Banco De Chile Earnings: Strong Net Interest Income and Tame Credit Costs Drive Strong Returns

Narrow-moat-rated Banco de Chile reported solid second-quarter results as the bank benefits from stable credit conditions and lower cost of funds. Net revenue increased 3.1% from last year, though declined slightly sequentially to CLP 770.9 billion. On the other hand, net income fell 2.6% to CLP 323.6 billion. Despite the year-over-year decrease in net income, these results translate to a return on equity of 24.6%, well above the bank’s peers and better than its historical average. As we incorporate these results, we do not plan to materially alter our fair value estimate of $23 per ADR share. We see the shares as roughly fairly valued at the current price.