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, 2014
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-
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 |
BANCO DE CHILE AND SUBSIDIARIES
|
|
Page | |
|
Interim Condensed Consolidated Statement of Financial Position |
3 | |
|
Interim Condensed Consolidated Statements of Comprehensive Income |
4 | |
|
nterim Condensed Consolidated Statement of Changes in Equity |
6 | |
|
7 | ||
|
8 | ||
|
Legal provisions, basis of preparation and other information: |
8 | |
|
11 | ||
|
16 | ||
|
17 | ||
|
21 | ||
|
24 | ||
|
25 | ||
|
Cash collateral on securities borrowed and reverse repurchase agreements: |
26 | |
|
29 | ||
|
35 | ||
|
36 | ||
|
42 | ||
|
44 | ||
|
46 | ||
|
49 | ||
|
51 | ||
|
56 | ||
|
57 | ||
|
57 | ||
|
58 | ||
|
60 | ||
|
63 | ||
|
63 | ||
|
67 | ||
|
68 | ||
|
73 | ||
|
77 | ||
|
79 | ||
|
79 | ||
|
80 | ||
|
81 | ||
|
82 | ||
|
83 | ||
|
84 | ||
|
85 | ||
|
86 | ||
|
87 | ||
|
93 | ||
|
105 | ||
|
107 | ||
BANCO DE CHILE AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
For the periods ended June 30, 2014 and December 31, 2013
(Translation of financial statements originally issued in Spanish)
(Expressed in million of Chilean pesos)
|
|
|
|
|
June |
|
December |
|
|
|
|
Notes |
|
MCh$ |
|
MCh$ |
|
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and due from banks |
|
7 |
|
732,161 |
|
873,308 |
|
|
Transactions in the course of collection |
|
7 |
|
390,327 |
|
374,471 |
|
|
Financial assets held-for-trading |
|
8 |
|
418,422 |
|
393,134 |
|
|
Cash collateral on securities borrowed and reverse repurchase agreements |
|
9 |
|
32,876 |
|
82,422 |
|
|
Derivative instruments |
|
10 |
|
548,173 |
|
374,688 |
|
|
Loans and advances to banks |
|
11 |
|
750,620 |
|
1,062,056 |
|
|
Loans to customers, net |
|
12 |
|
20,391,984 |
|
20,389,033 |
|
|
Financial assets available-for-sale |
|
13 |
|
1,489,507 |
|
1,673,704 |
|
|
Financial assets held-to-maturity |
|
13 |
|
— |
|
— |
|
|
Investments in other companies |
|
14 |
|
23,996 |
|
16,670 |
|
|
Intangible assets |
|
15 |
|
27,948 |
|
29,671 |
|
|
Property and equipment |
|
16 |
|
202,265 |
|
197,578 |
|
|
Current tax assets |
|
17 |
|
2,719 |
|
3,202 |
|
|
Deferred tax assets |
|
17 |
|
156,659 |
|
145,904 |
|
|
Other assets |
|
18 |
|
293,145 |
|
318,029 |
|
|
TOTAL ASSETS |
|
|
|
25,460,802 |
|
25,933,870 |
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current accounts and other demand deposits |
|
19 |
|
6,141,163 |
|
5,984,332 |
|
|
Transactions in the course of payment |
|
7 |
|
185,143 |
|
126,343 |
|
|
Cash collateral on securities lent and repurchase agreements |
|
9 |
|
225,148 |
|
256,766 |
|
|
Savings accounts and time deposits |
|
20 |
|
9,522,184 |
|
10,402,725 |
|
|
Derivative instruments |
|
10 |
|
581,142 |
|
445,132 |
|
|
Borrowings from financial institutions |
|
21 |
|
727,759 |
|
989,465 |
|
|
Debt issued |
|
22 |
|
4,850,192 |
|
4,366,960 |
|
|
Other financial obligations |
|
23 |
|
194,135 |
|
210,926 |
|
|
Current tax liabilities |
|
17 |
|
7,857 |
|
10,333 |
|
|
Deferred tax liabilities |
|
17 |
|
36,598 |
|
36,569 |
|
|
Provisions |
|
24 |
|
400,934 |
|
551,898 |
|
|
Other liabilities |
|
25 |
|
207,844 |
|
268,105 |
|
|
TOTAL LIABILITIES |
|
|
|
23,080,099 |
|
23,649,554 |
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
27 |
|
|
|
|
|
|
Attributable to Bank’s Owners: |
|
|
|
|
|
|
|
|
Capital |
|
|
|
1,944,920 |
|
1,849,351 |
|
|
Reserves |
|
|
|
263,553 |
|
213,636 |
|
|
Other comprehensive income |
|
|
|
15,905 |
|
15,928 |
|
|
Retained earnings: |
|
|
|
|
|
|
|
|
Retained earnings from previous periods |
|
|
|
16,379 |
|
16,379 |
|
|
Income for the period |
|
|
|
304,229 |
|
513,602 |
|
|
Less: |
|
|
|
|
|
|
|
|
Provision for minimum dividends |
|
|
|
(164,285 |
) |
(324,582 |
) |
|
Subtotal |
|
|
|
2,380,701 |
|
2,284,314 |
|
|
Non-controlling interests |
|
|
|
2 |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL EQUITY |
|
|
|
2,380,703 |
|
2,284,316 |
|
|
TOTAL LIABILITIES AND EQUITY |
|
|
|
25,460,802 |
|
25,933,870 |
|
The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements
BANCO DE CHILE AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIOD
For the six-month ended June 30, 2014 and 2013
(Translation of financial statements originally issued in Spanish)
(Expressed in million of Chilean pesos)
|
|
|
|
|
June |
|
June |
| ||
|
|
|
Notes |
|
MCh$ |
|
MCh$ |
| ||
|
A. CONSOLIDATED STATEMENT OF INCOME |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
|
Interest revenue |
|
28 |
|
1,042,883 |
|
781,304 |
| ||
|
Interest expense |
|
28 |
|
(425,529 |
) |
(293,754 |
) | ||
