Good afternoon, and welcome to Banco de Chile's Second Quarter 2025 Results Conference Call. If you need a copy of the financial management review, it is available on the company's website. Today with us, we have Mr. Rodrigo Aravena, Chief Economist and Institutional Relations Officer; Mr. Pablo Mejia, Head of Investor Relations; and Daniel Galarce, Head of Financial Control and Capital. Before we begin, I'd like to remind you that this call is being recorded, and the 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 notes in the company's press release regarding forward-looking statements. I would now like to turn the call over to Mr. Rodrigo Aravena. Please go ahead.

Good afternoon, everyone. Thank you for joining this conference call, where we will present the key results and developments achieved by our bank during the second quarter of this year. Once again, we are proud of Banco de Chile overall performance during this period since our bank has demonstrated its strong position in the local market by delivering solid results across various areas. As of June 2025, we reported a net income of [CLP 654 billion] that represents a year-to-date growth of 2%, resulting in an ROAE of 21.9%. As we will discuss later, these outcomes were driven by strong customer income, improved asset quality, increased loan activity in targeted segments and ongoing efforts in cost control and efficiency. As mentioned in previous calls, these results are particularly meaningful given the ongoing challenges and rising uncertainties in the global macroeconomic landscape. In circumstances like we currently face, solid long-term fundamentals truly standard. In this context, it's worth highlighting the bank's key strengths, including best-in-class asset quality a strong capital base and a robust level of additional provisions. These elements set us apart not only in Chile, but all across the region. Now I'd like to share a brief analysis of the macroeconomic environment. Please refer to Slide #3. The Chilean economy continues to show signs of recovery. As illustrated in the graph on the left, growth has followed an upward trend since the second half of 2024, beginning the fourth quarter with a 4% expansion. In the first quarter of this year, GDP grew by 2.3% year-on-year still above estimated long-term trend of around 2%. Although this represents a slowdown when compared to the previous quarter, it's important to note the improvement in certain components of domestic demand. Such as double good consumption up 10.9% year-on-year investment in machinery and…

Thank you, Rodrigo. Let's review Slide 8, which outlines our strategic framework and aspirations. On the left side of the slide is our strategy, structured around 3 key elements: our purpose, strategic pillars and strategic plan. Our purpose is straightforward to support the development of Chile, its people and its businesses. We achieved this by leveraging our long-standing competitive strength, trust stability and deep relationships across every segment in which we operate. Our strategic pillars define how we operate with a strong focus on efficiency, collaboration and the customer-first mindset. These principles guide both our short- and long-term decision-making, keeping us aligned with innovation and operational excellence. Our business scopes are defined as where we will operate and how we will deliver value, making us more agile, competitive and responsive to a constantly evolving environment and to the needs of our clients. Through this strategic framework, we aim to meet our midterm targets as shown on the right-hand side of the slide. We aim to achieve sustainable long-term industry-leading profitability. We are also targeting market leadership in both commercial and consumer loans in the high Net Promoter Score, which reflects the strength of our customer relationships over time. Additionally, we aspire to rank among the top 3 in corporate reputation in Chile. And on the cost front, we are committed to maintaining a cost-to-income ratio below 42%, reinforcing our focus on operational efficiency and disciplined execution to the development of digital capabilities and the continuous improvement in technological infrastructure. To summarize, our strategy is centered in long-term sustainability with management incentives aligned with these strategic priorities, ensuring we continue to create value for all of our stakeholders. Please move to Slide 9, where we will go over our key business achievements. During the first half of this year, we made…

[Operator Instructions]. So our first question is from Ernesto Gabilondo from Bank of America. Ernesto María Gabilondo Márquez: Thanks for the opportunity to take questions. My first question will be on the political landscape. I will appreciate, Rodrigo, if you can give us your two cents on the presidential costs and potential regulation related to taxes, interchange rate and mortgage and there could be potential impacts for Banco de Chile. My second question will be on NIMs. As you have explained in your presentation for every change of 1% in interest rates, NIM has an impact of around CLP 9 billion. But just wondering, looking beyond this year, how do you see the overnight rate next year? And also, how should we think about NIM next year? And for my last question is, as you said in terms of the ROE you're expected to be around 21% this year. But I just wanted to double check how are you seeing the ROE for the medium term and what will be the minimum common equity Tier 1 ratio you would like to have under that scenario?

