ITAÚ CORPBANCA AND SUBSIDIARIES
Consolidated Financial Statements
| | |
$ | = | Amounts expressed in Chilean pesos |
MM$ | = | Amounts expressed in millions of Chilean pesos |
US$ | = | Amounts expressed in US dollars |
MUS$ | = | Amounts expressed in thousands of US dollars |
MMUS$ | = | Amounts expressed in millions of US dollars |
COP$ | = | Amounts expressed in Colombian pesos |
MMCOP$ | = | 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– Consolidated Financial Statements– December 31, 2020 | 1 |
ITAÚ CORPBANCA AND SUBSIDIARIES
Consolidated Statements of Financial Position
(In millions of Chilean pesos - MCh$)
| | | | | | |
| | | | | | |
|
|
|
| As of December 31, |
| As of December 31, |
|
| Notes |
| 2020 |
| 2019 |
| | |
| MCh$ |
| MCh$ |
ASSETS |
|
|
|
|
|
|
Cash and deposits in banks |
| 5 |
| 3,089,072 |
| 1,009,681 |
Cash items in process of collection |
| 5 |
| 173,192 |
| 231,305 |
Trading investments |
| 6 |
| 580,369 |
| 181,402 |
Investments under resale agreements |
| 7 |
| 105,580 |
| 75,975 |
Financial derivative contracts |
| 8 |
| 3,982,803 |
| 3,154,957 |
Interbank loans, net |
| 9 |
| 7,115 |
| 56,205 |
Loans and accounts receivable from customers, net |
| 10 |
| 21,685,269 |
| 22,373,638 |
Available for sale investments |
| 11 |
| 3,964,720 |
| 3,593,204 |
Held to maturity investments |
| 11 |
| 111,643 |
| 115,682 |
Investments in companies |
| 12 |
| 11,983 |
| 14,938 |
Intangibles |
| 13 |
| 718,683 |
| 1,617,745 |
Fixed assets |
| 14 |
| 56,020 |
| 57,962 |
Right of use asset under lease agreements |
| 15 |
| 170,603 |
| 204,559 |
Current taxes |
| 16 |
| 64,699 |
| 85,516 |
Deferred taxes |
| 16 |
| 314,112 |
| 184,167 |
Other assets |
| 17 |
| 602,769 |
| 783,447 |
TOTAL ASSETS |
|
|
| 35,638,632 |
| 33,740,383 |
LIABILITIES |
|
|
|
|
|
|
Deposits and other demand liabilities |
| 18 |
| 6,197,406 |
| 4,873,448 |
Cash in process of being cleared |
| 5 |
| 154,232 |
| 164,573 |
Obligations under repurchase agreements |
| 7 |
| 638,851 |
| 559,457 |
Time deposits and other time liabilities |
| 18 |
| 11,433,064 |
| 11,620,187 |
Financial derivative contracts |
| 8 |
| 3,673,591 |
| 2,938,034 |
Interbank borrowings |
| 19 |
| 3,798,978 |
| 2,646,756 |
Debt instruments issued |
| 20 |
| 6,204,856 |
| 6,408,356 |
Other financial liabilities |
| 20 |
| 13,123 |
| 12,966 |
Lease contracts liabilities |
| 15 |
| 151,885 |
| 172,924 |
Current taxes |
| 16 |
| 1,766 |
| 13 |
Deferred taxes |
| 16 |
| 237 |
| 263 |
Provisions |
| 21 |
| 282,283 |
| 194,107 |
Other liabilities |
| 22 |
| 700,034 |
| 708,914 |
TOTAL LIABILITIES |
|
|
| 33,250,306 |
| 30,299,998 |
EQUITY |
|
|
|
|
|
|
Attributable to equity holders of the Bank |
|
|
|
|
|
|
Capital |
| 24 |
| 1,862,826 |
| 1,862,826 |
Reserves |
| 24 |
| 1,195,849 |
| 1,195,849 |
Valuation accounts |
| 24 |
| 25,873 |
| 42,140 |
Retained earnings: |
|
|
| (769,137) |
| 245,287 |
Retained earnings from prior years |
| 24 |
| 156,342 |
| 156,342 |
Net income (loss) for the year |
| 24 |
| (925,479) |
| 127,065 |
Less: Provision for mandatory dividends |
| 24 |
| — |
| (38,120) |
Total equity attributable to equity holders of the Bank |
|
|
| 2,315,411 |
| 3,346,102 |
Non-controlling interest |
| 24 |
| 72,915 |
| 94,283 |
TOTAL EQUITY |
|
|
| 2,388,326 |
| 3,440,385 |
TOTAL LIABILITIES AND EQUITY |
|
|
| 35,638,632 |
| 33,740,383 |
The explanatory notes are an integral part of these Consolidated Financial Statements.
| |
Itaú Corpbanca and subsidiaries– Consolidated Financial Statements– December 31, 2020 | 2 |
ITAÚ CORPBANCA AND SUBSIDIARIES
Consolidated Statements of Income
((In millions of Chilean pesos - MCh$)
| | | | | | | |
| | |
| | | ||
| | |
| For the years ended |
| ||
| | Notes |
| December 31, |
| ||
|
| |
| 2020 |
| 2019 |
|
| | |
| MCh$ |
| MCh$ |
|
Interest income |
| 25 |
| 1,519,401 |
| 1,719,940 |
|
Interest expense |
| 25 |
| (683,237) |
| (873,222) |
|
Net interest income |
|
|
| 836,164 |
| 846,718 |
|
Fee and commission income |
| 26 |
| 204,378 |
| 244,196 |
|
Fee and commission expense |
| 26 |
| (63,379) |
| (69,792) |
|
Net fee and commission income |
|
|
| 140,999 |
| 174,404 |
|
Net income (expense) from financial operations |
| 27 |
| 109,838 |
| 141,434 |
|
Net foreign exchange income (loss) |
| 28 |
| (74,464) |
| 27,626 |
|
Other operating income |
| 33 |
| 65,896 |
| 45,902 |
|
Net operating profit before provision for loan losses |
|
|
| 1,078,433 |
| 1,236,084 |
|
Provision for loan losses |
| 29 |
| (528,459) |
| (322,693) |
|
NET OPERATING PROFIT |
|
|
| 549,974 |
| 913,391 |
|
Personnel salaries and expenses |
| 30 |
| (292,191) |
| (298,209) |
|
Administrative expenses |
| 31 |
| (257,753) |
| (248,881) |
|
Depreciation and amortization |
| 32 |
| (126,444) |
| (127,166) |
|
Impairment |
| 32 |
| (857,990) |
| (728) |
|
Other operating expenses |
| 33 |
| (93,536) |
| (65,991) |
|
TOTAL OPERATING EXPENSES |
|
|
| (1,627,914) |
| (740,975) |
|
OPERATING INCOME (LOSS) |
|
|
| (1,077,940) |
| 172,416 |
|
Income (loss) from investments in companies |
| 12 |
| (1,339) |
| 6,832 |
|
Operating income (loss) before income taxes |
|
|
| (1,079,279) |
| 179,248 |
|
Income taxes |
| 16 |
| 140,662 |
| (46,784) |
|
CONSOLIDATED INCOME (LOSS) FOR THE YEAR |
|
|
| (938,617) |
| 132,464 |
|
Attributable to: |
|
|
| |
| |
|
Equity holders of the Bank |
| 24 |
| (925,479) |
| 127,065 |
|
Non-controlling interest |
| 24 |
| (13,138) |
| 5,399 |
|
Earnings (losses) per share attributable to equity holders of the Bank (in Chilean pesos) |
|
|
| |
| |
|
Basic earnings (losses) per share |
| 24 |
| (1.806) |
| 0.248 |
|
Diluted earnings (losses) per share |
| 24 |
| (1.806) |
| 0.248 |
|
The explanatory notes are an integral part of these Consolidated Financial Statements.
| |
Itaú Corpbanca and subsidiaries– Consolidated Financial Statements– December 31, 2020 | 3 |
ITAÚ CORPBANCA AND SUBSIDIARIES
Consolidated Statements of Other Comprehensive Income
(In millions of Chilean pesos - MCh$)
| | | | | | | | |
| | | | | | | ||
| | |
| |
| For the years ended | ||
| | Notes |
| |
| December 31, | ||
|
| |
|
|
| 2020 |
| 2019 |
| | |
|
|
| MCh$ |
| MCh$ |
CONSOLIDATED INCOME (LOSS) FOR THE YEAR |
| 24 |
|
|
| (938,617) | | 132,464 |
OTHER COMPREHENSIVE INCOME (LOSS) WHICH MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS |
|
|
|
|
| | | |
Available for sale investments |
| 24 |
|
|
| (9,092) | | 19,508 |
Exchange differences on investment in Colombia and New York branch |
| 24 |
|
|
| (69,699) | | 72,324 |
Gain from net investments in foreign operations hedge |
| 24 |
|
|
| 80,722 | | (46,786) |
Gain (loss) from cash flows hedge |
| 24 |
|
|
| (5,682) | | (6,792) |
Other comprehensive income (loss) before income taxes |
|
|
|
|
| (3,751) | | 38,254 |
Income taxes related to available for sale investments |
| 24 |
|
|
| 1,778 | | (5,333) |
Income taxes related to net investment in foreign operations hedge |
| 24 |
|
|
| (21,795) | | 14,373 |
Income taxes related to cash flows hedge |
| 24 |
|
|
| (707) | | (162) |
Income taxes on other comprehensive income |
|
|
|
|
| (20,724) | | 8,878 |
Other comprehensive income (loss) which may be reclassified subsequently to profit or loss, net of income taxes |
|
|
|
|
| (24,475) | | 47,132 |
| | | | | | | | |
OTHER COMPREHENSIVE INCOME (LOSS) WHICH MAY NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS |
|
|
|
|
| | | |
Defined benefits obligations |
| 24 |
|
|
| (3) | | (4,432) |
Income taxes related to defined benefits obligations |
| 24 |
|
|
| (19) | | 1,542 |
Other comprehensive income (loss) which may not be reclassified subsequently to profit or loss, net of income taxes |
|
|
|
|
| (22) | | (2,890) |
|
|
|
|
|
| | | |
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) FOR THE YEAR |
| 24 |
|
|
| (24,497) | | 44,242 |
|
|
|
|
|
| | | |
CONSOLIDATED COMPREHENSIVE INCOME (LOSS) FOR THE YEAR |
| 24 |
|
|
| (963,114) | | 176,706 |
Attributable to: |
|
|
|
|
| | | |
Equity holders of the Bank |
| 24 |
|
|
| (941,746) | | 153,973 |
Non-controlling interest |
| 24 |
|
|
| (21,368) | | 22,733 |
| | | | | | | | |
The explanatory notes are an integral part of these Consolidated Financial Statements.
| |
Itaú Corpbanca and subsidiaries– Consolidated Financial Statements– December 31, 2020 | 4 |
ITAÚ CORPBANCA AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
(In millions of Chilean pesos - MCh$)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | ||||
| | | | | | | | Reserves | | | | | | Retained earning | | | | | | | ||||
| | | | | | | | | | | | | | Retained | | Income for | | Provision | | Total attributable | | | | |
| | | | | | | | Reserves | | Other non- | | | | earnings | | the year/ | | for | | to equity | | Non- | | |
| | | | Number of | | | | from | | earnings | | Valuation | | from | | loss for | | mandatory | | holders of | | controlling | | Total |
|
| Note | | shares | | Capital | | earnings | | reserves | | accounts | | prior years | | the year | | dividends | | the Bank | | interest | | equity |
| | | | Millions | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
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 |
Transfer 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 |
|
| | — | | — | | — | | — | | — | | — | | — | | (38,120) | | (38,120) | | — | | (38,120) |
Comprehensive income for the year |
|
| | — | | — | | — | | — | | 26,908 | | — | | 127,065 | | — | | 153,973 | | 22,733 | | 176,706 |
Increase participation in Colombia | | | | — | | — | | — | | (94,282) | | — | | — | | — | | — | | (94,282) | | (151,531) | | (245,813) |
Equity as of December 31, 2019 |
|
| | 512,407 | | 1,862,826 | | 451,011 | | 744,838 | | 42,140 | | 156,342 | | 127,065 | | (38,120) | | 3,346,102 | | 94,283 | | 3,440,385 |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Equity as of December 31, 2019 |
|
| | 512,407 | | 1,862,826 | | 451,011 | | 744,838 | | 42,140 | | 156,342 | | 127,065 | | (38,120) | | 3,346,102 | | 94,283 | | 3,440,385 |
Transfer of income from previous year |
| 24.b | | — | | — | | — | | — | | — | | 127,065 | | (127,065) | | — | | — | | — | | — |
Equity as of January 1, 2020 |
|
| | 512,407 | | 1,862,826 | | 451,011 | | 744,838 | | 42,140 | | 283,407 | | — | | (38,120) | | 3,346,102 | | 94,283 | | 3,440,385 |
Dividends paid |
| | | — | | — | | — | | — | | — | | (127,065) | | — | | 38,120 | | (88,945) | | — | | (88,945) |
Comprehensive income for the year |
| | | — | | — | | — | | — | | (16,267) | | — | | (925,479) | | — | | (941,746) | | (21,368) | | (963,114) |
Equity as of December 31, 2020 |
| | | 512,407 | | 1,862,826 | | 451,011 | | 744,838 | | 25,873 | | 156,342 | | (925,479) | | — | | 2,315,411 | | 72,915 | | 2,388,326 |
The explanatory notes are an integral part of these Consolidated Financial Statements.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 5 |
ITAÚ CORPBANCA AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In millions of Chilean pesos - MCh$)
| | | | | | |
| | | | | ||
| | | | For the years ended | ||
|
| | | December 31, | ||
|
| Notes | | 2020 | | 2019 |
| | | | MCh$ | | MCh$ |
CASH FLOWS FROM OPERATING ACTIVITIES: |
| |
|
|
|
|
Operating income (loss) before income taxes | | | | (1,079,279) | | 179,248 |
Debits (credits) to income that do not represent cash flows: | | | | | |
|
Depreciation and amortization |
| 32 | | 126,444 | | 127,166 |
Impairment | | 32 | | 857,990 | | 728 |
Provisions for loans and accounts receivable from customers and interbank loans |
| 29 | | 589,307 | | 381,358 |
Provisions and write-offs of assets received in lieu of payment | | | | 7,031 | | 22,504 |
Provisions for contingencies | | | | 3,119 | | 507 |
Mark to market of trading instruments |
| | | (174,882) | | (93,299) |
Adjustment (profit) loss for instruments available for sale |
| 27 | | (56,666) | | (34,317) |
Adjustment (profit) loss on sale of loan portfolio |
| 27 | | (6,476) | | (14,588) |
Net interest income |
| 25 | | (836,164) | | (846,718) |
Fee and commission income |
| 26 | | (204,378) | | (244,196) |
Fee and commission expense |
| 26 | | 63,379 | | 69,792 |
Net foreign exchange (gain) loss |
| 28 | | 74,464 | | (27,626) |
Net loss on sale of fixed assets | | | | 131 | | (1,593) |
Net gain on sale of assets received in payment | | | | (3,287) | | (5,671) |
Net gain on sale of assets held for sale | | | | (970) | | — |
Net gain on sale of participation in companies |
| 12 | | (447) | | (1,028) |
Increase on deferred net tax asset and liability | | 16 | | (129,971) | | (29,776) |
Other debits (credits) that do not represent cash flows | | | | 167,285 | | 81062 |
Subtotals | | | | (603,370) | | (436,447) |
Loans and accounts receivable from customers and interbank loans | | | | 745,029 | | (1,254,664) |
Investments under resale agreements |
| 5c)i) | | (45,109) | | 33,492 |
Obligations under repurchase agreements |
| 5c)i) | | 79,394 | | (456,157) |
Trading investments |
| 5c)ii) | | 17,894 | | (55,236) |
Available for sale investments |
| 5c)ii) | | (1,750,287) | | (942,428) |
Held to maturity investments |
| 5c)ii) | | 4,039 | | 83,228 |
Other assets and liabilities | | | | 111,619 | | (41,251) |
Time deposits and other time liabilities | | | | (187,123) | | 1,499,076 |
Deposits and other demand liabilities | | | | 1,323,958 | | 572,973 |
Dividends received from investments in companies |
| 12 | | 1,008 | | 1,172 |
Foreign borrowings obtained |
| 5c)iii) | | 3,326,628 | | 3,163,543 |
Repayment of foreign borrowings |
| 5c)iii) | | (2,450,227) | | (2,928,952) |
Interest paid | | | | (597,602) | | (590,814) |
Interest received | | | | 1,471,570 | | 1,663,507 |
Net fee and commission income | | | | 110,902 | | 171,682 |
Taxes paid | | | | (152,593) | | (152,681) |
Repayment of other borrowings | | | | 157 | | (566) |
Proceeds from sale of assets received in lieu of payment | | | | 26,247 | | 23,203 |
Net cash flows provided by (used in) operating activities | | | | 1,432,134 | | 352,680 |
CASH FLOWS FROM INVESTMENT ACTIVITIES: | | | | | |
|
Purchase of fixed assets and intangible assets |
| 13-14 | | (67,675) | | (65,716) |
Sales of fixed assets | | | | 157 | | 18,263 |
Proceeds from sale of assets held for sale | | | | 1,550 | | — |
Disbursement made due to increased participation in subsidiary | | | | — | | (268,175) |
Disbursement made due to increased participation in associates | | 12 | | (338) | | — |
Proceeds from sale of investments in companies |
| 12 | | 621 | | 1,818 |
Net cash flows used in investing activities | | | | (65,685) | | (313,810) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | |
|
Borrowing obtained from Chilean Central Bank | | | | 2,257,200 | | — |
Debt instruments issued | | | | 408,402 | | 649,321 |
Redemption of debt issued | | | | (935,094) | | (633,671) |
Dividends paid |
| 24 | | (127,086) | | (51,347) |
Payments of lease liabilities |
| 15 | | (33,687) | | (34,226) |
Net cash flows (used in) provided by financing activities | | | | 1,569,735 | | (69,923) |
Effect of changes in exchange rates | | | | 122,133 | | 115,940 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | | | 3,058,317 | | 84,887 |
Cash and cash equivalents at the beginning of the year | | | | 1,447,939 | | 1,363,052 |
Cash and cash equivalents at end of the year |
| 5 | | 4,506,256 | | 1,447,939 |
Net increase (decrease) in cash and cash equivalents | | | | 3,058,317 | | 84,887 |
| | | | | | | | | | | | | | | | | |
| | | | | | | | ||||||||||
| | | | | Cash flows | | Changes other than cash flows | ||||||||||
|
| | As of | | | | |
| |
| |
| |
| |
| As of |
| Notes | | January 1, | | | | |
| Changes other | | |
| |
| Currency |
| December 31, |
|
| | 2020 | | Received | | Paid |
| than cash | | Acquisition | | Interest | | exchange effects | | 2020 |
|
| | MCh$ | | MCh$ | | MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Debt instruments issued |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing obtained from Chilean Central Bank | | | — | | 2,257,200 | | — | | — | | — | | 26 | | — | | 2,257,226 |
Mortgage finance bonds |
| | 40,933 | | — | | (11,349) | | — | | — | | 1,262 | | — | | 30,846 |
Bonds (senior and subordinated) |
| | 6,367,423 | | 408,402 | | (923,745) | | 53,213 | | — | | 328,348 | | (59,631) | | 6,174,010 |
Lease contracts liabilities |
| | 172,924 | | — | | (33,687) | | 4,100 | | 7,279 | | 4,919 | | (3,650) | | 151,885 |
Totals |
| | 6,581,280 | | 2,665,602 | | (968,781) |
| 57,313 |
| 7,279 |
| 334,555 |
| (63,281) |
| 8,613,967 |
Dividends approved and paid in 2020 | 24 | | — | | — | | (127,065) | | — | | — | | — | | — | | — |
Dividends approved in prior years and paid in 2020 |
| | — | | — | | (21) | | — | | — | | — | | — | | — |
Total Dividends paid |
| | — | | — | | (127,086) |
| — |
| — |
| — |
| — |
| — |
Subtotal cash flows from (used in) financing activities |
| | — | | 2,665,602 | | (1,095,867) |
| — |
| — |
| — |
| — |
| — |
Total cash flows from financing activities, net |
| | — | | 1,569,735 | | — | | — | | — | | — | | — |
| — |
The explanatory notes are an integral part of these Consolidated Financial Statements.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 6 |
ITAÚ CORPBANCA AND SUBSIDIARIEs
| | |
Notes to the Consolidated Financial Statements | Page | |
| | |
GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 8 | |
70 | ||
71 | ||
74 | ||
77 | ||
79 | ||
INVESTMENTS UNDER RESALE AGREEMENTS AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS | 80 | |
82 | ||
91 | ||
92 | ||
97 | ||
100 | ||
102 | ||
105 | ||
108 | ||
111 | ||
116 | ||
117 | ||
118 | ||
120 | ||
124 | ||
131 | ||
132 | ||
137 | ||
143 | ||
145 | ||
146 | ||
147 | ||
148 | ||
150 | ||
151 | ||
152 | ||
158 | ||
160 | ||
164 | ||
176 | ||
199 | ||
200 | ||
202 | ||
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 7 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies
General Information – Background of Itaú Corpbanca and subsidiarie
Itaú Corpbanca (the “Bank”) is a corporation incorporated under the laws of the Republic of Chile and regulated by the Commission for the Financial Market (onwards “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 (DFL) No. 3 dated January 12, 2019, which sets a new consolidated, systematized and agreed text for the General Bank Law. As a consequence of the merger of Banco Itaú Chile and Corpbanca (the latter is the legal successor) which was consummated on April 1, 2016, the date on which the Bank was renamed “Itaú Corpbanca”1.
The current ownership structure is 39,22% owned by Itaú Unibanco, 27,49% 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 Saieh Family through CorpGroup and other societies have signed a shareholders’ agreement relating to corporate governance, dividend policy, 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$35,638,632 (MUS$50,144) and its consolidated equity for MCh$2,388,326 (MUS$3,360). Focused on large and medium size companies and people, Itaú Corpbanca offers universal banking services.
The legal address of Itaú Corpbanca is Rosario Norte No 660, Las Condes, Santiago, Chile, and its web site is www.itau.cl.
The Consolidated Financial Statements as of December 31, 2020, were approved by the Board of Directors on February 24, 2021.
Significant Accounting Policies and Others
The Consolidated Financial Statements are referred as of December 31, 2020 and 2019 and comprise the years ended December 31, 2020 and 2019.
b)Basis of preparation of the Consolidated Financial Statements
These 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 International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). If there are discrepancies between IFRS and the accounting criteria set forth in the CAS, the latter will prevail.
Notes to these Consolidated Financial Statements contain information additional to that disclosed in the Consolidated Statements of Financial Position, Consolidated Statements of Income, Consolidated Statements of Other Comprehensive Income, Consolidated Statements of Changes in Equity, and Consolidated Statements of Cash Flows. On them descriptive and disaggregated information is presented. They provide narrative descriptions or disaggregation of such Consolidated Financial Statements in a clear, relevant, reliable, and comparable manner.
1 The business combination was a “reverse acquisition” as established in IFRS 3, “Business Combinations”, in which Banco Itaú Chile is the successor for accounting purposes and Corpbanca is the legal successor.
2 None of the markets in which Itaú Corpbanca and subsidiaries operate is facing an economy with a hyperinflationary currency.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 8 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
c) | Consolidation criteria |
The same accounting policies, presentation, and valuation methods applied in these 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 December 31, 2020 and December 31, 2019 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 Consolidated Financial Statements.
Assets, liabilities, income, and results of operations of subsidiaries, net of consolidation adjustments, represent 18%, 19%, 39%, and 11%, respectively, of total consolidated assets, liabilities, income, and operating results as of December 31, 2020 (20%, 22%, 37%, and 52%, as of December 31, 2019, 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.
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. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 9 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
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 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 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 table details the entities controlled by Itaú Corpbanca, therefore, they are part of the consolidation perimeter:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | ||||||||||
| | | | |
| | | Ownership percentage | ||||||||||
| | | | |
| Functional |
| As of December 31, 2020 | | As of December 31, 2019 | ||||||||
|
| Market |
| Country |
| currency |
| Direct |
| Indirect |
| Total | | Direct |
| Indirect |
| Total |
| | | | |
| % |
| % |
| % | | % | | % |
| % | | % |
Itaú Corredores de Bolsa Ltda. (1) |
| Domestic |
| Chile |
| $ |
| 99.990 |
| 0.010 |
| 100.000 |
| 99.990 |
| 0.010 |
| 100.000 |
Itaú Administradora General de Fondos S.A. (1) |
|
|
| Chile |
| $ |
| 99.994 |
| 0.006 |
| 100.000 |
| 99.994 |
| 0.006 |
| 100.000 |
Itaú Corredores de Seguros S.A. (1) |
|
|
| Chile |
| $ |
| 99.990 |
| 0.010 |
| 100.000 |
| 99.990 |
| 0.010 |
| 100.000 |
Itaú Asesorías Financieras Ltda. (1) (7) |
|
|
| Chile |
| $ |
| 99.990 |
| 0.010 |
| 100.000 |
| 99.990 |
| 0.010 |
| 100.000 |
Recaudaciones y Cobranzas Ltda. (1) (6) |
|
|
| Chile |
| $ |
| 99.990 |
| 0.010 |
| 100.000 |
| 99.990 |
| 0.010 |
| 100.000 |
Itaú Corpbanca New York Branch (1) (5) |
| Foreign |
| USA |
| US$ |
| 100.000 |
| — |
| 100.000 |
| 100.000 |
| — |
| 100.000 |
Itaú Corpbanca Colombia S.A. (2) (8) |
|
|
| Colombia |
| COP$ |
| 87.100 |
| — |
| 87.100 |
| 87.100 |
| — |
| 87.100 |
Itaú Corredor de Seguros Colombia S.A. (2) |
|
|
| Colombia |
| COP$ |
| 79.985 |
| — |
| 79.985 |
| 80.000 |
| — |
| 80.000 |
Itaú Securities Services Colombia S.A. (2) (10) (11) |
|
|
| Colombia |
| COP$ |
| 5.499 |
| 82.310 |
| 87.809 |
| 5.499 |
| 82.310 |
| 87.809 |
Itaú Comisionista de Bolsa Colombia S.A. (2) (12) |
|
|
| Colombia |
| COP$ |
| 2.219 |
| 85.166 |
| 87.385 |
| 2.219 |
| 85.166 |
| 87.385 |
Itaú Asset Management Colombia S.A. Sociedad Fiduciaria (2) |
|
|
| Colombia |
| COP$ |
| — |
| 87.083 |
| 87.083 |
| — |
| 87.083 |
| 87.083 |
Itaú (Panama) S.A. (3) |
|
|
| Panama |
| US$ |
| — |
| 87.100 |
| 87.100 |
| — |
| 87.100 |
| 87.100 |
Itaú Casa de Valores S.A. (4) (9) |
|
|
| Panama |
| US$ |
| — |
| — |
| — |
| — |
| 87.100 |
| 87.100 |
(1) Companies regulated by the Financial Market Commission (CMF) of Chile.
(2) Companies regulated by the Colombian Financial Superintendency (SFC), which has a supervision agreement with the CMF.
(3) Company regulated by the Superintendency of Banks of Panama.
(4) Company regulated by the Superintendency of the Securities Market of Panama.
(5) Company regulated by Office of the Comptroller of the Currency (OCC) and Federal Reserve (FED).
(6) On May 2, 2019, Recaudaciones y Cobranzas Ltda. acquired from Itaú Corredores de Bolsa its participation in Itaú Asesoría Financieras.
(7) On May 2, 2019 Itaú Asesorías Financieras modifies its legal statute turning from a public company (S.A.) to a private limited company.
(8) On December 3, 2019, Itaú Corpbanca acquired from Helm LLC and Kresge Stock Holding Company Inc its participation held in Itaú Corpbanca Colombia.
(9) On January 23, 2020, Itaú Comisionista de Bolsa Colombia S.A., a subsidiary of Itaú Corpbanca Colombia S.A., completed the process of selling its participation (100%) held in Itaú Casa de Valores S.A., domiciled in Panama.
(10) On July 8, 2020, Recaudaciones y Cobranza Ltda. acquired 1 share of Itaú Securities Services Colombia S.A. for the price of US$2.29 equivalent to $1.799 pesos.
(11) On July 8, 2020, Itaú Asesorías Financieras Ltda. acquired 1 share of Itaú Securities Services Colombia S.A. for the price of US$2.29 equivalent to $1.799 pesos.
(12) On July 8, 2020, Itaú Asesorías Financieras Ltda. acquired 6 shares of Itaú Comisionista de Bolsa S.A. for the price of US$7.19 equivalent to $5.648 pesos.
(ii) | Associated entities and/or business support |
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.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 10 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
The following entities are considered “Associated entities”, in which the Bank has participation and are accounted for by applying the equity method, according to IAS 28 “Investments in Associates and Joint Ventures”.
| | | | | | | | | |
| | | | | | | | | |
Associates |
| |
| |
| As of December 31, 2020 |
| As of December 31, 2019 | |
name |
| Principal activity |
| Place of incorporation | | % participation | | % participation | |
Nexus S.A. |
| Credit and debit card operator |
| Santiago, Chile |
| 14.8148 | % | 12.9000 | % |
Transbank S.A. |
| Credit card operator |
| Santiago, Chile |
| 8.7188 | % | 8.7188 | % |
Itaú Corpbanca exercises significant influence by virtue of its voting right to appoint a representative in the Board of Directors. This, among other business considerations, led the Administration to conclude that Itaú Corpbanca has significant influence over the aforementioned mentioned entities.
(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 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 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 No.23 Contingencies, Commitments, and Responsibilities, letter d), related to Responsibilities recorded in off-balance-sheet accounts.
In accordance with 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.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 11 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
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 December 31, 2020 and 2019 they act as Agents and, therefore, 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 to non-controlling interest” separately in the Consolidated Statement of Income, and separately from shareholders’ equity in the Consolidated Statement of Financial Position.
Additionally, the non-controlling interests in the 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 the non-controlling interests. The Bank also attributes the total integral result to the owners of the Bank and to the non-controlling interests even if the results of the non-controlling interests give rise to a debit balance.
e) | Business combination and goodwill |
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Bank, liabilities incurred by the Bank to the former owners of the acquiree and the equity interests issued by the Bank in exchange for control of the acquiree. Acquisition costs incurred are expensed and included in administrative expenses.
When Itaú Corpbanca and its subsidiaries (the Group) acquires a business, evaluates the identifiable assets acquired and liabilities assumed to determine proper classification and designation based on contractual conditions, economic circumstances, and other relevant conditions as of the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
Goodwill, defined as the difference between the consideration transferred and the amount recognized for the non-controlling interest in the net identifiable assets acquired and liabilities assumed, is measured initially at cost. If this consideration is less than the fair value of the net assets of the acquired subsidiary, the difference is recognized directly in profit or loss as of the acquisition date.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill acquired in a business combination is assigned, from the date of acquisition, to each of the Group's cash generating units (CGU) that are expected to benefit from the combination, independently of whether other assets or liabilities of the acquiree are assigned to those units.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 12 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
When goodwill is allocated to a CGU and an operation within that unit is sold, the goodwill associated with that operation is included in the carrying amount of the operation sold when determining the gain or loss on disposal. Goodwill that is derecognized under such circumstances is measured on the basis of the relative values of the operation disposed of and the retained portion of the CGU.
The Bank has defined as its functional and presentation currency the Chilean peso, which is the currency of the primary economic environment in which the Bank operates and the currency that influences its costs and revenue structure. Therefore, all balances and transactions denominated in currencies other than the Chilean peso are treated as "foreign currency".
The Bank translates accounting records of its subsidiaries in New York and in Colombia into Chilean pesos from US dollars and Colombian pesos, respectively, in accordance with instructions established by the CMF, which are consistent with IAS 21 "Effects of the variations in the exchange rates of the foreign currency". All amounts in the Consolidated Statements of Income, Consolidated Statements of Other Comprehensive Income and the Consolidated Statement of Financial Position are translated into Chilean pesos according to the exchange rate indicated in letter g) below. None of the markets in which Itaú Corpbanca and subsidiaries operate qualify as a hyperinflationary economy.
Transactions in foreign currency are initially recorded by the Bank entities at the exchange rates of their respective functional currencies at the date these transactions first meet the conditions for their recognition.
Monetary assets and liabilities denominated in foreign currency are converted at the closing exchange rate of the functional currency in force at the closing date of the reporting period.
All differences arising from the settlement or conversion of monetary items are recognized in the results, except for those that correspond to the monetary items that are part of the hedge of a net investment, at which time the cumulative difference in equity is reclassified to profit and loss (settlement). Tax effects attributable to the exchange differences on such monetary items are also recorded in Other Comprehensive Income.
Non-monetary items in foreign currency, which are measured in terms of historical cost, are converted using the exchange rate on the date of the transaction. Non-monetary items that are measured at their fair value in foreign currency are translated using the exchange rates on the date on which that fair value is measured. Gains or losses arising from the translation of non-monetary items measured at their fair value are recognized based on how the gains and losses arising from the change in fair value are recognized in Other Consolidated Comprehensive Income or in Consolidated Results, in accordance with IAS 21.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 13 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
The Bank grants loans and receives deposits in amounts denominated in foreign currency, mainly in US dollars and Colombian pesos.
The balances of the Financial Statements of the consolidated entities whose functional currency is different from the Chilean peso are converted to the presentation currency, according to the following:
● | Assets and liabilities, by using exchange rates as of the date of the Consolidated Financial Statements. |
● | Income and expenses and cash flows, by using the exchange rates as of the date of each transaction. |
Exchange differences arising from translating balances in functional currencies of the consolidated entities other than Chilean pesos into Chilean pesos, are recorded as "Exchange differences" in Equity under the line item "Valuation accounts", until the meet the derecognition criteria for the Consolidated Statement of Financial Position, and is subsequently recorded in profit or loss.
The net amount of foreign exchange gains and losses includes the recognition of the effects of changes in the exchange rate over assets and liabilities denominated in foreign currencies and gains and losses arising from exchange rate changes affecting current and future transactions (highly probable transactions) entered into by the Bank.
Assets and liabilities in foreign currencies are shown at their equivalent amount in pesos, calculated using the exchange rate of $710.73 per US$1 (US dollar) as of December 31, 2020 ($748.77 as of December 31, 2019) and the exchange rate of $0.2078 per COP$1 (Colombian peso) as of December 31, 2020 ($0.2284 as of December 31, 2019). The financial statements of the New York branch, as well as the Colombian subsidiaries, have been translated using these exchange rates for consolidation purposes, in accordance with IAS 21, related to the valuation of investments abroad in countries with stable economy.
The preparation of the 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 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.
In certain cases, CMF rules 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.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 14 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
The Bank has established allowances to cover possible credit losses in accordance with the 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 Consolidated Statement of Income for the year.
Loans are charged-off when the Bank’s management determines that the loan or a portion cannot be collected, this in accordance with CAS, as stated in chapter B-2 "Impaired loans and charge-offs". Chargeoffs 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 Consolidated Financial Statements are the following:
● | Goodwill - Impairment test (Notes 13 and 32). |
● | Allowances for loan losses (Notes 9, 10, and 29). |
● | Fair value of financial assets and liabilities (Note 35). |
● | Provisions (Note 21). |
● | Contingencies and commitments (Note 23). |
● | Current taxes and deferred taxes (Note 16). |
During the year ended December 31, 2020, with exception of goodwill, there have been no significant changes in estimates made at the end of 2019 (see Note 32).