|
Net interest income |
|
|
|
617,354 |
|
487,550 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Income from fees and commissions |
|
29 |
|
190,598 |
|
192,332 |
| ||
|
Expenses from fees and commissions |
|
29 |
|
(56,236 |
) |
(48,438 |
) | ||
|
Net fees and commission income |
|
|
|
134,362 |
|
143,894 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Net financial operating income |
|
30 |
|
27,168 |
|
(2,265 |
) | ||
|
Foreign exchange transactions, net |
|
31 |
|
30,554 |
|
41,980 |
| ||
|
Other operating income |
|
36 |
|
10,466 |
|
12,121 |
| ||
|
Total operating revenues |
|
|
|
819,904 |
|
683,280 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Provisions for loan losses |
|
32 |
|
(148,707 |
) |
(103,761 |
) | ||
|
|
|
|
|
|
|
|
| ||
|
OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES |
|
|
|
671,197 |
|
579,519 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Personnel expenses |
|
33 |
|
(169,680 |
) |
(155,801 |
) | ||
|
Administrative expenses |
|
34 |
|
(127,151 |
) |
(121,176 |
) | ||
|
Depreciation and amortization |
|
35 |
|
(12,962 |
) |
(14,291 |
) | ||
|
Impairment |
|
35 |
|
(208 |
) |
(9 |
) | ||
|
Other operating expenses |
|
37 |
|
(20,137 |
) |
(8,473 |
) | ||
|
|
|
|
|
|
|
|
| ||
|
TOTAL OPERATING EXPENSES |
|
|
|
(330,138 |
) |
(299,750 |
) | ||
|
|
|
|
|
|
|
|
| ||
|
NET OPERATING INCOME |
|
|
|
341,059 |
|
279,769 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Income attributable to associates |
|
14 |
|
1,180 |
|
1,591 |
| ||
|
Income before income tax |
|
|
|
342,239 |
|
281,360 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Income tax |
|
17 |
|
(38,009 |
) |
(38,026 |
) | ||
|
|
|
|
|
|
|
|
| ||
|
NET INCOME FOR THE PERIOD |
|
|
|
304,230 |
|
243,334 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Attributable to: |
|
|
|
|
|
|
| ||
|
Bank’s Owners |
|
|
|
304,229 |
|
243,334 |
| ||
|
Non-controlling interests |
|
|
|
1 |
|
— |
| ||
|
|
|
|
|
|
|
|
| ||
|
Net income per share attributable to Bank’s Owners: |
|
|
|
$ |
|
|
$ |
|
|
|
Basic net income per share |
|
27 |
|
3.27 |
|
2.62 |
| ||
|
Diluted net income per share |
|
27 |
|
3.27 |
|
2.62 |
| ||
The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements
BANCO DE CHILE AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIOD
For the six-month ended June 30, 2014 and 2013
(Translation of financial statements originally issued in Spanish)
(Expressed in million of Chilean pesos)
|
|
|
|
|
June |
|
June |
| ||
|
|
|
Notes |
|
MCh$ |
|
MCh$ |
| ||
|
|
|
|
|
|
|
|
| ||
|
NET INCOME FOR THE YEAR |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
|
Other comprehensive income that will be reclassified subsequently to profit or loss |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
|
Net unrealized gains (losses): |
|
|
|
|
|
|
| ||
|
Net change in unrealized gains (losses) on available for sale instruments |
|
13 |
|
4,587 |
|
7,228 |
| ||
|
Gains and losses on derivatives held as cash flow hedges |
|
10 |
|
(4,672 |
) |
(16,224 |
) | ||
|
Cumulative translation adjustment |
|
|
|
44 |
|
45 |
| ||
|
Subtotal Other comprehensive income before income taxes |
|
|
|
(41 |
) |
(8,951 |
) | ||
|
|
|
|
|
|
|
|
| ||
|
Income tax |
|
|
|
18 |
|
1,799 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Total other comprehensive income items that will be reclassified subsequently to profit or loss |
|
|
|
(23 |
) |
(7,152 |
) | ||
|
|
|
|
|
|
|
|
| ||
|
Other comprehensive income that will not be reclassified subsequently to profit or loss |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
|
Loss in defined benefit plans |
|
|
|
— |
|
— |
| ||
|
|
|
|
|
|
|
|
| ||
|
Subtotal other comprehensive income before income taxes |
|
|
|
— |
|
— |
| ||
|
|
|
|
|
|
|
|
| ||
|
Income taxes |
|
|
|
— |
|
— |
| ||
|
|
|
|
|
|
|
|
| ||
|
Total other comprehensive income items that will not be reclassified subsequently to profit or loss |
|
|
|
— |
|
— |
| ||
|
|
|
|
|
|
|
|
| ||
|
TOTAL CONSOLIDATED COMPREHENSIVE INCOME |
|
|
|
304,207 |
|
236,182 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Attributable to: |
|
|
|
|
|
|
| ||
|
Equity holders of the parent |
|
|
|
304,206 |
|
236,182 |
| ||
|
Non-controlling interest |
|
|
|
1 |
|
— |
| ||
|
|
|
|
|
|
|
|
| ||
|
Comprehensive net income per share from continued operations attributable to equity holders of the parent: |
|
|
|
$ |
|
|
$ |
|
|
|
Basic net income per share |
|
|
|
3.26 |
|
2.54 |
| ||
|
Diluted net income per share |
|
|
|
3.26 |
|
2.54 |
| ||
The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements
BANCO DE CHILE AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the six-month ended June 30, 2014 and 2013
