Hello, everyone, and welcome to Banco De Chile’s Full Year 2017 and Fourth Quarter 2017 Financial Results Conference Call. If you need a copy of the press release, it is available on the company’s website. Today with us, we have Mr. Rodrigo Aravena, Chief Economist and Senior VP of Institutional Relations; Mr. Pablo Mejia, Head of Investor Relations; Mr. Cecil Diaz, Investor Relations Officer; and Daniel Galarce, Head of Financial Control. Before we begin, I would like to remind you that this call is being recorded and that information discussed today may include forward-looking statements regarding the company’s financial and operating performance. All projections are subject to risks and uncertainties and actual results may differ materially. Please refer to the detailed note in the company’s press release regarding forward-looking statements. I will now turn the call over to Mr. Rodrigo Aravena. Please you may proceed.

Good morning, everyone and thank you for joining us today on our conference call for the full year and fourth quarter 2017 financial results. It's a pleasure for me to share with you our comments regarding the Chilean economy and the results of the banking industry during the quarter. Finally, Pablo Mejia, our Head of Investor Relations, will review our fourth quarter 2017 financial results and main and strategic achievements. Please turn to Slide number 3. During the quarter, the Chilean economy continues to show a strong signs of recovery. The monthly GDP, as seen on the top-left part, grew faster in the second half of last year. In fact, world economy was up only 0.5% in the first half. It completed an expansion of 2.5% between July and November, which is the latest available for the year. As a consequence of higher than stated 3.2% annual expansion in November, the economy accumulated an annual growth of 2.6% in the quarter ending in that front, the highest figure since April of 2014. This recovery has been a consequence of the diverse factors. One of them is important improvement in external conditions, which is a critical driver for a country like Chile where the trade volume is more than half of GDP. The second growth in favor of our trade partners and the increase in copper prices as you can see on the top right chart has supported various expectations for Chile. Since copper ore expense more than 10% of total GDP hence it is a relevant amount of our fiscal revenues, besides it generates [ph] to different areas of economy. Our second driver has been the normalization of mining activity after the strike in Escondida, which affected the copper production in the beginning of 2017. Internal factors are also supporting…

Thanks, Rodrigo. Can we turn to the next Slide Number 9 to begin the discussion of Banco De Chile's financial results? Despite that 2017 was sluggish in terms of economic growth, inflation and loan demand, we posted once again strong financial figures. Net income for the year reached Ch$576 billion that was 4.3% higher since 2016. And we continue to maintain attractive levels of profitability of 19.3%. It's also important to point out that this was obtained despite higher corporate tax rate less that 24% in 2016 to 25.5% in 2017. On a pretax basis, net income for the year was 7.8% higher than 2016. On a quarterly basis, we generated net income of Ch$142 billion, 14.8% higher than the same quarter last year mainly due to lower loan loss provisions. We were able to obtain these figures by developing various commercial strategies and improve our customer experience, and also drive recurring income. Additionally, we have been concentrating on maintaining adequate levels of risk return, improving productivity and controlling expenses proactively. Please turn to Slide Number 10. We have consistently demonstrated our ability to deliver sustainable and superior profitability for our shareholders, thanks to our long-term customer-centric growth model. The next is few slides we will go how we have shifted our strategy to focus on the retail segment. We will also discuss how our emphasis on strengthening customer experience is helping to build the foundation to success in this more competitive environment. And we will go over the parts of financial results. Thanks to improvements that we're made that has driven productivity. Lastly, we will examine how we have managed to keep risk at these very low levels that has played an important change in mix. Please turn to Slide 11. Our large and diversified customer base is clearly…

Thank you. The floor is now open for questions. [Operator Instructions] The first question comes from Ernesto Gabilondo with Bank of America Merrill Lynch. Please go ahead.

Hi, good afternoon, Pablo and Rodrigo. Three questions from my side. The first one, we have seen Banco De Chile losing market share. So how do you see competition? And who you see as the most aggressive competitor? My second question, how do you seeing in expansion grow in 2018? And what will be the assumptions behind in terms of inflation and loan growth? And, finally, how do you see asset quality, particularly the cost of risk? I believe you have done a fantastic job there. But how much room do you have to improve it? And just considering that you will like to entering in middle, low income segment through retail. And actually when do you expect to have your new platform or model to attend this segment? And finally, any guidance that you can provide in any of the lines, I think will be very helpful. Thank you.