The Bank provides financial information for each operating segment in conformity with IFRS 8 “Operating Segments” in order to disclose information that enables financial statement users to evaluate the nature and financial effects of the business activities in which the Bank engages and the economic environments in which it operates and to allow them to:
● | Better understand the Bank’s performance. |
● | Better evaluate its future cash flow projections. |
● | Form better opinions regarding the Bank as a whole. |
To comply with IFRS 8, Itaú Corpbanca identifies operating segments (Chile and Colombia) used by the Executive Committee to analyze and make decisions regarding operating, financing and investment matters, based on the following elements:
(i) | The nature of the products and services; |
(ii) | The nature of the processes; |
(iii) | The type or class of customer for their products and services; |
(iv) | The methods used to distribute their products or provide their services; and |
(v) | If applicable, the nature of the regulatory environment, for example, banking, insurance or public utilities. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 15 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
The Executive Committee manages these segments using an in-house system of internal profitability reports and reviews its segments on the basis of the operating results and uses efficiency, profitability and other indicators to evaluate performance and allocate resources. The Bank has also included geographic disclosures on its operations in New York and Colombia.
More information on each segment is presented in Note 4 Reporting Segments
Transactions with resale agreements are entered into as a form of investment. Under these agreements, financial instruments are sold, which are included as assets under "Investments under resale agreement” and are accounted for at amortized cost using the effective interest rate of the agreement.
There are also sales transactions with a repurchase agreement as a form of financing. In this regard, the investments that are sold subject to a repurchase obligation and that serve as collateral for the loan, form part of the investment items of "Trading instruments" or "Available-for-sale investment instruments". The obligation to repurchase the investment is classified in liabilities as "repurchase agreements and securities loans", recognizing interest and inflation-indexation adjustments accrued as of the closing date.
k)Classifications of financial instruments
(i) | Classification of financial assets for measurement purpose |
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.
Measurement criteria for financial assets recorded in the 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 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 are included. 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.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 16 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
Financial assets measured at fair value
According to IFRS 13 “Fair value measurement”, “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 an entity 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.
To increase consistency and comparability in fair value measurements and related disclosures, IFRS 13 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 rare cases when fair value cannot be reasonably estimated for a financial asset or liability, this is measured at its amortized cost.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 17 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
Additionally, in accordance to what is indicated in Chapter A-2 “Limitations or clarifications to the use of general criteria” of the Compendium of Accounting Standards, banks cannot designate financial assets or liabilities at fair value as an option instead of using the general criteria of amortized cost.
The 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 under hedge accounting relationships which allow them to be measured at 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 are 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 Consolidated Statement of Income.
All purchases or sales of trading investments must be delivered within the term established by market conventions or regulations and are recorded at the trading date, which is the date when the purchase or sale is agreed. Any other purchase or sale is treated as a derivative (forward contract) until settlement.
Held to maturity investments
Held to maturity investments are non-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.
Available for sale investments
The category of instruments available for sale includes those instruments that are not classified as trading instruments or as held to maturity.
Available for sale investments 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 valuation accounts within equity. When these investments are disposed or impaired, the recorded amount in equity is transferred to income and is reported under “Income (loss) from financial operations”.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 18 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
Interest and inflation-indexation adjustments of investments held to maturity and of instruments available for sale are included in “Interest income” in the Consolidated Statement of Income.
Investment instruments that are treated as hedged items in hedge accounting relationships 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 o 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. Investment instruments must be permanently assess to timely identify impairment indication which may result in losses.
Investment instruments must be permanently assess to timely identify impairment indication which may result in losses which are recorded in the Consolidated Statement of Income as “impairment”.
The Bank has assessed its investments portfolio classified as “Held to maturity investments” and “Available for sale investments” in order to identify impairment indication. 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 and interbank loans
Loans and accounts receivables from customers and interbank loans, originated and purchased, are nonderivative 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 determined according to the CAS.
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 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 flows 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 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 reflect the counterparty and own 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.
At inception of a derivative agreement, the Bank must designate it either as a derivative instrument for trading or for hedge accounting purposes. However, in some circumstances, the Bank can subsequently designate a derivative from the trading derivatives portfolio as a hedging instrument if the requirements for hedge accounting set in IAS 39, are met.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 19 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
Changes in the fair value of derivative instruments held for trading are included in “Net income from financial operations” in the Consolidated Statement of Income.
If the derivative instrument is classified as hedging instrument for hedge accounting purposes, the hedge can be:
1) | A fair value hedge of existing assets or liabilities or firm commitments |
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 instrument hedges the exposure to changes in the fair value of an existing asset or liability recorded in the Consolidated Statement of Financial Position, 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 Consolidated Statement of Income.
If the hedged item in a fair value hedge is a firm commitment, the changes in the fair value of the firm commitment regarding the hedged risk are recognized as assets or liabilities with effect on the Consolidated Statement of Income for the year. Gains or losses from the changes in fair value measurement of the hedging derivative are recognized with effect on the Consolidated Statements of Income for the year. 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 Consolidated Statement of Financial Position.
When a derivative instrument hedges the exposure to changes in the cash flows of existing assets or liabilities, or forecast transactions, the effective portion of changes in the fair value related to the hedged risk is recognized in other comprehensive income and accumulated valuation accounts within equity. The cumulative loss or gain in cash flows hedge recorded in valuation accounts is transferred to the Consolidated Statement of Income to the extent that the hedged item impacts income because of the hedged risk, offsetting the effect in the same line item of the Consolidated Statement of Income. Any ineffective portion is directly recognized in the Consolidated Statement of Income.
In case of a 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 Statement of Income, but the fair value adjustment of the hedged portfolio is presented in the Consolidated Statement of Financial Position under the “Other assets” or “Other liabilities” items, depending on the hedged portfolio balance as of the reporting date.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 20 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
Financial asset and liability balances are offset, i.e., reported in the Consolidated Statement 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 in the Consolidated Statement of Financial Position:
- | Cash and deposits in banks: This item comprises cash, checking accounts and demand deposits at the Central Bank of Chile and other financial institutions in Chile and abroad. The amounts invested in overnight deposits will continue to be reported under this heading and in the corresponding lines or items. If no special item is indicated for these operations, they will be included together with the accounts reported. |
- | Cash items in process of collection: this item represents 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: this item includes financial instruments held-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: 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 held for trading or designated as hedging instruments in hedge accounting relationships, as disclosed in Note 8 to the Consolidated Financial Statements. |
- Trading derivatives: includes the fair value of derivatives which do not qualify for hedge accounting, including embedded derivatives separated from hybrid financial instruments.
- Hedging derivatives: includes the fair value of derivatives designated as hedging instruments, including embedded derivatives segregated from hybrid financial instruments designated as hedging instruments, in hedge accounting relationships.
- | Interbank loans: this item includes balances of transactions with domestic and foreign banks, including the Central Bank of Chile, other than those reflected in other financial asset classifications listed above. |
- | Loans and accounts receivables from customers: these loans are non-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. |
- When the Bank is the lessor in a lease contract, and it satisfied the performance obligations related to the leased asset, the transaction is accounted for as a loan and/or account receivable from customer while the leased asset is derecognized from the Consolidated Statement of Financial Position.
- | Investment instruments are classified into two categories: held-to-maturity investments, and available-forsale investments. The held to maturity investment category includes only those instruments for which the Bank has the ability and intent to hold to maturity. The remaining investments are treated as available for sale. |
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 21 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
(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 fair value through profit and loss (FVTPL) or other financial liabilities:
Financial liabilities at fair value through profit and loss
As of December 31, 2020 and 2019 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 payable) are initially recorded at fair value and subsequently measured at amortized cost using the effective interest method.
(iv) | Classification of financial liabilities for presentation purposes |
Financial liabilities are classified by their nature into the following line items in the Consolidated Statement of Financial Position:
- | Deposits and other demand liabilities: this item includes all on-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 be on-demand obligations. Operations which become callable the day after the closing date are not treated as on-demand obligations. |
- | Cash items in process of being cleared: this item includes balances from asset purchase transactions that are not settled on the same day and from currency sales that are not yet delivered. |
- | Obligations under repurchase agreements: this includes the 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 item includes balances of deposit transactions in which a term at the end of which they become callable has been stipulated. |
- | Financial derivative contracts: this includes financial derivative contracts with negative fair values (i.e. a liability of the Bank), whether they are designated for trading or for hedge accounting purposes, as set forth in Note 8. |
- Trading derivatives: includes the fair value of derivatives which do not qualify for hedge accounting purposes, including embedded derivatives separated from hybrid financial instruments.
- Hedging derivatives: includes the fair value of derivatives designated as hedging instruments, including the embedded derivatives separated from the hybrid financial instruments, in hedge accounting relationships.
- Interbank borrowings: this item includes obligations with other domestic banks, foreign banks, or the Central Bank of Chile, other than those reflected in certain other financial liability classifications listed above.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 22 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
- 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: this item includes credit obligations with entities other than domestic banks, foreign banks, or the Central Bank of Chile, for financing purposes or operations in the normal course of business. |
In general, financial assets and liabilities are initially recognized at fair value which, in the absence of contrary evidence, is deemed to be the transaction price. Financial instruments, other than those measured at fair value through profit or loss, are initially recognized at fair value plus transaction costs. Subsequently, and at the end of each reporting period, financial instruments are measured pursuant to the following criteria:
(i) | Valuation of financial assets |
Financial assets, except for loans and accounts receivable from customers, are measured according to their fair value, gross of any transaction costs that may be incurred in the course of a sale.
According to IFRS 13, “Fair value measurement” 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. When measuring 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.
The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either: (a) in the principal market for the asset or liability, or (b) in the absence of a principal market, the most advantageous market for the asset or liability. Even when there is no observable market to provide pricing information in connection with the sale of an asset or the transfer of a liability at the measurement date, the fair value measurement shall assume that the transaction takes place, considered from the perspective of a potential market participant who intends to maximize value associated with the asset or liability.
When using valuation techniques, the Bank shall maximize the use of relevant observable inputs and minimize the use of unobservable inputs as available. If an asset or a liability measured at fair value has a bid price and an ask price, the price within the bid-ask spread that is most representative of fair value in the circumstances shall be used to measure fair value regardless of where the input is categorized within the fair value hierarchy (i.e. Level 1, 2 or 3). IFRS 13 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).
All derivatives are recorded in the Consolidated Statement of Financial Position at the fair value previously described. This value is compared to the valuation as at the trade date. If the fair value is subsequently measured positive, this is recorded as an asset. If the fair value is subsequently measured negative, this is recorded as a liability.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 23 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
On the trade date it is understood that, unless proven otherwise, its fair value is equal to the transaction price. Changes in the fair value of derivatives from the trade date are recorded with a balancing entry in the Consolidated Statement of Income under "Net income from financial operations".
Specifically, the fair value of financial derivatives included in the portfolios of financial assets or liabilities held for trading is deemed to be their daily quoted price. If, for exceptional reasons, the quoted price cannot be determined on a given date, the fair value is determined using similar methods to those used to measure over the counter (OTC) derivatives. Fair value of OTC derivatives is the sum of the future cash flows resulting from the instrument, discounted to present value at the date of valuation (“present value” or “theoretical close”) using valuation techniques commonly used by the financial markets: “net present value” (NPV) and option pricing models, among other methods. Also, within the fair value of derivatives are included Credit Valuation Adjustment (CVA), with the objective that the fair value of each instrument includes the credit risk of its counterparty. Credit valuation adjustment (CVA) is a valuation adjustment to OTC derivatives as a result of the risk associated with the credit exposure assumed by each counterparty. The CVA is calculated taking into account potential exposure to each counterparty in each future period.
Loans and accounts receivable from customers and held to maturity instrument portfolio are measured at amortized cost using the effective interest method. 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 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. For loans and accounts receivable designated as hedged items in fair value hedges, the changes in their fair value related to the risk or risks being hedged are recorded in “Net income (expense) from financial operations”.
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 are included. 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.
For stocks whose fair value cannot be reliably measured and for financial derivative contracts that have these instruments as underlying instruments and are settled by delivery of them are measured at cost adjusted by any impairment losses.
(ii) | Valuation techniques |
Financial instruments at fair value, determined on the basis of price quotations in active markets, include government debt securities, private sector debt securities, equity shares, short positions, and fixed-income securities issued.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 24 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
When price quotations cannot be observed in available markets, Bank’s management will determine its best estimated price that the market would set using its own internal models. In most cases, these models use data based on observable market parameters as significant inputs, however for some valuations of financial instruments, significant inputs are unobservable in the market. To determine a value for those instruments, various techniques are employed to make these estimates, including the extrapolation of observable market data. The most reliable evidence of the fair value of a financial instrument on initial recognition usually is the transaction price, however due to lack of availability of market information, the value of the instrument may be derived from other market transactions performed with the same or similar instruments or may be measured by using a valuation technique in which the variables used include only observable market data, mainly interest rates.
The main techniques used as of December 31, 2020 and 2019 by the Bank’s internal models to determine the fair value of the financial instruments are as follows:
- | In the valuation of financial instruments permitting static hedging (mainly forwards and swaps), the present value method is used. Estimated future cash flows are discounted using the interest rate curves of the related currencies. The interest rate curves are generally observable market data. |
- | In the valuation of financial instruments requiring dynamic hedging (mainly structured options and other structured instruments), the Black-Scholes model is normally used. Where appropriate, observable market inputs are used to obtain factors such as the bid-offer spread, exchange rates, volatility, correlation indexes, and market liquidity. |
- | In the valuation of certain financial instruments exposed to interest rate risk, such as interest rate futures, caps and floors, the present value method (futures) and the Black-Scholes model (plain vanilla options) are used. The main inputs used in these models are observable market data, including the related interest rate curves, volatilities, correlations and exchange rates. |
The fair value of the financial instruments calculated by the aforementioned internal models considers contractual terms and observable market data, which include interest rates, credit risk, exchange rates, quoted market price of shares, volatility and prepayments, among others. The Bank’s management considers that its valuation models are not significantly subjective, since these methodologies can be adjusted and evaluated, as appropriate, through the internal calculation of fair value and the subsequent comparison with the related actively traded price.
(iii) | Accounting hedging transactions |
The Bank uses financial derivatives for the following purposes:
- To sell to customers who request these instruments in the management of their market and credit risks;
- To use these derivatives in the management of the risks of the Bank entities’ own positions and assets and liabilities (“hedging derivatives”), and
- To obtain profits from changes in the price of these derivatives (“trading derivatives”).
All financial derivatives that are not held for hedging purposes are accounted for as trading derivatives.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 25 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
A derivative qualifies for hedge accounting if all the following conditions are met:
1. | The derivative hedges one of the following three types of exposure: |
1.1 | Changes in the value of assets and liabilities due to fluctuations, among others, in the interest rate and/or exchange rate to which the position or balance to be hedged is subject (“fair value hedge”). |
1.2 | Changes in the estimated cash flows arising from financial assets and liabilities, and highly probable forecasted transactions (“cash flow hedge”). |
1.3 | The net investment in a foreign operation (“hedge of a net investment in a foreign operation”). |
2. | It is effective in offsetting exposure inherent in the hedged item or position throughout the expected term of the hedge, which means that: |
2.1 | At the date of arrangement the hedge is expected, under normal conditions, to be highly effective (“prospective effectiveness”). |
2.2 | There is sufficient evidence that the hedge was actually effective during the life of the hedged item or position (“retrospective effectiveness”). |
3. There must be adequate documentation evidencing the specific designation of the financial derivative to hedge certain balances or transactions and how this effective hedge was expected to be achieved and measured, provided that this is consistent with the Bank’s management of own risks.
Changes in the value of financial instruments qualifying for hedge accounting are recorded as follows:
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 26 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
If a derivative designated as a hedging instrument no longer meets the requirements described above due to expiration, ineffectiveness or for any other reason, hedge accounting treatment is discontinued. When a “fair value hedge” is discontinued, the fair value adjustments to the carrying amount of the hedged item arising from the hedged risk are amortized to gain or loss from that date onwards, where applicable.
When cash flow hedges are discontinued, any cumulative gain or loss of the hedging instrument recognized under “Other comprehensive income” (from the period when the hedge was effective) remains recorded in equity until the hedged transaction occurs, at which time it is recorded in the Consolidated Statement of Income, unless the transaction is no longer expected to occur, in which case any cumulative gain or loss is recorded immediately in the Consolidated Statement of Income.
(iv) | Embedded derivatives in hybrid financial instruments |
Embedded derivatives in other financial instruments or in other host contracts are accounted for separately as financial derivatives contracts when the following criteria are met: 1) its risks and characteristics are not directly related with those of the host contract, 2) a separated instrument with same characteristics of the embedded derivative meets the derivative instrument definition, and 3) the host contract is not classified as “other financial assets (liabilities) at FVTPL” or as “trading instruments”.
(v) | Offsetting of financial instruments |
Financial asset and liability balances are offset, i.e., reported in the 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.
(vi) | Derecognition of financial assets and liabilities |
The accounting treatment for transfers of financial assets is determined by the extent and the manner in which the risks and rewards associated with the transferred assets are transferred to third parties.
If the Bank transfers substantially all the risks and rewards of ownership to third parties, as in the case of unconditional sales of financial assets, sales under repurchase agreements at fair value at the date of repurchase, sales of financial assets with a purchased call option or written put option deeply out of the money, utilization of assets in which the transferor does not retain subordinated debt nor grants any credit enhancement to the new holders, and other similar cases, the transferred financial asset is derecognized from the Consolidated Statement of Financial Position and any rights or obligations retained or created in the transfer are simultaneously recorded.
If the Bank retains substantially all the risks and rewards of ownership associated with the transferred financial asset, as in the case of sales of financial assets under repurchase agreements at a fixed price or at the sale price plus interest, securities lending agreements under which the borrower undertakes to return the same or similar assets, and other similar cases, the transferred financial asset is not derecognized from the Consolidated Statement of Financial Position and continues to be measured by the same criteria as those used before the transfer. However, the following items are recorded:
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 27 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
● | An associated financial liability for an amount equal to the consideration received; this liability is subsequently measured at amortized cost. |
● | Both the income from the transferred (but not removed) financial asset as well as any expenses incurred due to the new financial liability. |
If the Bank neither transfers nor substantially retains all the risks and rewards of ownership associated with the transferred financial asset - as in the case of sales of financial assets with a purchased call option or written put option that is not deeply in or out of the money, securitization of assets in which the transferor retains a subordinated debt or other type of credit enhancement for a portion of the transferred asset, and other similar case- the following distinction is made:
● | If the transferor does not retain control of the transferred financial asset: the asset is derecognized from the Consolidated Statement of Financial Position and any rights or obligations retained or created in the transfer are recognized. |
● | If the transferor retains control of the transferred financial asset: it continues to be recognized in the Consolidated Statement of Financial Position for an amount equal to its exposure to changes in value, a financial liability associated with the transferred financial asset is also recorded. The net carrying amount of the transferred asset and the associated liability is the amortized cost of the rights and obligations retained, if the transferred asset is measured at amortized cost, or the fair value of the rights and obligations retained, if the transferred asset is measured at fair value. |
Accordingly, financial assets are only derecognized from the Consolidated Statement of Financial Position when the rights over the cash flows they generate have terminated or when all the inherent risks and rewards of ownership have been substantially transferred to third parties. Similarly, financial liabilities are only derecognized from the Consolidated Statement of Financial Position when the obligations specified in the contract are discharged or cancelled or the contract has expired.
The main criteria applied by the Bank in connection with revenue and expenses recognition are presented below:
(i) | Interest revenue, interest expense and similar items |
Interest revenue and expense are recorded on an accrual basis using the effective interest method.
Nevertheless, when a loan presents an overdue payment equals to or higher than 180 days with exception of loans with guarantees that of at least 80%, or when the debtor, according to the Bank’s judgment, shows a high risk of non-compliance, interests and inflation indexation adjustment are not recorded in the Consolidated Statement of Income, unless they are effectively collected.
These interests and inflation-indexation adjustments are referred as “suspended” and are recorded in offbalance accounts, which are not part of the Consolidated Statement of Financial Position but reported as complementary information (see Note 25 Interest Income and Interest Expenses). These interests are recorded as income when they are effectively collected.
Interests related to “transactions with accrual suspended” are recorded again as income when those transactions become current (i.e. payments were received and overdue payments are less than 180 days) or when they are no longer classified in categories C3, C4, C5 or C6 (in the case of individually assessed clients).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 28 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
(ii) | Dividends received |
Dividends received from investments in other companies are recognized on income when the right to receive them arises and are recorded in the item “Income from investments in companies”.
(iii) | Commissions, fees and similar items |
According to IFRS 15 "Revenue from contracts with customers", revenue is recorded based on the consideration received according to contracts with customers, excluding amounts collected on behalf of third parties. Revenue is recognized when performance obligations are satisfied by transferring a promised good or service to a customer, which is evidenced by transferring control over an asset or the rendering of a service:
Commissions recorded by the Bank correspond mainly to:
● | Line of credit and overdraft commissions: includes earned commissions during the year related to lines of credit granted and checking accounts overdrafts. |
● | Guarantee and letters of credit fees: includes earned commissions during the year related to bank guarantees granted over actual or contingent obligations to third parties. |
● | Credit card fees: includes earned and received commissions during the year related to credit and debit cards usage. |
● | Accounts management fees: includes earned fees related to maintenance of checking accounts, savings accounts, and other accounts. |
● | Collection and payment services fees: includes fee income related to collection services as well as payment services rendered by the Bank and its subsidiaries. |
● | Brokerage and securities management fees: includes fee income related to financial assets brokerage and securities management and custody. |
● | Insurance brokerage fees: includes insurance brokerage fees. |
● | Other fee and commissions: includes income arising from currency exchange, financial advisory services, cashier checks issuance, placement of financial products and online banking services. |
Commission expenses include:
● | Cards transactions fees: includes credit and debit card transaction fees related to income generated in those transactions. |
● | Securities transactions fees: includes fees related to custody of securities and securities brokerage. |
● | Other fees and commissions: includes mainly expenses generated from online services. |
The Bank grants a group of benefits to its cardholders for which, in accordance with IFRS 15, has established provisions enough to comply with its performance obligations when these benefits become enforceable.
(iv) | Non-financial income and expenses |
They are recorded in accordance with IFRS 15, identifying the performance obligations, allocating the transaction price to separate performance obligations, and recognizing income when these are satisfied.
(v) | Loan arrangement fees |
Fees that arise from loans arrangement, opening accounts, study and information fees, they are accrued and recognized on a sistematic basis on the Consolidated Statement of Income throughout the life of the loan. However, opening fees, to the extent that the fee is not associated to a specific credit agreement, that is, there is no certainty of the amount actually disbursed and the moment in which the available funds will be used, both the fee and associated costs are immediately recorded on the Consolidated Statement of Income.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 29 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
Assets are acquired or purchased based on the future economic benefits they produce. Accordingly, impairment is recorded when the carrying amount of those assets is lower than the recoverable amount. Assets are subject to impairment tests in order to properly reflect the future economic benefits that assets are capable to produce when used by the Bank. The Bank follows the criteria described below in order to assess impairment, when applicable:
(i) | Financial assets |
A financial asset, other than those recorded at fair value through profit and loss, is evaluated on each financial statement reporting date in order to determine whether objective evidence of impairment exists. At the end of each reporting period the Bank assesses if objective evidence exist for a financial asset or group of financial assets to be impaired.
A financial asset or group of financial assets will be impaired if, and only if, objective evidence of impairment exists as a result of one or more events that occurred after initial recognition of the asset (“event causing the loss”), and this event or events causing the loss have an impact on the estimated future cash flows of a financial asset or group of financial assets, that can be estimated reliably. It may not be possible to identify a single event that causes of impairment.
An impairment loss relating to financial assets recorded at amortized cost is calculated as the difference between the recorded amount of the asset and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
Expected losses as a result of future events, regardless of their probability, shall not be recorded. Objective evidence for an asset or group of assets to be impaired includes the following events that cause losses: (i) significant financial difficulties of the issuer or debtor; (ii) failing to fulfil the terms of the contract; (iii) the lender, due to economic or legal reasons related to financial difficulties of the debtor, grants waivers or give unusual conditions that will not be granted in normal circumstances; (iv) it is probable that the debtor is in bankruptcy or any another financial reorganization; (v) there is no longer a market for the financial asset due to financial difficulties; or (vi) observable data indicates that since initial recognition of a group of financial assets there is a decrease in the estimated future cash flows, regardless of individual identification for each asset, including data about: (a) adverse changes in the payment behavior of debtors in the group; or (b) local or national economic conditions correlated to non-compliant in the group.
Individually significant financial assets are individually assessed to determine their impairment. The remaining financial assets are collectively evaluated in groups that share similar credit risk characteristics.
Impairment loss for available for sale investments, is calculated as the difference between the acquisition cost (net of any principal reimbursement) and the current fair value less any impairment loss previously recorded in income.
For equity investments classified as available for sale, objective evidence includes a significant and extended decrease under the initial fair value of the invested amount. In the case of debt instruments classified as available for sale investments, the Bank assess if objective evidence for impairment exist based on the criteria used for assessing loans impairment losses.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 30 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
If impairment evidence exists, any amount previously recorded in equity, net gains and losses recognized in the Consolidated Statement of Other Comprehensive Income, are transferred from equity to the Consolidated Statement of Income, presented as impairment of available for sale investments. This amount is calculated as the difference between acquisition cost (net of any amortization and reimbursement) and the current fair value of the asset, less any impairment loss on the investment previously recorded in the Consolidated Statement of Income.
When the fair value of available-for-sale debt instruments recovers at least to their amortized cost, it is no longer considered an impaired instrument and subsequent changes in fair value are reported in equity.
All impairment losses are recorded in income. Any impairment loss relating to a financial asset available for sale previously recorded in equity is transferred to profit or loss. The reversal of an impairment loss occurs only if it can be objectively linked to an event occurring after the initial impairment loss was recorded.
Reversal of an impairment loss shall not exceed the carrying amount that would have been determined if no impairment loss has been recognized for the asset in prior years. The reversal is recorded in income with the exception of available for sale equity financial assets, in which case it is recorded in other comprehensive income.
(ii) | Non-financial assets |
The Bank’s non-financial assets, are reviewed at each reporting date to determine whether they show signs of impairment (i.e. its carrying amount exceeds its recoverable amount). If any such evidence exists, the recoverable amount of the asset is estimated, in order to determine the extent of the impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
In connection with other assets, impairment losses recorded in prior periods are assessed at each reporting date to determine whether the loss has decreased and should be reversed. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years. Goodwill impairment is not reversed.
The Bank shall assess at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of that asset.
In assessing whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased, an entity shall consider, as a minimum, external sources of information (the asset’s value has increased significantly during the period; significant changes with a favorable effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which the asset is dedicated; market interest rates or other market rates of return on investments have decreased during the period, and those decreases are likely to affect the discount rate used in calculating the asset’s value in use and increase the asset’s recoverable amount materially) and internal sources of information such as significant changes with a favorable effect on the entity have taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which, the asset is used or is expected to be used. These
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 31 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
changes include costs incurred during the period to improve or enhance the asset’s performance or restructure the operation to which the asset belongs.
In the case of goodwill and indefinite useful life intangible assets or not yet available for use, the recoverable amount is estimated annually, at year end.
When impairment exists the carrying amount of the asset shall be reduced to its recoverable amount if, and only if, the recoverable amount of an asset is less than its carrying amount. This reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or los.
When the amount estimated for an impairment loss is greater than the carrying amount of the asset to which it relates, the Bank shall recognize a liability if, and only if, that is required by another standard. After the recognition of an impairment loss, the depreciation (amortization) charge for the asset shall be adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life.
If an impairment loss is recognized, any related deferred tax assets or liabilities are determined in accordance with IAS 12 “Income taxes” by comparing the revised carrying amount of the asset with its tax base.
Impairment losses recognized in previous years are assessed at the end of each reporting period in order to identify any indication of impairment reduction or disappearance. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized of the asset in prior years.
(iii) | Goodwill |
Goodwill is tested annually in order to determine if impairment losses exist and whenever there is an indication that the carrying value may be impaired. The impairment of goodwill is determined by evaluating the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. An impairment loss is recognized when the recoverable amount of the CGU is less than its carrying amount.
For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units. An impairment loss recognized for goodwill shall not be reversed in a subsequent periods.
According to IAS 36 “Impairment of assets” the annual impairment test for a cash-generating unit to which goodwill has been allocated or for intangible assets with indefinite useful lives may be performed at any time during an annual period, as long the test is performed at the same time every year. Different cash-generating units may be tested for impairment at different times.
Items of fixed assets are measured at acquisition cost, net of accumulated depreciation and impairment, if any.
In addition to the price paid to acquire each item, the cost also includes, where applicable, the capitalized cost. The capitalized cost includes expenses attributed directly to the asset acquisition and any other costs directly attributable to the process of placing the asset in conditions to be used.
When some part of an item of the fixed assets has a different useful life to that fixed asset, it is recognized as a separate component (significant components of fixed assets).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 32 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
This item includes the amounts of property, land, furniture, vehicles, technological equipment, and other facilities own by the consolidated entities or acquired under financial leases. These assets are classified based on their use in:
(i) | Fixed assets for own use |
Fixed assets for own use includes, but is not limited to, tangible assets received by the consolidated entities in full or partial satisfaction of financial assets representing accounts receivable from third parties which are intended to be held for continuing own use and tangible assets acquired under finance leases. These assets are recorded at acquisition cost less the related accumulated depreciation and, if applicable, any impairment losses (when net carrying amount was higher than recoverable amount). For accounting purposes, acquisition cost of the received asset is considered to be its net amount.
Depreciation is calculated using the straight line method over the acquisition cost of assets less their residual value, assuming that the land on which buildings and other structures stand has an indefinite life and, therefore, is not subject to depreciation. Fixed assets in leased properties are depreciated over the shorter period of time between their useful lives or the term of the lease, unless it is certain that the Bank will acquire the property at the end of the lease.
The consolidated entities assess at each reporting date whether there is any indication that the carrying amount of any tangible asset exceeds its recoverable amount. If this is the case, the carrying amount of the asset is reduced to its recoverable amount and future depreciation charges are adjusted in accordance with the revised carrying amount and to the new remaining useful life.
In a similar manner, when indication exists that a material asset has recovered its value, the consolidated entities recognize the impairment loss reversal and the future depreciation charges are adjusted accordingly. In no case the impairment loss reversal of an asset can increase its value over the initial value as it no impairment losses were recognized in previous years.
The estimated useful lives of the items of fixed assets held for own use are reviewed at the end of each reporting period to detect significant changes. If changes are detected, the useful lives of the assets are adjusted by correcting the depreciation charge to be recorded in the Consolidated Statement of Income in future years on the basis of the new useful lives.
Maintenance expenses relating to tangible assets held for own use are recorded as an expense in the period in which they are incurred.
(ii) | Assets leased out under operating leases |
The criteria used to record the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their respective estimated useful lives, and to record the impairment losses thereof, are consistent with those described in relation to fixed assets held for own use.
Intangible assets are identified as non-monetary assets (separately identifiable from other assets) without physical substance which arise as a result of legal or contractual rights, internally developed by the consolidated entities, as well as those generated in a business combination. These are assets for which the cost can be reliably measured and it is probable that future economic benefits attributable to the asset will flow to the Bank. The cost of intangible assets acquired or originated in a business combination correspond to its fair value at the acquisition date.
Intangible assets are recorded initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortization and any accumulated impairment losses.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 33 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
The Bank shall assess whether the useful life of an intangible asset is finite or indefinite and, if finite, the length of, or number of production or similar units constituting, that useful life. An intangible asset shall be assessed by the Bank as having an indefinite useful life when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Bank.
The accounting for an intangible asset is based on its useful life. An intangible asset with a finite useful life is amortized over its useful life, and it is reviewed in order to determine if the asset is impaired. The amortization period and the amortization method shall be reviewed at least at each financial year-end. An intangible asset with an indefinite useful life is not amortized. The Bank tests for impairment by comparing its recoverable amount with its carrying amount annually and whenever there is an indication that the intangible asset may be impaired
(i) | Software |
The software acquired by the Bank is recognized at cost less the accumulated amortization and impairment, if any.
The expenses in software developed internally are recorded as assets when the Bank is capable of proving its intention and ability to complete development, when internal use will generate future economic benefits, and when the cost of completing its development can be reliably measured. The capitalized costs of the software developed internally include all the direct costs attributable to the development of the software, and it is amortized over the course of its useful life. Software developed internally is recorded at cost less the accumulated amortization and losses from impairment.
The subsequent expenditures associated with the asset are capitalized only when future economic benefits from them will flow to the Bank. The rest of the expenditures are recognized in income.
Intangible assets are amortized on a straight-line basis over their estimated useful life; starting on the date it is ready for use.
(ii) | Generated in a business combination |
According to IFRS 3 “Business combinations”, when an intangible asset is acquired or generated in a business combination it cost will be the fair value at the acquisition date. The fair value of an intangible asset represents expectations of market participants at the acquisition date over the probability that future economic benefits from the asset will flow to the entity. In other words, the entity expects that economic benefits flows to them, even though there is uncertainty about the date or the amount of them.
As set forth by IAS 38 “Intangibles assets” and IFRS 3, the acquirer will recognize an intangible assets from the acquiree at the acquisition date separately from Goodwill independently if the asset was previously recognized by the acquiree before the business combination.
In connection with the aforementioned, the business combination between Itaú Chile and Corpbanca gave rise to intangible assets and Goodwill as indicated in Note 13 Intangible Assets.
(iii) | Other identifiable intangibles |
Correspond to those intangible assets that can be identified, the Bank controls them, can be reliably measured and it is probable that future benefits will flow to the Bank.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 34 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
The Bank performs operations with their clients, in which they receive invoices and other credit representative trading instruments with or without recourse to the transferor, anticipating a percentage of the total amount receivable of the borrower upon collection. These transactions are valued at the disbursed amounts by the Bank in exchange for invoices or other credit representative trading instruments.
The price differences between the disbursed amounts and the nominal amount of the documents are recorded in the Consolidated Statement of Income as interest income applying the effective interest rate method, over the term of the transaction. The responsibility of payment of the documents remains with the client (assignor).
On the date of commencement of a lease the Bank recognizes an asset for right of use and a liability for lease in accordance with the provisions of IFRS 16 “Leases”.
(i) | Assets for right-of-use |
At the beginning of a lease, the right-of-use asset is measured at cost. The cost includes (a) the amount of the initial measurement of the lease liability; (b) lease payments made before or from the start date, less lease incentives received; (c) the initial direct costs incurred by the lessee; and (d) a modification of the costs to be incurred by the lessee when dismantling and eliminating the underlying asset, restoring the place in which 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 right of use applying the cost model, which is defined as the asset by right of use measured at cost (a) less accumulated depreciation and accumulated risk losses of value; and (b) adjusted for any new measurement of the lease liability.
The Bank applies the depreciation requirements established by IAS 16 "Property, plant and equipment" over the right-of-use in these type of transactions.
If the lease transfers ownership of the underlying asset to the Bank at the end of the lease term or if the cost of the right-of-use asset reflects that the Bank exercises a purchase option, the Bank depreciates the right-ofuse asset from the date of beginning of it until the end of the useful life of the underlying asset. In another case, the Bank depreciates the asset by right of use from the start date until the end of the useful life of the asset whose right of use has or until the end of the lease term, whichever comes first.
The Bank applies IAS 36 “Impairment of assets” to determine if the right-of-use asset presents changes in value and accounts for identified value risk losses.
As of December 31, 2020, the Bank has not identified impairment in the value of the right-of-use assets.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 35 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
(ii) | Lease liability |
The Bank measures the lease liability at the present value of lease payments that have not been paid as of that date. Lease payments are discounted using the interest rate implicit in the lease, if that rate could be easily determined. Since that rate cannot be easily determined, the Bank uses the incremental rate for loans (cost of funding).