(Translation of financial statements originally issued in Spanish)
(Expressed in millions of Chilean pesos)
|
|
|
|
|
|
|
Reserves |
|
Other comprehensive income |
|
Retained earnings |
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
Paid-in |
|
Other |
|
Reserves |
|
Unrealized |
|
Derivatives |
|
Cumulative |
|
Retained |
|
Income for |
|
Provision for |
|
Attributable |
|
Non- |
|
Total |
|
|
|
|
Notes |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of December 31, 2012 |
|
|
|
1,629,078 |
|
30,496 |
|
145,318 |
|
17,995 |
|
1,034 |
|
(94 |
) |
16,379 |
|
467,610 |
|
(300,759 |
) |
2,007,057 |
|
2 |
|
2,007,059 |
|
|
Capitalization of retained earnings |
|
27 |
|
86,202 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(86,202 |
) |
— |
|
— |
|
— |
|
— |
|
|
Income distribution |
|
|
|
— |
|
1,760 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(1,760 |
) |
— |
|
— |
|
— |
|
— |
|
|
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 |
|
|
|
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 |
|
|
Defined benefit plans adjustment |
|
|
|
— |
|
(133 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(133 |
) |
— |
|
(133 |
) |
|
Equity adjustment associates |
|
|
|
— |
|
2 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
2 |
|
— |
|
2 |
|
|
Dividends distributions and paid |
|
|
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
1 |
|
1 |
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment |
|
|
|
— |
|
— |
|
— |
|
— |
|
— |
|
26 |
|
— |
|
— |
|
— |
|
26 |
|
— |
|
26 |
|
|
Cash flow hedge adjustment, net |
|
|
|
— |
|
— |
|
— |
|
— |
|
(1,476 |
) |
— |
|
— |
|
— |
|
— |
|
(1,476 |
) |
— |
|
(1,476 |
) |
|
Valuation adjustment on available-for-sale instruments, net |
|
|
|
— |
|
— |
|
— |
|
5,595 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
5,595 |
|
— |
|
5,595 |
|
|
Income for the period 2013 |
|
|
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
270,268 |
|
— |
|
270,268 |
|
— |
|
270,268 |
|
|
Provision for minimum dividends |
|
|
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(157,164 |
) |
(157,164 |
) |
— |
|
(157,164 |
) |
|
Balances as of December 31, 2013 |
|
|
|
1,849,351 |
|
32,125 |
|
181,511 |
|
29,372 |
|
(13,421 |
) |
(23 |
) |
16,379 |
|
513,602 |
|
(324,582 |
) |
2,284,314 |
|
2 |
|
2,284,316 |
|
|
Capitalization of retained earnings |
|
27 |
|
95,569 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(95,569 |
) |
— |
|
— |
|
— |
|
— |
|
|
Retention (released) earnings |
|
27 |
|
— |
|
— |
|
49,913 |
|
— |
|
— |
|
— |
|
— |
|
(49,913 |
) |
— |
|
— |
|
— |
|
— |
|
|
Dividends distributions and paid |
|
27 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(368,120 |
) |
324,582 |
|
(43,538 |
) |
(1 |
) |
(43,539 |
) |
|
Equity adjustment investment in other companies |
|
|
|
— |
|
4 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
4 |
|
— |
|
4 |
|
|
Other comprehensive income: |
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment |
|
|
|
— |
|
— |
|
— |
|
— |
|
— |
|
44 |
|
— |
|
— |
|
— |
|
44 |
|
— |
|
44 |
|
|
Cash flow hedge adjustment, net |
|
|
|
— |
|
— |
|
— |
|
— |
|
(3,737 |
) |
— |
|
— |
|
— |
|
— |
|
(3,737 |
) |
— |
|
(3,737 |
) |
|
Valuation adjustment on available-for-sale instruments (net) |
|
|
|
— |
|
— |
|
— |
|
3,670 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
3,670 |
|
— |
|
3,670 |
|
|
Income for the period 2014 |
|
|
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
304,229 |
|
— |
|
304,229 |
|
1 |
|
304,230 |
|
|
Provision for minimum dividends |
|
27 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(164,285 |
) |
(164,285 |
) |
— |
|
(164,285 |
) |
|
Balances as of June 30, 2014 |
|
|
|
1,944,920 |
|
32,129 |
|
231,424 |
|
33,042 |
|
(17,158 |
) |
21 |
|
16,379 |
|
304,229 |
|
(164,285 |
) |
2,380,701 |
|
2 |
|
2,380,703 |
|
The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements
BANCO DE CHILE AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six-month ended June 30, 2014 and 2013
(Translation of financial statements originally issued in Spanish)
(Expressed in million of Chilean pesos)
|
|
|
|
|
June |
|
June |
|
|
|
|
Notes |
|
MCh$ |
|
MCh$ |
|
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income for the period |
|
|
|
304,230 |
|
243,334 |
|
|
Items that do not represent cash flows: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
35 |
|
12,962 |
|
14,291 |
|
|
Impairment of intangible assets and property and equipment |
|
35 |
|
208 |
|
9 |
|
|
Provision for loan losses |
|
32 |
|
156,655 |
|
114,226 |
|
|
Provision of contingent loans |
