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29 May 2019
New York, May 29, 2019 -- Moody's Investors Service ("Moody's") today assigned
an A1 rating to Banco de Chile's JPY10 billion fixed-rate senior
unsecured notes maturing 3 June 2039. The rating has a stable outlook.
The notes will be governed by New York law and used for general corporate
The following rating was assigned to Banco de Chile's JPY10 billion fixed-rate
senior unsecured notes, due on 3 June 2039:
Long-term foreign currency senior unsecured debt rating:
A1, stable outlook.
The A1 debt rating is based on Banco de Chile's strong asset quality,
good profitability and stable, low cost retail deposit funding,
although its capitalization remains moderate by global standards.
Banco de Chile's asset quality benefits from a conservative risk
management and a predominant focus on low-risk large corporations,
high income consumer clients and residential mortgages. As of March
2019, Banco de Chile reported stable and low nonperforming loans
(NPLs) equal to just 1.2% of gross loans, while loan
loss reserves covered NPLs by an ample 190%.
Banco de Chile's robust core profitability reflects its diverse revenue
sources owing to a leading position in several of its target market segments
and low credit and operating costs. Moody's believes these
will continue to support strong profitability, despite the 29%
net income decrease in the first three months of 2019 from the same period
a year prior, resulting from lower than expected inflation and higher
provisioning needs in the bank's consumer portfolio as more detailed
information of the indebtedness of certain individuals was incorporated
into the bank's risk models, after two transactions occurred
last December in Chile between banks and retailers.
Banco de Chile benefits from low cost retail deposit funding that boosts
margins and limits its vulnerability to refinancing and interest rate
risks. However, to finance its mortgage portfolio and limit
balance sheet tenor mismatches, Banco de Chile relies on funds sourced
in the domestic and cross border markets. As of March 2019,
Banco de Chile's deposits funded 58% of the bank's total
Banco de Chile's core capitalization is moderate by global standards,
but its earnings generation capacity, strong asset quality and sufficient
reserve coverage offer adequate protection against risks. Even
though Banco de Chile's capitalization is well above current Chilean
regulatory minima, Moody's tangible common equity to risk-weighted
assets was at 11.1% as of March 2019, which is below
global peers and therefore remains a limitation for the bank's standalone
financial strength. However, Moody's expects Banco de Chile's
capitalization to gradually increase based on management's stated focus
on building tangible equity and the approval of a new law that establishes
higher capitalization requirements for Chilean banks in line with Basel
III guidelines. While the bank already complies with the new requirements,
including buffers, Moody's expects it will seek to build an additional
cushion. Additionally, the bank has recently completed the
total payment of long-term subordinated obligations due to the
central bank, which gives Banco de Chile higher income retention
Banco de Chile's A1 senior debt rating incorporates two notches
of uplift from the standalone baseline credit assessment (BCA) of a3 because
Moody's assesses a very high likelihood of government support in a situation
of financial stress in light of its large deposit and loan franchise in
The stable outlook is in line with the outlook on the debt rating of the
government of Chile.
WHAT COULD CHANGE THE RATING UP OR DOWN
Barring a sovereign upgrade, Banco de Chile's senior debt rating
is unlikely to face upward pressure even if the bank's fundamentals improve,
because the rating is already at the same level as the sovereign bond
The rating could face downward pressure if the bank's asset quality deteriorates
substantially, resulting in sustained challenges to its earnings
and capitalization. In addition, the bank's ratings will
face downward pressure if Chile's government bond rating is downgraded.
The principal methodology used in this rating was Banks published in August
2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Headquartered in Santiago, Chile, Banco de Chile reported
consolidated assets of CLP36.1 trillion (53.1$ billion),
CLP28.2 trillion in gross loans, CLP20.9 trillion
in deposits, shareholders' equity of CLP3.3 trillion,
and net income of CLP101.5 billion as of March 2019.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
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credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
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rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
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the associated regulatory disclosures will be those of the guarantor entity.
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Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
VP - Senior Credit Officer
Financial Institutions Group
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M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
No Related Data.
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