The lease payments included in the measurement of the lease liability determined the payments for the right of use the underlying asset during the term of the not cancelable lease at the measurement date which includes (a) fixed payments, less any lease incentive receivable (b) variable lease payments, which depends on an index or rate, recently measured using the index or rate on the start date; (c) it matters that the lessee expects to pay as residual value guarantees; (d) the exercise price of a purchase option if the lessee is reasonably sure to exercise that option; and (e) payments for penalties arising from the termination of the lease, if the term of the lease reflects that the lessee exercises an option to terminate the lease.
After the date of initial recognition, the Bank measures the lease liability in order to recognize (a) the interest on the lease liability; (b) lease payments made; and (c) the new measurements or modifications of the lease, and also for fixed lease payments that have essentially been reviewed.
The Bank makes new measures of the lease liability discounting the modified lease payments, if (a) there is a change in the expected amounts payable related to a residual value guarantee. A lessee will determine the lease payments to determine the change in the amounts expected to be paid under the residual value guarantee; (b) there will be a change in future lease payments determined from a change in an index or a rate used to determine those payments. The Bank measures the lease liability again to modify the modified lease payments only when there is a change in 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 measured the lease liability at the present value of the lease payments discounted using the incremental interest rate for loans (cost of funding).
The Bank has established allowances to cover the incurred and expected losses of certain financial assets that have been determined in accordance with the regulations and instructions set forth by the CMF 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 incurred and expected losses based on risk characteristics of debtors and their loans that determine the payment behavior and subsequent collection.
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, for small amounts which relate to individuals or small size entities.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 36 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
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 the non-compliant portfolio. |
● | Group allowances for the normal portfolio. |
● | Group allowances for the non-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 Chapter B1 “Provisions for credit risk” from the CAS, assigning risk categories to each debtor according to the following detail:
Normal portfolio
It corresponds 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 regarding the probability 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.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 37 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
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.
Below are presented the probabilities of default and loss given default, as established by the CMF:
| | | | | | | | |
| | | | | | | | |
| | Debtor | | Probability of default | | Loss given default | | Expected loss |
Type of portfolio |
| category |
| (PD) |
| (LGD) |
| (EL) |
| | | | (%) | | (%) | | (% allowance) |
|
| A1 |
| 0.04 |
| 90.00 |
| 0.03600 |
|
| A2 |
| 0.10 |
| 82.50 |
| 0.08250 |
Normal portfolio |
| 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 |
|
| B1 |
| 15.00 |
| 92.50 |
| 13.87500 |
|
| B2 |
| 22.00 |
| 92.50 |
| 20.35000 |
Substandard portfolio |
| 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. The Bank must demonstrate that the collateral 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.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 38 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
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 in the classification scale established below and classification is assigned to the debtor’s portfolio at the classification at the riskiest level, including 100% of the loan commitments that those borrowers maintain.
In calculating allowances for the non-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 the execution of actions to collect, net of expenses associated with these actions.
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 | |
|
| C1 |
| Up to 3% | | 2% | |
|
| C2 |
| More than 3% and up to 20% | | 10% | |
|
| C3 |
| More than 20% and up to 30% | | 25% | |
Non-compliant portfolio |
| C4 |
| More than 30% and up to 50% | | 40% | |
|
| C5 |
| More than 50% and up to 80% | | 65% | |
|
| C6 |
| More than 80% | | 90% | |
Loans are kept in this category until there is observable evidence to conclude that the capacity and payment behavior is back to normal, regardless of charging-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 Chapter B-2 of the Compendium of Accounting Standards).
To remove a debtor from this portfolio, once the circumstances that made it be classified in this category are overcome, all the following requirements must be met, in a copulative manner::
1) None of the debtor obligations with the Bank are overdue for more than 30 days.
2) No new refinancing 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.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 39 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
(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 for 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
For the purposes of calculating credit risk provisions of the mortgage loan portfolio for housing, the Bank uses the standard provision method for mortgage loans established in the CNC. 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:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Number of days | | | | | | | | | | Default |
LTV range |
| overdue |
| 0 |
| 1 - 29 |
| 30 - 59 |
| 60 - 89 |
| portfolio |
| | PD (%) |
| 1.0916 |
| 21.3407 |
| 46.0536 |
| 75.1614 |
| 100 |
LTV ≤ 40% | | LGD (%) |
| 0.0225 |
| 0.0441 |
| 0.0482 |
| 0.0482 |
| 0.0537 |
| | EL (%) |
| 0.0002 |
| 0.0094 |
| 0.0222 |
| 0.0362 |
| 0.0537 |
| | PD (%) |
| 1.9158 |
| 27.4332 |
| 52.0824 |
| 78.9511 |
| 100 |
40% < LVT ≤ 80% | | LGD (%) |
| 2.1955 |
| 2.8233 |
| 2.9192 |
| 2.9192 |
| 3.0413 |
| | EL (%) |
| 0.0421 |
| 0.7745 |
| 1.5204 |
| 2.3047 |
| 3.0413 |
| | PD (%) |
| 2.5150 |
| 27.9300 |
| 52.5800 |
| 79.6952 |
| 100 |
80% < LVT ≤ 90% | | LGD (%) |
| 21.5527 |
| 21.6600 |
| 21.9200 |
| 22.1331 |
| 22.2310 |
| | EL (%) |
| 0.5421 |
| 6.0496 |
| 11.5255 |
| 17.6390 |
| 22.2310 |
| | PD (%) |
| 2.7400 |
| 28.4300 |
| 53.0800 |
| 80.3677 |
| 100 |
LVT > 90% | | LGD (%) |
| 27.2000 |
| 29.0300 |
| 29.5900 |
| 30.1558 |
| 30.2436 |
| | EL (%) |
| 0.7453 |
| 8.2532 |
| 15.7064 |
| 24.2355 |
| 30.2436 |
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 the Non-compliant portfolio, calculating allowances for each one of those loans applying the corresponding percentage according to the LTV.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 40 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
For mortgage loans related to housing programs and benefits from the Government, 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:
| | | | |
| | | ||
| | MP factor of mitigation of losses for credits with state | ||
Range LTV | | insurance of auction | ||
| | Section V: Deed price of the house (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% |
Provisions for commercial loans
The Bank uses the three standard models established in the CAS, in order to determine the provisions of the group commercial portfolio. The applicable percentages of provision and the parameters used to determine the provision, are set out on the CAS.
● | Commercial leasing operations |
The allowance is determined based on the book value of the commercial lease operations (including the purchase option). The allowance percentage used in the calculation will depend on the delinquency of each operation, the type of leased asset and the relationship, at the end of each month, between the book 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 delinquency and type of asset (%) | ||||
Days in arrears of the operation at | | Type of leased assets | ||
the end of the month |
| Real estate |
| Non-real estate |
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 according to LTV range and type of asset (%) | ||||
LTV= Book value/Value of the leased asset | ||||
LTV range |
| Real estate |
| Non-real estate |
LTV <= 40% | | 0.05 |
| 18.20 |
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 for non-real estate, recorded at inception, considering any transitory event that may cause an increase on the value of the asset.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 41 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
• 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 payment enforceability delinquency and type of loan (%) | ||||||
Presents payment of principal or | | Overdue days at the | | Type of Student Loan | ||
interest at the end of the month | | end of the month | | CAE | | CORFO or other |
Yes |
| 0 |
| 5.20 |
| 2.90 |
|
| 1-29 |
| 37.20 |
| 15.00 |
|
| 30-59 |
| 59.00 |
| 43.40 |
|
| 60-89 |
| 72.80 |
| 71.90 |
|
| Portfolio in default |
| 100.00 |
| 100.00 |
No |
| N/A |
| 41.60 |
| 16.50 |
| | | | |
| ||||
Loss given default due according to the enforceability of the payment and type of loan (LGD) (%) | ||||
Presents payment of principal or interest at the end of | | Type of Student Loan | ||
the month |
| CAE |
| CORFO or other |
Yes |
| 70.90 |
| 70.90 |
No |
| 50.30 |
| 45.80 |
For loans granted in accordance with Law No. 20,027, the Bank considers the Government as a qualified guarantor for 90% of the loan.
● | Generic commercial placements 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 delinquency and LTV range (%) | ||||||
Days of delinquency at the end of the month |
| With collateral |
| No collateral | ||
|
| 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 |
Portfolio in default | | 100.00 | | 100.00 | | 100.00 |
| | | | | | |
| ||||||
Loss Given Default (LGD) applicable according to LTV range (%) | ||||||
| | | | Commercial operations or | | Factoring with |
| | | | factoring without transferor’s | | transferor’ s |
|
| LTV ranges |
| responsibility |
| responsibility |
| | LTV <= 60% | | 5.00 | | 3.20 |
With collateral | | 60% < LTV <= 75% | | 20.30 | | 12.80 |
| | 75% < LTV <= 90% | | 32.20 | | 20.30 |
| | 90% < LTV |
| 43.00 | | 27.10 |
| | No collateral |
| 56.90 | | 35.90 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 42 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
A guarantee or collateral 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 – Collectively assessed loan
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.
The following can be excluded from the group non-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 present conditions indicated in Circular No. 3,454 dated December 10, 2008. |
All debtor’s loans should be classified in the Non-compliant portfolio until a normalization of its behavior and management capacity can be observed, regardless of charge-offs requirements indicated in the accounting policy detailed in letter w), charge-offs section (title II, Chapter B-2 of the Compendium of Accounting Standards). In order to remove a debtor from the Non-compliant 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 new re-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.
(iii) | Guarantees |
Las 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 standards established by the CMF, 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:
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 43 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
1) | Collateral and guarantees. 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. |
2) | Guarantees. In order to apply the deduction method or to determine recovery rates, valuation of property and other guarantees (mortgages or financial instruments guarantees) 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 applying 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 can establish provisions in addition to those calculated by applying the loan portfolio assessment models, according to the set forth in number 9 of Chapter B-1 of the CAS. These provisions can be established with the purpose of addressing the risks arising from macroeconomic fluctuations by anticipating expansive economic cycle downturns which could materialize in the worsening of the economic environment in the future and, in that manner, operate as an anti-cycle mechanism to accumulate additional provisions during positive economic conditions and release or use provisions when negative economic conditions are present.
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 December 31, 2020, the Bank maintained additional provisions for its commercial, consumer and mortgage portfolio amounting to MCh$137,848 see Note 21 Provisions (as of December 31, 2019, the Bank does not maintain additional provisions for its commercial, consumer and mortgage portfolio).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 44 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
Impaired loans
This portfolio is comprised of the following assets:
● | For individually assessed debtors, includes loans classified in the “Non-compliant portfolio” and those classified under categories B3 and B4 of the “Substandard portfolio”, as described above. |
● | For those debtors collectively assessed, includes all loans classified in the “Non-compliant portfolio”. |
Charge-offs
As a general rule, charge-offs should be applied when contractual rights to cash flows expire. In the case of placements, even if this does not occur, the respective asset balances will be written off in accordance with the provisions of CAS, Chapter B-2, Title II "Impaired and written-off loans".
The write-offs in question refer to the derecognition in the Consolidated Statement of Financial Position of the asset corresponding to the respective operation, including, therefore, that part which might not be due if it were a loan payable in instalments or partial payments, or a leasing operation (there are no partial writeoffs).
Charge-offs are always recognized against provisions for loan losses, according to Chapter B-1 of the CAS, regardless of the reason.
Charge-off of loans and accounts receivable must take place when the following circumstances exist, whichever happens first:
1) | The Bank, based on all available information, concludes that no inflow related to the recorded loan will be received. |
2) | When a loan or account receivable with no legal documentation is 90 days overdue since recorded as an asset. |
3) | When the legal term for all legal shares to collect the loan have expired. |
4) | When a loan is overdue for a period of time that complies with the term listed below: |
| |
| |
Type of loans | Term |
Consumer loans with or without guaranties | 6 months |
Consumer leasing | 6 months |
Others operations of leasing no real state | 12 months |
Others operations without guaranties | 24 months |
Commercial loans with guaranties | 36 months |
Real state leasing (commercial and home purchase) | 36 months |
Mortgage loans for home | 48 months |
The term corresponds to the time passed since the date in which the loan became collectable partially or totally.
Recovery of assets previously charged-off
Payments received from loans previously charged-off are recognized directly as income, as recoveries of loans previously charged-off in “Provisions for loan losses” compensating the provision expense for the year.
In the event that recoveries through goods or non-financial assets income will be recognized for the amount in which those assets are recorded, according to Chapter B-5 “Assets received in lieu of payment” of the CAS. Same criteria will be followed for repossessed leased assets granted under finance leases, after being charged-off when incorporated back as assets.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 45 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
Renegotiation of previously charged-off loans
Any renegotiation of a charged-off loan will not give rise to income recognition, as long as it classified as impaired. Any payment received is treated as a recovery of loans previously charged-off.
The renegotiated loan is recorded as an actual asset when losses its characteristic of impaired, recording income as a recovery of a loan previously charged-off. Same criteria is applied when a loan is granted to pay for a loan previously charged-off.
Recovery of loans previously charged-off
The recoveries of loans that were previously charged-off are recognized directly in the Consolidated Statement of Income as a reduction of the provisions for loan losses.
Contingent loans are understood as those transactions or commitments for which the Bank is taking a risk when obligating in third parties benefit as requested by its customer subject to the occurrence or nonoccurrence of a future event to pay a certain amount which will subsequently recovered from its customer.
The Bank maintains recorded in off-balance accounts the following amounts related to commitments or responsibilities in the normal course of business.
1) Guarantees agreement: Includes collaterals, guarantees and stand by letter of credit as indicated in Chapter 8-10 of the Updated Compilation of Rules (RAN). Additionally, includes payment guarantees for factoring operations as indicated in Chapter 8-38 of the RAN.
2) Confirmed foreign letters of credit: Corresponds to letters of credit confirmed by the Bank.
3) Letters of credit issued: Includes documentary letters of credit issued by the Bank not yet negotiated.
4) Documented guarantees: Corresponds to documented guarantees granted with promissory notes as indicated in Chapter 8-11 of the RAN.
5) Available lines of credit: Considers the not used amounts of lines of credit which allow clients to use loans without additional approval from the Bank (i.e. for the usage of credit cards or checking account overdrafts).
6) Other loans commitments: Includes amounts for loan commitments not disbursed which should be granted in a future agreed date or disbursed when agreed terms are met, such as credit lines linked to stage of completion of projects or student loans (Law No. 20,027).
7) Other contingent loans: Includes any other type of commitment of the Bank that could exist and could give rise to an effective loan when certain future events take place. In general, includes unusual transactions such as delivery of instruments as collateral to guarantee payment for loan transactions between third parties or derivative contracts transactions entered into on behalf of third parties that could imply a payment obligation not covered by a deposit.
The amount of these contingent loans are considered at the end of each reporting period to calculate allowances for loan losses required by Chapter B-1 “Provisions for loan losses” of the Compendium of Accounting Standards, and the amounts must be calculated according to the exposition factor, according to the following table:
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 46 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
| |
| |
Type of contingent loans | Exposition |
1) Guaranties and security bonds | 100% |
2) Foreign credit letters confirmed | 20% |
3) Documentary credit letters issued | 20% |
4) Guarantee papers | 50% |
5) Available credit lines | 35% |
6) Other credit commitments: | |
- Loans for higher education, Law N°20,027 | 15% |
- Others | 100% |
7) Other contingent loans | 100% |
However, when evaluating contingent loans for clients with non-compliant loans the amount to be considered to calculate provisions for loan losses shall be 100% of the contingent loan as indicated in Chapter B-1 as previously indicated.
The Bank maintains in off-balance accounts amounts related to commitments or responsibilities due to its normal activities: Guarantees, letters of credit, documented guarantees, available lines of credit, other loans commitments, and other contingent loans.
The amount of contingent loans is considered at the end of each reporting period in order to calculate provisions for loans losses according to Chapter B-1 of the Compendium of Accounting Standards, using the methodology set forth in letter b) “Guarantees”.
The Bank has recognized an expense (income) arising from gains or losses for each year, according to the applicable taxation rules for each country or jurisdiction it operates.
The income tax expense for the year includes the sum of current tax, which results from applying the current rates to the taxable profit for the year (after deducting the tax credits allowed), and the change in deferred tax assets and liabilities recognized in the Consolidated Statement of Income.
The Bank records, when appropriate, deferred tax assets and liabilities for the estimated future tax effects attributable to differences between the carrying amount of assets and liabilities and their tax basis. The measurement of deferred tax assets and liabilities is based on the tax rate, in accordance with the applicable tax laws, using the tax rate that applies to the period when the deferred asset and liability will be settled. The future effects of changes in tax legislation or tax rates are recorded in deferred taxes beginning on the date on which the law is enacted or substantially enacted.
A provision is a liability of uncertain timing or amount. Provisions are recorded in the Consolidated Statement of Financial Position when the Bank:
● | has a present obligation (legal or constructive) as a result of past events, |
● | it is probable that an outflow of resources will be required to settle these obligations, and |
● | the amount of these resources can be reliably measured. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 47 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
A contingent liability is any possible obligation arising from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events that are not wholly within the control of the Bank.
Guarantees agreement, confirmed foreign letters of credit, letters of credit, letters of guarantee, unused lines of credit, other credit commitments, other contingent credits (see letter v) are classified as contingent in supplementary information.
The consolidated financial statements include all the material provisions with respect to which it is considered that it is more likely than not that the obligation will have to be settled.
Provisions (quantified using the best available information on the consequences of the event giving rise to them and are reviewed and adjusted at the end of each year) are used to satisfy specific obligations for which they were originally recognized. Partial or total reversals are recognized when such liabilities cease to exist or are reduced.
Provisions are classified according to the obligation covered (see Note 21 Provisions), as follows:
Provisions for restructuring cost
They are constructive obligation that rises from a restructuring plan. A restructuring plan is a programme that is planned and controlled by management, which changes either, the scope of the business undertaken; or the manner in which that business is conducted.
The provision for restructuring cost are recognized in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” once the Bank has the real expectation of executing the plan, either by having started to execute the plan or by having announced its main characteristics those who are going to be affected.
Correspond to personnel benefits (other than termination benefits) that are expected to be settled within twelve months after year end over which the employees have rendered their services.
These are recognized when the employee has rendered the service and are measured at the undiscounted amount of benefits expected to be paid in exchange for that service:
Personnel vacations
The annual cost of personnel vacations and benefits are recognized on an accrual basis.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 48 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
Post-employment benefits
Correspond to employee benefits (other than termination benefits and short-term employee benefits) that are expected to be settled after the completion of employment. Post-employment benefits plans are agreements, formal and informal, in which the Bank is committed to provide benefits to one or more employees after completion of their employment. Plans providing these benefits are classified as either defined contribution plans or defined benefit plans, depending on the economic substance of the plan as derived from its principal terms and conditions.
Defined contribution plans, the obligation is recognized for the amounts to be contributed in the period.
Defined benefit plans, a liability is recognized based on the estimated benefit cost that employees have accrued for services rendered, less the present value of the defined benefit obligation and present value of present services. Present service cost and gain or loss upon settlement will be recognized in the income statement for the year. Gains and losses generated from the remeasurement of the liability will be recognized in other comprehensive income.
Other long-term benefits
Other long-term employee benefits are employee benefits, other than short-term, post-employment and termination benefits, which are not due for payment within 12 months after the end of the period in which the employees render the service.
The regulations require the recognition of a liability for the present value of the defined benefit obligation less the fair value of the plan assets, if any. The results generated from its remediation will be recognized in the results of the year.
Termination benefits
Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment, as a consequence of:
● | A decision of the entity to terminate the employee’s employment before the normal termination date; or |
● | The decision of an employee to accept an offer with benefits in order to terminate the employment before the normal termination date. |
An entity recognizes a liability and expense for termination benefits at the earlier of the following dates:
● | When the entity can no longer withdraw the offer of those benefits; and |
● | When the entity recognizes costs for a restructuring that is within the scope of IAS 37 “Provisions, contingent liabilities and contingent assets” and involves the payment of termination benefits. |
A libility recognized due to the legal obligation to distribute 30% of the profit of the year in compliance with Public Company Law (30%) or in accordance with the provisions of the company bylaws. For the year ended December 31, 2019, the Bank provisioned 30% of its net income. For the year ended December 31, 2020, no provision was recorded given the net loss. This provision is recorded as a decrease in “Retained earnings” under the concept “Provision for mandatory dividends” within the Consolidated Statement of Changes in Equity.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 49 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
In the Bank’s bylaws, title VII, it is established that the Bank should distribute annually as a dividend to its shareholders, as a proposal of the Board of Directors and based on the number of shares, at least thirty percent (30%) of the net income of the year. Furthermore, no dividends distribution will take place if there are equity losses (negative reserves) until these losses are recovered or if a dividend distribution will cause a non-compliance of the capital requirements established by the Ley General de Bancos (General Bank Law).
For all matters related to dividends distributions, the Bank is subject to the terms incorporated in the Transaction Agreement (dated January 29, 2014 and its subsequent modifications), which was approved by the Ordinary Shareholders Meeting (dated March 11, 2016).
Assets received or awarded in lieu of payment of loans and accounts receivable from clients are recognized at their fair value (as determined by an independent appraisal). A price is agreed upon by the parties through negotiation or, when the parties do not reach an agreement, at the amount at which the Bank is awarded those assets at a judicial auction. In both cases, an independent appraisal is performed.
The excess of the outstanding loan balance over the fair value is charged to net income for the year, under “Provision for loan losses”.
Any excess of the fair value over the outstanding loan balance, less costs to sell of the collateral, is returned to the client. These assets are subsequently adjusted to their net realizable value less cost to sale, and the difference between the carrying value of the asset and the estimated fair value less costs to sell is charged to income, under “Other operating expenses”.
Write-offs required by local regulations are applied according to the Bank’s policies which cannot exceed one year. However, in some circumstances, the CMF, could allow the Bank to have an additional 18 months term to dispose these assets.
The Bank maintains a loyalty program to provide incentives to its customers, allowing them to purchase goods or services with certain benefits which are granted through credit cards issued by the Bank when they purchase according to the conditions established for each loyalty program.
The Bank has an adequate level of provisions in order comply with its current obligations and to properly reflect the associated expense when providing the benefits.
Non-current assets (or a group holding assets and liabilities for disposal) expected to be recovered mainly through the sale of these items rather than through the continued use, are classified as held for sale. Immediately prior to this classification, assets (or elements of a disposable group) are re-measured in accordance with the Bank’s policies. The assets (or disposal group) are measured at the lower of carrying amount and fair value less cost to sell.
Impairment losses in initial classification of non-current assets held for sale and with subsequent gains and losses are recorded in income. Gains are not recorded over previously recorded losses.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 50 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
Basic earnings per share are determined by dividing the net income attributable to the equity holders of the Bank for the reported period by the weighted average number of shares outstanding during the reported period.
Diluted earnings per share are determined in the same way as basic earnings, but the weighted average number of outstanding shares is adjusted to take into consideration the potential diluting effect of stock options, warrants, and convertible debt.
As of December 31, 2020 and 2019 the Bank did not have any instruments that generated dilution.
The Bank presents cash flows from operating activities, investing activities, and financing activities in a manner that best represent the nature of its activities. The classification of cash flows into the aforementioned categories provides information that allows users to evaluate the impact of the transactions in the financial position of the Bank, as well as over the ending balance of cash and cash equivalents. This information can be also useful when evaluating the relation between those activities.
For the preparation of the cash flow statement, the Bank used the indirect method, in which non-cash transactions, as well as income and expenses associated with cash flows classified as investing or financing activities, are subsequently added/subtracted from the consolidated income for the year before income taxes.
For the preparation of the cash flow statement, the following items are considered:
● | Cash flows: Inflows and outflows of cash and cash equivalents, such as deposits with the Central Bank of Chile, deposits in domestic banks, and deposits in foreign banks. |
● | Operating activities: Principal revenue-producing activities performed by banks and other activities that cannot be classified as investing or financing activities. This section includes, among others, foreign loans obtained, dividends received, available for sale investments and held to maturity. |
● | Investing activities: Correspond to the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents. |
● | Financing activities: Activities that result in changes in the size and composition of the equity and liabilities that are not part of operating activities nor investing activities. |
For cash flow statement purposes, it has been considered as cash and cash equivalents amounts included in “Cash and deposits in Banks” plus the net amount of cash items in process of collection, plus trading investment and available for sale investment instruments highly liquid and minimal value change risk which due date is less than three months since the acquisition date and investments under resale agreements under the same terms.
Includes also investments in fixed income mutual funds which are presented under trading investments in the Consolidated Statement of Financial Position. The amounts for cash and cash equivalents and the corresponding conciliation to the Consolidated Statement of Cash Flows are detailed in Note 5 Cash and Cash Equivalents.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 51 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
The provision for loan losses included under the operating activities section differs from the amount presented in the Consolidated Statement of Income, because for cash flows purposes such amount excludes recoveries of transactions previously charged-off.
The Consolidated Statement of Changes in Equity presents all movements affecting net equity, including those originated by accounting changes or errors recognition. This statement shows a conciliation between opening and ending balances for the year for all items that form part of consolidated equity, grouping transactions based on their nature, according to the following:
● | Adjustments due to accounting changes and errors recognition: Includes changes in equity arising as a consequence of re-expression of amounts in the Consolidated Financial Statements resulting from accounting changes or error recognition. |
● | Net comprehensive income for the year: Includes in an aggregated manner net income for the year and other comprehensive income for the year, as previously indicated. |
● | Other changes in equity: Includes retained earnings distributions, equity increases, provision for mandatory dividends, dividends paid, among other increases or decreases in consolidated equity. |
This information is presented in two statements: The Consolidated Statement of Other Comprehensive Income and the Consolidated Statement of Changes in Equity.
In the Consolidated Statement of Other Comprehensive Income are presented income and expenses generated by the Bank as a consequence of its regular activities during the year, clearly identifying those recorded in profit and loss from those recorded in net equity. Due to this, in this statement the following is shown:
● | Income for the year. |
● | Net amount of income and expenses recorded in equity as “Valuation accounts”. |
● | Deferred income taxes originated by transactions described above, except for those amounts related to exchange differences from foreign net investments. |
Total amount of consolidated income and expenses recorded, calculated as the sum of the items listed above, presenting in those attributable equity holders of the Bank from non-controlling interest.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 52 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
hh)New accounting pronouncements
New accounting pronouncements introduced by CMF
1) | Circular No. 2,243 December 20, 2019, Compendium of Accounting Standards for Banks, Updated instructions and Circular No. 2,249 issued on April 20, 2020, amends Chapter E, postpones its first application. |
As a result of various changes introduced by the International Accounting Standards Board to International Financial Reporting Standards (IFRS) in recent years, particularly to IFRS 9 “Financial instruments”, IFRS 15 “Revenue from contracts with customers” and IFRS 16 “Leases”, and as a consequence of a review of the current limitations on the application of these standards on a local basis, the CMF has decided to update the instructions in the Compendium of Accounting Standards for Banks, "CASB", in full.
All changes aim for a greater convergence to IFRS, as well as to improve financial reporting, to contribute to the financial stability and transparency of the banking system.
From the modifications mentioned before and the following sections are updated as follows:
● | Chapter A-1 Application of accounting criteria |
In this chapter, which deals with the application of accounting standards in the context of the legal framework applicable to banks. In addition, it emphasizes the responsibility of banks to verify the use of updated versions of IFRS
● | Chapter A-2 Limitations or clarifications on the use of general standards |
The limitations and clarifications for the application of IFRS are adjusted with the aim to move towards greater consistency with IFRS. The main changes are as follows:
- | The exception that existed until now for the application of IFRS 9, which replaced IAS 39, is eliminated, with exception of impairment sections and some particular limitations. |
- | The restriction for assets or liabilities to be recognized at fair value is eliminated, and all categories of financial assets and liabilities established by IFRS 9 are permitted. |
- | As a result of the adoption of IFRS 9, the classification of trading and investment instruments as instructed on IAS 39 are eliminated. Therefore, financial assets and liabilities will be classified and measured in accordance with the categories established by IFRS 9: "Financial assets for trading at fair value through profit and loss", "Financial assets not for trading compulsorily measured at fair value through profit and loss", "Financial assets designated at fair value through profit and loss", "Financial assets at fair value through other comprehensive income" and "Financial assets at amortized cost". |
- | In regards to the requirement on valuations of goodwill and other intangibles, it is established that the independent reports that support the recognized amount must explicitly consider the provisions of IAS 36 that are applicable and must be issued under the attestation standards adopted by the Chilean Association of Accountants. |
- | In connection with the preparation of the financial statements, the exception from the obligation to disclose results and other comprehensive income with their respective notes for the quarterly period, together with the cumulative periods already disclosed under IAS 34, are eliminated. |
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 53 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
- | It is specified that valuation according to the cost methodology, less accumulated depreciation, amortization and impairment, should be applied after initial recognition, both for fixed assets, intangible assets, investment property and assets with the right to use property under lease. |
- | Regarding financial leasing operations, where the bank acts as lessor, it is specified the Commission's instructions prevail over IFRS 16, which must be applied in all aspects that do not conflict with them |
● | Chapter B-2 Provisions for credit risk |
The criterion for the suspension of recognition of interest income and adjustments on an accrual basis is amended and will now apply to all loans that are more than 90 days past due, regardless the loan is subject to individual or group assessment.
● | Chapters C-1 and C-2 Impaired loans and write-offs |
The changes made to the CAS include the modification to the current Statement of Financial Position and the Statement of Income for the year, which are consistent with the adoption of IFRS 9 instead of IAS 39. In addition, the new “Statement of Other Comprehensive Income” and the “Statement of Changes in Equity” are included. Likewise, the financing and investment activities in the Cash Flows Statement are defined, incorporating more precise guidelines for the preparation of these.
In addition, more detail and disaggregation of the information contained in some notes to the financial statements are required, in order to comply with IFRS 7, along with specifying other considerations particular to other IFRSs that must be observed for the preparation of the notes. To this end, special emphasis is placed on the disclosure of information relating to impairment, considering the impairment model for placements contained in Chapters B-1, B-2 and B-3 of the same CAS. In accordance with these changes, Chapter C-1 containing models for the presentation of the notes on cash and cash equivalents, financial assets at amortized cost, contingent credits, credit losses, related party disclosures and regulatory capital requirements are modified.
Among the other aspects considered in updating chapter C-1, is the requirement for a financial report prepared in accordance with "IFRS Practice Statement 1 - Management Commentary", which must accompany the interim and annual financial statements.
With regard to the interim financial statements, Chapter C-2 contains references to their composition, presentation of comparative quarterly figures, their notes, the requirement for a financial report mentioned above and the corresponding publications, in accordance with Article 16 of the General Banking Law.
● | Chapter C-3 Contingent credits |
The accounting plan for the standardized monthly financial statements contained in Chapter C-3 of the CAS is modified, both in the coding of the accounts and in their description, so that the information detailed therein is consistent with the Statement of Financial Position, the Statement of Income and the Statement of Other Comprehensive Income.
● | Other matching adjustments |
In addition to the adjustments relating to the references to the new supervising entity, references to IFRS and some items of financial information that have been modified as mentioned above and which are present in various chapters of the CAS, where also updated.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 54 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
● | Chapter E- Transitional provisions |
The new CAS provisions will be applicable as of January 1, 2022, with a transition date as of January 1, 2021, for purposes of the comparative financial statements to be issued as of March 31, 2022.
Any impact from the transition to the new generally accepted principles and criteria set forth by the Commission at the transition date must be recorded against the equity item "Other non-earnings reserves" (item 32000.01.00), as of January 1, 2022.
Notwithstanding the above, the change of criteria for the suspension of the recognition of interest income and inflation-indexation adjustments on an accrual basis as established in Chapter B-2, must be adopted no later than January 1, 2022.
In accordance with the above, Chapter E of the CAS is updated, which contains its transitional provisions.
As of the issuance of these Consolidated Financial Statements, Management has evaluated the effects of the modification introduced to the CASB and is currently in the process of implementing the requierements in order to comply with the New Compendium of Accounting Standards for Banks.
2) | Circular No. 2,247 issued on March 25, 2020 modified the Updated Standards Compilation extending the term for the disposal of assets received in lieu of payment. |
The CMF issued this circular as part of its work performed in order to face the Covid-19 virus outbreak due to the potential effects that it may have in the financial markets and entities under its supervision.
The modification extended the period for disposing an asset received in lieu of payment to 18 months. As such a transitional provision has been included on number 6.5 of Chapter 10-1 of the Updated Compilation of Standards, replacing in its first paragraph from “March 1, 2008 to December 31, 2010” to "from March 1, 2019 to September 30, 2020."
Additionally, write-offs may be deferred on a proportional basis to the number of months between the date the asset was received or awarded and that set by the bank for disposal.
The adoption of this new circular had an impact on the presentation of the Consolidated Financial Statements as of December 31, 2020, through the implementation of a transitional accounting policy that decreased the write-offs of the assets received in lieu of payment, to benefit from the extension in the term for disposal and the quotation of the write-offs through the additional term.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 55 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
3) | Circular No. 2,248/ No. 2,250/ No. 2,265 Updated Compilation of Standards. Chapter 12-1 Equity for legal and regulatory purposes. |
Circular No. 2,248 issued on March 30, 2020, includes instructions in chapter 12-1 of the Updated Compilation of Standards on treatment of constituted guarantees related to derivatives celebrated under a compensation agreements with the Central Bank of Chile. The Commission decided to include instructions on this matter, for the purposes of calculating assets for capital adequacy.
Circular No. 2,250 released on April 20, 2020, it was issued in order to address the circumstances faced by financial markets as a result of the health crisis caused by the Covid-19 pandemic, and in accordance with the regulations issued by the Government. The circular incorporated an extraordinary provision that allows to use part of the voluntary provisions in the determination of the effective equity, within the limit of 1.25% established in the RAN 12-1, an amount of up to 15% of the guarantees that cover the risk-weighted assets, the guarantees that correspond to guarantees or re-guarantees granted by the Chilean Treasury, CORFO and FOGAPE, which cover the credits granted by the banks.
Circular No. 2,265 issued on August 21, 2020, modifies the ponderation of the risk-weight assets that are guaranteed by the Chilean Treasury, CORFO and FOGAPE, in accordance with the provision of Law No. 21,130, which sets out the treatment of risk-weight assets, as a result of the health crisis caused by the Covid-19 pandemic, and considering in particular the strengthening of the State's guarantor role through FOGAPE and other support mechanisms.
Modifications introduced by this circular are to be implemented as of its issuance date.
The adoption of this standard did not have an impact on the accounting information presented in the Consolidated Financial Statements as of December 31, 2020, however it presents a modification to the measurement of effective equity presented in Note 36 e) Capital requirements.
4) | Circular No. 2,252/ No. 2,256/ No. 2,260/ No. 2,264/ No. 2,278 regarding aspects related to Covid-19 Guarantee Lines of the Guarantee Fund for Small and Medium-sized Entrepreneurs (Covid-19 FOGAPE). |
Circular No. 2,252 issued on April 30, 2020, provides instructions related to the credits processed through the use of the Covid-19 Guarantee Lines of the Guarantee Fund for Small and Medium-Sized Entrepreneurs (FOGAPE), in terms of provisions, procedures and information to be sent to the Commission.
The Bank must ensure to comply with the rules established in the FOGAPE Regulations, as well as to evaluate clients financial and credit condition, thus being ultimately responsible on deciding to grant the credit to its client, which has to also be in accordance with the criteria established in its internal credit risk policies.