Thank you very much for your question. This is Rodrigo Aravena. Well, on the political scenario and macro concerns, we have different things to consider First of all, I think that it's very important to be aware that according to different surveys, it's very likely that there will be a second round in Chile, which will be by the end of this year, since there is not any candidate with more than 50% of votes. And it is very important to remember that in Chile, when there is any candidate with more than 50% of votes. There is a second round, which is scheduled for December of this year. Even though it's not clear it's going to compete in the runoff. There are some topics where there is a broad consensus in Chile that are very important to put on the table in terms of the discussion of the value policy in Chile for the next presidential term. One of them is related with the dynamic growth, so we have seen a growing concern for different candidates in terms of the need to improve the growth in the future. It's very important to remember that in Chile, the average economic growth since 2014 until now has been only 2% which is below the average global economic growth. So that's why we've seen some proposals related with lower corporate tax rates. We've seen some different proposals in order to improve, for example, to reduce the [bureaucracy] different to improve as well by system related with environmental licenses and permit. So what we've seen in general is that there is a consensus in terms to address the different challenges related to growth, employment the fiscal debt as well. And one of the measures that is getting more popular in Chile is the…

So in terms of your second question, in terms of net interest margins, what we have today is a level of around 4.8% for net interest margin, obviously, depending on how the inflation level is in the next couple of months. Will depend on the evolution of that figure for the rest of the year and especially for the third quarter. Because as you know, we had negative inflation a couple of months ago. So that would be an important driver to see how the inflation will be for the rest of this year, where we're expecting a level of inflation slightly above in terms of the U.S. variation above the long-term level target of the Central Bank. And we expect that should continue to move more aligned with the Central Bank in the medium term. So we have a little bit higher levels of net interest margin today because of about 0.5% more or less, generates, as you mentioned, about CLP 40 billion more in net interest income -- that's equal to around 10 basis points of NIM. And in the medium term, we think a level of NIM, a reasonable level is somewhere around 4.5% to 4.7% as we've said in prior calls. And obviously, about depends on different factors. It depends on the mix. If we see a recovery in the loan mix, how this recovers, which segments our target segments is consumer loans, SME loans, but we also want to be leaders in commercial corporate banking. So the evolution will depend on the mix inflation as we just spoke, as well as yield curves. So how the interest rates move in the future today. We're in a much better position than prior to the pandemic, but that will depend on these factors on how the evolution…

This is Daniel Galarce. As you probably know, our CET1 ratio is 4% or 5% above regulatory limits today. And this is basically due to the subdued economic growth, of course, and also the excellent financial result we have achieved this year. By the end of the year, we also expect to maintain the current levels of capital adequacy ratios by the end of 2025. Certainly, loan growth has been below expectations. And accordingly, it is probably to remain like that over the rest of the year. But as we have said in the past, we expect to use our existing capital buffers, in order to support future loan growth in the coming years as long as the economy gains some momentum, of course. Also, our current capital position should allow us to not only comply with capital requirements associated with Pillar 1, but also any requirement related to Pillar 2, if any. So as long as the economy reactivates and we need more capital in order to operate, of course, in the normal course of business, we expect to always maintain a favorable gap of at least 1% in terms of capital adequacy when compared to regulatory limits, okay. At least 1% of course. And this obviously depends on the evolution of loan growth and also financial results. Overall. Also, we -- excuse me. Ernesto María Gabilondo Márquez: No, yes, I agree, and thank you very much. I interrupt you, sorry. So I just had a follow-up a couple of follow-ups. One is on -- if you can give us also in comment related to potential regulatory related to taxes, the interchange rate, the mortgages of [CDI]. Any update on that will be helpful. And the other one is a follow-up on your ROE over the medium term. In the past, you have said it could be around 18%. I just want to double check if it's no longer 18%, it could be more at the 20%. I just also wanted to have that.

Okay. This is Rodrigo Aravena. In terms of the regulations, what we've seen so far is that most of the discussion in Chile is more related with the macro policies related with corporate tax rate related with some adjustments in fiscal spending, something like that. But in terms of any material regulation affecting the banking industry and more [idiosyncratic] regulation, we don't have any different assets to pilot here today. Most of the discussion is related with the macro analysis the macroeconomic in Chile, but again, it's going to depend on who's going to be present in Chile and the competition of telecom as well. In terms of ROE.