|
32 |
|
2,292 |
|
9,750 |
|
|
Fair value adjustment of financial assets held-for-trading |
|
|
|
982 |
|
(915 |
) |
|
Income attributable to investments in other companies |
|
14 |
|
(928 |
) |
(1,390 |
) |
|
Income from sales of assets received in lieu of payment |
|
36 |
|
(1,852 |
) |
(2,549 |
) |
|
Net gain on sales of property and equipment |
|
36-37 |
|
(60 |
) |
(167 |
) |
|
(Increase) decrease in other assets and liabilities |
|
|
|
(78,913 |
) |
(65,780 |
) |
|
Charge-offs of assets received in lieu of payment |
|
37 |
|
857 |
|
907 |
|
|
Other charges (credits) to income that do not represent cash flows |
|
|
|
10,563 |
|
12,916 |
|
|
(Gain) loss from foreign exchange transactions of other assets and other liabilities |
|
|
|
(154,275 |
) |
(52,486 |
) |
|
Net changes in interest and fee accruals |
|
|
|
(73,132 |
) |
56,674 |
|
|
Changes in assets and liabilities that affect operating cash flows: |
|
|
|
|
|
|
|
|
(Increase) decrease in loans and advances to banks, net |
|
|
|
310,252 |
|
1,029,201 |
|
|
(Increase) decrease in loans to customers |
|
|
|
26,913 |
|
(898,090 |
) |
|
(Increase) decrease in financial assets held-for-trading, net |
|
|
|
(73,038 |
) |
(158,232 |
) |
|
(Increase) decrease in deferred taxes, net |
|
17 |
|
(11,643 |
) |
8,567 |
|
|
(Increase) decrease in current account and other demand deposits |
|
|
|
156,002 |
|
97,074 |
|
|
(Increase) decrease in payables from repurchase agreements and security lending |
|
|
|
(11,389 |
) |
279,345 |
|
|
(Increase) decrease in savings accounts and time deposits |
|
|
|
(880,149 |
) |
(37,250 |
) |
|
Proceeds from sale of assets received in lieu of payment |
|
|
|
2,918 |
|
4,266 |
|
|
Total cash flows from operating activities |
|
|
|
(300,545 |
) |
636,567 |
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
(Increase) decrease in financial assets available-for-sale, net |
|
|
|
258,276 |
|
(301,612 |
) |
|
Purchases of property and equipment |
|
16 |
|
(13,568 |
) |
(6,937 |
) |
|
Proceeds from sales of property and equipment |
|
|
|
79 |
|
427 |
|
|
Purchases of intangible assets |
|
15 |
|
(2,378 |
) |
(2,771 |
) |
|
Investments in other companies |
|
14 |
|
(6,608 |
) |
— |
|
|
Dividends received from investments in other companies |
|
14 |
|
195 |
|
931 |
|
|
Total cash flows from investing activities |
|
|
|
235,996 |
|
(309,962 |
) |
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds of mortgage finance bonds |
|
|
|
— |
|
— |
|
|
Repayment of mortgage finance bonds |
|
|
|
(8,972 |
) |
(11,026 |
) |
|
Proceeds from bond issuances |
|
22 |
|
954,709 |
|
919,557 |
|
|
Redemption of bond issuances |
|
|
|
(427,093 |
) |
(417,589 |
) |
|
Proceeds from subscription and payment of shares |
|
|
|
— |
|
134,071 |
|
|
Dividends paid |
|
27 |
|
(368,120 |
) |
(343,455 |
) |
|
(Increase) decrease in borrowings from financial institutions |
|
|
|
(77,823 |
) |
(104,085 |
) |
|
(Increase) decrease in other financial obligations |
|
|
|
(14,134 |
) |
324 |
|
|
(Increase) decrease in borrowings from Central Bank of Chile |
|
|
|
— |
|
— |
|
|
Borrowings from Central Bank of Chile (long-term) |
|
|
|
7 |
|
— |
|
|
Payment of borrowings from Central Bank of Chile (long-term) |
|
|
|
(9 |
) |
(6 |
) |
|
Long-term foreign borrowings |
|
|
|
370,588 |
|
500,578 |
|
|
Payment of long-term foreign borrowings |
|
|
|
(553,326 |
) |
(346,321 |
) |
|
Proceeds from other long-term borrowings |
|
|
|
6,540 |
|
155 |
|
|
Payment of other long-term borrowings |
|
|
|
(9,574 |
) |
(2,480 |
) |
|
Total cash flows from financing activities |
|
|
|
(127,207 |
) |
329,723 |
|
|
TOTAL NET POSITIVE CASH FLOWS FOR THE PERIOD |
|
|
|
(191,756 |
) |
656,328 |
|
|
Net effect of exchange rate changes on cash and cash equivalents |
|
|
|
4,213 |
|
26,568 |
|
|
Cash and cash equivalents at beginning of year |
|
|
|
1,538,618 |
|
1,236,324 |
|
|
Cash and cash equivalents at end of period |
|
7 |
|
1,351,075 |
|
1,919,220 |
|
|
|
|
2014 |
|
2013 |
|
|
|
|
MCh$ |
|
MCh$ |
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
Interest received |
|
855,402 |
|
825,169 |
|
|
Interest paid |
|
(311,180 |
) |
(280,945 |
) |
The accompanying notes 1 to 41 are an integral part of these interim condensed consolidated financial statements
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)
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” or “Superintendency”), 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 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, 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, 2014 were approved for issuance in accordance with the directors on July 24, 2014.