In relation to credit risk management of the commercial loan portfolio, the Commission by means of the circular established certain guidelines regarding determining provisions for credit risk, both with regard to secured transactions by the Covid-19 FOGAPE, as well as for the other debtor credits that are affected by the conditions defined in the FOGAPE Regulation. In addition, it modifies the Information System Manual by incorporating three new files to be sent to the Commission. Requirement set out on the Circular are to be implemented as of the date of its issuance and are in force until October 31, 2021.
Circular No. 2,256 issued on May 22, 2020, provides modifications to the Information System Manual establishing details and modifications to the three regulatory files incorporated by circular No. 2,252 referring to operations related to credits processed through the use of the guarantee provided by Covid-19 FOGAPE.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 56 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
Circular No. 2,260 issued on June 26, 2020, introduces adjustments and clarifications incorporated into the FOGAPE Regulations. Which includes clarification to characteristics to categorize companies, instructions to financial institutions with access to financing from the Central Bank, and limitations on the guarantee granted by the fund.
Circular No. 2,264 issued on July 21, 2020, introduces adjustments to Chapter C-3 of the CAS and instructions related to C50 report on “Operations associated with a FOGAPE Covid-19 guarantee”, which requires to present information related to percentage of the deductible associated with financing with FOGAPE Covid-19 guarantee, as well as the provisions established to cover their effect on the expected losses. The provisions of the Circular are as of July 2020.
Circular N°2.278 emitida con fecha 2 de noviembre de 2020, el Reglamento de administración del fondo de garantía para pequeños empresarios en lo relativo a la obligación que tiene el Fisco de restituir los recursos que hubiere retirado, cuando se supere el límite establecido por la Comisión, respecto de la relación entre las obligaciones garantizadas y el patrimonio del Fondo. La vigencia de la Circular es a contar de la fecha de su emisión.
During the year ended December 31, 2020, the Bank granted credits using the Covid-19 Guarantee line of the Guarantee Fund for Small and Medium-sized Entrepreneurs (FOGAPE), which were accounted for according to the accounting practices adopted by the Bank and informed according to the instructions of the aforementioned circumstances, however the adoption of these circulars did not have an impact on these Consolidated Financial Statements.
5) | Circular No. 2,254 issued on May 8, 2020 - Reserve in foreign currency, transitory provision. |
In accordance with the resolution of the Central Bank of Chile, through Council Agreement No. 2294E-01200318, imparted a transitory modification to the regulation related to reserve requirements in foreign currency contained in Chapter 3.1 of the Compendium of Monetary and Financial Regulations, the Commission updates Chapter 4-1 of the Updated Compilation of Standards for Banks, replacing the transitory provision with the following: “Notwithstanding the provisions of numeral 8.2, in accordance with Agreement N ° 2294E-01- 200318 of the Board of the Central Bank of Chile, and in the terms provided in Bank Circular Letter No. 640 of April 8, 2020 of that issuing institution, from the reserve period that begins on March 9, 2020 and until the end of the day September 8, 2020, the reserve in foreign currency may also be established in euros or Japanese yen, all of which are measured by their equivalent in dollars.
As aforementioned on the agreement, excess reserve requirements in national currency may be used to cover reserve requirements in any foreign currency, converted by their equivalent in dollars.
The Bank implemented this measure in the reserve requirement process, considering the effects of the new regulations, for which the adoption of the circular had no impact on these Consolidated Financial Statements.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 57 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
6) | Circular No. 2,257 issued on May 22, 2020. Modifies chapter B-1 of the CAS. Allowing the recognition of the excess of mortgage guarantee for the home in the standard model of provisions of the group commercial portfolio. |
Chapter B-1 of the CAS establishes standard models to determine provisions for credit risk of the mortgage portfolio for housing and commercial group portfolio. Currently, these methodologies do not allow the use of mortgage guarantees associated with home loans in determining the debt guarantee ratio and in the determination of the provisions in the group commercial portfolio.
As a result of the health crisis caused by Covid-19, the effects it has had on the economy and the credit risk in banking, the Commission reviewed this restriction, temporarily and until the aforementioned new legal framework that includes the Basel III guidelines, allowing the recognition of the excess of mortgage guarantee associated with housing loans in the standard model of provisions of the group commercial portfolio in Chapter B-1, determined from the application of a haircut of 20%.
Modifications introduced by this circular are to be implemented as of its issuance date.
As of the issuance of these Consolidated Financial Statements, the modifications intruced by the circular are of a transitory nature to address the effects of the health crisis caused by the Covid-19 pandemic, thus Management decided to not to implement the modifications. However, the adoption of the aforementioned circular will be evaluated during 2021.
7) | Circular No. 2.261/ No. 2.262/ No. 2.263 on July 6, 2020 these circulars were issued related to the of information security and cyber security management. |
Circular No. 2,261 issued on July 6, 2020, establishes the new Chapter 20-10 “Information security and cybersecurity management” into the Updated Compilation of Standards, which incorporates the minimum requirements that banks must comply in order to establish practices for proper risk management of information security and cybersecurity.
Circular No. 2,262 issued on July 6, 2020, extends to business support companies, bank subsidiaries and real estate companies referred on the General Banking Law, the new provisions on information security and cybersecurity management, incorporated in Chapter 20-10 of its Updated Compilation of Standards.
Circular No. 2,263 establishes the minimum requirements that non-bank payment card issuing companies and payment card operating companies must observe, both supervised by the Commission, must meet the aim of the chapter is to establish practices for an adequate information security and cybersecurity management. These requirement are contained in the new Chapter 20-10 of the Updated Compilation of Standards for banks, which by its nature is fully applicable to the aforementioned card issuers and operators, as well as, consistent with the provisions of the Central Bank of Chile on the content of the Risk Management and Control Policies that such entities must develop and implement.
Chapter 20-10 of the Updated Compilation of Standards contains provisions, based on good practices, that should be considered as minimum requirements to be met by entities on security information and cybersecurity management. Information security shall be understood as the set of actions for the preservation of the confidentiality, integrity and availability of the entity's information.
Cybersecurity includes the set of actions for the protection of information present in cyberspace and the infrastructure that supports it, which aims to avoid or mitigate the adverse effects of its inherent risks and threats, which may affect the information security and business continuity of the institution.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 58 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
The instructions established in these circulars will be in force as of December 1, 2020.
During the year ended December 31, 2020, the Bank implemented these circulars regarding information security and cybersecurity management, as a result new processes have been put in place in order to manage the risks that the circulars intends to address, in note 36 d) Cybersecurity futher information on the implementation has been disclosed.
8) | Circular No 2,266 issued on August 25, 2020 – Information on student loans for higher education. |
In accordance with provisions of Law No. 21,214, on protection of private information, prohibits to report debts information contracted for educational purposes, Chapter 20-6 of the Updated Compilation of Standards was modified, prohibiting to inform loans contracted for education purposes on the Commercial Information Bulletin of the Chilean Chamber of Commerce.
The instructions established in this Circular came into force as of the date of its issuance.
As of August 25, 2020, the Bank implemented this circular, reporting operations in accordance with its requirements, its adoption did not have an impact on these Consolidated Financial Statements.
9) | Circular No. 2,267 issued on August 28, 2020 – Bank Factoring Operations. |
The circular was issued with introduced new instructions regarding the discounting of invoices by banks and subsidiaries on their factoring business. Before the issuance of this circular, the assignments of credits originated in the sale of goods or provision of non-financial services, were limited to be carried out by the natural or legal persons with whom the factoring operation is agreed, or on behalf of whose buyers the payment commitment is assumed. The modifications included in the chapter 8-38 of the Updated Compilation of Standards allow the discount of invoices to be carried out by third parties other than those of their originators, given the safeguards provided by Law No. 19,983 in force today. Additionally, a title referring to "Accounting Standards" is included, which indicates that factoring operations should be treated as commercial placements, based on Chapter B-1 of the Compendium of Accounting Standards, both with regard to provisions for credit risk, as by their classification in the periodic information models.
The instructions established in this Circular came into force as of the date of its issuance.
As of the date of issuance of these Consolidated Financial Statements, Management has not implemented modifications intruced by the Circular, however its adoption will be evaluated during the year 2021
10) | Tax Reform - Promulgation of the Law. |
On March 1, 2020, the "Tax Reform", Law No. 21,120, which modernizes the tax legislation, came into force. The reform modified several tax regulations, focused mainly on tax compliance issues, relations with the Internal Revenue Service for reviewing processes, and various adjustments that mainly impacted small and medium-sized companies. For the Bank, there are no substantial modifications regarding the current process to determine its taxes, and some minor modifications have been identified, such as the application of VAT to imports of standard software, the surcharge on real estate contributions and the progressive elimination of the PPUA.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 59 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 1 - General Information and Summary of Significant Accounting Policies, continued
11) | Legislation issued as a response to the pandemic generated by Covid-19. |
In response to the effects that the Covid-19 pandemic has had and is expected to have on the Chilean economy, the Government has taken certain economic measures, issuing new regulations that mainly benefit customers (for example, the Stam Tax exemption for operations carried out between April and September 2020, the possibility of extending VAT payments, etc.), but no impacts of any kind are visualized for the Bank.
On April 29, 2020, the Internal Revenue Service instructed through Circular No. 32 the tax treatment of expenses and donations associated with Covid-19. Broadly speaking, it points out that both money and goods, of any nature or kind, can be donated to the extent that they allow satisfying the basic needs of food, shelter, health, hygiene, decoration, removal of debris, education, communication and transportation of the inhabitants of the affected areas. To the extent that they meet a series of requirements indicated in the circular, they may be deducted as expenses for tax purposes.
12) | Circulars issued related to the implementation process for Basel III adoption. |
On January 12, 2019, Law No. 21,130 was issued updating the current banking legislation in order to implement the practices promoted by the Basel III agreement, introducing modifications to the General Banking Law (“GBL”).
In order to implement the new standard, the CMF began an implementation process by incorporating amendments and new chapters to the Compilation of Accounting Standards (“CAS”), the circulars issued with the amendments and new standards to date are detailed below:
Circular No. 2,270 issued on September 11, 2020, introduced Chapter 21-13 of the CAS "Evaluation capital adequacy for banks" incorporated provisions on capital management that banks must perform to ensure an adequate capital safeguard, in accordance with its risks, in line GBL. In addition, CAS 21-13 introduces the criteria that will be considered by the CMF to evaluate the capital adecuacy of the bank, where by it may require additional capital to the bank as described on article 66 of the GBL.
Additionally, updates Chapter 1-13 of the CAS separating the evaluation and qualification of the management of resources abroad, which as of was carried out as a whole. In regard to evaluation of "Financial risk management and treasury operations", management of market risk is included (general and specific interest rates, general and specific stock prices, raw materials and foreign currencies) and market risks are incorporated as part of the evaluation of the banking book (interest rates, readjustment and intermediation spread); in addition to parameters for the management of negotiation tables and their structure.
Circular No. 2,272 issued on September 25, 2020, incorporates the new Chapter 21-12 "Additional Basic Capital " to the CAS, which establishes the procedures to determin, implement and supervise of the additional capital requirements for banks established in Chile. Law No. 21, in accordance with the principles of the Basel Committee on Banking Supervision (Basel III). The provision requires to constitute capital buffers additional to minimum capital set in the GBL and they are divided into 2 types: conservation and counter-cyclical buffers.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 60 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
Circular No. 2,273 issued on October 5, 2020 incorporates Chapter 21-30 into the CAS, introduces the adjustments and criteria nequired to determine the relationship between basic capital and total assets (leverage). In addition, it incorporates the current limits set for the ratio between assets and capital, which cannot be less than 3% between basic capital and total assets. Although the current provisions of the GBL do not innovate on this requirement, they do contemplate the possibility of increasing it to 5% for banks that are classified as systemically important, in line with Basel III guidelines.
The instructions established in this Circular became effective on December 1, 2020.
Circular No. 2,274 issued on October 8, 2020, introduces the new Chapter 21-1 of the CAS "Legal and regulatory equity" The objective of the new chapter is to define the different components and levels that comprise banks equity, according to their ability to absorb losses, including adjustments or exclusions of assets or liabilities items that in those same terms should be made, in accordance with the provisions of article 66 of the GBL, and in line with the definitions of Pillar I of Basel III.
The circular is effective as of December 1, 2020, however, it contemplates a transition period that extend until December 1, 2025.
Circular No. 2,276 issued on November 2, 2020, incorporates into the CAS the new Chapter 21-11 "Criteria and methodology for banks or group of banks rated as systemically important". The chapter sets out the criteria and methodology to determine whether a bank or group of banks can be rated as systemically important. The assesment is based on determining a ratio that represents the systemic importance of a bank, constructed from elements that reflects its local impact of its financial deterioration or eventual insolvency (externality). Based on the ratios, an additional capital may be required
The circular is effective as of December 1, 2020, however, the first resolution that will rate the quality of systemic importance of banks will be issued during March 2021.
Circular No. 2,279 issued on November 24, 2020, incorporates the new Chapters 21-2 and 21-3 of the CAS, which included the following information:
Chapter 21-2 "Level 1 Additional Capital Instruments for the constitution of effective equity: preferred shares and bonds without a fixed maturity term of article 55 bis of the GBL ". Its objective is to define the minimum requirements and conditions that the issuance of preferred shares and bonds with no fixed maturity term of banking companies must meet so that they can be computed as additional Common Equity Tier 1 (CET1) capital and, therefore, as part of the effective equity of the banks.
Chapter 21-3 "Tier 2 capital instruments for the constitution of effective equity: subordinated bonds of article 55 of the GBL ", the chapter aims to define the minimum requirements and conditions that subordinated bond and subordinated convertible bonds, may compute as Tier 2 capital.
The applicability of these standards is as of December 1, 2020.
Circular No. 2,280 issued on November 30, 2020, incorporated the new Chapter 21-8 to the CAS “Standard methodology for assets weighted by operational risk”. establishes the methodology that banks must use to determine the assets weighted by operational risk (hereinafter APRO). The standard considers assets weighted by operational risk from two components: business indicator, prepared with information from the financial statements of each bank, and adjustment factor prepared from the operational losses experienced in the last 10 years.
The circular is effective as of December 1, 2020. However, it was established that until December 1, 2021, assets weighted by operational risk to be reported equal to 0.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 61 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
Circular No. 2,281 issued on December 1, 2020, incorporates the new Chapter 21-6 to the CAS “Determination of assets weighted by credit risk”. The new Chapter establishes the methods that banks must consider to determine their assets weighted by credit risk (hereinafter, APRC), stablishing that banks may either use the proposed standard model or an internal model. The standard method is considered more sensitive to risk, since it has categories that depend on the type of counterparty and different risk elements, together with the possibility to reduce the ponderation used by type of asset, when credit risk mitigators are considered, as may be the case of compensation agreements, guarantees and bonds, financial guarantees or balance sheet compensation.
Chapter 21-6 contemplates a transitory provision, which establishes that the determinations of assets weighted by credit risk may be carried out in accordance with the current provisions of Title II of Chapter 12-1 of the CAS until November 30, 2021; The new methodology must be applied as of December 1, 2021.
Circular No. 2,282 issued on December 1, 2020, introduces the new chapter 21-7 to the CAS "Determination of assets weighted by market risk", introduces a standard methodology to determine assets weighted by market risk . The model incorporated for the weighting of the market risk applies to the financial instruments classified in the trading book and has a general market component, associated with the reference interest rates, foreign currencies, commodities and stock prices; and a specific component, associated with aspects of the issuer, such as credit spread and default. Additionally, the risk of foreign currency and commodities is considered for the positions in the banking book.
The application of this circular is effective as of December 1, 2020, a transitional provision is included in order to report assets weighted by market risk equal to zero until December 1, 2021.
Circular No. 2,283 issued on December 1, 2020, incorporates the new chapter 21-20 into the CAS, which incoporates requirements to promote market discipline and financial transparency through the disclosure of significant and timely information from the entities towards the market (pillar 3), the established conditions operate as a complement to the requirements of Pillar 1 and 2 in line with the implementation of each of these standards, in addition to being in accordance with the provisions of the GBL. The chapter requires banking institutions to publish an independent document, referring exclusively to pillar 3.
The applicability of the circular is as of December 1, 2022, it must be published for the first time in 2023 with information for the January-March quarter of that year.
Circular No. 2,284 issued on December 31, 2020, requires to report file R11 "Rating of banks of systemic importance" in order to present the information required on Chapter 21-11 of the CAS for Banks, on "Criteria and methodology for banks or group of banks rated as systemically important"
The circular requiered banks to inform the monthly reports corresponding to the year 2020 (12 months) on February 1, 2021 through the SSI system (Secure Sending of Information), in order to identify the banks of systemic importance. Then on, within 9 business days after months end, all banks must submit the report on a monthly basis to the CMF, starting with the information referred to.January 2021. On January 26, 2021, the CMF issued Circular No. 2,285 that extended the initial deadline from February 1 to March 1, 2021 in order to send the reports required by the Circular No. 2,284.
As of the date of issuance of these Consolidated Financial Statements, the Administration has completed the initial diagnosis for the implementation of Basel III, based on this, it has prepared an implementation plan which is in the process of execution in order to comply with the dates and requirements mentioned above.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 62 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
New accounting pronouncements introduced by IASB
1)Standards and Interpretations that have been established in these Consolidated Financial Statements
1.1)Conceptual framework
In March 2018, the International Accounting Standards Board (the Board) issued a complete set of concepts for financial reporting, the revised Conceptual Framework for Financial Information (Conceptual Framework), replacing the previous version of the Conceptual Framework issued in 2010.
The revised Conceptual Framework has an effective date from January 1, 2020.
The amendment introduces new definitions and includes guidance on certain considerations. Given the nature of the amendment, it will not have a significant impact on the Consolidated Financial Statements.
1.2)IFRS 3 "Business Combinations" - Business definition
In October 2018, the International Accounting Standards Board (IASB) issued the Definition of a Business to make it easier for companies to decide whether the activities and assets they acquire are a business or simply a group of assets. Reduce the limitations of a company to the center of the definition of products in 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. The amendment to IFRS 3 has an effective date of January 1, 2020.
The new limitations introduced by the amendment have not had specific difficulties in the Consolidated Financial Statements.
1.3)Amendments to IAS 1 "Presentation of financial statements" and IAS 8 "Accounting policies, policy changes and accounting errors"
On October 31, 2018, the IASB published “Definition of material (amendments to IAS 1 and IAS 8)” to clarify the definition of “material” and align the definition used in the Conceptual Framework and similar standards.
The changes relate to a new revised definition of “material” that is cited following the final amendments: "Information is material if its omission, misstatement or concealment could reasonably be expected to influence the decisions that primary users of general purpose financial statements make on the basis of those 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 or after January 1, 2020. Early application is allowed.
The nature of the amendment includes standardizing the definition of "material", the adoption of which will not have a significant impact on the Consolidated Financial Statements.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 63 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
1.4) Criteria to IFRS 9, IAS 39 and IFRS 7 “Reform of the reference interest rate”
Published in September 2019, it is being modified providing certain simplifications in relation to the reform of reference interest Note 1 - General Information and Summary of Significant Accounting Policies, continued rates. The simplifications relate to hedge accounting and have 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 in income.
The amendments apply retrospectively to annual periods beginning on or after 1 January 2020.
The nature of the amendment includes simplifying requirements relating to interest rate benchmark reform, the adoption of which will not have a significant impact on the Consolidated Financial Statements.
1.5) Amendment to IFRS 16 regarding Covid-19-related rent concesión
On May 28, 2020, The International Accounting Standards Board (IASB) has published 'Covid-19-Related Rent Concessions (Amendment to IFRS 16)' amending the standard to provide lessees with an exemption from assessing whether a Covid-19-related rent concession is a lease modification. Concurrently, the IASB also published a proposed Taxonomy IFRS 2020 Update to reflect this amendment.
When there is a change in lease payments, the accounting consequences will depend on whether that change meets the definition of a lease modification, which IFRS 16 Leases defines as “a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease (for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term)”.
The changes in Covid-19-Related Rent Concessions (Amendment to IFRS 16) amend IFRS 16 to
a) | provide lessees with an exemption from assessing whether a Covid-19-related rent concession is a lease modification; |
b) | require lessees that apply the exemption to account for Covid-19-related rent concessions as if they were not lease modifications; |
c) | require lessees that apply the exemption to disclose that fact; and |
d) | require lessees to apply the exemption retrospectively in accordance with IAS 8, but not require them to restate prior period figures |
The exemption applies to those reductions in payments as a result of the Covid-19, due on or before June 30, 2021 in order to capture the lease concessions granted as of June and with a duration of 12 months.
The amendment is effective for annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted, including in financial statements not yet authorized for issue on 28 May 2020. The amendment is also available for interim reports.
The IFRS 2020 Taxonomy includes elements of the IFRS taxonomy to reflect the new disclosure requirements introduced by the amendment, issued in May 2020.
The adoption of the amendment did not have a significant impact on the Consolidated Financial Statements since to date there have been no significant changes on current contracts to make use of this amendment.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 64 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
2) Standards and Interpretations that have been issued but are not yet effective.
2.1)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 its revised version is published, agreeing guidelines on the classification and measures of financial liabilities. On November 19, 2013, see an amendment which includes the new general hedge accounting model. On July 24, 2014, the IASB issued the final version of IFRS 9, which contains the accounting requirements for financial instruments, replacing 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 and non-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 allowed. However, the local regulator has not authorized its application, therefore it has no effect on these Consolidated Financial Statements.
Amendment to IFRS 9 “Financial instruments”
Published on October 17, 2017, this modification allows more assets to be measured at amortized cost in the previous version of IFRS 9, in particular some prepaid financial assets with negative compensation. Qualified assets, which include some loans and debt securities, which would otherwise have been measured at fair value through profit or loss (FVTPL). To qualify at amortized cost, the negative compensation must be a "reasonable compensation for early termination of the contract."
The modifications are effective for annual periods beginning on January 1, 2019.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 65 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
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.
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 change requirements, involves long-term participation. In addition, when applying IFRS 9 to long-term interests, an entity does not take in the measurement of 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 evaluation of the reduction in accordance with IAS 28).
The retrospectively affected amendments sometimes annual that began on or after January 1, 2019. Early application is allowed. The specific transitional provisions specific to the application for the first time of the amendments coincide with that of IFRS 9.
Bank Management analyzed these amendments/new pronouncements in detail and concluded that, in accordance with the provisions of the CAS in numeral 12 of Chapter A-2, Limitations or Precisions on the Use of General Criteria, it indicates that it will not apply this rule in advance, and furthermore it will not be applied while the CMF does not establish it as a standard of obligatory use for all Banks. With the issuance of the New Compendium of Accounting Standards for Banks (CASB), IFRS 9 should be applied only in those sections where the regulator allows it.
2.2) Sale or Contribution of assets between an investor and its Association or Joint Business (amendments to IFRS 10 and IAS 28)
The amendments to IFRS 10 and IAS 28 address situations where there is a sale or contribution of assets between an investor and its associate or joint venture. Specifically, the amendments provide that gains or losses, resulting from the loss of control of a subsidiary that does not contain a business in a transaction with an associate or joint venture, accounted for using the equity method are recognized in the parent's profit or loss only to the extent of the unrelated investors' interests in that associate or joint venture. Similarly, gains or losses resulting from the remeasurement to fair value of investments held in a former subsidiary (which has become an associate or joint venture that is accounted for using the equity method) are recognized in the results of the former parent only to the extent of the unrelated investors' interests in the new associate or joint venture.
The effective date of the amendments was initially from January 1, 2016, however the IASB on December 17, 2015 indefinitely postponed their entry into force.
Management will assess the potential impacts of these amendments, once the new date to be implemented is communicated on these amendments.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 66 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
2.3) Amendment to IAS 1 "Presentation of Financial Statements" - Classification of liabilities as current or non-current
On January 23, 2020, the IASB published the amendment to IAS 1, which addresses the classification of liabilities and clarifies their presentation as current or non-current. This amendment applies as of January 1, 2023 retroactively and its early application is permitted.
Among the modifications are the following:
• An entity shall classify a liability as current when it does not have a right to postpone its liquidation for at least twelve months following the date of the reporting period. The amendment removes the factor of "unconditionality" from this right.
• The right to defer settlement of the liability must have substance and must exist at the end of the reporting period. If this right is subject to the entity that covers any condition, such right only exists if it is effectively fulfilled by fulfilling these conditions at the end of the reporting period and can be classified as non-current. The entity must comply with these conditions, although the counterparty does not carry out a testing of these.
• The classification of the liability will not be affected by the probability that the entity exercises its right to defer its settlement. Therefore, if the liability meets the non-current condition specified in the standard, it will be classified as non-current, even if the entity plans to liquidate it in less than 12 months from the period in which it is reported or between the periods in which it is reported. And the one that is reported to the regulator. If any of the above cases occurs, it must be disclosed in the Financial Statements to understand the impact of the entity's financial position.
• The liability is understood as liquid when the entity extinguishes the obligation to control its effective counterparty, other economic resources, or its own equity instruments.
The adoption of this amendment will not have a significant impact on the Consolidated Financial Statements. The Bank must present its financial statements in accordance with the regulatory framework set out on section II.3 of Chapter C-1, Financial Statements annual, of the CAS, which presents the Statement of Financial Situation that the Bank must use, therefore, this amendment will not affect the preparation of the factors affected by the entity.
2.4) Amendments to IFRS 3 to update a reference to the Conceptual Framework
On May 14, 2020, the IASB published, amendments to IFRS 3 'Business Combinations' that update an outdated reference in IFRS 3 without significantly changing its requirements.
The changes in Reference to the Conceptual Framework (Amendments to IFRS 3):
- update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework;
- add to IFRS 3 a requirement that, for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed in a business combination; and
- add to IFRS 3 an explicit statement that an acquirer does not recognize contingent assets acquired in a business combination.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 67 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
The amendments published are effective for annual periods beginning on or after 1 January 2022. Early application is permitted if an entity also applies all other updated references (published together with the updated Conceptual Framework) at the same time or earlier.
The adoption of the amendment will not have a significant impact on the Consolidated Financial Statements.
2.5) Amendments to IAS 16 'Property, Plant and Equipment — Proceeds before Intended Use
On May 14, 2020, the IASB published amendments to IAS 16)' regarding proceeds from selling items produced while bringing an asset into the location and condition necessary for it to be capable of operating in the manner intended by management.
Amends the standard to prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss.
The amendments is effective for annual periods beginning on or after 1 January 2022. Early application is permitted.
The Bank's Management is currently assessing the potential impact of the adoption of these amendments in its Consolidated Financial Statements.
2.6) Amendments to IAS 37 'Onerous Contracts — Cost of Fulfilling a Contract
On May 14, 2020, the IASB published 'Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37)' amending the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous.
The changes in Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labor, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).
The amendments published today are effective for annual periods beginning on or after 1 January 2022. Early application is permitted.
Bank's Management is currently assessing the potential impact of the adoption of these amendments in its Consolidated Financial Statements.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 68 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 1 - General Information and Summary of Significant Accounting Policies, continued
2.7) Annual improvements to IFRS standards 2018–2020
On May 14, 2020, the IASB published Annual Improvements to IFRS Standards 2018–2020 makes amendments to the following standards:
IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopter. The amendment permits a subsidiary that applies paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by its parent, based on the parent’s date of transition to IFRS.
IFRS 9 Financial Instruments - Fees in the ‘10 per cent’ test for derecognition of financial liabilities. The amendment clarifies which fees an entity includes when it applies the ‘10 per cent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognize a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
IFRS 16 Leases Lease incentives. The amendment to Illustrative Example 13 accompanying IFRS 16 removes from the example the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.
IAS 41 Agriculture. Taxation in fair value measurements. The amendment removes the requirement in paragraph 22 of IAS 41 for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique. This will ensure consistency with the requirements in IFRS 13.
The amendments to IFRS 1, IFRS 9, and IAS 41 published today are all effective for annual periods beginning on or after 1 January 2022. Early application is permitted.
The amendment to IFRS 16 only regards an illustrative example, so no effective date is stated.
The Bank's Management is currently assessing the potential impact of the adoption of these amendments in its Consolidated Financial Statements.
2.8) Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
The amendments in Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) introduce a practical expedient for modifications required by the reform, clarify that hedge accounting is not discontinued solely because of the IBOR reform, and introduce disclosures that allow users to understand the nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks as well as the entity’s progress in transitioning from IBORs to alternative benchmark rates, and how the entity is managing this transition. Currently, the IASB updated the Taxonomy as of September 2, 2020.
The amendments are effective for annual periods beginning on or after 1 January 2021 and are to be applied retrospectively.
As of the date of issuance of these Consolidated Financial Statements, Management has decided to incorporate disclosures required by the amendment. Information regarding the exposure and the transition process to address the interest rate benchmark reform is disclosed in Note 36.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 69 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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There are no significant accounting changes in these Consolidated Financial Statements.
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 70 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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As of December 31, 2020, the following significant events have influenced the operations of the Bank and its subsidiaries or these Consolidated Financial Statements:
ITAÚ CORPBANCA |
Chief Executive Officer appointment
On January 9, 2020 it was communicated the decision made between Mr. Manuel Olivares Rossetti, the Board of Directors, and the main shareholders, to allow Mr. Olivares to serve as Chief Executive Officer of Itaú Corpbanca until January 29, 2020.
The Board also agreed to appoint Mr. Gabriel Moura as the new Chief Executive Officer of Itaú Corpbanca, starting on January 30, 2020.
Investment increase in Nexus S.A.
On January 22, 2020 Itaú Corpbanca acquired 79,577 shares of Nexus S.A. corresponding to 1.9148% of the total equity of this company, for an approximated amount of MCh$338. With this transaction the Bank’s participation increased to 14.8148%.
Annual Ordinary Shareholders’ Meeting Agreements
At the Ordinary Shareholders’ Meeting of Itaú Corpbanca, held on March 18, 2020, it was approved to distribute a dividend equivalent to 100% of the net income attributable to equity holders of the Bank for the year ended December 31, 2019, which represents an aggregate amount equal to MCh$127,065 payable to the shareholders of the Bank entitled to receive dividends in a proportion of $0.2479770771 per share.
Changes in the Board of Directors
In the ordinary session held on April 29, 2020, the Board of Directors of Itaú Corpbanca was informed and resolved to accept the resignation of the director Mr. Andrés Bucher Cepeda, effective as of the same date. On this matter, the Board of Directors designated Mr. Rogério Carvalho Braga as his replacement, who will exercise his duties until the next Ordinary General Shareholders' Meeting, in which the definitive director will be appointed.
ITAÚ CORPBANCA COLOMBIA S.A.
Sale of the investment in Itaú Casa de Valores S.A.
On January 23, 2020 Itaú Comisionista de Bolsa Colombia S.A., a subsidiary of Itaú Corpbanca Colombia S.A., finalized the process of selling the one hundred percent (100%) of its investment held in Itaú Casa de Valores S.A., a public limited company, domiciled in Panama, with the company LVM Holdings SpA, a company domiciled in Chile, was completed.
Changes in the Board of Directors
On January 27, 2020, the Shareholders' Meeting of Itaú Corpbanca Colombia S.A. elected the following members of the Board of Directors:
Gabriel Amado de Moura
Cristián Toro Cañas
Juan Echeverría González
Mónica Aparicio Smith
Roberto Brigard Holguín
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Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 71 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
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Note 3 - Significant events, continued
Proposal for an irrevocable commitment for 2020 profits
On April 20, 2020, during the Extraordinary Shareholders Meeting was approved the commitment, in accordance with the capital requirements made to credit institutions in Colombia, to capitalize 100% of the profits for the 2020 fiscal year in order to increase the legal reserve of Itaú Corpbanca Colombia S.A., once the appropriations that in application of Colombian regulations must be made prior to this legal reserve have been made, thus complying with articles 451 to 455 of the Commercial Code and other pertinent regulations.
Chief Executive Officer appointment
On June 30, 2020, the Board of Directors approved the resignation of the Chief Executive Officer, Mr. Alvaro Pimentel as of November 1, 2020, and appointed Mr. Baruc Sáez as his replacement.
PAYMENT HOLIDAY AND CREDIT FACILITIES FOR OUR CLIENTS |
As part of the relief plan for our clients, the Bank granted a series of payment holidays to its clients, which mainly consist of the postponement of one to six installments on their loans under certain conditions. As of December 31, 2020 the Bank rescheduled installments for an amount to approximately to Ch$398,086 million.
The effects of these payment holiday have been recognized in accordance with the applicable accounting standards and have generated, mainly, the postponement of the recognition of interests in the Consolidated Income Statement as a result of the application of the effective interest rate method in the new granted loans associated with the payment holiday of the existing loans.
Additionally, on April 28, 2020, the Guarantee Fund for Small and Medium-sized Entrepreneurs (FOGAPE), made an offer of state guarantees in order to finance working capital under certain conditions, also referred as "Covid-19 lines". These credits are aimed to natural and legal persons with annual sales of less than UF 1,000,000 affected by the Covid-19 pandemic. The coverage of the guarantees is determined based on their sales which can range between 60% to 85% of the financing, after applying a deductible that may not exceed 5% of the guaranteed amount. Since the beginning of the program and until December 31, 2020, the Bank has carried out operations for an aggregate amount of $ 803,080 million.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 72 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 3 - Significant events, continued
GOODWILL AND ASSETS GENERATED IN BUSINESS COMBINATION IMPAIRMENT |
As a result of the application of the requirements established in International Accounting Standard 36 “Impairment of assets”, the Bank, at the end of each reporting period, assess impairment indicators that affect the determination of the recoverable amount for its assets.
Consistent with the requirements set forth above, as of the issuance of the Consolidated Financial Statements as of December 31, 2019, prepared in accordance with IFRS issued by the IASB, and incorporated in the 20-F report filed with the Securities and Exchange Commission of the United States, the Bank indicated that the effects of the economic and social events could have on the estimates and significant judgments, made on the process of preparing the Consolidated Financial Statements, were being monitored and concluded that there was no concrete evidence of impairment.
In the Interim Consolidated Financial Statements referred to as of March 31, 2020, considering the evolution of the economic and health situation, the Bank declared that it continued to monitor and permanently assess the impacts of the pandemic caused by Covid-19 in its results, as well as the effects on significant estimates and judgments including provisions for credit risk and impairment on assets in general, and on Goodwill in particular, concluding that these events did not have an impact on the results of the period or on the Consolidated Statement of Financial Position, despite identifying a decline in the relevant indicators that affect the determination of the recoverable amount of each of its cash generating units (CGUs).
In consideration of the impacts on the economy, both in Chile and Colombia, Peru and the United States (main markets where Itaú Corpbanca operates), which have had various factors, including the pandemic caused by Covid-19, as has been described above and in accordance with the constant monitoring carried out by the Bank, the indicators assessed, subsequently an impairment test was carried out as of June 30, 2020, on the valuation of the Goodwill and the intangibles assets generated in business combination assigned to the Chile and Colombia CGUs.
Once the corresponding calculations had been made, it was determined that it was necessary to recognize in the Consolidated Interim Financial Statements as of June 30, 2020, an impairment loss allocated to the Goodwill assigned to the Chile CGU for Ch$448,273 million, Ch$246,663 million corresponding to the total Goodwill assigned to the CGU Colombia and Ch$113,911 million (Ch$79,364 million net of deferred taxes) that represents all of the intangibles generated in business combinations assigned to the Colombia CGU. The total impact of these effects on the result attributable to equity holders of the Bank was Ch$764,024 million and Ch$10,276 million corresponding to non-controlling interest. This was reported on July 9, 2020 to the Commission for the Financial Market through a formal communication letter and recognized on our Consolidated Financial Statements as of June 30, 2020 and onwards. For further information see Note 32.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 73 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
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 years ended December 31, 2020 and 2019.
