payment		4,266		5,254
Total cash flows from operating activities		636,567		(134,999	)
INVESTING ACTIVITIES:
(Increase) decrease in financial assets available-for-sale, net		(301,612	)	193,358
Purchases of property and equipment	16	(6,937	)	(10,280	)
Proceeds from sales of property and equipment		427		119
Purchases of intangible assets	15	(2,771	)	(3,985	)
Investments in other companies	14	—		(34	)
Dividends received from investments in other companies	14	931		915
Total cash flows from investing activities		(309,962	)	180,093
FINANCING ACTIVITIES:
Proceeds of mortgage finance bonds		—		—
Repayment of mortgage finance bonds		(11,026	)	(14,149	)
Proceeds from bond issuances	22	919,557		656,214
Redemption of bond issuances		(417,589	)	(30,028	)
Proceeds from subscription and payment of shares	27	134,071		—
Dividends paid	27	(343,455	)	(296,802	)
(Increase) decrease in borrowings from financial institutions		(104,085	)	97,582
(Increase) decrease in other financial obligations		324		(29,022	)
(Increase) decrease in borrowings from Central Bank of Chile		—		(22,793	)
Payment of borrowings from Central Bank of Chile (long-term)		(6	)	(32	)
Long-term foreign borrowings		500,578		315,938
Payment of long-term foreign borrowings		(346,321	)	(641,153	)
Proceeds from other long-term borrowings		155		341
Payment of other long-term borrowings		(2,480	)	(2,694	)
Total cash flows from financing activities		329,723		33,402
TOTAL NET POSITIVE CASH FLOWS FOR THE PERIOD		656,328		78,496
Net effect of exchange rate changes on cash and cash equivalents		26,568		(21,753	)
Cash and cash equivalents at beginning of year		1,236,324		1,429,908
Cash and cash equivalents at end of period	7	1,919,220		1,486,651

Supplemental disclosure of cash flow information:		2013		2012
Cash paid during the year for:		MCh$		MCh$
Interest received		825,169		781,250
Interest paid		(280,945	)	(308,920	)

The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements

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BANCO DE CHILE AND SUBSIDIARIES

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

1. Corporate information:

Banco de Chile is authorized to operate like a commercial bank since September 17, 1996, in conformity with the Article 25 of Law No. 19,396. Banco de Chile, resulting from the merger of Banco Nacional de Chile, Banco Agrícola and Banco de Valparaíso, was formed on October 28, 1893 in the city of Santiago, in the presence of the Notary Eduardo Reyes Lavalle.

Banco de Chile (“Banco de Chile” or the “Bank”) is a Corporation organized under the laws of the Republic of Chile, regulated by the Superintendency of Banks and Financial Institutions (“SBIF”), Since 2001, - when the bank was first listed on the New York Stock Exchange (“NYSE”), in the course of its American Depository Receipt (ADR) program, which is also registered at the London Stock Exchange — Banco de Chile additionally follows the regulations published by the United States Securities and Exchange Commission (“SEC”), Banco de Chile’s shares are also listed on the Latin American securities market of the Madrid Stock Exchange (“LATIBEX”).

Banco de Chile offers a broad range of banking services to its customers, ranging from individuals to large corporations. The services are managed in large corporate banking, middle and small corporate banking, personal banking services and retail. Additionally, the Bank offers international as well as treasury banking services. The Bank’s subsidiaries provide other services including securities brokerage, mutual fund and investment management, factoring, insurance brokerage, financial advisory and securitization.

Banco de Chile’s legal address is Paseo Ahumada 251, Santiago, Chile and its website is www.bancochile.cl.

The Interim Condensed Consolidated Financial Statements of Banco de Chile, for the period ended June 30, 2013 were approved for issuance in accordance with the directors on July 25, 2013.

2. Legal provisions, basis of preparation and other information:

(a) Legal provisions:

The General Banking Law in its Article N° 15 authorizes the Chilean Superintendency of Banks (SBIF) to issue generally applicable accounting standards for entities it supervises. The Corporations Law, in turn, requires generally accepted accounting principles to be followed.

