Exhibit 99.1
ITAU CORPBANCA AND SUBSIDIARIES
Interim consolidated financial statements
September 30, 2019
(A free translation from the original in Spanish)
CONTENTS
Independent Auditors Report | ||||
Interim consolidated statement of financial position | ||||
Interim consolidated statement of income | ||||
Interim consolidated statement of comprehensive income | ||||
Interim consolidated statement of changes in equity | ||||
Interim consolidated statement of cash flows | ||||
Notes to the interim consolidated financial statements |
$ | - | Chilean pesos | ||
MCh$ | - | Million Chilean pesos | ||
US$ | - | United States dollars | ||
ThUS$ | - | Thousands United States dollars | ||
MUS$ | - | Million United States dollars | ||
COP$ | - | Colombian pesos | ||
MCOP$ | - | Millions Colombian pesos | ||
UF | - | The Unidad de Fomento is a Chilean government inflation- indexed, peso denominated monetary unit set daily in advance on the basis of the previous month’s inflation rate |
INDEPENDENT AUDITOR’S REPORT
(A free translation from the original in Spanish)
Santiago, October 28, 2019
To the Shareholders and Directors of
Itaú Corpbanca and subsidiaries
We have reviewed the accompanying interim consolidated statement of financial position of Itaú Corpbanca and subsidiaries as of September 30, 2019, the interim consolidated statements of income and of other comprehensive income for the three-month and nine-month periods ended September 30, 2019 and 2018, and the related interim consolidated statements of cash flows and of changes in equity for the nine-month periods then ended, and the related notes to the interim consolidated financial statements.
Management’s Responsibility for the Interim Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the interim consolidated financial statements in accordance with accounting standards and instructions issued by the Commission for the Financial Market (former Superintendence of Banks and Financial Institutions). This responsibility includes the design, implementation, and maintenance of internal control sufficient to provide a reasonable basis for the preparation and fair presentation of the interim consolidated financial statements in accordance with the applicable framework for preparation and presentation of financial information.
Auditor’s Responsibility
Our responsibility is to conduct our review in accordance with auditing standards generally accepted in Chile applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. The scope of a review, is substantially less than an audit conducted in accordance with auditing standards generally accepted in Chile, the objective of which is the expression of an opinion regarding the financial information. Accordingly, we do not express such an opinion.
Conclusion
Based on our review, we are not aware of any material modifications that should be made to the interim consolidated financial statements, mentioned in the first paragraph, to be in accordance with accounting standards and instructions issued by the Commission for the Financial Market (former Superintendence of Banks and Financial Institutions).
PwC Chile, Av. Andrés Bello 2711 - piso 5, Las Condes – Santiago, Chile RUT: 81.513.400-1 | Teléfono: (562) 2940 0000 | www.pwc.cl |
Santiago, October 28, 2019
Itaú Corpbanca and subsidiaries 2
Other Matter – Consolidated statement of financial position as of December 31, 2018
On February 26, 2019 we expressed an unmodified audit opinion on the consolidated financial statements as of December 31, 2018 and 2017 of Itaú Corpbanca and its subsidiaries, which comprise of the consolidated statement of financial position as of December 31, 2018 set forth in the accompanying interim consolidated financial statements and the notes thereto.
Digitally signed by Luis Fernando Orihuela Bertin |
Content | Page | |||
Interim Consolidated Statements of Financial Position | 2 | |||
Interim Consolidated Statements of Income for the period | 3 | |||
Interim Consolidated Statements of Other Comprehensive Income for the period | 4 | |||
Interim Consolidated Statements of Changes in Equity for the period | 5 | |||
Interim Consolidated Statements of Cash Flows for the period | 6 | |||
Notes to the Interim Consolidated Financial Statements | 7 |
$ | = | Amounts expressed in Chilean pesos | ||
MCh$ | = | Amounts expressed in millions of Chilean pesos | ||
US$ | = | Amounts expressed in US dollars | ||
ThUS$ | = | Amounts expressed in thousands of US dollars | ||
MUS$ | = | Amounts expressed in millions of US dollars | ||
COP$ | = | Amounts expressed in Colombian pesos | ||
MCOP$ | = | Amounts expressed in millions of Colombian pesos | ||
UF | = | Amounts expressed in Unidades de Fomento (a Chilean inflation-indexed, peso-denominated monetary unit that is set daily based on changes in the Chilean Consumer Price Index) |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements – September 30, 2019 |
1 |
Itaú Corpbanca and subsidiaries
Interim Consolidated Statements of Financial Position
(In millions of Chilean pesos - MCh$)
Notes | As of September 30, 2019 | As of December 31, 2018 | ||||||||||
MCh$ | MCh$ | |||||||||||
ASSETS | ||||||||||||
Cash and deposits in banks | 5 | 828,517 | 987,680 | |||||||||
Cash items in process of collection | 5 | 600,402 | 318,658 | |||||||||
Trading investments | 6 | 219,179 | 86,938 | |||||||||
Investments under resale agreements | 7 | 168,945 | 109,467 | |||||||||
Financial derivative contracts | 8 | 3,208,718 | 1,368,957 | |||||||||
Interbank loans, net | 9 | 109,516 | 341,244 | |||||||||
Loans and accounts receivable from customers, net | 10 | 21,825,974 | 20,833,935 | |||||||||
Available for sale investments | 11 | 2,592,082 | 2,650,776 | |||||||||
Held to maturity investments | 11 | 150,726 | 198,910 | |||||||||
Investments in companies | 12 | 9,689 | 10,555 | |||||||||
Intangibles | 13 | 1,584,075 | 1,613,807 | |||||||||
Fixed assets | 14 | 55,586 | 95,564 | |||||||||
Right of use asset under lease agreements | 15 | 205,401 | — | |||||||||
Current taxes | 16 | 75,583 | 123,129 | |||||||||
Deferred taxes | 16 | 177,563 | 154,599 | |||||||||
Other assets | 17 | 664,845 | 561,435 | |||||||||
TOTAL ASSETS | 32,476,801 | 29,455,654 | ||||||||||
LIABILITIES | ||||||||||||
Deposits and other demand liabilities | 18 | 4,379,085 | 4,300,475 | |||||||||
Cash in process of being cleared | 5 | 542,067 | 247,165 | |||||||||
Obligations under repurchase agreements | 7 | 390,488 | 1,015,614 | |||||||||
Time deposits and other time liabilities | 18 | 11,030,415 | 10,121,111 | |||||||||
Financial derivative contracts | 8 | 2,869,865 | 1,112,806 | |||||||||
Interbank borrowings | 19 | 2,432,249 | 2,327,723 | |||||||||
Debt instruments issued | 20 | 6,282,910 | 6,010,124 | |||||||||
Other financial liabilities | 20 | 14,057 | 12,400 | |||||||||
Lease contracts liabilities | 15 | 171,640 | — | |||||||||
Current taxes | 16 | 8 | 1,191 | |||||||||
Deferred taxes | 16 | 274 | 471 | |||||||||
Provisions | 21 | 196,844 | 237,170 | |||||||||
Other liabilities | 22 | 512,695 | 521,792 | |||||||||
TOTAL LIABILITIES | 28,822,597 | 25,908,042 | ||||||||||
EQUITY | ||||||||||||
Attributable to equity holders of the Bank | ||||||||||||
Capital | 24 | 1,862,826 | 1,862,826 | |||||||||
Reserves | 24 | 1,290,131 | 1,290,131 | |||||||||
Valuation accounts | 24 | 35,701 | 15,232 | |||||||||
Retained earnings | 238,456 | 156,342 | ||||||||||
Retained earnings from prior years | 24 | 156,342 | 35,909 | |||||||||
Net income for the period | 24 | 117,306 | 172,047 | |||||||||
Less: Provision for mandatory dividends | 24 | (35,192) | (51,614) | |||||||||
Total equity attributable to equity holders of the Bank | 3,427,114 | 3,324,531 | ||||||||||
Non-controlling interest | 24 | 227,090 | 223,081 | |||||||||
TOTAL EQUITY | 3,654,204 | 3,547,612 | ||||||||||
TOTAL LIABILITIES AND EQUITY | 32,476,801 | 29,455,654 |
The explanatory notes are an integral part of these Interim Consolidated Financial Statements.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements – September 30, 2019 |
2 |
Itaú Corpbanca and subsidiaries
Interim Consolidated Statements of Income for the period
(In millions of Chilean pesos - MCh$)
For the three month periods ended September 30, | For the nine month periods ended September 30, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||
Interest income | 25 | 418,482 | 420,943 | 1,275,802 | 1,258,789 | |||||||||||||||
Interest expense | 25 | (213,632) | (212,845) | (645,964) | (638,290) | |||||||||||||||
Net interest income | 204,850 | 208,098 | 629,838 | 620,499 | ||||||||||||||||
Fee and commission income | 26 | 58,921 | 59,718 | 182,864 | 173,524 | |||||||||||||||
Fee and commission expense | 26 | (16,674) | (12,462) | (53,524) | (37,067) | |||||||||||||||
Net fee and commission income | 42,247 | 47,256 | 129,340 | 136,457 | ||||||||||||||||
Net income from financial operations | 27 | 58,923 | 64,637 | 91,035 | 123,072 | |||||||||||||||
Net foreign exchange gain (loss) | 28 | 19,534 | (29,986) | 14,904 | (1,043) | |||||||||||||||
Other operating income | 10,787 | 6,852 | 34,019 | 25,775 | ||||||||||||||||
Net operating profit before provision for loan losses | 336,341 | 296,857 | 899,136 | 904,760 | ||||||||||||||||
Provision for loan losses | 29 | (82,024) | (54,616) | (185,103) | (174,356) | |||||||||||||||
NET OPERATING PROFIT | 254,317 | 242,241 | 714,033 | 730,404 | ||||||||||||||||
Personnel salaries and expenses | 30 | (72,597) | (77,229) | (220,337) | (217,280) | |||||||||||||||
Administrative expenses | 31 | (60,339) | (67,989) | (179,647) | (212,277) | |||||||||||||||
Depreciation and amortization | 32 | (32,623) | (23,609) | (94,004) | (64,700) | |||||||||||||||
Impairment | 32 | - | - | (1) | - | |||||||||||||||
Other operating expenses | (14,982) | (15,103) | (48,919) | (54,920) | ||||||||||||||||
Total operating expenses | (180,541) | (183,930) | (542,908) | (549,177) | ||||||||||||||||
OPERATING INCOME | 73,776 | 58,311 | 171,125 | 181,227 | ||||||||||||||||
Income from investments in companies | 12 | 26 | 55 | 2,170 | 1,541 | |||||||||||||||
Operating income before income taxes | 73,802 | 58,366 | 173,295 | 182,768 | ||||||||||||||||
Income taxes | 16 | (35,927) | (13,547) | (48,681) | (36,614) | |||||||||||||||
CONSOLIDATED INCOME FOR THE PERIOD | 37,875 | 44,819 | 124,614 | 146,154 | ||||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Bank | 24 | 36,449 | 42,894 | 117,306 | 143,591 | |||||||||||||||
Non-controlling interest | 24 | 1,426 | 1,925 | 7,308 | 2,563 | |||||||||||||||
Earnings per share attributable | ||||||||||||||||||||
to equity holders of the Bank (in Chilean pesos) | ||||||||||||||||||||
Basic earnings per share | 24 | 0.071 | 0.084 | 0.229 | 0.280 | |||||||||||||||
Diluted earnings per share | 24 | 0.071 | 0.084 | 0.229 | 0.280 |
The explanatory notes are an integral part of these Interim Consolidated Financial Statements.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements – September 30, 2019 |
3 |
Itaú Corpbanca and subsidiaries
Interim Consolidated Statements of Other Comprehensive Income for the period
(In millions of Chilean pesos - MCh$)
For the three month periods ended September 30, | For the nine month periods ended September 30, | |||||||||||||||||
Note | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
CONSOLIDATED INCOME FOR THE PERIOD | 24 | 37,875 | 44,819 | 124,614 | 146,154 | |||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) WHICH MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS | ||||||||||||||||||
Available for sale investments | 24 | 13,081 | 2,210 | 26,749 | (3,216) | |||||||||||||
Exchange differences on investment in Colombia and New York branch | 24 | 4,662 | (3,904) | (8,008) | 70,942 | |||||||||||||
Gain (loss) from net investments in foreign operations hedge | 24 | 6,263 | 4,363 | 16,019 | (45,693) | |||||||||||||
Gain (loss) from cash flows hedge | 24 | 5,692 | (2,064) | (6,440) | (3,663) | |||||||||||||
Other comprehensive income (loss) before income taxes | 29,698 | 605 | 28,320 | 18,370 | ||||||||||||||
Income taxes related to available for sale investments | 24 | (3,217) | (2,265) | (6,981) | (1,803) | |||||||||||||
Income taxes related to net investment in foreign operations hedge | 24 | 240 | 571 | (1,698) | 14,504 | |||||||||||||
Income taxes related to cash flows hedge | 24 | (3,872) | 557 | (1,246) | 989 | |||||||||||||
Income taxes on other comprehensive income | (6,849) | (1,137) | (9,925) | 13,690 | ||||||||||||||
Other comprehensive income (loss) which may be reclassified subsequently to profit or loss, net of income taxes | 22,849 | (532) | 18,395 | 32,060 | ||||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) WHICH MAY NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS | ||||||||||||||||||
Defined benefits obligations | 24 | 71 | (1,325) | (2,115) | (1,674) | |||||||||||||
Income taxes related to defined benefits obligations | 24 | (19) | 522 | 890 | 614 | |||||||||||||
Other comprehensive income (loss) which may not be reclassified subsequently to profit or loss, net of income taxes | 52 | (803) | (1,225) | (1,060) | ||||||||||||||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD | 24 | 22,901 | (1,335) | 17,170 | 31,000 | |||||||||||||
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD | 24 | 60,776 | 43,484 | 141,784 | 177,154 | |||||||||||||
Atribuibles a: | ||||||||||||||||||
Equity holders of the Bank | 24 | 60,977 | 41,933 | 137,775 | 158,570 | |||||||||||||
Non-controlling interest | 24 | (201) | 1,551 | 4,009 | 18,584 |
The explanatory notes are an integral part of these Interim Consolidated Financial Statements.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements – September 30, 2019 |
4 |
Itaú Corpbanca and subsidiaries
Interim Consolidated Statements of Changes in Equity for the period
(In millions of Chilean pesos - MCh$)
Reserves | Retained earnings | |||||||||||||||||||||||||||||||||||||||||||||
Note | Number of shares | Capital | Reserves from earnings | Other non-earnings reserves | Valuation accounts | Retained earnings from prior years | Income for the period | Provision for mandatory dividends | Total attributable to equity holders of the Bank | Non- controlling | Total equity | |||||||||||||||||||||||||||||||||||
Millions | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||||||||||||||
Equity as of December 31, 2017 | 512,407 | 1,862,826 | 451,011 | 839,120 | (4,735) | 1,441 | 57,447 | (17,234) | 3,189,876 | 209,954 | 3,399,830 | |||||||||||||||||||||||||||||||||||
Distribution of income from previous year | 24.b | - | - | - | - | - | 57,447 | (57,447) | - | - | - | - | ||||||||||||||||||||||||||||||||||
Equity as of January 1, 2018 | 512,407 | 1,862,826 | 451,011 | 839,120 | (4,735) | 58,888 | - | (17,234) | 3,189,876 | 209,954 | 3,399,830 | |||||||||||||||||||||||||||||||||||
Dividends paid | - | - | - | - | - | (22,979) | - | 17,234 | (5,745) | - | (5,745) | |||||||||||||||||||||||||||||||||||
Provision for mandatory dividends | - | - | - | - | - | - | - | (43,077) | (43,077) | - | (43,077) | |||||||||||||||||||||||||||||||||||
Comprehensive income for the period | - | - | - | - | 14,979 | - | 143,591 | - | 158,570 | 18,584 | 177,154 | |||||||||||||||||||||||||||||||||||
Equity as of September 30, 2018 | 512,407 | 1,862,826 | 451,011 | 839,120 | 10,244 | 35,909 | 143,591 | (43,077) | 3,299,624 | 228,538 | 3,528,162 | |||||||||||||||||||||||||||||||||||
Equity as of December 31, 2018 | 512,407 | 1,862,826 | 451,011 | 839,120 | 15,232 | 35,909 | 172,047 | (51,614) | 3,324,531 | 223,081 | 3,547,612 | |||||||||||||||||||||||||||||||||||
Distribution of income from previous year | 24.b | - | - | - | - | - | 172,047 | (172,047) | - | - | - | - | ||||||||||||||||||||||||||||||||||
Equity as of January 1, 2019 | 512,407 | 1,862,826 | 451,011 | 839,120 | 15,232 | 207,956 | - | (51,614) | 3,324,531 | 223,081 | 3,547,612 | |||||||||||||||||||||||||||||||||||
Dividends paid | - | - | - | - | - | (51,614) | - | 51,614 | - | - | - | |||||||||||||||||||||||||||||||||||
Provision for mandatory dividends | - | - | - | - | - | - | - | (35,192) | (35,192) | - | (35,192) | |||||||||||||||||||||||||||||||||||
Comprehensive income for the period | - | - | - | - | 20,469 | - | 117,306 | - | 137,775 | 4,009 | 141,784 | |||||||||||||||||||||||||||||||||||
Equity as of September 30, 2019 | 512,407 | 1,862,826 | 451,011 | 839,120 | 35,701 | 156,342 | 117,306 | (35,192) | (3,427,114) | 227,090 | 3,654,204 |
The explanatory notes are an integral part of these Interim Consolidated Financial Statements.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements – September 30, 2019 |
5 |
Itaú Corpbanca and subsidiaries
Interim Consolidated Statements of Cash Flows for the period
(In millions of Chilean pesos - MCh$)
For the nine month periods ended September 30, | ||||||||||||
Notes | 2019 | 2018 | ||||||||||
MCh$ | MCh$ | |||||||||||
|
|
| ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Operating income before income taxes | 173,295 | 182,768 | ||||||||||
Debits (credits) to income that do not represent cash flows: | ||||||||||||
Depreciation and amortization | 32 | 94,004 | 64,700 | |||||||||
Provisions for loans and accounts receivable from customers and interbank loans | 29 | 228,309 | 205,656 | |||||||||
Provisions and write-offs for assets received in lieu of payment | 21,285 | 15,623 | ||||||||||
Deterioration | 32 | 1 | - | |||||||||
Provisions for contingencies | 504 | 2,215 | ||||||||||
Mark to market of investments and derivatives adjustment | 27 | (62,487) | (25,972) | |||||||||
Adjustment (profit) loss for instruments available for sale | (30,707) | (13,923) | ||||||||||
Adjustment (profit) loss on sale credit portfolio | 27 | (1,093) | (10,520) | |||||||||
Net interest income | 25 | (629,838) | (620,499) | |||||||||
Fee and commission income | 26 | (182,864) | (173,524) | |||||||||
Fee and commission expense | 26 | 53,524 | 37,067 | |||||||||
Net foreign exchange gain (loss) | 28 | (14,904) | 1,043 | |||||||||
Net gain on sale of fixed assets | 1,352 | 5,480 | ||||||||||
Net gain on sale of participation in companies | (1,028) | (22) | ||||||||||
Other debits (credits) that do not represent cash flows | (51,798) | (2,895) | ||||||||||
Subtotals | (402,445) | (332,803) | ||||||||||
Loans and accounts receivable from customers and interbank loans | (760,311) | (1,184,771) | ||||||||||
Investments under resale agreements | 5c)i) | (59,478) | (107,261) | |||||||||
Obligations under repurchase agreements | 5c)i) | (625,126) | 180,718 | |||||||||
Trading investments | 5c)ii) | (214,943) | 329,062 | |||||||||
Available for sale investments | 5c)ii) | 58,694 | 393,460 | |||||||||
Held to maturity investments | 5c)ii) | 48,184 | (61,534) | |||||||||
Other assets and liabilities | (173,362) | 15,102 | ||||||||||
Time deposits and other time liabilities | 909,304 | 606,144 | ||||||||||
Deposits and other demand liabilities | 78,610 | 112,557 | ||||||||||
Dividends received from investments in companies | 12 | 1,142 | 1,519 | |||||||||
Foreign borrowings obtained | 5c)iii) | 2,073,547 | 1,803,474 | |||||||||
Repayment of foreign borrowings | 5c)iii) | (2,038,872) | (2,027,115) | |||||||||
Interest paid | (1,142,046) | (645,202) | ||||||||||
Interest received | 1,922,115 | 1,471,724 | ||||||||||
Net fee and commission income | 129,340 | 136,661 | ||||||||||
Taxes paid | (92,308) | (79,920) | ||||||||||
Repayment of other borrowings | 5c)iv) | (1,657) | (5,473) | |||||||||
Proceeds from sale of assets received in lieu of payment | 281 | 1,167 | ||||||||||
Net cash flows provided by (used in) operating activities | (289,331) | 607,509 | ||||||||||
CASH FLOWS FROM INVESTMENT ACTIVITIES: | ||||||||||||
Purchases of fixed and intangible assets | 13-14 | (41,525) | (57,688) | |||||||||
Sales of fixed assets | 14 | 2,182 | 14,347 | |||||||||
Proceeds from sales of assets held for sale | 11,200 | - | ||||||||||
Investments in companies | 12 | 1,818 | 59 | |||||||||
Net cash flows provided by (used in) investing activities | (26,325) | (43,282) | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Debt instruments issued | 631,299 | 526,534 | ||||||||||
Redemption of debt issued | (555,921) | (848,353) | ||||||||||
Dividends paid | 24 | (50,916) | (22,979) | |||||||||
Lease payments (Rights of use) | (24,656) | - | ||||||||||
Net cash flows provided by financing activities | (194) | (344,798) | ||||||||||
Effect of changes in exchange rates | 47,511 | 47,513 | ||||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (268,339) | 266,942 | ||||||||||
Cash and cash equivalents at the beginning of the period | 1,363,052 | 1,075,089 | ||||||||||
Cash and cash equivalents at end of the period | 5 | 1,094,713 | 1,342,031 | |||||||||
Net increase (decrease) in cash and cash equivalents | (268,339) | 266,942 |
Cash flows | Changes other than cash flows | |||||||||||||||||||||||||||||||||||||
As of January 1, 2019 | Received | Paid | Changes other than cash | Acquisition | Interest | Exchange rates effects | Fair value changes | As of September 30, 2019 | ||||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||||||||
Debt instruments issued | ||||||||||||||||||||||||||||||||||||||
Mortgage finance bonds | 53,463 | - | (11,170) | - | - | 1,454 | - | - | 43,747 | |||||||||||||||||||||||||||||
Bonds (senior and subordinated) | 5,956,661 | 631,299 | (544,751) | - | - | 241,857 | (45,903) | - | 6,239,163 | |||||||||||||||||||||||||||||
Lease contracts liabilities | 176,795 | - | (24,656) | 6,822 | - | 12,690 | (11) | - | 171,640 | |||||||||||||||||||||||||||||
Totals | 6,186,919 | 631,299 | (580,577) | 6,822 | - | 256,001 | (45,914) | - | 6,454,550 | |||||||||||||||||||||||||||||
Dividends paid | - | - | (50,916) | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Capital increase | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Subtotal cash flows from financing activities | - | 631,299 | (631,493) | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Total cash flows from financing activities (net) | - | (194) | - | - | - | - | - | - | - |
The explanatory notes are an integral part of these Interim Consolidated Financial Statements.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
6 |
Notes to the Interim Consolidated Financial Statements | Page | |||||
Note 1 | GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 8 | ||||
Note 2 | ACCOUNTING CHANGES | 34 | ||||
Note 3 | SIGNIFICANT EVENTS | 35 | ||||
Note 4 | REPORTING SEGMENTS | 39 | ||||
Note 5 | CASH AND CASH EQUIVALENTS | 42 | ||||
Note 6 | TRADING INVESTMENTS | 44 | ||||
Note 7 | INVESTMENTS UNDER RESALE AGREEMENTS AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS | 45 | ||||
Note 8 | FINANCIAL DERIVATIVE CONTRACTS AND HEDGE ACCOUNTING | 47 | ||||
Note 9 | INTERBANK LOANS | 50 | ||||
Note 10 | LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS | 51 | ||||
Note 11 | INVESTMENT INSTRUMENTS | 53 | ||||
Note 12 | INVESTMENTS IN COMPANIES | 55 | ||||
Note 13 | INTANGIBLE ASSETS | 56 | ||||
Note 14 | FIXED ASSETS | 58 | ||||
Note 15 | ASSETS FOR RIGHT OF USE AND LEASE CONTRACTS LIABILITIES | 60 | ||||
Note 16 | CURRENT TAXES AND DEFERRED TAXES | 62 | ||||
Note 17 | OTHER ASSETS | 65 | ||||
Note 18 | DEPOSITS AND OTHER DEMAND LIABILITIES AND TIME DEPOSITS | 66 | ||||
Note 19 | INTERBANK BORROWINGS | 67 | ||||
Note 20 | DEBT INSTRUMENTS ISSUED AND OTHER FINANCIAL LIABILITIES | 68 | ||||
Note 21 | PROVISIONS | 72 | ||||
Note 22 | OTHER LIABILITIES | 73 | ||||
Note 23 | CONTINGENCIES, COMMITMENTS, AND RESPONSIBILITIES | 74 | ||||
Note 24 | EQUITY | 79 | ||||
Note 25 | INTEREST INCOME AND INTEREST EXPENSE | 85 | ||||
Note 26 | FEE AND COMMISSION INCOME AND EXPENSE | 87 | ||||
Note 27 | NET INCOME (EXPENSE) FROM FINANCIAL OPERATIONS | 88 | ||||
Note 28 | NET FOREIGN EXCHANGE GAIN (LOSS) | 89 | ||||
Note 29 | PROVISION FOR LOAN LOSSES | 90 | ||||
Note 30 | PERSONNEL SALARIES AND EXPENSES | 92 | ||||
Note 31 | ADMINISTRATIVE EXPENSES | 93 | ||||
Note 32 | DEPRECIATION, AMORTIZATION, AND IMPAIRMENT | 94 | ||||
Note 33 | RELATED PARTY TRANSACTIONS | 95 | ||||
Note 34 | FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES | 97 | ||||
Note 35 | RISK MANAGEMENT | 108 | ||||
Note 36 | SUBSEQUENT EVENTS | 119 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
7 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies
General Information – Background of Itaú Corpbanca and subsidiaries
Itaú Corpbanca (here on the “Bank”) is a corporation incorporated under the laws of the Republic of Chile and supervised by the Commission for the Financial Market (hereinafter “CMF”), which as of June 1, 2019 assumed the functions of the Superintendency of Banks and Financial Institutions (“SBIF”), in accordance with the Decree with Force of Law No. 3 dated January 12, 2019, which established a new consolidated, systematized and agreed text of the General Banking Law. As a consequence of the merger of Banco Itaú Chile and Corpbanca on April 1, 2016, the latter is the legal continuator1.
The current ownership structure is (38.14%) owned by Itaú Unibanco, (28.57%) owned by the Saieh Family and (33.29%) owned by minority shareholders. Itaú Unibanco is the sole controlling shareholder of the merged bank. Within this context and without limiting the above, Itaú Unibanco and CorpGroup have signed a shareholders’ agreement relating to corporate governance, dividend policy (based on performance and capital metrics), and transfer of shares, liquidity, and other matters.
Itaú Corpbanca is headquartered in Chile and has operations in Colombia and Panama. In addition, Itaú Corpbanca has a branch in New York and a representative office in Lima2. The Bank has total consolidated assets for MCh$32,476,801 (MMUS$44,575) and equity for MCh$3,654,204 (MMUS$5,016).
The legal address of Itaú Corpbanca is Rosario Norte No. 660, Las Condes, Santiago, Chile, and its web site is www.itau.cl
The Interim Consolidated Financial Statements as of September 30, 2019, were approved by the Board of Directors on October 28, 2019.
Significant Accounting Policies and Others
a) | Accounting period |
The Interim Consolidated Financial Statements are referred as of September 30, 2019 and December 31, 2018 and comprise the three and nine month periods ended September 30, 2019 and 2018.
b) | Basis of preparation of the Interim Consolidated Financial Statements |
These Interim Consolidated Financial Statements have been prepared in accordance with the Compendium of Accounting Standards (onwards “CAS”) issued by the SBIF, currently integrated with the CMF. Banks must use the accounting criteria set forth in the CAS and in everything that is not dealt with by it and does not contradict its instructions, they must adhere to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). If there are discrepancies between the IFRS and the accounting criteria set forth in the CAS, the latter will prevail.
Additionally, these Interim Consolidated Financial Statements in relation to the application of IAS 34 “Intermediate Financial Information” are mainly prepared with the intention of updating the content of the latest Annual Consolidated Financial Statements, emphasizing new activities, events and circumstances that occurred during the nine-month periods ended September 30, after the end of the year, and not duplicating the information previously published in the last Consolidated Financial Statements.
1The business combination was a “reverse acquisition” as established in IFRS 3, “Business Combinations”, in which Banco Itaú Chile is the continuator for accounting purposes and Corpbanca is the legal continuator.
2 None of the markets in which Itaú Corpbanca and subsidiaries operates is facing an economy with a hyperinflationary currency.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
8 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
As a result, these Interim Consolidated Financial Statements do not include all the information that a complete set of Financial Statements prepared in accordance with the international accounting and financial information standards agreed by the IASB would require, so for an adequate understanding of the information included in these Interim Consolidated Financial Statements, these must be read in conjunction with the Annual Consolidated Financial Statements, corresponding to the immediately preceding annual period (information available atwww.itau.cl).
The present Interim Consolidated Financial Statements incorporate a significant accounting change due to the adoption of IFRS 16 “Leases”. See new accounting policy in letter g) of this section and in Note 2 “Accounting Changes”.
Notes to these Interim Consolidated Financial Statements contain information additional to that disclosed in the Interim Consolidated Statements of Financial Position, Interim Consolidated Statements of Income, Interim Consolidated Statements of Other Comprehensive Income, Interim Consolidated Statements of Changes in Equity, and Interim Consolidated Statements of Cash Flows. On them descriptive and disaggregated information is presented.
c) | Consolidation criteria |
The same accounting policies, presentation, and valuation methods applied in these Interim Consolidated Financial Statements were used in the preparation of the separate financial statements of Itaú Corpbanca and subsidiaries (hereinafter the “Group” or the “bank”) as of September 30, 2019 and December 31, 2018 and for the three and nine month periods ended September 30, 2019 and 2018 and include the adjustments and reclassifications necessary to standardize the accounting policies and valuation criteria applied by the Bank, in accordance with the standards established in the CAS.
Intercompany balances and any unrealized income or loss arising from intercompany transactions are eliminated upon consolidation during the preparation of the Interim Consolidated Financial Statements.
For consolidation purposes, the financial statements of the New York branch have been converted to Chilean pesos at the exchange rate of $728,58 per US$1 as of September 30, 2019 ($657,11 as of September 30, 2018 and $694,73 to December 31, 2018), same situation for Colombian subsidiaries using an exchange rate of $0.2092 per COP$1 as of September 30, 2019 ($0.2218 as of September 30, 2018 and $0.2139 as of December 31, 2018), in accordance with IAS 21 “Effects of changes in foreign currency exchange rates”, related to the valuation of investments abroad in countries with economic stability.
Assets, liabilities, income, and results of operations of subsidiaries, net of consolidation adjustments, represent 19%, 21%, 39%, and 50% of total consolidated assets, liabilities, income, and operating results, respectively, as of September 30, 2019 (24%, 26%, 36%, and 34% as of December 31, 2018 and 21%, 23%, 37%, and 26% as of September 30, 2018, respectively).
(i) | Controlled entities |
The Bank, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee.
The Bank controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
9 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
Thus, the Bank controls an investee if and only if has all the following:
1) Power over the investee, which is related to the existing rights that give the Bank the current ability to direct the relevant activities, these being those that significantly affect the investee’s returns;
2) Exposure, or rights, to variable returns from its involvement with the investee;
3) Ability to use its power over the investee to affect the amount of the Bank’s returns;
When the Bank has less than a majority of the voting rights over an investee, but such voting rights are sufficient to have the actual ability to direct the relevant activities, then it will be concluded that the Bank has control over the investee.
The Bank considers all relevant factors and circumstances when assessing if the voting rights are sufficient to obtain control, these include:
● | The amount of voting rights held by the Bank in relation to the amount and dispersion of those held by other vote holders. |
● | Potential voting rights held by the Bank, other voting holders or other parties. |
● | Rights that arise from other contractual agreements. |
● | Any additional facts and circumstances that indicate that the Bank has, or does not have, the current ability to direct the relevant activities at the time those decisions need to be made, including the patterns of voting behavior in previous shareholders meetings. |
The Bank reassesses whether or not it has control over an investee when facts and circumstances indicate that there are changes in one or more of the control elements listed above.
The interim financial statements of the controlled companies are consolidated with those of the bank through the global integration method (line by line). In accordance with this method, all balances and transactions between consolidated companies are eliminated through the consolidation process. Therefore, the Interim Consolidated Financial Statements refer to assets, liabilities, equity, income, expenses, and cash flows of the parent and its subsidiaries presented as if they were a single economic entity. The Bank prepares Consolidated Financial Statements using uniform accounting policies for transactions and other events that, being similar, have occurred in similar circumstances.
The following are detailed the entities controlled by Itaú Corpbanca, therefore, they are part of the consolidation perimeter:
Functional currency | Ownership percentage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Market | Country | As of September 30, 2019 | As of December 31, 2018 | As of September 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Direct | Indirect | Total | Direct | Indirect | Total | Direct | Indirect | Total | ||||||||||||||||||||||||||||||||||||||||||||||
% | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
Itaú Corredores de Bolsa Ltda. (1) (10) (12) | Domestic | Chile | $ | 99.990 | 0.010 | 100.000 | 99.990 | 0.010 | 100.000 | 99.990 | 0.010 | 100.000 | ||||||||||||||||||||||||||||||||||||||||||
Itaú Administradora General de Fondos S.A. (1) (9) | Chile | $ | 99.994 | 0.006 | 100.000 | 99.994 | 0.006 | 100.000 | 99.988 | 0.006 | 99.994 | |||||||||||||||||||||||||||||||||||||||||||
Itaú Corredores de Seguros S.A. (1) (5) (8) | Chile | $ | 99.900 | 0.100 | 100.000 | 99.900 | 0.100 | 100.000 | 99.900 | 0.100 | 100.000 | |||||||||||||||||||||||||||||||||||||||||||
Itaú Asesorías Financieras Ltda. (1) (7) (14) | Chile | $ | 99.990 | 0.010 | 100.000 | 99.990 | 0.010 | 100.000 | 99.900 | 0,010 | 100.000 | |||||||||||||||||||||||||||||||||||||||||||
CorpLegal S.A. (1) (13) (15) | Chile | $ | - | - | - | 99.990 | 0.010 | 100.000 | 99.990 | 0.010 | 100.000 | |||||||||||||||||||||||||||||||||||||||||||
Recaudaciones y Cobranzas Ltda. (1) (11) | Chile | $ | 99.999 | 0.001 | 100.000 | 99.999 | 0.001 | 100.000 | 99.990 | 0.010 | 100.000 | |||||||||||||||||||||||||||||||||||||||||||
Itaú Corpbanca New York Branch (1) (6) | Foreing | USA | US$ | 100.000 | - | 100.000 | 100.000 | - | 100.000 | 100.000 | - | 100.000 | ||||||||||||||||||||||||||||||||||||||||||
Itaú Corpbanca Colombia S.A. (2) | Colombia | COP$ | 66.279 | - | 66.279 | 66.279 | - | 66.279 | 66.279 | - | 66.279 | |||||||||||||||||||||||||||||||||||||||||||
Itaú Corredor de Seguro Colombia S.A. (2) | Colombia | COP$ | 80.000 | - | 80.000 | 80.000 | - | 80.000 | 80.000 | - | 80.000 | |||||||||||||||||||||||||||||||||||||||||||
Itaú Securities Services Colombia S.A. Sociedad Fiduciaria (2) | Colombia | COP$ | 5.499 | 62.634 | 68.133 | 5.499 | 62.634 | 68.133 | 5.499 | 62.634 | 68.133 | |||||||||||||||||||||||||||||||||||||||||||
Itaú Comisionista de Bolsa Colombia S.A. (2) | Colombia | COP$ | 2.219 | 64.807 | 67.026 | 2.219 | 64.807 | 67.026 | 2.219 | 64.807 | 67.026 | |||||||||||||||||||||||||||||||||||||||||||
Itaú Asset Management Colombia S.A. Sociedad Fiduciaria (2) | Colombia | COP$ | - | 66.266 | 66.266 | - | 66.266 | 66.266 | - | 66.266 | 66.266 | |||||||||||||||||||||||||||||||||||||||||||
Itaú (Panamá) S.A. (3) | Panama | US$ | - | 66.279 | 66.279 | - | 66.279 | 66.279 | - | 66.279 | 66.279 | |||||||||||||||||||||||||||||||||||||||||||
Itaú Casa de Valores S.A. (4) | Panama | US$ | - | 66.279 | 66.279 | - | 66.279 | 66.279 | - | 66.279 | 66.279 |
(1) | Companies regulated by the Chilean Financial Market Commission (CMF). |
(2) | Companies regulated by the Colombian Financial Superintendency (SFC), which maintains a supervision agreement with the SBIF (currently CMF) |
(3) | Company regulated by the Superintendency of Banks of Panama. |
(4) | Company regulated by the Superintendency of the Securities Market of Panama. |
(5) | On April 1, 2018, the merger of Corpbanca Corredores de Seguro S.A. and Itaú Chile Corredora de Seguros Limitada took place. |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
10 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
(6) | Company regulated by Office of the Comptroller of the Currency (OCC) and Federal Reserve (FED) |
(7) | On July 4, 2018, Itaú Asesorías Financieras S.A. acquired 2 shares of the company to minority shareholders, therefore Itaú Corpbanca and subsidiaries has 100% control of company shares. |
(8) | On September 10, 2018, Itaú Corpbanca acquired 127,901 shares of the Company to minority shareholders, therefore Itaú Corpbanca has directly and indirectly 100% control over the Company. |
(9) | On December 10, 2018, Itaú Corpbanca acquired 1 share from a minority investor, therefore Itaú Corpbanca has directly and indirectly 100% control over the Company. |
(10) | On August 1, 2018, the corporate name of Itaú Corpbanca Corredores de Bolsa S.A. was changed to Itaú Corredores de Bolsa Limitada. |
(11) | On May 2, 2019, Itaú Corpbanca Recaudaciones y Cobranzas S.A (Instacob) acquiered from Itaú Corredores de Bolsa it´s participation in Itaú Asesoría Financieras. |
(12) | On May 2, 2019, Itaú Corredores de Bolsa acquiered from Itaú Asesoría Financieras it´s participation on Instacob (Itaú Corpbanca Recaudaciones y Cobranzas S.A). |
(13) | On May 2, 2019 Itaú Corpbanca acquired from Itaú Corredores de Bolsa its participation on Corplegal. As of that date controlling 100% of the participation of the entity. |
(14) | On May 2, 2019 Itaú Asesoría Financieras modifies its legal statute turning from a public company (S.A.) to a private limited company. |
(15) | On May 20, 2019, the dissolution of Corplegal S.A. took place. |
(ii) Associates
Associated entities are those over which the Bank has significant influence; although not control or joint control. If the Bank holds, directly or indirectly (e.g. through subsidiaries), 20% or more of the voting power of the investee, it is presumed that the Bank has significant influence, unless it can be clearly demonstrated that this is not the case, and subsequently increased or decreased to recognize either the Bank’s proportional share in the net profit or loss of the associate and other movements recognized in its equity. The lower value arising from the acquisition of an associate is included in the book value of the investment net of any accumulated impairment loss.
Other factors considered to determine the significant influence on an entity are the representations in the Board of Directors and the existence of material transactions. The existence of these factors could determine the existence of significant influence on an entity, despite having a participation of less than 20% of the shares with the right to vote. These investments are accounted for using the equity method.
(iii) Investments in other companies
Investments in other companies, represented by shares or rights in other companies, are those in which the Bank has neither control nor significant influence. These investments are recorded at cost, and adjustments for impairment losses are recorded when appropriate.
(iv) Funds management, trust business and other related businesses
The Bank and its subsidiaries manage assets held in publicly offered investment funds and other investment vehicles on behalf of investors and receive market-rate compensation for providing this type of services. Managed funds belong to third parties and, therefore, are not included in the Interim Consolidated Statement of Financial Position.
The Bank provides trust commissions and other fiduciary services that result in the participation or investment of assets by clients. Assets held in a fiduciary activity are not reported in the Interim Consolidated Financial Statements, since they are not Bank assets and there is no control over them. Contingencies and commitments arising from this activity are disclosed in Note 23 “Contingencies, Commitments, and Responsibilities”, letter c), related to Responsibilities recorded inoff-balance sheet accounts.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
11 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
In accordance to IFRS 10 “Consolidated Financial Statements,” for consolidation purposes, the role of the Bank and its subsidiaries with respect to the managed funds must be evaluated to determine whether it is acting as Agent or Principal. According to this standard, an Agent is a party primarily engaged in acting on behalf and for the benefit of another party or parties (the Principal or Principals) and, therefore, it does not control the investee when it exercises decision-making authority. This evaluation must take into account the following aspects:
● | Scope of its decision-making authority over the investee. |
● | Rights held by other parties |
● | The remuneration to which it is entitled to in accordance with the remuneration agreements. |
● | Decision-maker’s exposure to variability of returns from other interests that it holds in the investee. |
The Bank does not control or consolidate any trusts or other entities related to this type of business.
The Bank manages the funds on behalf and for the benefit of investors, acting solely as an Agent. The assets managed by the Bank and its subsidiaries are owned by third parties. Under this category, and in accordance with the aforementioned standard, they do not control the assets when they exercise their decision-making authority. Therefore, as of September 30, 2019 and December 31, 2018 they act as Agent and none of these investment vehicles is consolidated.
d) | Non-controlling interest |
Non-controlling interest represents the portion of net income and net assets which the Bank does not own, either directly or indirectly. It is presented as “Attributable tonon-controlling interest” separately in the Interim Consolidated Statement of Income, and separately from shareholders’ equity in the Interim Consolidated Statement of Financial Position.
Additionally, thenon-controlling interests in the Interim Consolidated Statements of Financial Position will be presented, within the equity under item“Non-controlling interest”, separately from the equity attributable to owners of the Bank. Changes in the ownership interest of a parent in a subsidiary that do not result in a loss of control are equity transactions (i.e., transactions with owners in their capacity as owners).
The Bank attributes the result of the period and each component of other comprehensive income to the owners of the Bank and to thenon-controlling interests. The Bank also attributes the total integral result to the owners of the Bank and to thenon-controlling interests even if the results of thenon-controlling interests give rise to a debit balance.
e) | Use of estimates and judgments |
The preparation of the Interim Consolidated Financial Statements requires Bank’s management to make estimates, judgments and assumptions that affect the application of the accounting policies and the reported balances of assets and liabilities, disclosures of contingencies with respect to assets and liabilities as of the date of the Interim Consolidated Financial Statements, as well as income and expenses during the year. Actual results may differ from these estimates.
Estimates and relevant assumptions are regularly reviewed by Management in order to properly measure some assets, liabilities, income, and expenses. Accounting estimates changes due to reviews are recognized in the year in which the estimate is reviewed and in any future period affected.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
12 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
In certain cases, CAS and International Financial Reporting Standards require that assets and liabilities be recorded or disclosed at their fair values. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When market prices in active markets are available, they have been used as a basis for valuation. When market prices in active markets are not available, the Bank has estimated those values as values based on the best available information, including the use of modeling and other valuation techniques.