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. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 74 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 4 – Reporting Segments, continued
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 (Panama) S.A., Itaú Casa de Valores S.A. and Itaú Corredores de Seguros Colombia S.A.
The information on interest income and inflation-indexation adjustments for the years ended December 31, 2020 and 2019, of the aforementioned geographical areas is as follows:
| | | | | | | | | | | | |
| | | | | ||||||||
| | 2020 | | 2019 | ||||||||
| | Chile | | Colombia | | Totals | | Chile | | Colombia | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Interest income |
| 1,100,876 | | 418,525 | | 1,519,401 |
| 1,226,286 |
| 493,654 |
| 1,719,940 |
Interest expense |
| (490,729) | | (192,508) | | (683,237) |
| (631,279) |
| (241,943) |
| (873,222) |
Net interest income |
| 610,147 |
| 226,017 |
| 836,164 |
| 595,007 |
| 251,711 |
| 846,718 |
c)Information on assets, liabilities and profits and losses
Segment information on assets, liabilities, profits and losses for the year is presented in accordance with the main items described in the Compendium of Accounting Standards issued by the CMF.
c.1) Assets and Liabilities
| | | | | | | | | | | | | | |
| | | | | | | ||||||||
|
| | | As of December 31, 2020 |
| As of December 31, 2019 | ||||||||
|
| Notes | | Chile | | Colombia | | Totals | | Chile | | Colombia | | Totals |
|
| | | MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
ASSETS | | | | | | | | | | | | | | |
Cash and deposits in banks |
| 5 | | 2,761,202 | | 327,870 |
| 3,089,072 |
| 610,901 |
| 398,780 |
| 1,009,681 |
Cash items in process of collection |
| 5 | | 173,099 | | 93 |
| 173,192 |
| 230,595 |
| 710 |
| 231,305 |
Trading investments |
| 6 | | 143,330 | | 437,039 |
| 580,369 |
| 109,924 |
| 71,478 |
| 181,402 |
Investments under resale agreements |
| 7 | | 84,173 | | 21,407 |
| 105,580 |
| 46,686 |
| 29,289 |
| 75,975 |
Financial derivative contracts |
| 8 | | 3,817,286 | | 165,517 |
| 3,982,803 |
| 3,061,530 |
| 93,427 |
| 3,154,957 |
Interbank loans, net and loans and accounts receivable from customers, net |
| 9-10 | | 17,572,588 | | 4,119,796 |
| 21,692,384 |
| 17,768,441 |
| 4,661,402 |
| 22,429,843 |
Available for sale investments |
| 11 | | 3,353,239 | | 611,481 |
| 3,964,720 |
| 2,748,183 |
| 845,021 |
| 3,593,204 |
Held to maturity investments |
| 11 | | 7,297 | | 104,346 |
| 111,643 |
| 30,132 |
| 85,550 |
| 115,682 |
Investments in companies |
| 12 | | 8,710 | | 3,273 |
| 11,983 |
| 11,166 |
| 3,772 |
| 14,938 |
Intangibles (*) |
| 13 | | 682,695 | | 35,988 |
| 718,683 |
| 1,190,374 |
| 427,371 |
| 1,617,745 |
Fixed assets |
| 14 | | 32,161 | | 23,859 |
| 56,020 |
| 36,051 |
| 21,911 |
| 57,962 |
Right of use asset under lease agreements |
| 15 | | 142,108 | | 28,495 |
| 170,603 |
| 165,986 |
| 38,573 |
| 204,559 |
Current taxes |
| 16 | | 44,976 | | 19,723 |
| 64,699 |
| 30,773 |
| 54,743 |
| 85,516 |
Deferred taxes |
| 16 | | 263,934 | | 50,178 |
| 314,112 |
| 176,696 |
| 7,471 |
| 184,167 |
Other assets |
| 17 | | 513,838 | | 88,931 |
| 602,769 |
| 705,354 |
| 78,093 |
| 783,447 |
Totals |
| | | 29,600,636 |
| 6,037,996 |
| 35,638,632 |
| 26,922,792 |
| 6,817,591 |
| 33,740,383 |
(*)Includes Goodwill generated in business combination between Banco Itaú Chile and Corpbanca totaling MCh$492,512 as of December 31, 2020 (MCh$1,194,331 as of December 31, 2019).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 75 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 4 – Reporting Segments, continued
| | | | | | | | | | | | | | |
| | | | | | | ||||||||
|
| | | As of December 31, 2020 |
| As of December 31, 2019 | ||||||||
|
| Notes | | Chile | | Colombia | | Totals | | Chile | | Colombia | | Totals |
|
| | | MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
LIABILITIES | | | | | | | | | | | | | | |
Deposits and other demand liabilities |
| 18 | | 3,939,501 | | 2,257,905 |
| 6,197,406 |
| 2,765,496 |
| 2,107,952 |
| 4,873,448 |
Cash items in process of being cleared |
| 5 | | 154,231 | | 1 |
| 154,232 |
| 164,573 |
| — |
| 164,573 |
Obligations under repurchase agreements |
| 7 | | 399,593 | | 239,258 |
| 638,851 |
| 499,136 |
| 60,321 |
| 559,457 |
Time deposits and other time liabilities |
| 18 | | 9,984,010 | | 1,449,054 |
| 11,433,064 |
| 9,700,785 |
| 1,919,402 |
| 11,620,187 |
Financial derivative contracts |
| 8 | | 3,494,611 | | 178,980 |
| 3,673,591 |
| 2,839,914 |
| 98,120 |
| 2,938,034 |
Interbank borrowings |
| 19 | | 3,393,160 | | 405,818 |
| 3,798,978 |
| 1,883,900 |
| 762,856 |
| 2,646,756 |
Debt instruments issued |
| 20 | | 5,472,392 | | 732,464 |
| 6,204,856 |
| 5,687,763 |
| 720,593 |
| 6,408,356 |
Other financial liabilities |
| 20 | | 13,123 | | — |
| 13,123 |
| 12,966 |
| — |
| 12,966 |
Obligations for lease |
| 15 | | 125,265 | | 26,620 |
| 151,885 |
| 137,334 |
| 35,590 |
| 172,924 |
Current taxes |
| 16 | | 596 | | 1,170 |
| 1,766 |
| 13 |
| — |
| 13 |
Deferred taxes |
| 16 | | — | | 237 |
| 237 |
| — |
| 263 |
| 263 |
Provisions |
| 21 | | 181,003 | | 101,280 |
| 282,283 |
| 111,796 |
| 82,311 |
| 194,107 |
Other liabilities |
| 22 | | 619,955 | | 80,079 |
| 700,034 |
| 653,786 |
| 55,128 |
| 708,914 |
Totals |
| |
| 27,777,440 |
| 5,472,866 |
| 33,250,306 |
| 24,457,462 |
| 5,842,536 |
| 30,299,998 |
c.2) Income for the years ended December 31, 2020 and 2019
| | | | | | | | | | | | | | |
| | | | | ||||||||||
|
| |
| For the years ended December 31, | ||||||||||
| | | | 2020 | | 2019 | ||||||||
|
| Notes | | Chile | | Colombia | | Totals | | Chile | | Colombia | | Totals |
|
| |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Net interest income |
| 25 |
| 610,147 | | 226,017 |
| 836,164 |
| 595,007 | | 251,711 |
| 846,718 |
Net fee and commission income |
| 26 |
| 108,140 | | 32,859 |
| 140,999 |
| 138,007 | | 36,397 |
| 174,404 |
Net income (expense) from financial operations |
| 27 |
| 24,961 | | 84,877 |
| 109,838 |
| 151,572 | | (10,138) |
| 141,434 |
Net foreign exchange gain (loss) |
| 28 |
| (20,491) | | (53,973) |
| (74,464) |
| (24,858) | | 52,484 |
| 27,626 |
Other operating income |
| |
| 16,906 | | 48,990 |
| 65,896 |
| 20,682 | | 25,220 |
| 45,902 |
Provision for loan losses |
| 29 |
| (395,252) | | (133,207) |
| (528,459) |
| (243,133) | | (79,560) |
| (322,693) |
NET OPERATING PROFIT |
| |
| 344,411 |
| 205,563 |
| 549,974 |
| 637,277 |
| 276,114 |
| 913,391 |
Depreciation and amortization |
| 32 |
| (96,117) | | (30,327) |
| (126,444) |
| (86,593) | | (40,573) |
| (127,166) |
Operating expenses (*)(**) |
| |
| (935,094) | | (566,376) |
| (1,501,470) |
| (398,713) | | (215,096) |
| (613,809) |
OPERATING INCOME (LOSS) |
| |
| (686,800) |
| (391,140) |
| (1,077,940) |
| 151,971 |
| 20,445 |
| 172,416 |
Income (loss) from investments in companies |
| 12 |
| (2,765) | | 1,426 |
| (1,339) |
| 4,900 | | 1,932 |
| 6,832 |
Income taxes |
| 16 |
| 99,275 | | 41,387 |
| 140,662 |
| (41,520) | | (5,264) |
| (46,784) |
CONSOLIDATED INCOME (LOSS) FOR THE YEAR |
| |
| (590,290) |
| (348,327) |
| (938,617) |
| 115,351 |
| 17,113 |
| 132,464 |
(*)Includes personnel salaries and expenses, administrative expenses, impairment and other operating expenses
(**) | As of December 31, 2020, includes the recognition of an impairment loss of MCh$857,990. The impairment is broken down into MCh$694,936 corresponding to the impairment on Goodwill, MCh$448,273 and MCh$246.663 of CGUs of Chile and Colombia, respectively, and MCh$113,911 corresponds to the intangibles generated in the business combination of the CGU Colombia. Intangible assets includes an impairment loss on Softwares and Licenses of MCh$38,849, which is broken down into MCh$ 34,524 and MCh$4,325 in the Chile CGU and Colombia CGU, respectively. Additionally, CGU Chile includes impairment loss on Fixed assets and Leasehold improvements for MCh$891 and MCh$9,403 respectively. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 76 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 5 - Cash and Cash Equivalents
a)Cash and Cash Equivalents detail
The detail of balances included under cash and cash equivalents is as follows:
| | | | |
| | | | |
|
| As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Cash and deposits in banks |
|
|
|
|
Cash |
| 254,200 |
| 253,779 |
Deposits in the Central Bank of Chile |
| 1,067,421 |
| 103,756 |
Deposits in local banks |
| 27,017 |
| 14,254 |
Deposits in foreign banks |
| 1,740,434 |
| 637,892 |
Subtotals cash and deposits in banks |
| 3,089,072 |
| 1,009,681 |
| | | | |
Cash items in process of collection, net (1) |
| 18,960 |
| 66,732 |
Highly liquid financial instruments (2) |
| 1,337,754 |
| 295,551 |
Investments under resale agreements (3) |
| 60,470 |
| 75,975 |
Totals cash and cash equivalents |
| 4,506,256 |
| 1,447,939 |
(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 and available-for-sale portfolios with maturities that do not exceed three months from the acquisition date and the detail is as follows: |
| | | | | | |
| | | | | | |
|
| |
| As of December 31, | ||
| | Note | | 2020 | | 2019 |
|
| | | MCh$ | | MCh$ |
Highly liquid financial instruments | | |
|
|
|
|
Trading investments |
| 6 |
| 132,043 |
| 28,772 |
Available for sale investments |
| 11 |
| 1,205,711 |
| 266,779 |
Totals | | |
| 1,337,754 |
| 295,551 |
(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" of the asset in the Consolidated Statement of Financial Position. The detail is as follows:
| | | | | | |
| | | | | | |
| | |
| As of December 31, | ||
| | Note | | 2020 | | 2019 |
|
| | | MCh$ | | MCh$ |
Investments under resale agreements |
| 7 a) |
| 60,470 |
| 75,975 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 77 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 5 – Cash and Cash Equivalents, continued
b)Cash in process of collection and in process of being cleared
Corresponden Cash items in process of collection and in process of being cleared represent domestic transactions, which have not been processed through the central domestic clearinghouse, or international transactions that may be delayed in settlement due to timing differences. The detail of these balances is as follows:
| | | | |
| | | | |
|
| As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Assets |
|
|
|
|
Documents held by other banks (documents to be cleared) |
| 37,030 |
| 76,922 |
Funds receivable |
| 136,162 |
| 154,383 |
Subtotals assets |
| 173,192 |
| 231,305 |
Liabilities |
| |
|
|
Funds payable |
| 154,232 |
| 164,573 |
Subtotals liabilities |
| 154,232 |
| 164,573 |
Cash items in process of collection, net | | 18,960 |
| 66,732 |
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 Consolidated Statement of Income and our 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 and non-trading portfolio related financial instruments (see Note 6 and 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 19) 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 20).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 78 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 6 – Trading Investments
The detail of the financial instruments classified as trading investments is as follows:
| | | | |
| | | | |
|
| As of December 31, | ||
| | 2020 | | 2019 |
| | MCh$ | | MCh$ |
Chilean Central Bank and Government securities | |
| |
|
Chilean Central Bank bonds | | 21,369 |
| 52,019 |
Other Government securities | | 86,673 |
| 28,879 |
Other Chilean securities | | |
|
|
Bonds | | 271 |
| 905 |
Notes | | — | | — |
Other securities | | — |
| 22,218 |
Foreign financial securities | | |
|
|
Bonds | | 432,178 |
| 67,088 |
Other securities | | 4,861 |
| 4,390 |
Investments in mutual funds | | |
|
|
Funds managed by related entities | | 35,017 |
| 5,870 |
Funds managed by third parties | | — |
| 33 |
Totals | | 580,369 |
| 181,402 |
As of December 31, 2020, the trading portfolio includes financial assets for an amount of MCh$132,043 (MCh$28,772 as of December 31, 2019) with maturities which do not exceed three months from the acquisition date and are considered as cash equivalents (see Note 5).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 79 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 7 – Investments under Resale Agreements and Obligations under Repurchase Agreements
a) | The Bank purchases financial instruments to resell them on a future date. As of December 31, 2020 and 2019, the instruments acquired under agreements to resell are as follows: |
| | | | | | | | |
| | | ||||||
| | As of December 31, 2020 | ||||||
| | | | Between 3 | | | | |
| | Up to | | months and 1 | | | | |
| | 3 months | | year | | Over 1 year | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Chilean Central Bank and Government securities | | | | | | | | |
Chilean Central Bank instruments |
| — | | — | | — | | — |
Government securities |
| — | | 43,633 | | — | | 43,633 |
Other Chilean Central Bank and Government securities |
| — | | — | | — | | — |
Other Chilean securities |
| | | | | | | |
Bonds |
| 40,540 | | — | | — | | 40,540 |
Notes |
| — | | — | | — | | — |
Other securities |
| — | | — | | — | | — |
Foreign financial securities |
| | | | | | | |
Foreign financial securities |
| 14,072 | | — | | 1,477 | | 15,549 |
Other foreign instruments |
| 5,858 | | — | | — | | 5,858 |
Totals |
| 60,470 |
| 43,633 |
| 1,477 |
| 105,580 |
| | | | | | | | |
| | | ||||||
| | As of December 31, 2019 | ||||||
| | | | Between 3 | | | | |
| | Up to | | months and 1 | | | | |
| | 3 months | | year | | Over 1 year | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Chilean Central Bank and Government securities | |
| |
| |
| |
|
Chilean Central Bank instruments |
| 20,593 |
| — |
| — |
| 20,593 |
Government securities |
| 17,491 |
| — |
| — |
| 17,491 |
Other Chilean Central Bank and Government securities |
| — |
| — |
| — |
| — |
Other Chilean securities |
|
|
|
|
|
|
|
|
Bonds |
| 8,603 |
| — |
| — |
| 8,603 |
Notes |
| — |
| — |
| — |
| — |
Other securities |
| — |
| — |
| — |
| — |
Foreign financial securities |
|
|
|
|
|
|
|
|
Foreign financial securities |
| 27,546 |
| — |
| — |
| 27,546 |
Other foreign instruments |
| 1,742 |
| — |
| — |
| 1,742 |
Totals |
| 75,975 |
| — |
| — |
| 75,975 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 80 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 7- Investments under Resale Agreements and Obligations under Repurchase Agreements, continued
b) | As of December 31, 2020 and 2019, the instruments acquired under agreements to repurchase are as follows: |
| | | | | | | | |
| | | ||||||
|
| As of December 31, 2020 | ||||||
| | | | Between 3 | | | | |
| | Up to | | months and 1 | | | | |
| | 3 months | | year | | Over 1 year | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Chilean Central Bank and Government securities |
|
|
|
|
|
|
|
|
Chilean Central Bank instruments |
| 310,565 | | — | | — |
| 310,565 |
Government securities |
| 49,337 | | — | | — |
| 49,337 |
Other Chilean Central Bank and Government securities |
| — | | — | | — |
| — |
Other Chilean securities |
| | | | | | | |
Bonds |
| 39,691 | | — | | — |
| 39,691 |
Notes |
| — | | — | | — |
| — |
Other securities |
| — | | — | | — |
| — |
Foreign financial securities |
| | | | | | | |
Foreign financial securities |
| — | | — | | — |
| — |
Other foreign instruments |
| 239,258 | | — | | — |
| 239,258 |
Totals |
| 638,851 |
| — |
| — |
| 638,851 |
| | | | | | | | |
| | | ||||||
| | As of December 31, 2019 | ||||||
| | | | Between 3 | | | | |
| | Up to | | months and 1 | | | | |
| | 3 months | | year | | Over 1 year | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Chilean Central Bank and Government securities |
|
|
|
|
|
|
|
|
Chilean Central Bank instruments |
| 168,778 |
| — |
| — |
| 168,778 |
Government securities |
| 11,970 |
| — |
| — |
| 11,970 |
Other Chilean Central Bank and Government securities |
| — |
| — |
| — |
| — |
Other Chilean securities |
|
|
|
|
|
|
|
|
Bonds |
| 318,389 |
| — |
| — |
| 318,389 |
Notes |
| — |
| — |
| — |
| — |
Other securities |
| — |
| — |
| — |
| — |
Foreign financial securities |
|
|
|
|
|
|
|
|
Foreign financial securities |
| — |
| — |
| — |
| — |
Other foreign instruments |
| 60,320 |
| — |
| — |
| 60,320 |
Totals |
| 559,457 |
| — |
| — |
| 559,457 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 81 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 8 – Financial Derivative Contracts and Hedge Accounting
a)Derivatives held for trading and hedge accounting
The Bank and its 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 December 31, | ||||||
| | 2020 | | 2019 | ||||
| | Assets | | Liabilities | | Assets | | Liabilities |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Derivatives held for hedge accounting |
| 306,472 | | 162,450 |
| 203,868 |
| 144,069 |
Derivatives held for trading | | 3,676,331 | | 3,511,141 |
| 2,951,089 |
| 2,793,965 |
Totals |
| 3,982,803 |
| 3,673,591 |
| 3,154,957 |
| 2,938,034 |
a.1) Financial derivatives assets
| | | | | | | | |
| | | ||||||
|
| As of December 31, 2020 | ||||||
| | Notional | | | ||||
| | Up to | | Between 3 months | | Over | | Fair |
| | 3 months | | and 1 year | | 1 year | | value |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Currency forwards | | 7,882,839 | | 2,358,854 | | 417,178 | | 472,208 |
Currency swaps | | 246,599 | | 932,372 | | 8,656,771 | | 938,762 |
Interest rate swaps | | 3,828,930 | | 6,424,682 | | 26,020,406 | | 2,570,553 |
Call currency options | | 13,402 | | 15,483 | | — | | 195 |
Put currency options | | 7,797 | | 10,514 | | — | | 1,085 |
Totals | | 11,979,567 | | 9,741,905 | | 35,094,355 |
| 3,982,803 |
| | | | | | | | |
| | | ||||||
|
| As of December 31, 2019 | ||||||
| | Notional | | | ||||
| | Up to | | Between 3 months | | Over | | Fair |
| | 3 months | | and 1 year | | 1 year | | value |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Currency forwards |
| 8,174,950 |
| 3,931,647 |
| 1,234,741 |
| 454,300 |
Currency swaps |
| 217,953 |
| 923,526 |
| 6,640,937 |
| 855,780 |
Interest rate swaps |
| 4,125,562 |
| 7,225,228 |
| 31,308,891 |
| 1,840,855 |
Call currency options |
| 34,713 |
| 49,753 |
| 748 |
| 3,805 |
Put currency options |
| 5,067 |
| 15,940 |
| — |
| 217 |
Totals |
| 12,558,245 |
| 12,146,094 |
| 39,185,317 |
| 3,154,957 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 82 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
a.2) Financial derivatives liabilities
| | | | | | | | |
| | | ||||||
|
| As of December 31, 2020 | ||||||
| | Notional | | | ||||
| | Up to | | Between 3 months | | Over | | Fair |
| | 3 months | | and 1 year | | 1 year | | value |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Currency forwards | | 7,913,739 | | 1,989,333 | | 935,565 | | 433,863 |
Currency swaps | | 335,192 | | 953,275 | | 7,480,516 | | 775,122 |
Interest rate swaps | | 3,509,633 | | 6,205,021 | | 27,404,647 | | 2,463,249 |
Call currency options | | 9,434 | | 15,404 | | — | | 271 |
Put currency options | | 5,753 | | 5,786 | | — | | 1,086 |
Totals | | 11,773,751 | | 9,168,819 | | 35,820,728 |
| 3,673,591 |
| | | | | | | | |
| | | ||||||
|
| As of December 31, 2019 | ||||||
| | Notional | | | ||||
| | Up to | | Between 3 months | | Over | | Fair |
| | 3 months | | and 1 year | | 1 year | | value |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Currency forwards | | 11,622,926 | | 4,440,565 | | 830,870 |
| 504,276 |
Currency swaps | | 182,481 | | 831,635 | | 6,249,881 |
| 769,072 |
Interest rate swaps | | 2,939,069 | | 6,101,205 | | 29,362,545 |
| 1,662,363 |
Call currency options | | 31,482 | | 51,810 | | — |
| 1,758 |
Put currency options | | 18,837 | | 39,941 | | 374 |
| 565 |
Totals | | 14,794,795 | | 11,465,156 | | 36,443,670 |
| 2,938,034 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 83 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
a.3) Portfolio detail
As of December 31, 2020 and 2019, the portfolio of financial derivative instruments for hedge accounting and trading purposes are as follows:
| | | | | | | | | | |
| | | ||||||||
| | As of December 31, 2020 | ||||||||
| | Notional totals | | Fair Value | ||||||
|
| Up to | | Between 3 months | | | | | | |
| | 3 months | | and 1 year | | Over 1 year | | Assets | | Liabilities |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Derivatives held for hedge accounting | | 3,704,562 | | 965,569 | | 2,261,626 | | 306,472 | | 162,450 |
Fair value hedge | | | | | | | | | | |
Currency forwards | | — | | — | | — | | — | | — |
Currency swaps | | — | | — | | 74,894 | | 9,666 | | — |
Interest rate swaps |
| — | | 201,193 | | 1,960,759 | | 203,913 | | 61,705 |
Subtotals |
| — |
| 201,193 |
| 2,035,653 |
| 213,579 |
| 61,705 |
Cash flows hedge |
| |
| |
| |
| |
| |
Currency forwards |
| 1,657,848 | | 716,842 | | 178,107 | | 3,919 | | 33,112 |
Currency swaps | | — | | — | | — | | — | | — |
Interest rate swaps |
| 4,000 | | 29,233 | | 47,866 | | 2,094 | | 238 |
Subtotals |
| 1,661,848 |
| 746,075 |
| 225,973 |
| 6,013 |
| 33,350 |
Net investment in a foreign operation hedge |
| |
| |
| |
| |
| |
Currency forwards |
| 2,042,714 | | 18,301 | | — | | 86,880 | | 67,395 |
Subtotals |
| 2,042,714 |
| 18,301 |
| — |
| 86,880 |
| 67,395 |
| | | | | | | | | | |
Derivatives held for trading |
| 20,048,756 |
| 17,945,155 |
| 68,653,457 |
| 3,676,331 |
| 3,511,141 |
Currency forwards |
| 12,096,016 | | 3,613,044 | | 1,174,636 | | 381,409 | | 333,356 |
Currency swaps |
| 581,791 | | 1,885,647 | | 16,062,393 | | 929,096 | | 775,122 |
Interest rate swaps |
| 7,334,563 | | 12,399,277 | | 51,416,428 | | 2,364,546 | | 2,401,306 |
Call currency options |
| 22,836 | | 30,887 | | — | | 195 | | 271 |
Put currency options |
| 13,550 | | 16,300 | | — | | 1,085 | | 1,086 |
Subtotals |
| 20,048,756 |
| 17,945,155 |
| 68,653,457 |
| 3,676,331 |
| 3,511,141 |
Totals |
| 23,753,318 |
| 18,910,724 |
| 70,915,083 |
| 3,982,803 |
| 3,673,591 |
| | | | | | | | | | |
| | | ||||||||
| | As of December 31, 2019 | ||||||||
| | Notional totals | | Fair Value | ||||||
|
| Up to | | Between 3 months | | | | | | |
| | 3 months | | and 1 year | | Over 1 year | | Assets | | Liabilities |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Derivatives held for hedge accounting | | 3,679,576 | | 1,371,790 | | 3,072,685 | | 203,868 | | 144,069 |
Fair value hedge | | | | | | | | | | |
Currency swaps | | — | | — | | 47,463 | | — | | 1,479 |
Interest rate swaps |
| — |
| 29,342 |
| 1,952,968 |
| 152,011 |
| 50,247 |
Subtotals |
| — |
| 29,342 |
| 2,000,431 |
| 152,011 |
| 51,726 |
Cash flows hedge |
| |
| |
| |
| |
| |
Currency forwards |
| 1,426,697 |
| 849,243 |
| 556,633 |
| 4,174 |
| 17,798 |
Currency swaps | | — | | 47,155 | | 78,592 | | 6,145 | | 2,703 |
Interest rate swaps |
| 32,408 |
| — |
| 437,029 |
| 2,722 |
| 5,820 |
Subtotals |
| 1,459,105 |
| 896,398 |
| 1,072,254 |
| 13,041 |
| 26,321 |
Net investment in a foreign operation hedge |
| |
| |
| |
| |
| |
Currency forwards |
| 2,220,471 |
| 446,050 |
| — |
| 38,816 |
| 66,022 |
Subtotals |
| 2,220,471 |
| 446,050 |
| — |
| 38,816 |
| 66,022 |
| | | | | | | | | | |
Derivatives held for trading |
| 23,673,464 |
| 22,239,460 |
| 72,556,302 |
| 2,951,089 |
| 2,793,965 |
Currency forwards |
| 16,150,708 |
| 7,076,919 |
| 1,508,978 |
| 411,310 |
| 420,456 |
Currency swaps |
| 400,434 |
| 1,708,006 |
| 12,764,763 |
| 849,635 |
| 764,890 |
Interest rate swaps |
| 7,032,223 |
| 13,297,091 |
| 58,281,439 |
| 1,686,122 |
| 1,606,296 |
Call currency options |
| 66,195 |
| 101,563 |
| 748 |
| 3,805 |
| 1,758 |
Put currency options |
| 23,904 |
| 55,881 |
| 374 |
| 217 |
| 565 |
Subtotals |
| 23,673,464 |
| 22,239,460 |
| 72,556,302 |
| 2,951,089 |
| 2,793,965 |
Totals |
| 27,353,040 |
| 23,611,250 |
| 75,628,987 |
| 3,154,957 |
| 2,938,034 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 84 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 8 - Financial Derivative Contracts and Hedge Accounting, continued
b. Hedge accounting
b.1 Fair value hedges
The Bank uses interest rate derivatives to manage its structural risk by minimizing accounting asymmetries in the Consolidated Statement of Financial Position. Through different hedging strategies, it redenominates an element originally at a fixed rate to a floating rate, thus decreasing the financial duration and consequently risk, aligning the balance sheet structure with expected movements in the yield curve.
The following table presents the hedged items and the hedging instrument at fair value as of December 31, 2020 and 2019, broken down by maturity:
| | | | | |
| | | | | |
| As of December 31, 2020 | ||||
| National amounts | ||||
| Up to 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Totals |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Hedged items | | | | | |
Loans and accounts receivable from customers | | | | | |
Commercial and mortgage loans | — | — | — | — | — |
Mortgage mutual loans (1) | 162,429 | 242,180 | 16,753 | 241,691 | 663,053 |
Time deposits and other time liabilities | | | | | |
Time deposits | — | 20,472 | 5,817 | — | 26,289 |
Available fro sale investments | | | | | - |
Treasury bonds | 9,950 | 187,635 | 20,540 | 37,527 | 255,652 |
Interbank borrowings | | | | | |
Interbank loans | — | 75,994 | — | — | 75,994 |
Debt instruments issued | | | | | - |
Senior bonds | 29,070 | 70,000 | 428,077 | 688,967 | 1,216,114 |
Totals | 201,449 | 596,281 | 471,187 | 968,185 | 2,237,102 |
Hedging instruments | | | | | |
Currency forwards | — | — | — | — | — |
Currency swaps | — | 74,894 | — | — | 74,894 |
Interest rate swaps | 201,193 | 521,387 | 471,187 | 968,185 | 2,161,952 |
Totals | 201,193 | 596,281 | 471,187 | 968,185 | 2,236,846 |
| | | | | |
| | | | | |
| As of December 31, 2019 | ||||
| National amounts | ||||
| Up to 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Totals |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Hedged items | | | | | |
Loans and accounts receivable from customers | | | | | |
Commercial and mortgage loans | 1,032 | — | — | — | 1,032 |
Mortgage mutual loans (1) | — | 342,159 | 80,629 | 263,067 | 685,855 |
Available fro sale investments | | | | | |
Treasury bonds | — | 52,704 | 49,932 | 25,458 | 128,094 |
Debt instruments issued | | | | | |
Senior bonds | 28,310 | 98,310 | 80,620 | 1,007,834 | 1,215,074 |
Totals | 29,342 | 493,173 | 211,181 | 1,296,359 | 2,030,055 |
Hedging instruments | | | | | |
Currency swaps | — | 47,463 | — | — | 47,463 |
Interest rate swaps | 29,342 | 445,428 | 211,181 | 1,296,359 | 1,982,310 |
Totals | 29,342 | 492,891 | 211,181 | 1,296,359 | 2,029,773 |
(1) | Colombia: The information includes the effects on the hedge item generated by prepayments, therefore, cash flows from the hedge item and the hedging instrument are not perfectly balanced. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 85 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
A Below is an estimate forecast of cash flows:
Forecasted cash flows by interest rate risk:
| | | | | |
| | | | | |
| As of December 31, 2020 | ||||
| National amounts | ||||
| Up to 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Totals |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Hedged items | | | | | |
Inflows (*) | 12,496 | 191,835 | 11,437 | 3,563 | 219,331 |
Outflows | (18,448) | (130,799) | (48,778) | (43,439) | (241,464) |
Net flows | (5,952) | 61,036 | (37,341) | (39,876) | (22,133) |
Hedging instruments(**) | | | | | |
Outflows | 18,448 | 130,799 | 48,778 | 43,439 | 241,464 |
Inflows | (12,240) | (191,835) | (11,437) | (3,563) | (219,075) |
Net flows | 6,208 | (61,036) | 37,341 | 39,876 | 22,389 |
| | | | | |
| | | | | |
| As of December 31, 2019 | ||||
| National amounts | ||||
| Up to 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Totals |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Hedged items | | | | | |
Inflows (*) | 9,890 | 66,797 | 13,343 | 4,570 | 94,600 |
Outflows | (45,795) | (36,038) | (129,595) | (54,460) | (265,888) |
Net flows | (35,905) | 30,759 | (116,252) | (49,890) | (171,288) |
Hedging instruments(**) | | | | | |
Outflows | (9,890) | (66,515) | (13,343) | (4,570) | (94,318) |
Inflows | 45,795 | 36,038 | 129,595 | 54,460 | 265,888 |
Net flows | 35,905 | (30,477) | 116,252 | 49,890 | 171,570 |
(*) Colombia: The information includes the effects on the hedge item generated by prepayments, therefore, cash flows from the hedge item and the hedging instrument are not perfectly balanced.
(**) Only includes cash flows forecast portion of the hedge instruments used to cover interest rate risk.
b.2 Cash flow hedges
Cash flow hedges are used by the Bank mainly to:
● | Reduce the volatility of cash flows in items in the Statement of Financial position that are indexed to inflation through the use of inflation forwards and combinations of swaps in pesos and indexed units. |
● | Set the rate of a portion of the pool of short-term liabilities in pesos, thus reducing the risk of an important part of the Bank's cost of funding, although still maintaining the liquidity risk of the pool. |
● | It also sets the rate of funding sources at a floating rate, decreasing the risk that its funding costs increase. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 86 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
The following table presents the nominal values of the hedged item as of December 31, 2020 and 2019:
| | | | | |
| | | | | |
| As of December 31, 2020 | ||||
| Notional amounts | ||||
| Up to 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Totals |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Hedged item | | | | | |
Loans and accounts receivables from customers | | | | | |
C40 UF | 2,102,296 | 174,422 | — | — | 2,276,718 |
Commercial loans | 23,000 | 20,000 | — | — | 43,000 |
Time deposits and other time liabilities | | | | | |
Time deposits | — | — | — | — | — |
Debt instruments issued | | | | | |
Senior bonds | — | 27,866 | — | — | 27,866 |
Interbank borrowings | | | | | |
Interbank loans | 240,831 | 3,685 | — | — | 244,516 |
Highly probable transaction | | | | | |
Disbursement USD | 40,796 | — | — | — | 40,796 |
Totals | 2,406,923 | 225,973 | — | — | 2,632,896 |
Hedging instruments | | | | | |
Currency forwards | 2,374,690 | 178,107 | — | — | 2,552,797 |
Currency swaps | — | — | — | — | - |
Interest rate swaps | 33,233 | 47,866 | — | — | 81,099 |
Totals | 2,407,923 | 225,973 | — | — | 2,633,896 |
| | | | | |
| | | | | |
| As of December 31, 2019 | ||||
| Notional amounts | ||||
| Up to 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Totals |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Hedged item | | | | | |
Loans and accounts receivables from customers | | | | | |
C40 UF | 1,804,079 | 566,729 | — | — | 2,370,808 |
Commercial loans | 5,000 | 43,000 | — | — | 48,000 |
Time deposits and other time liabilities | | | | | |
Time deposits | 27,408 | — | 342,633 | 41,300 | 411,341 |
Debt instruments issued | | | | | |
Senior bonds | 476,036 | — | 78,592 | — | 554,628 |
Interbank borrowings | | | | | |
Interbank loans | 42,979 | — | — | — | 42,979 |
Totals | 2,355,502 | 609,729 | 421,225 | 41,300 | 3,427,756 |
Hedging instruments | | | | | |
Currency forwards | 2,275,939 | 556,633 | — | — | 2,832,572 |
Currency swaps | 47,155 | — | 78,592 | — | 125,747 |
Interest rate swaps | 32,408 | 53,096 | 342,633 | 41,300 | 469,437 |
Totals | 2,355,502 | 609,729 | 421,225 | 41,300 | 3,427,756 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 87 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
Below is an estimate forecast of cash flows:
Forecasted cash flows by interest rate risk:
| | | | | |
| | | | | |
| As of December 31, 2020 | ||||
| Notional amounts | ||||
| Up to 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Totals |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Hedged items | | | | | |
Inflows | 47,490 | 5,925 | — | — | 53,415 |
Outflows | (240,854) | (31,551) | — | — | (272,405) |
Net flows | (193,364) | (25,626) | — | — | (218,990) |
Hedging instruments(*) | | | | | |
Inflows | 240,854 | 31,551 | — | — | 272,405 |
Outflows | (47,490) | (5,925) | — | — | (53,415) |
Net flows | 193,364 | 25,626 | — | — | 218,990 |
| | | | | |
| | | | | |
| As of December 31, 2019 | ||||
| Notional amounts | ||||
| Up to 1 year | Between 1 and 3 years | Between 3 and 6 years | Over 6 years | Totals |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Hedged items | | | | | |
Inflows | 43,430 | 23,797 | - | - | 67,227 |
Outflows | (484,997) | (17,615) | (13,260) | (941) | (516,813) |
Net flows | (441,567) | 6,182 | (13,260) | (941) | (449,586) |
Hedging instruments(*) | | | | | |
Inflows | (43,430) | (23,797) | - | - | (67,227) |
Outflows | 484,997 | 17,615 | 13,260 | 941 | 516,813 |
Net flows | 441,567 | (6,182) | 13,260 | 941 | 449,586 |
(*) Only includes cash flows forecast portion of the hedge instruments used to cover interest rate risk.
| | | | | |
| | | | | |
| As of December 31, | ||||
| 2020 | | 2019 | ||
| Effective | Ineffective | | Effective | Ineffective |
| portion | portion | | portion | portion |
| MCh$ | MCh$ | | MCh$ | MCh$ |
Hedged item | | | | | |
Loans and accounts receivables from customers | | | | | |
C40 UF | (527) | (37) | | 1,090 | (516) |
Commercial loans | 1,654 | 140 | | 2,159 | 289 |
Time deposits and other time liabilities | | | | | |
Time deposits | (1,090) | (1) | | (4,510) | 91 |
Debt instruments issued | | | | | |
Senior bonds | (34) | — | | — | — |
Interbank borrowings | | | | | |
Interbank loans | 2,320 | (7) | | (6,676) | (8) |
Highly probable transaction. | | | | | |
Disbursement USD | 882 | — | | 3,065 | — |
Totals | 3,205 | 95 | | (4,872) | (144) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 88 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
The effective portion generated by cash flow derivatives recorded in the Statement of Changes in Equity as of December 31, 2020 and 2019. The ineffective portion generated by cash flow derivatives is because both the hedged item and the hedged object do not mirror each other, which means that changes in value attributable to rate and reset components are not fully offset, but remain within the effectiveness range defined by the standard.