Based on the aforementioned laws, banks should use the criteria provided by the Superintendency in accordance with the Compendium of Accounting Standards, and any matter not addressed therein, as long as it does not contradict its instructions, should adhere to generally accepted accounting principles in technical standards issued by the Chilean Association of Accountants, that coincide with international accounting standards and international financial reporting standards agreed upon by the International Accounting Standards Board (IASB). Should there be discrepancies between these generally accepted accounting principles and the accounting criteria issued by the SBIF, the latter shall prevail.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

2. Legal provisions, basis of preparation and other information, continued:

(b) Basis of preparation:

(b.1) These Interim Condensed Consolidated Financial Statements are presented according to Chapter C-2 of the Compendium of Accounting Standards, issued by the Superintendency of Banks and Financial Institutions (SBIF).

(b.2) The following table details the entities in which the Bank —directly or indirectly— owns a controlling interest and that are therefore consolidated in these financial statements:

				Interest Owned
				Direct		Indirect		Total
			Functional	June	December	June	December	June	December
Rut	Subsidiaries	Country	Currency	2013	2012	2013	2012	2013	2012
				%	%	%	%	%	%
44,000,213-7	Banchile Trade Services Limited	Hong Kong	US$	100.00	100.00	—	—	100.00	100.00
96,767,630-6	Banchile Administradora General de Fondos S.A.	Chile	Ch$	99.98	99.98	0.02	0.02	100.00	100.00
96,543,250-7	Banchile Asesoría Financiera S.A.	Chile	Ch$	99.96	99.96	—	—	99.96	99.96
77,191,070-K	Banchile Corredores de Seguros Ltda.	Chile	Ch$	99.83	99.83	0.17	0.17	100.00	100.00
96,894,740-0	Banchile Factoring S.A. (*)	Chile	Ch$	99.75	99.75	0.25	0.25	100.00	100.00
96,571,220-8	Banchile Corredores de Bolsa S.A.	Chile	Ch$	99.70	99.70	0.30	0.30	100.00	100.00
96,932,010-K	Banchile Securitizadora S.A.	Chile	Ch$	99.00	99.00	1.00	1.00	100.00	100.00
96,645,790-2	Socofin S.A.	Chile	Ch$	99.00	99.00	1.00	1.00	100.00	100.00
96,510,950-1	Promarket S.A.	Chile	Ch$	99.00	99.00	1.00	1.00	100.00	100.00

(*) See note No. 41 of Subsequent events

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

2. Legal provisions, basis of preparation and other information, continued:

(c) Use of estimates and judgment:

Preparing financial statements requires management to make judgments, estimations and assumptions that affect the application of accounting policies and the valuation of assets, liabilities, income and expenses presented. Real results could differ from these estimated amounts. Details on the use of estimates and judgment and their effect on the amounts recognized in the Interim Condensed Consolidated Financial Statement are included in the following notes:

1.	Goodwill valuation (Note 15);
2.	Useful lives of property and equipment and intangible assets (Notes 15 y 16);
3.	Income taxes and deferred taxes (Note 17);
4.	Provisions (Note 24);
5.	Commitments and contingencies (Note 26);
6.	Provision for loan losses (Note 32);
7.	Impairment of other financial assets (Note 35);
8.	Fair value of financial assets and liabilities (Note 39).

During period 2013, the Bank has made a modification to the derivatives valuation model, this consist in the incorporation of “Counterparty Value Adjustment” (CVA) in the valuation of derivatives, to reflect the counterparty risk in determining the fair value. In accordance with IAS 8 “Accounting Policies: Changes in Accounting Estimates and Errors”, this modification has been treated as a change in accounting estimate and its effect recorded in earnings. The effect of this change involved a charge of income of Ch$7,821 million.

There have been no significant changes to estimates made during period 2013, except for the above.

(d) Seasonality or Cyclical Character of the Transactions of the Intermediate Period:

Due to the nature of its business, the Bank and its subsidiaries’ activities do not have a cyclical or seasonal character. Accordingly, no specific details have been included on the notes to this Interim Condensed Consolidated Financial Statements with the information regarding the period of six month ended June 30, 2013.

(e) Relative Importance:

When determining the information to present on the different items from the financial statements or other subjects, the Bank has considered the relative importance in relation to the Interim Condensed Consolidated financial statements of the period.