The Bank has established allowances to cover possible credit losses accordance with CAS. These regulations require that, in order to estimate allowances, they be evaluated regularly, taking into account factors such as changes in the nature and size of the loan portfolio, trends in the expected portfolio, credit quality and economic conditions that may affect the payment capacity of the debtors. Changes in allowances for loan losses are reflected as “Provision for loan losses” in the Interim Consolidated Statements of Income for the period.
Loans arecharged-off when the Bank’s management determines that the loan or a portion cannot be collected, this in accordance with CAS, as stated in chapterB-2 “Impaired loans and charge-offs”. Charge-offs are recorded as a reduction of the allowance for loan losses.
In particular, information on most significant areas of estimate due to uncertainties and critical judgments in the application of accounting policies that have the most important effect on the amounts recorded in the Interim Consolidated Financial Statements are the following:
● | Useful lives of fixed assets and intangible assets (Notes 13, 14, and 32). |
● | Goodwill - Impairment test (Notes 13 and 32). |
● | Periods of renewal and discount rates for assets for the right of use assets under lease and obligations for lease agreements (Notes 15 and 32) |
● | Allowances for loan losses (Notes 9, 10 and 29). |
● | Fair value of financial assets and liabilities (Note 34). |
● | Provisions (Note 21). |
● | Contingencies and commitments (Note 23). |
● | Impairment losses of certain assets (Notes 9, 10, 13, 14, 29 and 32). |
● | Current taxes and deferred taxes (Note 16). |
● | Perimeter of consolidation and control assessment for consolidation purposes (Note 1, letter c)). |
During the nine month period ended September 30, 2019, there have been no significant changes in estimates made at the end of 2018, other than those indicated in these Interim Consolidated Financial Statements (see Note 2).
f) | Classification of financial instruments |
(i) | Classification of financial assets for measurement purposes |
Financial assets are classified into the following specified categories: trading investments, ‘held to maturity investments’, ‘available for sale investments’ and ‘loans and accounts receivable from customers’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Financial assets are initially recognized at fair value plus, in the case of a financial assets not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
13 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
Measurement criteria for financial assets recorded in the Interim Consolidated Statement of Financial Position, are as follows:
Financial assets measured at amortized cost
Amortized cost is the acquisition cost of a financial asset or liability, plus or minus, as appropriate, prepayments of principal and the cumulative amortization (recorded in the Interim Consolidated Statement of Income) of the difference between the initial cost and the maturity amount as calculated under the effective interest method. For financial assets, amortized cost also includes any reductions for impairment or uncollectibility.
The “effective interest rate” is the discount rate that exactly matches the initial amount of a financial instrument to all its estimated cash flows over its remaining life. For fixed-rate financial instruments, the effective interest rate incorporates the contractual interest rate established on the acquisition date plus, where applicable, the fees and transaction costs that are a part of the financial return. For floating-rate financial instruments, the effective interest rate matches the current rate of return until the date of the next review of interest rates.
The effective interest rate includes all commissions and other items paid or received that are part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition of a financial asset.
Financial assets measured at fair value
“Fair value” is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique.
Fair value is a market-based measurement, not a Bank-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same - to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions (i.e. an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).
When a price for an identical asset or liability is not observable, an entity measures fair value using another valuation technique that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. Because fair value is a market-based measurement, it is measured using the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk.
Between valuation techniques are included the use of recent market transactions to sell the asset or to transfer the liability between market participants at the measurement date, references to the fair value of other substantially identical financial instrument, discounted cash flows and option pricing models. Consistent with this, the Bank’s intention to keep and asset or to sell, dispose or satisfy a liability is not relevant when estimating fair value.
When determining fair value an entity shall take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
14 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
To increase consistency and comparability in fair value measurements and related disclosures, this IFRS establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1 inputs) and the lowest priority to unobservable inputs (level 3 inputs). Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.
In those cases when fair value cannot be reasonably estimated for a financial asset or liability, this is measured at its amortized cost.
Additionally, in accordance with ChapterA-2 “Limitations or clarifications to the use of general criteria” of the CAS, banks cannot designate financial assets or liabilities at fair value as an option instead of using the general criteria of amortized cost.
The Interim Consolidated Financial Statements have been prepared using the general criteria of amortized cost, except for:
● | Financial derivatives contracts measured at fair value. |
● | Available for sale investments measured at fair value through other comprehensive income. |
● | Trading investments measured at fair value. |
● | Financial assets and liabilities denominated as items covered in hedges with fair value values, which have been measured at their fair value. |
Trading investments
Financial assets are classified as held for trading when they have been acquired mainly for the purpose of selling them in the near term and on initial recognition are part of a portfolio of identified financial instruments that the Bank manages together and have a recent actual pattern of short-term profit-taking.
Trading investments are measured at fair value according to market quotes or by using valuation techniques at the closing date. Any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the “Net income (expense) from financial operations” line item in the Interim Consolidated Statement of Income.
Held to maturity investments
Held to maturity investments arenon-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Bank has the positive intent and ability to hold to maturity. Any other investment instrument is classified as available for sale.
Investment instruments are initially recorded at cost, which includes transaction costs. Subsequent to initial recognition,held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
Available for sale investments
The category of instruments available for sale includes instruments that are not classified as instruments for negotiation or for maintaining maturity.
Available for sale investments (or “AFS”) are subsequently measured at fair value according to market prices or valuation obtained by using valuation techniques, less impairment losses. Unrealized gains and losses originated as a consequence of fair value changes are recorded in equity. When these investments are disposed or impaired, the recorded amount in equity is transferred to income and is reported under “Net income (expenses) from financial operations”.
Interest and readjustments of investments held to maturity and of the instruments available for sale are included in the item “Interest income”.
Investment instruments that are hedged item in hedge accounting transactions are adjusted according to the rules applicable to hedge accounting. See letter l) in this section.
Purchases and sales of investment instruments that shall be delivered or settled within the term established by market regulations or conventions are recognized at the trading date when the purchase or sale of the instrument is agreed. Any other purchase or sale is treated as a derivative until settlement.
Investment instruments must be permanently assess to timely identify impairment indication which may result in losses.
The Bank has assessed its investments portfolio classified as “Held to maturity investments” and “Available for sale investments” in order to identify if there is objective evidence of impairment. Such assessment includes economic analysis, risk ratings for the issuers, and Management’s ability and intent to hold those investments until maturity. Based on the Management’s evaluation of these investments it is concluded that no impairment indication exists.
Loans and accounts receivables from customers
Loans and accounts receivables from customers and interbank loans, originated and purchased, arenon-derivative financial assets with fixed or determinable payments that are not quoted in an active market and for which the Bank has no intention to sell them immediately or in the short term, They are measured at amortized cost using the effective interest method, less any impairment.
Financial derivative contracts
Financial derivative contracts, which include foreign currency and Unidades de Fomento (UF) forwards, interest rate futures, currency and interest rate swaps, currency and interest rate options and other financial derivative instruments are initially recognized in the Interim Consolidated Statement of Financial Position at their fair value (including transaction costs), which is usually their acquisition cost, and subsequently measured at their fair value.
The fair value is obtained from corresponding market pricings, discounted cash flow models and pricing valuation models. The derivative instruments are recognized as an asset when their fair value is positive and as a liability when they are negative in “Financial derivative contracts” in the Interim Consolidated Statement of Financial Position. Additionally, the Credit Valuation Adjustment and Debit Value Adjustment is included as part of the fair value for each instrument, all that with the objective of properly reflecting the counterparty risk in the fair value measurement.
Certain derivatives embedded in other financial instruments are treated as separate derivatives when their risks and characteristics are not closely related with those of the host contract and when such host contracts are not measured at fair value through profit or loss.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
At inception of a derivative agreement, the Bank must designate it either as a derivative instrument for trading or for hedge accounting purposes.
Changes in the fair value of derivative instruments held for trading are included in “Net income (expenses) from financial operations” in the Interim Consolidated Statement of Income.
If the derivative instrument is classified for hedge accounting purposes, the hedge can be:
1) A fair value hedge of existing assets or liabilities or a “commitment” to be executed
2) A cash flow hedge of existing assets or liabilities or forecast transactions
3) A net investment in foreign operations hedge, as defined by IAS 21
A hedging relationship qualifies for hedge accounting if, and only if, all of the following conditions are met:
1) At the inception of the hedge there is formal designation and documentation of the hedging relationship;
2) The hedge is expected to be highly effective;
3) The effectiveness of the hedge can be reliably measured, and;
4) The hedge is assessed on an ongoing basis and determined to have actually been highly effective throughout the financial reporting periods for which the hedge was designated.
Certain transactions with derivatives that do not qualify for being classified as hedging derivatives are treated and recognized as trading derivatives, even when they provide effective economic hedges of the risk positions.
When a derivative hedges the exposure to changes in the fair value of an existing item of the asset or liability, such hedged item is measured at fair value from the designation of the fair value hedge until its expiration in connection with the specific hedged risk. Fair value adjustments for both the hedged item and the hedging instrument are recognized in the Interim Consolidated Statements of Income.
If the hedged item in a fair value hedge is a commitment, the changes in the fair value of the firm commitment regarding the covered risk are recognized as assets or liabilities with effect in the interim consolidated statements of income for the period. Gains or losses from the changes in fair value measurement of the hedging derivative are recognized with effect in the interim consolidated statements of income for the period. When a new asset or liability is acquired as a result of the firm commitment, the initial recognition of the acquired asset or liability is adjusted to incorporate the accumulated effect of the fair value valuation of the firm commitment recognized in the Interim Consolidated Statement of Financial Position.
When a derivative hedges exposure to changes in the cash flows of existing assets or liabilities, or forecast transactions, the effective portion of changes in fair value related to the hedged risk is recognized in other comprehensive income and accumulated in equity. The cumulative loss or gain in cash flow hedge reserve is transferred to the Consolidated Statements of Income to the extent that the hedged item impacts income because of the hedged risk, offsetting the effect in the same line of the Consolidated Statements of Income. Any ineffective portion is recognized directly in the Interim Consolidated Statement of Income.
In case of fair value hedge of interest rate risk of a portfolio with the hedged item representing currency value instead of individual assets or liabilities, gains or losses from the fair value measurement for both the hedged item and the hedging instrument, are recognized in the consolidated statements of income, but the fair value adjustment of the hedged instrument is presented in the consolidated statements of financial position under the “Other assets” or “Other liabilities” lines, depending on the hedged item position as of reporting date.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
Financial asset and liability balances are offset, i.e., reported in the Interim Consolidated Statements of Financial Position at their net amount, only if there is a legally enforceable right to offset the recorded amounts and the Bank intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
(ii) | Classification of financial assets for presentation purposes |
For presentation purposes, financial assets are classified by their nature into the following line items:
- | Cash and deposits in banks: comprises of cash balances, checking accounts andon-demand deposits with the Central Bank of Chile and other domestic and foreign financial institutions. Amounts invested as overnight deposits are included in this item. |
- | Cash items in process of collection: comprises of domestic transactions in the process of transfer through a central domestic clearinghouse or international transactions which may be delayed in settlement due to timing differences, etc. |
- | Trading investments: comprises of financial instrumentsheld-for-trading and investments in mutual funds which must be adjusted to their fair value in the same way as instruments acquired for trading. |
- | Financial derivative contracts: comprises of financial derivative contracts with positive fair values are presented in this item. It includes both independent contracts as well as derivatives that should and can be separated from a host contract, whether they are for trading or accounted for as derivatives held for hedging, as disclosed in Note 8. |
- | Interbank loans: comprises of transactions held with domestic and foreign banks, including the Central Bank of Chile, other than those reflected in certain other financial asset classifications listed above. |
- | Loans and accounts receivables from customers: comprises ofnon-derivative financial assets for which fixed or determined amounts are charged, that are not listed on an active market and for which the Bank has no intention to sell them immediately or in the short term. |
- | Investment instruments: are classified into two categories:held-to-maturity investments, andavailable-for-sale investments. Held to maturity investment comprises of those instruments for which the Bank has the ability and intention to hold them until their maturity. The remaining investments are treated as available for sale. |
(iii) | Classification of financial liabilities for measurement purposes |
Financial liabilities are generally measured at amortized cost, except for those financial liabilities designated as hedged item (or as hedge instruments) and liabilities held for trading, which are measured at fair value. Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.
Financial liabilities at fair value with changes in results: Asof September 30, 2019 and December 31, 2018 the Bank does not maintain financial liabilities at FVTPL other than financial derivative contracts.
Other financial liabilities:Other financial liabilities (including interbank borrowings, issued debt instruments and other accounts payables) are initially recorded at fair value and subsequently measured at amortized cost using the effective interest method.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
(iv) | Classification of financial liabilities for presentation purposes |
Financial liabilities are classified by their nature into the following line items in the interim consolidated statements of financial position:
- | Deposits and other demand liabilities: this item includes allon-demand obligations except for term savings accounts, which are not considered demand instruments in view of their special characteristics. Obligations whose payment may be required during the period are deemed to beon-demand obligations. Operations which become callable the day after the closing date are not treated ason-demand obligations. |
- | Cash items in process of being cleared: Includes cash on exchange arrangement and balances on transactions carried out, which were not settled on the same day. |
- | Obligations under repurchase agreements: comprises of balances of sales of financial instruments under securities repurchase and loan agreements. The Bank does not record in its own portfolio instruments acquired under repurchase agreements. |
- | Time deposits and other time liabilities: This includes balances of deposit transactions in which a term at the end of which they become callable has been stipulated. |
- | Financial derivative contracts: comprises of financial derivative contracts with negative fair values whether they are for trading or for hedge accounting, as set forth in Note 8. |
- | Interbank borrowings: comprises of obligations due to other domestic banks, foreign banks, or the Central Bank of Chile, other than those reflected in certain other financial liability classifications listed above. |
- | Issued debt instruments: there are three types of instruments issued by the Bank: Obligations under letters of credit, Subordinated bonds and Senior bonds placed in both local and foreign markets. |
- | Other financial liabilities: comprises of credit obligations to persons other than domestic banks, foreign banks, or the Central Bank of Chile, for financing purposes or operations in the normal course of business. |
g) | Leases |
At the commencement date, the Bank shall recognize aright-of-use asset and a lease liability in accordance with the provisions set forth on IFRS 16.
(i) | Right-of-use asset |
At commencement date, theright-of-use asset is measured at cost. The cost ofright-of-use asset comprises of:(a) the amount of the initial measurement of the lease liability (b) any lease payments made at or before the commencement date, less any lease incentives received;(c) the initial direct costs incurred by the bank; (d) an estimate of the costs to be incurred by the bank in dismantling and disposing of the underlying asset, restoring the place where it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.
After the initial recognition date, the Bank measures the assets by the right of use by applying the cost model, which is defined as the asset by the right of use measured at cost: (a) less any accumulated depreciation and any accumulated impairment losses; and (b) adjusted by any new measurement of the lease liability.
The bank applies the depreciation requirements of IAS 16 “Property, Plant and Equipment” when depreciating the right of use asset.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
19 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
If the lease transfers ownership of the underlying asset to the Bank at the end of the lease term or if the cost of theright-of-use asset reflects that the Bank will exercise a purchase option, the Bank will depreciate theright-of-use asset from the initial recognition date to the end of the useful life of the underlying asset. In another case, the Bank will depreciate theright-of-use asset from start date to end of the useful life of theright-of-use asset or the end of the lease term.
The Bank applies IAS 36 “Impairment of Assets” to determine whether theright-of-use asset is impaired and to account for any impairment loss identified.
As of September 30, 2019, the Bank has not identified any impairment in the value of the right of use assets under lease.
(ii) | Lease liability |
The Bank measured the lease liability as the present value of lease payments that have not been paid at that date. Lease payments are discounted using the interest rate implicit in the lease, if that rate can be easily determined. If that rate cannot be readily determined, the bank uses it´s incremental borrowing rate.
The lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the term of the lease that is not paid on the commencement date:(a) fixed payments, minus any lease incentive receivable; (b) variable lease payments, which depend on an index or a rate, initially measured using the index or rate on commencement date; (c) amounts that the bank expects to pay as residual value guarantees; (d) the exercise price of a purchase option if the bank has reasonably certainty of exercising that option; and (e) payments of penalties for terminating the lease, if the term of the lease reflects that the bank will exercise an option to terminate the lease.
After the initial recognition date, the Bank measures the lease liability in order to recognize (a) the increase on the carrying amount to reflect interest on the lease liability; (b) the reduction of the carrying amount to reflect the lease payments made; and (c) remeasurement of the carrying amount to reflect any reassessment or lease modifications.
The Bank remeasure the lease liability by discounting the revised lease payments, if (a) there is a change in the amounts expected to be payable under a residual value guarantee. The bank determines the revised lease payments to reflect the change in amounts expected to be payable under the residual value guarantee, (b) there is a change in future lease payments resulting from a change in an index or a rate used to determine those payments. The Bank remeasure the lease liability to reflect those revised lease payments only when there is a change in the cash flows. The Bank will determine the revised lease payments, for the remainder of the lease term, based on the revised contractual payments. The bank recognizes the amount of the remeasurement of the lease liability as an adjustment to theright-of-use asset.
As of January 1, 2019, the Bank measured the lease liability at the present value of the lease payments discounted using the incremental borrowing rate.
h. | Allowances for loan losses |
The Bank has established allowances to cover the expected losses of certain financial assets that have been determined in accordance with the regulations and instructions of the CAS and models and methodologies based on individual and collective analysis of the borrowers, approved by the Board of Directors with the aim of establishing in a timely manner allowances required and sufficient enough to cover expected losses based on risk characteristics of debtors and their loans that determine the payment behavior and subsequent collection.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
20 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
Processes and policies compliance are evaluated and supervised according to the established internal control procedures with the purpose of ensuring its compliance and an adequate level of allowances to cover expected and incurred losses.
Individual assessment of borrowers is performed when the customer, due to its size, complexity or exposure, is required to be identified and analyzed on an individual basis. Collective assessment is used for a large number of transactions with homogeneous characteristics and small amounts and related to individuals or small size entities.
In order to establish allowances for loan losses, an assessment of the loans and contingent loans portfolios is performed as indicated below:
● | Individual allowances for the normal portfolio. |
● | Individual allowances for the substandard portfolio. |
● | Individual allowances for thenon-compliant portfolio. |
● | Group allowances for the normal portfolio. |
● | Group allowances for thenon-compliant portfolio. |
i. | Individual allowances |
When a debtor is considered as individually significant, i.e. with significant levels of debt and for those ones that are not significant but cannot be classified in groups of financial assets with homogeneous credit risk characteristics, and due to its size and complexity or exposure it is required to be individually assessed.
The methodology used to classify and determine its allowances is performed in accordance with ChapterB-1 ”Provisions for credit risk” from CAS, assigning risk categories to each debtor according to the following detail:
Normal portfolio
It correspond to debtors whose capacity payments allows them to comply with their obligations and commitments, and according to the economic-financial situation this condition will not change. The classifications assigned to this portfolio are the categories that goes from A1 to A6. Notwithstanding the above, the Bank must maintain a minimal allowance percentage of 0.5% over its loan portfolio and contingent loans that form part of the Normal portfolio.
Substandard portfolio
The substandard portfolio includes the borrowers which have financial difficulties, or whose payment capacity worsened significantly, presenting reasonable doubt that the principal and interest under the contractually agreed terms, indicating that they are less likely to comply with their financial obligations in the short term. In addition, borrowers that recently held loans in default for over 30 days also are included in the substandard portfolio. The classifications assigned to this portfolio are categories B1 to B4.
Normal and Substandard portfolios
As part of the debtors’ individual analysis, the Bank classifies its debtors into the aforementioned categories, assigning probabilities of default (PD) and loss given default (LGD), which yield the expected loss percentages as a result. These variables are regulated by the CMF to be applied to each of the individual categories.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
Below are presented the probabilities of default and loss given default, as established on the CAS:
Type of portfolio | Debtor category | Probability of default | Loss given default | Expected loss | ||||||||||
(PD) | (LGD) | (EL) | ||||||||||||
(%) | (%) | (% allowance) | ||||||||||||
Normal portfolio | A1 | 0.04 | 90.00 | 0.03600 | ||||||||||
A2 | 0.10 | 82.50 | 0.08250 | |||||||||||
A3 | 0.25 | 87.50 | 0.21875 | |||||||||||
A4 | 2.00 | 87.50 | 1.75000 | |||||||||||
A5 | 4.75 | 90.00 | 4.27500 | |||||||||||
A6 | 10.00 | 90.00 | 9.00000 | |||||||||||
Substandard portfolio | B1 | 15.00 | 92.50 | 13.87500 | ||||||||||
B2 | 22.00 | 92.50 | 20.35000 | |||||||||||
B3 | 33.00 | 97.50 | 32.17500 | |||||||||||
B4 | 45.00 | 97.50 | 43.87500 |
In order to determine the amount of allowance to be established, the first step is to determine the net exposure which is comprised of loans and receivables plus loan commitments, less the amount to be recovered by collateral execution and then the corresponding expected losses percentages are applied. For collateral the Bank must demonstrate that the value considered as an exposure deduction reasonably reflects the value that the collateral would have when disposed. The credit risk category of the debtor is substituted by the credit risk category of the guarantor only if the guarantor is an entity with a credit risk classification corresponding to an investment grade or higher, granted by a national or international classification agency approved. In any case the guaranteed values may be deducted from the exposure amount. The procedure apply only in the case of financial or real guarantees.
Non-compliant portfolio
Non-compliant portfolio includes the loans to borrowers for which recovery is considered remote, given that they have suffered a loss event resulting in impairment. This portfolio includes borrowers with evident signs of possible bankruptcy, as well as those in which a forced debt renegotiation is required, and also includes any borrower with loans in default for equal to or greater than 90 days in the payment of interest or principal of any loan. This portfolio includes borrowers classified under categories C1 to C6. Provision is estimated including all the borrowers loans and 100% of the loan commitments that those borrowers maintain.
In allocating allowances on thenon-compliant portfolio, loss rate percentages are used, which must be applied to the exposure, corresponding to the sum of loans and receivables and loan commitments held by the same borrower. In order to apply this percentage, an expected loss rate must be estimated first, deducting from the exposure the amounts expected to be recovered by execution of collateral and. in the case of having solid data that justifies them, deducting also the net present value of expected recoveries that can be obtained by execution of collection actions, net of expenses associated with them.
That loss rate must be classified into one of the nine categories defined according to the range of losses effectively expected by the Bank for all the operations of an individual borrower.
Allowance percentages to be applied over the exposition are as follows:
Type of portfolio | Risk scale | Expected loss range | Allowance | |||
Non-compliant portfolio | C1 | Up to 3% | 2% | |||
C2 | More than 3% and up to 20% | 10% | ||||
C3 | More than 20% and up to 30% | 25% | ||||
C4 | More than 30% and up to 50% | 40% | ||||
C5 | More than 50% and up to 80% | 65% | ||||
C6 | More than 80% | 90% |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
Loans are classified in this category until there is observable evidence for their payment capacity and payment behavior, regardless ofcharging-off loans that comply with the conditions established in the accounting policy indicated in letter t) “Impaired loans and charge-offs”,charge-off section title II of ChapterB-2 of the CAS.
To remove a debtor from this portfolio, once the circumstances that made it be classified in this category are overcome according to these standards, all the following requirements must be met:
1) | None of the debtor obligations with the Bank are overdue for more than 30 days. |
2) | No newre-financing of loans has been granted. |
3) | At least one of the payments received includes principal payment (total or partial). |
4) | If the debtor has a loan with partial payments due within six months, two payments have been made. |
5) | If the debtor has to pay monthly installments for one or more loans, at least four consecutive installments have been paid. |
6) | The debtor shows no direct unpaid debts in the consolidated information provided by the CMF, unless those debts are not material. |
ii) Group allowances
Collective assessment are used to deal with a large number of loan transactions with small amounts granted to individuals and small size companies. This type of assessment, as well as the criteria to apply them, must be consistent with those used when loans were granted.
To establish allowances, collective assessment requires grouping loans with homogeneous characteristics in terms of type of debtor and loan conditions, in order to conform by technically formulated methodologies and following prudential criteria, the payment behavior of the group and the recoveries for defaulted loans.
Based on the above, the groups are assigned with a probability of default (PD) and loss given default (LGD) considering the profile that best suits the loan. Net exposure is calculated, which includes the book value of the loan plus contingent loans.
Standard method for mortgage loans allowances
The Bank applies the standard method for mortgage loans allowances established by the CAS. According to this method the provision factor to be applied, represented by the expected loss (EL) over the amount of the mortgage loans, depends on the overdue of each loan and the relation, at the end of each month, between the gross exposure and the corresponding collateral (LTV), according to the following table:
LTV range | Number overdue days | 0 | 1 - 29 | 30 - 59 | 60 - 89 | Non-compliant portfolio | ||||||||||||||||
LTV£ 40% | PI (%) | 1.0916 | 21.3407 | 46.0536 | 75.1614 | 100.0000 | ||||||||||||||||
PDI (%) | 0.0225 | 0.0441 | 0.0482 | 0.0482 | 0.0537 | |||||||||||||||||
PE (%) | 0.0002 | 0.0002 | 0.0094 | 0.0222 | 0.0362 | |||||||||||||||||
40% < LVT£ 80% | PI (%) | 1.9158 | 27.4332 | 52.0824 | 78.2511 | 100.0000 | ||||||||||||||||
PDI (%) | 2.1955 | 2.8233 | 2.9192 | 2.9192 | 3.04130 | |||||||||||||||||
PE (%) | 0.0421 | 0.7745 | 1.5204 | 2.3047 | 3.04130 | |||||||||||||||||
80% < LVT£ 90% | PI (%) | 2.5150 | 27.0300 | 52.5800 | 79.6952 | 100.0000 | ||||||||||||||||
PDI (%) | 21.5527 | 21.6600 | 21.9200 | 22.1331 | 22.2310 | |||||||||||||||||
PE (%) | 0.5421 | 6.0496 | 11.5255 | 17.6390 | 22.2310 | |||||||||||||||||
LVT > 90% | PI (%) | 2.7400 | 28.4300 | 53.0800 | 80.3677 | 100.0000 | ||||||||||||||||
PDI (%) | 27.2000 | 29.0300 | 29.5900 | 30.1558 | 30.2436 | |||||||||||||||||
PE (%) | 0.7453 | 8.2532 | 15.7064 | 24.2355 | 30.2436 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
23 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
In case the same debtor has more than one mortgage loan with the Bank and one of those loans is 90 days overdue or more all those loans are incorporated to theNon-compliant portfolio, calculating allowances for each one of those loans applying the corresponding percentage according to the LTV.
For mortgage loans related to housing programs and benefits from the Estate of Chile, when guaranteed by the corresponding auction insurance, the allowance percentage could be weighted for a loss mitigating factor, which depends on the LTV percentage and the value of the property at inception. The loss mitigating factors are those shown in the table below:
Range LTV | MP factor of mitigation of losses for credits with state insurance of auction | |||||||
Section V: House price at inception (UF) | ||||||||
V£ 1,000 | 1,000 < V£ 2,000 | |||||||
LTV£ 40% | 100 | % | 100 | % | ||||
40% < LTV£ 80% | 100 | % | 100 | % | ||||
80% < LTV£ 90% | 95 | % | 96 | % | ||||
LTV > 90% | 84 | % | 89 | % |
Standard method for commercial loans allowances
The Bank uses the three standard models stablished on the CAS, in order to estimate the allowances for loan losses of the group commercial portfolio. Percentages and parameters to be used in order to determine the provision are determined on CAS.
● | Commercial leasing operations |
Expected loss percentage (%) is applied over the current value of commercial leasing operations (including the purchase option). The factor used is determined based on the overdue of each operation, the type of leased asset and; the relationship at the end of each month between the current value of each operation and the value of the leased asset (LTV), as indicated in the following tables:
Probability of default (PD) applicable according to overdue and type of leased asset (%) | ||||
Days of default of the operation at the end of the month | Type of asset | |||
Real Estate | Non-real state | |||
0 | 0.79 | 1.61 | ||
1-29 | 7.94 | 12.02 | ||
30-59 | 28.76 | 40.88 | ||
60-89 | 58.76 | 69.38 | ||
Non-compliant portfolio | 100.00 | 100.00 |
Loss Given Default (LGD) applicable based on range of LTV and type of asset (%) | ||||
LTV= Operation current value / Fair value of the leased asset | ||||
LTV range | Real Estate | Non-real state | ||
LTV <= 40% | 0.05 | 18.2 | ||
40% < LTV <= 50% | 0.05 | 57.00 | ||
50% < LTV <= 80% | 5.10 | 68.40 | ||
80% < LTV <= 90% | 23.20 | 75.10 | ||
LTV > 90% | 36.20 | 78.90 |
The LTV relationship is determined considering the guarantee appraisal value, expressed in UF for real estate and in Chilean pesos fornon-real estate, recorded at inception, considering any transitory event that may cause an increase on the value of the asset.
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
● | Student loans |
The expected loss (%) is applied over the amount of the student loan and the exposure of the contingent credit when applicable. The factor used is determined based on the type of student loan and the collectable payment of principal or interest, at the end of each month. Only when payment is due, the factor will also depend on overdue.
Probability of default (PD) applicable according to collectibility, overdue and type of student loan (%) | ||||||
If loan is collectable | Days overdue | type of student loan | ||||
CAE | CORFO or other | |||||
0 | 5.2 | 2.9 | ||||
1-29 | 37.2 | 15.0 | ||||
Yes | 30-59 | 59.0 | 43.4 | |||
60-89 | 72.8 | 71.9 | ||||
Non-compliant portfolio | 100.0 | 100.0 | ||||
No | N/A | 41.6 | 16.5 |
Loss Given Default (LGD) applicable based on collectability and type of student loan (%) | ||||
Collectable capital and intrest | Type of student loan | |||
CAE | CORFO or others | |||
Yes | 70.9 | |||
No | 50.3 | 45.8 |
Loans granted in accordance with Law No. 20,027, the bank considers the state as a qualified guarantee for 90% of the loan.
● | Generic commercial loans and factoring |
Factoring operations and commercial loans, other than those indicated above, expected loss (%) is applied over the amount of the loan and on the exposure of the contingent credit. The factor used is determined based on whether the operation has guarantees and it’s overdue. In addition for those operations with guarantees, the relationship between the debtor´s obligations to the bank and the value of the guarantees (LTV) is used to determine the factor as indicated in the following tables:
Probability of default (PD) applicable according to overdue and LTV range (%) | ||||||
Overdue | With guarantee | Without guarantee | ||||
LTV <=100% | LTV >100% | |||||
0 | 1.86 | 2.68 | 4.91 | |||
1-29 | 11.60 | 13.45 | 22.93 | |||
30-59 | 25.33 | 26.92 | 45.30 | |||
60-89 | 41.31 | 41.31 | 61.63 | |||
Non-compliant portfolio | 100.00 | 100.00 | 100.00 |
Loss Given Default (LGD) applicable based on LTV relationship (%) | ||||
LTV <= 60% | 5.0 | |||
With guarantee | 60% < LTV <= 75% | 20.3 | ||
75% < LTV <= 90% | 32.2 | |||
90% < LTV | 43.0 | |||
Without guarantee | 56.9 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
A guarantee can only be considered if, the guarantee was constituted in favor of the Bank with preference and if the guarantees is directly associates with the debtor´s credits (not shared with other debtors). For the purposes of calculating the LTV , the invoices assigned in the factoring operations, nor the guarantees associated with mortgage loans can be considered.
The guarantees used in calculating the LTV relationship may be of a specific or general purpose, including those that are simultaneously specific and general. For specific guarantees, the LTV ratio must be calculated independently for each guaranteed transaction. For general and specific guarantees, LTV is determined as the division between the sum of the amounts of the loan and exposures of contingent credits and the general, or general and specific guarantees considering any restriction.
Non-compliant portfolio – group
Non-compliant portfolio includes the loans to borrowers for which recovery is considered remote, given that they have suffered a loss event resulting in impairment. This portfolio includes borrowers with evident signs of possible bankruptcy, as well as those in which a forced debt renegotiation is required, and also includes any borrower with loans overdue for a period equal to or greater than 90 days in the payment of interest or principal of any loan.
The following can be excluded from the groupnon-compliant portfolio:
a) | Mortgage loans overdue for less than 90 days, unless the debtor has another loan of the same type with large overdue; and, |
b) | Student loans as set forth in Law No.20,027, that do not meet the conditions indicated in Circular No.3,454 dated December 10, 2008. |
All debtor’s loans should be classified in theNon-compliant portfolio until a normalization of its behavior and payment capacity can be observed, regardless of charge-offs requirements indicated in the accounting policy detailed in letter w), charge-offs section title II, ChapterB-2 of the CAS. In order to remove a debtor from theNon-compliant portfolio, once the circumstances that made it be classified in this category are overcome according to these standards, required to comply with the copulative conditions indicated in paragraph (i) above.
iii) Guarantees
Guarantees can be considered for allowances calculation purposes only if they are legally documented and comply with all conditions and requirements to be executable in Bank’s favor.
In all cases, for purposes of the CAS, the Bank should be able to demonstrate the mitigating effect of the guarantees over the inherent credit risk of the exposures. For allowances calculation purposes, guarantees will be treated according to the following, as applicable:
1) | Guaranty agreement. Considers contractual agreements to guarantee a specific loan or loans in a way that the coverage over the exposure can be clearly defined and where the rights to collect have been unquestionably transferred over to the guarantor. |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
2) | Guarantees.In order to apply the deduction method or to determine recovery rates, valuation of property and other guarantees (mortgages or other assets or financial assets placed under guarantee) must reflect the net inflow that will be obtained from the sale of the assets, debts instruments or shares in the event that the borrower falls into default and a secondary source of payment is required. In appling the deduction method, the amount to be recovered by executing the guarantee, corresponds to the present value of the asset sold in its current market condition at disposal, minus all expenses required to keep the asset in its current conditions and to sell them, all in accordance with the Bank policies and terms established by Law for assets disposal. |
3) | Security deposit. On this type of guarantees the adjustment of its fair value may be deducted from the exposition, solely when the guarantee can be established with the unique aim to guarantee compliance with the related loans. |
Leased assets
Estimated losses when establishing allowances based on the assessment method corresponding to each debtor, consider the amount that will be obtained if the leased asset are sold, taking into account any potential impairment for the assets in case of debtor’s default and the related recovery and relocation expenses.
Factoring operations
Establishing allowances for factoring operations will consider as counterparty the entity ceding rights over the endorsed in favor of the Bank, when the cession is recourse for the latter, and to the debtor when the cession has been made without recourse.
iv) Additional provisions
The Bank may establish additional provisions to those recognized by using its models, in accordance with the methology stablished on ChapterB-1 of the CAS. Such provisions can be established to cover potential losses due to macroeconomic changes, in order to anticipate recessions in the future that may adversely affect the Bank. The release of those provisions is performed when a positive Outlook is anticipated.
According to the above, additional provisions shall always correspond to general allowances for commercial, consumer or mortgage loans, or to identify segments of them and in no case can be used to compensate deficiencies in the Bank’s models.
As of September 30, 2019 and December 31, 2018 the Bank maintains additional provisions for its commercial, consumer and mortgage loans portfolios for an amount of MCh$12,742 (see Note 21 “Provisions”).
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
l) | New accounting pronouncements |
New accounting pronouncements introduced by the CMF |
1) | Circular No 3,638 dated July 6, 2018 Compendium of Accounting Standards. Establishes a standard method to estimate allowances for loan losses of collectively assessed commercial loans on ChapterB-1 and Circular No. 3,647 dated January 31, 2019 Compendium of Accounting Standards. ChaptersB-1. Complements instructions on factoring operations related to the standar method proposed for collectively assessed commercial loans. |
These circulars are part of a procces lead by the CMF (“the Commission”) in order to standardized methodologies to estimate allowances for loan losses stablished on a collectively basis, a process which began in December 2014.
The proposed methods and risk factors considered are the following:
Commercial leasing portfolio: considers risk factors based on days overdue, type of leased asset (real estate ornon-real estate) and gross exposure and the corresponding collateral (LTV).
Student portfolio: considers the type of loan granted, if the payment is collectable and days overdue, in case the loan is due.
Collectively assesed commercial portfolio: considers risk factors based on days overdue, if there are any guarantees associated to the loan and the coverage of guarantees over the loan.
In order to recognize the accounting effects of its first application, the Comission has stablished that its impact must be recognized as a change on accounting estimate in accordance with IAS 8 and, therefore, be recorded on the income statement.
Circular No. 3,647 complements instructions on factoring operations, in order to recognize the difference on risk factors presented on recourse factoring andnon-recourse factoring operations. On this basis, it has been deemed necessary to introduce a particular factor to the component “ Loss given Default ”(hereinafter LGD) of the standard method for the commercial portfolio of group analysis, which must be considered in the estimation of the allowances for loan losses of those operations, as provided in ChapterB-1 of the Compendium of Accounting Standards.
In accordance with the aforementioned, the following adjustments was introduced by Circular No. 3,647 on section 3.1.2:
- The expression “and factoring” is added to the end of the title of literal c), which contains the standard methodology that should be used for factoring operations.
- It is incorporated a table which contains the LGD for recourse factoring, that which must be considered for factoring operations with the responsibility of th assignor, also specifying the factor that applies otherwise.
The implementation of both circulars was mandatory as of July 1, 2019
The impact of the adoption of both circulars is disclosed in Note 2”Accounting Changes”.
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Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
2) | Circular No 3,645, January 11, 2019 Compendium of Accounting Standards. Leases according to IFRS 16. Modify and supplement instructions. ChaptersA-2,B-1,C-1 andC-3 and Circular No. 3,649 Compendium of Accounting Standards. ChapterC-3 Leases according to IFRS 16. Supplements instructions. |
Instructs on the need to clarify how banks should apply the criteria defined in IFRS 16 “Leases” which introduces changes in the CAS.
1. ChapterA-2 Valuation of fixed assets and right of use assets under lease. For all assets recognized in accordance with IAS 16 and IFRS 16 respectively, the cost method, less accumulated depreciation / amortization and accumulated impairment, should be applied as measurement after initial recognition.
2. ChapterB-1 Replaces instructions on goods delivered under lease contracts replaces the term “lessor” by “lessee”.
3. ChapterC-1 No. 4 of Title II introduces the items “Right of use asset under lease agreements” “Lease contract liabilities” in the Statement of Financial Position model, which introduces the following changes:
- Note 14 Fixed assets, right of use asset under lease agreements and lease contracts liabilities. This note will include all the information on fixed assets, related to Note 31.
- All the information that refers to the financial and operational leases and the obligations for such lease agreements signed by the banks and their subsidiaries as lessees must also be incorporated in this note, in accordance with the disclosures required by IFRS 16.
4. ChapterC-3 In order to adapt the formats to the new instructions on leases and to cover certain information needs with a greater breakdown, items are disclosed per asset for the right of use assets under lease and lease contracts liabilities.
Regarding the treatment as a lessee of the lease agreements expressed in the Development Unit and the consequences of the adjustment experienced by the liability, within the framework of the criteria defined in International Financial Reporting Standard No. 16 (IFRS 16), Circular 3,649 introduces the following modification to ChapterC-3 of the Compendium of Accounting Standards:
1. On the statement of financial position model, the explanatory glossaries of line items 1650 “Right of use asset under lease agreements” and 2550 “Lease contracts liabilities” are modified.
2. On the income statement model, the amounts recorded during fiscal year 2019 in item 4150.7.51 “Readjustments” must be reclassified, at the end of May at the latest, to line item 1650 “Right of use asset under lease agreements”.
The adoption of this new circular had impacts on the presentation of these Interim Consolidated Financial Statements. These impacts are presented in Note 2 “Accounting Changes”.
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Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
New accounting pronouncements introduced by IASB |
3) | Standards and interpretations that have been adopted in these Interim Consolidated Financial Statements |
3.1) IFRS 16 “Leases”
On January 13, 2016, the IASB published a new standard, IFRS 16 “Leases”. The new standard will imply that most leases are presented in the tenants’ balance sheet under a single model, eliminating the distinction between operating and financial leases. However, the accounting for the lessors remains largely unchanged and the distinction between operating and financial leases is retained. IFRS 16 replaces IAS 17 “Leases” and related interpretations and is effective for periods beginning on or after January 1, 2019, early application is allowed, provided that IFRS 15 “Income from Contracts with Customers” is also applied.
The impacts of the adoption of this standard are presented in Note 2 “Accounting Changes“and its corresponding disclosures in Note 15 “Assets for right of use and lease contract liability”.
3.2) IFRIC 23 “Uncertainty regarding the treatment of Income Taxes”
Issued on June 7, 2017, it aims to reduce the diversity in how companies recognize and measure a tax liability or a tax asset when there is uncertainty about the treatment of income tax. The Interpretation deals with how to reflect the uncertainty in the accounting for income taxes, being applicable to the determination of the tax base (tax loss), taxable bases, unused fiscal losses, tax credits not used and tax rates when there is uncertainty about tax treatments under IAS 12.
The adoption of this interpretation had no impact on the Interim Consolidated Financial Statements.
3.3) Annual improvements 2015-2017 cycle
Amendment published in December 2017 introduces the following improvements:
• IFRS 3 “Business Combinations” / IFRS 11 “Joint Agreements” - Treat the prior interest in a joint operation, as a business combination in stages.
• IAS 12 “Income Tax” - Deals with the income tax consequences of payments of financial instruments classified as equity.
• IAS 23 “Loan Costs” - Deals with eligible costs for capitalization.
The implementation is mandatory from January 1, 2019.
The adoption of these improvements had no impact on the Interim Consolidated Financial Statements.
3.4) Amendment to IAS 19 “Employee Benefits” - Reduction or Settlement
In February 2018, the International Accounting Standards Board issued the Amendment, Reduction or Settlement of the Plan (Amendments to IAS 19). Modifications to accounting when a modification, reduction or liquidation of the plan occurs.
The adoption of this amendment had no impact on the Interim Consolidated Financial Statements.
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
4) | Standards and interpretations that have been issued, but have not entered into force in these Interim Consolidated Financial Statements. |
4.1) IFRS 9 “Financial Instruments” – Final version
On November 12, 2009, the International Accounting Standard Board (IASB) issued IFRS 9, “Financial Instruments.” On October 28, 2010, the IASB published a revised version which included the implementation guides on the classification and measurement of financial liabilities. On November 19, 2013, the IASB issued an amendment, which includes a new general model for hedge accounting.On July 24, 2014, the IASB issued the final version of IFRS 9, which contains the accounting requirements for financial instruments, in replacement of IAS 39 “Financial Instruments: Recognition and Measurement.”
The standard establishes the following requirements:
Classification and Measurement: Financial assets are to be classified on the basis of the business model in which they are held and the characteristics of their contractual cash flows. The 2014 version of IFRS 9 introduces a measurement category called “fair value with change in other comprehensive income” for certain debt instruments. Financial liabilities are classified in a manner similar to IAS 39 “Financial Instruments: Recognition and Measurement”, however, there are differences in the requirements applicable to the measurement of the entity’s own credit risk.
Impairment: The 2014 version of IFRS 9 introduces an “expected credit loss” model for the measurement of impairment of financial assets, so it is not necessary for an event related to the credit to occur before the recognition of the credit losses.
Hedge accounting: Introduces a new model that is designed to align hedge accounting more closely with risk management, when they cover exposure to financial andnon-financial risk.
Derecognition of accounts: The requirements for derecognition of financial assets and liabilities keep the existing requirements of IAS 39 “Financial Instruments: Recognition and Measurement”.
IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Early adoption is permitted. However, the local regulator has not authorized its application, therefore it has no effect on these Interim Consolidated Financial Statements.
Amendment to IFRS 9 “Financial instruments”
Published on October 17, 2017, this amendment allows more assets to be measured at amortized cost than in the previous version of IFRS 9, in particular some prepaid financial assets with negative compensation. Qualifying assets, which include some loans and debt securities that would otherwise have been measured at fair value through profit or loss (FVTPL). To qualify for the amortized cost, the negative compensation must be “reasonable compensation for the early termination of the contract”.
The amendments are effective for annual periods beginning on January 1, 2019.