The income generated by cash flow hedge derivatives whose effect was transferred from Other Comprehensive Income to Income for the year, as follow:
| | |
| | |
| As of December 31, | |
| 2020 | 2019 |
| MCh$ | MCh$ |
Hedged item | | |
Loans and accounts receivables from customers | | |
C40 UF | 1,617 | 3,681 |
Commercial loans | 505 | (1,134) |
Time deposits and other time liabilities | | |
Time deposits (*) | (4,324) | 4,088 |
Debt instruments issued | | |
Senior bonds | — | — |
Interbank borrowings | | |
Interbank loans | — | — |
Totals | (2,202) | 6,635 |
(*) Includes the effects of the discontinuing cash flow hedge strategy on time deposits.
b.3 Hedge of net investments in foreign operations
Itaú Corpbanca, the parent company whose functional currency is the Chilean peso, has foreign business investments consisting of a branch in New York and acquisitions in Colombia. As a result of the proper accounting treatment for these investments, fluctuations in the value of the investments as a result of changes in the Chilean peso-Colombian peso exchange rate alter the parent company's equity. The objective of these hedges is to safeguard the value of equity by managing exchange rate risk affecting the investments.
Hedges of a net investment in a foreign operation, including hedges of monetary items that are accounted for as part of a net investment, are recorded to cash flow hedges, where:
● | The effective portion generated by cash flow derivatives recorded in the Consolidated Statement of Changes in Equity amount to MM$ 58,927 net of taxes as of December 31, 2020 and MM $ 32,413 net of deferred taxes 2019. |
● | The ineffective portion generated from hedge instruments is recorded on profit and loss. For the years ended on December 31, 2020 and 2019 no ineffective portions were recorded. |
| | | |
| | | |
| | As of December 31, | |
| Notes | 2020 | 2019 |
| | MCh$ | MCh$ |
Opening balance | | (10,756) | 21,657 |
Gains (losses) on hedge of net investment in foreign operation, before tax | 24 g. | 80,722 | (46,786) |
Income tax relating to hedges of net investment in foreign operations | 24 g. | (21,795) | 14,373 |
Closing balance | | 48,171 | (10,756) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 89 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
Each hedge is detailed in the table below:
b.3.1 Hedge of net investment in the New York branch and Itaú Corpbanca Colombia subsidiary
| | | | | | | | |
| | | | | | | | |
| As of December 31, 2020 | |||||||
| Notional amounts | | Statement of Changes in Equity | Statement of Income | ||||
| Up to 1 year | Between 1 and 3 years | | Between 3 and 6 years | Over 6 years | | Effective portion for the year | Ineffective portion |
| MCh$ | MCh$ | | MCh$ | MCh$ | | MCh$ | MCh$ |
Hedged items | | | | | | | | |
Net foreign investment in Colombia | 1,897,025 | - | | - | - | | 51,803 | - |
Net foreign investment in NY | 163,990 | - | | - | - | | (8,231) | - |
Totals | 2,061,015 | - | | - | - | | 43,572 | - |
Hedging instruments | | | | | | | | |
Currency forwards | 2,061,015 | - | | - | - | | 43,572 | - |
| | | | | | | | |
| | | | | | | | |
| As of December 31, 2019 | |||||||
| Notional amounts | | Statement of Changes in Equity | Statement of Income | ||||
| Up to 1 year | Between 1 and 3 years | | Between 3 and 6 years | Over 6 years | | Effective portion for the year | Ineffective portion |
| MCh$ | MCh$ | | MCh$ | MCh$ | | MCh$ | MCh$ |
Hedged items | | | | | | | | |
Net foreign investment in Colombia | 2,360,798 | - | | - | - | | (35,744) | - |
Net foreign investment in NY | 305,723 | - | | - | - | | (11,042) | - |
Totals | 2,666,521 | - | | - | - | | (46,786) | - |
Hedging instruments | | | | | | | | |
Currency forwards | 2,666,521 | - | | - | - | | (46,786) | - |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 90 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
As of December 31, 2020 and 2019, interbank loans are detailed as follows:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Local Banks |
|
|
|
|
Loans to local banks |
| — |
| — |
Allowances for loans losses |
| — |
| — |
Subtotals |
| — |
| — |
Foreign Banks |
|
|
|
|
Interbank cash loans |
| — |
| 37,048 |
Loans to foreign banks |
| — |
| 755 |
Non-transferable deposits with foreign banks |
| 7,131 |
| 18,832 |
Allowances for loans losses |
| (16) |
| (430) |
Subtotals |
| 7,115 |
| 56,205 |
Chilean Central Bank |
|
|
|
|
Deposits with the Chilean Central Bank not available |
| — |
| — |
Subtotals |
| — |
| — |
Totals |
| 7,115 |
| 56,205 |
Movements in provisions and impairment for local and foreign interbank loans during the years ended December 31, 2020 and 2019 are as follows:
| | | | | | | | | | | | |
| | | | | ||||||||
| | Banks | | Banks | ||||||||
| | Local | | Foreign | | Totals | | Local | | Foreign | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Balances at the beginning of the year |
| — | | (430) | | (430) |
| — |
| (463) |
| (463) |
Charge-offs |
| — | | — | | — |
| — |
| — |
| — |
Allowances established |
| — | | (407) | | (407) |
| — |
| (507) |
| (507) |
Allowances released |
| — | | 800 | | 800 |
| — |
| 574 |
| 574 |
Impairment |
| — | | — | | — |
| — |
| — |
| — |
Exchange differences |
| — | | 21 | | 21 |
| — |
| (34) |
| (34) |
Balances at end of year |
| — |
| (16) |
| (16) |
| — |
| (430) |
| (430) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 91 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 10 – Loans and accounts receivable from customers
a) | Loans and accounts receivable from customers |
As of December 31, 2020 and 2019, the loan portfolio is detailed as follows:
| | | | | | | | | | | | | | |
| | | | | | | ||||||||
| | Assets before allowances | | Allowances | | | ||||||||
| | Normal | | Impaired | | | | Individual | | Group | | | | Net assets |
As of December 31, 2020 | | portfolio | | portfolio | | Totals | | allowances | | allowances | | Totals | | |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Commercial loans |
|
| |
| |
|
|
|
|
|
|
| | |
Commercial loans |
| 10,907,500 | | 1,267,481 | | 12,174,981 |
| (555,343) | | (59,475) |
| (614,818) | | 11,560,163 |
Foreign trade loans |
| 846,209 | | 3,290 | | 849,499 |
| (18,933) | | (3,048) |
| (21,981) | | 827,518 |
Checking accounts debtors |
| 59,545 | | 10,581 | | 70,126 |
| (4,214) | | (3,993) |
| (8,207) | | 61,919 |
Factoring transactions |
| 155,156 | | 384 | | 155,540 |
| (3,941) | | (176) |
| (4,117) | | 151,423 |
Student loans |
| 533,813 | | 74,475 | | 608,288 |
| — | | (17,980) |
| (17,980) | | 590,308 |
Commercial leasing transactions |
| 868,947 | | 72,350 | | 941,297 |
| (20,067) | | (4,335) |
| (24,402) | | 916,895 |
Other commercial loans and receivables |
| 26,076 | | 2,087 | | 28,163 |
| (868) | | (1,536) |
| (2,404) | | 25,759 |
Subtotals |
| 13,397,246 | | 1,430,648 | | 14,827,894 |
| (603,366) |
| (90,543) |
| (693,909) | | 14,133,985 |
Mortgage loans |
|
| |
| |
|
|
|
|
|
|
| |
|
Loans with mortgage finance bonds |
| 21,550 | | 1,795 | | 23,345 |
| — | | (114) |
| (114) | | 23,231 |
Endorsable mortgage mutual loans |
| 83,039 | | 7,417 | | 90,456 |
| — | | (515) |
| (515) | | 89,941 |
Other mortgage mutual loans |
| 4,563,173 | | 208,861 | | 4,772,034 |
| — | | (29,411) |
| (29,411) | | 4,742,623 |
Mortgage leasing transactions |
| 295,271 | | 12,303 | | 307,574 |
| — | | (11,718) |
| (11,718) | | 295,856 |
Other mortgage loans and receivables |
| 72,881 | | 1,634 | | 74,515 |
| — | | (329) |
| (329) | | 74,186 |
Subtotals |
| 5,035,914 | | 232,010 | | 5,267,924 |
| — |
| (42,087) |
| (42,087) | | 5,225,837 |
Consumer loans |
|
| |
| |
|
|
|
|
|
|
| |
|
Installment consumer loans |
| 1,724,931 | | 141,908 | | 1,866,839 |
| — | | (137,770) |
| (137,770) | | 1,729,069 |
Checking account debtors |
| 113,626 | | 10,383 | | 124,009 |
| — | | (8,407) |
| (8,407) | | 115,602 |
Credit card balances |
| 456,053 | | 11,571 | | 467,624 |
| — | | (18,821) |
| (18,821) | | 448,803 |
Consumer leasing transactions |
| 1,279 | | 188 | | 1,467 |
| — | | (182) |
| (182) | | 1,285 |
Other consumer loans and receivables |
| 32,033 | | 1,281 | | 33,314 |
| — | | (2,626) |
| (2,626) | | 30,688 |
Subtotals |
| 2,327,922 | | 165,331 | | 2,493,253 |
| — |
| (167,806) |
| (167,806) | | 2,325,447 |
Totals |
| 20,761,082 | | 1,827,989 | | 22,589,071 |
| (603,366) |
| (300,436) |
| (903,802) | | 21,685,269 |
| | | | | | | | | | | | | | |
| | | | | | | ||||||||
| | Assets before allowances |
| Allowances | | | ||||||||
| | Normal | | Impaired | | | | Individual | | Group | | | | Net assets |
As of December 31, 2019 | | portfolio | | portfolio | | Totals | | allowances | | allowances | | Totals | | |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Commercial loans |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Commercial loans |
| 11,404,955 |
| 883,855 |
| 12,288,810 |
| (350,331) |
| (55,621) |
| (405,952) | | 11,882,858 |
Foreign trade loans |
| 1,082,539 |
| 26,630 |
| 1,109,169 |
| (72,506) |
| (1,321) |
| (73,827) | | 1,035,342 |
Checking accounts debtors |
| 142,076 |
| 12,200 |
| 154,276 |
| (5,593) |
| (4,823) |
| (10,416) | | 143,860 |
Factoring transactions |
| 220,554 |
| 550 |
| 221,104 |
| (3,231) |
| (331) |
| (3,562) | | 217,542 |
Student loans |
| 595,271 |
| 78,692 |
| 673,963 |
| — |
| (19,052) |
| (19,052) | | 654,911 |
Commercial leasing transactions |
| 948,297 |
| 56,912 |
| 1,005,209 |
| (11,832) |
| (4,470) |
| (16,302) | | 988,907 |
Other commercial loans and receivables |
| 24,251 |
| 3,004 |
| 27,255 |
| (691) |
| (1,998) |
| (2,689) | | 24,566 |
Subtotals |
| 14,417,943 |
| 1,061,843 |
| 15,479,786 |
| (444,184) |
| (87,616) |
| (531,800) | | 14,947,986 |
Mortgage loans |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Loans with mortgage finance bonds |
| 27,771 |
| 2,498 |
| 30,269 |
| — |
| (157) |
| (157) | | 30,112 |
Endorsable mortgage mutual loans |
| 95,838 |
| 8,012 |
| 103,850 |
| — |
| (648) |
| (648) | | 103,202 |
Other mortgage mutual loans |
| 4,183,069 |
| 201,478 |
| 4,384,547 |
| — |
| (31,452) |
| (31,452) | | 4,353,095 |
Mortgage leasing transactions |
| 318,777 |
| 17,810 |
| 336,587 |
| — |
| (12,879) |
| (12,879) | | 323,708 |
Other mortgage loans and receivables |
| 18,819 |
| 1,969 |
| 20,788 |
| — |
| (156) |
| (156) | | 20,632 |
Subtotals |
| 4,644,274 |
| 231,767 |
| 4,876,041 |
| — |
| (45,292) |
| (45,292) | | 4,830,749 |
Consumer loans |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Installment consumer loans |
| 1,869,870 |
| 135,168 |
| 2,005,038 |
| — |
| (155,642) |
| (155,642) | | 1,849,396 |
Checking account debtors |
| 187,794 |
| 18,944 |
| 206,738 |
| — |
| (16,179) |
| (16,179) | | 190,559 |
Credit card balances |
| 518,471 |
| 19,270 |
| 537,741 |
| — |
| (27,784) |
| (27,784) | | 509,957 |
Consumer leasing transactions |
| 2,943 |
| 170 |
| 3,113 |
| — |
| (227) |
| (227) | | 2,886 |
Other consumer loans and receivables |
| 43,986 |
| 1,613 |
| 45,599 |
| — |
| (3,494) |
| (3,494) | | 42,105 |
Subtotals |
| 2,623,064 |
| 175,165 |
| 2,798,229 |
| — |
| (203,326) |
| (203,326) | | 2,594,903 |
Totals |
| 21,685,281 |
| 1,468,775 |
| 23,154,056 |
| (444,184) |
| (336,234) |
| (780,418) | | 22,373,638 |
Unimpaired portfolio: This includes individual debtors in the Normal portfolio (A1 to A6) and the Substandard portfolio (B1 to B2). For group assessed loans, it includes the Normal portfolio.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 92 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 10 – Loans and accounts receivable from customers, continued
Impaired portfolio: This includes individually assessed debtors in the Non-compliant portfolio (C1 to C6) and the Substandard portfolio (B3 to B4). For group assessed loans, it includes the Non-compliant portfolio.
Guarantees received by the Bank to secure collections of rights reflected in its loan portfolios are real 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). As of December 31, 2020 and 2019, the fair value of guarantees received corresponds to 145.15% and 137.51 of the assets guaranteed, respectively.
In the case of mortgage collaterals, as of December 31, 2020 and 2019, the fair value of the guarantees received corresponds to 96.88% and 89.87% of the outstanding receivable balance on loans, respectively.
The Bank finances its customers’ purchases of assets, including real estate and other personal property, through financial lease agreements that are presented within this item. As of December 31, 2020, the Bank recorded MCh$877,510 in financial leases for non-real estate assets (MCh$628,823 as of December 31, 2019) and MCh$372,827 in financial leases for real estate assets (MCh$716,401 as of December 31, 2019).
Collaterals: As of December 31, 2020, the bank constituted guarantees in favor of the Central Bank of Chile (BCCH), endorsing loans from the commercial portfolio as requirement in order to use the lines of Credit Facility Conditional to the Increase in Loans (FCIC) and the Liquidity Credit Line (LCL). The pledged loans have an outstanding principal balance of Ch $ 1,766,997 million. Additional disclosures on FCIC and LCL were included in Notes 19 and 23, letter e).
b)Portfolio characteristics
The following table details the Bank's loan portfolio (before allowances) as of December 31, 2020 and 2019, by the customer's industry sector:
| | | | | | | | | | | |
| | | | | | | | | | | |
| Local loans | | Foreign loans | | Totals | | Percentages | ||||
| As of December 31, | | As of December 31, | | As of December 31, | | As of December 31, | ||||
| 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 |
| MCh$ | MCh$ | | MCh$ | MCh$ | | MCh$ | MCh$ | | % | % |
Commercial Loans | | | | | | | | | | | |
Manufacturing | 973,913 | 988,739 | | 87,253 | 111,000 | | 1,061,166 | 1,099,739 | | 4.69% | 4.75% |
Mining | 336,354 | 292,263 | | 198,635 | 259,352 | | 534,989 | 551,615 | | 2.37% | 2.38% |
Electricity, gas and water | 694,970 | 685,749 | | 404,875 | 439,792 | | 1,099,845 | 1,125,541 | | 4.87% | 4.86% |
Agriculture and livestock | 328,563 | 309,648 | | 166,191 | 174,295 | | 494,754 | 483,943 | | 2.19% | 2.09% |
Forestry and wood extraction | 51,348 | 48,192 | | 4,674 | 5,136 | | 56,022 | 53,328 | | 0.25% | 0.23% |
Fishing | 31,461 | 42,397 | | 4,273 | 4,505 | | 35,734 | 46,902 | | 0.16% | 0.20% |
Transport | 498,450 | 478,737 | | 88,563 | 80,534 | | 587,013 | 559,271 | | 2.59% | 2.41% |
Communications | 52,911 | 25,209 | | 3,254 | 9,717 | | 56,165 | 34,926 | | 0.25% | 0.15% |
Construction | 1,536,686 | 1,757,874 | | 300,997 | 348,955 | | 1,837,683 | 2,106,829 | | 8.14% | 9.10% |
Commerce | 1,618,660 | 1,439,969 | | 592,492 | 689,210 | | 2,211,152 | 2,129,179 | | 9.79% | 9.20% |
Services | 2,761,121 | 2,864,307 | | 839,930 | 1,080,264 | | 3,601,051 | 3,944,571 | | 15.94% | 17.04% |
Others | 2,227,031 | 2,294,517 | | 1,025,289 | 1,049,425 | | 3,252,320 | 3,343,942 | | 14.40% | 14.44% |
Subtotals | 11,111,468 | 11,227,601 | | 3,716,426 | 4,252,185 | | 14,827,894 | 15,479,786 | | 65.64% | 66.85% |
Mortgage Loans | 4,636,151 | 4,211,094 | | 631,773 | 664,947 | | 5,267,924 | 4,876,041 | | 23.32% | 21.06% |
Consumer Loans | 1,707,058 | 1,923,745 | | 786,195 | 874,484 | | 2,493,253 | 2,798,229 | | 11.04% | 12.09% |
Totals | 17,454,677 | 17,362,440 | | 5,134,394 | 5,791,616 | | 22,589,071 | 23,154,056 | | 100% | 100% |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 93 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 10 – Loans and accounts receivable from customers, continued
c)Allowances
Movements in allowances for loan losses during the years ended December 31, 2020 and 2019, are as follows:
| | | | | | |
| | | | | | |
| | Individual | | Group | | |
| | allowances | | allowances | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
Balances as of January 1, 2020 |
| 444,184 | | 336,234 |
| 780,418 |
Portfolio charge-offs |
| |
| |
| |
Commercial loans |
| (101,121) | | (35,500) |
| (136,621) |
Mortgage loans |
| — | | (9,006) |
| (9,006) |
Consumer loans |
| — | | (153,187) |
| (153,187) |
Total charge-offs |
| (101,121) |
| (197,693) |
| (298,814) |
Allowances established |
| 411,540 | | 298,350 |
| 709,890 |
Allowances released |
| (134,114) | | (122,482) |
| (256,596) |
Allowances used |
| — | | (2,123) |
| (2,123) |
Exchange differences |
| (17,123) | | (11,850) |
| (28,973) |
Balances as of December 31, 2020 |
| 603,366 |
| 300,436 |
| 903,802 |
| | | | | | |
| | | | | | |
| | Individual | | Group | | |
| | allowances | | allowances | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
Balances as of January 1, 2019 |
| 400,736 |
| 267,977 |
| 668,713 |
Portfolio charge-offs |
|
|
|
|
|
|
Commercial loans |
| (80,186) |
| (36,111) |
| (116,297) |
Mortgage loans |
| — |
| (7,381) |
| (7,381) |
Consumer loans |
| — |
| (160,700) |
| (160,700) |
Total charge-offs |
| (80,186) |
| (204,192) |
| (284,378) |
Allowances established |
| 299,980 |
| 374,501 |
| 674,481 |
Allowances released |
| (163,789) |
| (112,803) |
| (276,592) |
Allowances used |
| (20,924) |
| — |
| (20,924) |
Exchange differences |
| 8,367 |
| 10,751 |
| 19,118 |
Balances as of December 31, 2019 |
| 444,184 |
| 336,234 |
| 780,418 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 94 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 10 – Loans and accounts receivable from customers, continued
In addition to these allowances for loan losses, the Bank establishes country risk provisions to hedge foreign transactions and additional provisions approved by the Board of Directors, which are presented within liabilities in Note 21 Provisions. Therefore, total credit risk provisions established for different concepts are detailed as follows:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
| Notes | MCh$ | | MCh$ |
Individual | 10 | 603,366 | | 444,184 |
Group | 10 | 300,436 | | 336,234 |
Contingent loans (i) | 21 | 44,049 | | 44,947 |
Additional | 21 | 137,848 | | — |
Country risk (ii) | 21 | 5,072 | | 5,604 |
Interbank loans | 9 | 16 | | 430 |
Totals | | 1,090,787 | | 831,399 |
(i) In accordance with the Compendium of Accounting Standards, mainly chapters B-1 and B-3, the Bank has calculated provisions for contingent loans. They are recorded in liabilities, specifically within "provisions" (Note 21, letter a)
(ii) Country risk is necessary to cover the risk assumed by maintaining and committing resources to a customer in a foreign country. These provisions are on the basis of country risk ratings made by the Bank in accordance with Chapter 7-13 of the CAS (Note 21, letter b).
d) Portfolio sales
As of December 31, 2019, the Bank engaged in sales of its current and written-off portfolio, recognizing a profit of Ch $ 6,004 million. During fiscal year 2020, no transactions of this nature were recorded. See detail in section d.1).
Additionally, as of December 31, 2020, the Bank performed portfolio sales of loans with state guarantee (Law No. 20,027) which generated profit of $ 6,476 million ($ 8,584 million in 2019). The profit is net of provisions which amount to Ch $ 2,123 million. See details in section d.2).
These results are included in the caption “Net income from financial operations” in the Consolidated Income Statement for the year (see Note 27).
d.1) Sales of current and charged-off portfolios
As of December 31, 2019, the Bank and its subsidiaries derecognized 100% of its sold portfolio, thus complying with the requirements of the accounting policy for derecognizing financial assets and liabilities set in Note 1, letter l), point iv) of the annual Consolidated Financial Statements. The main sales during 2020 and 2019 were loans related to Law 20,027, which are detailed in point d.2).
| | | | | | | | | | | |
| | | | | | | | | | | |
| As of December 31, 2020 | | As of December 31, 2019 | ||||||||
Type of portfolio | Loan value | Allowances | Sales price | Exchange differences | Net effect on income | | Loan value | Allowances | Sales price | Exchange differences | Net effect on income |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Current | - | - | - | - | - | | 14,231 | (14,113) | 4,130 | (207) | 3,805 |
Charged-off | - | - | - | - | - | | - | - | 2,199 | - | 2,199 |
Totals | - | - | - | - | - | | 14,231 | (14,113) | 6,329 | (207) | 6,004 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 95 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 10 – Loans and accounts receivable from customers, continued
d.2) CAE portfolio sales
For the year ended on December 31, 2020 gains recognized from sales of portfolio amounts to MCh$6,476 (MCh$8,584 for the year ended on December 31, 2019), these amounts are presented in the Consolidated Statement of Income under the line item “Net income from financial operations”. The portion to be deferred amounts to MCh$6,717 as of December 31, 2020 (MCh$9,079 as of December 31, 2019) and is recognized on income according to its deferral period, recognizing the effective rate equivalent of these operations, according to IAS 39.
| | | | | | | | | | | |
| | | | | | | | | | | |
| As of December 31, 2020 | | As of December 31, 2019 | ||||||||
Type of portfolio | Loan value | Allowances | Sales price | Unearned income | Net effect on income | | Loan value | Allowances | Sales price | Unearned income | Net effect on income |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
CAE portfolio | 81,697 | (2,123) | 92,767 | 6,717 | 6,476 | | 103,201 | (849) | 120,015 | 9,079 | 8,584 |
Circular No. 3,548 (issued in March 2014) specifies the treatment in order to present the effect recorded on profit and loss originated from sales of loan portfolio, gain or losses generated from the sale of loans (interbank loans and loans and accounts receivable from customers), are determined by the difference between the price of the sold portfolio (or the fair value of the instruments received as consideration) and the carrying value of the portfolio (net of allowances) of the transferred assets, recognized at the date of the sale. Income from the sale of the charged-off portfolio will also be included in this line and not as a recovery of the charged-off portfolio.
e) | Leasing |
The maturity analysis of financial leases as of December 31, 2020 and 2019, is detailed as follows:
| | | | | | | | |
| | | | | | | | |
| Total receivable | | Unearned interest | | Net balance receivable | |||
| As of December 31, | | As of December 31, | | As of December 31, | |||
| 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 |
| MCh$ | MCh$ | | MCh$ | MCh$ | | MCh$ | MCh$ |
Up to 1 month | 30,141 | 13,793 | | (144) | (7) | | 29,997 | 13,786 |
More than 1 month until 3 months | 3,400 | 4,033 | | (86) | (54) | | 3,314 | 3,979 |
More than 3 months until 1 year | 38,446 | 39,184 | | (1,525) | (1,839) | | 36,921 | 37,345 |
More than 1 year until 3 years | 189,921 | 263,280 | | (11,253) | (23,286) | | 178,668 | 239,994 |
More than 3 years until 6 years | 338,156 | 413,066 | | (42,164) | (71,543) | | 295,992 | 341,523 |
More than 6 years | 1,121,698 | 1,172,198 | | (416,252) | (463,916) | | 705,446 | 708,282 |
Totals | 1,721,762 | 1,905,554 | | (471,424) | (560,645) | | 1,250,338 | 1,344,909 |
| | |
| | |
| Total receivable | |
| As of December 31, | |
| 2020 | 2019 |
| MCh$ | MCh$ |
Commercial leasing | 941,297 | 1,005,209 |
Mortgage leasing | 307,574 | 336,587 |
Consumer leasing | 1,467 | 3,113 |
Totals | 1,250,338 | 1,344,909 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 96 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 11 – Investment Instruments
a)Investment instruments
As of December 31, 2020 and 2019, the detail of instruments available for sale and held to maturity is as follows:
| | | | | | | | | | | | |
| | | | | ||||||||
| | As of December 31, 2020 | | As of December 31, 2019 | ||||||||
| | Available | | Held | | | | Available | | Held | | |
| | for sale | | to maturity | | Totals | | for sale | | to maturity | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Securities quoted in active markets |
|
|
|
|
|
|
|
|
|
|
|
|
Chilean Central Bank and Government securities |
|
|
|
|
|
|
|
|
|
|
|
|
Chilean Central Bank instruments |
| 1,170,841 | | — | | 1,170,841 |
| 477,900 |
| — |
| 477,900 |
Chilean Treasury bonds |
| 1,783,765 | | — | | 1,783,765 |
| 1,609,397 |
| — |
| 1,609,397 |
Other government securities |
| 101,573 | | — | | 101,573 |
| 86,981 |
| — |
| 86,981 |
Other local institutions financial instruments |
| | | | | |
|
|
|
|
|
|
Time deposits in local banks |
| 14,856 | | — | | 14,856 |
| 412,962 |
| — |
| 412,962 |
Mortgage finance bonds |
| 30 | | — | | 30 |
| 41 |
| — |
| 41 |
Chilean financial institutions bonds |
| 277,163 | | — | | 277,163 |
| 118,583 |
| — |
| 118,583 |
Other local financial investments |
| 4,616 | | — | | 4,616 |
| 4,990 |
| — |
| 4,990 |
Foreign institutions financial instruments |
| | | | | |
|
|
|
|
|
|
Foreign Governments and Central Banks financial instruments |
| 217,185 | | — | | 217,185 |
| 165,927 |
| — |
| 165,927 |
Other foreign financial instruments |
| 394,691 | | 111,643 | | 506,334 |
| 716,423 |
| 115,682 |
| 832,105 |
Investments not quoted in active markets |
| | | | | |
|
|
|
|
|
|
Corporate bonds |
| — | | — | | — |
| — |
| — |
| — |
Other financial instruments |
| — | | — | | — |
| — |
| — |
| — |
Totals |
| 3,964,720 |
| 111,643 |
| 4,076,363 |
| 3,593,204 |
| 115,682 |
| 3,708,886 |
As of December 31, 2020, 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$1,205,711 As of December 31, 2019, the amount of instruments with these characteristics is MCh$266,779 (see Note 5).
As of December 31, 2020, the portfolio of financial investments available-for-sale includes unrealized gains for MCh$39,505 (MCh$44.123 as of December 31, 2019), presented under “Valuation accounts” in Equity, distributed between MCh$29,993 (MCH$35.170 as of December 31, 2019) attributable to equity holders of the Bank and MCh$9,512 (MCh$8.953 as of December 31, 2019) attributable to non-controlling interest.
As of December 31, 2020, the available for sale portfolio includes financial instruments endorsed to guarantee the credits obtained by the bank through the use of the Loan Increase Conditional Credit Facility (FCIC), granted by the Central Bank of Chile in response to the financial tensions generated by Covid-19, in the amount of Ch $ 319,213 million. Further disclosures on FCIC are included on Note 19 and Note 23.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 97 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 11 – Investment Instruments, continued
Investments instrument do not present evidence of impairment as of December 31, 2020 and 2019.
The detail of investments quoted in non-active markets, classified as available for sale have been recorded at their fair value.
Itaú Corpbanca reviewed the unrealized losses of its investments instruments as of December 31, 2020 and 2019, concluding that they were only temporary impairments, therefore, they do not imply adjustments to profit and loss for the year.
c)Unrealized gains and losses of the available for sale portfolio
Unrealized gains and losses of the available for sale portfolio as of December 31, 2020 and 2019 are detailed as follows:
| | | | | | | | |
| | | ||||||
| | As of December 31, 2020 | ||||||
| | Amortized | | Unrealized | | Fair | ||
| | cost | | Gain | | Losses | | Value |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Securities quoted in active markets |
|
|
|
|
|
|
|
|
Chilean Central Bank and Government securities |
|
|
|
|
|
|
|
|
Chilean Central Bank instruments |
| 1,171,350 | | 29 | | (538) | | 1,170,841 |
Chilean Treasury bonds |
| 1,781,626 | | 8,989 | | (6,850) | | 1,783,765 |
Other government securities |
| 96,924 | | 4,409 | | 240 | | 101,573 |
Other local institutions financial instruments |
| | | | | | | |
Time deposits in local banks |
| 14,622 | | 252 | | (18) | | 14,856 |
Mortgage finance bonds |
| 29 | | 1 | | — | | 30 |
Chilean financial institutions bonds |
| 273,028 | | 4,135 | | — | | 277,163 |
Other local financial investments |
| 3,189 | | 1,427 | | — | | 4,616 |
Foreign institutions financial instruments |
| | | | | | | |
Foreign Governments and Central Banks financial instruments |
| 193,389 | | 23,848 | | (52) | | 217,185 |
Other foreign financial instruments |
| 391,058 | | 3,724 | | (91) | | 394,691 |
Investments not quoted in active markets |
| | | | | | | |
Corporate bonds |
| — | | — | | — | | — |
Other financial instruments |
| — | | — | | — | | — |
Totals |
| 3,925,215 |
| 46,814 |
| (7,309) |
| 3,964,720 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 98 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 11 - Investment Instruments, continued
| | | | | | | | |
| | | ||||||
| | As of December 31, 2019 | ||||||
| | Amortized | | Unrealized | | Fair | ||
| | cost | | Gain | | Losses | | Value |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Securities quoted in active markets |
|
|
|
|
|
|
|
|
Chilean Central Bank and Government securities |
|
|
|
|
|
|
|
|
Chilean Central Bank instruments |
| 477,127 |
| 2,023 |
| (1,250) |
| 477,900 |
Chilean Treasury bonds |
| 1,593,550 |
| 19,865 |
| (4,018) |
| 1,609,397 |
Other government securities |
| 86,454 |
| 626 |
| (99) |
| 86,981 |
Other local institutions financial instruments |
|
|
|
|
|
|
|
|
Time deposits in local banks |
| 412,936 |
| 85 |
| (59) |
| 412,962 |
Mortgage finance bonds |
| 40 |
| 1 |
| — |
| 41 |
Chilean financial institutions bonds |
| 117,641 |
| 1,008 |
| (66) |
| 118,583 |
Other local financial investments |
| 3,189 |
| 1,801 |
| — |
| 4,990 |
Foreign institutions financial instruments |
|
|
|
|
|
|
|
|
Foreign Governments and Central Banks financial instruments |
| 160,481 |
| 5,520 |
| (74) |
| 165,927 |
Other foreign financial instruments |
| 697,663 |
| 18,965 |
| (205) |
| 716,423 |
Investments not quoted in active markets |
|
|
|
|
|
|
|
|
Corporate bonds |
| ��� |
| — |
| — |
| — |
Other financial instruments |
| — |
| — |
| — |
| — |
Totals |
| 3,549,081 |
| 49,894 |
| (5,771) |
| 3,593,204 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 99 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 12 – Investments in Companies
As of December 31, 2020 and 2019 detail of investments in companies is presented below:
a) | Investments recognized using the equity method (associates): |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | As of December 31, 2020 | | As of December 31, 2019 | ||||||||
| | | | Investment | | | | | | Investment | | |
Company | | Participation | | value | | Income | | Participation | | value | | Income |
|
| % |
| MCh$ | | MCh$ |
| % |
| MCh$ | | MCh$ |
Nexus S.A. (*) |
| 14.8148% | | 1,278 | | (1,341) |
| 12.9000% | | 2,281 |
| 924 |
Transbank S.A. |
| 8.7188% | | 5,871 | | (1,453) |
| 8.7188% | | 7,324 |
| 3,708 |
Totals |
| |
| 7,149 | | (2,794) |
| |
| 9,605 |
| 4,632 |
(*)On January 22, 2020, Itaú Corpbanca acquired 79,577 shares of Nexus S.A., corresponding to a 1.9148% participation over the total equity. With this transaction, the Bank's total participation increased to 14.8148%.
b) | Summary of financial information of associated entities as of and for the year ended December 31, 2020 and 2019: |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| As of December 31, 2020 | | As of December 31, 2019 | ||||||||||||
| Assets | | Liabilities | | Equity | | Net income for the year | | Assets | | Liabilities | | Equity | | Net income for the year |
| MCh$ | | MCh$ | | MCh$ | | MCh$ |
| MCh$ | | MCh$ | | MCh$ | | MCh$ |
Nexus S.A. | 19,210 | | 10,585 | | 17,676 | | (9,051) |
| 31,147 | | 13,471 | | 17,659 | | 17 |
Transbank S.A. | 1,006,137 | | 938,800 | | 84,007 | | (16,670) |
| 1,217,448 | | 1,133,441 | | 70,605 | | 13,402 |
Totals | 1,025,347 | | 949,385 | | 101,683 | | (25,721) |
| 1,248,595 | | 1,146,912 | | 88,264 | | 13,419 |
c) | Shares or rights in other companies |
| | | | | | | | |
| | | | | ||||
| | As of December 31, | ||||||
Company | | 2020 | | 2019 | ||||
|
| % |
| MCh$ |
| % |
| MCh$ |
Combanc S.A. |
| 8.1848 |
| 305 |
| 8.1848 | | 305 |
Redbanc S.A. |
| 2.5043 |
| 110 |
| 2.5043 |
| 110 |
Sociedad Interbancaria de Depósitos de Valores S.A. |
| 9.4021 |
| 132 |
| 9.4021 |
| 132 |
Imerc OTC S.A. |
| 8.6624 |
| 1,012 |
| 8.6624 |
| 1,012 |
A.C.H. Colombia (*) |
| 4.2100 |
| 192 |
| 4.2100 |
| 211 |
Redeban Multicolor S.A. (*) |
| 1.6000 |
| 236 |
| 1.6000 |
| 259 |
Cámara de Compensación Divisas de Colombia S.A. (*) |
| 6.2056 |
| 86 |
| 6.2056 |
| 94 |
Cámara de Riesgo Central de Contraparte S.A. (**) |
| — |
| — |
| 2.4300 |
| 174 |
Bolsa de Valores de Colombia (*) |
| 0.6700 |
| 629 |
| 0.6700 |
| 691 |
Credibanco (*) |
| 6.3662 |
| 2,116 |
| 6.3662 |
| 2,326 |
Patrimonio Autónomo Fiducredicorp (Comisionista) (*) |
| 5.2630 |
| 16 |
| 5.2630 |
| 19 |
Totals |
| |
| 4,834 |
|
|
| 5,333 |
(*)Correspond to investments in other companies held by subsidiaries established in Colombia.