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2. Legal provisions, basis of preparation and other information, continued:

(f) Reclassifications:

During this period, the expense that, by their nature is directly related with credit cards was reclassified from “Other operational expenses” to “Expenses from fees and commissions”, in order to relate them better with the revenues from that product. The effect of this reclassification is the following:

	Balance as of June 30, 2012		Reclassification		Pro-forma Balance as of June 30, 2012
	MCh$		MCh$		MCh$

Expenses from fees and commissions	(32,361	)	(11,968	)	(44,329	)
Other operational expenses	(27,961	)	11,968		(15,993	)

This reclassification does not affect any comply of covenants.

There are no other significant reclassifications at the ended period 2013, different to described above.

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3. New Accounting Pronouncements:

The following is a summary of new standards, interpretations and improvements to the International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) but which have not come into effect as of June 30, 2013, and that it could affect the Bank according with Note 2 (a), as per the following detail:

IAS 32 Financial Instruments: Presentation

The amendments issued in December 2011, clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The standard is effective for annual periods beginning on or after January 1, 2014 and early adoption is permitted.

According to current rules about netting force in Chile, this rule has no impact on the consolidated financial statements of Banco de Chile and its subsidiaries.

IAS 36 Impairment assets

On May 29, 2013, the IASB issued amendments to IAS 36 respect to disclosures information related to recoverable amount of impaired assets, if this amount corresponded to fair value less disposal cost. These modifications are related to IFRS 13: “Fair Value measurement”.

The amendments will be applied retrospectively to annual periods beginning in January 1, 2014. Early adoption is permitted for the periods that the entity has applied IFRS 13.

The Bank and its subsidiaries are assessing the probably impact of this amendments in the consolidated financial statements.

IAS 39 Financial Instruments: Recognition and Measurement

On June 27, 2013 the IASB issue amendments to IAS 39 related to continuing hedge accounting after novation. This amendment provides an exception to the requirement to discontinue hedge accounting in situations where over-the-counter (OTC) derivatives designated in hedging relationships are directly or indirectly, novated to a central counterparty (CCP) as a consequence of laws or regulations, or the introduction of laws or regulations.

The effective date for annual periods beginning on or after January 1, 2014. Early adoption is permitted.

The Bank and its subsidiaries are assessing the probably impact of this amendments in the consolidated financial statements.

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3. New Accounting Pronouncements, continued:

IFRS 9 Financial Instruments: Financial liabilities

In October, 2010, the IASB published the requirements for classifying and measuring financial liabilities were added to IFRS 9. Most of the added requirements were carried forward unchanged from IAS 39. However, the requirements related to the fair value option for financial liabilities were changed to address the issue of own credit risk in response to consistent feedback from users of financial statements and others that the effects of changes in a liability’s credit risk ought not to affect profit or loss unless the liability is held for trading.

The mandatory effective date for annual periods beginning on or after January 1, 2015.

IFRS 9 Financial Instruments: Recognition and Measurement

In November 2009, the IASB issued IFRS 9, “Financial Instruments,” the first step in its project to replace IAS 39, “Financial Instruments: Recognition and Measurement”. IFRS 9 introduces new requirements for classifying and measuring financial assets that are in the scope of the application of IAS 39. This new regulation requires that all financial assets be classified in function of the entity’s business model for the management of financial assets and of the characteristics of the contractual cash flows of financial assets. A financial asset shall be measured at amortized cost if two criteria are fulfilled: (a) the objective of the business model is to maintain a financial asset to receive contractual cash flows, and (b) contractual cash flows represent principal and interest payments. Should a financial asset not comply with the aforementioned conditions, it will be measured at fair value. In addition, this standard allows a financial asset that fulfills the criteria to be valued at amortized cost to be designated at fair value with changes in income under the fair value option, as long as this significantly reduces or eliminates an accounting asymmetry. Likewise, IFRS 9 eliminates the requirement of separating embedded derivatives from the host financial assets. Therefore, it requires that a hybrid contract be classified entirely in amortized cost or fair value.

IFRS 9 requires, mandatory and prospective way, that the entity makes reclassifications of financial assets when the entity modifies the business model.