2. Legal provisions, basis of preparation and other information:
(a) Legal provisions:
The General Banking Law in its Article No.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 (“Compendium”), 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.
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 has controlling interest and that are therefore consolidated in these financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Owned |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Direct |
|
Indirect |
|
Total |
| ||||||
|
|
|
|
|
|
|
|
|
June |
|
December |
|
June |
|
December |
|
June |
|
December |
|
|
|
|
|
|
|
|
Functional |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
Rut |
|
Subsidiaries |
|
Country |
|
Currency |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
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 |
|
|
96,571,220-8 |
|
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 |
|
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 No. 15);
2. Useful lives of property and equipment and intangible assets (Notes No. 15 and No. 16);
3. Income taxes and deferred taxes (Note No. 17);
4. Provisions (Note No. 24);
5. Contingencies and Commitments (Note No. 26);
6. Provision for loan losses (Note No. 11, No. 12 and No. 32);
7. Impairment of other financial assets (Note No. 35);
8. Fair value of financial assets and liabilities (Note No. 39).
Estimates and relevant assumptions are regularly reviewed by the management of the Bank, according to quantify certain assets, liabilities, gains, loss and commitments. Estimates reviewed are registered in income in the period that the estimate is reviewed.
During the period ended June 30, 2014 there have been no significant changes to estimates made during period 2013.
(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, 2014.
(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.
(f) Reclassifications:
During the period of six-month ended as of June, 2013, there are not reclassifications. Different to mentioned in Note No. 39 letter (a).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
3. New Accounting Pronouncements:
3.1 Accounting rules issued by IASB
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), which are no effective as of June 30, 2014:
3.1 Accounting rules issued by IASB:
IFRS 9 Financial Instruments
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. Only financial assets that classified like amortized cost will be applied impairment.
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.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
3. New Accounting Pronouncements, continued:
In November 2013, the IASB issued amendments to IFRS 9 for introduce a new model of hedge accounting, which align hedge accounting and risk management. Moreover, the requirements relating to the fair value option for financial liabilities were changed to address own credit risk, this improvement requires that the effects of changes in credit risk of liability should not affect profit or loss to unless the liability is held for trading. Early application of this amendment without application of the other requirements of IFRS 9 are allowed.
In that amendment is deleted January 1, 2015 as effective date of application, the new effective date is in process of definition by the IASB.
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, this standard has not been approved by the Superintendency of Banks, event that is required for their application.
IAS 19 Employee benefits
On November 2013, IASB modified requirements of IAS 19 respect to employee contributions or third parties contributions, which are related to defined benefit plans.
Adoption date of this modification is beginning July 1, 2014, and anticipated adoption is permitted.
The Bank has not employee contributions related to defined benefit plans, so this amendment has not impacts over consolidated financial statements of Banco de Chiles and its subsidiaries.
Annual improvements IFRS 2010 — 2012 Cycle and 2011 — 2013 Cycle
On December 12, 2013, IASB issued two cycles of annual improvements to IFRS: 2010 — 2012 and 2011 — 2013 Cycles.
The effective date of these amendments is beginning July 1, 2014 except for modifications of IFRS 13 and IFRS 1, which affects to Basis of Conclusions of those rules, so are affective immediately.
2010-2012 Cycle
IFRS 2 — Share based payments; Definition relating to vesting conditions. Not applicable
This rule was amended to change definitions of “vesting conditions” and “market condition” and add definition for “performance condition” and “service condition” which were previously included within the definition of “vesting condition”.
IFRS 3 — Business combination; Accounting for contingent consideration in a business combination. Without impact.
This amendment clarifies that contingent consideration that is classified as an asset or a liability should be measured at fair value at each reporting date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
3. New Accounting Pronouncements, continued:
Annual improvements IFRS 2010 — 2012 Cycle and 2011 — 2013 Cycle, continued
2010-2012 Cycle, continued
IFRS 8 — Operating Segments. The Bank and its subsidiaries are assessing the impact of adoption of these changes in its financial position. Without impact.
The amendment requires an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have “similar economic characteristics”.
IAS 16 — Property, plant and equipment. Not applicable
The amendment clarifies that gross carrying amount and depreciation are adjusted for to make consistent with revaluation, when an entity uses revaluation model.
IAS 24 — Related party disclosures; Key management personnel. Not applicable
The amendment clarifies that a management entity providing key management personnel services to a reporting entity is a related party of the reporting entity.
IAS 38 — Intangible assets; Revaluation method proportionate restatement of accumulated depreciation. Not applicable
The amendment requirements clarify that the gross carrying amount is adjusted in a manner consistent with the revaluation of the carrying amount, when an entity uses revaluation model.
2011-2013 Cycle
IFRS 1 — First time adoption. Not applicable
The amendment clarifies that a first-time adopters is allowed, but not required, to apply a new IFRS that is not yet mandatory if that IFRS permits early application. If an entity chooses to early apply a new IFRS, it must apply that new IFRS retrospectively throughout all periods presented unless IFRS 1 provides and exemption or an exception that permits or requires otherwise.