(**) During August 2020, Cámara de Riesgo Central de Contraparte S.A. participation was sold, corresponding to 2.43% of the total equity, generating a profit of Ch$447 million recorded in income from investments in companies.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 100 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 12 – Investments in Companies, continued
d) | During the years ended December 31, 2020 and 2019, the Bank received dividends, according to the following detail: |
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Dividends received |
| 1,008 |
| 1,172 |
Totals |
| 1,008 |
| 1,172 |
e) | Movements on investments in companies for the years ended December 31, 2020 and December 31, 2019, are as follows: |
| | | | |
| | | | |
|
| As of December 31, | ||
| | 2020 | | 2019 |
| | MCh$ | | MCh$ |
Balances as of January 1, |
| 14,938 |
| 10,555 |
Acquisition of investments (*) |
| 338 |
| — |
Sale of investments (**) (***) |
| (174) |
| (951) |
Initial application of the equity method and participation on income |
| (2,794) |
| 4,933 |
Exchange differences |
| (325) |
| 401 |
Totals |
| 11,983 |
| 14,938 |
(*)Corresponds to the participation increase in Nexus S.A. See letter a) on previous page.
(**) In February 2019, 100% of the shares held in Servibanca – Tecnibanca were sold, these shares represented 4.53% of the total equity of the company, the seeling price was MCh$1,818, generating a profit of MCh$1,028 recorded in income from investments in companies.
(***) In 2020 the participation in Cámara de Riesgo Central de Contraparte S.A. was sold. See previous page, letter b).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 101 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
a) | Composition of intangibles assets as of December 31, 2020 and 2019 is as follows: |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
|
| |
| Remaining |
| Net assets as |
| |
| |
| Net assets as |
| | Useful life | | amortization | | of January 1, | | | | Accumulated | | of December 31, |
Items | | years | | years | | 2020 | | Gross balances | | amortization | | 2020 |
| | N° | | N° | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Computer equipment system or software | | 5 | | 4 | | 169,991 | | 221,070 | | (94,407) | | 126,663 |
IT projects and licenses |
| 2 | | 2 |
| 14,944 |
| 13,484 |
| (654) |
| 12,830 |
Assets generated in business combination: |
| | | |
| 1,431,614 |
| 681,556 |
| (103,053) |
| 578,503 |
Goodwill |
| — | | — |
| 1,194,331 |
| 492,512 |
| — |
| 492,512 |
Trademarks |
| 10 | | 5 |
| 31,898 |
| 51,037 |
| (24,243) |
| 26,794 |
Customer relationship |
| 10 | | 5 |
| 63,317 |
| 26,371 |
| (12,526) |
| 13,845 |
Core deposits |
| 8 | | 3 |
| 142,068 |
| 111,636 |
| (66,284) |
| 45,352 |
Other projects |
| 10 | | 4 |
| 1,196 |
| 4,055 |
| (3,368) |
| 687 |
Totals |
|
|
|
|
| 1,617,745 |
| 920,165 |
| (201,482) |
| 718,683 |
| | | | | | | | | | | | |
|
| |
| |
| |
| |
| |
| |
| | |
| Remaining |
| Net assets as |
| |
| |
| Net assets as |
| | Useful life | | amortization | | of January 1, | | | | Accumulated | | of December 31, |
Items | | years | | years | | 2019 | | Gross balances | | amortization | | 2019 |
| | N° | | N° | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Computer equipment system or software | | 6 | | 4 | | 151,840 | | 304,448 | | (134,457) | | 169,991 |
IT projects and licenses |
| 7 |
| 6 |
| 12,614 |
| 43,104 |
| (28,160) |
| 14,944 |
Assets generated in business combination: |
|
|
|
|
| 1,448,859 |
| 1,588,079 |
| (156,465) |
| 1,431,614 |
Goodwill |
| — |
| — |
| 1,178,235 |
| 1,194,331 |
| — |
| 1,194,331 |
Trademarks |
| 10 |
| 7 |
| 37,002 |
| 51,459 |
| (19,561) |
| 31,898 |
Customer relationship |
| 12 |
| 9 |
| 69,259 |
| 98,268 |
| (34,951) |
| 63,317 |
Core deposits |
| 9 |
| 6 |
| 164,363 |
| 244,021 |
| (101,953) |
| 142,068 |
Other projects |
| 10 |
| 4 |
| 494 |
| 4,055 |
| (2,859) |
| 1,196 |
Totals |
|
|
|
|
| 1,613,807 |
| 1,939,686 |
| (321,941) |
| 1,617,745 |
b) | Movements on gross balances of intangible assets as of December 31, 2020 and 2019 are as follows: |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
|
| Computer |
| |
| Assets generated |
| |
| |
| |
| | equipment system | | IT projects | | in business | | | | Other | | |
| | or software | | and licenses | | combination | | Goodwill | | projects | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2020 | | 304,448 | | 43,104 | | 393,748 | | 1,194,331 | | 4,055 | | 1,939,686 |
Acquisitions | | 43,747 | | 12,002 | | — | | — | | — | | 55,749 |
Disposals for the year | | (47,746) | | (8,388) | | — | | — | | — | | (56,134) |
Impairment losses (1) (2) (3) | | (67,363) | | (32,334) | | (195,596) | | (694,936) | | — | | (990,229) |
Exchange differences |
| (12,016) | | (900) | | (9,108) | | (6,883) | | — | | (28,907) |
Balances as of December 31, 2020 |
| 221,070 | | 13,484 | | 189,044 | | 492,512 | | 4,055 | | 920,165 |
(1) Impairment loss on "Computer equipment software or system" and "computer projects and licenses" arises from the integration the systems in Chile; mainly due to the derecognition of the systems from Corpbanca, which have an effect on the gross value of the asset for MCh$59,525 and MCh$28,099 on accumulated amortization, generating a loss effect of MCh$31,426 on profit, and for impairment of systems and software recognized in Colombia, which have an effect on the gross value of the asset of MCh$(7,838) and MCh$3,513 in accumulated amortization, generating an effect on income of MCh$(4,325). Additionally, an impairment is recognized in systems integration projects, which have an effect on the gross asset value of Ch$32,334million and Ch$29,236 million in accumulated amortization, generating a loss effect of Ch$3,098 in profit.
(2) Impairment loss on intangible assets generated in business combinations recognized on UGE Colombia had a net impact of Ch$113,911 million, which is broken down between an effect on the gross balance of Ch$195,596 million and an effect on the accumulated amortization of Ch$81,685 million. Itaú Corpbanca Colombia recognized an impairment for the gross value of the asset of Ch$193,761 million and Ch$80,623 million in accumulated amortization, generating a loss effect in result for Ch$113,138 million. Itaú Corredor de Seguro Colombia recognized an impairment for the gross asset value of Ch$1,835 million and Ch$1,062 million in accumulated amortization, generating a loss effect of Ch$773 million.
(3) The impairment on Goodwill is allocated between the Chile CGU in Ch$448,273 million and the Colombia CGU in Ch$246,663 million.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 102 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 13 – Intangible Assets, continued
| | | | | | | | | | | | |
| | | | | | | | | | | | |
|
| Computer |
| |
| Assets generated |
| |
| |
| |
| | equipment system | | IT projects | | in business | | | | Other | | |
| | or software | | and licenses | | combination | | Goodwill | | projects | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2019 | | 263,179 | | 42,601 | | 383,207 | | 1,178,235 | | 3,645 | | 1,870,867 |
Acquisitions | | 53,140 | | 80 | | — | | — | | — | | 53,220 |
Reclassifications | | (9,752) | | 9,752 | | — | | — | | — | | — |
Exchange difference |
| 5,308 |
| 20 |
| 12,876 |
| 16,096 |
| — |
| 34,300 |
Others |
| (7,427) |
| (9,349) |
| (2,335) |
| — |
| 410 |
| (18,701) |
Balances as of December 31, 2019 |
| 304,448 |
| 43,104 |
| 393,748 |
| 1,194,331 |
| 4,055 |
| 1,939,686 |
c) | Movements on accumulated amortization of intangible assets for the years ended December 31, 2020 and 2019 are as follows: |
| | | | | | | | | | |
| | | | | | | | | | |
|
| Computer |
| |
| Assets generated |
| |
| |
| | equipment system | | IT projects | | in business | | Other | | |
| | or software | | and licenses | | combination | | projects | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2020 | | (134,457) | | (28,160) | | (156,465) | | (2,859) | | (321,941) |
Amortization for the year | | (40,632) | | (1,748) | | (31,736) | | (509) | | (74,625) |
Disposals for the year | | 44,490 | | — | | — | | — | | 44,490 |
Impairment losses (*) (**) | | 31,612 | | 29,236 | | 81,685 | | — | | 142,533 |
Exchange differences |
| 4,580 | | 18 | | 3,463 | | — | | 8,061 |
Balances as of December 31, 2020 |
| (94,407) | | (654) | | (103,053) | | (3,368) | | (201,482) |
(*) Impairment loss on "Computer equipment software or system" and "computer projects and licenses" arises from the integration the systems in Chile; mainly due to the derecognition of the systems from Corpbanca, which have an effect on the gross value of the asset for MCh$59,525 and MCh$28,099 on accumulated amortization, generating a loss effect of MCh$31,426 on profit, and for impairment of systems and software recognized in Colombia, which have an effect on the gross value of the asset of MCh$(7,838) and MCh$3,513 in accumulated amortization, generating an effect on income of MCh$(4,325). Additionally, an impairment is recognized in systems integration projects, which have an effect on the gross asset value of Ch$32,334million and Ch$29,236 million in accumulated amortization, generating a loss effect of Ch$3,098 in profit.
(**) Impairment loss on intangible assets generated in business combinations recognized on UGE Colombia had a net impact of Ch$113,911 million, which is broken down between an effect on the gross balance of Ch$195,596 million and an effect on the accumulated amortization of Ch$81,685 million. Itaú Corpbanca Colombia recognized an impairment for the gross value of the asset of Ch$193,761 million and Ch$80,623 million in accumulated amortization, generating a loss effect in result for Ch$113,138 million. Itaú Corredor de Seguro Colombia recognized an impairment for the gross asset value of Ch$1,835 million and Ch$1,062 million in accumulated amortization, generating a loss effect of Ch$773 million.
| | | | | | | | | | |
| | | | | | | | | | |
|
| Computer |
| |
| Assets generated |
| |
| |
| | equipment system | | IT projects | | in business | | Other | | |
| | or software | | and licenses | | combination | | projects | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2019 | | (111,339) | | (29,987) | | (112,583) | | (3,151) | | (257,060) |
Amortization for the year | | (30,363) | | (2,809) | | (40,816) | | (152) | | (74,140) |
Disposals | | 3 |
| — |
| — |
| — |
| 3 |
Exchange differences |
| (2,995) |
| (14) |
| (4,648) |
| — |
| (7,657) |
Others |
| 10,237 |
| 4,650 |
| 1,582 |
| 444 |
| 16,913 |
Balances as of December 31, 2019 |
| (134,457) |
| (28,160) |
| (156,465) |
| (2,859) |
| (321,941) |
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 this indication exists, or when an impairment test is required, the Bank estimates the recoverable amount of the asset.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 103 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 13 – Intangible Assets, continued
As indicated in Note 3 “Significant events”, it has been identified that the behavior of the global economy has been significantly affected by several factors, including the effects of Covid-19, generating an adverse impacts in the relevant markets where Itaú Corpbanca operates (Chile, Colombia, Peru and NY), concluding that as of, there is concrete evidence of impairment as a result of the deterioration of financial indicators such as the cost of credit, portfolio growth and capital costs . As such, an impairment test was performed for the intangible assets generated in the business combination and the Cash Generating Units where Goodwill has been allocated, recognizing an impairment loss of Ch$113,911 million and Ch$694,936 million, respectively. See additional information in Note 32.
Due to the merger of the financial institutions, Itaú Corpbanca has made use of systems of both Banks in order to manage its operations entities and has established an integration plan to eliminate this duplication and generate efficiencies. In relation to this integration process, during the 2020 financial year, the migration proyect was substantially completed, and an impairment of Ch$38,849 millionhas been recognized, affecting those systems and licenses that will not continue to be used.
Restrictions
Itaú Corpbanca and its subsidiaries have no restrictions on intangible assets as of December 31, 2020 and December 31, 2019. In addition, no intangible assets have been pledged as collateral to secure the fulfillment of any obligations.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 104 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
a) | Fixed assets as of December 31, 2020 and 2019 are broken down as follows: |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Useful | | Remaining | | Net assets as | | | | | | Net assets as of |
| | life | | amortization | | of January 1 | | Gross | | Accumulated | | December 31, |
| | years | | years | | 2020 | | balances | | depreciation | | 2020 |
| | N° | | N° | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Land and buildings |
| 26 |
| 15 |
| 13,104 |
| 21,763 | | (6,198) | | 15,565 |
Equipment |
| 6 |
| 4 |
| 27,551 |
| 85,404 | | (57,754) | | 27,650 |
Others |
| 14 |
| 9 |
| 17,307 |
| 35,664 | | (22,859) | | 12,805 |
Furniture |
| | | |
| 8,879 |
| 21,203 | | (14,217) | | 6,986 |
Others |
| | | |
| 8,428 |
| 14,461 | | (8,642) | | 5,819 |
Totals |
| | | |
| 57,962 |
| 142,831 | | (86,811) | | 56,020 |
| | | | | | | | | | | | |
|
| |
| | | | | | | | | |
| | Useful | | Remaining | | Net assets as | | | | | | Net assets as of |
| | life | | amortization | | of January 1 | | Gross | | Accumulated | | December 31, |
| | years | | years | | 2019 | | balances | | depreciation | | 2019 |
| | N° | | N° | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Land and buildings |
| 27 |
| 17 |
| 43,065 |
| 17,521 | | (4,417) | | 13,104 |
Equipment |
| 6 |
| 4 |
| 32,607 |
| 81,423 | | (53,872) | | 27,551 |
Others |
| 15 |
| 11 |
| 19,892 |
| 47,748 | | (30,441) | | 17,307 |
Furniture |
| | | |
| 9,373 |
| 27,088 | | (18,209) | | 8,879 |
Others |
| | | |
| 10,519 |
| 20,660 | | (12,232) | | 8,428 |
Totals |
| | | |
| 95,564 |
| 146,692 | | (88,730) | | 57,962 |
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.
b) | Movements on gross balances of fixed assets as of December 31, 2020 and 2019, are as follows: |
| | | | | | | | |
| | | | | | | | |
|
| Land and |
| |
| |
| |
| | buildings | | Equipment | | Others | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2020 | | 17,521 | | 81,423 | | 47,748 | | 146,692 |
Acquisitions |
| 159 |
| 9,964 |
| 1,803 |
| 11,926 |
Sales and/or disposals for the year |
| — |
| (1,855) |
| (1,974) |
| (3,829) |
Impairment losses (1) (2) | | (618) | | (578) | | (9,862) | | (11,058) |
Reclassifications from assets held for sale (3) | | 5,622 | | — | | — | | 5,622 |
Exchange differences | | (921) | | (3,550) | | (1,173) | | (5,644) |
Others | | — | | — | | (878) | | (878) |
Balances as of December 31, 2020 |
| 21,763 | | 85,404 | | 35,664 | | 142,831 |
(1) Correspond to Impaired ATM equipment with a gross value of MM$53 and MM$29 on accumulated depreciation, generating a net loss of MM$24.
(2) Impairment on fixed assets due to the restructuring plan in Chile, had an effect on the gross value of the asset by MM$11,005 and MM$10,138 on accumulated depreciation, generating a loss of MM$867.
(3) Assets clasified as available for sales that came out of the sales plan in Colombia and are reclasified back to fixed assets.See note 17.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 105 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 14 - Fixed Assets, continued
Movements on gross balances of fixed assets for the year ended December 31, 2019 are as follows:
| | | | | | | | |
| | | | | | | | |
|
| Land and |
| |
| |
| |
| | buildings | | Equipment | | Others | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2019 | | 65,843 | | 80,383 | | 50,248 | | 196,474 |
Acquisitions |
| 1,505 |
| 8,503 |
| 2,488 |
| 12,496 |
Sales and/or disposals for the year |
| (1,224) |
| (4,493) |
| (4,014) |
| (9,731) |
Reclassification to right of use asset under lease agreements (*) | | (61,733) | | — | | — | | (61,733) |
Reclassification to asset held for sale (**) | | 9,863 | | — | | — | | 9,863 |
Exchange differences | | 270 | | 2,514 | | 969 | | 3,753 |
Others |
| 2,997 |
| (5,484) |
| (1,943) |
| (4,430) |
Balances as of December 31, 2019 |
| 17,521 | | 81,423 | | 47,748 | | 146,692 |
(*) Correspond to improvements in leased properties which have been reclassified to right of use asset under lease agreements as a result of Circular No. 3,465 implementation issued by the CMF on January 11, 2019 related to the adoption of IFRS 16 “Leases”. See Note 15 “Assets for right of use and lease contracts liabilities”
(**) Corresponds to properties reincorporated to buildings and land that were previously classified as held for sale by Itaú Corpbanca Colombia S.A. See Note 17 a).
c) | Movements on accumulated depreciation of fixed assets for years ended December 31, 2020 and 2019, are as follows: |
| | | | | | | | |
| | | | | | | | |
|
| Land and |
| |
| |
| |
| | buildings | | Equipment | | Others | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2020 | | (4,417) | | (53,872) | | (30,441) | | (88,730) |
Depreciation for the year |
| (631) | | (8,967) | | (4,580) |
| (14,178) |
Sales and/or disposals for the year |
| — | | 1,856 | | 1,893 |
| 3,749 |
Impairment losses (1) (2) | | 251 | | 526 | | 9,390 | | 10,167 |
Reclassifications from assets held for sale | | (1,634) | | — | | — | | (1,634) |
Exchange differences |
| 233 | | 2,703 | | 879 |
| 3,815 |
Balances as of December 31, 2020 |
| (6,198) | | (57,754) | | (22,859) | | (86,811) |
(1) Correspond to Impaired ATM equipment with a gross value of MM$5) and MM$29 on accumulated depreciation, generating a net loss of MM$24.
(2) Impairment on fixed assets due to the restructuring plan in Chile, had an effect on the gross value of the asset by MM$11,147 and MM$10,280 on accumulated depreciation, generating a loss of MM$867.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 106 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 14 - Fixed Assets, continued
| | | | | | | | |
| | | | | | | | |
|
| Land and |
| |
| |
| |
| | buildings | | Equipment | | Others | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2019 | | (22,778) | | (47,776) | | (30,356) | | (100,910) |
Depreciation for the year |
| (627) |
| (9,026) |
| (4,329) |
| (13,982) |
Sales and/or disposals for the year |
| 603 |
| 3,622 |
| 2,079 |
| 6,304 |
Reclassification to right of use asset under lease agreements (*) | | 24,813 | | — | | — | | 24,813 |
Reclassification to asset held for sale (**) | | (2,152) | | — | | — | | (2,152) |
Impairment losses | | (2) | | (11) | | (476) | | (489) |
Exchange differences | | (63) | | (2,110) | | (705) | | (2,878) |
Others |
| (4,211) |
| 1,429 |
| 3,346 |
| 564 |
Balances as of December 31, 2019 |
| (4,417) | | (53,872) | | (30,441) | | (88,730) |
(*) Corresponds to improvements in leased properties which have been reclassified to assets for the right of use assets as a result of Circular No. 3,465 issued by the CMF on January 11, 2019 related to the adoption of IFRS 16 “Leases”. See Note 15 “Assets for right of use and lease contracts liabilities”
(**) Correspond to properties reincorporated to land and buildings that were previously classified as held for sale by Itaú Corpbanca Colombia S.A.
d) Impairment
Since the health emergency, the bank had to accelerate the digital transformation as a mean to take care of both its customers and its collaborators. For this purpose, processes have been digitized, so that our clients may access their products and make use of the various services provided by the bank from our digital plataform. The bank has also permanently adopted the remote working to minimize the exposure of our collaborators to Covid 19.
One of the main effects of the pandemic has been reflected in our clients preferring to use digital channels over performing presential transactions in our branches, which has been reflected in a decrease in the flow of clients in certain branches. As a result, the Bank has initiated a restructuring plan in search of efficiencies in order to close branches that have lower customer demand, added to the Bank's choice to adopt remote working, the plan also contemplates the closure of certain offices.
Within the framework of the aforementioned restructuring plan, during this fiscal year, the Bank has recognized the impairment of certain assets associated with branches and offices which were closed during fiscal year 2020.
e) Restrictions
The Bank and its subsidiaries have no restrictions on fixed assets as of December 31, 2020 and December 31, 2019. 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 – Consolidated Financial Statements – December 31, 2020 | 107 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 15 – Assets for right of use and lease contracts liabilities
a) | Right of use asset under lease agreements |
(i) | The Bank mainly has opening contracts for its branches and corporate building. The composition of the item as of December 31, 2020 and December 31, 2019, is as follows: |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Useful | | Remaining | | Net assets | | | | | | Net assets as of |
| | life | | amortization | | as of January 1, | | Gross | | Accumulated | | December 31, |
| | years | | years | | 2020 | | balances | | depreciation | | 2020 |
| | N° | | N° | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Land and buildings |
| 7 |
| 6 |
| 167,265 |
| 195,992 |
| (50,086) |
| 145,906 |
Leasehold improvements |
| 10 |
| 5 |
| 37,118 |
| 55,055 |
| (30,460) |
| 24,595 |
Other assets |
| 3 |
| 3 |
| 176 |
| 173 |
| (71) |
| 102 |
Totals | | | | |
| 204,559 | | 251,220 | | (80,617) | | 170,603 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Useful | | Remaining | | Net assets | | | | | | Net assets as of |
| | life | | amortization | | as of January 1, | | Gross | | Accumulated | | December 31, |
| | years | | years | | 2019 | | balances | | depreciation | | 2019 |
| | N° | | N° | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Land and buildings |
| 7 |
| 7 |
| 176,795 |
| 197,065 |
| (29,800) |
| 167,265 |
Leasehold improvements |
| 10 |
| 7 |
| 36,920 |
| 71,769 |
| (34,651) |
| 37,118 |
Other assets |
| 3 |
| 3 |
| — |
| 190 |
| (14) |
| 176 |
Totals | | | | |
| 213,715 |
| 269,024 |
| (64,465) |
| 204,559 |
(ii) | Movement on gross balances of right of use assets for the year ended on December 31, 2020 and 2019, is as follows: |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | Land and | | Leasehold | | Other | |
|
| | buildings | | improvements | | assets | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2020 |
| 197,065 |
| 71,769 |
| 190 | | 269,024 |
Additions for the year | | 9,250 | | 5,044 | | — |
| 14,294 |
Disposals for the year | | (9,707) | | (381) | | — |
| (10,088) |
Remeasurements of the liability due to modifications (1) | | 747 | | — | | — |
| 747 |
Remeasurements of the liability due to indexation adjustments | | 2,701 | | — | | — | | 2,701 |
Losses due to Impairment (2) | | — | | (20,363) | | — | | (20,363) |
Exchange differences | | (4,064) | | (1,014) | | (17) |
| (5,095) |
Balances as of December 31, 2020 |
| 195,992 | | 55,055 | | 173 | | 251,220 |
(1) Corresponds to remeasurements of the recognized liability due to contracts modifications.
(2) Correspond to impairment recognized on improvements in leased properties due to restructuring plan, which have an effect on the gross value of the asset for MCh$20,363 and MCh$10,960 in accumulated depreciation, generating a loss for MCh$9,403.
| | | | | | | | |
| | | | | | | | |
| | Land and | | Leasehold | | Other | |
|
| | buildings | | improvements | | assets | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2019 |
| 176,795 | | 61,733 | | — |
| 238,528 |
Additions for the year |
| 25,624 | | 7,944 | | 190 | | 33,758 |
Disposals for the year |
| (16,953) | | (2,368) | | — | | (19,321) |
Reclassifications |
| — | | 4,223 | | — | | 4,223 |
Remeasurements of the liability due to indexation adjustments |
| 9,488 | | — | | — | | 9,488 |
Exchange differences |
| 2,111 | | 237 | | — | | 2,348 |
Balances as of December 31, 2019 |
| 197,065 | | 71,769 | | 190 | | 269,024 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 108 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 15 – Assets for right of use and lease contracts liabilities, continued
(iii) | Movement on accumulated depreciation of right of use assets for the year ended December 31, 2020 and 2019, is as follows: |
| | | | | | | | |
| | | | | | | | |
| | Land and | | Leasehold | | Other | |
|
| | buildings | | improvements | | assets | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2020 |
| (29,800) |
| (34,651) |
| (14) |
| (64,465) |
Depreciation for the year (1) |
| (29,936) | | (7,648) | | (57) | | (37,641) |
Disposals due to early termination |
| 8,738 | | 287 | | — | | 9,025 |
Impairment losses (2) | | — | | 10,960 | | — | | 10,960 |
Exchange differences |
| 912 | | 592 | | — | | 1,504 |
Balances as of December 31, 2020 |
| (50,086) | | (30,460) | | (71) | | (80,617) |
(1) | See Note 32, Depreciation, amortization and impairment. |
(2) | Correspond to impairment recognized on improvements in leased properties due to restructuring plan, which have an effect on the gross value of the asset for MCh$20,363 and MCh$10,960 in accumulated depreciation, generating a loss for MCh$9,403. |
| | | | | | | | |
| | | | | | | | |
| | Land and | | Leasehold | | Other | |
|
| | buildings | | improvements | | assets | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Balances as of January 1, 2019 |
| — |
| (24,813) |
| — |
| (24,813) |
Depreciation for the year |
| (31,843) |
| (7,187) |
| (14) |
| (39,044) |
Disposals due to early termination |
| 2,590 |
| 2,281 |
| — |
| 4,871 |
Exchange differences |
| (547) |
| (16) |
| — |
| (563) |
Reclassifications |
| — |
| (4,677) |
| — |
| (4,677) |
Impairment losses |
| — |
| (239) |
| — |
| (239) |
Balances as of December 31, 2019 |
| (29,800) |
| (34,651) |
| (14) |
| (64,465) |
b) | Lease contracts liabilities |
(i) | The obligations for lease contracts as of December 31, 2020 and 2019, are as follows: |
| | | | |
| | | | |
|
| As of December 31, | ||
| | 2020 | | 2019 |
| | MCh$ | | MCh$ |
Lease contracts liabilities |
| 151,885 |
| 172,924 |
Totals |
| 151,885 |
| 172,924 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 109 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 15 – Assets for right of use and lease contracts liabilities, continued
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 the right-of-use asset and a lease liability of the contract.
(ii) | The movement of the obligations for lease contract liabilities for year ended on December 31, 2020 and 2019, is as follows: |
| | | | | |
| | | | | |
|
| As of December 31, | | ||
| | 2020 | | 2019 | |
| | MCh$ | | MCh$ | |
Opening balances as of January 1, |
| 172,924 |
| 176,795 | |
Additions due to new contracts (1) |
| 9,250 |
| 25,624 | |
Disposals due to early termination |
| (1,971) |
| (10,808) | |
Interest expense |
| 4,923 |
| 5,034 | |
Remeasurements of the liability due to modifications (2) |
| 1,399 |
| — | |
Remeasurements of the liability due to indexation adjustments | | 2,701 | | 9,488 | |
Exchange rate adjustments |
| (4) |
| — | |
Exchange differences |
| (3,650) |
| 2,868 | |
Capital and interest payments |
| (33,687) |
| (36,077) | |
Ending balances |
| 151,885 |
| 172,924 | |
(1) | Includes contract renewals |
(2) | Includes remeasurements of the recognized liability due to contract modifications. |
(iii) | The future maturities of the lease liabilities as of December 31, 2020 and 2019, are as follows |
| | | | |
| | | | |
|
| As of December 31, | ||
| | 2020 | | 2019 |
| | MCh$ | | MCh$ |
Within 1 year | | 30,829 |
| 32,628 |
After 1 year but within 2 years | | 27,779 |
| 28,462 |
After 2 years but within 3 years | | 24,083 |
| 25,084 |
After 3 years but within 4 years | | 20,991 |
| 22,098 |
After 4 years but within 5 years | | 16,627 |
| 19,042 |
After 5 years | | 31,576 |
| 45,610 |
Total | | 151,885 | | 172,924 |
c) | Impairment |
Since the health emergency, the Bank has had to accelerate the digital transformation as a mean to take care of both its customers and its collaborators. One of the main effects of the pandemic, has been reflected in our customers preferring to use digital tools over using our branche to carry out their transactions, which has been reflected in a decrease in the flow of customers in branches. As a result, the Bank has initiated a restructuring plan in search of efficiencies in order to close branches that have less customer demand, added to the Bank's choice to adopt the teleworking modality.
Within the framework of the aforementioned restructuring plan, during this fiscal year, the bank has recognized the impairment of certain assets associated with improvements to leased properties.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 110 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 16 - Current Taxes and Deferred Taxes
a)Current taxes
At the end of each reporting period, the Bank and its 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 December 31, 2020 was MCh$62,933 (MCh$85,503 as of December 31, 2019), according to the following detail:
a.1) Current tax assets and liabilities by geographical area
| | | | | | | | | | | | | | | | |
| | | | | ||||||||||||
| | As of December 31, 2020 | | As of December 31, 2019 | ||||||||||||
|
| Chile |
| USA (*) |
| Colombia |
| Totals |
| Chile |
| USA (*) |
| Colombia |
| Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Current tax assets | | 43,533 | | 1,443 | | 19,723 | | 64,699 | | 30,773 | | — | | 54,743 | | 85,516 |
Current tax liabilities |
| (596) | | — | | (1,170) |
| (1,766) |
| (13) |
| — |
| — |
| (13) |
Totals net |
| 42,937 |
| 1,443 |
| 18,553 |
| 62,933 |
| 30,760 |
| — |
| 54,743 |
| 85,503 |
(*)Corresponds to the New York branch
a.2) Details of current tax items by geographical área
| | | | | | | | | | | | | | | | |
| | | | | ||||||||||||
| | As of December 31, 2020 | | As of December 31, 2019 | ||||||||||||
|
| Chile |
| USA (*) |
| Colombia |
| Totals |
| Chile |
| USA (*) |
| Colombia |
| Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Income tax, with effect in profit and loss | | 12,348 | | — | | (4,284) | | 8,064 | | (68,075) | | — | | (9,062) | | (77,137) |
Income tax, effect on equity, net investments | | (21,795) | | — | | — | | (21,795) | | 6,124 | | — | | — | | 6,124 |
Income tax, effect on equity cash flow hedge | | (5) | | — | | — | | (5) | | 964 | | — | | — | | 964 |
Income tax, rate 27% | | (9,452) | | — | | (4,284) | | (13,736) | | (60,987) | | — | | (9,062) | | (70,049) |
| | | | | | | | | | | | | | | | |
Deductions: | | | | | | | | | | | | | | | | |
Monthly provisional payments | | 49,340 | | — | | 21,268 | | 70,608 |
| 61,621 |
| — |
| 27,218 |
| 88,839 |
Tax credit for training costs | | 800 | | — | | — | | 800 |
| 850 |
| — |
| — |
| 850 |
Tax credit for donations | | 264 | | — | | — | | 264 |
| 802 |
| — |
| — |
| 802 |
4% event capital credit | | 2,920 | | — | | — | | 2,920 | | — | | — |
| — | | — |
Other taxes to be recovered (**) | | (935) | | 1,443 | | 1,569 | | 2,077 |
| 28,474 |
| — |
| 36,587 |
| 65,061 |
Totals | | 42,937 | | 1,443 | | 18,553 | | 62,933 |
| 30,760 |
| — |
| 54,743 |
| 85,503 |
(*)Corresponds to the New York branch
(**) | Other taxes to be recovered correspond mainly to monthly provisional payments paid in previous years, provisional payments for absorbed losses with reimbursement right, taxes paid in previous years, among others. |
b)Effect on income
The tax expense for the years ended December 31, 2020 and 2019 is comprised of the following items:
| | | | |
| | | ||
| | For the year ended on December 31, | ||
|
| 2020 |
| 2019 |
| | MCh$ | | MCh$ |
Income tax expense |
|
|
|
|
Income tax for the year |
| 8,064 |
| (77,137) |
Credit (debit) for deferred taxes |
| |
|
|
Origination and reversal of temporary differences for the year |
| 128,416 |
| 34,754 |
Subtotals |
| 136,480 |
| (42,383) |
Others |
| 4,182 |
| (4,401) |
Net (debit) credit to income taxes |
| 140,662 |
| (46,784) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 111 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
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 December 31, 2020 and 2019.
| | | | | |
| | | | | |
|
| As of December 31, | |||
| | 2020 | | 2019 | |
Nominal tax rates by geographic area | | Rate | | Rate | |
Chile |
| 27.0 | % | 27.0 | % |
Colombia |
| 36.0 | % | 33.0 | % |
United States |
| 24.1 | % | 25.3 | % |
The main tax effects, according to the nominal tax rates of the countries that are reported consolidated, are the following:
| | | | | | | | |
| | | | | | | | |
|
| For the year ended December 31, | ||||||
|
| 2020 |
| 2019 | ||||
| | Taxe | | Taxe | | Taxe | | Taxe |
| | rate | | amount | | rate | | amount |
| | % | | MM$ | | % | | MM$ |
Amount calculated by using the statutory rates | | 27.00 | | (291,405) |
| 27.00 |
| 48,397 |
Inflation-indexation adjustment over tax equity (3) | | 2.21 | | (23,814) |
| (13.41) | | (24,037) |
Exchange rate changes on investment in Colombia (4) | | 1.69 | | (18,285) |
| 9.15 | | 16,399 |
Effect of Colombian subsidiaries rates (2) | | 1.19 | | (12,884) |
| 0.72 | | 1,292 |
Variación tipo de cambio inversión EEUU | | 0.15 | | (1,665) | | 1.14 | | 2,041 |
Effect of New York branch rate (2) | | — | | (10) |
| 0.02 | | 33 |
Goodwill impairment effect | | (17.39) | | 187,633 | | — | | — |
Intangible tax penalties | | (0.61) | | 6,561 | | — | | — |
Tax rate change effect in Colombia | | (0.35) | | 3,804 |
| (2.21) | | (3,954) |
Tax impact arising from New York branch income | | (0.09) | | 931 |
| 2.65 | | 4,757 |
Other adjustments (1) | | (0.78) | | 8,472 |
| 1.04 | | 1,856 |
Effective rate and profit (expense) for tax | | 13.02 | | (140,662) |
| 26.10 |
| 46,784 |
(1)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.