Under IFRS 9, all equity investments of are measured at fair value. However, the Management has the option of present the changes of fair value in the item “Other Comprehensive Income” in equity. This accounting treatment is available for the initial recognition of an instruments and it is irrevocable. The unrealized income (loss) recognized in “Other Comprehensive Income”, derived from the changes of fair value, and must be not included in income statements.

IFRS 9 is effective for annual periods commencing as of January 1, 2015, and allows adoption prior to that date. IFRS 9 must be applied retroactively, however if it is adopted before January 1, 2012, there is no need to reformulate comparative periods.

Banco de Chile and its subsidiaries are assessing the possible impact of adoption of these changes on the consolidated financial statements, however, that impact will depend on the assets maintained by the institution as of the adoption date. It is not practicable to quantify the effect on the issuance of these consolidated financial statements. To date, neither of these standards has been approved by the Superintendency of Banks, event that is required for their application.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

3. New Accounting Pronouncements, continued:

IFRS 10 Consolidated Financial Statement, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements

The Amendments to IFRS 10, IFRS 12 and IAS 27 incorporate a definition of an investment entity and also introduce an exception to consolidate certain subsidiaries owned investment entities. These amendments require an entity to measure investment considered its investments in subsidiaries at fair value through profit or loss in accordance with IFRS 9 instead of consolidating such subsidiaries.

Amendments also introduce new disclosure requirements related to investment entities IFRS 12 and IAS 27.

If an entity applies these amendments but not applies IFRS 9 yet, any reference in this document to IFRS 9 must be interpreted as a reference to IAS 39 Financial Instruments: Recognition and Measurement.

The standard is effective for annual periods beginning on or after January 1, 2014 and early adoption is permitted.

On March 19, 2013 the Superintendency of Banks issued a Circular No. 3,548 that modified the following:

(a) The instructions relative to the presentation of Statements of Income for matching the names used in the Compendium of Accounting Standards issued by the Chilean Superintendency of Banks with last modifications of IAS 1.

The expressions: “Statement of Income” and “Statement of Comprehensive Income” must be replaced by “Statement of Income for the Period” and “Statement of Other Comprehensive Income for the Period” respectively.

(b) Accurate presentation of income (loss) that originate in the case of sale portfolio loans, stipulated that the net income (loss) for sale portfolio loans classified in the item “Net financial operating income”, corresponds to differences between the cash perceived (or fair value of the instruments that are received as consideration) and the value net of provisions of the transferred assets, registered at the sale date.

Before this regulatory change, the net income (loss) of sale portfolio loans, corresponded to differences between the cash perceived (or fair value of the instruments that are received as consideration) and the gross value of transferred assets, proceeding after to release of the established provisions for that loans, being this last effect recognized in the item “Provisions for loan losses” of the Income Statements of the Periods.

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4. Changes in Accounting Policies and Disclosures:

During the period ended June 30, 2013, there have not been significant accounting changes that affect the presentation of consolidated financial statements.

5. Relevant Events:

(a) On January 04, 2013 Banco de Chile has concluded the execution process of the insurance agreements between Banco de Chile and its subsidiary Banchile Corredores de Seguros Limitada, with Banchile Seguros de Vida S.A., which were entered into through private instruments dated on December 28, 2012, which are:

(1) Brokerage Agreement entered into by the affiliate Banchile Corredores de Seguros Limitada and the related company Banchile Seguros de Vida S.A.

(2) Agreements entered into by Banco de Chile and Banchile Seguros de Vida S.A.:

i) Collection and Data Administration Agreement.

ii) Use Agreement for Distribution Channels.

iii) Banchile’s Trademark License Agreement.

iv) Credit Life Insurance Agreement.

(3) Framework agreement for Insurance Banking, entered into by Banco de Chile, Banchile Corredores de Seguros Limitada and Banchile Seguros de Vida S.A.

All of the agreements have a duration of 3 years effective from January 1, 2013, excluding those insurances, as applicable, that are related to loan mortgages subject to public bid in accordance with article 40 of DFL No. 251 of 1931.

It is worth noting that Banchile Seguros de Vida S.A. is a related party to Banco de Chile in accordance with Article 146 of the Chilean Corporations Law. In turn, Banchile Corredores de Seguros Limitada is a subsidiary of Banco de Chile, incorporated pursuant to Article 70 letter a) of the Chilean Banking Act.