IFRS 3 — Business combination. Without impact
The amendment clarifies that IFRS 3 does not apply to the accounting for the formation of all types of joint arrangements in the financial statements of the joint arrangements itself.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
3. New Accounting Pronouncements, continued:
Annual improvements IFRS 2010 — 2012 Cycle and 2011 — 2013 Cycle, continued
2011-2013 Cycle, continued
IFRS 13 — Fair Value Measurement. The Bank and its subsidiaries are assessing the impact of adoption of these changes in its financial position. Without impact.
The scope of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with IAS 39 or IFRS 9, even if those contracts do not meet the definition of financial assets or financial liabilities within IAS 32.
IAS 40 — Investment Properties. Without impact
IAS 40 was amended to clarify that this standard and IFRS 3 — Business Combinations are not mutually exclusive and application of both standards may be required. Consequently, an entity acquiring investment property must determine whether, the property meets the definition of investment property in IAS 40 and, the transactions meet the definition of business combination under IFRS 3.
IFRS 11 — Joint Ventures. Banco de Chile are assessing the impact of these rule in its consolidated financial statements.
In May of 2014 the IASB modified IFRS 11, to provide guides about the accounting of acquisitions of participations in joint operations, whose activity constitute a business.
This IFRS requires that the acquirer of an participation in joint operation whose activity constitute a business, like it is defined in IFRS 3 “Business Combination”, applies all the principles about accounting of business combination of IFRS 3 and others IFRS, except those that conflict with guidelines of these IFRS.
The effective date is beginning on January 1, 2016 and its early application is permitted.
IAS 16 — Property, plant and equipment and IAS 38 — Intangible assets. Banco de Chile and its subsidiaries are assessing the impact of this rule in its consolidated financial statements.
In May of 2014 the IASB modified IAS 16 and 38 with purpose of clarifies accepted method of depreciation and amortization.
The amendment of IAS 16 prohibits for property, plant and equipment, depreciation based on ordinary income.
The amendment of IAS 38 introduces the presumption of ordinary income are not an appropriate base for the amortization of intangible asset. This presumption only is refuted in two circumstances: (a) intangible asset is expressed like a unit of ordinary income; and (b) ordinary income and consumption of intangible asset are highly correlated.
Also, it introduces guidelines to explain that expected futures reductions in the prices of sale could be indicator of reductions in futures economics benefits in an asset. The effective date is beginning on January 1, 2016, its early application is permitted.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
3. New Accounting Pronouncements, continued:
Annual improvements IFRS 2010 — 2012 Cycle and 2011 — 2013 Cycle, continued
IFRS 15 — Revenue from Contracts with Customers. Banco de Chile and its subsidiaries are assessing the impact of this rule in its consolidated financial statements.
In May of 2014 was issued IFRS 15, whose objective is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer.
Application of the standard is mandatory for annual reporting periods starting from 1 January 2017 onwards. Earlier application is permitted.
3.2 Accounting rules issued by SBIF:
On February 17, 2014 SBIF issued a Circular No. 3,565, which introduces changes to the instructions related to monthly information sent to the Superintendency. Changes have as objective inform in separate way the investment in entities controlled abroad and requires information of credit and its overdue maintained for the subsidiaries controlled. These changes are applied in present consolidated financial statements.
3.3 Rules issued by the Superintendency of Securities and Insurance (“Superintendencia de Valores y Seguros” (SVS))
On January 13, 2014 SVS issued a Circular No. 2,137, which regulates financial statements that insurance brokers (not individuals) must be sent to SVS. This rule establishes the presentation of financial statements under IFRS since January 1, 2015 and establishes accounting criteria related to income recognition for concept of commissions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
4. Changes in Accounting Policies and Disclosures:
On December 1, 2013, new rules are beginning in application. These are about return of premiums not accrued for the insurance contracts, according to established by law No. 20,667 of 9th. of May of 2013 and Circular No. 2,114 issued by the SVS on July 26, 2013. The legal change requires returns of premiums collected in advance but not accrued, due to the early termination or extinction of an insurance contract. The premium to return it will be calculated in proportion of the remaining time.
During the period ended as of March 31, 2014, the Bank and its subsidiary Banchile Corredores de Seguros have established provisions for the concept of commission’s refunds to the insurance companies for the policies (paid in advance) commercialized since December 1, 2013. This estimation is based in the history of the prepayments and disclaimers of its products portfolio that originate the commissions.
Additionally, the legal exchange for the return of premiums collected in advance and unearned, also had an impact on the income — expense of commissions recognized directly in income. This means that it has begun to defer a portion of the commission earned jointly with future costs of sales.
These estimates correspond to changes in an accounting estimates whose effects are registered in income under item “Income from fees and commissions”. The effect of the change involves a lesser income in the period by an amount of Ch$3,964 million.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
(a) On January 9, 2014 LQ Inversiones Financieras S.A. (“LQIF”) informed Banco de Chile that LQIF will carry out a process to offer for sale or transfer up to 6,900,000,000 shares of Banco de Chile (a secondary offering). In addition, LQIF has requested that Banco de Chile perform all the actions related to the execution of this kind of transaction in the local and international markets.
Furthermore, the letter indicates that, if consummated, this transaction will reduce LQIF’s share of outstanding voting rights from 58.4% to 51%, so that the control status of LQIF with respect to Banco de Chile will not be altered.