Prepayment Features with Negative Compensation (amendments to IFRS 9)
In October 2017, the IASB issued an amendment to IFRS 9 on “Advance payments with negative compensation”. These conditions have been successfully modified.The modifications are effective for annual periods beginning on January 1, 2019.
The Bank Administration has not adopted the amendments before mentioned in order to comply with the requirements of the local regulator, who has not authorized the application of IFRS 9, therefore the amendment have no effect on these Interim Consolidated Financial Statements.
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
4.2) Amendment to Conceptual Framework
In March, 2018, the International Accounting Standards Board (IASB) issued a complete set of concepts for the presentation of financial reports, the revised Conceptual Framework for financial information, replacing the previous version of the Conceptual Framework issued in 2010.
The revised Conceptual Framework has an effective date from January 1, 2020.
The Bank’s Management is evaluating the potential impact of the adoption of these amendments/ new pronouncements in its Interim Consolidated Financial Statements.
4.3) Amendment to IFRS 3 “Business Combination” – Business definition
In October 2018, the International Accounting Standards Board (IASB) issued the Definition of a business to enable companies to decide whether the activities and assets they acquire are a business or simply a group of assets. Reducing the definitions of a company by focusing the definition of products on goods and services provided to customers and other income from ordinary activities, instead of providing dividends or other economic benefits directly to investors or reducing costs. Amendment to IFRS 3 or has a validity date from January 1, 2020.
The Bank’s Management is evaluating the potential impact of these amendments / new pronouncements in its Interim Consolidated Financial Statements.
4.4) | Amendment to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” |
On October 31, 2018, the IASB issued ‘Definition of Material (Amendments to IAS 1 and IAS 8)’ to clarify the definition of ‘material’ and to align the definition used in the Conceptual Framework and the standards themselves.
The changes in Definition of Material all relate to a revised definition of ‘material’ which is quoted below from the final amendments:“Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.”
The new definition of material is found in IAS 1, Presentation of Financial Statements. The definition of material in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors has been replaced with a reference to IAS 1.
The amendments are effective for annual periods beginning on January 1, 2020.
The Bank’s Management is evaluating the potential impact of the adoption of these amendments / new pronouncements in its Interim Consolidated Financial Statements.
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Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 1 – General Information and Summary of Significant Accounting Policies, continued
4.5) | Amendment to IAS 28 “Investments in associates and joint ventures” |
On October 12, 2017, the IASB published Long-Term Participations in Associates and Joint Ventures (Amendments to IAS 28). The amendments clarify that IFRS 9, including its impairment requirements, applies to long-term interests. Additionally, when applying IFRS 9 to long-term participations, an entity does not take into account the adjustments to its book values required by IAS 28 (that is, adjustments to the book value of long-term shares that originate from the allocation of Investment losses or impairment assessment in accordance with IAS 28).
The amendments apply retrospectively to annual periods beginning on or after January 1, 2019. Early application is allowed. Specific transitional provisions apply depending on whether the application for the first time of the amendments coincides with that of IFRS 9.
The adoption of this amendment had no impact on these financial statement, in accordance with the provisions of numeral 12 of ChapterA-2, Limitations or Precisions to the Use of General Criteria, of the CAS, this standard (IFRS 9) or its amendments will not apply, subsequent improvements, as long as the CMF does not authorize and therefore has its mandatory use for all Banks.
4.6) | Amendments to IFRS 9, IAS 39 and IFRS 7 “Reform of the reference interest rate” |
Published in September 2019, the amendment provides certain simplications in relation to the reform of reference interest rates. The simplifications relate to hedge accounting and hace an effect on the IBOR reform, the quality generally should not cause hedge accounting to end. However, any inefficiency of coverage must continue to be recorded as a profit or loss.
The Bank’s Management is currently evaluating the potential impact on the adoption of this amendment in its Consolidated Financial Statements.
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 2 – Accounting Changes
a) | Adoption of IFRS 16 “Leases” |
On January 13, 2016, the IASB published IFRS 16 “Leases”. The new standard, adopted on January 1, 2019, requires that leases that meet the requirements set by the standard to be presented on the tenant balance sheet under a single model, eliminating the distinction between operating and financial leases.
The Bank adopted the “prospectively modified” approach for the initial application of the standard, as of January 1, 2019 the required measurements were performed in order to determine the right of use assets under lease agreements and the lease contracts liabilities to be recognized as of the application date onwards, without considering the date of origin of the contract. For more detail on the recognition practices, refer to letters g) and h) of Note 1.
Bank’s Management evaluated the impact on the adoption of this standard through the valuation of its executed lease agreements, recognizing an right of use assets under lease agreements and lease contracts liabilities as of January 1, 2019 of MCh$176,795, which generated impact on the consolidated solvency indicators of 11 basis points going from 14.62% to 14.51%(for additional information see Note 35 Risk Management letter d) Capital Requirements).
Below is a breakdown of the impacts and reclassifications due to initial application of the standard as of January 1, 2019:
As of December 31, 2018 | Initial recognition | Reclassifications (*) | As of January 1, 2019 | |||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||
Right of use asset under lease agreements | - | 176,795 | 36,920 | 213,715 | ||||||||||||||||
Fixed assets | 95,564 | - | (36,920) | 58,644 | ||||||||||||||||
Subtotals assets | 95,564 | 176,795 | - | 272,359 | ||||||||||||||||
Lease contracts liabilities | - | 176,795 | - | 176,795 | ||||||||||||||||
Subtotals liabilities | - | 176,795 | - | 176,795 |
(*) Corresponds to improvements in leased properties which have been reclassified as assets for the right of use assets under lease agreements resulting from the adoption of IFRS 16 “Leases” and in accordance with Circular No. 3,645 of January 11, 2019 issued by the SBIF (currenty CMF). See letter d) in Note 14 “Fixed assets”.
Additional disclosures for right of use assets under lease agreements and lease contracts liabilities are presented in Note 15 “Assets for right of use and lease contract liabilities”.
b) | Debit value adjustment recognition |
As of March 2019, the Bank’s Management decided to recognize in its Interim Consolidated Financial Statements the effect on the valuation of the derivatives corresponding to the Debit Value Adjustment (DVA here on). This valuation criterion generated a positive result of MCh $ 301, which has been recognized as a change in the estimate in accordance with IAS 8 “Accounting policies, changes in accounting estimates and errors”.
c) | Implementation of the standard method for commercial group provisions as stablished on circulars No. 3,638 and No. 3,647 issued by the CMF |
As of July 1, 2019, the bank implemented the standard method to determine provisions for commercial loans group portfolio. This change in criteria implied to recognize additional allowances of MCh$21,232, which has been recognized as a change in an estimate in accordance with IAS 8.
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 3 – Significant Events
As of September 30, 2019, the following significant events have influenced the operations of the Bank and its subsidiaries or the Interim Consolidated Financial Statements:
ITAÚ CORPBANCA |
Acquisition of MCC S.A. Corredores de Bolsa
On May 28, 2019, the Board of Directors of Itaú Corpbanca approved the acquisition of the MCC group, in accordance with the provisions of the Transaction Agreement and in compliance with the provisions of Title XVI of Law No. 18,046 on Corporations.
The acquisition of the shares of MCC by Itaú Corpbanca is subject to the approval of the CMF.
The detail of the aforementioned transaction is further discussed on Note 23 “Contingencies, Commitments and Responsibilities”, letter b).
Purchase of Itaú Corpbanca Colombia shares (participation held by Helm LLC and KSHC)
On May 29, 2019, the CMF authorized the Bank to acquire the participation held by Helm LLC and KSHC in Itaú Corpbanca Colombia of 19.44% and 1.38%, respectively.
Consequently, as a result of these relevant events, it is not required to recognize any effect in these Interim Consolidated Financial Statements as the transaction is still pending approval from the regulators in Colombia and Brazil.
The detail of the aforementioned transaction is further discussed on Note 23 “Contingencies, Commitments and Responsibilities”, letter b) and subsequent events related to this matter in Note 36 “Subsequent Events”.
Annual Ordinary Shareholders Meeting Agreements
At the Ordinary Shareholders’ Meeting of Itaú Corpbanca, held on March 19, 2019, the following agreements were adopted, among others:
1) | The Board of Directors was renewed, electing the following eleven (11) Directors and two (2) Acting Directors, in accordance with the Statutes of Itaú Corpbanca: |
Directors:
Jorge Andrés Saieh Guzmán Ricardo Villela Marino Jorge Selume Zaror Fernando Aguad Dagach Pedro Samhan Escándar Fernando Concha Ureta | Caio Ibrahim David Milton Maluhy Filho Andrés Bucher Cepeda Gustavo Arriagada Morales Bernard Pasquier |
Alternate Directors:
Diego Fresco Gutiérrez | Jessica López Saffie |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 3 – Significant Events, continued
It was submitted that the following directors, Mr. Gustavo Arriagada Morales, Mr. Pedro Samhan Escándar, Bernard Pasquier and Fernando Concha Ureta, were appointed as independent directors, in accordance with the provisions of article 50 bis of Law No. 18,046.
2) | It was approved to distribute 30% of the profits of the year ended on December 31, 2018 as a dividend to shareholders, which corresponds to the amount of MCh$51,614, which entitles a dividend per share of $0.100728627. |
Close of representative office
On April 24, 2019, the SBIF (currently CMF) was informed of the intention to close the representative office in Madrid, which was materialized on July 31, 2019.
ITAÚ CORREDORES DE SEGUROS S.A. |
On March 18, 2019, at the Ordinary Shareholders’ Meeting, it was approved to distribute 61.1027% of the profits of the year ended on December 31, 2018 as a dividend to the shareholders, which corresponds to the amount of MCh$14,722.
At the same Ordinary Shareholders’ Meeting, the Board of Directors of the company was renewed, and the following directors were elected:
Cristián Toro Cañas
Julián Acuña Moreno
Pablo Meyer Black
Arturo Achondo Guzmán
Walter Krefft Moreno
On August 28, 2019, the Chairman of the Board of Directors, in ordinary session, Mr. Cristián Toro Cañas, reports that on the 23rd of the same month, Mr. Arturo Achondo Guzmán submitted his resignation to the position of Chief Executive Officer and Directos of the company. In its place, the board of Directors unanimously agreed on the appointment of Mr. Felipe Benavente Nazar as Chief Executive Officer who assumed his duties as of September 2, 2019.
On September 30, 2019, in extraordinary session, the board of Directors agrees to the appointment of Mr. Felipe Benavente Nazar as Director of the company, remaining in office until the next ordinary shareholders meeting. This situation was reported to the commission for the financial market.
At the same Ordinary Shareholders’ Meeting, the Board of Directors of the company was renewed, and the following directors were elected:
Cristián Toro Cañas
Julián Acuña Moreno
Pablo Meyer Black,
Arturo Achondo Guzmán
Walter Krefft Moreno.
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Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 3 – Significant Events, continued
ITAÚ ADMINISTRADORA GENERAL DE FONDOS S.A. |
In the ordinary meeting of the Board of Directors held on February 25, 2019, Itaú AGF’s Board of Directors took knowledge and accepted the resignation of director Mr. Fernando Beyruti, consequently, and given the vacancy of the position, the Board of Directors of Itaú AGF appointed Mr. Jorge Novis Neto as a replacement for Mr. Beyruti, as of that date.
During the session, Mrs. Luciana Hildebrandi Marchione was appointed as director of the Company.
On March 18, 2019, the Ordinary Shareholders’ Meeting of Itaú Administradora General de Fondos S.A. was held, where it was approved to distribute all of the profits as of December 31, 2018, in order to be to be distributed as dividends, for an equivalent amount of MCh$6,790.
During the meeting, the renewal of the member of the Board of Directors was approved in accordance with the provisions of Article 32 of Law 18,046, the following persons were appointed as directors of Itaú Administradora General de Fondos S.A.:
Gabriel Amado de Moura Marcello Siniscalchi Julián Acuña Moreno | Jorge Novis Neto Luciana Hildebrandi Marchione |
In extraordinary session of the Board of Directors held on May 27, 2019, the resignation of the Director of the Company, Mr. Marcello Siniscalchi, was accepted, which became effective immediately.
ITAÚ ASESORÍAS FINANCIERAS LTDA. |
On March 15, 2019, during the Ordinary Shareholders Meeting was approved to distribute 90% of the profits for the year ended December 31, 2018, amounting to MCh$7,489 as dividends.
On April 5, 2019, the CMF through letter addressed to the General Manager of Itaú Corpbanca authorized the following:
- Recaudaciones y Cobranzas Limitada may acquire from Itaú Corpbanca Corredores de Bolsa S.A. its paticipation held over Itaú Asesoría Financieras S.A.
- Itaú Asesoría Financieras S.A. proceed to become a limited liability company.
On May 2, 2019, Itaú Corredores de Bolsa sold its participation held in Itaú Asesoría Financieras to Recaudaciones y Cobranzas Limitada, corresponding to 3 shares of a total of 30,000. On the same date the Extraordinary Shareholders Meeting of Itaú Asesoría Financieras was held, where it was agreed to transform the company from a public corporation to a limited liability company, changing its corporate name to Itaú Asesoría Financieras Limitada.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
37 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 3 – Significant Events, continued
CORPLEGAL S.A. |
On January 8, 2019, authorization was requested to the CMF in order to proceed with the dissolution of the subsidiary CorpLegal SA, in order to conduct the dissolution, Itaú Corpbanca’s will acquire the participation of CorpLegal held by Itaú Corredores de Bolsa (the “transaction”), both subsidiaries of the Bank, as a result of this transaction, all of its shares will be held by one shareholder, meeting with the provisions of article 103 number 2 of Law 18,046 to dissolve a Corporation, the transaction was authorized by SBIF(currently CMF) on February 26, 2019.
During the Board of Directors of the Bank held on March 27, 2019, it was approved the dissolution of CorpLegal S.A. in the terms before mentioned.
On May 20, 2019, the dissolution of the company and subsidiary of Itaú Corpbanca, Corplegal S.A. was materialized.
ITAU CORPBANCA COLOMBIA |
Dividend Distributions
As stated on commitment held by the Bank with the Financial Superintendence of Colombia to capitalize the profits generated in 2018, it was approved at the Ordinary Shareholders Meeting on March 23, 2018, to capitalize 100% of the profits generated as of December 31, 2018 of COP$10,343,857,073.51 as legal reserve.
Directors appointment
On March 18, 2019 Shareholders Meeting was held, where by Board of Directors for the period 2019-2020 was elected, the following members where apointed:
Roberto de Santa
Ana Brigard Holguin
Luis Fernando Martínez Lema
Lema Cristián Toro Cañas
Gabriel Amado de Moura
Juan Bernabé Echeverría González
Manuel Olivares Rossetti
María Carmiña Ferro Iriarte
Mónica Inés María Aparicio Smith
Rafael Pardo Soto
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
38 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 4 – Reporting Segments
The information reported by segments is determined by the Bank on the basis of its operating segments (Chile, that includes the New York Branch, and Colombia), which are mainly differentiated by the risks and rewards that affect them.
The reporting segments and the criteria used to inform the highest authority of the Bank on the decision making of the operation are in accordance with what is set forth in IFRS 8 “Operating Segments”.
a. | Segments |
In accordance with the foregoing, the descriptions of each operating segment are as follows:
i) | Chile |
The Bank’s business activities in Chile take place mainly in the local market. It has strategically aligned its operations into the following five business areas that are directly related to its customers’ needs and the Bank’s strategy: 1) Wholesale Banking (a) Corporate Banking, (b) Large Companies, and (c) Real Estate and Construction; 2) Retail Banking (a) Itaú Private Bank, (b) Itaú Companies, (c) Itaú Personal Bank (d) Itaú and (e) Banco Condell; 3) Treasury; 4) Corporate; and 5) Other Financial Services.
The Bank manages these business areas using a reporting system for internal profitability. The operating results are regularly reviewed by the entity’s highest decision-making authority for operating decisions as one single cash generating unit, to decide on the resource allocation for the segment and evaluate its performance.
ii) | Colombia |
Colombia has been identified as a separate operating segment based on its business activities. Its operating results are reviewed regularly by the entity’s highest decision-making authority for operating decisions as one single cash generating unit, to decide about resource allocation for the segment and evaluate its performance, and separate financial information is available for it.
The commercial activities of this segment are carried out by Itaú Corpbanca Colombia S.A. and its subsidiaries.
The Bank did not enter into transactions with a particular customer or third party in excess of 10% of its total income during the nine month periods ended September 30, 2019 and 2018.
b. | Geographic Information |
Itaú Corpbanca reports revenue by segment from external customers that is:
• | Attributed to the entity’s country of domicile and |
• | Attributed, in aggregate, to all foreign countries where the entity obtains revenue. |
When income from ordinary activities from external clients attributed to a particular foreign country is significant, they will be disclosed separately. According to the previous, the group operates in two main geographical areas: Chile and Colombia. Chile segment includes the operations carried out by Itaú Corpbanca New York Branch and Colombia segment includes the operations carried out by Itaú (Panamá) S.A., Itaú Casa de Valores S.A. and Itaú Corredores de Seguros Colombia S.A.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
39 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 4 – Reporting Segments, continued
The information on interest income and inflation adjustments for the nine month periods ended September 30, 2019 and 2018, for the aforementioned geographical areas is shown below:
2019 | 2018 | |||||||||||||||||||||||||||
Chile | Colombia | Totals | Chile | Colombia | Totals | |||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Interest income | 903,842 | 371,960 | 1,275,802 | 858,561 | 400,228 | 1,258,789 | ||||||||||||||||||||||
Interes expense | (463,537) | (182,427) | (645,964) | (442,127) | (196,163) | (638,290) | ||||||||||||||||||||||
Net interest income | 440,305 | 189,533 | 629,838 | 416,434 | 204,065 | 620,499 |
c. | Information on assets, liabilities, and profits and losses |
Segment information on assets, liabilities, profits and losses for the periods indicated below is presented in accordance with the main items described in the CAS.
c.1 Assets and liabilities
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||
| Note |
| Chile | Colombia | Totals | Chile | Colombia | Totals | ||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||
Cash and deposits in banks | 5 | 562,381 | 266,136 | 828,517 | 483,416 | 504,264 | 987,680 | |||||||||||||||||||||||||||
Cash items in process of collection | 5 | 600,237 | 165 | 600,402 | 318,433 | 225 | 318,658 | |||||||||||||||||||||||||||
Trading investments | 6 | 75,338 | 143,841 | 219,179 | 44,157 | 42,781 | 86,938 | |||||||||||||||||||||||||||
Investments under resale agreements | 7 | 40,839 | 128,106 | 168,945 | 91,510 | 17,957 | 109,467 | |||||||||||||||||||||||||||
Financial derivative contracts | 8 | 3,081,341 | 127,377 | 3,208,718 | 1,266,218 | 102,739 | 1,368,957 | |||||||||||||||||||||||||||
Interbank loans, net and Loans and accounts receivable from customers, net | 9-10 | 17,470,293 | 4,465,197 | 21,935,490 | 16,710,824 | 4,464,355 | 21,175,179 | |||||||||||||||||||||||||||
Available for sale investments | 11 | 2,079,238 | 512,844 | 2,592,082 | 1,594,955 | 1,055,821 | 2,650,776 | |||||||||||||||||||||||||||
Held to maturity investments | 11 | 67,046 | 83,680 | 150,726 | 122,372 | 76,538 | 198,910 | |||||||||||||||||||||||||||
Investments in companies | 12 | 6,234 | 3,455 | 9,689 | 6,232 | 4,323 | 10,555 | |||||||||||||||||||||||||||
Intangibles | 13 | 1,420,184 | 163,891 | 1,584,075 | 1,432,529 | 181,278 | 1,613,807 | |||||||||||||||||||||||||||
Fixed assets | 14 | 36,492 | 19,094 | 55,586 | 78,430 | 17,134 | 95,564 | |||||||||||||||||||||||||||
Right of use asset under lease agreements | 15 | 169,204 | 36,197 | 205,401 | - | - | - | |||||||||||||||||||||||||||
Current taxes | 16 | 29,088 | 46,495 | 75,583 | 70,255 | 52,874 | 123,129 | |||||||||||||||||||||||||||
Deferred taxes | 16 | 175,835 | 1,728 | 177,563 | 149,894 | 4,705 | 154,599 | |||||||||||||||||||||||||||
Other assets | 17 | 584,549 | 80,296 | 664,845 | 438,329 | 123,106 | 561,435 | |||||||||||||||||||||||||||
Totals | 26,398,299 | 6,078,502 | 32,476,801 | 22,807,554 | 6,648,100 | 29,455,654 | ||||||||||||||||||||||||||||
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||
| Note |
| Chile | Colombia | Totals | Chile | Colombia | Totals | ||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||
Deposits and other demand liabilities | 18 | 2,603,286 | 1,775,799 | 4,379,085 | 2,463,722 | 1,836,753 | 4,300,475 | |||||||||||||||||||||||||||
Cash in process of being cleared | 5 | 542,067 | - | 542,067 | 247,165 | - | 247,165 | |||||||||||||||||||||||||||
Obligations under repurchase agreements | 7 | 362,381 | 28,107 | 390,488 | 370,623 | 644,991 | 1,015,614 | |||||||||||||||||||||||||||
Time deposits and other time liabilities | 18 | 9,013,281 | 2,017,134 | 11,030,415 | 8,104,729 | 2,016,382 | 10,121,111 | |||||||||||||||||||||||||||
Financial derivative contracts | 8 | 2,764,745 | 105,120 | 2,869,865 | 1,035,394 | 77,412 | 1,112,806 | |||||||||||||||||||||||||||
Interbank borrowings | 19 | 1,716,189 | 716,060 | 2,432,249 | 1,602,125 | 725,598 | 2,327,723 | |||||||||||||||||||||||||||
Debt instruments issued | 20 | 5,672,273 | 610,637 | 6,282,910 | 5,445,000 | 565,124 | 6,010,124 | |||||||||||||||||||||||||||
Other financial liabilities | 20 | 14,057 | - | 14,057 | 12,400 | - | 12,400 | |||||||||||||||||||||||||||
Lease contracts liabilities | 15 | 138,504 | 33,136 | 171,640 | - | - | - | |||||||||||||||||||||||||||
Current taxes | 16 | 8 | - | 8 | 528 | 663 | 1,191 | |||||||||||||||||||||||||||
Deferred taxes | 16 | 1 | 273 | 274 | - | 471 | 471 | |||||||||||||||||||||||||||
Provisions | 21 | 117,964 | 78,880 | 196,844 | 162,930 | 74,240 | 237,170 | |||||||||||||||||||||||||||
Other liabilities | 22 | 463,914 | 48,781 | 512,695 | 471,669 | 50,123 | 521,792 | |||||||||||||||||||||||||||
Totals | 23,408,670 | 5,413,927 | 28,822,597 | 19,916,285 | 5,991,757 | 25,908,042 |
(*) Includes Goodwill generated in business combinations between Banco Itaú Chile and Corpbanca totaling MCh$1,173,017 as of September 30, 2019 (MCh$1,178,235 as of December 31, 2018).
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
40 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 4 – Reporting Segments, continued
c.2 Income for the three and nine month periods ended September 30, 2019 and 2018
For the three month periods ended September 30, | ||||||||||||||||||||||||||
Note | 2019 | 2018 | ||||||||||||||||||||||||
Chile | Colombia | Totals | Chile | Colombia | Totals | |||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||
Net interest income | 25 | 148,929 | 55,921 | 204,850 | 139,667 | 68,431 | 208,098 | |||||||||||||||||||
Net fee and commission income | 26 | 32,772 | 9,475 | 42,247 | 37,183 | 10,073 | 47,256 | |||||||||||||||||||
Net income (expense) from financial operations | 27 | 45,971 | 12,952 | 58,923 | 58,822 | 5,815 | 64,637 | |||||||||||||||||||
Net foreign exchange gain (loss) | 28 | 19,303 | 231 | 19,534 | (29,209) | (777) | (29,986) | |||||||||||||||||||
Other operating income | 33 | 6,525 | 4,262 | 10,787 | 2,904 | 3,948 | 6,852 | |||||||||||||||||||
Provision for loan losses | 29 | (65,974) | (16,050) | (82,024) | (36,120) | (18,496) | (54,616) | |||||||||||||||||||
NET OPERATING PROFIT | 187,526 | 66,791 | 254,317 | 173,247 | 68,994 | 242,241 | ||||||||||||||||||||
Depreciation and amortization | 32 | (23,035) | (9,588) | (32,623) | (14,284) | (9,325) | (23,609) | |||||||||||||||||||
Operating expenses (*) | (95,346) | (52,572) | (147,918) | (108,287) | (52,034) | (160,321) | ||||||||||||||||||||
OPERATING INCOME | 69,145 | 4,631 | 73,776 | 50,676 | 7,635 | 58,311 | ||||||||||||||||||||
Income from investments in companies | 12 | 25 | 1 | 26 | 51 | 4 | 55 | |||||||||||||||||||
Income taxes | 16 | (35,612) | (315) | (35,927) | (11,643) | (1,904) | (13,547) | |||||||||||||||||||
CONSOLIDATED INCOME FOR THE PERIOD | 33,558 | 4,317 | 37,875 | 39,084 | 5,735 | 44,819 | ||||||||||||||||||||
For the nine month periods ended September 30, | ||||||||||||||||||||||||||
Note | 2019 | 2018 | ||||||||||||||||||||||||
Chile | Colombia | Totals | Chile | Colombia | Totals | |||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||
Net interest income | 25 | 440,305 | 189,533 | 629,838 | 416,434 | 204,065 | 620,499 | |||||||||||||||||||
Net fee and commission income | 26 | 102,871 | 26,469 | 129,340 | 110,001 | 26,456 | 136,457 | |||||||||||||||||||
Net income (expense) from financial operations | 27 | 74,520 | 16,515 | 91,035 | 115,801 | 7,271 | 123,072 | |||||||||||||||||||
Net foreign exchange gain (loss) | 28 | (1,454) | 16,358 | 14,904 | (7,044) | 6,001 | (1,043) | |||||||||||||||||||
Other operating income | 33 | 13,859 | 20,160 | 34,019 | 15,659 | 10,116 | 25,775 | |||||||||||||||||||
Provision for loan losses | 29 | (131,436) | (53,667) | (185,103) | (99,319) | (75,037) | (174,356) | |||||||||||||||||||
NET OPERATING PROFIT | 498,665 | 215,368 | 714,033 | 551,532 | 178,872 | 730,404 | ||||||||||||||||||||
Depreciation and amortization | 32 | (64,500) | (29,504) | (94,004) | (39,624) | (25,076) | (64,700) | |||||||||||||||||||
Operating expenses (*) | (293,854) | (155,050) | (448,904) | (327,995) | (156,482) | (484,477) | ||||||||||||||||||||
OPERATING INCOME | 140,311 | 30,814 | 171,125 | 183,913 | (2,686) | 181,227 | ||||||||||||||||||||
Income from investments in companies | 12 | 238 | 1,932 | 2,170 | 297 | 1,244 | 1,541 | |||||||||||||||||||
Income taxes | 16 | (37,825) | (10,856) | (48,681) | (45,662) | 9,048 | (36,614) | |||||||||||||||||||
CONSOLIDATED INCOME FOR THE PERIOD | 102,724 | 21,890 | 124,614 | 138,548 | 7,606 | 146,154 |
(*) Includes personnel salaries and expenses, administrative expenses, impairment, and other operating expenses.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
41 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 5 – Cash and Cash Equivalents
a. Cash and Cash Equivalents detail
The detail of balances included under cash and cash equivalents is as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||
MCh$ | MCh$ | |||||||
Cash and deposits in banks | ||||||||
Cash | 257,918 | 255,449 | ||||||
Deposits in the Central Bank of Chile | 42,705 | 70,444 | ||||||
Deposits in local banks | 7,905 | 4,422 | ||||||
Deposits in foreign banks | 519,989 | 657,365 | ||||||
Subtotals cash and deposits in banks | 828,517 | 987,680 | ||||||
Cash items in process of collection, net (1) | 58,335 | 71,493 | ||||||
Highly liquid financial instruments (2) | 38,916 | 194,412 | ||||||
Investments under resale agreements (3) | 168,945 | 109,467 | ||||||
Totals cash and cash equivalents | 1,094,713 | 1,363,052 |
(1) See letter b. “Cash in process of collection and in process of being cleared” on the next page.
(2) Highly liquid financial instruments: Corresponds to those financial instruments included in the trading andavailable-for-sale portfolios with maturities that do not exceed three months from the acquisition date and the detail is as follows:
Note | As of September 30, 2019 | As of December 31, 2018 | ||||||||||
MCh$ | MCh$ | |||||||||||
Highly liquid financial instruments | ||||||||||||
Trading investments | 6 | 6,304 | 15,741 | |||||||||
Available for sale investments | 11 | 32,612 | 178,671 | |||||||||
Totals | 38,916 | 194,412 |
(3) Investments under resale agreements: Corresponds to resale agreements with maturities that do not exceed three months from the acquisition date, which are presented under the item “Investments under resale agreements” in the Interim Consolidated Statement of Financial Position. The detail is as follows:
Note | As of September 30, 2019 | As of December 31, 2018 | ||||||||||
MCh$ | MCh$ | |||||||||||
Investments under resale agreements | 7 a) | 168,945 | 109,467 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
42 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 5 – Cash and Cash Equivalents, continued
b. Cash in process of collection and in process of being cleared
Cash items in process of collection and in process of being cleared represent domestic transactions, which have not been processed by the Central Bank of Chile, or international transactions that may be delayed in settlement due to timing differences. All before mentioned transactions are settled during the next 12 to 24 working hour. The detail of these balances is as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||
MCh$ | MCh$ | |||||||
Assets | ||||||||
Documents held by other banks (documents to be cleared) | 59,490 | 77,085 | ||||||
Funds receivable | 540,912 | 241,573 | ||||||
Subtotals assets | 600,402 | 318,658 | ||||||
Liabilities | ||||||||
Funds payable | 542,067 | 247,165 | ||||||
Subtotals liabilities | 542,067 | 247,165 | ||||||
Cash items in process of collection, net | 58,335 | 71,493 |
c. Other operating cash flows
Based on the nature of its activities, the Bank considers that its funding has a direct relationship with its loan and investing portfolio; for such purpose all those activities are taken into consideration to determine, approve and monitor the financial strategies that guide the Bank with respect to the composition of its assets and liabilities, cash inflows and outflows and transactions with financial instruments.
Finally, the Bank, based on its overall business strategy, considers that gains and losses derived from these transactions are part of the main revenue generating activities and core business, and that the presentation of the cash flows from those items under operating activities consequently shows consistency between our Interim Consolidated Statement of Income and our Interim Consolidated Statement of Cash Flows.
Examples of cash flows from operating activities are:
i.Investments under resale agreements and obligations under repurchase agreements. These items represent the cash flows (collections and payments) corresponding to the purchase and sale of obligations and securities lending associated with financial intermediation activities (see Note 7).
ii.Investments portfolio.This item represents the cash flows (collections and payments) of our trading andnon-trading portfolio related financial instruments (see Note 11).
iii.Foreign borrowings and repayment of foreign borrowings. These items represent the cash flows (collections and payments) of obligations with foreign banks (see note 20) for the financing of foreign trade loans, which are included as part of the following items: “Loans and receivables from banks” (see Note 9) and “Loans and receivables from customers” (see Note 10).
iv.Increase and repayment of other borrowings.These items represent the cash flows (collections and payments) arising from the obligations corresponding to financing or operations specific to the business (see Note 21).
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
43 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 6 – Trading Investments
The detail of the financial instruments classified as trading investments is as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||
MCh$ | MCh$ | |||||||
Chilean Central Bank and Government securities | ||||||||
Chilean Centran Bank instruments | 44,114 | 21,736 | ||||||
Other Chilean Central Bank and Government securities | 23,710 | 14,872 | ||||||
Other Chilean securities | ||||||||
Bonds | 5,573 | 3 | ||||||
Notes | 603 | 4,014 | ||||||
Other instruments | 671 | - | ||||||
Foreign financial securities | ||||||||
Bonds | 124,902 | 23,276 | ||||||
Other securities | 18,939 | 19,505 | ||||||
Investments in mutual funds | ||||||||
Funds managed by related entities | 667 | 3,532 | ||||||
Totals | 219,179 | 86,938 |
As of September 30, 2019, the trading portfolio financial assets include MCh$6,304 (MCh$15,741 as of December 31, 2018) with maturities which do not exceed three months from the acquisition date and are considered as cash equivalents (see Note 5).
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
44 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 7 – Investments under Resale Agreements and Obligations under Repurchase Agreements
a. | The Bank purchases financial instruments to resell them on a future date. As of September 30, 2019 and December 31, 2018 the instruments acquired under agreements to resell are as follows: |
As of September 30, 2019 | ||||||||||||||||
Up to 3 months | Between 3 months and 1 year | Over 1 year | Totals | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Chilean Central Bank and Government securities | ||||||||||||||||
Chilean Centran Bank instruments | - | - | - | - | ||||||||||||
Government securities | 10,032 | - | - | 10,032 | ||||||||||||
Other Chilean Central Bank and Government securities | - | - | - | - | ||||||||||||
Other Chilean securities | ||||||||||||||||
Bonds | - | - | - | - | ||||||||||||
Notes | 25,807 | - | - | 25,807 | ||||||||||||
Other securities | 5,001 | - | - | 5,001 | ||||||||||||
Foreign financial securities | ||||||||||||||||
Central Banks and Government securities | 123,682 | - | - | 123,682 | ||||||||||||
Other foreign instruments | 4,423 | - | - | 4,423 | ||||||||||||
Totals | 168,945 | - | - | 168,945 | ||||||||||||
As of December 31, 2018 | ||||||||||||||||
Up to 3 months | Between 3 months and 1 year | Over 1 year | Totals | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Chilean Central Bank and Government securities | ||||||||||||||||
Chilean Centran Bank instruments | 14,533 | - | - | 14,533 | ||||||||||||
Government securities | 76,977 | - | - | 76,977 | ||||||||||||
Other Chilean Central Bank and Government securities | - | - | - | - | ||||||||||||
Other Chilean securities | ||||||||||||||||
Bonds | - | - | - | - | ||||||||||||
Notes | - | - | - | - | ||||||||||||
Other securities | - | - | - | - | ||||||||||||
Foreign financial securities | ||||||||||||||||
Central Banks and Government securities | 17,351 | - | - | 17,351 | ||||||||||||
Other foreign instruments | 606 | - | - | 606 | ||||||||||||
Totals | 109,467 | - | - | 109,467 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
45 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 7 – Investments under Resale Agreements and Obligations under Repurchase Agreements, continued
b. | As of September 30, 2019 and December 31, 2018 the instruments acquired under agreements to repurchase are as follows: |
As of September 30, 2019 | ||||||||||||||||
Up to 3 months | Between 3 months and 1 year | Over 1 year | Totals | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Chilean Central Bank and Government securities | ||||||||||||||||
Chilean Centran Bank instruments | 244,709 | - | - | 244,709 | ||||||||||||
Government securities | 2,335 | - | - | 2,335 | ||||||||||||
Other Chilean Central Bank and Government securities | - | - | - | - | ||||||||||||
Other Chilean securities | ||||||||||||||||
Bonds | 115,337 | - | - | 115,337 | ||||||||||||
Notes | - | - | - | - | ||||||||||||
Other securities | - | - | - | - | ||||||||||||
Foreign financial securities | ||||||||||||||||
Central Banks and Government securities | - | - | - | - | ||||||||||||
Other foreign instruments | 28,107 | - | - | 28,107 | ||||||||||||
Totals | 390,488 | - | - | 390,488 | ||||||||||||
As of December 31, 2018 | ||||||||||||||||
Up to 3 months | Between 3 months and 1 year | Over 1 year | Totals | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Chilean Central Bank and Government securities | ||||||||||||||||
Chilean Centran Bank instruments | 21,018 | - | - | 21,018 | ||||||||||||
Government securities | 283,898 | - | - | 283,898 | ||||||||||||
Other Chilean Central Bank and Government securities | - | - | - | - | ||||||||||||
Other Chilean securities | ||||||||||||||||
Bonds | - | - | - | - | ||||||||||||
Notes | - | - | - | - | ||||||||||||
Other securities | 65,707 | - | - | 65,707 | ||||||||||||
Foreign financial securities | ||||||||||||||||
Central Banks and Government securities | - | - | - | |||||||||||||
Other foreign instruments | 644,991 | - | - | 644,991 | ||||||||||||
Totals | 1,015,614 | - | - | 1,015,614 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
46 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 8 – Financial Derivative Contracts and Hedge Accounting
a. Derivatives held for trading and hedge accounting
The Bank and subsidiaries use the following derivate financial instruments for hedge accounting and trading purposes, which, in order to capture the credit risk in the valuation, are adjusted to reflect the CVA (Credit Value Adjustment) and DVA (Debit Value Adjustment). The detail of these instruments is presented below:
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||
Derivatives held for hedge accounting | 276,113 | 118,986 | 86,562 | 75,615 | ||||||||||||||||
Derivatives held for trading | 2,932,605 | 2,750,879 | 1,282,395 | 1,037,191 | ||||||||||||||||
Totals | 3,208,718 | 2,869,865 | 1,368,957 | 1,112,806 |
a.1. Financial derivatives assets
As of September 30, 2019 | ||||||||||||||||||
Notional | ||||||||||||||||||
Up to 3 months | Between 3 months and 1 year | Over 1 year | Fair value | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Currency forwards | 7,385,142 | 4,032,828 | 1,149,908 | 366,895 | ||||||||||||||
Currency swaps | 524,497 | 1,178,173 | 7,078,800 | 782,550 | ||||||||||||||
Interest rate swaps | 2,303,426 | 6,611,142 | 28,742,024 | 2,055,777 | ||||||||||||||
Call currency options | 38,561 | 54,285 | 3,687 | 3,401 | ||||||||||||||
Put currency options | 9,861 | 10,727 | - | 95 | ||||||||||||||
Totals | 10,261,487 | 11,887,155 | 36,974,419 | 3,208,718 |
As of December 31, 2018 | ||||||||||||||||||
Notional | ||||||||||||||||||
Up to 3 months | Between 3 months and 1 year | Over 1 year | Fair value | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Currency forwards | 3,643,505 | 703,790 | 419,833 | 342,993 | ||||||||||||||
Currency swaps | 168,254 | 1,817,002 | 6,449,984 | 468,093 | ||||||||||||||
Interest rate swaps | 3,061,784 | 8,933,622 | 34,958,699 | 553,608 | ||||||||||||||
Call currency options | 26,435 | 102,163 | 17,750 | 4,217 | ||||||||||||||
Put currency options | 1,119 | 33,260 | - | 46 | ||||||||||||||
Totals | 6,901,097 | 11,589,837 | 41,846,266 | 1,368,957 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
47 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
a.2 Financial derivatives liabilities
As of September 30, 2019 | ||||||||||||||||||
Notional | ||||||||||||||||||
Up to 3 months | Between 3 months and 1 year | Over 1 year | Fair value | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Currency forwards | 7,070,480 | 5,095,719 | 1,263,023 | 339,432 | ||||||||||||||
Currency swaps | 169,555 | 497,441 | 5,753,112 | 592,713 | ||||||||||||||
Interest rate swaps | 1,969,122 | 6,312,493 | 29,196,376 | 1,935,557 | ||||||||||||||
Call currency options | 24,830 | 37,427 | - | 1,644 | ||||||||||||||
Put currency options | 18,398 | 30,027 | 3,047 | 519 | ||||||||||||||
Totals | 9,252,385 | 11,973,107 | 36,215,558 | 2,869,865 |
As of December 31, 2018 | ||||||||||||||||||
Notional | ||||||||||||||||||
Up to 3 months | Between 3 months and 1 year | Over 1 year | Fair value | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Currency forwards | 1,406,262 | 550,427 | 113,872 | 322,241 | ||||||||||||||
Currency swaps | 658,937 | 1,035,357 | 3,169,546 | 298,415 | ||||||||||||||
Interest rate swaps | 3,111,787 | 5,826,465 | 26,522,433 | 489,718 | ||||||||||||||
Call currency options | 11,540 | 35,344 | - | 1,493 | ||||||||||||||
Put currency options | 16,367 | 38,172 | 11,115 | 939 | ||||||||||||||
Totals | 5,204,893 | 7,485,765 | 29,816,966 | 1,112,806 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
48 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
a.3 Portfolio detail
As of September 30, 2019 and December 31, 2018 the portfolio of financial derivative instruments for hedge accounting and trading purposes are as follows:
As of September 30, 2019 | ||||||||||||||||||||||||
Notional | Fair value | |||||||||||||||||||||||
Up to 3 months | Between 3 months and 1 year | Over 1 year | Assets | Liabilities | ||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||
Derivatives held for hedge accounting | 2,621,286 | 1,549,512 | 2,979,571 | 276,113 | 118,986 | |||||||||||||||||||
Fair value hedge | ||||||||||||||||||||||||
Currency forwards | 89,390 | - | 118,507 | 18,730 | 1,395 | |||||||||||||||||||
Currency swaps | 25,125 | 26,565 | 1,997,868 | 194,805 | 56,099 | |||||||||||||||||||
Interest rate swaps | 114,515 | 26,565 | 2,116,375 | 213,535 | 57,494 | |||||||||||||||||||
Subtotals | ||||||||||||||||||||||||
Cash flows hedge | ||||||||||||||||||||||||
Currency forwards | 1,103,410 | 1,368,687 | 431,947 | 32,359 | 13,169 | |||||||||||||||||||
Currency swaps | - | - | - | - | - | |||||||||||||||||||
Interest rate swaps | - | 5,000 | 431,249 | 2,832 | 7,727 | |||||||||||||||||||
Subtotals | 1,103,410 | 1,373,687 | 863,196 | 35,191 | 20,896 | |||||||||||||||||||
Net investment in a foreign operation hedge | ||||||||||||||||||||||||
Currency forwards | 1,403,361 | 149,260 | - | 27,387 | 40,596 | |||||||||||||||||||
Subtotals | 1,403,361 | 149,260 | - | 27,387 | 40,596 | |||||||||||||||||||
Derivatives held for trading | 16,892,586 | 22,310,750 | 70,210,406 | 2,932,605 | 2,750,879 | |||||||||||||||||||
Currency forwards | 11,948,851 | 7,610,600 | 1,980,984 | 307,149 | 285,667 | |||||||||||||||||||
Currency swaps | 604,662 | 1,675,614 | 12,713,405 | 763,820 | 591,318 | |||||||||||||||||||
Interest rate swaps | 4,247,423 | 12,892,070 | 55,509,283 | 1,858,140 | 1,871,731 | |||||||||||||||||||
Call currency options | 63,391 | 91,712 | 3,687 | 3,401 | 1,644 | |||||||||||||||||||
Put currency options | 28,259 | 40,754 | 3,047 | 95 | 519 | |||||||||||||||||||
Subtotals | 16,892,586 | 22,310,750 | 70,210,406 | 2,932,605 | 2,750,879 | |||||||||||||||||||
Totals | 19,513,872 | 23,860,262 | 73,189,977 | 3,208,718 | 2,869,865 | |||||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||
Notional | Fair value | |||||||||||||||||||||||
Up to 3 months | Between 3 months and 1 year | Over 1 year | Assets | Liabilities | ||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||
Derivatives held for hedge accounting | 3,661,557 | 1,323,671 | 2,527,255 | 86,562 | 75,615 | |||||||||||||||||||
Fair value hedge | ||||||||||||||||||||||||
Currency forwards | 32,639 | 17,421 | 102,847 | 16,461 | 5,814 | |||||||||||||||||||
Currency swaps | 610,980 | 192,926 | - | 7,697 | 11,038 | |||||||||||||||||||
Interest rate swaps | 1,231 | 52,105 | 2,194,956 | 15,492 | 16,995 | |||||||||||||||||||
Subtotals | 644,850 | 262,452 | 2,297,803 | 39,650 | 33,847 | |||||||||||||||||||
Cash flows hedge | ||||||||||||||||||||||||
Currency forwards | 2,188,426 | - | 130,191 | 4,835 | 1,283 | |||||||||||||||||||
Currency swaps | - | 330,033 | - | 13,363 | 17,593 | |||||||||||||||||||
Interest rate swaps | - | 198,573 | 99,261 | 1,119 | 1,892 | |||||||||||||||||||
Subtotals | 2,188,426 | 528,606 | 229,452 | 19,317 | 20,768 | |||||||||||||||||||
Net investment in a foreign operation hedge | ||||||||||||||||||||||||
Currency forwards | 828,281 | 532,613 | - | 27,595 | 21,000 | |||||||||||||||||||
Subtotals | 828,281 | 532,613 | - | 27,595 | 21,000 | |||||||||||||||||||
Derivatives held for trading | 8,444,433 | 17,751,931 | 69,135,977 | 1,282,395 | 1,037,191 | |||||||||||||||||||
Currency forwards | 2,000,421 | 704,183 | 300,667 | 294,102 | 294,144 | |||||||||||||||||||
Currency swaps | 216,211 | 2,329,400 | 9,619,530 | 447,033 | 269,784 | |||||||||||||||||||
Interest rate swaps | 6,172,340 | 14,509,409 | 59,186,915 | 536,997 | 470,831 | |||||||||||||||||||
Call currency options | 37,975 | 137,507 | 17,750 | 4,217 | 1,493 | |||||||||||||||||||
Put currency options | 17,486 | 71,432 | 11,115 | 46 | 939 | |||||||||||||||||||
Subtotals | 8,444,433 | 17,751,931 | 69,135,977 | 1,282,395 | 1,037,191 | |||||||||||||||||||
Totals | 12,105,990 | 19,075,602 | 71,663,232 | 1,368,957 | 1,112,806 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
49 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 9 – Interbank Loans
As of September 30, 2019 and December 31, 2018 interbank loans are detailed as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||
MCh$ | MCh$ | |||||||
Local banks | ||||||||
Loans to local banks | - | - | ||||||
Allowances for loans losses | - | - | ||||||
Subtotals | - | - | ||||||
Foreign banks | ||||||||
Interbank cash loans | 25,831 | 30,507 | ||||||
Loans to foreign banks | 21,181 | 5,594 | ||||||
Non-transferable deposits with foreign banks | 11,000 | 65,556 | ||||||
Allowances for loans losses | (496) | (463) | ||||||
Subtotals | 57,516 | 101,194 | ||||||
Chilean Central Bank | ||||||||
Deposits with the Chilean Central Bank not available (*) | 52,000 | 240,050 | ||||||
Subtotals | 52,000 | 240,050 | ||||||
Totals | 109,516 | 341,244 |
(*) These are deposits that do not qualify as time deposits.