Thanks, Ernesto. I think it’s important to emphasize the strategy due to the sustainable and high profitability. It’s important to highlight this, for your question. I think first, continue to penetrate the retail segment is very important for us. We’re also trying to continue during this by using the advanced technologies, which will provide new and improved digital solutions for customers and help us leverage business intelligence continue drawing. We are also very focused on cost control, streamlining processes, which should help maintain a good level of efficiency. And we think that good competitive advantages based on these factors should allow us to continue to start gaining market share in 2018 when we see a pickup improvement in the economy. It’s true that we have seen a deterioration in market share in 2017. But it’s also very important to focus on how we have been growing. We’ve been growing and this is the key segment that we consider to be the most important and the most profitable. If you look at spreads, spreads have been improving at Banco de Chile. If you look at lending interest rates comparative, I don’t think you can say the same for other banks, especially the more middle sized bank, which are the ones that we have seen have been very aggressive. So I think it’s important to emphasize that for 2018, I think we have the competitive advantages and the strategy that we should be able to leverage well and use this intelligence in order to gain market share in all the key segments that we’re looking at. And one of your questions, you also mentioned entering the low, middle income segment. I think it’s important to emphasize that we’re a universal bank. We’ve always been a universal bank and we’ve never decided to…

Great. Thank you very much Pablo. Just in terms of CapEx growth, any assumptions for this year?

CapEx growth, we should expect CapEx growth to be less than inflation, with a slight improvement in efficiency ratio. Always, it’s important to mention that for the efficiency ratio as inflation is 3%. So should have an efficiency ratio of 45% and it should be a slight improvement over this.

Thank you very much, Pablo.

The next question comes from Tito Labarta with Deutsche Bank. Please go ahead.

Hi, good morning. Thanks for the call. I’ll keep to one question so others have a chance to ask others. We recently saw one of your main competitors announce a new product to the middle, lower income segments. I know you just mentioned that you don’t enter and exit segments. But given the improved macro outlook, is this a segment where you may see more opportunity and you may start to maybe increase penetration there? And how does maybe your product offering potentially compare? I know you talked a lot about digital initiatives. Is this something that you’re using to go after this segment? Just wanted to get sense of how you see the growth there and this potentially new competition in that segment? Thank you.

Like mentioned the Universal Bank and we have always been in that segment. But I think the main difference that we have seen as we compare Banco de Chile today about five years ago as a portfolio. And Credit Chile, that’s what we call that segment, has remained relatively the same. How we’ve grown? Definitely we control wholesale customers, employees to grow that segment. We’ve adjusted the model accordingly depending on the cycle that we have found ourselves in. And going forward we think that there should be an opportunity there and we’ll continue to adjust our customers below to continue maintaining our position there. And if the case may be that Chile continues to show improvement for overall continue growing in that environment.

Great. Thanks, Pablo. And do you think with Credit Chile, like that’s the way to go after it? Do see more opportunity as you move towards more digital penetration? Is that also a way to growing the segment?

Well, I would say in every segment today, Chile is a very advanced economy in terms of digital and how people use mobile apps and the Internet. So through digital solutions, that’s great – one of the ways that we’ll be looking at growing in this segment, as with all the other segments in the bank, it just how we feel that the future is evolving for banking. So the brand name is Credit Chile. It’s just within the commercial division of Banco De Chile. But it’s a different subsidiary or a different commercial segment.

Okay. Thank you very much.

Welcome.

The next question comes from Thiago Batista with Itau BBA. Please go ahead. Actually, it looks he just left the Q&A. So I will then go to the next participant, who is Alonso Garcia with Credit Suisse.

Thank you. Good morning, everyone. My question is a follow-up of the previous questions. I wanted to ask you, I mean over the past couple of years, you and also other banks in Chile has been focusing their attention in the mid and higher income segment. So I wanted to ask at this point you are seeing some kind of – or anticipating to acquire soon an overcrowding in the mid and higher income segment, that is together with the better income growth, making you more interested, again, in the consumer finance segment. Thank you.

I would say that we're – like I mentioned, we're an universal bank and we are interested in all segments independent on the cycle. We can grow a little bit more or less in certain segments. So I think over the past year, there has been less demand. And we expect in the future there should be more demand in all segments, including the middle and upper income segment. We are by far the leader in that segment. And in the lower income segment, which we actually also have a very high market share – market position with the information that's publicly available in that segment. So I think both segments, the lower and the upper, or all three lower, middle, upper are very attractive for growth in the future. And it would just – what would be interesting will be how we service these customers, especially the lower income, which has always been very focused on servicing customers with – in the lowest cost of coming necessary.

The next question comes from Neha Agarwala with HSBC. Please go ahead.

Thank you for taking my question. We have seen significant improvement in the cost of risk over the past four, five years. Where do you expect this to stabilize going forward in the medium to long-term? Thank you so much.

I – we took a good level of cost of risk for the portfolio that we have today, which is something like 60% retail, 40% wholesale. It's a level of what I've mentioned, between – around the 1.1% is reasonable. Obviously, if we continue to expand the retail loan book much quicker and Chile continues to grow, GDP per capita continues to grow, you should see Chile as a whole expand presence in the retail segment. There could be changes there, but in the medium term what we can see today, obviously it's closer to that 1.1%.

Thank you, Pablo. If I can ask another question. In terms of NIM expansion with high inflation and slightly higher this year, do you have an estimate of how much NIM expansion you can expect?