With regard to the above, on this date the Board of Directors of Banco de Chile has agreed to LQIF’s request and the conditions under which Banco de Chile will participate in the appropriate filings with foreign regulators, the entering into of contracts and other documents required by law and consistent with securities market practice in the United States of America and other international markets, and in the performing of such other steps and actions as are necessary for the consummation of this transaction in the local and international markets and that are related to the commercial and financial condition of Banco de Chile.
(b) On January 14, 2014, in relation to the relevant event dated January 9, 2014, it is informed that Banco de Chile has filed with the Securities and Exchange Commission of the United States of America (SEC), Supplemental Preliminary a prospectus which contains financial and business information of the Bank.
Also, it has been registered the agreed contract text called Underwriting Agreement that will be subscribed by LQ Inversiones Financieras S.A. (LQIF), as a seller of securities, Banco de Chile as issuer, and Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc. and Banco BTG Pactual S.A. - Cayman Branch, as underwriters.
Additionally, LQIF and Banco de Chile have agreed the terms and general conditions under which the Bank will participate in this process.
(c) On January 29, 2014, LQ Inversiones Financieras S.A. informed as a relevant event that was placed of 6,700,000,000 shares of Banco de Chile, in the local market and the United States of America, by American Depositary Receipts Program, at a price of $ 67 per share, declaring successful offer for sale. Additionally, it informed that the 6,700,000,000 shares of Banco de Chile offered for sale will be placed in stock exchange at price stated on January 29, 2014.
(d) On January 29, 2014, Bank is informed that in relation to the secondary offering shares of Banco de Chile that is performing with LQ Inversiones Financieras S.A., in this date Banco de Chile as issuer, LQ Investments SA, as seller of the securities, and Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc., and Banco BTG Pactual SA - Cayman Branch as underwriters, have been subscribed a contract called Underwriting Agreement, according to relevant event dated January 14, 2014.
Also, later than January 30, 2014, Banco de Chile will proceed to register in Securities and Exchange Commission of the United States of America (SEC), Final Prospectus Supplement, which contains financial and commercial information of the Bank.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
5. Relevants events, continued
(e) On January 31, 2014, it was informed that in the Ordinary Meeting No. BCH 2,790 held on January 30th, 2014, the Board of Directors of Banco de Chile resolved to call an Ordinary Shareholders Meeting to be held on March 27th, 2014, with the objective of proposing, among other matters, the distribution of the Dividend number 202 of $3.48356970828 per each of the 93,175,043,991 “Banco de Chile” shares, which will be payable at the expense of the distributable net income obtained during the fiscal year ending on December 31st, 2013, corresponding to the 70% of such income.
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 the 30% of the distributable net income of the Bank obtained during the fiscal year ending on December 31st, 2013, through the issuance of fully paid-in shares, of no par value, with a value of $64.56 per “Banco de Chile “share, which will be distributed among the shareholders in the proportion of 0.02312513083 shares for each “Banco de Chile” share and to adopt the necessary agreements subject to the exercise of the options established in article 31 of Law 19,396.
(f) On March 27, 2014 was informed as essential information that in the Ordinary Shareholders’ Meeting of this institution, which took place on March 27, 2014, the Board of Directors was completely renew, due to the end of the legal and statutory three years term established for the Board of Directors that has ceased in its functions.
After the corresponding voting at the aforesaid meeting, the following persons were appointed as Directors for a new three years term:
|
Directors: |
Francisco Aristeguieta Silva | |
|
|
Jorge Awad |
(Independent) |
|
|
Juan José Bruchou | |
|
|
Jorge Ergas Heymann | |
|
|
Jaime Estévez |
(Independent) |
|
|
| |
|
|
Pablo Granifo Lavín | |
|
|
Andrónico Luksic Craig | |
|
|
Jean Paul Luksic Fontbona | |
|
|
Gonzalo Menéndez Duque | |
|
|
Francisco Pérez Mackenna | |
|
|
Juan Enrique Pino Visinteiner | |
|
|
| |
|
First Alternate Director: |
Rodrigo Manubens Moltedo | |
|
Second Alternate Director: |
Thomas Fürst |
(Independent) |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
5. Relevants events, continued
Moreover, at the ordinary Board of Directors meeting No BCH 2,793 held on March 27, 2014, it was agreed to make the following appointments and designations:
|
President: |
Pablo Granifo Lavín |
|
Vice-President: |
Andrónico Luksic Craig |
|
Vice-President: |
Francisco Aristeguieta Silva |
|
|
|
|
Advisers to the Board: |
Hernán Büchi Buc |
|
|
Francisco Garcés Garrido |
|
|
Jacob Ergas Ergas |
(g) On April 1, 2014 it was informed as an Essential Information that, as of this date, the Central Bank of Chile has communicated to Banco de Chile that the Board of such institution (Consejo), in Extraordinary Session No 1813E, held today, considering the resolutions adopted by the shareholders’ meetings of Banco de Chile of March 27, 2014, regarding distribution of dividends and the increase of capital through the issuance of fully paid-in shares corresponding to the 30% of the net income obtained during the fiscal year ending on December 31st, 2013, resolved to take the option that the entirety of its corresponding surplus, including the part of the profits proportional to the agreed capitalization, be paid to the Central Bank of Chile in cash currency, according to the letter b) of the article 31 of the law No 19.396, regarding a modification of the way of payment of the subordinated obligation and other applicable legislation.
(h) On May 29, 2014 in Ordinary Meeting No. 2,796, the Board of Bank of Chile agreed dissolution, liquidation and termination of Subsidiary Banchile Trade Services Limited, as well as of contracts and operations of this subsidiary. The Board gave full powers and rights, to execute the dissolution, liquidation and termination of the subsidiary mentioned above.
