Banco Santander Chile (BSAC) Q4 2025 earnings review
Profitability Surge Defies Loan Contraction
Santander Chile delivered a stellar profitability performance in FY25, with Net Income jumping 22.8% to Ch$1.05 trillion and ROAE hitting 23.5%—significantly above the 20.2% recorded in FY24. The story was driven by margin expansion (NIM +40bps) and operational efficiency (36.0%) rather than volume; total loans actually contracted 0.9% YoY. While the retail franchise remains a powerhouse, the Corporate Investment Banking (CIB) segment dragged, contracting 10.8%. Management's 2026 guidance is optimistic, forecasting a return to loan growth ('mid-single digits') while maintaining ROE above 22%.
🐂 Bull Case
Net Interest Margin expanded to 4.0% in FY25 (up from 3.6%), driven by a sharp reduction in funding costs (4.7% to 3.8%) as the Central Bank cut rates. The bank's liability sensitivity positions it well as rates normalize.
The efficiency ratio improved 300bps to 36.0%, significantly better than peers. Operating expenses grew only 1.8%—well below inflation (3.5%)—validating the 'Project Gravity' cloud migration and branch optimization strategy.
🐻 Bear Case
While overall NPLs were stable at 3.2%, the mortgage portfolio is deteriorating. Mortgage NPLs jumped to 6.3% in Dec 2025 from 5.4% a year prior due to household liquidity strain and a weaker labor market.
Despite the profit beat, the bank is shrinking its book. Total loans fell 0.9% YoY, with Commercial loans down 2.6%. The bank is losing volume leverage, relying entirely on pricing and fees to drive growth.
⚖️ Verdict: 🟢
Bullish. The bank demonstrated exceptional pricing power and cost control, delivering a 23.5% ROE in a shrinking credit environment. If the 2026 guidance for loan growth (mid-single digits) materializes alongside these margins, the earnings power is substantial.
Key Themes
Margin Expansion via Funding Costs
The primary earnings driver was the collapse in funding costs, which fell from 4.7% to 3.8% in FY25. This allowed Net Interest Income to grow 10.9% despite the loan book shrinking. The bank successfully repriced liabilities faster than assets during the rate-cutting cycle.
Fee Income & Getnet Success
Non-interest income remains robust, with Net Fees up 8.9% YoY. The 'Getnet' acquiring business grew fees by 38.8% YoY, and Card fees rose 12.8%. The recurrence ratio (fees covering expenses) hit a record 63.7%, providing a massive buffer against credit volatility.
Mortgage Portfolio Stress
A specific red flag emerged in the mortgage book. While total NPLs are stable, Mortgage NPLs climbed to 6.3% (from 5.4% in Dec 24). Management cited 'deterioration in payment behavior' due to a weak labor market. Given mortgages are 42% of the loan book, this trend requires close monitoring.
Commercial & CIB Weakness
The Corporate Investment Banking (CIB) segment was a significant drag, with total income falling 10.8% YoY. Commercial loans contracted 2.6% YoY. Management attributed this to lower demand for new originations and FX appreciation impacts, but it highlights a struggle to grow the corporate book in the current macro environment.
Digital Efficiency (Project Gravity)
Operating expenses grew only 1.8% YoY, effectively declining in real terms against 3.5% inflation. The completion of 'Project Gravity' (cloud migration) and the shift to Work/Café formats (36% of branches now cashless) has structurally lowered the cost base, pushing the efficiency ratio to an industry-leading 36.0%.
Inflation Exposure (UF) Management
The bank actively reduced its exposure to UF (inflation-indexed) volatility, cutting the UF Gap by 7.7% in Q4. Despite lower inflation variation in 2025 vs 2024, the bank managed to grow NII, proving it can decouple earnings from high inflation—a key concern for investors in previous years.
Other KPIs
Up 2.6% YoY. This segment is the absolute anchor of the bank, generating 70% of total operating income. Despite provisions rising 18.9% in this segment, top-line growth from fees (+10.8%) and margins offset the credit costs.
Deteriorating slightly from 1.29% in FY24. While still manageable, the upward creep reflects the mortgage stress and normalization of consumer credit risk. Guidance for 2026 expects this to moderate to ~1.3%.
Strong capital generation of +50bps YoY. This supports the proposed 60% dividend payout ratio for FY25 earnings. The bank is comfortably above the 9.08% regulatory requirement.
Guidance
Reversing. After a 0.9% contraction in FY25, management pivots to growth in 2026, citing 'demand reactivation driven by the macro environment'.
Stable. Management expects to maintain the high profitability levels achieved in 2025 (23.5%), signaling that the current performance is structural, not a one-off.
Stable. Expecting to hold the 4.0% level achieved in 2025, implying that funding cost benefits have largely played out and asset yields will stabilize.
Accelerating (Improvement). Forecasts an improvement from the 1.39% reported in FY25, implying confidence that the mortgage deterioration will plateau.
Key Questions
Loan Growth Confidence
You are guiding for 'mid-single digit' loan growth in 2026 after a 0.9% contraction in 2025. Given that Commercial loans fell 2.6% this year, what specific macro indicators or pipeline visibility gives you confidence in this reversal?
Mortgage NPL Trajectory
Mortgage NPLs deteriorated significantly to 6.3% from 5.4%. Is this purely a denominator effect from the shrinking loan book, or are you seeing structural stress in the vintage? When do you expect this metric to peak?
CIB Segment Drag
The CIB segment saw income drop 10.8% and NII compress. Is this solely due to FX and lower volatility, or are we losing market share in the corporate segment to competitors with different funding structures?