NIM expansion? Well, right now we're at a level – we ended the quarter – we just look at the quarter around 4.3% for the year. It was at the level of 4.24%. Probably with the gaps that we have today in the balance sheet with the spreads that we have today, we should be within a level above that 4.3%. So it's around 4.4%, maybe reaching slightly higher, obviously depending on inflation.

Thank you so much.

The next question comes from Sebastian Gallego with CrediCorp Capital. Please go ahead.

Hi, everyone. Thanks for the presentation. I only have one question actually. You mentioned the 2017 digital achievements and how you're working on your strategy. Can you tell us what's the focus or what are the key projects or initiatives in 2018 that we should be looking at? Thank you.

There are many initiatives, difficult to mention about in this call, the most important would be the new CRM system that we're clearly working on, and we've launched various or modules of this system. Today, we have the 360-degree view of customers who customers. We understand the customer. All this product. Everything is on one page. It allows us not to use different systems banks that offers products and services to customers. It gives a more complete view of customer. So customer experience and they contact us through different channel will be much better. What's being launched? Well, what's left to be launched is being able to take on all the products and services through the new CRM and expand this CRM across all the segments. So today it's mainly in the retail segment that uses the CRM. But our subsidiaries, our wholesale segment also use the CRM. We recently launched the new company webpage. We're continually improving the we provide customers. We're really what Banco De Chile doing that's very different in terms of in our digital banking. I would say most banks are doing – what most banks offer is pretty similar with the exception of I would say is quite different from Banco De Chile, which is an allows you to do purchases. You can do purchases in retail establishment. You can do instant transfers between customers. You can. I think that payment system is one of the most important – one very important aspect of our digital mobile platform and. Some more technological way to do purchases than the historical credit cards and cash payment. We're also implementing a new platform for insurance, a new platform for bank. And then business intelligence, we continually improving the use of business intelligence on how we understand the customers following the lifecycle. How we use the information of the customer to provide better customer, so led by – if a customer is using our product less, notice to maintain and improve attrition levels. And recently – recent new IT project is personalized pricing. We have a personalized pricing model. Rather than segment customers by income or which banking segment they operate in, we actually look at many different factors to see a more precise pricing in terms of the actual risk that they have with us. so the prices are much more accurate.

All right. Thank you so much.

You’re welcome.

[Operator Instructions] The next question comes from Gary Fernandes with JP Morgan. Please go ahead.

Thank you, gentlemen. I have a question on your branch strategy. We note that Banco de Chile has been reducing the number of branches. That is always something should be here and it's a multiyear trend. But given the better macro, do you think it's – branches in the short-term. And I am asking you because main competitor has a plan to start – open more branches in the coming five years. So just to have an overview on your strategy for branch. That's the first question. And the second question is about banking law. We know it was to Lower House in January and sent to the Congress. But can you just provide an update on it. Like what is the expected provision time, if you had any visibility on the buffers. And also if you can remainder us the capital impact your base case, we know that there is no capital need for you. But if you can provide a number of view on the potential impact, that would be helpful? Thank you.

Okay, thanks. In terms of the branch strategy obviously, I think the most important aspects for how customers are using banks is more through the digital side. So the digital channels are becoming much more important. How we're looking at managing the branch network is very important. So how we are adjusting the branch network is we've been optimizing the branch network moving customers from if we close the branch to nearby branch we have seen no impact in terms of net promoter score and how customers receive experience the best. We've been doing this adjustment slowly, always keep in mind how this could impact net promoter score. And we don't expect large changes rapidly. I would say there is a good presence in Chile today for Banco de Chile branches. And how we're looking to move forward in the future is continue to operating new types of channels in order to for these customers to operate with us with smart ATMs, reducing the size of branches. Today the branches are very large, somewhere around 600 meters squares. We're looking at reducing the size of those branches to around 200 meters squares. But we don't think that we can make the branches, at least today, more interesting in order to get the customer to come back to the branches. Customers want ease of use and to use digital channels in order to bank with us and focus and trying to make those platforms better where a customers can began, for example, take a product on one channel and finish on another channel. Not all customers are the same and obviously that’s why we need to continue maintaining branches. But I think it's important doing in digital banking for the future. So I'll pass the call to Rodrigo.

Hi, with respect to this fortunately we don’t have more information. What we know is that it was passed to the Lower House. But there are other and new profits in this and other parts of the Congress. But we have to consider that there would be new Congress in terms that in the Lower House, behalf of that. So it's not clear when it finally would be approved. But it's important to highlight here, as Pablo mentioned in the presentation that according to our internal estimate, we won't need more capital in the short-term. But it's very important to analyze from information that with regard with some who further finish in terms of the signing for some who when a bank is depend or not. So I think it's better to analyze new information, the new in terms of the Congress. After that, the new government would take place in March.

This concludes the question-and-answer session. At this time I would like to turn the floor back over to Banco De Chile for any closing remarks.

Thank you for listening to the call and participating. We look forward to speaking to you for next quarter financial results. Thanks.

Thank you. This concludes today's presentation. You may disconnect your lines at this time and have a nice day.