At the date of these financial statements dissolution, liquidation and termination of this subsidiary is in process.
(i) On June 23, 2014, the Second Extraordinary General Meeting of Shareholders of the subsidiary Banchile Securitizadora SA, unanimously agreed to increase the statutory capital by Ch$240 million. Superintendency of Securities and Insurance commented to the approval of the reform statutes dated July 18, 2014. Therefore, on July 21, 2014, the Board requested a new Extraordinary shareholders meeting in order to address the comments of the regulator.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
5. Relevants events, continued
(j) On June 26, 2014 and regarding the capitalization of 30% of the distributable net income obtained during the fiscal year ending the 31st of December, 2013, through the issuance of fully paid-in shares, agreed in the Extraordinary Shareholders Meeting held on the 27th of March, 2014, It was informed as an essential information:
a. In the said Extraordinary Shareholders Meeting, it was agreed to increase the Bank´s capital in the amount of $ 95,569,688,582 through the issuance of 1,480,323,553 fully paid-in shares, of no par value, payable under the distributable net income for the year 2013 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 N°153 dated May 30, 2014, which was registered on page 24,964 N°40,254 of the register of the Chamber of Commerce of Santiago for the year 2014, and was published at “Diario Oficial” on June 5, 2014.
The issuance of fully in paid shares was registered in the Securities Register of the Superintendence of Banks and Financial Institutions with N°3/2014, on June 19, 2014.
b. The Board of Directors of Banco de Chile, at the meeting N°2,798, dated June 26, 2014, set July 10, 2014, as the date for issuance and distribution of the fully paid in shares.
c. The shareholders that will be entitled to receive the new shares, at a ratio of 0.02312513083 fully in paid shares for each Banco de Chile share, shall be those registered in the Register of Shareholders on July 4, 2014.
d. The titles will be duly assigned to each shareholder. The Bank will only print the titles for those shareholders who request it in writing at the Shareholders Department of Banco de Chile.
e. As a consequence of the issuance of the fully in paid shares, the capital of the Bank will be divided in 94,655,367,544 nominative shares, without par value, completely subscribed and paid.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
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, and lesser extent in the item “Interest revenue”
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 Corredores de Bolsa S.A.
· Banchile Securitizadora S.A.
· Socofin S.A.
· Promarket S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
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 applying 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, 2014 and 2013.
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.
On July 1, 2013, Banco de Chile absorbed its subsidiary Banchile Factoring SA. This subsidiary was previously presented under the “Subsidiaries” operating segment. As a result of being absorbed by the Bank, now its operations are presented under “Retail” and “Wholesale” segments. Operating segment information for June 30, 2013 has been reclassified for comparative purposes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued
6. Segment Reporting, continued:
The following table presents the income by segment for the periods ended June 2014 and 2013 for each of the segments defined above:
|
|
|
Retail |
|
Wholesale |
|
Treasury |
|
Subsidiaries |
|
Subtotal |
|
Consolidation |
|
Total |
| ||||||||||||||
|
|
|
June |
|
June |
|
June |
|
June |
|
June |
|
June |
|
June |
|
June |
|
June |
|
June |
|
June |
|
June |
|
June |
|
June |
|
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
MCh$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
415,536 |
|
347,340 |
|
187,354 |
|
132,806 |
|
18,198 |
|
8,257 |
|
(5,172 |
) |
(6,542 |
) |
615,916 |
|
481,861 |
|
1,438 |
|
5,689 |
|
617,354 |
|
487,550 |
|
|
Net fees and commissions income (loss) |
|
66,719 |
|
76,901 |
|
20,608 |
|
21,499 |
|
(813 |
) |
(293 |
) |
54,492 |
|
51,277 |
|
141,006 |
|
149,384 |
|
(6,644 |
) |
(5,490 |
) |
134,362 |
|
143,894 |
|
|
Other operating income |
|
12,249 |
|
17,581 |
|
25,604 |
|
27,642 |
|
16,055 |
|
(5,021 |
) |
16,984 |
|
18,517 |
|
70,892 |
|
58,719 |
|
(2,704 |
) |
(6,883 |
) |
68,188 |
|
51,836 |
|
|
Total operating revenue |
|
494,504 |
|
441,822 |
|
233,566 |
|
181,947 |
|
33,440 |
|
2,943 |
|
66,304 |
|
63,252 |
|
827,814 |
|
689,964 |
|
(7,910 |
) |
(6,684 |
) |
819,904 |
|
683,280 |
|
|
Provisions for loan losses |
|
(118,669 |
) |
(100,804 |
) |
(29,484 |
) |
(2,783 |
) |
(708 |
) |
(61 |
) |
154 |
|
(113 |
) |
(148,707 |
) |
(103,761 |
) |
— |
|
— |
|
(148,707 |
) |
(103,761 |
) |
|
Depreciation and amortization |
|
(9,422 |
) |
(10,150 |
) |
(2,432 |
) |
(2,778 |
) |
(106 |
) |
(499 |
) |
(1,002 |
) |
(864 |
) |
(12,962 |
) |
(14,291 |
) |
— |
|
— |
|
(12,962 |
) |
(14,291 |
) |
|
Other operating expenses |
|
(213,328 |
) |
(189,775 |
) |
(60,862 |
) |
(55,111 |
) |
||||||||||||||||||||