As I mentioned, the aspiration is to be the most profitable bank in terms of profitability on return on average capital and it really depends when asking that question in what scenario and what scenario in place and what scenario of rates yield curves. So if we look today, if we look at how we are today or over the past few years, we've been a very profitable bank in the industry, and that's been with a very high level of capital. If we look at the regulatory capital or just our total capital, we have a very high level and we have room to continue growing. So for the future, we think that we should be -- we have all the tools to be the most probable, but it really depends on the scenario. So when comparing 1 bank to another. It's challenging to give an exact number because it depends on which scenario because it depends on the cycle. So in this cycle, bank that has over 20% in a cycle where interest rates were much lower, like in the past, it would be a different scenario. But today, the banking sector is a profitable banking sector and we think we should be the leaders amongst that.

So let me just to reinforce one idea. So the main difference in terms of the evolution of ROE in the future, is more related with the macro factors rather than a specific aspect of the bank. So our strategy is very clear. We have been mentioning different presentation today, which are our main resources, we've been discussing that. But the main source of uncertainty in terms of the long-term ROE is related to the final level of the interest rate the final level of inflation in Chile, the final elasticity in terms of loans compared to the GDP. So my point here is that the main service of certain doubts are related with macro factors, which will affect all the banks in Chile, not only for us, but in our case, the strategy is very clear our differentiating factors as well. So that's why, as Pablo said, we are confident in terms of our fundamentals to be the leader in stability.

Our next question is from Lindsay Shima from Goldman Sachs.

I was wondering if you could expand on what cost control initiatives particularly have driven the lower-than-expected expense growth. And then looking forward, should we start to see expenses accelerate towards inflation levels? And then if so, what would that time line look like?

So if we look at the evolution of Banco de Chile, I think we can see some very important changes over the last let's say, 10, 15 years, where at one point, we had efficiency levels. Worse than the average of the industry. And today, we're amongst the leaders. One of the things that we implement there's a lot of cost controls across the bank improved incremental changes across different levels, which is using our resources better. One of the main things that we've seen recently is a reduction on the branch network. Before the pandemic in 2018, we had 390 branches. Today, we have 224 branches. And also the increased use of digital tools, digitally enhancing Banco de Chile in terms of the front office and the back office has allowed us to be a much more efficient bank to grow with less operational expenses. And if we look at the very short term, what we've been doing is we've reviewed our loyalty programs in line with the adjustments of the acquiring reduction fees for the credit card business. We've optimized the areas of the bank in terms of, for example, telemarketing expenses. We've shifted marketing efforts to more digital channels, which we've seen an improvement in terms of costs as well over the last period. This whole initiative started very easily where you could find a lot of easy areas to reduce expenses. But today, it's becoming a little bit more it taking a little bit longer in terms to find the significant improvements quickly as we did in the past. We have a branch network that today is more streamlined. We have implemented a lot of digital solutions. And however, we think that we can continue still to be -- have very good efficiency indicators despite the high operating income that we've had, thanks to inflation and other onetime effects. So in the long term, we think that we should have a efficiency ratio better than 42%. That's our aspiration. And I think with that explains, I love the question. But there is a second part to your question, which I didn't catch.

It was just how long should it take for us to see the efficiency ratio get towards that 42%? And when we should start to see expenses growing sort of inflation?

Well, the aspiration is less than 42%. So we're well below that. Probably what I would say is this year, we have 38% expected efficiency ratio in the guidance. The aspiration is to be below 42%. It's something that we've, over the last few years, has been well below, so not necessarily returning to 42%. It's something that's reviewed on an annual basis. No change depending on the evolution of the bank, especially, today, there's so many changes over the past, let's say, 5 years with all the digital initiatives that the bank can operate much more efficiently. So it's important to take that into consideration. So the target isn't to increase expenses. We'll continue to look for new areas and where we can improve, and we're doing that. But it's a lot of incremental changes. Today, we've implemented a lot of changes in terms of even purchasing areas where how we purchase different products and services from other companies. We've implemented a lot of changes, which has helped improve the indicator, but not necessarily we're planning to move to 42%. We'll continue looking to improve and be better.

Our next question is from Yuri Fernandes from JPMorgan.