Movements in allowances and impairment for loans with domestic and foreign banks for the nine month period ended September 30, 2019 and for the year ended December 31, 2018 are detailed as follows:
For the nine month period ended September 30, 2019 | For the year ended December 31, 2018 | |||||||||||||||||||||||||||
Banks | Banks | |||||||||||||||||||||||||||
Local | Foreign | Totals | Local | Foreign | Totals | |||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Balance at the beggining of the period | - | (463) | (463) | - | (208) | (208) | ||||||||||||||||||||||
Charge-offs | - | - | - | - | - | - | ||||||||||||||||||||||
Allowances established | - | (507) | (507) | - | (344) | (344) | ||||||||||||||||||||||
Allowances released | - | 487 | 487 | - | 131 | 131 | ||||||||||||||||||||||
Impairment | - | - | - | - | - | - | ||||||||||||||||||||||
Exchange differences | - | (13) | (13) | - | (42) | (42) | ||||||||||||||||||||||
Balance at the end of the period | - | (496) | (496) | - | (463) | (463) |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
50 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 10 – Loans and accounts receivable from customers
a. Loans and accounts receivable from customers
As of September 30, 2019 and December 31, 2018 the loan portfolio is detailed as follows:
Assets before allowances | Allowances | |||||||||||||||||||||||||||||||||||
As of September 30, 2019 | Normal portfolio | Impaired portfolio | Totals | Individual allowances | Group allowances | Totals | Net assets | |||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||||||||||||||
Commercial loans | 11,203,941 | 749,327 | 11,953,268 | (286,992) | (52,154) | (339,146) | 11,614,122 | |||||||||||||||||||||||||||||
Foreign trade loans | 1,076,207 | 24,655 | 1,100,862 | (66,152) | (1,912) | (68,064) | 1,032,798 | |||||||||||||||||||||||||||||
Checking accounts debtors | 133,055 | 11,668 | 144,723 | (6,042) | (4,513) | (10,555) | 134,168 | |||||||||||||||||||||||||||||
Factoring transactions | 201,999 | 563 | 202,562 | (2,893) | (323) | (3,216) | 199,346 | |||||||||||||||||||||||||||||
Student loans | 698,398 | 67,528 | 765,926 | - | (17,894) | (17,894) | 748,032 | |||||||||||||||||||||||||||||
Leasing transactions | 890,588 | 60,501 | 951,089 | (12,179) | (3,521) | (15,700) | 935,389 | |||||||||||||||||||||||||||||
Other commercial loans and receivables | 23,658 | 2,523 | 26,181 | (612) | (1,646) | (2,258) | 23,923 | |||||||||||||||||||||||||||||
Subtotals | 14,227,846 | 916,765 | 15,144,611 | (374,870) | (81,963) | (456,833) | 14,687,778 | |||||||||||||||||||||||||||||
Mortgage loans | ||||||||||||||||||||||||||||||||||||
Loans with mortgage finance bonds | 29,939 | 2,278 | 32,217 | - | (66) | (66) | 32,151 | |||||||||||||||||||||||||||||
Endorsable mortgage mutual loans | 99,089 | 8,445 | 107,534 | - | (751) | (751) | 106,783 | |||||||||||||||||||||||||||||
Other mortgage mutual loans | 3,990,905 | 186,696 | 4,177,601 | - | (23,401) | (23,401) | 4,154,200 | |||||||||||||||||||||||||||||
Mortgage leasing transactions | 292,204 | 15,319 | 307,523 | - | (11,659) | (11,659) | 295,864 | |||||||||||||||||||||||||||||
Other mortgage loans and receivables | 19,346 | 2,034 | 21,380 | - | (197) | (197) | 21,183 | |||||||||||||||||||||||||||||
Subtotals | 4,431,483 | 214,772 | 4,646,255 | - | (36,074) | (36,074) | 4,610,181 | |||||||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||||||||||||||
Installment consumer loans | 1,830,569 | 119,376 | 1,949,945 | - | (136,562) | (136,562) | 1,813,383 | |||||||||||||||||||||||||||||
Checking account debtors | 187,545 | 17,829 | 205,374 | - | (14,888) | (14,888) | 190,486 | |||||||||||||||||||||||||||||
Credit card balances | 489,054 | 16,802 | 505,856 | - | (25,501) | (25,501) | 480,355 | |||||||||||||||||||||||||||||
Consumer leasing transactions | 3,374 | 196 | 3,570 | - | (251) | (251) | 3,319 | |||||||||||||||||||||||||||||
Other consumer loans and receivables | 42,259 | 1,603 | 43,862 | - | (3,390) | (3,390) | 40,472 | |||||||||||||||||||||||||||||
Subtotals | 2,552,801 | 155,806 | 2,708,607 | - | (180,592) | (180,592) | 2,528,015 | |||||||||||||||||||||||||||||
Totals | 21,212,130 | 1,287,343 | 22,499,473 | (374,870) | (298,629) | (673,499) | 21,825,974 | |||||||||||||||||||||||||||||
Assets before allowances | Allowances | |||||||||||||||||||||||||||||||||||
As of December 31, 2018 | Normal portfolio | Impaired portfolio | Totals | Individual allowances | Group allowances | Totals | Net assets | |||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||||||||||||||
Commercial loans | 10,694,305 | 763,083 | 11,457,388 | (345,552) | (37,531) | (383,083) | 11,074,305 | |||||||||||||||||||||||||||||
Foreign trade loans | 897,916 | 30,527 | 928,443 | (31,852) | (799) | (32,651) | 895,792 | |||||||||||||||||||||||||||||
Checking accounts debtors | 122,191 | 8,909 | 131,100 | (5,735) | (3,090) | (8,825) | 122,275 | |||||||||||||||||||||||||||||
Factoring transactions | 206,322 | 4,245 | 210,567 | (267) | (4) | (271) | 210,296 | |||||||||||||||||||||||||||||
Student loans | 624,757 | 72,090 | 696,847 | - | (16,780) | (16,780) | 680,067 | |||||||||||||||||||||||||||||
Leasing transactions | 857,066 | 71,094 | 928,160 | (16,473) | (3,732) | (20,205) | 907,955 | |||||||||||||||||||||||||||||
Other commercial loans and receivables | 32,600 | 1,953 | 34,553 | (857 | (1,099) | (1,956) | 32,597 | |||||||||||||||||||||||||||||
Subtotals | 13,435,157 | 951,901 | 14,387,058 | (400,736) | (63,035) | (463,771) | 13,923,287 | |||||||||||||||||||||||||||||
Mortgage loans | ||||||||||||||||||||||||||||||||||||
Loans with mortgage finance bonds | 36,089 | 2,275 | 38,364 | - | (103) | (103) | 38,261 | |||||||||||||||||||||||||||||
Endorsable mortgage mutual loans | 110,193 | 8,475 | 118,668 | - | (1,748) | (1,748) | 116,920 | |||||||||||||||||||||||||||||
Other mortgage mutual loans | 3,769,846 | 183,399 | 3,953,245 | - | (23,366) | (23,366) | 3,929,879 | |||||||||||||||||||||||||||||
Mortgage leasing transactions | 298,495 | 13,623 | 312,118 | - | (10,637) | (10,637) | 301,481 | |||||||||||||||||||||||||||||
Other mortgage loans and receivables | 21,311 | 2,121 | 23,432 | - | (239) | (239) | 23,193 | |||||||||||||||||||||||||||||
Subtotals | 4,235,934 | 209,893 | 4,445,827 | - | (36,093) | (36,093) | 4,409,734 | |||||||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||||||||||||||
Installment consumer loans | 1,817,663 | 104,122 | 1,921,785 | - | (118,838) | (118,838) | 1,802,947 | |||||||||||||||||||||||||||||
Checking account debtors | 193,814 | 15,678 | 209,492 | - | (18,858) | (18,858) | 190,634 | |||||||||||||||||||||||||||||
Credit card balances | 466,275 | 15,292 | 481,567 | - | (26,859) | (26,859) | 454,708 | |||||||||||||||||||||||||||||
Consumer leasing transactions | 5,729 | 474 | 6,203 | - | (397) | (397) | 5,806 | |||||||||||||||||||||||||||||
Other consumer loans and receivables | 48,850 | 1,866 | 50,716 | - | (3,897) | (3,897) | 46,819 | |||||||||||||||||||||||||||||
Subtotals | 2,532,331 | 137,432 | 2,669,763 | - | (168,849) | (168,849) | 2,500,914 | |||||||||||||||||||||||||||||
Totals | 20,203,422 | 1,299,226 | 21,502,648 | (400,736) | (267,977) | (668,713) | 20,833,935 |
Normal portfolio
This includes individual debtors in the Normal portfolio (A1 to A6) and in the Substandard portfolio (categories B1 and B2, only). For collectively assessed loans, it includes the Normal portfolio.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
51 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 10 – Loans and accounts receivable from customers, continued
Impaired portfolio
This includes individual debtors in theNon-compliant portfolio (C1 to C6) and in the Substandard portfolio (categories B3 and B4, only). For collectively assessed loans, it includes theNon-compliant portfolio.
b. Provisions
Movements in credit risk allowances for the nine month period ended September 30, 2019 and the year ended on December 31, 2018 are detailed as follows:
Individual allowances | Group allowances | Totals | ||||||||||||||||
MCh$ | MCh$ | MCh$ | ||||||||||||||||
Balances as of January 1, 2019 | 400,736 | 267,977 | 668,713 | |||||||||||||||
Portfolio charge-offs | ||||||||||||||||||
Commercial loans | (62,764) | (21,940) | (84,704) | |||||||||||||||
Mortgage loans | - | (5,388) | (5,388) | |||||||||||||||
Consumer loans | - | (113,898) | (113,898) | |||||||||||||||
Total charge-offs | (62,764) | (141,226) | (203,990) | |||||||||||||||
Allowances established | 157,218 | 261,338 | 418,556 | |||||||||||||||
Allowances released | (101,946) | (87,989) | (189,935) | |||||||||||||||
Allowances used | (6,784) | - | (6,784) | |||||||||||||||
Exchange differences | (11,590) | (1,471) | (13,061) | |||||||||||||||
Balances as of September 30, 2019 | 374,870 | 298,629 | 673,499 | |||||||||||||||
Individual allowances | Group allowances | Totals | ||||||||||||||||
MCh$ | MCh$ | MCh$ | ||||||||||||||||
Balances as of January 1, 2018 | 416,083 | 255,931 | 672,014 | |||||||||||||||
Portfolio charge-offs | ||||||||||||||||||
Commercial loans | (63,220) | (39,230) | (102,450) | |||||||||||||||
Mortgage loans | - | (7,271) | (7,271) | |||||||||||||||
Consumer loans | - | (164,680) | (164,680) | |||||||||||||||
Total charge-offs | (63,220) | (211,181) | (274,401) | |||||||||||||||
Allowances established | 207,111 | 385,068 | 592,179 | |||||||||||||||
Allowances released | (144,464) | (175,985) | (320,449) | |||||||||||||||
Allowances used | (24,662) | - | (24,662) | |||||||||||||||
Exchange differences | 9,888 | 14,144 | 24,032 | |||||||||||||||
Balances as of December 31, 2018 | 400,736 | 267,977 | 668,713 |
c. Portfolio sales
As of September 30, 2019 and 2018, Itaú (Panama) S.A., made the sale of the written off portfolio during the month of April 2019, which generated a profit for MCh$2,390 as of September 30, 2019 (profit for MCh$10,520 as of September 30, 2018). In addition, Itaú Corpbanca made portfolio sales during the months of January, May and September 2019, which generated losses of MCh$1,297 as of September 30, 2019, corresponding to loans with state guarantee (Law 20,027). Both results are included in the heading “Net income from financial operations” in the Interim Statement of Consolidated income for the period and together represent a net income of MCh$1,093 as of September 30, 2019 (net income of MCh$10,520 as of September 30, 2018). See note 27.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
52 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 11 – Investment Instruments
a. Investment instruments
As of September 30, 2019 and December 31, 2018 detail of instruments available for sale and held to maturity is as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||
Available for sale | Held to maturity | Totals | Available for sale | Held to maturity | Totals | |||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Securities quoted in active markets | ||||||||||||||||||||||||||||
Chilean Central Bank and Government securities | ||||||||||||||||||||||||||||
Chilean Central Bank instruments | 611,100 | - | 611,100 | 411,431 | - | 411,431 | ||||||||||||||||||||||
Chilean Treasury bonds | 1,339,553 | - | 1,339,553 | 913,041 | - | 913,041 | ||||||||||||||||||||||
Other government securities | 71,984 | - | 71,984 | 27,612 | - | 27,612 | ||||||||||||||||||||||
Other local institutions financial instruments | ||||||||||||||||||||||||||||
Time deposits in local banks | 13,852 | - | 13,852 | 185,501 | - | 185,501 | ||||||||||||||||||||||
Mortgage finance bonds | 44 | - | 44 | 50 | - | 50 | ||||||||||||||||||||||
Chilean financial institutions bonds | 15,945 | - | 15,945 | - | - | - | ||||||||||||||||||||||
Other local financial investments | 5,109 | - | 5,109 | 5,979 | - | 5,979 | ||||||||||||||||||||||
Foreign institutions financial instruments | ||||||||||||||||||||||||||||
Foreign Governments and Central Banks financial instruments | 465,792 | - | 465,792 | 769,693 | - | 769,693 | ||||||||||||||||||||||
Other foreign financial instruments | 68,660 | 150,726 | 219,386 | 332,560 | 198,910 | 531,470 | ||||||||||||||||||||||
Investments not quoted in active markets | - | |||||||||||||||||||||||||||
Corporate bonds | 43 | - | 43 | 4,909 | - | 4,909 | ||||||||||||||||||||||
Other financial instruments | - | - | - | - | - | - | ||||||||||||||||||||||
Totals | 2,592,082 | 150,726 | 2,742,808 | 2,650,776 | 198,910 | 2,849,686 |
As of September 30, 2019, the total of available for sale instruments with maturities that do not exceed three months from the acquisition date and that are considered cash equivalent amounts to MCh$32,612 (MCh$178,671 as of December 31, 2018) (see Note 5).
As of September 30, 2019, financial investmentsavailable-for-sale portfolio includes unrealized gains of MCh$52,155 (MCh$23,456 as of December 31, 2018) presented under “Valuation accounts” in Equity. The distribution of the unrealized gains between attributable to equity holders and attributable tonon-controlling interest is of MCh$42,547 as of September 30, 2019 (MCh$16,337 as of December 31, 2018) and MCh$9,608 as of September 30, 2019 (MCh$7,119 as of December 31, 2018), respectively.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
53 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 11 – Investment Instruments, continued
b. Unrealized gains and losses of the available for sale portfolio
Unrealized gains and losses of the available for sale portfolio as of September 30, 2019 and December 31, 2018 are detail as follows:
As of September 30, 2019 | ||||||||||||||||||||
Amortized | Unrealized | Fair value | ||||||||||||||||||
cost | Gain | Losses | ||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||
Securities quoted in active markets | ||||||||||||||||||||
Chilean Central Bank and Government securities | ||||||||||||||||||||
Chilean Central Bank instruments | 610,023 | 2,445 | (1,368) | 611,100 | ||||||||||||||||
Chilean Treasury bonds | 1,314,425 | 26,470 | (1,342) | 1,339,553 | ||||||||||||||||
Other government securities | 69,734 | 2,289 | (39) | 71,984 | ||||||||||||||||
Other local institutions financial instruments | ||||||||||||||||||||
Time deposits in local banks | 13,850 | 2 | - | 13,852 | ||||||||||||||||
Mortgage finance bonds | 43 | 1 | - | 44 | ||||||||||||||||
Chilean financial institutions bonds | 15,816 | 129 | - | 15,945 | ||||||||||||||||
Other local financial investments | 3,189 | 1,920 | - | 5,109 | ||||||||||||||||
Foreign institutions financial instruments | ||||||||||||||||||||
Foreign Governments and Central Banks financial instruments | 444,142 | 21,829 | (179) | 465,792 | ||||||||||||||||
Other foreign financial instruments | 68,665 | 1 | (6) | 68,660 | ||||||||||||||||
Investments not quoted in active markets | ||||||||||||||||||||
Corporate bonds | 40 | 3 | - | 43 | ||||||||||||||||
Other financial instruments | - | - | - | - | ||||||||||||||||
Totals | 2,539,927 | 55,089 | (2,934) | 2,592,082 | ||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||
Amortized | Unrealized | Fair value | ||||||||||||||||||
cost | Gain | Losses | ||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||
Securities quoted in active markets | ||||||||||||||||||||
Chilean Central Bank and Government securities | ||||||||||||||||||||
Chilean Central Bank instruments | 411,223 | 533 | (325) | 411,431 | ||||||||||||||||
Chilean Treasury bonds | 911,596 | 2,458 | (1,013) | 913,041 | ||||||||||||||||
Other government securities | 28,131 | - | (519) | 27,612 | ||||||||||||||||
Other local institutions financial instruments | ||||||||||||||||||||
Time deposits in local banks | 185,468 | 70 | (37) | 185,501 | ||||||||||||||||
Mortgage finance bonds | 50 | - | - | 50 | ||||||||||||||||
Chilean financial institutions bonds | - | - | - | - | ||||||||||||||||
Other local financial investments | 4,001 | 1,978 | - | 5,979 | ||||||||||||||||
Foreign institutions financial instruments | ||||||||||||||||||||
Foreign Governments and Central Banks financial instruments | 752,791 | 24,505 | (7,603) | 769,693 | ||||||||||||||||
Other foreign financial instruments | 329,136 | 5,801 | (2,377) | 332,560 | ||||||||||||||||
Investments not quoted in active markets | ||||||||||||||||||||
Corporate bonds | 4,924 | 5 | (20) | 4,909 | ||||||||||||||||
Other financial instruments | - | - | - | - | ||||||||||||||||
Totals | 2,627,320 | 35,350 | (11,894) | 2,650,776 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
54 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 12 – Investments in Companies
a. | As of September 30, 2019 and December 31, 2018 detail of the investments in companies is presented below: |
Company | As of September 30, 2019 | As of December 31, 2018 | ||||||||||||||||||||
% | MCh$ | % | MCh$ | |||||||||||||||||||
Nexus S.A. | 12.9000 | 1,056 | 12.9000 | 1,056 | ||||||||||||||||||
Transbank S.A. | 8.7200 | 3,616 | 8.7200 | 3,616 | ||||||||||||||||||
Combanc S.A. | 8.1800 | 305 | 8.1800 | 305 | ||||||||||||||||||
Redbanc S.A. | 2.5000 | 110 | 2.5000 | 110 | ||||||||||||||||||
Sociedad Interbancaria de Depósitos de Valores S.A. | 9.4000 | 132 | 9.4000 | 132 | ||||||||||||||||||
Imerc OTC S.A. | 8.6600 | 1,012 | 8.6600 | 1,012 | ||||||||||||||||||
A.C.H Colombia (*) | 4.2100 | 193 | 4.2100 | 192 | ||||||||||||||||||
Redeban Multicolor S.A. (*) | 1.6000 | 238 | 1.6000 | 221 | ||||||||||||||||||
Cámara de Compensación Divisas de Colombia S.A. (*) | 6.2056 | 86 | 6.2056 | 80 | ||||||||||||||||||
Cámara de Riesgo Central de Contraparte S.A. (*) | 2.4300 | 161 | 2.4300 | 162 | ||||||||||||||||||
Servibanca - Tecnibanca (*) (**) | - | - | 4.5300 | 951 | ||||||||||||||||||
Bolsa de Valores de Colombia (*) | 0.6700 | 633 | 0.6700 | 547 | ||||||||||||||||||
Credibanco (*) | 6.3662 | 2,129 | 6.3662 | 2,153 | ||||||||||||||||||
Patrimonio Autónomo Fiducredicorp (Comisionista) (*) | 5.2630 | 18 | 5.2630 | 18 | ||||||||||||||||||
Totals | 9,689 | 10,555 |
(*) Correspond to investments in other companies held by subsidiaries established in Colombia.
(**) During February 2019, 100% of the shares of the company was sold for MCh$1,818, generating a profit of MCh$1,028 recorded in net income (expense) from financial operations.
(***) During the month of August 2018 and based on Combanc Shareholders agreement, Itaú Corpbanca transfered 96 shares, at a price per share of $621,935.82, decreasing its participation from a 9.18% to 8.18%. As a result of this assignment, a profit of MCh$22 was generated.
b. | During the nine month periods ended September 30, 2019 and 2018, the Bank received dividends, according to the following detail: |
2019 | 2018 | |||||||||||
MCh$ | MCh$ | |||||||||||
Dividends received | 1,142 | 1,519 | ||||||||||
Totals | 1,142 | 1,519 |
c. | Movement on investments in companies for the nine month period ended September 30, 2019 and December 31, 2018, is as follows: |
As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Balances as of January 1, | 10,555 | 10,412 | ||||||||
Acquisition of investments | - | - | ||||||||
Sale of investments | (951) | (39) | ||||||||
Exchange differences | 85 | 182 | ||||||||
Totals | 9,689 | 10,555 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
55 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 13 – Intangible Assets
a. | Composition of intangibles assets as of September 30, 2019 and December 31, 2018 is as follows: |
Items | Useful life years | Remaining amortization years | Net assets as 2019 | Gross balances | Accumulated amortization | Net assets as 2019 | ||||||||||||||||
No. | No. | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||
Computer equipment system or software | 6 | 2 | 151,840 | 290,059 | (122,473) | 167,586 | ||||||||||||||||
IT projects and licenses | 6 | 1 | 12,614 | 33,319 | (27,548) | 5,771 | ||||||||||||||||
Assets generated in business combination | 1,448,859 | 1,548,944 | (139,545) | 1,409,399 | ||||||||||||||||||
- Goodwill | 1,178,235 | 1,173,017 | - | 1,173,017 | ||||||||||||||||||
- Trademarks | 10 | 7 | 37,002 | 51,424 | (18,250) | 33,174 | ||||||||||||||||
- Customer relationship | 12 | 9 | 69,259 | 91,577 | (30,003) | 61,574 | ||||||||||||||||
- Core deposits | 9 | 6 | 164,363 | 232,926 | (91,292) | 141,634 | ||||||||||||||||
Other projects | 10 | - | 494 | 4,055 | (2,736) | 1,319 | ||||||||||||||||
Totals | 1,613,807 | 1,876,377 | (292,302) | 1,584,075 | ||||||||||||||||||
Items | Useful life years | Remaining amortization years | Net assets as 2018 | Gross balances | Accumulated amortization | Net assets as of 2018 | ||||||||||||||||
No. | No. | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||
Computer equipment system or software | 6 | 3 | 113,355 | 263,179 | (111,339) | 151,840 | ||||||||||||||||
IT projects and licenses | 6 | 2 | 16,663 | 42,601 | (29,987) | 12,614 | ||||||||||||||||
Assets generated in business combination | 1,474,570 | 1,561,442 | (112,583) | 1,448,859 | ||||||||||||||||||
- Goodwill | 1,169,243 | 1,178,235 | - | 1,178,235 | ||||||||||||||||||
- Trademarks | 10 | 8 | 42,106 | 51,432 | (14,430) | 37,002 | ||||||||||||||||
- Customer relationship | 12 | 10 | 76,038 | 93,591 | (24,332) | 69,259 | ||||||||||||||||
- Core deposits | 9 | 7 | 187,183 | 238,184 | (73,821) | 164,363 | ||||||||||||||||
Other projects | 10 | 1 | 646 | 3,645 | (3,151) | 494 | ||||||||||||||||
Totals | 1,605,234 | 1,870,867 | (257,060) | 1,613,807 |
b. | Movements on gross balances for intangible assets as of September 30, 2019 and December 31, 2018 are as follows: |
Computer
| IT projects and
| Goodwill
| Assets generated in business combination | Other
| Totals
| |||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Balances as of January 1, 2019 | 263,179 | 42,601 | 1,178,235 | 383,207 | 3,645 | 1,870,867 | ||||||||||||||||||||||
Acquisitions | 34,148 | 56 | - | - | - | 34,204 | ||||||||||||||||||||||
Exchange differences | (1,678) | 11 | (5,218) | (4,172) | - | (11,057) | ||||||||||||||||||||||
Others | (5,590) | (9,349) | - | (3,108) | 410 | (17,637) | ||||||||||||||||||||||
Balances as of September 30, 2019 | 290,059 | 33,319 | 1,173,017 | 375,927 | �� | 4,055 | 1,876,377 | |||||||||||||||||||||
Computer
| IT projects and
| Goodwill
| Assets generated in business combination | Other
| Totals
| |||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Balances as of January 1, 2018 | 203,080 | 42,474 | 1,169,243 | 375,952 | 3,645 | 1,794,394 | ||||||||||||||||||||||
Acquisitions | 58,085 | 111 | - | - | - | 58,196 | ||||||||||||||||||||||
Disposals | (147) | - | - | - | - | (147) | ||||||||||||||||||||||
Exchange differences | 2,161 | 16 | 8,992 | 7,255 | - | 18,424 | ||||||||||||||||||||||
Balances as of December 31, 2018 | 263,179 | 42,601 | 1,178,235 | 383,207 | 3,645 | 1,870,867 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
56 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 13 – Intangible Assets, continued
c. | Movements on accumulated amortization of intangible assets for the nine month period ended September 30, 2019 and for the year ended December 31, 2018 are as follows: |
Computer equipment system or software | IT projects and licenses | Assets generated in business combination | Other projects | Totals | ||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Balances as of January 1, 2019 | (111,339) | (29,987) | (112,583) | (3,151) | (257,060) | |||||||||||||||
Amortization for the period | (22,191) | (2,203) | (30,135) | (370) | (54,899) | |||||||||||||||
Disposals | 3 | - | - | - | 3 | |||||||||||||||
Exchange differences | 770 | (8) | 1,255 | - | 2,017 | |||||||||||||||
Others | 10,284 | 4,650 | 1,918 | 785 | 17,637 | |||||||||||||||
Balances as of September 30, 2019 | (122,473) | (27,548) | (139,545) | (2,736) | (292,302) | |||||||||||||||
Computer system or software | IT projects and licenses | Assets generated in business combination | Other projects | Totals | ||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||
Balances as of January 1, 2018 | (89,725) | (25,811) | (70,625) | (2,999) | (189,160) | |||||||||||||||
Amortization for the year | (20,868) | (4,164) | (40,976) | (150) | (66,158) | |||||||||||||||
Exchange differences | (746) | (12) | (982) | (2) | (1,742) | |||||||||||||||
Balances as of December 31, 2018 | (111,339) | (29,987) | (112,583) | (3,151) | (257,060) |
d. | Impairment |
Itaú Corpbanca evaluates, at the end of each reporting period, whether there is any indication of impairment of any asset (including Goodwill). If indications exists, or when an impairment test is required, the Bank estimates the recoverable amount for the asset.
As of September 30, 2019 and December 31, 2018 there is no indication nor concrete evidence of impairment (see details in Note 32). As of the date of these Interim Consolidated Financial Statements, there have been no events that require impairment to be recorded.
e. | Restrictions |
Itaú Corpbanca and its subsidiaries have no restrictions on intangible assets as of September 30, 2019 and December 31, 2018. In addition, no intangible assets have been pledged as collateral to secure the fulfillment of any obligations.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
57 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 14 – Fixed Assets
a) | Fixed Assets |
i) | Fixed assets as of September 30, 2019 and December 31, 2018 are broken down as follows: |
Useful life years | Remaining amortization years | Net assets as of 2019 | Gross balances | Accumulated depreciation | Net assets as of 2019 | |||||||||||||||||||||||
No. | No. | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Land and buildings | 19 | 14 | 43,065 | 16,599 | (4,557) | 12,042 | ||||||||||||||||||||||
Equipment | 3 | 1 | 32,607 | 78,022 | (51,975) | 26,047 | ||||||||||||||||||||||
Others | 3 | 2 | 19,892 | 48,431 | (30,934) | 17,497 | ||||||||||||||||||||||
- Furniture | 9,373 | 27,314 | (18,767) | 8,547 | ||||||||||||||||||||||||
- Others | 10,519 | 21,117 | (12,167) | 8,950 | ||||||||||||||||||||||||
Totals | 95,564 | 143,052 | (87,466) | 55,586 | ||||||||||||||||||||||||
Useful life years | Remaining amortization years | Net assets as of 2018 | Gross balances | Accumulated depreciation | Net assets as of 2018 | |||||||||||||||||||||||
No. | No. | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Land and buildings | 19 | 14 | 83,151 | 65,843 | (22,778) | 43,065 | ||||||||||||||||||||||
Equipment | 3 | 1 | 25,160 | 80,383 | (47,776) | 32,607 | ||||||||||||||||||||||
Others | 3 | 2 | 22,268 | 50,248 | (30,356) | 19,892 | ||||||||||||||||||||||
- Furniture | 10,357 | 27,440 | (18,067) | 9,373 | ||||||||||||||||||||||||
- Leased assets | - | 28 | (28) | - | ||||||||||||||||||||||||
- Others | 11,911 | 22,780 | (12,261) | 10,519 | ||||||||||||||||||||||||
Totals | 130,579 | 196,474 | (100,910) | 95,564 |
The useful life presented in the preceding tables, corresponds to the total useful life and residual useful life for the Bank’s fixed assets. Total useful lives have been determined based on our expected use of the assets, considering quality of the original construction, the environment in which the assets are located, quality and degree of maintenance carried out, and appraisals performed by external experts of the Bank.
ii) | Movements on gross balances of fixed assets as of September 30, 2019 as follows: |
Land and buildings | Equipment | Others | Totals | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Balances as of January 1, 2019 | 65,843 | 80,383 | 50,248 | 196,474 | ||||||||||||||
Acquisitions | 887 | 5,099 | 1,335 | 7,321 | ||||||||||||||
Sales and/or disposals for the period | (663) | (792) | (727) | (2,182) | ||||||||||||||
Reclasifications due to IFRS 16 adoption (*) | (61,733) | - | - | (61,733) | ||||||||||||||
Reclassifications to assets held for sale (**) | 9,035 | - | - | 9,035 | ||||||||||||||
Exchange differences | (44) | (724) | (287) | (1,055) | ||||||||||||||
Others(***) | 3,274 | (5,944) | (2,138) | (4,808) | ||||||||||||||
Balances as of September 30, 2019 | 16,599 | 78,022 | 48,431 | 143,052 |
(*) Corresponds to improvements in leased properties which have been reclassified to assets for the right to use leased assets as a result of Circular N ° 3,465 issued by the SBIF on January 11, 2019 for adoption of IFRS 16 “Leases”. See Note 2 “Accounting Changes” and Note 15 “Assets for right of use and obligations for leases”.
(**) Corresponds to properties reincorporated to buildings and land that were previously classified as held for the sale of Itaú Corpbanca Colombia S.A.
(***) The “Equipment” column includes MCh$5,431 corresponding to purchases of equipment reclassified to computer equipment under the heading “Intangibles”. See note 13.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
58 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 14 – Fixed Assets, continued
Movements on gross balances of fixed assets as of December 31, 2018 as follows:
Land and buildings | Equipment | Others | Totals | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Balances as of January 1, 2018 | 118,481 | 65,018 | 50,773 | 234,272 | ||||||||||||||
Acquisitions | 6,207 | 16,253 | 2,296 | 24,756 | ||||||||||||||
Sales and/or retirements for the year | (14,010) | (2,334) | (3,187) | (19,531) | ||||||||||||||
Reclasification to asset held for sale (**) | (45,123) | (101) | (101) | (45,325) | ||||||||||||||
Exchange differences | 288 | 1,547 | 467 | 2,302 | ||||||||||||||
Balances as of December 31, 2018 | 65,843 | 80,383 | 50,248 | 196,474 |
(**) Corresponds to buildings owned by Itaú Corpbanca Colombia S.A. held for sale, as approved by the Board of Directors of said company, held on July 31, 2018. See Note 17 a).
(iii) | Movements on accumulated depreciation of fixed assets for nine month period ended September 30, 2019 and for the year ended December 31, 2018 are as follows: |
Land and buildings | Equipment | Others | Totals | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Balances as of January 1, 2019 | (22,778) | (47,776) | (30,356) | (100,910) | ||||||||||||||
Depreciation of the period | (735) | (6,674) | (2,902) | (10,311) | ||||||||||||||
Sales and/or disposals for the period | 45 | 708 | 512 | 1,265 | ||||||||||||||
Exchange differences | 17 | 584 | 237 | 838 | ||||||||||||||
Reclasification to IFRS 16 (*) | 24,813 | - | - | 24,813 | ||||||||||||||
Reclasification to asset held for sale (**) | (1,971) | (1,971) | ||||||||||||||||
Others | (3,948) | 1,184 | 1,575 | (1,189) | ||||||||||||||
Impairment | - | (1) | - | (1) | ||||||||||||||
Balances as of September 30, 2019 | (4,557) | (51,975) | (30,934) | (87,466) |
(*) Corresponds to Land and buildings which have been reclassified to assets for the right to use assets under lease as a result of Circular N ° 3,465 issued by the SBIF on January 11, 2019 by adoption of IFRS 16 “Leases”. See letter d) in this Note and Note 2 “Accounting Changes” and Note 15 “Assets for right of use and lease contracts liabilities”.
(**) Corresponds to properties reincorporated to building and land that were classified as held for sale by Itaú Corpbanca Colombia S.A.
Land and buildings | Equipment | Others | Totals | |||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Balances as of January 1, 2018 | (35,330) | (39,858) | (28,505) | (103,693) | ||||||||||||||
Depreciation of the year | (7,833) | (9,182) | (3,644) | (20,659) | ||||||||||||||
Sales and/or disposals for the year | 6,796 | 2,237 | 2,429 | 11,462 | ||||||||||||||
Exchange differences | (883) | (987) | (705) | (2,575) | ||||||||||||||
Reclasification to asset held for sale (**) | 14,472 | 42 | 69 | 14,583 | ||||||||||||||
Impairment | - | (28) | - | (28) | ||||||||||||||
Balances as of December 31, 2018 | (22,778) | (47,776) | (30,356) | (100,910) |
(*) Corresponds to buildings owned by Itaú Corpbanca Colombia S.A. held for sale, as approved by the Board of Directors, on July 31, 2018. See Note 17 a).
iv) | The Bank and its subsidiaries have no restrictions on fixed assets as of September 30, 2019 and December 31, 2018. Additionally, no fixed assets have been pledged as collateral to secure the fulfillment of any obligations. Furthermore, there are no amounts owned by the Bank on fixed assets as of the aforementioned dates. |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
59 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 15 - Assets for right of use and lease contracts liabilities
a) | Right of use asset under lease agrements |
In accordance with Note 2 “Accounting Changes”, no comparative balances are presented as of December 31, 2018, because the “modified prospective” approach was applied for adoption purposes.
(i) The Bank mainly has lease contracts for its branches. The composition of the item as of September 30, 2019, is as follows:
Years of
| Years of average
| Net assets as of
| Gross
| Accumulated
|
Net Assets as of
| |||||||||||||||||||
No. | No. | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||
Land and buildings | 5 | 5 | 176,795 | 191,882 | (22,930) | 168,952 | ||||||||||||||||||
Leasehold improvements | 7 | 5 | 36,920 | 64,499 | (28,050) | 36,449 | ||||||||||||||||||
Totals | 213,715 | 256,381 | (50,980) | 205,401 |
(ii) Movement on gross balances of right of use assets as of September 30, 2019 is as follows:
Land and buildings | Leasehold improvements | Totals | ||||||||||
MCh$ | MCh$ | MCh$ | ||||||||||
Balances as of January 1, 2019 | 176,795 | 61,733 | 238,528 | |||||||||
Additions of the period | 10,075 | 4,888 | 14,963 | |||||||||
Disposals due to early termination | (4,240) | (2,082) | (6,322) | |||||||||
Inflation indexation adjustments | 8,890 | - | 8,890 | |||||||||
Exchange differences | 362 | (40) | 322 | |||||||||
Balances as of September 30, 2019 | 191,882 | 64,499 | 256,381 |
(iii) Movement on accumulated depreciation of right of use assets for the nine month period ended September 30, 2019 is as follows:
Land and buildings | Leasehold improvements | Totals | ||||||||||
MCh$ | MCh$ | MCh$ | ||||||||||
Balances as of January 1, 2019 | - | (24,813) | (24,613) | |||||||||
Depreciation of the period (*) | (23,764) | (5,030) | (28,794) | |||||||||
Disposals due to early termination | 753 | 1,783 | 2,536 | |||||||||
Exchange differences | 81 | 10 | 91 | |||||||||
Balances as of September 30, 2019 | (22,930) | (28,050) | (50,980) |
(*) See note 32 “Depreciation, amortization and impairment”.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
60 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 15 – Assets for right of use and obligations for leases, continued
b) | Lease contracts liabilities |
(i)As of September 30, 2019, the lease contracts liabilities are as follows:
As of September 30, 2019
| ||||||
Mch$ | ||||||
Lease contracts liabilties | 171,640 | |||||
Total | 171,640 |
The Bank and its subsidiaries have contracts, with certain renewal options and for which there is reasonable certainty that the option will be exercised. In such cases, the renewal period is considered as part of the term of the lease used to measure theright-of-use asset and a lease liability of the contract.
(ii)Below is the movement of the period of the obligations for lease liabilities and flows of the period:
As of September 30, 2019
| ||||||
MCh$ | ||||||
Balances as of January 1, 2019 | 176,795 | |||||
Additions due to new contracts | 10,353 | |||||
Disposals due to early termination | (3,531) | |||||
Interest expenses | 3,800 | |||||
Inflation indexation adjustments | 8,890 | |||||
Exchange differences | (11) | |||||
Capital and interest payments | (24,656) | |||||
Balances as of September 30, 2019 | 171,640 |
(iii) | The following table presents a maturitie analysis for obligation for lease liabilities: |
As of September 30, 2019
| ||||||
MCh$ | ||||||
Within 1 year | 10,154 | |||||
After 1 year but within 2 years | 9,815 | |||||
After 2 years but within 3 years | 9,714 | |||||
After 3 years but within 4 years | 13,175 | |||||
After 4 years but within 5 years | 8,530 | |||||
After 5 years | 120,252 | |||||
Total | 171,640 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
61 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 16 – Current Taxes and Deferred Taxes
a) | Current taxes |
At the end of each reporting period, the Bank and subsidiaries recognize a First Category Income Tax Provision, which is determined based on currently enacted tax legislation. The net provision for current recoverable taxes recognized as of September 30, 2019 was MCh$75,575 (MCh$121,938 as of December 31, 2018), according to the following detail:
a.1)Current taxes assets and liabilities by geographical area
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||
Chile | USA (*) | Colombia | Totals | Chile | USA (*) | Colombia | Totals | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Current tax assets | 29,088 | - | 46,495 | 75.583 | 68,094 | 2,161 | 52,874 | 123,129 | ||||||||||||||||||||||||
Current tax liabilities | (8) | - | - | (8) | (528) | - | (663) | (1,191) | ||||||||||||||||||||||||
Totals net | 29,080 | - | 46,495 | 75.575 | 67,566 | 2,161 | 52,211 | 121,938 |
(*) Corresponds to the subsidiary located in New York.
a.2)Details of current tax items by geographical area
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||
Chile | USA (*) | Colombia | Totals | Chile | USA (*) | Colombia | Totals | |||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||
Income tax, rate 27% | (70,740) | - | (7,117) | (77,857) | (81,487) | - | (14,273) | (95,760) | ||||||||||||||||||||||||||
Deductions: | ||||||||||||||||||||||||||||||||||
Monthly provisional payments | 40,866 | - | 19,694 | 60,560 | 21,424 | - | 1,544 | 22,968 | ||||||||||||||||||||||||||
Tax credit for training costs | - | - | - | - | 800 | - | - | 800 | ||||||||||||||||||||||||||
Tax credit for donations | 751 | - | - | 751 | 745 | - | - | 745 | ||||||||||||||||||||||||||
Other taxes to be recovered (**) | 58,203 | - | 33,918 | 92,121 | 126,084 | 2,161 | 64,940 | 193,185 | ||||||||||||||||||||||||||
Totals | 29,080 | - | 46,495 | 75,575 | 67,566 | 2,161 | 52,211 | 121,938 |
(*) Corresponds to the subsidiary located in New York.
(**)The other taxes to be recovered correspond mainly to monthly provisional payments paid in previous years, credits for training expenses, provisional payments for absorbed profits with reimbursement right, among others.
b) Effect on income
The tax expense for the nine month periods ended September 30, 2019 and 2018 is comprised of the following items:
For the nine month periods ended September 30, | ||||||||
2019 | 2018 | |||||||
MCh$ | MCh$ | |||||||
Income tax expense | ||||||||
Income tax for the year | (74,928) | (66,766) | ||||||
Credit (debit) for deferred taxes | ||||||||
Origination and reversal of temporary differences for the year | 26,283 | 29,502 | ||||||
Subtotals | (48,645) | (37,264) | ||||||
Others | (36) | 650 | ||||||
Net (debit) credit to income taxes | (48,681) | (36,614) |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
62 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 16 – Current Taxes and Deferred Taxes, continued
c) Effective tax rate reconciliation
The following table presents the enacted tax rates for each country where the Bank operates as of September 30, 2019 and as of December 31, 2018.