(b) On January 17, 2013 the Central Bank of Chile, in session No.1730-02-130117 held on that day, agreed and determined, in accordance with article 30 letter b) of Law No. 19,396, the selling price of the subscription options pertaining the 1,279,502,316 (Banco de Chile-T series) cash shares issued by Banco de Chile as agreed during the Extraordinary Shareholders Meeting held on October 17, 2012. Those shares are owned by Sociedad Administradora de la Obligación Subordinada SAOS S.A. and are pledged as collateral to the Chilean Central Bank.

The above referred subscription options shall be preferentially offered to shareholders of series A, B and D of Sociedad Matriz del Banco de Chile S.A. during the so called “Special Preferential Rights Offering Period” which will begin running on January 19, 2013, and shall be elapsed on February 17, 2013.

In accordance with the above referred resolution of the Council of the Central Bank of Chile, the price of each option shall be as follows:

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5. Relevant Events, continued:

“The price of the subscription option, hereinafter the “Option Price”, shall correspond to the higher value between Ch$0.1 and the value resulting from the difference obtained after multiplying 0.9752 over the average stock trading price of Banco de Chile´s shares registered in local stock exchanges during the three business trading days preceding the date in which the corresponding option is acquired, hereinafter the “Weighted Average Share Price” (“Precio Promedio Ponderado de la Acción”), and Ch$62.0920.

For these purposes, the “Weighted Average Share Price” was determined, for each day, in accordance to the weighted average price of Banco de Chile´s shares traded during the three business trading days preceding the date in which the corresponding option is acquired, having in mind that the value corresponding to the Weighted Average Price, in relation to the beginning of the Special Preferential Rights Offering Period shall be of Ch$71.4. This value considers the resulting prices from the Ordinary Preferential Rights Offering Period referred to in letter a) of article 30 of Law N°19.396, so that, initially, the Option Price shall correspond to Ch$7.5 per each Banco de Chile´s share, and subsequently, he Option Price shall be determined pursuant to the Weighted Average Share Price, as explained before.

In any event, and for the purposes of selling the subscription options, the Option Price shall corresponded to Ch$7.5 for each Banco de Chile´s share, as long as the Weighted Average Share Price, determined as described before, does not exceed Ch$76.9 nor be less than Ch$71.3.

The Option Price that is determined in accordance with the aforementioned shall be paid up front pursuant to the conditions set forth by Banco de Chile for purposes of the Bank’s capital increase and its calculation procedure shall also be governed by the term established in the final paragraph of letter b) of article 30 of the Law No. 19,396, in accordance to the conditions established by the same legal provision”.

In addition, the Central Bank of Chile resolved that Sociedad Administradora de la Obligación Subordinada SAOS S.A. shall preferentially offer the options to the mentioned shareholders at the price singularized before. The price was notified by Sociedad Administradora de la Obligación Subordinada SAOS S.A. to the Central Bank of Chile and also be informed to interested persons at the beginning of each day of the “Special Preferential Rights Offering Period”.

(c) On January 24, 2013 in the Ordinary Meeting No. BCH 2,769, the Board of Directors of Banco de Chile resolved to call an Ordinary Shareholders Meeting to be held on the 21th of March, 2013 with the objective of proposing, among other matters, the distribution of the Dividend number 201 of Ch$3.41625263165 per every of the 88.037.813.511 “Banco de Chile” shares, which will be payable at the expense of the distributable net income obtained during the fiscal year ending the 31st of December, 2012, corresponding to 70% of such income.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

5. Relevant Events, continued:

In the Ordinary and Extraordinary Banco de Chile’s meetings held on March 21, 2013 it was agreed to comply the previous agreements.

Likewise, the Board of Directors resolved to call an Extraordinary Shareholders Meeting to be held on the same date in order to propose, among other things, the capitalization of 30% of the distributable net income obtained during the fiscal year ending the 31st of December, 2012, through the issuance of fully paid-in shares, of no par value, with a value of Ch$71.97 per “Banco de Chile “share which will be distributed among the shareholders in the proportion of 0.02034331347 shares for each “Banco de Chile” share, and to adopt the agreements that are necessary in this regard, subject to the exercise of the options established in article 31 of Law 19,396.

