Fitch Publishes Chilean Banks Performance Dashboard

Fitch Ratings has published a dashboard report for the Chilean banking sector. 

Chilean banks 1Q15 earnings have been mildly affected by lower inflation and the economic slowdown. However, asset quality and capital levels are holding up.

Banks have ample assets denominated in inflation-linked units, which makes interest margins highly correlated to inflation trends. The inflation rate in 1Q15 was 0% (compared with 1.3% in 1Q14). Therefore, the system's net interest margin (NIM) contracted materially in 1Q15, by roughly 70 bps below the level of fiscal 2014. 

Fitch Ratings expects that these factors could partially revert in 2Q15 and the second half of 2015, since annual inflation is projected at 3%, according to market consensus. 

The decline in interest income was offset by growing non-interest revenues, mostly fees accrued by subsidiaries operating in the capital markets business, while also aided by stable provisions. 

However, Fitch expects that operating profitability will remain constrained by lower inflation and the contribution of sight deposits due to the decrease in short-term interest rates, in addition to the effects of slower loan growth and higher corporate taxes.

The 'Chilean Banking Sector - 1Q15 Performance' is available on Fitch's website at www.fitchratings.com.