Nominal tax rates by geographic area | 2019 | 2018 | ||||||
Rate | Rate | |||||||
Chile | 27.0 | % | 27.0 | % | ||||
Colombia | 37.0 | % | 37.0 | % | ||||
United States | 21.0 | % | 21.0 | % |
The main tax effects, according to the nominal tax rates of the countries that are reported consolidated, are the following:
For the nine month periods ended September 30, | ||||||||||||||||||
2019 | 2018 | |||||||||||||||||
Tax rate | Tax amount | Tax rate �� | Tax amount | |||||||||||||||
% | MCh$ | % | MCh$ | |||||||||||||||
Amount calculated by using the statutory rates | 27.00 | 46,790 | 27.00 | 49,347 | ||||||||||||||
Effect subsidiary rates Colombia | 7.60 | 13,163 | 9.84 | 17,978 | ||||||||||||||
US and Panama income tax | 2.29 | 3,970 | 0.41 | 753 | ||||||||||||||
Effect subsidiary rates Colombia (**) | 1.86 | 3,222 | (0.05) | (89) | ||||||||||||||
Effect subsidiary rates New York (**) | 0.02 | 26 | (0.15) | (270) | ||||||||||||||
Colombia Business Credit | (0.70) | (1,218) | (6.40) | (11,692) | ||||||||||||||
Rate change effect Colombia | (1.44) | (2,491) | 0.13 | 233 | ||||||||||||||
Monetary correction over tax based equity | (9.44) | (16,363) | (9.11) | (16,657) | ||||||||||||||
Other adjustments (*) | 0.90 | 1,582 | (1.64) | (2,989) | ||||||||||||||
Effective tax rate | 28.09 | 48,681 | 20.03 | 36,614 |
(*)This item contains the effects due to changes in the observed US dollar exchange rate in the valuation of the investment in the New York branch for tax purposes and other effects.
(**)These items reflect differences in tax rates of other jurisdictions, based on the Bank’s consolidated result.
d) Tax effects on Other Comprehensive Income
d.1) Tax effect recorded in other comprehensive income (loss) which may be reclassified subsequently to profit or loss:
For the nine month periods ended September 30, | ||||||||||
2019 | 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Available for sale investments | (6,981) | (1,803) | ||||||||
Net investment in foreign operations hedge | (1,698) | 14,504 | ||||||||
Cash flows hedge | (1,246) | 989 | ||||||||
Totals in other comprehensive income | (9,925) | 13,690 |
d.2) Tax effect recorded in other comprehensive income (loss) which may not be reclassified subsequently to profit or loss:
For the nine month periods ended September 30, | ||||||||||
2019 | 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Income taxes related to defined benefits obligations | 890 | 614 | ||||||||
Totals in other comprehensive income | 890 | 614 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
63 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 16 – Current Taxes and Deferred Taxes, continued
e) | Effect of deferred taxes |
e.1)Totals deferred taxes
Detail of effects for deferred taxes presented in assets and liabilities is as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||
Assets (*) | Liabilities (*) | Net | Assets (*) | Liabilities (*) | Net | |||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Allowances for loan losses | 100,766 | - | 100,766 | 109,925 | - | 109,925 | ||||||||||||||||||||||
Miscellaneous provisions | 43,732 | 195 | 43,927 | 51,033 | - | 51,033 | ||||||||||||||||||||||
Tax losses | 43,650 | - | 43,650 | 62,685 | - | 62,685 | ||||||||||||||||||||||
Lease division and others | 20,862 | - | 20,862 | 19,261 | - | 19,261 | ||||||||||||||||||||||
Net tax value of amortizable assets | 19,303 | - | 19,303 | 14,731 | - | 14,739 | ||||||||||||||||||||||
Provision associated with staff | 17,863 | - | 17,863 | 18,220 | (155) | 18,065 | ||||||||||||||||||||||
Interest andre-adjustments overdue portfolio | 7,656 | - | 7,656 | 7,377 | - | 7,377 | ||||||||||||||||||||||
Mark to market of financial instruments | 19,782 | (196) | 19,586 | (26,278) | 138 | (26,140) | ||||||||||||||||||||||
Lease effect under IFRS 16 | 762 | - | 762 | - | - | - | ||||||||||||||||||||||
Price difference not accrued | 290 | - | 290 | 288 | - | 288 | ||||||||||||||||||||||
Itaú-Corpbanca business combination | (55,716) | - | (55,716) | (61,521) | - | (61,521) | ||||||||||||||||||||||
Depreciation of plants and equipment | (44,062) | - | (44,062) | (42,581) | (42,581) | |||||||||||||||||||||||
Others | 2,675 | (273) | 2,402 | 1,451 | (454) | 997 | ||||||||||||||||||||||
Totals assets (liabilities) for deferred taxes | 177,563 | (274) | 177,289 | 154,599 | (471) | 154,128 |
(*) Presentation of the deferred taxes is in accordance to the requirements established by IAS 12 “Income Tax” as instructed by the SBIF, this generates that assets and liabilities appear with opposite sign in the table.
e.2) Deferred taxes by geographic area:
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||||
Chile | USA (*) | Colombia | Totals | Chile | USA (*) | Colombia | Totals | |||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||
Deferred tax assets | 157,596 | 18,239 | 1,728 | 177,563 | 133,375 | 16,519 | 4,705 | 154,599 | ||||||||||||||||||||||||||||
Deferred tax liabilities | (1) | - | (273) | (274) | - | - | (471) | (471) | ||||||||||||||||||||||||||||
Totals by geographic area, net | 157,595 | 18,239 | 1,455 | 177,289 | 133,375 | 16,519 | 4,234 | 154,128 |
(*) Corresponds to the subsidiary located in New York.
Effects of deferred taxes on assets and liabilities arising from temporary differences (by geographic area) are as follows:
As September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||||
Chile | USA (*) | Colombia | Totals | Chile | USA (*) | Colombia | Totals | |||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||
Allowances for loan losses | 91,654 | 258 | 8,854 | 100,766 | 101,258 | 155 | 8,512 | 109,925 | ||||||||||||||||||||||||||||
Miscellaneous provisions | 32,445 | 4,245 | 7,237 | 43,927 | 41,914 | 3,843 | 3,366 | 49,123 | ||||||||||||||||||||||||||||
Tax losses | 1,922 | 11,594 | 30,134 | 43,650 | 2,460 | 11,034 | 49,191 | 62,685 | ||||||||||||||||||||||||||||
Provision associated with staff | 17,612 | 128 | 3,122 | 20,862 | 13,871 | 139 | 4,055 | 18,065 | ||||||||||||||||||||||||||||
Net tax value of amortizable assets | 19,303 | - | - | 19,303 | 14,739 | - | - | 14,739 | ||||||||||||||||||||||||||||
Lease division and others | 12,505 | - | 5,358 | 17,863 | 9,422 | - | 9,839 | 19,261 | ||||||||||||||||||||||||||||
Interest and readjustments overdue portfolio | 7,656 | - | - | 7,656 | 7,377 | - | - | 7,377 | ||||||||||||||||||||||||||||
Lease effect under IFRS 16 | 501 | - | 261 | 762 | - | - | - | - | ||||||||||||||||||||||||||||
Price difference not accrued | 290 | - | - | 290 | 288 | - | - | 288 | ||||||||||||||||||||||||||||
Mark to market of financial instruments | 36,245 | - | (16,659) | 19,586 | (4,181) | - | (20,049) | (24,230) | ||||||||||||||||||||||||||||
Depreciation of plants and equipment | (47,187) | - | 3,125 | (44,062) | (37,513) | - | (5,068) | (42,581) | ||||||||||||||||||||||||||||
Itaú-Corpbanca business combination | (16,591) | - | (39,125) | (55,716) | (16,613) | - | (44,908) | (61,521) | ||||||||||||||||||||||||||||
Others | 1,240 | 2,014 | (852) | 2,402 | 353 | 1,348 | (704) | 997 | ||||||||||||||||||||||||||||
Totals assets (liabilities), net | 157,595 | 18,239 | 1,455 | 177,289 | 133,375 | 16,519 | 4,234 | 154,128 |
(*) Corresponds to the subsidiary located in New York.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
64 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 17 – Other Assets
a. | As of September 30, 2019 and December 31, 2018 composition of Other assets is as follows: |
As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Assets for leasing (1) | 21,516 | 33,991 | ||||||||
Assets received or awarded in lieu of payment (2) | 8,074 | 29,236 | ||||||||
Assets received in lieu of payment | 47,602 | 62,476 | ||||||||
Provisions for assets received in lieu of payment or awarded | (43,489) | (36,244) | ||||||||
Assets awarded at judicial auction | 3,961 | 3,004 | ||||||||
Other assets | 635,255 | 498,208 | ||||||||
Deposits in guarantee | 10,537 | 3,766 | ||||||||
Accounts and notes receivable (3) | 121,000 | 135,793 | ||||||||
Right of intermediation operations | 66,928 | 63,816 | ||||||||
Assets recovered from leasing for sale | 2,927 | 5,368 | ||||||||
Rentals paid in advance (4) | 5,522 | 5,698 | ||||||||
Fixed assets held for sale (6) | 10,813 | 30,742 | ||||||||
Prepaid expenses (5) | 21,190 | 19,674 | ||||||||
Collateral for financial transactions | 325,174 | 181,891 | ||||||||
IVA tax credit | 5,521 | 4,573 | ||||||||
Other assets | 65,643 | 46,887 | ||||||||
Totals | 664,845 | 561,435 |
(1) Fixed assets acquired to be ceded under financial leases.
(2) Assets received in lieu of payment correspond to assets received as payment in connection with past due loans. According to local regulations, the total amount of these assets shall not exceed, under no circumstance, the 20% of the effective equity of the Bank. These assets currently represent 1.38% as of September 30, 2019 (1.84% as of December 31, 2018) of the Bank’s effective equity.
The assets awarded in a judicial auction correspond to assets that have been acquired in a judicial auction in order to recover loans previously granted to clients, through subsequent sale. These properties are assets available for sale. The assets acquired at a judicial auction are not subject to the previously mentioned limit. For most assets, the sale is expected to be completed within one year from the date on which the asset is received or acquired. Should such assets not be sold within a year, they must bewritten-off.
Provisions are also recorded resulting from the difference between the initial values of these assets compared to their realizable value, when the last is lower.
(3) This includes rights and accounts that fall outside the Bank’s line of business such as tax credits, cash guarantee deposits and other balances pending of collection.
(4) Leases paid in advance to SMU S.A. in connection with ATM locations (see Note 33, letter b)
(5) Includes payments made in advance for different services that will be received (leases, insurance, and others).
(6) Correspond to buildings owned by Itaú Corpbanca Colombia S.A. held for sale, as approved by the Board of Directors of the entity, during the meeting held on July 31, 2018.
b. | Movements on the provision for assets received in lieu of payment or awarded for the nine month period ended September 30, 2019 and year ended on December 31, 2018 are as follows: |
As of September 30, 2019 | As of December 31, 2018 | |||||||||||
MCh$ | MCh$ | |||||||||||
Balances as of January 1, | (36,244) | (19,613) | ||||||||||
Provisions released | 9,161 | 22 | ||||||||||
Provisions established | (17,379) | (16,132) | ||||||||||
Exchange differences | 973 | (521) | ||||||||||
Balances at the end of the period, | (43,489) | (36,244) |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
65 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 18 – Deposits and Other Demand Liabilities and Time Deposits
a. | As of September 30, 2019 and December 31, 2018 deposits and other demand liabilities are as follows: |
As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Checking accounts | 2,663,308 | 2,570,436 | ||||||||
Other deposits and demand accounts | 1,409,487 | 1,396,573 | ||||||||
Advance payments received from customers | 64,217 | 79,801 | ||||||||
Other demand liabilities | 242,073 | 253,665 | ||||||||
Totals | 4,379,085 | 4,300,475 |
b. | As of September 30, 2019 andDecember 31, 2018 the composition of deposits and other time deposits is as follow: |
As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Time deposits | 11,013,339 | 10,093,703 | ||||||||
Time savings accounts | 16,847 | 27,156 | ||||||||
Other time liabilities | 229 | 252 | ||||||||
Totals | 11,030,415 | 10,121,111 |
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Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 19 – Interbank Borrowings
a. | As of September 30, 2019 and December 31, 2018 interbank borrowings are as follows: |
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||
MCh$ | MCh$ | |||||||||||||
Loans obtained from local financial institutions | ||||||||||||||
Banco BTG Pactual Chile | - | 5,863 | ||||||||||||
Subtotals | - | 5,863 | ||||||||||||
Loans from Financial Institutions abroad | �� | |||||||||||||
Sumitomo Mitsui Banking Corporation | 274,453 | 242,883 | ||||||||||||
Standard Chartered Bank | 226,268 | 68,169 | ||||||||||||
Citibank N.A. | 193,492 | 118,975 | ||||||||||||
Wells Fargo Bank, N.A. | 186,147 | 209,615 | ||||||||||||
Credicorp Capital SASAF | 157,516 | 175,326 | ||||||||||||
IFC Corporación Financiera Internacional | 154,723 | 145,817 | ||||||||||||
Bank of America, N.A. | 133,014 | 153,546 | ||||||||||||
BNP Paribas | 132,710 | 91,072 | ||||||||||||
Bank of Montreal | 105,103 | 106,586 | ||||||||||||
Banco de Crédito del Perú | 88,074 | 90,022 | ||||||||||||
Bank of Nova Scotia | 82,347 | 65,802 | ||||||||||||
BBVA Asset Management Continental S.A. (Perú) | 81,252 | 73,481 | ||||||||||||
Bancoldex S.A. (Colombia) | 77,205 | 80,394 | ||||||||||||
Banco Latinoamericano de Exportación | 54,728 | 52,817 | ||||||||||||
Interfondos S.A. Sociedad Administradora de Fondos | 53,049 | 45,149 | ||||||||||||
Corporación Andina de Fomento | 52,468 | 104,273 | ||||||||||||
Scotia Fondos Sociedad Administradora de Fondos S.A. | 50,631 | 108,979 | ||||||||||||
HSBC USA | 45,275 | 43,214 | ||||||||||||
Commerzbank A.G. | 41,384 | 75,032 | ||||||||||||
Findeter S.A. Financiera del Desarrollo Territorial | 40,876 | 38,364 | ||||||||||||
Mizuho Corporate Bank | 33,318 | 31,763 | ||||||||||||
Cobank C.B. | 30,868 | 33,850 | ||||||||||||
Apple Bank for Saving | 18,933 | 18,147 | ||||||||||||
Bancaribe Curacao Bank N.V. | 14,562 | 12,694 | ||||||||||||
Ing Bank NV | 14,313 | 30,874 | ||||||||||||
La Caixa | 13,439 | - | ||||||||||||
Export Development Canada | 11,752 | 11,199 | ||||||||||||
Zuercher Kantonalbank | 7,220 | - | ||||||||||||
China Construction Bank | 5,406 | 5,155 | ||||||||||||
Banco República | 4,866 | 1,805 | ||||||||||||
Shanghai Commercial & Savings Bank | 2,346 | 2,244 | ||||||||||||
The Export- Import Bank of Korea | 2,346 | 2,244 | ||||||||||||
Bayern Landesbank | 2,346 | 2,237 | ||||||||||||
Banco de Bogotá | - | 8,560 | ||||||||||||
Fondos SURA SAF S.A.C. | - | 2,827 | ||||||||||||
Scotiabank Perú S.A | - | 1,457 | ||||||||||||
Other Banks | 39,819 | 67,288 | ||||||||||||
Subtotals | 2,432,249 | 2,321,860 | ||||||||||||
Totals | 2,432,249 | 2,327,723 |
b. Interbank borrowings by maturity are as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||
MCh$ | MCh$ | |||||||||||||
Within 1 year | 1,956,720 | 1,829,814 | ||||||||||||
After 1 year but within 2 years | 224,619 | 319,870 | ||||||||||||
After 2 years but within 3 years | 8,613 | 17,595 | ||||||||||||
After 3 years but within 4 years | 163,040 | 77,993 | ||||||||||||
After 4 years but within 5 years | 12,773 | 11,644 | ||||||||||||
After 5 years | 66,484 | 70,807 | ||||||||||||
Totals | 2,432,249 | 2,327,723 |
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Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 20 – Debt Instruments Issued and Other Financial Liabilities
As of September 30, 2019 and December 31, 2018 composition of debt instruments issued and other financial liabilities is as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Debt instruments issued | ||||||||||
Mortgage finance bonds | 43,747 | 53,463 | ||||||||
Senior bonds | 5,182,965 | 4,882,341 | ||||||||
Subordinated bonds | 1,056,198 | 1,074,320 | ||||||||
Subtotals | 6,282,910 | 6,010,124 | ||||||||
Other financial liabilities | ||||||||||
Liabilities with the public sector | 10 | 10 | ||||||||
Borrowings from local financial institutions | 14,047 | 12,390 | ||||||||
Foreign borrowings | - | - | ||||||||
Subtotals | 14,057 | 12,400 | ||||||||
Totals | 6,296,967 | 6,022,524 |
Debts classified as short term are those that constitute demand obligations or will expire within a year.
All other debts are classified as long-term. Detail is as follows:
As of September 30, 2019 | ||||||||||||
Short-term | Long-term | Totals | ||||||||||
MCh$ | MCh$ | MCh$ | ||||||||||
Mortgage finance bonds | 8,387 | 35,360 | 43,747 | |||||||||
Senior bonds | 703,956 | 4,479,009 | 5,182,965 | |||||||||
Subordinated bonds | - | 1,056,198 | 1,056,198 | |||||||||
Debt instruments issued | 712,343 | 5,570,567 | 6,282,910 | |||||||||
Other financial liabilities | 14,057 | - | 14,057 | |||||||||
As of December 31, 2018 | ||||||||||||
Short-term | Long-term | Totals | ||||||||||
MCh$ | MCh$ | MCh$ | ||||||||||
Mortgage finance bonds | 10,434 | 43,029 | 53,463 | |||||||||
Senior bonds | 661,715 | 4,220,626 | 4,882,341 | |||||||||
Subordinated bonds | 22,209 | 1,052,111 | 1,074,320 | |||||||||
Debt instruments issued | 694,358 | 5,315,766 | 6,010,124 | |||||||||
Other financial liabilities | 12,400 | - | 12,400 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 20 – Debt Instruments Issued and Other Financial Liabilities, continued
The following tables provide with additional information, including maturities, for each type of debt issued as of September 30, 2019 and December 31, 2018.
a. | Mortgage finance bonds |
Detail of maturities for mortgage finance bonds is as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Within 1 year | 8,387 | 10,434 | ||||||||
After 1 year but within 2 years | 6,827 | 7,612 | ||||||||
After 2 years but within 3 years | 6,246 | 7,092 | ||||||||
After 3 years but within 4 years | 5,786 | 6,516 | ||||||||
After 4 years but within 5 years | 5,287 | 5,908 | ||||||||
After 5 years | 11,214 | 15,901 | ||||||||
Totals | 43,747 | 53,463 |
b. | Senior bonds |
Details for senior bonds, by currency, are as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Bonds in UF | 4,279,030 | 3,568,532 | ||||||||
Bonds in CLP | 469,350 | 416,116 | ||||||||
Bonds in USD | - | 529,363 | ||||||||
Bonds in COP | 434,585 | 368,330 | ||||||||
Totals | 5,182,965 | 4,882,341 |
Detail of maturities for senior bonds is as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Within 1 year | 703,956 | 661,715 | ||||||||
After 1 year but within 2 years | 277,102 | 637,595 | ||||||||
After 2 years but within 3 years | 397,366 | 216,695 | ||||||||
After 3 years but within 4 years | 358,280 | 446,323 | ||||||||
After 4 years but within 5 years | 732,315 | 276,047 | ||||||||
After 5 years | 2,713,946 | 2,643,966 | ||||||||
Totals | 5,182,965 | 4,882,341 |
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Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 20 – Debt Instruments Issued and Other Financial Liabilities, continued
The following table presents details for senior bonds issued:
Senior bonds issued during the nine month period ended on September 30, 2019:
Serie | Currency | Amount | Term | Issuance rate | Placement date | Maturity date | ||||||||||||
BCORAM0710 | UF | 2,000,000 | 5 years and 5 months | 3% annual | 02/11/2019 | 07/01/2024 | ||||||||||||
BCORAM0710 | UF | 3,000,000 | 5 years and 5 months | 3% annual | 02/15/2019 | 07/01/2024 | ||||||||||||
BITACU0418 | UF | 2,000,000 | 9 years and 7 months | 2% annual | 02/25/2019 | 10/09/2028 | ||||||||||||
BITACU0418 | UF | 2,000,000 | 9 years and 7 months | 2% annual | 02/26/2019 | 10/09/2028 | ||||||||||||
BITACV0418 | UF | 2,000,000 | 10 years and 7 months | 2% annual | 03/07/2019 | 10/09/2029 | ||||||||||||
BITACV0418 | UF | 2,000,000 | 10 years and 7 months | 2% annual | 03/14/2019 | 10/09/2029 | ||||||||||||
BITACW0418 | UF | 2,500,000 | 11 years and 5 months | 2% annual | 05/07/2019 | 10/09/2030 | ||||||||||||
BITACS0418 | UF | 2,000,000 | 7 years and 3 months | 2% annual | 03/07/2019 | 09/10/2026 | ||||||||||||
Totals | 17,500,000 | |||||||||||||||||
Serie | Currency | Amount | Term | Issuance rate | Placement date | Maturity date | ||||||||||||
BCORBX0914 | CLP | 40,000,000,000 | 2 years and 2 months | 5% annual | 04/07/2019 | 01/09/2021 | ||||||||||||
BCORBX0914 | CLP | 1,000,000,000 | 2 years and 2 months | 5% annual | 05/07/2019 | 01/09/2021 | ||||||||||||
BCORBX0914 | CLP | 14,500,000,000 | 2 years and 2 months | 5% annual | 10/07/2019 | 01/09/2021 | ||||||||||||
BCORBX0914 | CLP | 1,500,000,000 | 2 years and 2 months | 5% annual | 15/07/2019 | 01/09/2021 | ||||||||||||
Totals | 57,000,000,000 | |||||||||||||||||
Serie | Currency | Amount | Term | Issuance rate | Placement date | Maturity date | ||||||||||||
SUBSERIE A36 | COP | 163,035,000.000 | 3 years | 6.13% annual | 05/21/2019 | 05/21/2022 | ||||||||||||
SUBSERIE C60 | COP | 186,965,000,000 | 5 years | 2.86% annual | 05/21/2019 | 05/21/2024 | ||||||||||||
Totals | 350,000,000,000 |
Senior bonds issued during the year ended December 31, 2018:
Serie | Currency | Amount | Term | Issuance rate | Placement date | Maturity date | ||||||||||||
BCORAQ0710 | UF | 2,000,000 | 10 years and 4 months | 3% annual | 02/06/2018 | 07/01/2028 | ||||||||||||
BCORAR0710 | UF | 2,450,000 | 11 years and 4 months | 3% annual | 02/21/2018 | 07/01/2029 | ||||||||||||
BCORAR0710 | UF | 5,000,000 | 11 years and 4 months | 3% annual | 03/14/2018 | 07/01/2029 | ||||||||||||
BCORAN0710 | UF | 2,000,000 | 7 years and 5 months | 3% annual | 06/05/2018 | 07/01/2025 | ||||||||||||
Totals | 11,450,000 | |||||||||||||||||
Serie | Currency | Amount | Term | Issuance rate | Placement date | Maturity date | ||||||||||||
BCORBY0914 | CLP | 70,000,000,000 | 4 years and 5 months | 5% annual | 04/13/2018 | 09/01/2022 | ||||||||||||
Totals | 70,000,000,000 | |||||||||||||||||
Serie | Currency | Amount | Term | Issuance rate | Placement date | Maturity date | ||||||||||||
SUBSERIE B30 | COP | 55,470,000,000 | 3 years and 6 months | 1.20% annual | 11/22/2018 | 05/10/2021 | ||||||||||||
SUBSERIE C48 | COP | 258,706,000,000 | 4 years | 2.91% annual | 11/22/2018 | 11/01/2022 | ||||||||||||
Totals | 314,176,000,000 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 20 – Debt Instruments Issued and Other Financial Liabilities, continued
c. | Subordinated bonds |
Details of subordinated bonds, by currency, are as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||
MCh$ | MCh$ | |||||||
Bonds in UF | 95,894 | 95,599 | ||||||
Bonds in CLP | 784,251 | 781,925 | ||||||
Bonds in COP | 176,053 | 196,796 | ||||||
Totals | 1,056,198 | 1,074,320 |
Detail of maturities for subordinated bonds is as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||
MCh$ | MCh$ | |||||||
Within 1 year | - | 22,209 | ||||||
After 1 year but within 2 years | - | - | ||||||
After 2 years but within 3 years | - | - | ||||||
After 3 years but within 4 years | 38,702 | 18,604 | ||||||
After 4 years but within 5 years | 123,378 | 22,484 | ||||||
After 5 years | 894,118 | 1,011,023 | ||||||
Totals | 1,056,198 | 1,074,320 |
As of September 30, 2019 and December 31, 2018no issuance of subordinated bonds took place.
d. | Other financial obligations |
As of September 30, 2019 | As of December 31, 2018 | |||||||
MCh$ | MCh$ | |||||||
Within 1 year | - | - | ||||||
After 1 year but within 2 years | - | - | ||||||
After 2 years but within 3 years | - | - | ||||||
After 3 years but within 4 years | - | - | ||||||
After 4 years but within 5 years | - | - | ||||||
After 5 years | - | - | ||||||
Totals financial liabilities | - | - | ||||||
Short-term financial liabilities | ||||||||
Amounts due to credit card transactions | 14,047 | 12,390 | ||||||
Others | 10 | 10 | ||||||
Totals other financial liabilities | 14,057 | 12,400 |
As of September 30, 2019 and December 31, 2018, the Bank has not incurred in any default in payments of principal, interest or others in regards to debt instruments issued.
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 21 - Provisions
Provisions disclosed in liabilities as of September 30, 2019 and December 31, 2018 present the following detail:
As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Provisions for personnel salaries and expenses | 90,661 | 99,945 | ||||||||
Provisions for mandatory dividends | 35,192 | 51,614 | ||||||||
Provisions for contingent loans risk (1) | 47,387 | 55,290 | ||||||||
Provisions for contingencies (2) | 18,259 | 24,238 | ||||||||
Provisions for country risk | 5,345 | 6,083 | ||||||||
Totals | 196,844 | 237,170 |
(1) See Note 23, letter c
(2) Includes additional provisions for MCh$12,742 as of September 30, 2019 (MCh$6,742 as of December 31, 2018)
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 22 - Other Liabilities
As of September 30, 2019 and December 31, 2018 composition of this item is as follows:
As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Accounts and notes payable (1) (2) | 285,861 | 274,616 | ||||||||
Collateral for financial transactions | 106,018 | 91,223 | ||||||||
Payables due to brokerage transactions | 49,764 | 72,298 | ||||||||
Other liabilities | 17,625 | 17,557 | ||||||||
VAT and other monthly taxes | 8,533 | 8,604 | ||||||||
Deferred fees | 4,411 | 9,089 | ||||||||
Unearned income (3) | 698 | 270 | ||||||||
Dividends payable | 39,785 | 48,135 | ||||||||
Totals | 512,695 | 521,792 |
(1) | Obligations other than those directly related to the business operations, such as payable withholding taxes, payable social security contributions, balances due on purchases of materials, balances due on obligations under lease agreements for the acquisition of fixed assets, accounts payable for expenses, and others. |
(2) | As of December 31, 2018 it includes MCh$5,985 correspondent to a penalty fee payable to the former SBIF (currently CMF). |
(3) | It corresponds to commissions associated with financial advisory and insurance brokerage businesses that must be deferred in accordance to applicable regulations. |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 23 – Contingencies, Commitments, and Responsibilities
a) | Lawsuits and Legal Proceedings |
As of the date of issuance of these consolidated financial statements, legal actions have been filed against the Bank and its subsidiaries involving its transactions in the ordinary course of business. They are mainly lawsuits pending against the Bank related to loans and other matters, most of which, according to the Bank’s Legal Services Divisions involved in the suits, present no risk of significant loss. Notwithstanding the above, provisions for MCh$331 and MCh$956 as of September 30, 2019 and December 31, 2018, respectively have been recorded in the Consolidated Financial Statements.
Other lawsuits
Other legal actions have been filed against the Bank and its subsidiaries involving its transactions carried out in the ordinary course of business. The Bank’s maximum exposure for these lawsuits amounts to approximately MCh$23,746 as of September 30, 2019 and MCh$26,995 as of December 31, 2018. However, in Management’s opinion based on reports from the Legal Division as of September 30, 2019, it is more likely than not that these lawsuits will not result in significant losses not contemplated by the Bank in these consolidated financial statements.
Itaú Corpbanca Colombia S.A.
The Bank and its subsidiaries are involved in civil, administrative and labor proceedings. The outstanding civil and administrative proceedings, them are related to banking transactions, and the remaining ones derive from the ownership of leased assets. Such claims amount, in the aggregate, to MCh$32,476 as of September 30, 2019 (MCh$32,375 as of December, 31 2018). According to the evaluation of the expected results in each lawsuits the Bank has recorded a provision of MCh$416 as of September 30, 2019 (MCh$152 as of December 31, 2018).
b) | Commitments |
Transaction Agreement
On January 29, 2014, Inversiones Corp Group Limitada, Inversiones Saga Limitada (CorpGroup), Itaú-Unibanco Holding S.A., Corpbanca and Bank Itaú, subscribed a contract called “Transaction Agreement”, in accordance to the contract, they agreed a strategic association of its operations in Chile and Colombia. This strategic association gave rise to the merger of Corpbanca and Banco Itaú, which was be renamed “Itaú Corpbanca” and took place on April 1, 2016.
Additionally, the Transaction Agreement also included the postponement of the date for Itaú Corpbanca to purchase the shares that CorpGroup holds in Corpbanca Colombia. The purchase of those shares of Banco Corpbanca Colombia held by CorpGroup (currently representing 12.36% of shares outstanding), which was previously agreed to be carried out no later than January 29, 2017, was postponed until January 28, 2022, subject to receipt of the applicable regulatory approvals. The purchase price for the shares has not changed and will be US$3.5367 per share plus interest from August 4, 2015 until the payment date at an annual interest rate equal to Libor plus 2.7% minus the sum of the aggregate amount of dividends paid by Banco Corpbanca Colombia to CorpGroup since the date of the Transaction Agreement.
According to article 76 of the General Banking Law, investments in shares of banks established abroad are subject to the prior approval of the Superintendency of Banks and Financial Institutions (SBIF), as well as the Central Bank of Chile (BCCH), which in turn is subject to compliance with the conditions set forth in article 78 of said legal corp. Additionally, in the case of banks incorporated in Colombia, an eventual acquisition of shares in Itaú Corpbanca Colombia by Itaú Corpbanca is also subject to the prior authorization of the Financial Superintendency of Colombia (SFC).
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 23 – Contingencies, Commitments, and Responsibilities, continued
Consequently, the aforementioned transaction must be confirmed only by the occurrence of one or more future and uncertain events that are not entirely under the control of the Bank.
Purchase of Itaú Corpbanca Colombia shares (participation held by Helm LLC and KSHC)
On December 20, 2016, Helm LLC filed a lawsuit in the New York State Supreme Court (“the State Court Lawsuit”) and a Request for Arbitration before the ICC International Arbitration Court (here on the “Arbitration”), against Itaú Corpbanca, CorpGroup Holding Inversiones Lade and Itaú Corpbanca Colombia (here on collectively the “Defendants”). Helm LLC (“Helm”) alleged the defendant (i) breach the shareholders’ agreement of Itaú Corpbanca Colombia as amended and restated of HB Acquisition S.A.S. on July 31, 2013 which applies to Itaú Corpbanca Colombia, a subsidiary of Itaú Corpbanca, and (ii) the Transaction Agreement dated January 29, 2014, as amended, which regulates the merger between Banco Itaú Chile and Corpbanca, through which Itaú Corpbanca was created and the potential acquisition by Itaú Corpbanca of CorpGroup of certain shares in Itaú Corpbanca Colombia. During the course of this process, Helm demanded that Itaú Corpbanca and CorpGroup carry out the acquisition of their shares in Itaú Corpbanca Colombia at the same price agreed with CorpGroup in the Transaction Agreement, by which (at an interest rate of 9% per annum as of January 29, 2014) it would have amounted approximately to US$850 million.
On February 28, 2019, the ICC Court rejected the Helm lawsuit and ordered Helm to sell its shares in Itaú Corpbanca Colombia (“the transaction”), which represent 19.44% of the share capital of Itaú Corpbanca Colombia, to the Defendants at an approximate price of US$299 million (which includes interest at LIBOR plus 2.7% per annum as of April 1, 2016).
The Bank intends to acquire these shares from Helm. The approximate price of US$299 million implies an increase on the book value of 1.36 per share of Itaú Corpbanca Colombia as of December 31, 2018 and is consistent with the valuations of Itaú Corpbanca Colombia in the financial statements of Itaú Corpbanca. The acquisition, once perfected, will result in an estimated impact of 0.82% on Tier 1 capital (Common Equity Tier 1 capital, CET 1) of Itaú Corpbanca, on a full basis (“fully loaded”), according to the Basel III standards (using exchange rates as of February 28, 2019).
Considering that the purchase of these shares is subject to prior authorization from the Superintendence of Banks and Financial Institutions, today the Commission for the Financial Market, and the Central Bank of Chile. In this context, on March 11, 2019, the Bank has formally requested to the regulator to authorize the purchase of the shares from Helm corresponding to 19.44% as indicated above and also to Kresge Stock Holdings Company Inc (KSHC) for 1.38% of the equity of Itaú Corpbanca Colombia, respectively, as part of the shareholders’ agreement in Colombia. Both Helm LLC and KSCH are part of the shareholders’ agreement referred to above.
On May 29, 2019, the CMF authorized the Bank to acquire the participation held by Helm LLC and KSHC over Itaú Corpbanca Colombia of 19.44% and 1.38%, respectively.
On July 4, 2019, the central Bank of Chile authorized the acquisition of 19.44% participation owned by Helm LLC and 1.38% owned by KSHC, in accordance with the therms set forth by said authority for that purpose.
Additionally, Itaú Corpbanca requested authorization to proceed with the transaction aforementioned to the Financial Superintendence of Colombia (“SFC”), which is still pending of aproval. Moreover, the transaction is also subject to the approval of the Central Bank of Brazil (“BACEN”), Itaú Unibanco Holding requested approval to the regulator, which is also pending of response.
The authorization of regulators in Chile and Colombia, as well as in Brazil, is a required in order to carry out this transaction, and therefore the acquisition ofnon-controlling interest and the corresponding obligation will be reflected in the Consolidated Financial Statements once all the regulators approve the transaction.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 23 – Contingencies, Commitments, and Responsibilities, continued
MCC S.A. Corredores de Bolsa acquisition
In accordance with the Transaction Agreement executed on January 29, 2014 between Inversiones Corp Group Interhold SpA, Inversiones GASA Limitada (these last two, together “CorpGroup”), Itaú Unibanco Holding SA, Corpbanca and Banco Itaú Chile, later modified on June 2, 2015 and January 20, 2017, hereinafter the “Transaction Agreement”, Itaú Unibanco Holding S.A. assumed the obligation to transfer Itaú Corpbanca, and the latter the obligation to acquire, 100% of its shares in MCC S.A. Corredores de Bolsa (“MCC”) in accordance with the terms agreed upon and subject to normal terms and conditions for this kind of operations.
On May 28, 2019, the Board of Itaú Corpbanca approved to proceed with the acquisition of MCC, including certain companies related to MCC, in accordance with the provisions of the Transaction Agreement and in compliance with the provisions of Title XVI of the Law No. 18,046 on Corporations.
The acquisition of the shares of MCC by Itaú Corpbanca is subject to obtain the corresponding approval of the CMF.
Participation increase in Nexus S.A.
In accordance with exempt resolution No. 6,482 of September 13, 2019 the CMF authorized Banco Santander Chile to sell its 537,141 Nexus S.A. shares. Itaú Corpbanca is in the process of obtaining the approval of the Central Bank of Brazil to increase its participation in Nexus S.A., by acquiring the equivalent to 1.9% of ownership, whose approval is mandatory before executing the transaction.
c) | Contingent loans and provisions |
The following table contains the amounts for which the Bank and its subsidiaries are contractually obliged to grant loans together with the relevant allowances for loan losses. It should be noted that these loans are not recognized in the balance sheet in accordance with applicable accounting policies:
Contingent loans | Provisions (*) | |||||||||||||||
As of September 30, 2019 | As of December 31, 2018 | As of September 30, 2019 | As of December 31, 2018 | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Collateral and guarantees | 443,262 | 411,023 | 4,038 | 3,139 | ||||||||||||
Confirmed foreign letters of credit | 85,261 | 95,476 | 271 | 294 | ||||||||||||
Letters of credit issued | 1,379,039 | 1,286,805 | 9,033 | 9,231 | ||||||||||||
Available on demand credit lines | 2,606,118 | 2,143,333 | 11,222 | 9,767 | ||||||||||||
Other credit commitments | 1,189,468 | 1,447,277 | 22,823 | 32,859 | ||||||||||||
Totals | 5,703,148 | 5,383,914 | 47,387 | 55,290 |
(*) See Note 21, letter b.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
76 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 23 – Contingencies, Commitments, and Responsibilities, continued
d) Responsibilities
The Bank and its subsidiaries have the following responsibilities arising from its regular course of business:
As of September 30, 2019 | As of December 31, 2018 | |||||||
MCh$ | MCh$ | |||||||
Third party operations | ||||||||
Collections | 18,247 | 17,030 | ||||||
Transferred financial assets managed by the Bank | 1,127,468 | 1,101,327 | ||||||
Third party funds under management | 2,711,530 | 2,306,154 | ||||||
Subtotals | 3,857,245 | 3,424,511 | ||||||
Custody of securities | ||||||||
Securities held in custody | 5,390,564 | 5,896,162 | ||||||
Securities held in custody deposited in other entities | — | 315,347 | ||||||
Securities issued by the Bank held in custody | 145,091 | 148,193 | ||||||
Subtotals | 5,535,655 | 6,359,702 | ||||||
Commitments | ||||||||
Others | — | — | ||||||
Subtotals | — | — | ||||||
Totals | 9,392,900 | 9,784,213 |
e) | Guarantees, Contingencies and other |
Itaú Corredores de Seguros S.A.
In order to comply with Article 58, letter d) of the Chilean Decree with Force of Law (“DFL”) 251 of 1930, which states that, “Insurance Brokers, in order to conduct business, must comply with the requirement of contracting insurance policies as determined by the Commission for the Financial Market(Ex- Superintendency of Securities and Insurance or “SVS”), in order to correctly and fully comply with the obligations arising from its activities and especially regarding damages that may be incurred by insured parties taking policies through the brokerage house,” the subsidiary has renewed the following (civil liability and guarantee) insurance policies:
Entity | From | To | Amount (UF) | Beneficiary | ||||
Consorcio Nacional de Seguros S.A. | 04-12-2019 | 04-12-2020 | 60,000 and 500 | Itaú Corredores de Seguros S.A. |
Itaú Corredores de Bolsa Limitada
In order to comply with articles 30 and 31 of Chilean Law 18,045, this subsidiary kept a bank guarantee certificate with the Chilean Electronic Stock Exchange and Santiago Stock Exchange, to ensure the correct and complete fulfillment of its obligations as stockbroker. The beneficiaries are the current or future creditors that the subsidiary has or will have derived from its transactions. The detail of the bank guarantee certificate is as follows:
Entity | From | To | Amount (UF) | Beneficiary | ||||
Itaú Corpbanca Chile | 04-23-2019 | 04-23-2020 | 16,000 | Bolsa Electrónica de Chile | ||||
Mapfre Compañía de Seguros S.A. | 04-22-2019 | 04-22-2020 | 4,000 | Bolsa de Comercio de Santiago | ||||
Itaú Corpbanca Chile | 04-22-2019 | 04-22-2020 | 10,000 | Comisión para el Mercado Financiero |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 23 – Contingencies, Commitments, and Responsibilities, continued
In addition, the company has contracted the following fidelity guarantee insurance policy:
Entity | From | To | Amount (UF) | Beneficiary | ||||
Orión Seguros Generales S.A | 05-31-2019 | 05-31-2020 | 5,000 and 10,000 | Bolsa Electrónica de Chile |
The company pledged its shares of the Santiago Stock Exchange in favor of said company, to secure the fulfillment of the Obligations related to the transactions carried out with other brokers. This amounts to MCh$17,900 as of September 30, 2019 (MCh$12,621 as of December 31, 2018).
The Broker is registered in the Registry of Portfolio Administrators since November 22, 2017, the company granted a bank guarantee certificate from Itaú Corpbanca for an amount of UF 10,000 expiring on June 20, 2020, as a representative of the beneficiaries the guarantee pursuant to Articles 98 and 99 of Chilean Law 20,172 to secure its obligations as Portfolio Manager.
There are guarantees constituted by US$100,000 equivalent to MCh$73 and US$30,138 equivalent to MCh$22, to guarantee operations with foreign traders, Pershing and Corp FX respectively, the latter is a Chilean broker mainly dedicated to the purchase and sale, either by itself or by third-party account, of financial assets, and in general, the performance of all types of purchase and sales operations, arbitrations and/or financial assets, expressly including, derivate contracts, either swaps, forwards, options and /or arbitration, all of them with respect to any underlying assets, in addition to receiving the guarantees granted with respect to the contracts and operations mentioned above, and accepting all kinds of mandates with respects to them, whatever the good over which these guarantees fall.
As of September 30, 2019, this subsidiary is under guarantee with Bolsa de Comercio de Santiago, Bolsa de Valores in cash and financial assets ceded to guarantee transactions in Cámara de Compensación y Liquidación de Valores for MCh$6,696 (MCh$5,042 as of December 31, 2018).
Itaú Administradora General de Fondos S.A.
Below are the documented guarantees that Itau Corpbanca Administradora General de Fondos S.A. keeps current to date, which were required to comply with the obligations of portfolio management contracts, their committees, funds, payments of labor and social obligations with the contractor’s workers:
Entity | From | To | Amount (UF) | Amount (MCh$) | Beneficiary | |||||||||
Banco Santander Chile | 06-02-2017 | 08-31-2021 | 15,000 | - | Corporación de Fomento de la Producción Corfo. | |||||||||
Banco Santander Chile | 08-14-2017 | 08-30-2021 | 500 | - | Corporación de Fomento de la Producción Corfo. | |||||||||
Itaú Corpbanca | 06-27-2019 | 07-01-2020 | - | 50 | Ferrocarriles del Estado |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
78 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 24 – Equity
a. | Movements in equity accounts and reserves (attributable to the equity holders of the Bank) |
As of September 30, 2019 and December 31, 2018 the paid capital of the Banks is represented by ordinary shares subscribed and paid, with no par value as presented below:
Common shares | ||||||||
As of September 30, 2019 | As of December 31, 2018 | |||||||
Issued as of January 1, | 512,406,760,091 | 512,406,760,091 | ||||||
Issuance of paid shares | - | - | ||||||
Issuance of shares pending payment | - | - | ||||||
Repurchase of own shares | - | - | ||||||
Sale of own shares | - | - | ||||||
Totals | 512,406,760,091 | 512,406,760,091 |
● | Subscribed and paid shares |
As of September 30, 2019 and December 31, 2018 the Bank has a capital in the amount of MCh$1,862,826, consisting of 512,406,760,091 common shares subscribed and paid, with no par value.
● | Purchase and sale of own shares |
During the period ended September 30, 2019 and the year ended on December 31, 2018 there were no transactions to buy and sell own shares.