(d) On March 21, 2013 Banco de Chile informed that the Ordinary Shareholders Meeting of the Bank held today, agreed to definitely appoint Mr. Francisco Aristeguieta Silva as Director of the Bank, position that he will hold until the next renewal of the Board.

(e) On March 26, 2013 the Central Bank of Chile communicated to Banco de Chile that in the Extraordinary Session, No. 1742E, held today, the Board of the Central Bank of Chile resolved to request its corresponding surplus, from the fiscal year ended on December 31, 2012, including the proportional part of the profits agreed upon capitalization, be paid in cash currency.

(f) On March 27, 2013 Mr. Guillermo Luksic Craig. died, an important member of our Board since 2001 and member of controlling group of our Bank.

(g) According to Note 27 (a) during April concluded the process of subscription and payment of shares of increase capital authorized in the Extraordinary Shareholders Meeting held on October 17, 2012.

(h) On April 11, 2013 in Extraordinary Meeting appointed to Mr. Jean-Paul Luksic Fontbona like Director, until the next Ordinary Shareholders Meeting, replacing to Mr. Guillermo Luksic Craig.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

5. Relevant Events, continued:

(i) On May 13, 2013 and regarding the capitalization of 30% of the distributable net income obtained during the fiscal year ending as of December 31, 2012, through the issuance of fully paid-in shares, agreed in the Extraordinary Shareholders Meeting held on the March 21, 2013, it is informed the following information:

a) In the Extraordinary Shareholders Meeting mentioned above, it was agreed to increase the Bank´s capital in the amount of Ch$86,201,422,505 through the issuance of 1,197,741,038 fully paid-in shares, of no par value, payable under the distributable net income for the year 2012 that was not distributed as dividends as agreed at the Ordinary Shareholders Meeting held on the same day.

The Chilean Superintendency of Banks and Financial Institutions approved the amendment of the bylaws, through resolution No. 126 dated April 30, 2013, which was registered on page 34,465, No. 23,083 of the register of the Chamber of Commerce of Santiago for the year 2013, and was published at “Diario Oficial” on May 8, 2013.

The issuance of fully in paid shares was registered in the Securities Register of the Superintendence of Banks and Financial Institutions with No. 2/2013, on May 10, 2013.

b) The Board of Directors of Banco de Chile, at the meeting No. 2,775, dated May 09, 2013, set May 30, 2013, as the date for issuance and distribution of the fully paid in shares.

c) The shareholders are entitled to receive the new shares, at a ratio of 0.02034331347 fully in paid shares for each Banco de Chile share, shall be those registered in the Register of Shareholders on May 24, 2013.

d) In accordance to the first transitory article of the Bank’s bylaws, Banco de Chile-T shares issued as a consequence of the capital increase agreed on the Extraordinary Shareholders Meeting held on October 17, 2012, do not allow their holders to receive dividends or fully paid-in shares in respect to Banco de Chile’s net distributable earnings for fiscal year 2012. Once any dividends and/or fully paid-in shares are distributed, the Banco de Chile-T series shares automatically convert to Banco de Chile ordinary shares.

e) The titles were duly assigned to each shareholder. The Bank only print the titles for those shareholders who request it in writing at the Shareholders Department of Banco de Chile.

f) As a consequence of the issuance of the fully in paid shares, the capital of the Bank will be divided in 93,175,043,991 nominative shares, without par value, completely subscribed and paid.

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6. Segment Reporting:

For management purposes, the Bank has organized its operations and commercial strategies into four business segments, which are defined in accordance with the type of products and services offered to target customers. These business segments are currently defined as follows:

Retail: This segment focuses on individuals and small and medium-sized companies with annual sales up to 70,000UF, where the product offering focuses primarily on consumer loans, commercial loans, checking accounts, credit cards, credit lines and mortgage loans.

Wholesale: This segment focused on corporate clients and large companies, whose annual revenue exceed 70,000UF, where the product offering focuses primarily on commercial loans, checking accounts and liquidity management services, debt instruments, foreign trade, derivative contracts and leases.

Treasury and money market operations:

This segment includes revenue associated with managing the Bank’s balance sheet (currencies, maturities and interest rates) and liquidity, including financial instrument and currency trading on behalf of the Bank itself.