Thank you Pablo, and congrats on another very good quarter. I have a few questions as well. Maybe I would like to start with your loan growth outlook. I know you have a guidance to grow slightly above the industry and for the industry, you're talking about 4%. This is below the nominal GDP, right? You just revised the GDP up to 2.3% inflation should be, I don't know, 3%, 4%. So industry is still growing below nominal GDP in Chile and maybe you grow slightly above the industry. My question is, why not higher petite? Like when should we start to see better loan growth here for you? Because my concern is that once inflation normalizes and you are growing your loans at a very limited pace like 4%, I don't know where the revenue will come from? And then I have my second question regarding fees, like fees, they have been saving the day. These are growing some 8% year-over- year. This is way above more growth. This is above the number of clients' growth. So I would like to explore a little bit more the fee line, how -- what is the outlook for the fees, like you believe this can continue to grow above the loan growth above the number of clients? I think this year, it has been a lot driven by our mutual funds, right? I think you put this in the release and even in the mutual funds, we see fees growing faster than AUM. So maybe, I don't know, performance fee is a little bit of price regarding your mutual funds. But also checking accounts, right, checking accounts have been growing a lot, like 11%. It is also above the number of clients. So I don't know, I think you see there is a component of pricing in most of those things. And I don't know how sustainable those things are. So if you can help me to understand 1 loan growth because I think this is the model of many of the revenue lines, right? And 2 fees like how fees can evolve going forward because Chile have been very good and congrats on that. But my concern is that how sustainable this good pace is? And if I may, just a follow-up on fees regarding the costs. We saw an increase on your credit cards loyalty fees if you can explain a little bit what were those campaigns, what is your credit card strategy? I think this is an entire other topic, but I would love to hear your view on the credit card operation as well.

Hi, Yuri, this is Rodrigo Aravena. Thank you very much for your question. I'm going to take the first question. In terms of the loan growth, what we have today and what we also believe is that there is like a decoupling between the loan cycle compared to the GDP growth. In fact, if you analyze, for example, the loans to GDP rate in Chile, that number today is around 76%, 77% in terms of the nominal loans compared to the nominal GDP in pesos. Which is a number that is well below the numbers that we used to have in the past. It's worth to mention, for example, that because the pandemic, the number was higher than 80%. During the pandemic, the number was even close to 90%. But we acknowledge the season of temporary factors that increased that temporarily that ratio between low GDP. But all in all, we think that 76%, 77% is below the numbers consistent with the fundamentals, but there are some explanation on that. When we analyze the chart that we showed in the presentation, we can see that there is a very important delay in terms of consumer loans which are nearly 20% in real terms below the level that we have by 2019, but there are some explanations behind that, for example, the very high levels of interest rate that we have until the previous year and also the excess of liquidity that negatively affected the demand for consumer loans. And also, we have an important delay for commercial loans, bad explanation of that placed with the very weak investment growth that we've seen during the last year. It is also important to keep in mind that despite the positive economic growth that we had last year, the main driver of that growth was related with exports rather than domestic demand. In that aspect, we have to remember that the key driver for loans is related with the domestic demand. And in this area, we are more optimistic for the future since today, we have a better leading indicator for investment. A similar story we have for [private] consumption. So basically, this year, we are expecting that at the better domestic demand, which at least partially offset the weakness in total exports. So that's why we're expecting a gradual recovery in loans for the future. What is reasonable to expect in the long term? It's reasonable to see elasticity of loans to GDP of a number of around 1.5x like that, and sometimes it would be higher in more negative times, it could be a bit lower, but the elasticity that we have today is not sustainable for the long term. And so basically, what we have today is an important delay a decoupling, but in the future, it's reasonable to expect a recovery in both commercial loans and consumer loans, which are our main targets.

In terms of fees, what we've always mentioned is that fees should grow in the mid- to high-single digits, which is completely in line with customer growth plus low inflation. Customers have been growing between around the 5% to 7% on over the last decade. And that continues to be the case. If we look at current accounts, we continue to grow strongly. And one of the reasons why we're very optimistic about the fund account, was precisely to expand our customer base so that we could have new customers entering the bank that we could cross-sell to other products and services. In fact, 30% of the new current accounts come from fund accounts, fund existing accounts. So this is an important area where we've seen improvements. So these customers are also -- we're offering credit cards, the customers enter Banco de Chile, they received, obviously, a current account package. And these also drive fees. So in this quarter or this first half of the year, the fees have been driven through by AUM growth because customers are searching for higher profitability from their investments were coming from a high inflationary period. So their investments in time deposits, for example, we're earning at 1 point around 11%. And today, the overnight rate is around the 5% level. So things have changed and we've seen a change in terms of how customers are investing their liquidity, and that's moved into the mutual fund business, and we've made new products to also enhance that offering. So moving forward, what we see is a customer base that should continue to grow and continue to be driven in part by new fund customers moving into Banco de Chile and as well as cross-selling across the bank. So working together with the subsidiaries and Banco de Chile to cross-sell to the customers in the subsidiaries in Banco de Chile and Banco de Chile and our subsidiaries. So the 8% growth that we've seen year-to-date is reasonable in terms of the level of customer growth, what we've been doing in terms of cross-selling, and it's important to remember that, these are charged based in U.S. So inflation plays a role as well. So mid- to high single-digit mix complete sense.