List of major shareholders
The shareholders list as of September 30, 2019 and December 31, 2018 is as follows:
Shares | ||||||||||||||||
Company name or shareholder name | As of September 30, 2019 | As of December 31, 2018 | ||||||||||||||
No. shares | Ownership % | No. shares | Ownership % | |||||||||||||
Itaú Unibanco | 195,408,043,473 | 38.14% | 195,408,043,473 | 38.14% | ||||||||||||
Itaú Unibanco Holding S.A. | 115,039,610,411 | 22.45% | 115,039,610,411 | 22.45% | ||||||||||||
ITB Holding Brasil Participaçoes Ltda. | 57,008,875,206 | 11.13% | 57,008,875,206 | 11.13% | ||||||||||||
CGB II SpA | 10,908,002,836 | 2.13% | 10,908,002,836 | 2.13% | ||||||||||||
CGB III SPA | 1,800,000,000 | 0.35% | 1,800,000,000 | 0.35% | ||||||||||||
Saga II SpA | 7,000,000,000 | 1.37% | 7,000,000,000 | 1.37% | ||||||||||||
Saga III SpA (1) | 3,651,555,020 | 0.71% | 3,651,555,020 | 0.71% | ||||||||||||
Saieh Family | 146,394,540,608 | 28.57% | 146,394,540,608 | 28.57% | ||||||||||||
Corp Group Banking S.A. | 136,127,850,073 | 26.57% | 136,127,850,073 | 26.57% | ||||||||||||
Compañía Inmobiliaria y de Inversiones Saga SpA (2) | 10,266,690,535 | 2.00% | 10,266,690,535 | 2.00% | ||||||||||||
International Finance Corporation | 17,017,909,711 | 3.32% | 17,017,909,711 | 3.32% | ||||||||||||
Others | 153,586,266,299 | 29.97% | 153,586,266,299 | 29.97% | ||||||||||||
Stoke Brokers | 64,729,279,594 | 12.63% | 55,932,422,813 | 10.92% | ||||||||||||
ADR holders and foreign investors | 47,316,937,641 | 9.23% | 55,163,474,593 | 10.77% | ||||||||||||
Domestic Institutional Investors | 27,711,507,513 | 5.41% | 27,523,706,571 | 5.47% | ||||||||||||
Other minority shareholders | 13,828,541,551 | 2.70% | 14,966,662,322 | 2.83% | ||||||||||||
Totals | 512,406,760,091 | 100% | 512,406,760,091 | 100% |
(1) | Shares in custody of a third party as of December 31, 2018. |
(2) | Includes 508,721,981 Saga shares in custody of a third party. |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
79 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 24 – Equity, continued
b. | Dividends |
At the Ordinary Meeting of the Shareholders of Itaú Corpbanca held on March 19, 2019 the shareholders agreed to distribute profits for MCh$51,614 representing 30% of the profits for 2018.
A the Ordinary Meeting of the Shareholders of Itaú Corpbanca held on March 27, 2018 the shareholders agreed to distribute profits for MCh$22,979, representing 40% of the 2017 profits.
Income attributable to equity holders of the Bank | Allocated to reserves and retained earnings | Allocated to dividends | Percentage distributed | Number of shares | Dividend per (in pesos) | |||||||||||||||||||
MCh$ | MCh$ | MCh$ | % | No. | $ | |||||||||||||||||||
Year 2018 (Shareholders Meeting March 2019) | 172,047 | 120,433 | 51,614 | 30% | 512,406,760,091 | 0.10073 | ||||||||||||||||||
Year 2017 (Shareholders Meeting March 2018) | 57,447 | 34,468 | 22,979 | 40% | 512,406,760,091 | 0.04485 |
As of September 30, 2019 and December 31, 2018 and for the nine month period ended on September 30, 2019 and for the year ended December 31, 2018:
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||
Basic earning and diluted earning | Number of shares | Amount | Number of shares | Amount | ||||||||||||||||
Millons | MCh$ | Millons | MCh$ | |||||||||||||||||
Basic earnings per share | ||||||||||||||||||||
Net income for the period | - | 117,306 | 172,047 | |||||||||||||||||
Weighted average number of outstanding shares | 512,407 | - | 512,407 | - | ||||||||||||||||
Assumed convertible debt conversion | - | - | - | - | ||||||||||||||||
Adjusted number of outstanding shares | 512,407 | - | 512,407 | - | ||||||||||||||||
Basic earnings per share (Chilean pesos) | - | 0.229 | 0.336 | |||||||||||||||||
Diluted earnings per share | ||||||||||||||||||||
Net income for the period | - | 117,306 | 172,047 | |||||||||||||||||
Weighted average number of outstanding shares | 512,407 | - | 512,407 | |||||||||||||||||
Dilutive effects | ||||||||||||||||||||
Assumed convertible debt conversion | - | - | - | - | ||||||||||||||||
Conversion of common shares | - | - | - | - | ||||||||||||||||
Options rights | - | - | - | - | ||||||||||||||||
Adjusted number of shares | 512,407 | - | 512,407 | |||||||||||||||||
Diluted earnings per share (Chilean pesos) | - | 0.229 | 0.336 |
For the nine month period ended September 30, 2019 and for the year ended on December 31, 2018, there were no dilutive effects.
c. | Valuation accounts |
Available for sale investments: It includes accumulated net changes in the fair value of investments available for sale until the investment is disposed of or any impairment.
Cash flows hedge:It includes the effects of hedges on the Bank’s exposure to variations in cash flows that are attributed to a particular risk related to a recognized asset and/or liability, which may affect the results of the period.
Net investment in foreign operations hedge:Corresponds to adjustments for hedges of net investments in foreign operations.
Exchange differences on investments in Colombia and New York branch: It includes the effects of converting the financial statements of the New York Branch and Colombian subsidiaries, whose functional currencies are the US dollar and Colombian peso, respectively, to the presentation currency of Itaú Corpbanca (Chilean peso).
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
80 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 24 – Equity, continued
Defined benefits obligations:This includes the effects of complying with IAS 19 “Employees Benefit”.
The following are the equity effects and income taxes for nine month period ended September 30, 2019 and for the year ended on December 31, 2018:
As of September 30, 2019 | Available for sale investments | Net investments in foreign operations hedges | Cash flows hedges | Exchange differences on investment in Colombia and New York branch | Defined benefits obligations | Totals | ||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||
Other comprehensive income (loss) before income taxes |
| |||||||||||||||||||||||
Balances as of January 1, 2019 | 16,337 | 5,559 | 29,403 | (19,119) | (3,236) | 28,944 | ||||||||||||||||||
Effects for the period | 26,210 | (2,467) | 12,738 | (5,330) | (1,401) | 29,750 | ||||||||||||||||||
Balances as of September 30, 2019 | 42,547 | 3,092 | 42,141 | (24,449) | (4,637) | 58,694 | ||||||||||||||||||
Income taxes related to components of other comprehensive income (loss) |
| |||||||||||||||||||||||
Balances as of January 1, 2019 | (6,375) | (280) | (7,746) | - | 689 | (13,712) | ||||||||||||||||||
Effects for the period | (6,859) | (1,312) | (1,698) | 588 | (9,281) | |||||||||||||||||||
Balances as of September 30, 2019 | (13,234) | (1,592) | (9,444) | - | 1,277 | (22,993) | ||||||||||||||||||
Net balances as of September 30, 2019 | 29,313 | 1,500 | 32,697 | (24,449) | (3,360) | 35,701 | ||||||||||||||||||
As of December 31, 2018 | Available for sale investments | Net investments in foreign operations hedges | Cash flows hedges | Exchange differences on investment in Colombia and New York branch | Defined benefits obligations | Totals | ||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||
Other comprehensive income (loss) before income taxes |
| |||||||||||||||||||||||
Balances as of January 1, 2018 | 16,592 | (5,730) | 64,741 | (57,485) | (2,736) | 15,382 | ||||||||||||||||||
Effects for the year | (255) | 11,289 | (35,338) | 38,366 | (500) | 13,562 | ||||||||||||||||||
Balances as of December 31, 2018 | 16,337 | 5,559 | 29,403 | (19,119) | (3,236) | 28,944 | ||||||||||||||||||
Income taxes related to components of other comprehensive income (loss) |
| |||||||||||||||||||||||
Balances as of January 1, 2018 | (4,937) | 1,389 | (17,287) | - | 718 | (20,117) | ||||||||||||||||||
Effects for the year | (1,438) | (1,669) | 9,541 | (29) | 6,405 | |||||||||||||||||||
Balances as of December 31, 2018 | (6,375) | (280) | (7,746) | - | 689 | (13,712) | ||||||||||||||||||
Net balances as of December 31, 2018 | 9,962 | 5,279 | 21,657 | (19,119) | (2,547) | 15,232 |
d. | Reserves |
This item corresponds to “Othernon-earnings reserves” corresponding to the adjustments recorded as a result of the business combination between Banco Itaú Chile and Corpbanca for MCh$839,120 as of September 30, 2019 and December 31, 2018, and reserves from Banco Itaú Chile before the business combination for MCh$451,011 as of September 30, 2019 and December 31, 2018.
e. | Retained earnings from prior years |
Corresponds to profits for the year ended on December 31, 2018 and 2017 not distributed to shareholders for a total of MCh$156,342 as of September 30, 2019 and MCh$35,909 as of December 31, 2018.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
81 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 24 – Equity, continued
f. | Non-controlling interest |
Correspond to the net equity amount of the subsidiaries attributable to equity instruments which do not belong, either directly or indirectly, to the Bank, including the portion that has been attributed to the income (loss) for the year. The amounts and ownership percentage of thenon-controlling interest in equity and income (loss) of the subsidiary are shown below:
As of and for the nine month period ended on September 30, 2019
Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||||||||||||
Subsidiary | Non-controlling interest | Equity | �� | Net income | Available for sale | Exchange differences | Net investment in foreign operations hedges | Cash flows hedges | Defined benefits obligations | Deferred taxes | Total other comprehensive income | Total comprehensive income | ||||||||||||||||||||||||||||||||
% | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||||||||||||
Itaú Corredor de Seguro Colombia S.A. | 20.000 | % | 396 | 80 | - | - | - | - | - | - | - | 80 | ||||||||||||||||||||||||||||||||
Banco Itaú Corpbanca Colombia S.A. and subsidiaries | 33.721 | % | 226,694 | 7,228 | 539 | (2,678) | 3,281 | (3,973) | (714) | 246 | (3,299) | 3,929 | ||||||||||||||||||||||||||||||||
Totals | 227,090 | 7,308 | 539 | (2,678) | 3,281 | (3,973) | (714) | 246 | (3,299) | 4,009 |
As of and for the year ended December 31, 2018
Other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||||||||||||
Subsidiary | Non-controlling interest | Equity | Net income | Available for sale | Exchange differences | Net investment in foreign operations hedges | Cash flows hedges | Defined benefits obligations | Deferred taxes | Total other comprehensive income | Total comprehensive income | |||||||||||||||||||||||||||||||||
% | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||||||||||||||
Itaú Corredor de Seguro Colombia S.A. | 20.000 | % | 409 | 15 | - | - | - | - | - | - | �� | - | 15 | |||||||||||||||||||||||||||||||
Banco Itaú Corpbanca Colombia S.A. and subsidiaries | 33.721 | % | 222,672 | 4,776 | (841) | 10,244 | (1,195) | - | (254) | 374 | 8,328 | 13,104 | ||||||||||||||||||||||||||||||||
Itaú Corredores de Seguros S.A. (Ex -Corpbanca Corredores de Seguros S.A.) (*) | 0.000 | % | - | 8 | - | - | - | - | - | - | - | 8 | ||||||||||||||||||||||||||||||||
Totals | 223,081 | 4,799 | (841) | 10,244 | (1,195) | - | (254) | 374 | 8,328 | 13,127 |
(*) On April 1, 2018, the merger of Corpbanca Corredores de Seguro S.A. and Itaú Chile Corredora de Seguros Limitada through the absorption of this last entity in the first took place, being its new name Itaú Corredores de Seguros S.A. On September 10, 2018, Itaú Corpbanca acquired 127,901 shares from minority investors. As a result, the Bank and its subsidiaries own a 100% of the Company shares.
The following table shows thenon-controlling interest movements for the nine month period ended September 30, 2019 and for the year ended on December 31, 2018
As of September 30, 2019 | As of December 31, 2018 | |||||||
MCh$ | MCh$ | |||||||
Balances as of January 1, | 223,081 | 209,954 | ||||||
Comprehensive income (loss) for the period/year | 4,009 | 13,127 | ||||||
Balances for the period ended | 227,090 | 223,081 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
82 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 24 – Equity, continued
Itaú Corpbanca’s main subsidiary withnon-controlling interest is as follows:
Entity name | Country | Ownership
| Non-controlling
| Main
| ||||
Itaú Corpbanca Colombia S.A. and subsidiaries | Colombia | 66.28% | 33.72% | Banking |
Information that represents thenon-controlling interest of the aforementioned company before the consolidation elimination adjustments is as follows:
Statements of Financial Position summary | As of September 30, 2019 | As of December 31, 2018 | ||||||
MCh$ | MCh$ | |||||||
Current assets | 5,130,140 | 4,679,588 | ||||||
Current liabilities | (3,821,039) | (3,523,186) | ||||||
Net current assets (liabilities) | 1,309,101 | 1,156,402 | ||||||
Non-current assets | 945,927 | 1,664,700 | ||||||
Non-current liabilities | (1,592,433) | (2,160,781) | ||||||
Netnon-current assets (liabilities) | (646,506) | (496,081) | ||||||
Total net assets (liabilities) | 662,595 | 660,321 | ||||||
Accumulatednon-controlling interest | 226,690 | 222,672 |
For the nine month periods ended September 30, | ||||||||
Statements of Income summary | 2019 | 2018 | ||||||
MCh$ | MCh$ | |||||||
Interest income | 530,826 | 400,220 | ||||||
Income (loss) for the period | 21,432 | 7,588 | ||||||
Non-controlling interest income (loss) | 7,227 | 2,559 |
For the nine month periods ended September 30, | ||||||||
Statements of Cash Flows summary | 2019 | 2018 | ||||||
MCh$ | MCh$ | |||||||
Net cash flows provided by (used in) operating activities | (198,019) | 196,133 | ||||||
Net cash flows provided by (used in) investing activities | 143,429 | (135,908) | ||||||
Net cash flows provided by (used in) financing activities | 19,100 | (51,953) | ||||||
Net increase (decrease) in cash flows | (35,490) | 8,272 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
83 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 24 – Equity, continued
g. Consolidated comprehensive income for the period
For the three month periods ended September 30, | ||||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||
Items | Equity holders of the Bank | Non- controlling interest | Totals | Equity holders of the Bank | Non- controlling interest | Totals | ||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||
Comprehensive income (loss) for the period | 36,449 | 1,426 | 37,875 | 42,894 | 1,925 | 44,819 | ||||||||||||||||||||
Other comprehensive income (loss) before income taxes | ||||||||||||||||||||||||||
Available for sale investments | 14,345 | (1,264) | 13,081 | 1,559 | 651 | 2,210 | ||||||||||||||||||||
Net investment in foreign operations hedges | 2,982 | 3,281 | 6,263 | 4,046 | 317 | 4,363 | ||||||||||||||||||||
Cash flow hedges | 9,843 | (4,151) | 5,692 | (2,064) | - | (2,064) | ||||||||||||||||||||
Exchange differences | 4,657 | 5 | 4,662 | (3,068) | (836) | (3,904) | ||||||||||||||||||||
Defined benefits obligations | 47 | 24 | 71 | (878) | (447) | (1,325) | ||||||||||||||||||||
Subotals | 31,874 | (2,105) | 29,769 | (405) | (315) | (720) | ||||||||||||||||||||
Income taxes | ||||||||||||||||||||||||||
Available for sale investments | (3,603) | 386 | (3,217) | (1,525) | (740) | (2,265) | ||||||||||||||||||||
Net investment in foreign operations hedges | 240 | - | 240 | 66 | 505 | 571 | ||||||||||||||||||||
Cash flows hedges | (3,970) | 98 | (3,872) | 557 | - | 557 | ||||||||||||||||||||
Defined benefits obligations | (13) | (6) | (19) | 346 | 176 | 522 | ||||||||||||||||||||
Subtotals | (7,346) | 478 | (6,868) | (556) | (59) | (615) | ||||||||||||||||||||
Comprehensive income (loss) for the period | 60,977 | (201) | 60,776 | 41,933 | 1,551 | 43,484 | ||||||||||||||||||||
For the nine month periods ended September 30, | ||||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||
Items | Equity holders of the Bank | Non- controlling interest | Totals | Equity holders of the Bank | Non- controlling interest | Totals | ||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||
Comprehensive income (loss) for the period | 117,306 | 7,308 | 124,614 | 143,591 | 2,563 | 146,154 | ||||||||||||||||||||
Other comprehensive income (loss) before income taxes | ||||||||||||||||||||||||||
Available for sale investments | 26,210 | 539 | 26,749 | (2,620) | (596) | (3,216) | ||||||||||||||||||||
Net investment in foreign operations hedges | 12,738 | 3,281 | 16,019 | (46,649) | 956 | (45,693) | ||||||||||||||||||||
Cash flow hedges | (2,467) | (3,973) | (6,440) | (3,663) | - | (3,663) | ||||||||||||||||||||
Exchange differences | (5,330) | (2,678) | (8,008) | 54,665 | 16,277 | 70,942 | ||||||||||||||||||||
Defined benefits obligations | (1,401) | (714) | (2,115) | (1,110) | (564) | (1,674) | ||||||||||||||||||||
Subotals | 29,750 | (3,545) | 26,205 | 623 | 16,073 | 16,696 | ||||||||||||||||||||
Income taxes | ||||||||||||||||||||||||||
Available for sale investments | (6,859) | (122) | (6,981) | (1,071) | (732) | (1,803) | ||||||||||||||||||||
Net investment in foreign operations hedges | (1,698) | - | (1,698) | 14,031 | 473 | 14,504 | ||||||||||||||||||||
Cash flows hedges | (1,312) | 66 | (1,246) | 989 | - | 989 | ||||||||||||||||||||
Defined benefits obligations | 588 | 302 | 890 | 407 | 207 | 614 | ||||||||||||||||||||
Subtotals | (9,281) | 246 | (9,035) | 14,356 | (52) | 14,304 | ||||||||||||||||||||
Comprehensive income (loss) for the period | 20,469 | (3,299) | 17,170 | 14,979 | 16,021 | 31,000 | ||||||||||||||||||||
137,775 | 4,009 | 141,784 | 158,570 | 18,584 | 177,154 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
84 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 25 – Interest Income and Interest Expense
This item comprises interest accrued in the year by all financial assets and liabilities, interest income and expenses, whose implicit or explicit performance is measured by applying the effective interest rate method, independently if these are measured at fair value, as well as the effects from hedge accounting relationships, which are part of the interest income and expenses included in the Consolidated Statement of Income for the period.
a. | The composition of interest income, including the effects related to hedge accounting, for the three and nine month periods ended September 30, 2019 and 2018, is as follows: |
For the three month periods ended September 30, | ||||||||||||||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||||||||||
Interest income | Interest | Inflation adjustments | Prepayment fees | Totals | Interest | Inflation adjustments | Prepayment fees | Totals | ||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||
Investments under resale agreements | 1,259 | (2) | - | 1,257 | 1,427 | 3 | - | 1,430 | ||||||||||||||||||||||||||||
Interbank loans | 985 | - | - | 985 | 1,290 | - | - | 1,290 | ||||||||||||||||||||||||||||
Commercial loans | 198,301 | 23,253 | 6,239 | 227,793 | 195,252 | 29,043 | 1,220 | 225,515 | ||||||||||||||||||||||||||||
Mortgage loans | 48,941 | 20,546 | 409 | 69,896 | 48,541 | 27,383 | 218 | 76,142 | ||||||||||||||||||||||||||||
Consumer loans | 93,762 | 27 | 802 | 94,591 | 93,054 | 395 | 664 | 94,113 | ||||||||||||||||||||||||||||
Financial investments | 12,958 | 2,950 | - | 15,908 | 25,713 | 3,375 | - | 29,088 | ||||||||||||||||||||||||||||
Other interest income | 6,715 | 151 | - | 6,866 | 3,083 | 407 | - | 3,490 | ||||||||||||||||||||||||||||
Gain (loss) from hedge accounting | 1,186 | - | - | 1,186 | (10,125) | - | - | (10,125) | ||||||||||||||||||||||||||||
Totals | 364,107 | 46,925 | 7,450 | 418,482 | 358,235 | 60,606 | 2,102 | 420,943 | ||||||||||||||||||||||||||||
For the nine month periods ended September 30, | ||||||||||||||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||||||||||
Interest income | Interest | Inflation adjustments | Prepayment fees | Totals | Interest | Inflation adjustments | Prepayment fees | Totals | ||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||
Investments under resale agreements | 3,751 | (1) | - | 3,750 | 3,491 | - | - | 3,491 | ||||||||||||||||||||||||||||
Interbank loans | 3,868 | - | - | 3,868 | 3,342 | - | - | 3,342 | ||||||||||||||||||||||||||||
Commercial loans | 603,291 | 74,145 | 10,497 | 687,933 | 580,481 | 82,263 | 3,113 | 665,857 | ||||||||||||||||||||||||||||
Mortgage loans | 145,401 | 67,422 | 1,197 | 214,020 | 142,338 | 76,167 | 673 | 219,178 | ||||||||||||||||||||||||||||
Consumer loans | 280,812 | 95 | 2,346 | 283,253 | 275,877 | 541 | 1,865 | 278,283 | ||||||||||||||||||||||||||||
Financial investments | 61,154 | 6,528 | - | 67,682 | 78,718 | 14,248 | - | 92,966 | ||||||||||||||||||||||||||||
Other interest income | 14,885 | 831 | - | 15,716 | 7,129 | 4,772 | - | 11,901 | ||||||||||||||||||||||||||||
Gain (loss) from hedge accounting | (420) | - | - | (420) | (16,229) | - | - | (16,229) | ||||||||||||||||||||||||||||
Totals | 1,112,742 | 149,020 | 14,040 | 1,275,802 | 1,075,147 | 177,991 | 5,651 | 1,258,789 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
85 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 25 – Interest Income and Interest Expense
b. | Is of interest expenses and inflation adjustments including the effect related o hedge accounting, for the three and nine month periods ended September 30, 2019 and 2018, is as follows: |
For the three month periods ended September 30, | ||||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||
Interest expense | Interest | Inflation adjustments | Totals | Interest | Inflation adjustments | Totals | ||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||
Deposits and other demand liabilities | (13,191) | (43) | (13,234) | (12,827) | (34) | (12,861) | ||||||||||||||||||||
Obligations under repurchase agreements | (5,937) | - | (5,937) | (6,958) | (3) | (6,961) | ||||||||||||||||||||
Time deposits and other time liabilities | (93,790) | (1,633) | (95,423) | (92,888) | (3,601) | (96,489) | ||||||||||||||||||||
Interbank borrowings | (18,958) | - | (18,958) | (17,895) | (41) | (17,936) | ||||||||||||||||||||
Debt instruments issued | (54,636) | (25,483) | (80,119) | (51,200) | (31,953) | (83,153) | ||||||||||||||||||||
Other financial liabilities | (112) | - | (112) | (148) | - | (148) | ||||||||||||||||||||
Lease contracts liabilities | (1,766) | - | (1,766) | - | - | - | ||||||||||||||||||||
Other Interest expense | (18) | (907) | (925) | (32) | (1,085) | (1,097) | ||||||||||||||||||||
Gain (loss) from hedge accounting | 2,842 | - | 2,842 | 5800 | - | 5,800 | ||||||||||||||||||||
Totals | (185,566) | (28,066) | (213,632) | (176,148) | (36,697) | (212,845) |
For the nine month periods ended September 30, | ||||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||
Interest expense | Interest | Inflation adjustments | Totals | Interest | Inflation adjustments | Totals | ||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||
Deposits and other demand liabilities | (37,851) | (141) | (37,992) | (37,132) | (113) | (37,245) | ||||||||||||||||||||
Obligations under repurchase agreements | (22,454) | - | (22,454) | (21,020) | (3) | (21,023) | ||||||||||||||||||||
Time deposits and other time liabilities | (277,772) | (5,799) | (283,571) | (281,166) | (11,908) | (293,074) | ||||||||||||||||||||
Interbank borrowings | (59,004) | 1 | (59,003) | (50,673) | (165) | (50,838) | ||||||||||||||||||||
Debt instruments issued | (159,101) | (84,254) | (243,355) | (148,363) | (89,345) | (237,708) | ||||||||||||||||||||
Other financial liabilities | (335) | - | (335) | (413) | - | (413) | ||||||||||||||||||||
Lease contracts liabilities | (3,801) | - | (3,801) | - | - | - | ||||||||||||||||||||
Other Interest expense | (69) | (2,274) | (2,343) | (394) | (3,295) | (3,689) | ||||||||||||||||||||
Gain (loss) from hedge accounting | 6,890 | - | 6,890 | 5,700 | - | 5,700 | ||||||||||||||||||||
Totals | (553,497) | (92,467) | (645,964) | (533,461) | (104,829) | (638,290) |
For purposes of the Interim Consolidated Statement of cash flows, the net amount of interest and inflation adjustments for the nine month period ended September 30, 2019 is MCh$629,838 (MCh$620,499 for the nine month period ended on September 30, 2018).
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
86 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 26 – Fee and Commission Income and Expense
a) | Fee and commission income |
This item comprises the amount of all commissions accrued and paid during the year that generate the business segments, except for those that form an integral part of the effective interest rate of the financial instruments. Details of these items are as follows:
For the three month periods ended September 30, | For the nine month periods ended September 30, | |||||||||||||||
Fee and commission income | 2019 | 2018 | 2019 | 2018 | ||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Fees and commissions from lines of credits and overdrafts | 304 | 383 | 914 | 4,838 | ||||||||||||
Fees and commissions from guarantees and letters of credit | 1,217 | 4,434 | 9,883 | 11,055 | ||||||||||||
Fees and commissions from card services | 18,735 | 18,166 | 56,501 | 54,314 | ||||||||||||
Fees and commissions from accounts management | 3,857 | 3,649 | 11,863 | 8,001 | ||||||||||||
Fees and commissions from collections and payments | 5,758 | 5,598 | 17,840 | 15,625 | ||||||||||||
Fees and commissions from brokerage and securities management | 2,150 | 3,354 | 7,249 | 8,899 | ||||||||||||
Fees and commissions from asset management | 6,855 | 6,300 | 19,390 | 18,490 | ||||||||||||
Insurance brokerage fees | 9,135 | 9,382 | 27,497 | 27,600 | ||||||||||||
Investment banking and advisory fees | 5,369 | 2,752 | 17,243 | 8,646 | ||||||||||||
Fees and commissions from student loans ceded | 538 | 1,261 | 3,430 | 3,796 | ||||||||||||
Commissions on loan transactions | 342 | 146 | 371 | 580 | ||||||||||||
Commissions from mortgage credits | 1,102 | - | 1,107 | - | ||||||||||||
Other fees from services rendered | 331 | 2,763 | 5,185 | 7,369 | ||||||||||||
Other commissions earned | 3,228 | 1,530 | 4,391 | 4,311 | ||||||||||||
Totals | 58,921 | 59,718 | 182,864 | 173,524 |
b) | Fee and commission expense |
This item includes expenses for commissions accrued during for the period, according to the following detail:
For the three month periods ended September 30, | For the nine month periods ended September 30, | |||||||||||||||
Fee and commission expense | 2019 | 2018 | 2019 | 2018 | ||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Compensation for card operation | (13,551) | (8,548) | (43,014) | (26,135) | ||||||||||||
Fees and commissions for securities transactions | (599) | (759) | (2,075) | (2,348) | ||||||||||||
Commissions paid for foreign trade transactions | (195) | (742) | (1,538) | (1,853) | ||||||||||||
Commissions paid for services to customers management | (1,529) | (439) | (2,331) | (1,284) | ||||||||||||
Other commissions paid | (800) | (1,974) | (4,566) | (5,447) | ||||||||||||
Totals | (16,674) | (12,462) | (53,524) | (37,067) |
Commissions earned on mortgage finance loans are recorded in the Interim Consolidated Statement of Income under “Interest income”,
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
87 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 27 – Net Income (Expense) from Financial Operations
This item includes the amount of changes in the fair value of financial instruments, except those attributable to interest accrued by applying the effective interest rate method, as well as the results obtained in the purchase and sale thereof.
Net income (expense) from financial operations in the Interim Consolidated Statements of Income for the period is as follows:
For the three month periods ended September 30, | For the nine month periods ended September 30, | |||||||||||||||
Net income (expense) from financial operations | 2019 | 2018 | 2019 | 2018 | ||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Trading investments | 4,957 | (727) | 14,415 | (1,205) | ||||||||||||
Financial derivative contracts (trading) | 41,629 | 48,694 | 48,072 | 95,106 | ||||||||||||
Sale of loans and accounts receivable from customers (*) | 185 | 9,655 | 1,093 | 10,520 | ||||||||||||
Available for sale investments | 13,954 | 3,104 | 30,707 | 13,923 | ||||||||||||
Others | (1,802) | 3,911 | (3,252) | 4,728 | ||||||||||||
Totals | 58,923 | 64,637 | 91,035 | 123,072 |
(*) See detail in Note 10, letter c).
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
88 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 28 – Net Foreign Exchange Gain (Loss)
This item includes the income earned from foreign currency trading, differences arising from converting monetary items in a foreign currency to the functional currency, and those generated bynon-monetary assets in foreign currency at the time of their disposal. Net foreign exchange gains (losses) details are as follows:
For the three month periods ended September 30, | For the nine month periods ended September 30, | |||||||||||||||
Net foreign exchange gain (loss) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Net foreign exchange gain (loss) | ||||||||||||||||
Gain (loss) on net foreign currency exchange positions | 12,823 | (24,958) | 20,172 | (20,646) | ||||||||||||
Other foreign currency Exchange gains (losses) | 1,192 | 645 | 3,021 | 2,337 | ||||||||||||
Subtotals | (14,015) | (24,313) | 23,193 | (18,309) | ||||||||||||
Net exchange rate adjustments gain (loss) | ||||||||||||||||
Adjustments for loans and accounts receivable from customers | 601 | 13 | 405 | 56 | ||||||||||||
Adjustment for investment instruments | - | - | - | 105 | ||||||||||||
Adjustment for other assets | 5 | (2) | (1) | 12 | ||||||||||||
Adjustments for other liabilities | - | - | - | (335) | ||||||||||||
Net gain (loss) from hedge accounting | 4,913 | (5,684) | (8,693) | 17,428 | ||||||||||||
Subtotals | (5,519) | (5,673) | (8,289) | 17,266 | ||||||||||||
Totals | (19,534) | (29,986) | 14,904 | (1,043) |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
89 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 29 – Provision for Loan Losses
The movement registered in income for the period related to allowances and impairment due to credit risk, for the three and nine month periods ended September 30, 2019 and 2018, is summarized as follows:
For the three month period ended September 30, 2019 | ||||||||||||||||||||||||||||||||
Loans and accounts receivable from customers | Minimum normal portfolio provisions | |||||||||||||||||||||||||||||||
Interbank loans | Commercial loans | Mortgage loans | Consumer loans | Contingent loans | Additional provisions | Totals | ||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Provisions established | ||||||||||||||||||||||||||||||||
Individually assessed | - | (58,981) | - | - | (6,760) | - | - | (65,741) | ||||||||||||||||||||||||
Collectively assessed | - | (35,276) | (4,403) | (71,525) | (450) | (6,000) | - | (117,654) | ||||||||||||||||||||||||
Income (loss) for provisions established (*) | - | (94,257) | (4,403) | (71,525) | (7,210) | (6,000) | - | (183,395) | ||||||||||||||||||||||||
Provisions released | ||||||||||||||||||||||||||||||||
Individually assessed | 96 | 44,614 | - | - | 6,337 | - | - | 51,047 | ||||||||||||||||||||||||
Collectively assessed | - | 3,034 | 2,023 | 29,378 | 111 | - | - | 34,546 | ||||||||||||||||||||||||
Income (loss) for provisions released (*) | 96 | 47,648 | 2,023 | 29,378 | 6,448 | - | - | 85,593 | ||||||||||||||||||||||||
Recovery of loans previouslycharged-off | - | 5,340 | 875 | 9,563 | - | - | - | 15,778 | ||||||||||||||||||||||||
Net charge to income | 96 | (41,269) | (1,505) | (32,584) | (762) | (6,000) | - | (82,024) | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
For the three month period ended September 30, 2018 | ||||||||||||||||||||||||||||||||
Loans and accounts receivable from customers | Minimum normal portfolio provisions | |||||||||||||||||||||||||||||||
Interbank loans | Commercial loans | Mortgage loans | Consumer loans | Contingent loans | Additional provisions | Totals | ||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Provisions established | ||||||||||||||||||||||||||||||||
Individually assessed | (104) | (45,902) | - | - | (10,056) | - | - | (56,062) | ||||||||||||||||||||||||
Collectively assessed | - | (12,843) | (4,637) | (58,866) | (112) | - | - | (76,458) | ||||||||||||||||||||||||
Income (loss) for provisions established (*) | (104) | (58,745) | (4,637) | (58,866) | (10,168) | - | - | (132,520) | ||||||||||||||||||||||||
Provisions released | ||||||||||||||||||||||||||||||||
Individually assessed | 7 | 28,731 | - | - | 11,702 | - | - | 40,440 | ||||||||||||||||||||||||
Collectively assessed | - | 2,232 | 8,750 | 16,521 | 490 | - | - | 27,993 | ||||||||||||||||||||||||
Income (loss) for provisions released (*) | 7 | 30,963 | 8,750 | 16,521 | 12,192 | - | - | 68,433 | ||||||||||||||||||||||||
Recovery of loans previouslycharged-off | - | 2,116 | 633 | 6,722 | - | - | - | 9,471 | ||||||||||||||||||||||||
Net charge to income | (97) | (25,666) | 4,746 | (35,623) | 2,024 | - | - | (54,616) |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
90 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 29 – Provision for Loan Losses, continued
For the nine month period ended September 30, 2019 | ||||||||||||||||||||||||||||||||
Loans and accounts receivable from customers | Minimum normal portfolio provisions | |||||||||||||||||||||||||||||||
Interbank loans | Commercial loans | Mortgage loans | Consumer loans | Contingent loans | Additional provisions | Totals | ||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Provisions established | ||||||||||||||||||||||||||||||||
Individually assessed | (507) | (157,218) | - | - | (10,087) | - | - | (167,812) | ||||||||||||||||||||||||
Collectively assessed | - | (54,385) | (13,650) | (193,303) | (1,362) | (6,000) | - | (268,700) | ||||||||||||||||||||||||
Income (loss) for provisions established (*) | (507) | (211,603) | (13,650) | (193,303) | (11,449) | (6,000) | - | (436,512) | ||||||||||||||||||||||||
Provisions released | ||||||||||||||||||||||||||||||||
Individually assessed | 487 | 101,946 | - | - | 17,125 | - | - | 119,558 | ||||||||||||||||||||||||
Collectively assessed | - | 12,365 | 6,715 | 68,909 | 656 | - | - | 88,645 | ||||||||||||||||||||||||
Income (loss) for provisions released (*) | 487 | 114,311 | 6,715 | 68,909 | 17,781 | - | - | 208,203 | ||||||||||||||||||||||||
Recovery of loans previouslycharged-off | - | 15,037 | 2,124 | 26,045 | - | - | - | 43,206 | ||||||||||||||||||||||||
Net charge to income | (20) | (82,255) | (4,811) | (98,349) | 6,332 | (6,000) | - | (185,103) | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
For the nine month period ended September 30, 2018 | ||||||||||||||||||||||||||||||||
Loans and accounts receivable from customers | Minimum normal portfolio provisions | |||||||||||||||||||||||||||||||
Interbank loans | Commercial loans | Mortgage loans | Consumer loans | Contingent loans | Additional provisions | Totals | ||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Provisions established | ||||||||||||||||||||||||||||||||
Individually assessed | (234) | (131,111) | - | - | (31,743) | - | - | (163,088) | ||||||||||||||||||||||||
Collectively assessed | - | (50,083) | (27,951) | (215,892) | (480) | - | - | (294,406) | ||||||||||||||||||||||||
Income (loss) for provisions established (*) | (234) | (181,194) | (27,951) | (215,892) | (32,223) | - | - | (457,494) | ||||||||||||||||||||||||
Provisions released | ||||||||||||||||||||||||||||||||
Individually assessed | 63 | 92,231 | - | - | 18,665 | - | - | 110,959 | ||||||||||||||||||||||||
Collectively assessed | - | 21,884 | 27,165 | 90,697 | 1,133 | - | - | 140,879 | ||||||||||||||||||||||||
Income (loss) for provisions released (*) | 63 | 114,115 | 27,165 | 90,697 | 19,798 | - | - | 251,838 | ||||||||||||||||||||||||
Recovery of loans previouslycharged-off | - | 11,215 | 2,108 | 17,977 | - | - | - | 31,300 | ||||||||||||||||||||||||
Net charge to income | (171) | (55,864) | 1,322 | (107,218) | (12,425) | - | - | (174,356) |
(*) The amounts in the Interim Consolidated Statements of Cash Flows for the period are as follows:
For the nine month periods ended September 30, | ||||||||||
2019 | 2018 | |||||||||
MCh$ | MCh$ | |||||||||
Charge to income for provisions established | 436,502 | 457,494 | ||||||||
Credit to income for provisions used | (208,193) | (251,838) | ||||||||
Totals | 228,309 | 205,656 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
91 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 30 – Personnel Salaries and Expenses
Personnel salaries and expenses for the three and nine month periods ended September 30, 2019 and 2018, are broken down as follows:
For the three month periods ended September 30, | For the nine month periods ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
Personnel compensation | (45,092) | (45,125) | (134,261) | (131,513) | ||||||||||||
Bonuses or gratifications | (19,489) | (23,144) | (60,156) | (59,436) | ||||||||||||
Seniority compensation | (2,886) | (3,149) | (9,306) | (8,485) | ||||||||||||
Training expenses | (160) | (191) | (616) | (642) | ||||||||||||
Other personnel expenses | (4,970) | (5,620) | (15,998) | (17,204) | ||||||||||||
Totals | (72,597) | (77,229) | (220,337) | (217,280) |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
92 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 31 – Administrative Expenses
For the three and nine month periods ended on September 30, 2019 and 2018, the composition of this item is as follows:
For the three month periods ended September 30, | For the nine month periods ended September 30, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||
Administration expenses | (42,708) | (48,663) | (129,111) | (153,131) | ||||||||||||||||
Maintenance and repair of fixed assets | (7,621) | (7,629) | (22,700) | (22,872) | ||||||||||||||||
Office lease (*) | - | (9,046) | - | (26,708) | ||||||||||||||||
Equipment lease (*) | - | (797) | - | (2,123) | ||||||||||||||||
Insurance payments | (3,897) | (4,982) | (12,589) | (15,660) | ||||||||||||||||
Office supplies | (372) | (406) | (1,229) | (1,389) | ||||||||||||||||
IT and communications expenses | (11,898) | (9,531) | (35,272) | (32,367) | ||||||||||||||||
Utilities and other services | (1,188) | (1,220) | (3,596) | (3,234) | ||||||||||||||||
Security and transportation of securities services | (884) | (1,183) | (3,956) | (3,935) | ||||||||||||||||
Representation and personnel travel expenses | (806) | (749) | (2,437) | (2,519) | ||||||||||||||||
Legal and notarial expenses | (4,629) | (3,489) | (14,283) | (11,406) | ||||||||||||||||
Technical report fees | (3,407) | (1,964) | (9,700) | (7,821) | ||||||||||||||||
Professional services fees | (460) | (303) | (1,187) | (1,322) | ||||||||||||||||
Other expenses of obligations for lease Agreements | (181) | - | (410) | - | ||||||||||||||||
Expenses for lease | (599) | - | (1,239) | - | ||||||||||||||||
ATM maintenance and management services | (269) | (687) | (1,958) | (2,164) | ||||||||||||||||
Temporary external services | (144) | (111) | (492) | (388) | ||||||||||||||||
Postage and mailing expenses | (276) | (272) | (833) | (1,037) | ||||||||||||||||
Internal events | (52) | (96) | (558) | (495) | ||||||||||||||||
Donations | (855) | (815) | (1,698) | (1,576) | ||||||||||||||||
Other services | (1,226) | (905) | (4,107) | (3,735) | ||||||||||||||||
Miscellaneous contributions | (181) | (16) | (212) | (47) | ||||||||||||||||
Credit card management services | (1,395) | (739) | (3,180) | (2,395) | ||||||||||||||||
Other administrative expenses | (2,368) | (3,723) | (7,475) | (9,938) | ||||||||||||||||
Outsourced services | ||||||||||||||||||||
Data processing | (4,940) | (5,056) | (15,980) | (17,701) | ||||||||||||||||
Products sales | (2,856) | (2,558) | (9,327) | (9,960) | ||||||||||||||||
Others | (2,084) | (2,498) | (6,653) | (7,741) | ||||||||||||||||
Board expenses | (326) | (403) | (1,011) | (1,125) | ||||||||||||||||
Board of Directors compensation | (326) | (403) | (1,011) | (1,125) | ||||||||||||||||
Marketing and advertising expenses | (3,957) | (3,328) | (9,492) | (9,547) | ||||||||||||||||
Taxes and contributions | (8,408) | (10,539) | (24,053) | (30,773) | ||||||||||||||||
Real estate contributions | (67) | (59) | (258) | (262) | ||||||||||||||||
Patents | (335) | (266) | (867) | (855) | ||||||||||||||||
Other taxes (**) | (5,950) | (8,207) | (16,821) | (23,655) | ||||||||||||||||
Contributions to CMF | (2,056) | (2,007) | (6,107) | (6,001) | ||||||||||||||||
Totals | (60,339) | (67,989) | (179,647) | (212,277) |
(*) As instructed per circular No.3,645 issued by the CMF, all future payments from leases subject to IFRS 16, are recognized and later amortized on “Right of use assets under lease agreement”. Low value leases that fall out scope IFRS 16 are to be recognized as an expense and classified under “expenses contract lease”.
(**) Correspond to taxes other than income taxes subject to Itaú Corpbanca Colombia S.A and subsidiaries (Colombia segment), which affect to local financial transactions, commercial activities or services such as, value added tax, taxes to equity among other.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
93 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 32– Depreciation, Amortization, and Impairment
a. | Depreciation and amortization |
The amounts corresponding to charges to income for depreciation and amortization for the three and nine month periods ended September 30, 2019 and 2018, are detailed below:
Depreciation and amortization | For the three month periods ended September 30, | For the nine month periods ended September, | ||||||||||||||||
Note | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Depreciation of fixed assets | 14 | (3,583) | (5,333) | (10,311) | (15,167) | |||||||||||||
Amortization of intangible assets | 13 | (19,562) | (18,276) | (54,899) | (49,533) | |||||||||||||
Depreciation of assets for right to use of lease (*) | 15 | (9,478) | (28,794) | |||||||||||||||
Totals | (32,623) | (23,609) | (94,004) | (64,700) |
(*) See note 2 Accounting Changes
b. | Impairment |
The composition of the impairment expense, for the three and nine month periods ended September 30, 2019, and 2018, is as follows:
For the three month periods ended September 30, | For the nine month periods ended September 30, | |||||||||||||||||
Note | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||
Impairment of investments available for sale | 11 | - | - | - | - | |||||||||||||
Impairment of investments held until maturity | 11 | - | - | - | - | |||||||||||||
Subtotal financial assets | - | - | - | - | ||||||||||||||
Impairment of fixed assets (**) | 14 | - | - | (1) | - | |||||||||||||
Impairment of intangibles | 13 | - | - | - | - | |||||||||||||
Subtotalnon-financial assets | - | - | (1) | - | ||||||||||||||
Totals | - | - | (1) | - |
(**) Corresponds impairment recognized due to technological obsolescence caused by current regulations (Decree No. 222 of October 30, 2013 of the Ministry of Interior and Public Security) applied to ATMs, which is in accordance with stipulated by IAS 36 Impairment of assets.