Transactions on behalf of customers carried out by the Treasury are reflected in the respective aforementioned segments. These products are highly transaction-focused and include foreign exchange transactions, derivatives and financial instruments in general.

Subsidiaries: Corresponds to companies and corporations controlled by the Bank, where income is obtained individually by the respective subsidiary. The companies that comprise this segment are:

	Entity

	· Banchile Trade Services Limited
	· Banchile Administradora General de Fondos S.A.
	· Banchile Asesoría Financiera S.A.
	· Banchile Corredores de Seguros Ltda.
	· Banchile Factoring S.A.
	· Banchile Corredores de Bolsa S.A.
	· Banchile Securitizadora S.A.
	· Socofin S.A.
	· Promarket S.A.

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6. Segment Reporting, continued:

The financial information used to measure the performance of the Bank’s business segments is not necessarily comparable with similar information from other financial institutions because it is based on internal reporting policies. The accounting policies used to prepare the Bank’s operating segment information are similar as those described in “Summary of Significant Accounting Principles”. The Bank obtains the majority of its income from: interest, revaluations and fees, discounted the credit cost and expenses. Management is mainly based on these concepts in its evaluation of segment performance and decision-making regarding goals, allocation of resources for each unit individually. Although the results of the segments reconcile with those of the Bank at total level, it is not thus necessarily concerning the different concepts, since the management is measured and controls in individual form and additionally applies the following criteria:

· The net interest margin of loans and deposits is measured on an individual transaction and individual client basis, stemming from the difference between the effective customer rate and the related Bank’s fund transfer price in terms of maturity, re-pricing and currency.

· The internal performance profitability system considers capital allocation in each segment in accordance to the Basel guidelines.

· Operating expenses are distributed at each area level. The Bank allocates all of its indirect operating costs to each business segment by utilizing a different cost driver in order to allocate such costs to the specific segment.

The Bank did not enter into transactions with a particular customer or third parties that exceed 10% or more of its total income during the six-month period ended June 30, 2013 and 2012.

Transfer pricing between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

Taxes are managed at a corporate level and are not allocated to business segments.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

6. Segment Reporting, continued:

The following table presents the income by segment for the periods ended June 30, 2013 and 2012 for each of the segments defined above:

	Retail				Wholesale				Treasury (1)				Subsidiaries				Subtotal				*Adjustment ()**				Total
	June		June		June		June		June		June		June		June		June		June		June		June		June		June
	2013		2012		2013		2012		2013		2012		2013		2012		2013		2012		2013		2012		2013		2012
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Net interest income	343,442		325,896		127,874		129,775		8,257		10,821		2,435		2,353		482,008		468,845		5,542		6,218		487,550		475,063
Net fees and commissions income (loss)	76,662		73,590		21,203		20,013		(293	)	(219	)	51,808		51,290		149,380		144,674		(5,486	)	(5,070	)	143,894		139,604
Other operating income	17,472		7,377		27,499		18,787		(5,022	)	2,441		18,773		16,133		58,722		44,738		(6,886	)	(7,465	)	51,836		37,273
Total operating revenue	437,576		406,863		176,576		168,575		2,942		13,043		73,016		69,776		690,110		658,257		(6,830	)	(6,317	)	683,280		651,940

Provisions for loan losses	(100,846	)	(92,053	)	(3,439	)	(5,684	)	(61	)	(91	)	585		593		(103,761	)	(97,235	)	—		—		(103,761	)	(97,235	)
Depreciation and amortization	(10,141	)	(10,467	)	(2,770	)	(3,651	)	(499	)	(659	)	(881	)	(747	)	(14,291	)	(15,524	)	—		—		(14,291	)	(15,524	)
Other operating expenses	(188,080	)	(185,819	)	(53,653	)	(57,731	)	(2,952	)	(2,858	)	(47,604	)	(44,265	)	(292,289	)	(290,673	)	6,830		6,317		(285,459	)	(284,356	)
Income attributable to associates	875		557		427		121		45		6		244		190		1,591		874		—		—		1,591		874
Income before income taxes	139,384		119,081		117,141		101,630		(525	)	9,441		25,360		25,547		281,360		255,699		—		—		281,360		255,699
Income taxes																									(38,026	)	(27,574	)
Income after income taxes