If I may, just a follow-up on fees because it is one of your strategies. And I think part of the competence you have is that you always create like new avenues even whenever we don't see loan growth, and I think this is part of your answer. Just on the acquirer on Banchile Pagos like the Pagos. I think it's the target for the year-end. Is there any update on that? Like any KPI you can share like any goals you have? I think like I read an interview, and given you are entering the game a little bit late, maybe you were less positive, but maybe this can be good for fees as well. So if you can comment on Pagos. So like Banchile Pagos, would be interesting.

So yes, so Banchile Pagos, it's an important initiative that we're planning to launch in the last quarter of this year. This strengthens our position as a full-service functional institution to all of our customers. So obviously, now we can give them a complete suite of products and services to these business customers. It's where it focuses SMEs and middle market companies, where we have a very strong position. So it's an area that we can cross-sell, give this value-added products to these customers with Banco de Chile infrastructure. So this is very important for us. So based -- if you look at the size of our SME book, we have about 15%, a little bit less than 15%. Total loans come from SMEs. There's 150,000 customers there. There's a huge growth potential that we have for Banchile Pagos as well. KPIs, we don't have anything to share today. But we don't think that we've entered the market late, we've been waiting to see a clear understanding of what the risks and changes, regulatory changes that were occurring would happen and how we could implement an acquiring business ourselves. So we think that similar to the fund account, which we proved, which was also considered that we are entering late, we've proved very successful. And today, we have -- we have almost 2 million customers from FAN, and it's one of the most important drivers of current accounts growth. So we're confident with this new acquiring business.

[Judy] sorry, just to clarify and reinforce the idea despite the decoupling that we have this year, in terms of loan growth compared to [GDP] growth, we expect a normalization in the future. So if we assume, I don't know, elasticity of 1.5x, for example, of loans compared to GDP. It's reasonable to expect that if the economy grew, for example, a number between 2% and 2.5% real terms and inflation rate between 3% and 3.5%. It's reasonably expect in that scenario. Loan growth in nominal terms of high single digits. Just to be clear, what we expect for the future.

Our next question is from Daniel Mora Ardila from CrediCorp.

Thank you for the opportunity to ask questions. I have just 1 question regarding loan growth. considering that we are in a challenging scenario for loan dynamics. I would like to understand what is the short-term strategy to grow above the industry level, what segments or products are you planning to grow? And also given the recovery that we are expecting in the future, do you plan to change the longer strategy? Or it will be maintained as the same as we should see in the short term. Thank you so much.

Pablo here. In terms of loan growth, what we're expecting, what our focus is we're focused on high potential segments. So those high potential segments is SMEs consumer and consumer lending. And in terms of SMEs, we're targeting businesses with obviously scalable models, strong credit profile. This is a segment that, as I mentioned earlier, we have just under 15% of the total loan book is dedicated to the segment. We have very high-quality customers here, a customer base that we're interested to continue growing. We've worked a lot with these customers. We hold a variety of conferences. We have very strong relationships in Banchile Pagos is another tool that we'll be offering in the fourth quarter for these customers, which will continue strengthening the relationship. So this is an area that historically has been less penetrated in Chile. It became a little bit more penetrated during the pandemic. But we still consider it to be there one of the areas that will have the fastest level of growth in the future. Today, the demand is a little bit slower, but as the economy improved, we should expect an improvement in this segment together with the corporate segment. In consumer lending, we're focused -- we're a bank that's focused in the more affluent, the more operating income and middle income segments. So we're very focused on the type of services -- services that we offer these customers, how we're offering and we're using a lot of digitalization as well in order to grow consumer loans across the board, but we're more focused in the upper and middle income segments. So what we've seen today is some banks gaining a little bit of market share, but they're focused on a little bit different segments than we are. And we've been bringing out new innovative products, which have been driving these client acquisitions and making new cross-sell opportunities. If we look at a little over the digital initiatives that we've done in order to -- because obviously, in this segment, it's important to be a bank that offers very high-quality service across all channels. So today, we're a bank has implemented a lot of front office digital solutions. Most of the transactions are being done online. For example, over 90% time deposits as well is very high, over 80%. Even mortgage loan applications, we have a very high level of 50%. So we're a much more digital bank than we were 10 years ago, obviously. So this is also helping to grow this segment in consumer lending. And obviously, as the economy improves, we should expect to see an improvement in the multinationals and large corporations in Chile, but that's has had very little demand due to the economic and political situations that we've had over the past 5 years.