The Bank evaluates whether there is any indication of impairment of property, plant and equipment, intangibles and goodwill allocated to each Cash Generating Unit (CGU). Should any such indication exist, or when an impairment test is required, the Bank estimates the recoverable amount (RA) of its CGU.
The Bank has defined two CGUs: CGU Chile (Itaú Corpbanca and its Chileans subsidiaries and subsidiary located in New York) and CGU Colombia (Itaú Corpbanca Colombia and its subsidiaries and Itaú Corredores de Seguros S.A.). These CGUs were defined based on their main geographic areas. Their cash flow generation and performance are analyzed separately by Top management because their contributions to the consolidated entity may be identified independently. It is worth mentioning that these CGUs are consistent with the Bank’s operating segments (see Note 4).
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
94 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 33 – Transactions with Related Parties
In accordance with the provisions set forth in the Chilean General Banking Law and the Commission for the Financial Market (CMF – formerly the Chilean Superintendency of Banks and Financial Institutions), related parties are those individuals or corporations related to the ownership or management of the Institution directly or through third parties.
Article 89 of the Ley de Sociedades Anónimas (Chilean Companies Law), which also applies to Banks, establishes that any transaction with a related party must be carried out on an arm’s length basis.
In the case of publicly traded companies and their subsidiaries, transactions with related parties involve any negotiation, act, contract or transaction in which the company must intervene; the following are considered as parties related to them: those entities of the corporate group to which the company belongs; the corporations that, with respect to the company, have the status as parent, controlling entity, affiliate, subsidiary; the Directors, Managers, Administrators, Chief Executive Officer or Liquidators of the company, acting in their own names or on behalf of individuals other than the company, and their respective spouses or their relatives up to the second degree of consanguinity, as well as any entity controlled either directly or indirectly, through any of them; and any person who either acting individually or jointly with others with whom it has executed a joint operation agreement, may appoint at least one member of the management of the company or controls 10% or more of its capital stock, with the right to vote, in the case of a sociedad por acciones (stock corporation); those established by the bylaws of the company, or justifiably identified by the Directors’ Committee; and those in which it has acted as Director, Manager, Administrator, Chief Executive Officer or Liquidator of the company, during the last eighteen months. Article 147 of the Ley de Sociedades Anónimas (Chilean Companies Law) sets forth that a sociedad anónima abierta (publicly traded company) may only carry out transactions with related parties when they are intended to contribute to the corporate interest, are adjusted in the price, terms and conditions to those prevailing in the market at the time of their approval and comply with the requirements and the procedure indicated by it. Moreover, Article 84 of the Chilean General Banking Law establishes limits for the loans that may be granted to related parties and the prohibition to grant loans to the Directors, Managers or General Attorneys of the Bank.
a. | Loans granted to related parties |
As of September 30, 2019 and December 31, 2018 the loans granted to related persons are detailed below:
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||
Productive companies | Investment companies | Individuals | Productive companies | Investment companies | Individuals | |||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Loans and accounts receivable from customers | ||||||||||||||||||||||||||||
Commercial loans | 107,282 | 10,244 | 4,655 | 170,873 | 64,073 | 3,960 | ||||||||||||||||||||||
Mortgage loans | - | - | 25,539 | - | - | 21,154 | ||||||||||||||||||||||
Consumer loans | - | - | 8,130 | - | - | 5,961 | ||||||||||||||||||||||
Gross loans and accounts receivable from customers | 107,282 | 10,244 | 38,324 | 170,873 | 64,073 | 31,075 | ||||||||||||||||||||||
Allowance for loan losses | (2,776) | (92) | (198) | (2,550) | (70) | (63) | ||||||||||||||||||||||
Net loans and accounts receivable from customers | 104,506 | 10,152 | 38,126 | 168,323 | 64,003 | 31,012 | ||||||||||||||||||||||
Contingent loans | ||||||||||||||||||||||||||||
Contingent loans | 10,467 | 20,432 | 17,135 | 10,803 | 16,325 | 9,220 | ||||||||||||||||||||||
Provisions for contingent loans | (4) | (319) | (22) | (16) | (308) | (10) | ||||||||||||||||||||||
Net contingent loans | 10,463 | 20,113 | 17,113 | 10,787 | 16,017 | 9,210 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
95 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 33 – Transactions with Related Parties, continued
b. | Other transactions and contracts with related parties |
Below are the balances as of September 30, 2019 and December 31, 2018, for transactions with related parties and the impact on income for the nine month periods ended September 30, 2019 and 2018:
As of September 30, 2019 | As of December 31, 2018 | As of September 30, 2018 | ||||||||||||||||||||||||||||
Corporate name | Description | Balances | Effect on income | Balances | Effect on income | |||||||||||||||||||||||||
receivable (payable) | Income | Expense | receivable (payable) | Income | Expense | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||
Redbanc S.A. | ATM management | - | - | 2,615 | - | - | 2,163 | |||||||||||||||||||||||
Transbank S.A. | Credit card management | - | - | 10,809 | - | - | 10,984 | |||||||||||||||||||||||
Combanc S.A. | Data transmission services | - | - | - | - | - | 259 | |||||||||||||||||||||||
Itaú Chile Cía. de Seguros de Vida S.A. | Life insurance | - | 45 | 211 | - | 91 | 577 | |||||||||||||||||||||||
Corp Research S.A. | Management consulting services | - | - | 354 | - | - | 307 | |||||||||||||||||||||||
Itaú Chile Inv. Serv. y Administración S.A. | Leases | - | - | 344 | - | - | 366 | |||||||||||||||||||||||
Instituto de Estudios Bancarios Guillermo Subercaseaux | Education services | - | - | - | - | - | 108 | |||||||||||||||||||||||
VIP Asesorias y Servicios Integrales Ltda. | Marketing services | - | - | - | - | - | 128 | |||||||||||||||||||||||
Everis Chile S.A. | Department stores | - | - | - | - | - | 900 | |||||||||||||||||||||||
CAI Gestion Inmobiliaria S.A. | Other services | - | - | 3 | - | - | 86 | |||||||||||||||||||||||
Promoservice S.A. | Bank services | - | - | - | - | - | - | |||||||||||||||||||||||
Comder Contraparte Central S.A | Credit card management | - | - | 689 | - | - | 670 | |||||||||||||||||||||||
Operadora de Tarjeta de Crédito Nexus S.A. | Office lease and common expenses | - | - | 2,208 | - | - | 2,205 | |||||||||||||||||||||||
Inmobiliaria Edificio Corpgroup S.A. | Accomodations, events | - | - | 3,461 | - | - | 3,319 | |||||||||||||||||||||||
Hotel Corporation of Chile S.A. | Advisory services | - | - | 14 | - | - | 87 | |||||||||||||||||||||||
Corp Imagen y diseños S.A. | Publishing services | - | - | 75 | - | - | 69 | |||||||||||||||||||||||
Corp Group Holding Inversiones Limitada | ATM space rentals (See Note 16) | - | - | 312 | - | - | 270 | |||||||||||||||||||||||
SMU S.A., Rendic Hnos. S.A. | Management advisory services | 3,965 | - | 1,733 | 5,698 | - | 1,690 | |||||||||||||||||||||||
Inversiones Corp Group Interhold Ltda. | Financial services | - | - | 1,859 | - | - | 1,850 | |||||||||||||||||||||||
Bcycle Latam SPA | Other services | - | - | 989 | - | - | - | |||||||||||||||||||||||
Bolsa de Comercio de Santiago | Advisory services | - | - | 148 | - | - | 174 | |||||||||||||||||||||||
Itaú Unibanco | Bank services | 1,209 | - | 1,581 | 1,804 | - | - | |||||||||||||||||||||||
Pulso Editorial S.A. | Servicios de Publicación | - | - | 22 | - | - | 465 | |||||||||||||||||||||||
Compañía Chilena de Televisión S.A. | Television broadcasting services | - | - | 39 | - | - | - | |||||||||||||||||||||||
Sociedad Operadora Cámara de Compensación de Pagos de Alto Valor | Others services | - | - | 294 | - | - | - | |||||||||||||||||||||||
Inmobiliaria Gabriela S.A | Others services | - | - | 90 | - | - | - | |||||||||||||||||||||||
Adexus S.A. | Data transmission services | - | - | 507 | - | - | - |
These transactions were carried out at normal market prices prevailing on the date of the transactions.
c. | Donations |
Corporate name | Description | For the nine month periods ended September 30, | ||||||||||
2019 | 2018 | |||||||||||
MCh$ | MCh$ | |||||||||||
Fundación Corpgroup Centro Cultural | Donations | 1,324 | 1,225 | |||||||||
Fundación Descúbreme | Donations | 204 | 194 | |||||||||
Fundación Itaú | Donations | 170 | 157 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
96 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities
This disclosure was prepared based on the application of the local regulatory guidelines stated in Chapter7-12 “Fair value of financial instruments” of the SBIF and IFRS 13 “Fair value measurement”. These standards have been applied to both financial assets andnon-financial assets measured at fair value (recurring andnon-recurring).
The following section details the main guidelines and definitions used by the Group:
Fair value: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The transaction is carried out in the principal1or most advantageous2 market and is not forced, that is, it does not consider factors specific to the Group that may influence a real transaction.
Market participants. Buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the following characteristics:
a) | They are independent of each other, i.e. they are not related parties as defined in IAS 24Related Party Disclosures, although the price in a related party transaction may be used as an input to a fair value measurement if the entity has evidence that the transaction was entered into at market terms. |
b) | They are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information, including information that might be obtained through due diligence efforts that are usual and customary. |
c) | They are able to enter into a transaction for the asset or liability. |
d) | They are willing to enter into a transaction for the asset or liability (i.e. they are motivated, but not forced or otherwise compelled, to do so). |
Fair value measurement. When measuring fair value, the Group takes into account the same characteristics of the asset or liability that market participants would consider in pricing that asset or liability on the measurement date.
Aspects of the transaction. A fair value measurement assumes that the asset or liability is exchanged in an orderly transaction between market participants to sell the asset or transfer the liability at the measurement date under current market conditions. The measurement assumes that the transaction to sell the asset or transfer the liability takes place: (a) on the principal market for the asset or liability; or (b) in the absence of a principal market, on the most advantageous market for the asset or liability.
Market participants. The fair value measurement measures the fair value of the asset or liability using the assumptions that the market participants would use in pricing the asset or liability, assuming that the participants act in their best economic interest.
Prices. Fair value is the price that will be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction on the main (or most advantageous) market as of the measurement date under current market conditions (i.e. exit price) regardless of whether that price is directly observable or estimated using another valuation technique.
1 | The market with the greatest volume and level of activity for the asset or liability. |
2 | The market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability, after taking into account transaction costs and transport costs. |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
97 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities, continued
Highest and best use ofnon-financial assets. The fair value measurement of these assets takes into account the market participant’s ability to generate economic benefits through the highest and best use of the asset or through the sale of the asset to another market participant that would maximize the value of the asset.
Group’s own liabilities and equity instruments.The fair value measurement assumes that these items are transferred to a market participant on the date of measurement. The transfer of these items assumes that:
a. | A liability would remain outstanding and the market participant transferee would be required to fulfill the obligation. The liability would not be settled with the counterparty or otherwise extinguished on the measurement date. |
b. | An entity’s own equity instrument would remain outstanding and the market participant transferee would take on the rights and responsibilities associated with the instrument. The instrument would not be canceled or otherwise extinguished on the measurement date. |
Credit risk. The fair value of a liability reflects the effect of the credit risk. This risk includes, but is not limited to, the entity’s own credit risk. This risk is assumed to be the same before and after the liability is transferred.
Initial recognition. When an asset is acquired or a liability assumed in an exchange transaction involving that asset or liability, the transaction price is the price paid to acquire the asset or received to assume the liability (the entry price). In contrast, the fair value of the asset or liability is the price received to sell the asset or paid to transfer the liability (the exit price). Entities do not necessarily sell assets at the prices paid to acquire them. Likewise, they do not necessarily transfer liabilities at the price received to assume them.
Valuation techniques. The Bank will use techniques that are appropriate for the circumstances and for which sufficient data is available to measure the fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. The following approaches deserve mention. The first two are the most frequently used by the Group:
a. | Market approach.Uses prices and other relevant information generated by market transactions involving identical or comparable (similar) assets, liabilities, or a group of assets and liabilities (e.g. a business). |
b. | Income approach.Converts future amounts (cash flows or income and expenses) to a single current (discounted) amount, reflecting current market expectations about those future amounts. The fair value measurement is determined based on the value indicated by the current market expectations about those future amounts. |
c. | Cost approach. Reflects the amount that would be required currently to replace the service capacity of an asset (current replacement cost). |
Present value techniques. Technique to adjust the discount rate and expected cash flows (expected present value). The present value technique used to measure the fair value will depend on the specific facts and circumstances of the asset or liability being measured and the availability of sufficient data.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities, continued
Components of the present value measurement. Present value is the tool used to link future amounts (e.g. cash flows or values) to a present amount using a discount rate. A fair value measurement of an asset or a liability using a present value technique captures all the following elements from the perspective of market participants at the measurement date:
a. | An estimate of future cash flows for the asset or liability being measured. |
b. | Expectations about possible variations in the amount and timing of the cash flows representing the uncertainty inherent in the cash flows. |
c. | The temporary value of money, represented by the rate on risk-free monetary assets that have expiration dates or duration that coincides with the period covered by the cash flows and do not raise uncertainty in the temporary distribution or risk of default for the holder (that is, risk-free interest rate). |
d. | The price to bear the uncertainty inherent in the cash flows (i.e., a risk premium). |
e. | Other factors that market participants would take into account in these circumstances. |
f. | For a liability, the credit risk related to that liability, including the entity’s own credit risk (i.e. the debtor’s). |
Fair value hierarchy. It gives the highest priority to quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1 inputs) and lowest priority to unobservable inputs (Level 3 inputs). Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Determination of fair value
The following is a summary of the fair values of the main financial assets and liabilities as of September 30, 2019 and December 31, 2018, including those that are not presented at fair value in the Interim Consolidated Statement of Financial Position.
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||
Book value | Estimated fair value | Book value | Estimated fair value | |||||||||||||||||||||||||
Recurring | Non-recurring | Recurring | Non-recurring | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Cash and deposits in banks | 828,517 | - | 828,517 | 987,680 | - | 987,680 | ||||||||||||||||||||||
Cash items in process of collection | 600,402 | - | 600,402 | 318,658 | - | 318,658 | ||||||||||||||||||||||
Trading investments | 219,179 | 219,179 | - | 86,938 | 86,938 | - | ||||||||||||||||||||||
Investments under resale agreements | 168,945 | - | 168,945 | 109,467 | - | 109,467 | ||||||||||||||||||||||
Financial derivative contracts | 3,208,718 | 3,208,718 | - | 1,368,957 | 1,368,957 | - | ||||||||||||||||||||||
Interbank loans, net | 109,516 | - | 109,516 | 341,244 | - | 341,244 | ||||||||||||||||||||||
Loans and accounts receivable from customers, net | 21,825,974 | - | 22,766,169 | 20,833,935 | - | 20,947,417 | ||||||||||||||||||||||
Available for sale investments | 2,592,082 | 2,592,082 | - | 2,650,776 | 2,650,776 | - | ||||||||||||||||||||||
Held to maturity investments | 150,726 | - | 149,280 | 198,910 | - | 198,272 | ||||||||||||||||||||||
Totals | 29,704,059 | 6,019,979 | 24,622,829 | 26,896,565 | 4,106,671 | 22,902,738 | ||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||
Deposits and other demand liabilities | 4,379,085 | - | 4,379,085 | 4,300,475 | - | 4,300,475 | ||||||||||||||||||||||
Cash in process of being cleared | 542,067 | - | 542,067 | 247,165 | - | 247,165 | ||||||||||||||||||||||
Obligations under repurchase agreements | 390,488 | - | 390,488 | 1,015,614 | - | 1,015,614 | ||||||||||||||||||||||
Time deposits and other time liabilities | 11,030,415 | - | 11,112,515 | 10,121,111 | - | 10,135,722 | ||||||||||||||||||||||
Financial derivative contracts | 2,869,865 | 2,869,865 | - | 1,112,806 | 1,112,806 | - | ||||||||||||||||||||||
Interbank borrowings | 2,432,249 | - | 2,438,682 | 2,327,723 | - | 2,335,509 | ||||||||||||||||||||||
Debt instruments issued | 6,282,910 | - | 7,081,086 | 6,010,124 | - | 6,311,527 | ||||||||||||||||||||||
Lease contracts liabilities | 171,640 | - | 183,809 | - | - | - | ||||||||||||||||||||||
Other financial liabilities | 14,057 | - | 14,057 | 12,400 | - | 12,400 | ||||||||||||||||||||||
Totals | 28,112,776 | 2,869,865 | 26,141,789 | 25,147,418 | 1,112,806 | 24,358,412 |
In addition, the fair value estimates presented above do not attempt to estimate the value of the Group’s profits generated by its business, nor future business activities, and, therefore, do not represent the value of the Group as a going concern.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
99 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities, continued
The following section describes the methods used to estimate fair value:
a. | Measurement of the fair value of assets and liabilities for disclosure purposes(Non-recurring). |
Measurement at fair value of items on non-recurring basis | As of September 30, | As of December 31, | ||||||||||
2019 | 2018 | |||||||||||
MCh$ | MCh$ | |||||||||||
ASSETS | ||||||||||||
Cash and deposits in banks | 828,517 | 987,680 | ||||||||||
Cash items in process of collection | 600,402 | 318,658 | ||||||||||
Investments under resale agreements | 168,945 | 109,467 | ||||||||||
Interbank loans, net | 109,516 | 341,244 | ||||||||||
Loans and accounts receivable from customers, net | 22,766,169 | 20,947,417 | ||||||||||
Held to maturity investments | 149,280 | 198,272 | ||||||||||
Totals | 24,622,829 | 22,902,738 | ||||||||||
LIABILITIES | ||||||||||||
Deposits and other demand liabilities | 4,379,085 | 4,300,475 | ||||||||||
Cash in process of being cleared | 542,067 | 247,165 | ||||||||||
Obligations under repurchase agreements | 390,488 | 1,015,614 | ||||||||||
Time deposits and other time liabilities | 11,112,515 | 10,135,722 | ||||||||||
Financial derivative contracts | 2,438,682 | 2,335,509 | ||||||||||
Interbank borrowings | 7,081,086 | 6,311,527 | ||||||||||
Lease contracts liabilities | 183,809 | - | ||||||||||
Other financial liabilities | 14,057 | 12,400 | ||||||||||
Totals | 26,141,789 | 24,358,412 |
Cash, short-term assets and short-term liabilities
The fair value of these items approximates their book value given their short-term nature. These items include:
● | Cash and deposits in banks |
● | Cash in the process of collection |
● | Investments under agreements to resell |
● | Checking accounts and demand deposits |
● | Other financial obligations |
Loans
The fair value of loans is determined using a discounted cash flow analysis. In the case of mortgage loans and consumer loans, the cash flows were discounted by using the effective average placement rate of the last month of the reporting period for each type of product. The fair value of commercial loans is determined using a discounted cash flow analysis, using a risk-free interest rate adjusted for expected losses from debtors based on their credit quality. The credit risk adjustment is based on variables observable in the market and the Group’s policies for qualitative and quantitative credit risk methodologies.
This methodology was applied to:
● | Interbank loans |
● | Loans and accounts receivable from customers |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
100 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities, continued
Held to maturity investments
The estimated fair value of these financial instruments is determined using quotes and transactions observed in the main market for identical instruments, or in their absence, for similar instruments. Fair value estimates of debt instruments or securities representative of debt take into account additional variables and inputs to the extent that they apply, including estimates of prepayment rates and the credit risk of issuers.
Medium and long-term liabilities
The fair value of medium and long-term liabilities is determined using a discounted cash flow analysis, using an interest rate curve that reflects current market conditions at which the entity’s debt instruments are traded. Medium and long-term liabilities include:
● | Time deposits and saving accounts |
● | Interbank borrowings |
● | Debt instruments issued |
b. | Fair value measurement of financial assets and liabilities for recording purposes (recurring) |
Measurement at fair value of items on a recurring basis | As of September 30, | As of December 31, | ||||||||||
2019 | 2018 | |||||||||||
MCh$ | MCh$ | |||||||||||
ASSETS | ||||||||||||
Trading securities | 219,179 | 86,938 | ||||||||||
Chilean Central Bank and Government securities | 67,824 | 36,608 | ||||||||||
Other securities issued locally | 6,847 | 4,017 | ||||||||||
Foreign government and central bank instruments | 124,902 | 23,276 | ||||||||||
Other securities issued abroad | 18,939 | 19,505 | ||||||||||
Investments in mutual funds | 667 | 3,532 | ||||||||||
Available for sale investments | 2,592,082 | 2,650,776 | ||||||||||
Chilean Central Bank and Government securities | 2,022,637 | 1,352,084 | ||||||||||
Other securities issued locally | 34,993 | 196,439 | ||||||||||
Foreign government and central bank instruments | 465,792 | 769,693 | ||||||||||
Other securities issued abroad | 68,660 | 332,560 | ||||||||||
Financial derivative contracts | 3,208,718 | 1,368,957 | ||||||||||
Forwards | 366,895 | 342,993 | ||||||||||
Swaps | 2,838,327 | 1,021,701 | ||||||||||
Call options | 3,401 | 4,217 | ||||||||||
Put options | 95 | 46 | ||||||||||
Totals | 6,019,979 | 4,106,671 | ||||||||||
LIABILITIES | ||||||||||||
Financial derivative contracts | 2,869,865 | 1,112,806 | ||||||||||
Forwards | 339,432 | 322,241 | ||||||||||
Swaps | 2,528,270 | 788,133 | ||||||||||
Call options | 1,644 | 1,493 | ||||||||||
Put options | 519 | 939 | ||||||||||
Totals | 2,869,865 | 1,112,806 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
101 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities, continued
Financial instruments
The estimated fair value of these financial instruments is determined using quotes and transactions observed in the main market for identical instruments, or in their absence, for similar instruments. Fair value estimates of debt instruments or securities representative of debt take into account additional variables and inputs to the extent that they apply, including estimates of prepayment rates and the credit risk of issuers. These financial instruments are classified as follows:
● | Trading investments |
● | Available for sale investments |
Financial derivative contracts
The estimated fair value of derivative instruments is calculated using prices quoted in the market for financial instruments with similar characteristics. Therefore, the methodology recognizes the own credit risk and the credit risk of each counterparty. The adjustment is known internationally as counterparty risk adjustment, which is composed of CVA (Credit Value Adjustment) and DVA (Debit Value Adjustment), the sum of both risk adjustments the effective counterparty risk that must be recognized..This adjustment is periodically recorded in the financial statements.
As of September 30, 2019, the portfolio of derivative contracts both in Chile and Colombia have an aggregate effect of MCh$36,157 (MCh$38,429 as of December 31, 2018), broken down as follow:
Credit Value Adjustment (CVA) |
| Debit Value Adjustment (DVA) | ||||||||||||||||||
As of September 30, 2019 | As of December 31, 2018 | As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||
Derivatives held for hedging | - | (121) | - | - | ||||||||||||||||
Fair value hedge | - | (70) | �� | - | - | |||||||||||||||
Currency forwards | - | - | - | - | ||||||||||||||||
Currency swaps | - | (68) | - | - | ||||||||||||||||
Interest rate swaps | - | (2) | - | - | ||||||||||||||||
Cash flows hedge | - | (51) | - | - | ||||||||||||||||
Currency forwards | - | (51) | - | - | ||||||||||||||||
Currency swaps | - | - | - | - | ||||||||||||||||
Interest rate swaps | - | - | - | - | ||||||||||||||||
Net investment in a foreign operation hedge | - | - | - | - | ||||||||||||||||
Currency forwards | - | - | - | - | ||||||||||||||||
Currency swaps | - | - | - | - | ||||||||||||||||
Interest rate swaps | - | - | - | - | ||||||||||||||||
Derivatives held for trading | (36,824) | (38,308) | 667 | - | ||||||||||||||||
Currency forwards | (340) | (310) | 222 | - | ||||||||||||||||
Interest rate swaps | (30,618) | (31,671) | 36 | - | ||||||||||||||||
Currency swaps | (5,866) | (6,327) | 409 | - | ||||||||||||||||
Call currency options | - | - | - | - | ||||||||||||||||
Put currency options | - | - | - | - | ||||||||||||||||
Total financial derivatives | (36,824) | (38,429) | 667 | - |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
102 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities, continued
c. | Fair value hierarchy |
IFRS 13 establishes a fair value hierarchy that classifies assets and liabilities based on the characteristics of the data that the technique requires for its valuation.
● | Level 1 |
Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Entity can access at the measurement date. The inputs needed to value the instruments in this category are available daily and used directly.
In the case of currency, shares and mutual funds, prices are observed directly inover-the-counter markets and the stock exchange. These prices correspond to the values at which the exact same assets are traded. As a result, the portfolio valuation does not require assumptions or models of any type.
For instruments issued by the Chilean Central Bank and the Chilean Treasury, benchmark prices are used. Benchmark prices are defined using similar durations, type of currency and are traded the equivalent of every day. The valuation of these instruments is identical to the valuation of the Santiago Stock Exchange, which is a standard international methodology. This methodology uses the internal rate of return to discount the instrument’s cash flows.
● | Level 2 |
The specific instrument does not have daily quotes. However, similar instruments can be observed (e.g. same issuer, different maturity; or different issuer, same maturity and risk rating). In general, they are diverse combinations of pseudo-arbitration. Although the inputs are not directly observable, observable inputs are available with the needed periodicity.
In this category, instruments are valued by discounting contractual cash flows based on azero-coupon curve determined through the price of instruments with similar characteristics and a similar issuer risk. The income approach is used, which converts future amounts to present amounts.
For derivative instruments within this category, quotes fromover-the-counter transactions reported by the most important brokers in the Chilean market and the Bloomberg platform are used. The inputs observed include forward prices, interest rates and volatilities. Based on these inputs, market curves are modeled. They are a numerical representation of the opportunity costs of the instrument’s cash flows or the price volatility of an asset. Finally, cash flows are discounted.
The Black and Scholes model is used for options based on prices of brokers in the OTC market.
For money market instruments, prices of transactions on the Santiago Stock Exchange are observed and used to model market curves.
For corporate or bank bonds, given the lack of market depth, the Bank uses transactions (if any) in the Chilean market, on foreign markets,zero-coupon curves of risk-free instruments, adjustment curves, spread modeling, correlation with similar financial instruments, etc. and gives market curves as the final result. These market curves are provided by a pricing supplier and are widely accepted by the market, regulators and scholars.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
103 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities, continued
● | Level 3 |
This is used when prices, data or necessary inputs are not directly or indirectly observable for similar instruments for the asset or liability as of the valuation date. These fair value valuation models are subjective in nature. Therefore, they base their estimate of prices on a series of assumptions that are widely accepted by the market. The Group has two products in this category:
Due to the lack of liquidity in the basis of the active banking rate (TAB) over the chamber rate (cámara), the price is not observable and, therefore, models must be used to estimate the future cash flows of the contract. This spread is calculated on a historical basis using the IRS with the greatest market depth, which is the chamber swap.
In addition, the Bank offers American forwards to meet its customers’ needs. They do not have a secondary market and, therefore, their value is estimated using an extension of the Hull-White model, used widely by the financial services industry.
None of these products generate significant impacts on the Bank’s results as a result of recalibration. The TAB swap does not have significant impacts on the valuation as the parameters are stable and the reversal to a historic average is empirically quick, which this model reflects correctly. On the other hand, the American forward behaves like a traditional forward when there is an important curve differential, which is the case between the Chileanpeso-US dollar curves. Also, the model’s parameters are very stable.
The table below summarizes the impacts on the portfolio of a recalibration of the models based on a stress scenario, recalibrating parameters with the shock incorporated.
As of September 30, 2019 |
| As of December 31, 2018 | ||||||||||||||||||||||||||
Impact calibration | American | Basis TAB CLP | Basis TAB CLF | American | Basis TAB CLP | Basis TAB CLF | ||||||||||||||||||||||
Forward | Forward | |||||||||||||||||||||||||||
USD-CLP | USD-CLP | |||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Volatility exchange rateUSD-CLP | - | - | - | |||||||||||||||||||||||||
TAB 30 | - | 95 | - | - | 116 | - | ||||||||||||||||||||||
TAB 90 | - | 6 | - | - | 26 | - | ||||||||||||||||||||||
TAB 180 | - | 42 | 19 | - | 50 | 21 | ||||||||||||||||||||||
TAB 360 | - | - | 4 | - | 3 | 5 | ||||||||||||||||||||||
Totals | - | 143 | 23 | - | 195 | 26 |
The following table summarizes the fair value hierarchy for the Group’s recurring valuation of financial instruments:
Level
| Instrument
| Issuer
| Price Source
| Model
| ||||
I | Currency | N/A | OTC, Bloomberg | Directly observable price. | ||||
Shares | Others | Santiago Exchange | Directly observable price. | |||||
Mutual funds | Asset Managers | SVS | Directly observable price. | |||||
Bonds | Chilean Central Bank and Chilean Treasury | Santiago Exchange | Internal rate of return (IRR) based on prices. | |||||
II | Derivatives | N/A | OTC (brokers), Bloomberg | Interest rate curves based on forward prices and coupon rates. | ||||
Money market | Chilean Central Bank and Chilean Treasury | Santiago Exchange | Interest rate curves based on prices. | |||||
Money market | Banks | Santiago Exchange | Interest rate curves based on prices. | |||||
Bonds | Companies, banks | Pricing supplier | Interest rate curves based on correlations, spreads, extrapolations, etc. | |||||
III | Derivatives, active banking rate (TAB) | N/A | OTC (brokers) | Interest rate curves based on modeling ofTAB-Chamber spread. | ||||
Derivatives, American forwards | N/A | Bloomberg | Black and Scholes with inputs from European options. |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
104 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities, continued
The following table classifies assets and liabilities measured at fair value on a recurring basis, in accordance to the fair value hierarchy established in IFRS 13 as of September 30, 2019 and December 31, 2018.
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||||
Measurement at fair value of instruments on a recurring basis using | Fair value | Market value of the asset for identified assets (Level 1) | Other observable significant inputs (Level 2) | Non- observable | Fair value | Market value of the asset for identified assets (Level 1) | Other observable significant inputs (Level 2) | Non- observable | ||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||
Trading securities | 219,179 | 192,726 | 25,786 | - | 86,938 | 67,430 | 19,508 | - | ||||||||||||||||||||||||||||
Chilean Central Bank and Government securities | 67,824 | 67,824 | - | 36,608 | 36,608 | - | - | |||||||||||||||||||||||||||||
Other securities issued locally | 6,847 | - | 6,847 | - | 4,017 | 4,014 | 3 | - | ||||||||||||||||||||||||||||
Foreign government and central bank instruments | 124,902 | 124,902 | - | - | 23,276 | 23,276 | - | - | ||||||||||||||||||||||||||||
Other securities issued abroad | 18,939 | - | 18,939 | - | 19,505 | - | 19,505 | - | ||||||||||||||||||||||||||||
Investments in mutual funds | 667 | - | - | - | 3,532 | 3,532 | - | - | ||||||||||||||||||||||||||||
Available for sale investments | 2,592,082 | 2,507,284 | 84,798 | - | 2,650,776 | 2,458,410 | 192,366 | - | ||||||||||||||||||||||||||||
Chilean Central Bank and Government securities | 2,022,637 | 2,022,637 | - | - | 1,352,084 | 1,352,084 | - | - | ||||||||||||||||||||||||||||
Other securities issued locally | 34,993 | - | 34,993 | - | 196,439 | 5,979 | 190,460 | - | ||||||||||||||||||||||||||||
Foreign government and central bank instruments | 465,792 | 465,792 | - | - | 769,693 | 769,693 | - | - | ||||||||||||||||||||||||||||
Other securities issued abroad | 68,660 | 18,855 | 49,805 | - | 332,560 | 330,654 | 1,906 | - | ||||||||||||||||||||||||||||
Financial derivative contracts | 3,208,718 | - | 3,182,156 | 26,562 | 1,368,957 | - | 1,341,801 | 27,156 | ||||||||||||||||||||||||||||
Forwards | 366,895 | - | 363,561 | 3,334 | 342,993 | - | 342,375 | 618 | ||||||||||||||||||||||||||||
Swaps | 2,838,327 | - | 2,815,099 | 23,228 | 1,021,701 | - | 995,163 | 26,538 | ||||||||||||||||||||||||||||
Call options | 3,401 | - | 3,401 | - | 4,217 | - | 4,217 | - | ||||||||||||||||||||||||||||
Put options | 95 | - | 95 | - | 46 | - | 46 | - | ||||||||||||||||||||||||||||
Totals | 6,019,979 | 2,700,010 | 3,292,740 | 26,562 | 4,106,671 | 2,525,840 | 1,553,675 | 27,156 | ||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||
Financial derivative contracts | 2,869,865 | - | 2,869,020 | 845 | 1,112,806 | - | 1,112,237 | 569 | ||||||||||||||||||||||||||||
Forwards | 339,432 | - | 339,390 | 42 | 322,241 | - | 322,192 | 49 | ||||||||||||||||||||||||||||
Swaps | 2,528,270 | - | 2,527,467 | 803 | 788,133 | - | 787,613 | 520 | ||||||||||||||||||||||||||||
Call options | 1,644 | - | 1,644 | - | 1,493 | - | 1,493 | - | ||||||||||||||||||||||||||||
Put options | 519 | - | 519 | - | 939 | - | 939 | - | ||||||||||||||||||||||||||||
Totals | 2,869,865 | - | 2,869,020 | 845 | 1,112,806 | - | 1,112,237 | 569 |
d. | Transfers between level 1 and level 2 |
During the nine month period ended on September 30, 2019 and for the year ended on December 31, 2018, no transfers were performed between levels 1 and 2.
e. | Disclosures Regarding Level 3 Assets and Liabilities |
Level 3 assets and liabilities are valued using techniques that require inputs that are not observable on the market, for which the income approach is used to convert future amounts to present amounts.
This category includes:
● | Financial derivative instruments indexed to the TAB rate. This rate is comprised of an interbank rate and a liquidity premium charged to financial institutions and is determined using a short-rate model with mean reversion. |
● | American forward options. |
As none of these products has a market, the Bank uses financial engineering valuation techniques that use unobservable variables.
These techniques use the following inputs: transaction prices from the main financial instrument markets and assumptions that are widely accepted by the financial services industry. Using this information, unobservable variables are constructed such as: adjustment curves, spreads, volatilities and other variables necessary for the valuation. Lastly, all of the models are subject to internal contrasts by independent areas and have been reviewed by internal auditors and regulators.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
105 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities, continued
None of these products generate significant impacts on the Bank’s results as a result of recalibration. The American forward is only offered for the US dollar-Chilean peso market and until now, given the important differential between these interest rates, the product behaves like a traditional forward. The TAB swap does not have significant impacts on the valuation as the modeled liquidity premiums have a quick mean reversion for the short part and low volatility for the long part, concentrating on the book’s sensitivity in the longest part of the curve. The following table reconciles assets and liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018.
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Level 3 reconciliation | Opening balance | Gain (loss) recognized in profit or loss | Gain (loss) recognized in equity | Purchases, sales and agreements | Transfers from level 1 or level 2 | Ending balance | Opening balance | Gain (loss) recognized in profit or loss | Gain (loss) recognized in equity | Purchases, sales and agreements | Transfers from level 1 or level 2 | Ending balance | ||||||||||||||||||||||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial derivative contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forwards | 618 | 3,616 | - | (900) | - | 3,334 | 53 | 716 | - | (151) | - | 618 | ||||||||||||||||||||||||||||||||||||||||||||
Swaps | 26,538 | 4,957 | - | (8,267) | - | 23,228 | 30,475 | 5,147 | - | (9,084) | - | 26,538 | ||||||||||||||||||||||||||||||||||||||||||||
Call options | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
Put options | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
Totals | 27,156 | 8,573 | - | (9,167) | - | 26,562 | 30,528 | 5,863 | - | (9,235) | - | 27,156 | ||||||||||||||||||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial derivative contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forwards | 49 | 1,895 | - | (1,902) | - | 42 | - | 831 | - | (782) | - | 49 | ||||||||||||||||||||||||||||||||||||||||||||
Swaps | 520 | 464 | - | (181) | - | 803 | 605 | 392 | - | (477) | - | 520 | ||||||||||||||||||||||||||||||||||||||||||||
Call options | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
Put options | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
Totals | 569 | 2,359 | - | (2,083) | - | 845 | 605 | 1,223 | - | (1,259) | - | 569 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
106 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 34 – Fair Value of Financial Assets and Liabilities, continued
f. | Hierarchy for remaining assets and liabilities. |
The following table classifies assets and liabilities not measured at fair value on a recurring basis, in accordance with the fair value hierarchy as of September 30, 2019 and December 31, 2018:
Measurement at fair value of items on anon- recurring basis | As of September 30, 2019 | |||||||||||||||
Estimated fair value | Market value of the asset for identified assets (Level1) | Other observable significant inputs (Level 2) | Non-observable significant inputs (Level 3) | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
ASSETS | ||||||||||||||||
Cash and deposits in banks | 828,517 | 828,517 | - | - | ||||||||||||
Cash items in process of collection | 600,402 | 600,402 | - | - | ||||||||||||
Investments under resale agreements | 168,945 | 168,945 | - | - | ||||||||||||
Interbank loans, net | 109,516 | 109,516 | - | - | ||||||||||||
Loans and accounts receivable from customers, net | 22,766,169 | - | - | 22,766,169 | ||||||||||||
Held to maturity investments | 149,280 | 149,280 | - | - | ||||||||||||
Totals | 24,622,829 | 1,856,660 | - | 22,766,169 | ||||||||||||
LIABILITIES | ||||||||||||||||
Deposits and other demand liabilities | 4,379,085 | 4,379,085 | - | - | ||||||||||||
Cash in process of being cleared | 542,067 | 542,067 | - | - | ||||||||||||
Obligations under repurchase agreements | 390,488 | 390,488 | - | - | ||||||||||||
Time deposits and other time liabilities | 11,112,515 | - | 11,112,515 | - | ||||||||||||
Interbank borrowings | 2,438,682 | 2,438,682 | - | - | ||||||||||||
Debt instruments issued | 7,081,086 | - | 7,081,086 | - | ||||||||||||
Lease contracts liabilities | 183,809 | 183,809 | - | - | ||||||||||||
Other financial liabilities | 14,057 | 14,057 | - | - | ||||||||||||
Totals | 26,141,789 | 7,948,188 | 18,193,601 | - |
Measurement at fair value of items on anon- recurring basis | As of December 31, 2018 | |||||||||||||||
Estimated fair value | Market value of the asset for identified assets (Level1) | Other observable significant inputs (Level 2) | Non-observable significant �� inputs (Level 3) | |||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||
ASSETS | ||||||||||||||||
Cash and deposits in banks | 987,680 | 987,680 | - | - | ||||||||||||
Cash items in process of collection | 318,658 | 318,658 | - | - | ||||||||||||
Investments under resale agreements | 109,467 | 109,467 | - | - | ||||||||||||
Interbank loans, net | 341,244 | 341,244 | - | - | ||||||||||||
Loans and accounts receivable from customers, net | 20,947,417 | - | - | 20,947,417 | ||||||||||||
Held to maturity investments | 198,272 | - | 198,272 | - | ||||||||||||
Totals | 22,902,738 | 1,757,049 | 198,272 | 20,947,417 | ||||||||||||
LIABILITIES | ||||||||||||||||
Deposits and other demand liabilities | 4,300,475 | 4,300,475 | - | - | ||||||||||||
Cash in process of being cleared | 247,165 | 247,165 | - | - | ||||||||||||
Obligations under repurchase agreements | 1,015,614 | 1,015,614 | - | - | ||||||||||||
Time deposits and other time liabilities | 10,135,722 | - | 10,135,722 | - | ||||||||||||
Interbank borrowings | 2,335,509 | 2,335,509 | - | - | ||||||||||||
Debt instruments issued | 6,311,527 | - | 6,311,527 | - | ||||||||||||
Lease contracts liabilities | - | - | - | - | ||||||||||||
Other financial liabilities | 12,400 | 12,400 | - | - | ||||||||||||
Totals | 24,358,412 | 7,911,163 | 16,447,249 | - |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
107 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management
The following is a description of the main business activities and policies of the Bank in terms of risk management.
a) Credit Risk
Credit risk is the risk of potential loss that it faces, if a client or counterparty in a financial instrument does not comply with its contractual obligations to the Bank.
For Itaú Corpbanca, adequate risk management in all areas and, in particular, with regard to credit risk is one of the fundamental pillars for managing the Bank’s portfolio, ensuring that it maintains an adequate risk / return ratio. It should be noted that this management includes both credit risk caused by effective placements, as well as contingent placements.
The Credit Managements have autonomyvis-à-vis the business areas and their size and organization are in accordance with the demands demanded by the size of the portfolio, as well as the complexity of the operations.
For the management, administration and monitoring of credit risk, each Credit Risk Management uses tools and methodologies that are in accordance with the segments they address. These allow an appropriate control of the risk, according to the size and complexity of the operations carried out by the Bank.
The Bank has a structure of Credit Committees associated with the Debtor’s Risk Rating and with attributions based mostly on the committees in which Risk Managers participate. On certain amounts, a concurrence of Bank Directors is required.
These committees define the levels of individual and group exposure to clients, as well as the mitigating conditions such as guarantees, credit agreements or others. As part of the policies it is defined that all customers must be analyzed at least once a year, when the line is renewed (situation that occurs first), or by activation of any alert.
a.i) Individually assessed portfolio
The Bank’s risk management tool divides its portfolio into the following categories:
● | Normal risk portfolio |
● | Substandard portfolio |
● | Non-compliant portfolio |
Normal risk portfolio
This includes debtors with payment capacity to comply normally with their obligations and commitments whose economic and financial situation shows no signs that this may change.
They are evaluated using a general parametric model with three qualitative factors (industry, shareholders and access to credit) and three quantitative financial position parameters, which are weighted based on the Bank’s total sales.
Substandard portfolio
It includes debtors with financial difficulties that significantly affect their payment capacity and about which there are reasonable doubts regarding repayment of all principal and interest in the contractually agreed-upon terms, showing little room to meet its financial obligations in the short term. Among other customers, this portfolio includes debtors with recent balances between 30 and 90 days overdue that can be attributed to the company’s performance.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
108 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management
They are evaluated using a default parametric model that includes payment behavior and also considers the impact of negative results (losses).
Non-compliant portfolio
This portfolio is comprised of debtors managed by the Normalization Area and that come from clients with individual classification in default and all the clients that present some expired transaction originated by problems in their capacity to pay, regardless of their rating.
Monthly, the Asset Control and Classification Area checks that this provision is complied with.
a.2) Collectively assessed portfolio
A collective assesment requires the formation of groups of credits with homogeneous characteristics in terms of type of debtors and agreed conditions, in order to establish, by means of technically based estimates and following prudential criteria, both the payment behavior of the group in question as the recoveries of their unfulfilled credits.
Non-performing portfolio includes total loans and 100% of the amount of the contingent loans of debtors who, at the end of a month, have any of the following conditions:
i) Overdue equal to or greater than 90 days in the payment of interest or principal of any loans;
ii) they are granted a loan to leave an operation that had more than 60 days of delay in its payment and
iii) it has been subject to forced restructuring or partial debt cancellation.
a.3) Financial instruments
The Bank, for this type of asset, measures the probability of uncollectibility to issuers using internal ratings and, when they are available, external such as independent risk evaluators of the Bank.
Maximum exposure to credit risk
Following is the distribution by financial asset of the maximum exposure to the Bank’s credit risk as of September 30, 2019 and December 31, 2018, for the different components of the balance sheet, including derivatives, without deducting the collateral or other credit enhancements received.
Maximum exposure | Note
| As of September 30, 2019 | As of December 31, 2018 | |||||||||
MCh$ | MCh$ | |||||||||||
Interbank loans | 9 | 109,516 | 341,244 | |||||||||
Loans and accounts receivable from customers | 10 | 21,825,974 | 20,833,935 | |||||||||
Financial derivative contracts | 8 | 3,208,718 | 1,368,957 | |||||||||
Investments under resale agreements | 7 | 168,945 | 109,467 | |||||||||
Available for sale investments | 11 | 2,592,082 | 2,650,776 | |||||||||
Held to maturity investments | 11 | 150,726 | 198,910 | |||||||||
Other assets | 17 | 664,845 | 561,435 | |||||||||
Contingent loans | 23 | 5,655,761 | 5,328,624 | |||||||||
Totals | 34,376,567 | 31,393,348 |
For more details of the maximum exposure to credit and concentration risk for each type of financial instrument, refer to the specific Notes.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
109 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management, continued
a.4) Guarantees
In order to mitigate credit risk, guarantees have been established in the Bank’s favor. The main guarantees provided by customers are detailed as follows:
For loans to individuals, the main guarantees are: | For loans to companies, the main guarantees are: | |||
- Machinery and/or equipment - Buildings for specific purposes under construction - Agricultural land - Maritime ships and aircrafts - Mining infrastructure - Inventory - Agricultural assets - Industrial assets - Biological assets - Other warranties | - Urban plots or land |
Guarantees taken by the Bank to secure collections of rights reflected in its loan portfolios are mortgage-type guarantees (urban and rural property, farm land, ships and aircraft, mining claims and other assets) and pledges (inventory, farm assets, industrial assets, plantings and other pledged assets).
a.5) Loan portfolio by credit risk assesment
Credit quality is described in accordance with the compendium of accounting standards issued by the CMF. A detail by credit risk category is presented below:
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||||
Categories | Individual | % over total portfolio | Allowance | Coverange ratio | Individual | % over total portfolio | Allowance | Coverange ratio | ||||||||||||||||||||||||||||
MCh$ | % | MCh$ | % | MCh$ | % | MCh$ | % | |||||||||||||||||||||||||||||
A1 | 131,887 | 0.59% | 47 | 0.04% | 110,565 | 0.51% | 45 | 0.04% | ||||||||||||||||||||||||||||
A2 | 616,992 | 2.74% | 308 | 0.05% | 453,413 | 2.11% | 475 | 0.10% | ||||||||||||||||||||||||||||
A3 | 3,377,678 | 15.01% | 5,022 | 0.15% | 3,097,001 | 14.40% | 3,506 | 0.11% | ||||||||||||||||||||||||||||
A4 | 4,305,043 | 19.13% | 33,877 | 0.79% | 4,161,368 | 19.35% | 37,403 | 0.90% | ||||||||||||||||||||||||||||
A5 | 2,917,165 | 12.97% | 60,439 | 2.07% | 2,840,866 | 13.21% | 58,360 | 2.05% | ||||||||||||||||||||||||||||
A6 | 617,710 | 2.75% | 15,341 | 2.48% | 615,467 | 2.86% | 27,477 | 4.46% | ||||||||||||||||||||||||||||
Normal risk portfolio | 11,966,475 | 53.19% | 115,034 | 0.96% | 11,278,680 | 52.44% | 127,266 | 1.13% | ||||||||||||||||||||||||||||
B1 | 242,256 | 1.08% | 7,974 | 3.00% | 277,825 | 1.29% | 12,642 | 4.55% | ||||||||||||||||||||||||||||
B2 | 184,433 | 0.82% | 25,480 | 13.82% | 76,825 | 0.36% | 2,570 | 3.35% | ||||||||||||||||||||||||||||
B3 | 60,956 | 0.27% | 12,305 | 20.19% | 61,891 | 0.29% | 8,381 | 13.54% | ||||||||||||||||||||||||||||
B4 | 204,704 | 0.91% | 49,626 | 24.24% | 218,737 | 1.02% | 60,218 | 27.53% | ||||||||||||||||||||||||||||
Substandar portfolio | 692,349 | 3.08% | 95,385 | 13.78% | 635,278 | 2.96% | 83,811 | 13.19% | ||||||||||||||||||||||||||||
C1 | 138,834 | 0.62% | 2,776 | 2.00% | 129,943 | 0.61% | 2,599 | 2.00% | ||||||||||||||||||||||||||||
C2 | 69,541 | 0.31% | 6,954 | 10.00% | 74,940 | 0.35% | 7,494 | 10.00% | ||||||||||||||||||||||||||||
C3 | 38,395 | 0.17% | 9,599 | 25.00% | 32,447 | 0.15% | 8,112 | 25.00% | ||||||||||||||||||||||||||||
C4 | 30,838 | 0.14% | 12,336 | 40.00% | 58,943 | 0.27% | 23,577 | 40.00% | ||||||||||||||||||||||||||||
C5 | 82,765 | 0.37% | 53,797 | 65.00% | 59,832 | 0.28% | 38,891 | 65.00% | ||||||||||||||||||||||||||||
C6 | 87,766 | 0.39% | 78,989 | 90.00% | 121,096 | 0.56% | 108,986 | 90.00% | ||||||||||||||||||||||||||||
Non-compliant portfolio | 448,139 | 2.00% | 164,451 | 36.70% | 477,201 | 2.22% | 189,659 | 39.74% | ||||||||||||||||||||||||||||
Subtotals | 13,106,963 | 58.27% | 374,870 | 2.86% | 12,391,159 | 57.62% | 400,736 | 3.23% | ||||||||||||||||||||||||||||
As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||||
Categories | Group | % over total portfolio | Allowance | Coverange ratio | Group | % over total portfolio | Allowance | Coverange ratio | ||||||||||||||||||||||||||||
MCh$ | % | MCh$ | % | MCh$ | % | MCh$ | % | |||||||||||||||||||||||||||||
Normal risk portfolio | 1,834,682 | 8.15% | 28,757 | 1.57% | 1,801,827 | 8.38% | 26,606 | 1.48% | ||||||||||||||||||||||||||||
Non-compliant portfolio | 202,966 | 0.90% | 53,206 | 26.21% | 194,072 | 0.90% | 36,429 | 18.77% | ||||||||||||||||||||||||||||
Commercial | 2,037,648 | 9.05% | 81,963 | 4.02% | 1,995,899 | 9.28% | 63,035 | 3.16% | ||||||||||||||||||||||||||||
Normal risk portfolio | 4,431,483 | 19.70% | 15,961 | 0.36% | 4,235,934 | 19.70% | 21,741 | 0.51% | ||||||||||||||||||||||||||||
Non-compliant portfolio | 214,772 | 0.95% | 20,113 | 9.36% | 209,893 | 0.98% | 14,352 | 6.84% | ||||||||||||||||||||||||||||
Living place | 4,646,255 | 20.65% | 36,074 | 0.78% | 4,445,827 | 20.68% | 36,093 | 0.81% | ||||||||||||||||||||||||||||
Normal risk portfolio | 2,552,801 | 11.35% | 85,046 | 3.33% | 2,532,331 | 11.78% | 104,580 | 4.13% | ||||||||||||||||||||||||||||
Non-compliant portfolio | 155,806 | 0.69% | 95,546 | 61.32% | 137,432 | 0.64% | 64,269 | 46.76% | ||||||||||||||||||||||||||||
Consumer | 2,708,607 | 12.04% | 180,592 | 6.67% | 2,669,763 | 12.42% | 168,849 | 6.32% | ||||||||||||||||||||||||||||
Total portfolio | 22,499,473 | 100% | 673,499 | 2.99% | 21,502,648 | 100% | 668,713 | 3.11% |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
110 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management, continued
b) Financial Risk
Definition and principles of financial risk management
The Bank defines this risk as the possibility of an event having unexpected financial consequences on the institution. Although this definition involves a strong adversity component, it also involves an important opportunity component. Therefore, the purpose of financial risk management is not to eliminate this risk, but rather to limit its exposure to negative events in line with the risk appetite of the Bank’s shareholders and the regulations that govern the institution. The main financial risks to which the Bank is exposed are: Market Risk, Liquidity Risk and Counterparty Risk.
b.1) Market Risk
Market Risk is the exposure to economic gains or losses caused by movements in prices and market variables. This risk stems from the activities of the Trading and Banking Books. In the first case, it comes from activities intended to obtain short-term gains and from the intensive use of fair value instruments. In the second case, with a more long-term vision, it stems from commercial activities with products valued at amortized cost.
The following section describes the main market risk factors to which the Bank and its subsidiaries are exposed:
b.1.1) Currency Risk
Currency risk is the exposure to adverse movements in the exchange rates of currencies other than their base currency (CLP in the case of operations in Chile and COP in the case of operations in Colombia) for all those positions inside and outside of balance. The main sources of exchange risk are:
• Positions in foreign currency (MX) within the attributions of the Trading Book.
• Currency mismatches between the assets and liabilities of the Banking Book.
• Currency flow mismatches.
• Structural positions, generated by consolidating our financial statements, assets and liabilities denominated in currencies other than the Chilean peso registered in our branches and subsidiaries abroad.
The foregoing means that movements in exchange rates can generate volatility in both the result and the Bank’s equity. This effect is known as “translation risk”.
b.1.2) Index adjustments Risk
The index adjustment risk is the exposure due to changes in units or indexes of adjustment (such as UF, UVR or others) defined in national or foreign currency, in which some of the instruments, contracts or other transactions registered in the balance with such characteristics.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
111 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management, continued
The positions in currencies of assets and liabilities as of September 30, 2019 and December 31, 2018 are as follows:
As of September 30, 2019 | Note | CLP
| UF
| USD
| COP
| EUR
| Others currencies | Exchange rate indexed | Totals | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||
Cash and deposits in banks | 5 | 212,845 | - | 311,961 | 264,614 | 34,143 | 4,954 | - | 828,517 | |||||||||||||||||||||||||
Cash items in process of collection | 5 | 252,396 | - | 287,664 | 165 | 58,025 | 2,152 | - | 600,402 | |||||||||||||||||||||||||
Trading investments | 6 | 75,338 | - | - | 143,841 | - | - | - | 219,179 | |||||||||||||||||||||||||
Investments under resale agreements | 7 | 40,839 | - | - | 128,106 | - | - | - | 168,945 | |||||||||||||||||||||||||
Financial derivative contracts | 8 | 2,134,408 | 364,750 | 620,918 | 85,616 | 3,016 | 10 | - | 3,208,718 | |||||||||||||||||||||||||
Interbank loans, net | 9 | 51,909 | - | 37,216 | 20,391 | - | - | - | 109,516 | |||||||||||||||||||||||||
Loans and accounts receivable from customers, net | 10 | 5,689,294 | 8,577,643 | 3,157,962 | 4,357,024 | 32,622 | 994 | 10,435 | 21,825,974 | |||||||||||||||||||||||||
Available for sale investments | 11 | 1,325,026 | 660,620 | 93,592 | 512,844 | - | - | - | 2,592,082 | |||||||||||||||||||||||||
Held to maturity investments | 11 | - | - | 67,046 | 83,680 | - | - | - | 150,726 | |||||||||||||||||||||||||
Investments in companies | 12 | 6,234 | - | - | 3,455 | - | - | - | 9,689 | |||||||||||||||||||||||||
Intangibles | 13 | 1,420,028 | - | 1,088 | 162,959 | - | - | - | 1,584,075 | |||||||||||||||||||||||||
Fixed assets | 14 | 36,082 | - | 432 | 19,072 | - | - | - | 55,586 | |||||||||||||||||||||||||
Right of use asset under lease agreements | 15 | 32,336 | 128,978 | 7,830 | 35,982 | - | - | 275 | 205,401 | |||||||||||||||||||||||||
Current taxes | 16 | 29,088 | - | - | 46,495 | - | - | - | 75,583 | |||||||||||||||||||||||||
Deferred taxes | 16 | 157,596 | - | 18,239 | 1,728 | - | - | - | 177,563 | |||||||||||||||||||||||||
Other assets | 17 | 249,780 | 49,310 | 292,067 | 70,783 | 1,293 | 1,342 | 270 | 664,845 | |||||||||||||||||||||||||
TOTAL ASSETS | 11,713,199 | 9,781,301 | 4,896,015 | 5,936,755 | 129,099 | 9,452 | 10,980 | 32,476,801 | ||||||||||||||||||||||||||
Deposits and other demand liabilities | 18 | 2,159,553 | 3,485 | 445,814 | 1,764,044 | 6,097 | 92 | - | 4,379,085 | |||||||||||||||||||||||||
Cash in process of being cleared | 5 | 213,948 | - | 249,369 | - | 77,823 | 927 | - | 542,067 | |||||||||||||||||||||||||
Obligations under repurchase agreements | 7 | 362,381 | - | - | 28,107 | - | - | - | 390,488 | |||||||||||||||||||||||||
Time deposits and other time liabilities | 18 | 7,319,044 | 393,433 | 1,300,790 | 2,017,134 | 13 | - | 1 | 11,030,415 | |||||||||||||||||||||||||
Financial derivative contracts | 8 | 1,769,526 | 450,590 | 544,629 | 105,069 | - | 51 | - | 2,869,865 | |||||||||||||||||||||||||
Interbank borrowings | 19 | - | - | 1,890,415 | 540,040 | 1,570 | 224 | - | 2,432,249 | |||||||||||||||||||||||||
Debt instruments issued | 20 | 820,393 | 4,851,880 | 115,151 | 495,486 | - | - | - | 6,282,910 | |||||||||||||||||||||||||
Other financial liabilities | 20 | 14,047 | 10 | - | - | - | - | - | 14,057 | |||||||||||||||||||||||||
Lease contracts liabilities | 15 | - | 130,857 | 7,553 | 32,918 | - | - | 312 | 171,640 | |||||||||||||||||||||||||
Current taxes | 16 | 8 | - | - | - | - | - | - | 8 | |||||||||||||||||||||||||
Deferred taxes | 16 | 1 | - | - | 273 | - | - | - | 274 | |||||||||||||||||||||||||
Provisions | 21 | 122,213 | - | - | 74,631 | - | - | - | 196,844 | |||||||||||||||||||||||||
Other liabilities | 22 | 186,658 | 162,544 | 77,729 | 48,303 | 1,566 | 2,305 | 33,590 | 512,695 | |||||||||||||||||||||||||
TOTAL LIABILITIES | 12,967,772 | 5,992,799 | 4,631,450 | 5,106,005 | 87,069 | 3,599 | 33,903 | 28,822,597 | ||||||||||||||||||||||||||
Assets (liabilities) net | (1,254,573) | 3,788,502 | 264,565 | 830,750 | 42,030 | 5,853 | (22,923) | 3,654,204 | ||||||||||||||||||||||||||
As of December 31, 2018 | Note | CLP
| UF
| USD
| COP
| EUR
| Others currencies | Exchange rate indexed | Totals | |||||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||||||
Cash and deposits in banks | 5 | 223,099 | - | 449,437 | 299,458 | 15,686 | - | - | 987,680 | |||||||||||||||||||||||||
Cash items in process of collection | 5 | 195,640 | - | 119,725 | 226 | 2,861 | 206 | - | 318,658 | |||||||||||||||||||||||||
Trading investments | 6 | 44,157 | - | - | 42,781 | - | - | - | 86,938 | |||||||||||||||||||||||||
Investments under resale agreements | 7 | 91,510 | - | - | 17,957 | - | - | - | 109,467 | |||||||||||||||||||||||||
Financial derivative contracts | 8 | 972,693 | 66,989 | 226,561 | 102,709 | 5 | - | - | 1,368,957 | |||||||||||||||||||||||||
Interbank loans, net | 9 | 239,963 | - | 70,823 | 30,458 | - | - | - | 341,244 | |||||||||||||||||||||||||
Loans and accounts receivable from customers, net | 10 | 5,675,609 | 7,785,104 | 3,199,242 | 4,145,634 | 19,391 | 13 | 8,942 | 20,833,935 | |||||||||||||||||||||||||
Available for sale investments | 11 | 835,543 | 680,505 | 78,908 | 1,055,820 | - | - | - | 2,650,776 | |||||||||||||||||||||||||
Held to maturity investments | 11 | - | - | 122,372 | 76,538 | - | - | - | 198,910 | |||||||||||||||||||||||||
Investments in companies | 12 | 6,232 | - | - | 4,323 | - | - | - | 10,555 | |||||||||||||||||||||||||
Intangibles | 13 | 1,432,361 | - | 1,308 | 180,138 | - | - | - | 1,613,807 | |||||||||||||||||||||||||
Fixed assets | 14 | 77,639 | - | 846 | 17,079 | - | - | - | 95,564 | |||||||||||||||||||||||||
Current taxes | 15 | 68,094 | - | 2,887 | 52,148 | - | - | - | 123,129 | |||||||||||||||||||||||||
Deferred taxes | 15 | 133,375 | - | 16,519 | 4,705 | - | - | - | 154,599 | |||||||||||||||||||||||||
Other assets | 16 | 259,802 | 7,787 | 164,724 | 121,619 | 7,467 | 36 | �� | - | 561,435 | ||||||||||||||||||||||||
TOTAL ASSETS | 10,255,717 | 8,540,385 | 4,453,352 | 6,151,593 | 45,410 | 255 | 8,942 | 29,455,654 | ||||||||||||||||||||||||||
Deposits and other demand liabilities | 17 | 2,058,537 | 4,214 | 444,668 | 1,785,581 | 7,418 | 57 | - | 4,300,475 | |||||||||||||||||||||||||
Cash in process of being cleared | 5 | 133,926 | - | 112,284 | - | 796 | 159 | - | 247,165 | |||||||||||||||||||||||||
Obligations under repurchase agreements | 7 | 363,789 | - | 6,834 | 644,991 | - | - | - | 1,015,614 | |||||||||||||||||||||||||
Time deposits and other time liabilities | 17 | 6,513,874 | 609,136 | 1,955,631 | 1,042,445 | 25 | - | - | 10,121,111 | |||||||||||||||||||||||||
Financial derivative contracts | 8 | 773,186 | 83,339 | 178,869 | 76,207 | 1,205 | - | - | 1,112,806 | |||||||||||||||||||||||||
Interbank borrowings | 18 | - | 5,863 | 2,279,817 | 39,859 | 2,170 | 14 | - | 2,327,723 | |||||||||||||||||||||||||
Debt instruments issued | 19 | 439,805 | 4,475,832 | 649,897 | 444,590 | - | - | - | 6,010,124 | |||||||||||||||||||||||||
Other financial liabilities | 19 | 12,390 | 10 | - | - | - | - | - | 12,400 | |||||||||||||||||||||||||
Current taxes | 15 | 528 | - | - | 663 | - | - | - | 1,191 | |||||||||||||||||||||||||
Deferred taxes | 15 | - | - | 454 | 17 | - | - | - | 471 | |||||||||||||||||||||||||
Provisions | 20 | 163,481 | - | - | 73,689 | - | - | - | 237,170 | |||||||||||||||||||||||||
Other liabilities | 21 | 239,172 | 133,106 | 69,900 | 49,508 | 2,509 | - | 27,597 | 521,792 | |||||||||||||||||||||||||
TOTAL LIABILITIES | 10,698,688 | 5,311,500 | 5,698,354 | 4,157,550 | 14,123 | 230 | 27,597 | 25,908,042 | ||||||||||||||||||||||||||
Assets (liabilities) net | (442,971) | 3,228,885 | (1,245,002) | 1,994,043 | 31,287 | 25 | (18,655) | 3,547,612 |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
112 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management, continued
b,2)interest Rate Risk
Interest Rate Risk is the exposure to movements in market interest rates. Changes in market interest rates can affect both the price of instruments recorded at fair value and the financial margin and other gains from the Banking Book such as fees. Fluctuations in interest rates also affect the Bank’s economic value.
Interest rate risk can be represented by sensitivities to parallel and/ornon-parallel yield shifts with the effects reflected in the prices of instruments, the financial margin, equity and economic value.
The measurement of the structural interest rate risk is carried out through the representation by risk factor of the cash flows expressed in fair value, assigned on the dates of repricing and by currency. This methodology facilitates the detection of concentrations of interest risk in the different terms. All the balance sheet and off balance sheet items are unbundled in their flows and placed at the repricing/maturity. In the case of those accounts that do not have a contractual maturity, an internal model of analysis and estimation of their durations and sensitivities is used.
The following are the Banking Book items (products valued at amortized cost and instruments available for sale and derivatives valued at fair value) for the most relevant currencies in which the Bank trades as of September 30, 2019 and December 31, 2018.
As of September 30, 2019 | ||||||||||||||||||||||||
Positions | Up to 1 month | 1 to 3 months |
3 months to 1 year
| 1 to 3 years | More than 3 years | Totals | ||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||
Assets | 7,547,569 | 3,158,622 | 5,559,264 | 4,843,392 | 9,111,261 | 30,220,108 | ||||||||||||||||||
CLP | 3,138,670 | 979,932 | 2,276,318 | 1,908,959 | 1,307,997 | 9,611,876 | ||||||||||||||||||
CLF | 422,725 | 598,802 | 1,519,606 | 1,851,715 | 6,704,596 | 11,097,444 | ||||||||||||||||||
USD | 1,965,447 | 887,483 | 1,072,720 | 102,701 | 198,590 | 4,226,941 | ||||||||||||||||||
COP | 2,020,727 | 692,405 | 690,620 | 980,017 | 900,078 | 5,283,847 | ||||||||||||||||||
Liabilities | (14,679,087) | (2,822,488) | (5,895,354) | (1,756,258) | (6,017,003) | (31,170,190) | ||||||||||||||||||
CLP | (8,986,879) | (1,632,900) | (2,974,496) | (437,836) | (215,000) | (14,247,111) | ||||||||||||||||||
CLF | (197,503) | (35,669) | (775,223) | (720,579) | (5,458,261) | (7,187,235) | ||||||||||||||||||
USD | (1,532,870) | (755,106) | (1,424,895) | (82,575) | - | (3,795,446) | ||||||||||||||||||
COP | (3,961,835) | (398,813) | (720,740) | (515,268) | (343,742) | (5,940,398) | ||||||||||||||||||
Derivative | 710,385 | 184,178 | (80,211) | (382,278) | 507,843 | 939,917 | ||||||||||||||||||
CLP | 412,476 | 381,551 | 1,213,687 | 551,758 | (362,273) | 2,197,199 | ||||||||||||||||||
CLF | (463,611) | (33,906) | (1,180,208) | (765,160) | 941,991 | (1,500,894) | ||||||||||||||||||
USD | (87,216) | 81,163 | 256,059 | 12,162 | (16,059) | 246,109 | ||||||||||||||||||
COP | 848,736 | (244,630) | (369,749) | (181,038) | (55,816) | (2,497) | ||||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||
Positions | Up to 1 month | 1 to 3 months | 3 months to 1 year | 1 to 3 years | More than 3 years | Totals | ||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||
Assets | 7,361,827 | 2,732,465 | 5,510,072 | 4,787,052 | 8,314,688 | 28,706,104 | ||||||||||||||||||
CLP | 3,519,009 | 1,000,478 | 1,753,132 | 1,800,011 | 1,181,157 | 9,253,787 | ||||||||||||||||||
CLF | 466,115 | 447,398 | 1,329,598 | 1,845,604 | 6,182,033 | 10,270,748 | ||||||||||||||||||
USD | 1,469,457 | 623,505 | 1,197,716 | 126,122 | 102,349 | 3,519,149 | ||||||||||||||||||
COP | 1,907,246 | 661,084 | 1,229,626 | 1,015,315 | 849,149 | 5,662,420 | ||||||||||||||||||
Liabilities | (14,009,676) | (2,685,555) | (4,724,403) | (2,206,000) | (5,849,673) | (29,475,307) | ||||||||||||||||||
CLP | (8,733,561) | (1,463,211) | (2,101,205) | (560,099) | (330,000) | (13,188,076) | ||||||||||||||||||
CLF | (214,266) | (181,744) | (190,917) | (1,072,879) | (5,201,884) | (6,861,690) | ||||||||||||||||||
USD | (1,319,813) | (643,544) | (1,750,434) | (173,922) | - | (3,887,713) | ||||||||||||||||||
COP | (3,742,036) | (397,056) | (681,847) | (399,100) | (317,789) | (5,537,828) | ||||||||||||||||||
Derivative | (729,147) | 444,096 | 251,673 | (21,576) | 784,784 | 729,830 | ||||||||||||||||||
CLP | (209,799) | 1,521,695 | 394,300 | 209,804 | 65,913 | 1,981,913 | ||||||||||||||||||
CLF | (366,332) | (1,221,035) | (469,699) | (330,428) | 762,022 | (1,625,472) | ||||||||||||||||||
USD | (50,293) | 263,381 | 452,557 | (38,395) | (8,123) | 619,127 | ||||||||||||||||||
COP | (102,723) | (119,945) | (125,485) | 137,443 | (35,028) | (245,738) |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
113 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management, continued
The expositions presented above correspond to the present values resulting from:
● Model contract flows according to their behaviors that affect market risk exposure. Example: prepayment, renewal, etc.
● Discount the flows of the items recorded to accrual at a rate that represents the opportunity cost of the liability/ asset.
● Discount the flows of items accounted to the market at the market rate.
b.3) Volatility Risk
In addition to the exposure associated to the underlying asset, the issuance of options carries other risks. These are caused by thenon-linear relationship between the profit generated by the option and the price and levels of the underlying factors, as well as by exposure to changes in the volatility of the price of the underlying asset.
b.4)Liquidity Risk
Liquidity Risk is the exposure of the Bank’s and its subsidiaries to events that affect their ability to meet, in a timely manner and at reasonable costs, cash payment obligations arising from maturities of time deposits that are not renewed, withdrawals from demand accounts, maturities or settlements of derivatives, liquidations of investments or any other payment obligation.
Financial institutions are exposed to funding liquidity risk that is intrinsic to the role of intermediary that they play in the economy. In general, in financial markets demand for medium or long-term financing is usually much greater than the supply of funds for those terms while short-term financing is in considerable supply. In this sense, the role of intermediary played by financial institutions, which assume the risk of satisfying the demand for medium and long-term financing by brokering short-term available funds, is essential for the economy to function properly.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
114 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management, continued
Normative Measurement of Contractual Liquidity Gap
According to chapter12-20 of the RAN, all the items on and off the balance sheet that contribute cash flows are analyzed. The consolidatednon-discounted contractual cash flows of financial assets and liabilities of the Bank as of September 30, 2019 and December 31, 2018, are presented below:
Up to 1 month | 1 to 3 months | From 3 months to 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | Totals
| ||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||||||
Assets | 4,262,405 | 1,910,583 | 4,735,104 | 7,171,855 | 4,261,903 | 8,959,599 | 31,301,449 | |||||||||||||||||||||
Cash | 648,290 | - | - | - | - | - | 648,290 | |||||||||||||||||||||
Financial instruments recorded at market value | 50,376 | 42,455 | 808,371 | 1,224,464 | 759,402 | 201,231 | 3,086,299 | |||||||||||||||||||||
Loans to local banks without credit lines | 174,325 | - | - | - | - | - | 174,325 | |||||||||||||||||||||
Credit lines granted to local banks | - | - | - | - | - | - | - | |||||||||||||||||||||
Commercial loans without credit lines | 1,228,369 | 1,836,100 | 3,260,418 | 3,994,404 | 2,140,520 | 4,146,319 | 16,606,130 | |||||||||||||||||||||
Commercial credit lines and overdrafts | 142,386 | - | - | - | - | - | 142,386 | |||||||||||||||||||||
Consumer loans without credit lines | 102,353 | 125,300 | 544,535 | 1,063,368 | 588,555 | 148,832 | 2,572,943 | |||||||||||||||||||||
Consumer credit lines and overdrafts | 279,860 | - | - | - | - | - | 279,860 | |||||||||||||||||||||
Residential mortgage loans | 36,052 | 70,413 | 319,045 | 836,036 | 782,256 | 4,340,153 | 6,383,955 | |||||||||||||||||||||
Financial investments computed according to issuer flow | 253,355 | 40,072 | 7,286 | - | - | - | 300,713 | |||||||||||||||||||||
Other transactions or commitments without credit lines | 1,310,557 | - | - | - | - | - | 1,310,557 | |||||||||||||||||||||
Other lines of credit granted | - | - | - | - | - | - | - | |||||||||||||||||||||
Derivative contracts | 36,482 | (203,757) | (204,551) | 53,583 | (8,830) | 123,064 | (204,010) | |||||||||||||||||||||
Liabilities | (10,185,105) | (2,996,211) | (6,058,009) | (1,943,530) | (1,534,200) | (5,002,353) | (27,719,408) | |||||||||||||||||||||
Checking accounts and demand deposits | (4,313,253) | - | - | - | - | - | (4,313,253) | |||||||||||||||||||||
Term savings accounts - unconditional withdrawal | - | - | - | - | - | - | - | |||||||||||||||||||||
Term savings accounts - deferred withdrawal | (16,846) | - | - | - | - | - | (16,846) | |||||||||||||||||||||
Obligations with the Chilean Central Bank without credit lines | (238,034) | - | - | - | - | - | (238,034) | |||||||||||||||||||||
Credit Lines obtained from the Central Bank of Chile | - | - | - | - | - | - | - | |||||||||||||||||||||
Obligations with others Banks without credit lines | - | - | - | - | - | - | - | |||||||||||||||||||||
Credit lines obtained from other banks in the country | - | - | - | - | - | - | - | |||||||||||||||||||||
Deposits and time deposits | (4,038,984) | (2,417,002) | (3,650,399) | (673,394) | (75,650) | (705,290) | (11,560,719) | |||||||||||||||||||||
Foreing borrowings without credit lines | (229,846) | (533,354) | (1,563,647) | (170,235) | (98,282) | (105,936) | (2,701,300) | |||||||||||||||||||||
Credit lines obtained abroad | (2,743) | - | - | - | - | - | (2,743) | |||||||||||||||||||||
Letter of credit obligations | - | (345) | (6,783) | (15,030) | (12,098) | (12,145) | (46,401) | |||||||||||||||||||||
Bonds payable | (13,910) | (45,510) | (837,180) | (1,084,871) | (1,348,170) | (4,178,982) | (7,508,623) | |||||||||||||||||||||
Other payment obligations or commitments without credit lines | (1,331,489) | - | - | - | - | - | (1,331,489) | |||||||||||||||||||||
Other credit lines obtained | - | - | - | - | - | - | - | |||||||||||||||||||||
Net contractual liquidity gap | (5,922,700) | (1,085,628) | (1,322,905) | 5,228,325 | 2,727,703 | 3,957,246 | 3,582,041 |
Up to 1 month | 1 to 3 months | From 3 months to 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | Totals
| ||||||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | ||||||||||||||||||||||
Assets | 7,375,699 | 3,492,109 | 3,006,936 | 3,344,986 | 5,966,743 | 3,588,079 | 26,774,552 | |||||||||||||||||||||
Cash | 758,288 | - | - | - | - | - | 758,288 | |||||||||||||||||||||
Financial instruments recorded at market value | 1,164,800 | 3,506 | 15,950 | 53,557 | 918,530 | 56,574 | 2,212,917 | |||||||||||||||||||||
Loans to local banks without credit lines | 50,365 | - | - | - | - | - | 50,365 | |||||||||||||||||||||
Credit lines granted to local banks | 1,806,741 | 1,832,376 | 1,446,176 | 1,339,990 | 2,452,859 | 1,777,430 | 10,655,572 | |||||||||||||||||||||
Commercial loans without credit lines | 271,871 | - | - | - | - | - | 271,871 | |||||||||||||||||||||
Commercial credit lines and overdrafts | 83,929 | 120,660 | 173,903 | 324,320 | 959,704 | 516,100 | 2,178,616 | |||||||||||||||||||||
Consumer loans without credit lines | (453,803) | - | - | - | - | - | (453,803) | |||||||||||||||||||||
Consumer credit lines and overdrafts | 33,874 | 64,651 | 96,573 | 193,707 | 758,207 | 734,572 | 1,881,584 | |||||||||||||||||||||
Residential mortgage loans | 144,255 | 36,997 | 81,900 | 81,441 | 386 | 385 | 345,364 | |||||||||||||||||||||
Other transactions or commitments without credit lines | 1,272,711 | - | - | - | 78 | - | 1,272,789 | |||||||||||||||||||||
Derivative contracts | 2,242,668 | 1,433,919 | 1,192,434 | 1,351,971 | 876,979 | 503,018 | 7,600,989 | |||||||||||||||||||||
Liabilities | (11,078,830) | (3,233,358) | (2,860,472) | (2,172,304) | (347,618) | (5,423,494) | (25,116,076) | |||||||||||||||||||||
Checking accounts and demand deposits | (3,834,752) | - | - | - | - | - | (3,834,752) | |||||||||||||||||||||
Term savings accounts - unconditional withdrawal | (2,575) | - | - | - | - | - | (2,575) | |||||||||||||||||||||
Term savings accounts - deferred withdrawal | (24,914) | - | - | - | - | - | (24,914) | |||||||||||||||||||||
Obligations with the Chilean Central Bank without credit lines | (639,757) | - | - | - | - | - | (639,757) | |||||||||||||||||||||
Deposits and time deposits | (3,437,994) | (2,678,067) | (1,652,852) | (1,397,485) | (114,845) | (727,375) | (10,008,618) | |||||||||||||||||||||
Foreing borrowings without credit lines | (624,446) | (461,062) | (346,289) | (605,155) | (91,307) | (164,036) | (2,292,295) | |||||||||||||||||||||
Letter of credit obligations | (2,532) | (467) | (2,963) | (5,593) | (15,074) | (19,706) | (46,335) | |||||||||||||||||||||
Bonds payable | (1,524,193) | (93,762) | (858,368) | (164,071) | (126,392) | (4,512,377) | (7,279,163) | |||||||||||||||||||||
Other credit lines obtained | (987,667) | - | - | - | - | - | (987,667) | |||||||||||||||||||||
Net contractual liquidity gap | (3,703,131) | (258,751) | (146,464) | (1,172,682) | 5,619,125 | (1,835,415) | 1,658,476 |
Items presented on table above correspond to categories that group financial transactions with similar caracteristics from a liquidity point of view.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
115 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management, continued
C) | Operational Risk |
The Bank and its subsidiaries define operational risk as the possibility of occurrence of losses resulting from failures, deficiencies or inadequacies in internal processes, people, and systems or external events, including in this definition the legal risk and excluding strategic risks and reputational. Operational risk is recognized as a manageable risk, for which it has defined a function in charge of this task within its corporate structure.
Operational risk management is executed, mainly, through the Operational Risk Management function. The Bank adopts a model of three lines of defense as the primary way to implement its operational risk management structure, internal controls and compliance, ensuring compliance with corporate guidelines.
The defense lines are composed by; the business and support areas (first line of defense) responsible for managing the risks related to their processes; Operational Risk, Internal Controls, and Compliance (second line of defense) area in charge of supporting the first line of defense in relation to the fulfillment of its direct responsibilities; and Internal Audit function (third line of defense) responsible for verifying, independently and periodically, the adequacy of the risk identification and management processes and procedures, in accordance with the guidelines established in the Internal Audit Policy and submitting the results of its recommendations for improvement to the Audit Committee.
The risk management program contemplates that all relevant risk issues must be reported to the higher levels and to the Operational Risk Committee.
Our methodology consists in the evaluation of the risks and controls of a business from a broad perspective and includes a plan to monitor the effectiveness of such controls and the identification of eventual weaknesses. The main objectives of the Bank and its subsidiaries in terms of operational risk management are the following:
● Identification, evaluation, information, management, and monitoring of the operational risk in connection with activities, products, and processes carried out or commercialized by the Bank and its subsidiaries;
● Build a strong culture of operational risk management and internal controls, with clearly defined and adequately segregated responsibilities between business and support functions, whether these are internally developed or outsourced to third parties;
● Generate effective internal reports in connection with issues related to operational risk management, with a clearly defined escalation protocol;
● Control the design and application of effective plans to deal with contingencies that ensure business continuity and losses control.
Regarding training and awareness, the risk culture continues to be reinforced throughface-to-face training in the field of operational risk, internal control, prevention of external and internal fraud, and the implementation of the annual “more security” program for all collaborators and induction programs for new employees.
Finally, it is worth mentioning that Sarbanes-Oxley methodologies (SOX) continue to be applied for their main products and processes, the application of this methodology is annually certified by an external consultant.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
116 |
Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management, continued
D) | Capital requirements |
The primary objectives of capital management are to ensure compliance with regulatory requirements and to maintain a solid risk rating and healthy capital ratios. During the nine month period ended on September 30, 2019 and the year ended on December 31, 2018, the Bank has complied fully with all capital requirements.
In accordance with the General Banking Law, the Bank must maintain a minimum ratio of Regulatory Capital to Consolidated Risk-Weighted Assets of 8%, net of required provisions, and a minimum ratio of Core Capital to Total Consolidated Assets of 3%, net of required provisions. However, after the merger, the regulator determined that the Bank’s Regulatory Capital could not be less than 10% of its Risk-Weighted Assets. For this purpose, the Bank has applied the dispose in the Chapter12-1 “Heritage for legal and regulatory purposes” of RAN.
Assets are weighted using risk categories, which are assigned a risk percentage based on the capital needed to back up each asset. There are 5 risk categories (0%, 10%, 20%, 60% and 100%) and additionally an intermediate category with a risk weighting percentage of 2%. For example, cash, due from banks and financial instruments issued by the Chilean Central Bank have 0% risk, which means that, in accordance with current standards, no capital is required to back these assets. Property, plant and equipment have 100% risk, which means that a minimum capital equivalent to 8% of the value of these assets is needed. In the case of Itaú, it uses 10%.
All derivative instruments tradedoff-market are taken into account to determine risk assets using conversion factors over notional values, thus calculating the value of the credit risk exposure (or “credit equivalent”). For weighting purposes, “credit equivalent” also considers contingent loans not recorded in the Consolidated Statement of Financial Position.
As of September 30, 2019 and December 31, 2018, the relation between assets and risk weighted assets is as follow:
Consolidated assets | Risk-weighted assets | |||||||||||||||||||||
Note | As of September 30, 2019 | As of December 31, 2018 | As of September 30, 2019 | As of December 31, 2018 | ||||||||||||||||||
MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||||||||||
Asset balance (net of allowances) | ||||||||||||||||||||||
Cash and deposits in banks | 5 | 828,517 | 987,680 | - | - | |||||||||||||||||
Cash items in process of collection | 5 | 600,402 | 318,658 | 115,288 | 56,963 | |||||||||||||||||
Trading investments | 6 | 219,179 | 86,938 | 35,945 | 27,658 | |||||||||||||||||
Investments under resale agreements | 7 | 168,945 | 109,467 | 63,184 | 106,916 | |||||||||||||||||
Financial derivative contracts (*) | 8 | 1,859,166 | 1,315,165 | 1,573,421 | 1,040,274 | |||||||||||||||||
Interbank loans | 9 | 109,516 | 341,244 | 57,516 | 95,612 | |||||||||||||||||
Loans and accounts receivable from customers | 10 | 21,863,447 | 20,880,186 | 19,664,576 | 18,808,886 | |||||||||||||||||
Available for sale investments | 11 | 2,592,082 | 2,650,776 | 267,513 | 551,593 | |||||||||||||||||
Held to maturity investments | 11 | 150,726 | 198,910 | 150,726 | 198,910 | |||||||||||||||||
Investments in companies | 12 | 9,689 | 10,555 | 9,689 | 10,555 | |||||||||||||||||
Intangibles | 13 | 1,584,075 | 1,613,807 | 411,058 | 435,572 | |||||||||||||||||
Fixed assets | 14 | 55,586 | 95,564 | 55,586 | 95,564 | |||||||||||||||||
Right of use asset under lease agreements | 15 | 205,401 | - | 205,401 | - | |||||||||||||||||
Current taxes | 16 | 75,583 | 123,129 | 7,558 | 12,313 | |||||||||||||||||
Deferred taxes | 16 | 177,563 | 154,599 | 17,756 | 15,460 | |||||||||||||||||
Other assets | 17 | 664,845 | 561,435 | 617,437 | 505,495 | |||||||||||||||||
Off-balance sheet assets | ||||||||||||||||||||||
Contingent loans | 2,460,238 | 2,333,398 | 1,476,143 | 1,400,038 | ||||||||||||||||||
Totals | 33,624,960 | 31,781,511 | 24,728,797 | 23,361,809 |
(*) Items presented at their Equivalent Credit Risk value, in accordance with the provisions of Chapter12-1 “Equity for Legal and Regulatory Effects” of the RAN, issued by the Superintendency of Banks and Financial Institutions.
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 35 – Risk Management, continued
Amount | Ratio | |||||||||||||||||||
As of September 30, 2019 | As of December 31, 2018 | As of September 30, 2019 | As of December 31, 2018 | |||||||||||||||||
MCh$ | MCh$ | % | % | |||||||||||||||||
Basic capital | 3,427,114 | 3,324,531 | (a) | 10.19 | 10.46 | (c) | ||||||||||||||
Effective equity | 3,510,122 | 3,415,845 | (b) | 14.19 | 14.62 | (d) |
(a) Basic Capital Corresponds to the net amount that must be shown in the Consolidated Financial Statements as “Equity attributable to equity holders” as indicated in the Compendium of Accounting Standards.
(b) The effective equity will be equal to the aforementioned basic capital, subordinated Bonds, additional provisions,non-controlling interest as indicated in the Compendium of Accounting Standards; however, if this amount exceeds 20% of the basic capital, only the amount equivalent to that percentage will be added; the amount of the assets corresponding to the goodwill is deducted and in the event that the sum of the assets corresponding to minority investments in companies other than support companies to the line of business is greater than 5% of the basic capital, the amount in which that sum is deducted will be deducted exceed that percentage.
(c) Consolidated basic capital ratio corresponding to basic capital divided by total assets for capital purposes (includes items outside the Consolidated Financial Statements).
(d) Consolidated solvency ratio corresponds to the ratio of effective equity to weighted assets.
The shareholders’ agreement established an “Optimal Regulatory Capital” with respect to Itaú Corpbanca Chile and Colombia, which must be, at any date, the highest between 120% of the minimum regulatory capital ratio established by the respective legislation and the average of the regulatory capital ratio of the 3 largest private banks in the respective country, multiplied by the consolidated risk-weighted assets (APR) of the Chilean or Colombian bank, as applicable, on the date that is one year from the last day of the fiscal year more recent, assuming that the assets weighted by their level of risk grow during that year at a rate equal to the Minimum Growth Rate.
The Bank, in consolidated terms (owners of the Bank), maintains a total equity of MCh$3,427,114 as of September 30, 2019 (MCh$3,324,531 in December 2018).
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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Itaú Corpbanca and subsidiaries
Notes to the Interim Consolidated Financial Statements
As of September 30, 2019 and December 31, 2018 and for the three and nine month period ended on September 30, 2019 and 2018 |
Note 36 – Subsequent Events
Other subsequent events |
As a result of serious acts of vandalism that have recently occurred in certain cities in Chile, some of our branches have been affected, which have presented material damage to their facilities preventing their normal operation. As of October 28, 2019, out of a total of 193 branches in Chile, 9 of them are temporarity closed due to this situation. All these incidents, of an operational nature, have been duly informed to the Commision for the Financial Market, in accordance with applicable regulations.
As a Bank, we have made our best effort to guarantee operational continuity and to provide our clients with services throughout web and digital channels and, as far as possible and always ensuring first and foremost the physical integrity of our human team, by opening our branches even under constitutional state of emergency.
In the period between the 1st and the 28th of October, 2019, the date of issuance of these Consolidated Interim Financial Statements, no other subsequent events have occurred that significantly could affect them.
Roxana Zamorano Pozo | Manuel Olivares Rossetti | |
Chief Accounting Officer | Chief Executive Officer |
Itaú Corpbanca and subsidiaries – Interim Consolidated Financial Statements September 30, 2019 |
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