Perfect. Considering would you expect that this change in the loan mix to be significant and offset the normalization of inflation and also the normalization of interest rates. On margins, if we see that we are planning to grow in SMEs and consumer, I'm wondering if we could see that NIM could be maintained around 4.7%, 4.8% even with the normalization of inflation and interest rates.

Remember that this year, we're expecting only inflation of 3.4% in terms of variation of the U.S. So that 0.4% or 0.5% above the level of the long-term target. It only represents around 10 basis points. So our expectations is that net interest margin should be around the levels that we have today, maybe slightly less than 4.8% with around 4.5% to 4.7% is reasonable, depending on inflation. And it also depends on -- loan mix is very important. So today, what we've been seeing is a lot of growth in the industry and thus in mortgage loans, which has lower net interest margins. And what's happened over the last 15 years is the mortgage loan portfolio grew significantly and that brought down significantly together with other market factors, net interest margins to what we saw prior to the pandemic. And today, thanks to market factors, we have these higher levels of net interest margins. But the rates in terms of interest rates, we think that it will probably remain higher for longer. Maybe Rodrigo can mention about the long-term interest rates for overnight rate that we expect in the long term, medium term.

So basically, the main question that we have today is, okay, what's going to be the main parameters in the long term. Today with the information that we have today in the next -- during the next year, we're going to have an interest rate above the levels that we used to see, for example, for before pandemic, similar economic growth. But at the end of the day, we have a different mix trends that we have to evaluate. So that's why we have mentioned that inflation probably will be lower in the future, but we don't have an important gap in inflation today compared to will have in the future interest rates, probably the terminal rate will be around 4%. Today, the rate is 4.75% where -- but on the other hand, we're expecting a recovery in loan growth. So that's why this opposite trends will likely be that the result of that mix trend will be a similar level of stable NIM as Pablo said before.

Our next question is from Neha Agarwala from HSBC.

Congrats on the results, and thank you for the very clear detailed answers through the call. Just quickly [Audio Gap].

It looks like Neha dropped. Perhaps we can take her question once she dials back. Our next question is from Andres Soto from Santander. Please go ahead.

Most of my questions have been already addressed, but I still have a question regarding dividends and capital position. Previously, on this call, you mentioned that you target for core equity Tier 1 was to be 100 basis points above the minimum regulatory requirement or at least 100 basis points and you are way, way, way above that level at this point. And that, in addition to the additional reserves you have in your balance sheet that is as you mentioned, CLP 600 million. So I would like to understand your thoughts around the possibility of an extraordinary dividend and what will need to happen for that to be considered as a potential for investors.

Andres, this is Daniel Galarce. Well, extra dividend or a payout ratio higher than 60%. That is our long-term view with respect to dividends would be only possible under some specific circumstances like we have had in the recent years, is only possible under consistently lower-than-expected growth and also higher than normal net income. It's also important to note that at least we will always retain the inflation effect on equity or capital every year. So if economic activity and private investment in particular, remains subdued in the midterm and our financial performance keeps strong. We cannot rule out to temporarily decouple from our midterm view in terms of dividend distribution, as we have done in the recent years. And definitely, the -- during 2025, our results have continued to consistently with our expectations and loan growth also remains, remains tempered and subdued. However, any change from this baseline scenario, in terms of dividend payout is something that needs to be determined by our shareholders every year.

Absolutely, Daniel. And regarding the additional reserves that you guys have in the balance sheet. It's much higher than any other bank in Chile and despite having much better asset quality indicators. What are your thoughts around that position is going to be released gradually and cost of risk pressure? Or is that a potential source of dividends for shareholders.

The idea -- this is Pablo speaking. The idea behind the additional provisions is to use in negative cycles. We did release them earlier this year for the change in models for the consumer loan book. Looking forward, obviously, the Board of Directors makes these decisions and analyzes based on circumstances that we're seeing. So what we've mentioned in the past is if you don't need these additional provisions, a portion of these additional provisions could be reversed and paid out, but there's no clear time regarding that. Today, there's still a lot of uncertainties in terms of economical global macro scenarios, geopolitical. So today we don't have any new information but it's something that's taken into consideration every year. So releasing these provisions slowly, it hasn't been or a payout of these additional provisions hasn't been discussed, but it's something that we have to continue looking forward.

Thank you. We'll get back to Neha Agarwala from HSBC.

Congratulations on the results and thank you for the detailed answers through the call. Just a quick one. What kind of cadence should we expect in the coming 2 quarters for this year? Any big moves that we should be mindful of to create opportunity. And second, just on the upcoming election, any uncertainty that you see depending upon which candidate is finally goes through the elections and when the presidential election. Any kind of risk that you see from the upcoming elections?

I think one of the things to take into consideration is how the evolution of inflation will move from here on. The last figure that we had was a negative level of inflation. So It will be interesting to see the next print, which comes out in a couple of days to see how that will affect the third quarter results. This will be very important. So depending on that, we'll see how our bottom line will be affected for us in the industry in terms of interest income from inflation. I think that's the most relevant area other than that what we're expecting in line with what we mentioned in the guidance is a return on average capital of around 21% and net interest margin that will drop a little bit because there's an expectation that the inflation number will drop the third quarter figure, a little in terms of inflation for that quarter, NIM of 4.7%, efficiency 38% and the cost of risk, which we've reduced to 1%, around 1%. And this is because of the very good performance that we've had in the first half of the year. And we're expecting that this trend should more or less stay similar. We don't see any large changes in the immediate term in terms of risk. So other than the U.S. variations is what we've taken into consideration for our guidance for this quarter and Rodrigo will answer the other part.

Sure. Thanks for the question Neha. We know that the political environment is getting more and more important everywhere. In our case, I'm saying that it's critical to be aware that the political system in Chile is based in important counterweights between the government, the Congress, also important to keep in mind that any important performance in Chile has to be approved by the Congress in both cameras and the Congress is valid, for example, for the case of Chinese taxes, changes in the constitution, et cetera. So that's why I would say that it will be very important to analyze the results not only of presidential election, but also in terms of the composition of the Congress given the very important role that the Congress has in Chile. So far, what we've seen is that there is a broad consensus in the country in the sense that it's very important to address the important challenge is in economic growth, especially today, given the growing uncertainty that we have in the rest of the world. Also important to address different challenges on the labor market in terms of reviews the bureaucracy -- the [indiscernible] et cetera. So far, we haven't seen any discussion related to structural changes in the economy but again, the main uncertainty that we have today for the countries related with the global economy, related with the evolution of the copper price, the evolution of growth in our main 3 partners, which are China and the U.S. And locally, I would say that it's not only a matter of who's going to be present in Chile, but also the composition of the commerce.

Our next question is from Ewald Stark from BICE Inversiones.

Well, your current basic capital ratio is really high, especially compared with what's required by the regulator. And this is basically a result of almost 0 loan growth in the past couple of years. So my question is, what's your targeted basic capital ratio once loan growth reactivates or at least, why do you feel come first of all?

This is Daniel Galarce. Well, basically, as long as the economy reactivates in the future, we expect to use our capital for doing business, of course. And accordingly, we aim to always maintain a favorable gap of at least 1% of our regulatory limit for all of our capital adequacy ratio. This is basically what we are seeing in the future, but there is not a specific time frame for that, of course.

Okay. But Banco de Chile traditionally has -- do you hear me?

Yes, we can hear you.

Banco de Chile traditionally had as always complex capital ratios and other requirements well above what the meaning required ratio. So do you have like any guidance about where basic capital like be in the next couple of years?

Well, in the next couple of years, it will depend on the economic growth and also loan growth, of course, and how we can use our capital for doing business. But basically, if everything works as we expect, this is the economy reactivates and so on, the minimum amount or the minimum rate of capital that we expect to comply with is to be at least 1% over total regulatory limits.

Okay. Perfect. Thank you.

Thank you very much. We would like to thank everyone for the participation today. I will now hand it back to the Banco de Chile team for the closing remarks.

Well, thanks for listening to the call today, and we look forward to discussing our third quarter results with you in the future. Have a good day.

That concludes the call. Thank you, and have a nice day.