(2) These items reflect differences in tax rates of other jurisdictions, based on the Bank's consolidated result
(3) During the fiscal year ended December 31, 2020, he inflation indexation adjustments over the Tax Equity was equal to 2.7% (2.8% in 2019).
(4) For tax purposes, investment in Colombia is measured in US dollars. The devaluation (appreciation) of the Chilean peso against the US dollar generates income (expenses) for tax purposes without a corresponding effect on the accounting results. The value presented here represents the income tax expense (income) due to the effect of the exchange rate on investment in Colombia. As part of its exchange rate risk management policy, the Bank has managed this exposure through instruments available in the market to protect it financially against the tax effect generated by the variation in the exchange rate. The effect of these instruments (which offsets the tax effect presented here) is recognized in the Net exchange profit (loss) line of the Consolidated Statement of Income for the year.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 112 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 16 – Current Taxes and Deferred Taxes, continued
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 ended December 31, | ||
|
| 2020 |
| 2019 |
| | MCh$ | | MCh$ |
Available for sale investments |
| 1,778 |
| (5,333) |
Net investment in foreign operations hedge |
| (21,795) |
| 14,373 |
Cash flows hedge |
| (707) |
| (162) |
Totals in other comprehensive income |
| (20,724) |
| 8,878 |
d.2) Tax effect recorded in other comprehensive income (loss) which may not be reclassified subsequently to profit or loss:
| | | | |
| | | ||
|
| For the year ended December 31, | ||
|
| 2020 |
| 2019 |
| | MCh$ | | MCh$ |
Income taxes related to defined benefits obligations | | (19) |
| 1,542 |
Totals in other comprehensive income | | (19) |
| 1,542 |
e)Effect of deferred taxes
e.1) Totals deferred taxe
| | | | | | | | | | | | |
| | | | | ||||||||
|
| As of December 31, 2020 |
| As of December 31, 2019 | ||||||||
|
| Assets |
| Liabilities |
| Net |
| Assets |
| Liabilities |
| Net |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Deferred taxes with effect on profit and loss |
|
|
|
|
|
|
|
|
|
| | |
Allowances for loan losses | | 183,996 | | — | | 183,996 |
| 124,774 |
| — |
| 124,774 |
Miscellaneous provisions | | 64,383 | | — | | 64,383 |
| 67,396 |
| — |
| 67,396 |
Tax losses | | 51,546 | | — | | 51,546 |
| 55,598 |
| — |
| 55,598 |
Lease division and others | | 10,803 | | — | | 10,803 |
| 18,925 |
| — |
| 18,925 |
Net tax value of amortizable assets | | 2,231 | | — | | 2,231 |
| 16,051 |
| — |
| 16,051 |
Provisions for employee benefits | | 10,183 | | 17 | | 10,200 |
| 20,618 |
| — |
| 20,618 |
Interest and inflation-indexation overdue portfolio | | 6,031 | | — | | 6,031 |
| 8,214 |
| — |
| 8,214 |
Mark to market of financial instruments | | 37,517 | | — | | 37,517 |
| (15,846) |
| — |
| (15,846) |
IFRS 16 leases effects | | 1,643 | | — | | 1,643 |
| 1,403 |
| — |
| 1,403 |
Price difference not accrued | | 183 | | — | | 183 |
| 324 |
| — |
| 324 |
Itaú-Corpbanca business combination | | (17,975) | | — | | (17,975) |
| (57,996) |
| — |
| (57,996) |
Depreciation of plants and equipment | | (30,697) | | (274) | | (30,971) |
| (47,423) |
| — |
| (47,423) |
Others | | (272) | | 20 | | (252) |
| (856) |
| (263) |
| (1,119) |
Totals assets (liabilities) for deferred taxes | | 319,572 | | (237) | | 319,335 |
| 191,182 |
| (263) |
| 190,919 |
| | | | | | | | | | | | |
Deferred taxes with effect on other comprehensive income | | | | | | | | | | | | — |
Taxes for investments available for sale | | (9,946) | | — | | (9,946) |
| (11,711) |
| — |
| (11,711) |
Defined benefits tax | | 4,486 | | — | | 4,486 |
| 4,696 |
| — |
| 4,696 |
Subtotal deferred tax assets (liabilities) with effect on other comprehensive income | | (5,460) | | — | | (5,460) |
| (7,015) |
| — |
| (7,015) |
Total deferred tax assets (liabilities) | | 314,112 | | (237) | | 313,875 |
| 184,167 |
| (263) |
| 183,904 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 113 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 16 - Current Taxes and Deferred Taxes, continued
e.2) Deferred taxes by geographic area
| | | | | | | | | | | | | | | | |
| | | | | ||||||||||||
|
| As of December 31, 2020 |
| As of December 31, 2019 | ||||||||||||
|
| Chile |
| USA (*) |
| Colombia |
| Totals |
| Chile |
| USA (*) |
| Colombia |
| Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Deferred tax assets | | 245,271 | | 18,663 | | 50,178 | | 314,112 |
| 158,174 |
| 18,522 |
| 7,471 |
| 184,167 |
Deferred tax liabilities | | — | | — | | (237) | | (237) |
| — |
| — |
| (263) |
| (263) |
Totals by geographic area, net | | 245,271 | | 18,663 | | 49,941 | | 313,875 |
| 158,174 |
| 18,522 |
| 7,208 |
| 183,904 |
(*) Corresponds to the New York branch.
Effects of deferred taxes on assets and liabilities arising from temporary differences (by geographic area) are as follows:
| | | | | | | | | | | | | | | | |
| | | | | ||||||||||||
| | As of December 31, 2020 | | As of December 31, 2019 | ||||||||||||
| | Chile |
| USA (*) |
| Colombia |
| Totals | | Chile |
| USA (*) |
| Colombia |
| Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Allowances for loan losses |
| 172,045 | | — | | 11,951 | | 183,996 |
| 117,015 |
| 358 |
| 7,401 |
| 124,774 |
Miscellaneous provisions |
| 67,374 | | 1,025 | | (1,201) | | 67,198 |
| 72,906 |
| 882 |
| (6,392) |
| 67,396 |
Tax losses |
| 1,744 | | 15,500 | | 34,302 | | 51,546 |
| 1,912 |
| 15,750 |
| 37,936 |
| 55,598 |
Lease division and others |
| 3,682 | | — | | 7,121 | | 10,803 |
| 11,619 |
| — |
| 7,306 |
| 18,925 |
Net tax value of amortizable assets |
| 2,231 | | — | | — | | 2,231 |
| 16,051 |
| — |
| — |
| 16,051 |
Provision associated with staff |
| 3,634 | | 195 | | 3,556 | | 7,385 |
| 16,860 |
| (91) |
| 3,849 |
| 20,618 |
Interest and inflation-indexation overdue portfolio |
| 6,031 | | — | | — | | 6,031 |
| 8,214 |
| — |
| — |
| 8,214 |
Mark to market of financial instruments |
| 40,938 | | (448) | | (2,973) | | 37,517 |
| (13,484) |
| — |
| (2,362) |
| (15,846) |
Lease division and others |
| 1,080 | | 48 | | 515 | | 1,643 |
| 905 |
| — |
| 498 |
| 1,403 |
Price difference not accrued |
| 183 | | — | | — | | 183 |
| 324 |
| — |
| — |
| 324 |
Itaú-Corpbanca business combination |
| (17,975) | | — | | — | | (17,975) |
| (16,584) |
| — |
| (41,412) |
| (57,996) |
Depreciation of plants and equipment |
| (31,611) | | (68) | | 708 | | (30,971) |
| (50,746) |
| — |
| 3,323 |
| (47,423) |
Others |
| (2,523) | | 2,860 | | (589) | | (252) |
| (2,059) |
| 1,654 |
| (714) |
| (1,119) |
Totals assets (liabilities), net | | 246,833 |
| 19,112 |
| 53,390 |
| 319,335 |
| 162,933 |
| 18,553 |
| 9,433 |
| 190,919 |
| | | | | | | | | | | | | | | | |
Taxes for investments available for sale | | (1,562) | | (449) | | (7,935) | | (9,946) | | (4,759) | | (31) | | (6,921) | | (11,711) |
Taxes on defined benefit obligations | | — | | — | | 4,486 | | 4,486 | | — | | — | | 4,696 | | 4,696 |
Comprehensive results | | (1,562) | | (449) | | (3,449) | | (5,460) | | (4,759) | | (31) | | (2,225) | | (7,015) |
Total deferred tax assets (liabilities) | | 245,271 | | 18,663 | | 49,941 | | 313,875 | | 158,174 | | 18,522 | | 7,208 | | 183,904 |
| | | | | | | | | | | | | | | | |
(*) Corresponds to the New York branch
f)Summary of deferred taxes
The following is a summary of the deferred taxes with effect on equity and on income.
| | | | |
| | | | |
|
| As of December 31, | ||
|
| 2020 |
| 2019 |
| | MCh$ | | MCh$ |
Deferred tax assets | | |
|
|
With effect on other comprehensive income | | (5,460) |
| (7,015) |
With effect on profit and loss | | 319,572 |
| 191,182 |
Total deferred tax assets | | 314,112 |
| 184,167 |
| | | | |
With effect on other comprehensive income | | — |
| — |
With effect on profit and loss | | (237) |
| (263) |
Total deferred tax liabilities | | (237) |
| (263) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 114 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 16 - Current Taxes and Deferred Taxes, continued
g) Effects of the Circular N°3,478 of the SBIF and N°47 of Internal tax service
The information presented does not include the operations of entities that are consolidated in the Financial Statements or the leasing and factoring operations. The information presented only includes the operations of the contributing Bank, as of December 31, 2020 and 2019, according to the instructions of the regulators.
Total assets are reported at carrying amounts and assets at tax value, regardless of the fact that the transactions are not related to each other or that they do not correspond to what should be included in the past due loan columns.
The following is the detail of the operations for the year ended December 31, 2020:
| | | | | | | | |
| | | | | | | | |
| | | | Tax value for the assets | ||||
A. Loans and accounts receivable from customers | | | | | | Secured overdue | | Unsecured overdue |
as of December 31, 2020 | | Carrying amount | | Totals | | portfolio | | portfolio |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Commercial loans | | 10,612,466 |
| 10,634,803 | | 57,245 | | 114,945 |
Mortgage loans | | 4,636,149 |
| 4,636,149 | | 13,515 | | 11,559 |
Consumer loans | | 1,706,656 |
| 1,706,656 | | 1,296 | | 17,192 |
Totals | | 16,955,271 | | 16,977,608 | | 72.056 | | 143.696 |
| | | | | | | | | | |
| | | | | | | | | | |
B. Allowances for the overdue portfolio | | Balances as of January 1, 2020 | | Write-off against provisions | | Allowances established | | Allowances released | | Balances as of December 31, 2020 |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Commercial loans | | 93,072 | | 46,814 | | 68,687 | | — | | 114,945 |
Mortgage loans | | 217 | | 8,946 | | 20,288 | | — | | 11,559 |
Consumer loans | | 25,760 | | 145,307 | | 136,739 | | — | | 17,192 |
Totals | | 119,049 | | 201,067 | | 225,714 | | — | | 143,696 |
| | | | | | |
| | | | | | |
| | | | | | |
C. Direct charge-offs and recoveries | | | | D. application of Art 31 No. 4 | | |
| | MCh$ | | paragraphs 1 and 3 | | MCh$ |
Direct charge-offs Art 31 No.4, paragraph 2 | | 201,067 | | Charge-offs, paragraph 1 | | — |
Cancelations that resulted in releasing provisions | | — | | Relief, paragraph 3 | | — |
Recoveries or renegotiation of charged-off loans | | — | | | | |
The following is the detail of the operations for the year ended December 31, 2019:
| | | | | | | | |
| | | | | | | | |
| | | | Tax value for the assets | ||||
A. Loans and accounts receivable from customers | | | | | | Secured overdue | | Unsecured overdue |
as of December 31, 2019 | | Carrying amount | | Totals | | portfolio | | portfolio |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Commercial loans | | 10,930,449 | | 10,960,870 | | 57,245 | | 93,072 |
Mortgage loans | | 4,211,094 | | 4,211,094 | | 13,515 | | 217 |
Consumer loans | | 1,923,300 | | 1,923,300 | | 1,296 | | 25,760 |
Totals | | 17,064,843 | | 17,095,264 | | 72,056 | | 119,049 |
| | | | | | | | | | |
| | | | | | | | | | |
B. Allowances for the overdue portfolio | | Balances as of January 1, 2019 | | Write-off against provisions | | Allowances established | | Allowances released | | Balances as of December 31, 2019 |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Commercial loans | | 35,441 | | 22,560 | | 106,734 | | 26,543 | | 93,072 |
Mortgage loans | | 38 | | 142 | | 460 | | 140 | | 217 |
Consumer loans | | 19,435 | | 15,770 | | 25,375 | | 3,280 | | 25,760 |
Totals | | 54,914 | | 38,472 | | 132,569 | | 29,963 | | 119,049 |
| | | | | | |
| | | | | | |
| | | | | | |
C. Direct charge-offs and recoveries | | | | D. application of Art 31 No. 4 | | |
| | MCh$ | | paragraphs 1 and 3 | | MCh$ |
Direct charge-offs Art 31 No.4, paragraph 2 | | 145,693 | | Charge-offs, paragraph 1 | | — |
Cancelations that resulted in releasing provisions | | — | | Relief, paragraph 3 | | — |
Recoveries or renegotiation of charged-off loans | | 40,233 | | | | |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 115 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
a) | As of December 31, 2020 and 2019, composition of heading is as follows: |
| | | | |
| | | | |
|
| As of December 31, | ||
|
| 2020 |
| 2019 |
| | MCh$ | | MCh$ |
Assets for leasing (1) | | 10,807 |
| 18,724 |
Assets received or awarded in lieu of payment (2) | | 9,009 |
| 5,673 |
Assets received in lieu of payment | | 16,055 |
| 45,533 |
Provisions for assets received in lieu of payment or awarded | | (13,306) |
| (44,301) |
Assets awarded at judicial auction | | 6,260 |
| 4,441 |
Other assets | | 582,953 |
| 759,050 |
Deposits in guarantee | | 11,230 |
| 12,756 |
Accounts and notes receivable (3) | | 46,175 |
| 49,141 |
Right of intermediation operations | | 26,589 |
| 158,687 |
Assets recovered from leasing operations for sale | | 3,809 |
| 1,787 |
Rentals paid in advance (4) | | 991 |
| 3,379 |
Fixed assets held for sale (6) | | 1,809 |
| 6,331 |
Prepaid expenses (5) | | 26,629 |
| 19,386 |
Collateral for financial transactions (threshold) | | 413,439 |
| 428,559 |
VAT credit | | 3,562 |
| 4,429 |
Insurance brokerage fees receivable | | 6,741 |
| 5,654 |
Other assets held for sale (7) | | — |
| 580 |
Other assets | | 41,979 |
| 68,361 |
Totals | | 602,769 |
| 783,447 |
(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. At December 31, 2020, these assets represented 0.08% (0.2% at December 31, 2019) of the Bank's effective equity. Assets awarded in judicial auction correspond to assets that have been acquired in judicial auction in payment of debts previously contracted with the Bank. Assets awarded in judicial auction are not subject to the aforementioned margin. These properties are assets available for sale. For most assets, the sale is expected to be completed within one year from the date the asset is received or acquired. In the event that said good is not sold within the course of a year, it must be punished. In response to the COVID-19 pandemic, the CMF issued a transitory regulation that extends the term for the disposal of these assets and makes the provisions on penalties more flexible. See Note 1, letter hh) “New accounting pronouncements”. Provisions resulting from the difference between the initial value of these assets in relation to their realizable value are also recorded, when the former is higher.
(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 34, letter b).
(5)Includes payments made in advance for different services that will be received (leases, insurance, and others).
(6)Comprises of buildings owned by Itaú Corpbanca Colombia S.A. classified as held for sale, approved by the Board of Directors, during the meeting held on July 31, 2018
(7)Comprises of assets classified as held for sale of Itaú Casa de Valores Panama, as of December 31, 2019 (see Note 3 Significant events).
b) | As of December 31, 2020 and 2019, composition of heading is as follows: |
| | | | |
| | | | |
|
| As of December 31, | ||
|
| 2020 |
| 2019 |
| | MCh$ | | MCh$ |
Opening balance | | (44,301) |
| (36,244) |
Provisions released | | 30,622 |
| 13,163 |
Provisions established | | (4,006) |
| (18,100) |
Exchange differences | | 4,379 |
| (3,120) |
Ending balance | | (13,306) |
| (44,301) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 116 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 18 - Deposits and Other Demand Liabilities and Time Deposits
a) | As of December 31, 2020 and 2019, deposits and other demand liabilities are as follows |
| | | | |
| | | | |
|
| As of December 31, | ||
|
| 2020 |
| 2019 |
| | MCh$ | | MCh$ |
Checking accounts | | 4,038,467 |
| 2,882,535 |
Other deposits and demand accounts | | 1,852,355 |
| 1,698,439 |
Advance payments received from customers | | 40,032 |
| 45,902 |
Other demand liabilities | | 266,552 |
| 246,572 |
Totals | | 6,197,406 |
| 4,873,448 |
b) | As of December 31, 2020 and 2019, deposits and other demand liabilities are as follows |
| | | | |
| | | | |
|
| As of December 31, | ||
|
| 2020 |
| 2019 |
| | MCh$ | | MCh$ |
Time deposits |
| 11,413,370 |
| 11,599,943 |
Time savings accounts |
| 19,467 |
| 20,016 |
Other time liabilities |
| 227 |
| 228 |
Totals |
| 11,433,064 |
| 11,620,187 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 117 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 19 - Interbank Borrowings
a) | As of December 31, 2020 and 2019 interbank borrowings are as follows: |
| | | | |
| | | | |
| | As of December 31, | ||
|
| 2020 |
| 2019 |
| | MCh$ | | MCh$ |
Loans and other obligations | | | | |
Chilean Central Bank (*) | | 2,257,226 | | — |
Subtotal | | 2,257,226 | | — |
Loan obtained from foreign financial institutions | | | | |
Apple Bank for Saving | | — | | 34,195 |
Bancaribe Curacao Bank N.V. | | — | | 2,411 |
Banco Crédito del Perú | | — | | 104,831 |
Banco de Bogotá | | 4,156 | | 8,250 |
Banco Latinoamericano de Exportación (BLADEX) | | 60,759 | | 63,991 |
Banco República | | — | | 1,403 |
Bancoldex S.A. (Colombia) | | 11,123 | | 46,390 |
Bank of America, N.A. | | 92,395 | | 160,243 |
Bank of Montreal | | 113,404 | | 104,331 |
Bank of New York | | 56,858 | | — |
Bank of Nova Scotia | | 82,324 | | 101,989 |
Barclays Bank Plc | | — | | — |
Bayern Landesbank | | — | | 2,411 |
BBVA Asset Management Continental S.A. (Perú) | | 75,057 | | 86,709 |
BNP Paribas | | 92,167 | | 98,817 |
China Construction Bank | | — | | 5,556 |
Citibank N.A. | | 37,522 | | 206,549 |
Cobank C.B. | | 16,258 | | 30,882 |
Commerzbank A.G. | | 24,055 | | 71,646 |
Corporación Andina de Fomento | | 71,073 | | 75,149 |
Credicorp Capital SASAF | | 175,854 | | 200,374 |
Deutsche Bank AG | | 74,220 | | — |
Export Development Canada | | — | | 12,078 |
Findeter S.A. Financiera del Desarrollo Territorial | | 44,100 | | 44,552 |
HSBC USA | | — | | 74,877 |
IFC Corporación Financiera Internacional | | 82,561 | | 118,065 |
Ing Bank NV | | — | | 14,870 |
Interfondos S.A. Sociedad Administradora de Fondos | | 20,105 | | 55,596 |
KBC Bank NV | | — | | 21,896 |
La Caixa | | 25,690 | | 13,961 |
Mizuho Corporate Bank | | — | | 2,411 |
Scotia Fondos Sociedad Administradora de Fondos S.A. | | 24,280 | | 34,951 |
Shanghai Commercial & Savings Bank | | — | | 279,202 |
Standard Chartered Bank | | — | | 229,063 |
Sumitomo Mitsui Banking Corporation | | 217,347 | | 44,826 |
The Export-Import Bank of Korea | | — | | 146,549 |
Unicredit Bank | | 14,220 | | — |
W Capital Safi S.A | | — | | — |
Wells Fargo Bank, N.A. | | 67,519 | | 82,480 |
Zuercher Kantonalbank | | 7,044 | | — |
Others | | 51,661 | | 65,252 |
Subtotal | | 1,541,752 | | 2,646,756 |
Totals | | 3,798,978 | | 2,646,756 |
(*) Corresponds to funds obtained through the use of the Conditional Credit Facility to Increase Loans (FCIC) and the Liquidity Credit Line (LCL), granted by the Chilean Central Bank in response to tensions generated by the spread of the COVID-19 virus. The loans obtained through FCIC are guaranteed by high credit quality loans and / or bonds issued by the Chilean Central Bank and have automatic and successively monthly renewal maturities, with a maximum term of 4 years from March 30, 2020, until March 30, 2024. The LCL differs from FCIC as is not guaranteed, has a maximum term of 2 years and is granted based on the amount of the Bank's average reserve requirement. Both the FCIC and the LCL accrue interests at the Monetary Policy Rate (MPR) in force on the date of each operation.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 118 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 19 - Interbank Borrowings, continued
b)Interbank borrowings by maturity are as follows:
| | | | |
| | | | |
|
| As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Within 1 year | | 942,140 |
| 1,997,751 |
After 1 year but within 2 years | | 962,045 |
| 442,784 |
After 2 years but within 3 years | | 8,764 |
| 83,908 |
After 3 years but within 4 years | | 1,847,890 |
| 80,073 |
After 4 years but within 5 years | | 15,675 |
| 7,521 |
After 5 years | | 22,464 |
| 34,719 |
Totals | | 3,798,978 |
| 2,646,756 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 119 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 20 - Debt Instruments Issued and Other Financial Liabilities
As of December 31, 2020 and 2019, composition of debt instruments issued and other financial liabilities is as follows:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Debt instruments issued | | | | |
Mortgage finance bonds |
| 30,846 |
| 40,933 |
Senior bonds |
| 5,092,979 |
| 5,289,084 |
Subordinated bonds |
| 1,081,031 |
| 1,078,339 |
Subtotals |
| 6,204,856 |
| 6,408,356 |
Other financial liabilities |
|
|
|
|
Liabilities with the public sector |
| — |
| 10 |
Borrowings from local financial institutions |
| 13,123 |
| 12,956 |
Foreign borrowings |
| — |
| — |
Subtotals |
| 13,123 |
| 12,966 |
Totals |
| 6,217,979 |
| 6,421,322 |
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 December 31, 2020 | ||||
| | Short-term | | Long-term | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
Mortgage finance bonds |
| 6,595 | | 24,251 | | 30,846 |
Senior bonds |
| 321,678 | | 4,771,301 | | 5,092,979 |
Subordinated bonds |
| — | | 1,081,031 | | 1,081,031 |
Debt instruments issued |
| 328,273 | | 5,876,583 | | 6,204,856 |
Other financial liabilities |
| 13,123 | | — | | 13,123 |
| | | | | | |
| | | ||||
| | As of December 31, 2019 | ||||
| | Short-term | | Long-term | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
Mortgage finance bonds |
| 7,887 |
| 33,046 |
| 40,933 |
Senior bonds |
| 643,621 |
| 4,645,463 |
| 5,289,084 |
Subordinated bonds |
| — |
| 1,078,339 |
| 1,078,339 |
Debt instruments issued |
| 651,508 |
| 5,756,848 |
| 6,408,356 |
Other financial liabilities |
| 12,966 |
| — |
| 12,966 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 120 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
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 December 31, 2020 and 2019:
a)Mortgage finance bonds
Detail of maturities for mortgage finance bonds is as follows:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Within 1 year |
| 6,595 |
| 7,887 |
After 1 year but within 2 years |
| 5,638 |
| 6,508 |
After 2 years but within 3 years |
| 5,068 |
| 6,072 |
After 3 years but within 4 years |
| 4,544 |
| 5,524 |
After 4 years but within 5 years |
| 3,484 |
| 5,121 |
After 5 years |
| 5,517 |
| 9,821 |
Totals |
| 30,846 |
| 40,933 |
b)Senior bonds
Details for senior bonds, by currency, are as follows:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Bonds in UF |
| 4,134,994 |
| 4,273,637 |
Bonds in CLP |
| 399,992 |
| 481,083 |
Bonds in COP |
| 557,993 |
| 534,364 |
Totals |
| 5,092,979 |
| 5,289,084 |
Detail of maturities for senior bonds is as follows:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Within 1 year |
| 321,678 |
| 643,621 |
After 1 year but within 2 years |
| 486,427 |
| 323,921 |
After 2 years but within 3 years |
| 309,111 |
| 608,342 |
After 3 years but within 4 years |
| 589,699 |
| 282,882 |
After 4 years but within 5 years |
| 592,851 |
| 478,634 |
After 5 years |
| 2,793,213 |
| 2,951,684 |
Totals |
| 5,092,979 |
| 5,289,084 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 121 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 20 - Debt Instruments Issued and Other Financial Liabilities, continued
The following table presents details for senior bonds issued:
Senior bonds issued during the year ended December 31, 2020:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | Issuance | | Placement | | Maturity |
Series |
| Currency |
| Amount |
| Term |
| rate |
| date |
| date |
BITACR0418 | | UF | | 500,000 | | 5 years and 8 months | | 2% annual | | 01/14/2020 | | 10/09/2025 |
BITACR0418 | | UF | | 1,000,000 | | 5 years and 8 months | | 2% annual | | 01/14/2020 | | 10/09/2025 |
BITACR0418 | | UF | | 500,000 | | 5 years and 8 months | | 2% annual | | 01/14/2020 | | 10/09/2025 |
BITACR0418 | | UF | | 3,000,000 | | 5 years and 9 months | | 2% annual | | 04/08/2020 | | 10/09/2025 |
BITACS0418 | | UF | | 3,000,000 | | 6 years and 6 months | | 2% annual | | 04/08/2020 | | 10/09/2026 |
Totals |
| |
| 8,000,000 |
| |
| |
| | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | Issuance | | Placement | | Maturity |
Series |
| Currency |
| Amount |
| Term |
| rate |
| date |
| date |
SERIE A - 60 | | COP | | 148,100,000,000 | | 5 years | | 6.00% annual | | 02/27/2020 | | 02/27/2025 |
SERIE U - 120 | | COP | | 351,837,710,484 | | 10 years | | 2.71% annual | | 02/27/2020 | | 02/27/2030 |
SERIE A SUBSERIE A60 | | COP | | 165,915,000,000 | | 5 years | | 4.83% annual | | 09/29/2020 | | 09/29/2025 |
SUBSERIE B36 | | COP | | 134,100,000,000 | | 3 years | | 1.28% annual | | 09/29/2020 | | 09/29/2023 |
Totals | | | | 799,952,710,484 | | | | | | | | |
Senior bonds issued during the year ended December 31, 2019:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | Issuance | | Placement | | Maturity |
Series |
| Currency |
| Amount |
| Term |
| rate |
| date |
| 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 |
| 07/03/2019 | | 10/09/2026 |
Totals |
|
|
| 17,500,000 |
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | Issuance | | Placement | | Maturity |
Series |
| Currency |
| Amount |
| Term |
| rate |
| date |
| date |
BCORBX0914 |
| CLP |
| 40,000,000 |
| 2 years and 2 months |
| 5% annual |
| 07/04/2019 |
| 09/01/2021 |
BCORBX0914 |
| CLP |
| 1,000,000 |
| 2 years and 2 months |
| 5% annual |
| 07/05/2019 |
| 09/01/2021 |
BCORBX0914 |
| CLP |
| 14,500,000 |
| 2 years and 2 months |
| 5% annual |
| 07/10/2019 |
| 09/01/2021 |
BCORBX0914 |
| CLP |
| 1,500,000 |
| 2 years and 2 months |
| 5% annual |
| 07/15/2019 |
| 09/01/2021 |
Totals |
| |
| 57,000,000 |
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | Issuance | | Placement | | Maturity |
Series |
| Currency |
| Amount |
| Term |
| rate |
| date |
| 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 |
SERIE A SUBSERIE A60 |
| COP |
| 170,820,000,000 |
| 5 years |
| 6.05% annual |
| 10/16/2019 |
| 10/16/2024 |
SERIE C SUBSERIE C84 |
| COP |
| 50,000,000,000 |
| 7 years |
| 2.28% annual |
| 10/16/2019 |
| 10/16/2026 |
SERIE C SUBSERIE C120 |
| COP |
| 129,180,000,000 |
| 10 years |
| 2.76% annual |
| 10/16/2019 |
| 10/16/2029 |
Totals | | |
| 700,000,000,000 |
|
|
|
|
|
|
|
|
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 122 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 20 - Debt Instruments Issued and Other Financial Liabilities, continued
c)Subordinated bonds
Details of subordinated bonds, by currency, are as follows:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Bonds in UF |
| 95,373 |
| 95,545 |
Bonds in CLP |
| 811,185 |
| 796,564 |
Bonds in COP |
| 174,473 |
| 186,230 |
Totals |
| 1,081,031 |
| 1,078,339 |
Detail of maturities for subordinated bonds is as follows:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Within 1 year |
| — |
| — |
After 1 year but within 2 years |
| 10,082 |
| — |
After 2 years but within 3 years |
| 21,706 |
| 14,526 |
After 3 years but within 4 years |
| 122,290 |
| 23,923 |
After 4 years but within 5 years |
| — |
| 128,717 |
After 5 years |
| 926,953 |
| 911,173 |
Totals |
| 1,081,031 |
| 1,078,339 |
. For the years ended December 31, 2020 and 2019 no issuance of subordinated bonds took place.
d) | Other financial obligations |
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| 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 |
| 13,123 |
| 12,956 |
Others |
| — |
| 10 |
Totals other financial liabilities |
| 13,123 |
| 12,966 |
As of December 31, 2020 and 2019, the Bank has not incurred in any default in the payments of principal, interest or others in regards to debt instruments issued.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 123 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
As of December 31, 2020 and 2019, the Bank has registered the following movements in its provisions:
a)Other provisions
Provisions disclosed in liabilities as of December 31, 2020 and 2019 present the following detail:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Provisions for personnel salaries and expenses |
| 90,739 |
| 102,877 |
Provisions for mandatory dividends |
| — |
| 38,120 |
Provisions for contingent loans risk (1) |
| 44,049 |
| 44,947 |
Provisions for contingencies (2) |
| 142,423 |
| 2,559 |
Provisions for country risk |
| 5,072 |
| 5,604 |
Totals |
| 282,283 |
| 194,107 |
(1) | See Note 23, letter b |
(2) | Includes additional provisions for trade loans for MCh$53,373, mortgages loans for MCh$15,500 and consumer for MCh$ 68,975. As of December 31, 2019 there is no balance for this concept. |
b)Provisions for contingent loans
Provisions established as of December 31, 2020 and 2019 for contingent loans are detailed as follows:
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| MCh$ | | MCh$ |
Co-signers and guarantors | 9,175 | | 4,316 |
Letters of documentary credits issued | 685 | | 318 |
Confirmed foreign letters of credit | 1 | | — |
Performance and bid bonds | 12,910 | | 9,792 |
Unrestricted lines of credit | 11,833 | | 12,601 |
Other contingent loans | 9,445 | | 17,920 |
Total provisions for contingent loans | 44,049 | | 44,947 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 124 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 21 – Provisions, continued
c)The following table details the movements in provisions during 2020 and 2019:
| | | | | |
| | | | | |
| Provisions for | ||||
| Employee benefits and compensation | Minimum dividends | Contingent loan risk | Country risk and contingencies | Totals |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Balances as of January 1, 2020 | 102,877 | 38,120 | 44,947 | 8,163 | 194,107 |
Provisions applied | (55,487) | (38,120) | — | (85) | (93,692) |
Provisions recorded | 133,055 | — | 16,509 | 152,870 | 302,434 |
Provisions released | (85,078) | — | (16,365) | (15,431) | (116,874) |
Other movements | (4,628) | — | (1,042) | 1,978 | (3,692) |
Balances as of Decemeber 31, 2020 | 90,739 | — | 44,049 | 147,495 | 282,283 |
| | | | | |
| | | | | |
| Provisions for | ||||
| Employee benefits and compensation | Minimum dividends | Contingent loan risk | Country risk and contingencies | Totals |
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ |
Balances as of January 1, 2019 | 99,945 | 51,614 | 55,290 | 30,321 | 237,170 |
Provisions applied | (71,020) | (51,614) | (1,472) | (13,547) | (137,653) |
Provisions recorded | 82,456 | 38,120 | 15,855 | 8,899 | 145,330 |
Provisions released | (17,514) | — | (25,577) | (17,931) | (61,022) |
Other movements | 9,010 | — | 851 | 421 | 10,282 |
Balances as of Decemeber 31, 2019 | 102,877 | 38,120 | 44,947 | 8,163 | 194,107 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 125 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 21 – Provisions, continued
d) | Provisions for payroll and employee benefits |
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
| | MCh$ | | MCh$ |
Provision for long-term termination benefits | (e,1) | 9,300 | | 9,814 |
Provision for pension plan | (e,2) | 31,531 | | 35,166 |
Provision for retroactive unemployment plan | (e,3) | 296 | | 334 |
Provision for retirements bonus plan | (e,4) | 689 | | 687 |
Provision of compensation years of service (short term) | | 716 | | — |
Provision for other employee benefits | (*) | 31,000 | | 41,645 |
Vacation accrual | | 17,207 | | 15,231 |
Total provisions for contingent loans | | 90,739 | | 102,877 |
(*) It includes provision for performance compensations, holiday benefits, year-end bonuses and other similar employee compensation.
e)The main aspects of the Bank’s long term employee benefits are detailed below:
e.1) Other long-term employee benefits
Description: Annual payment during the month in which the employee completes a given number of years of service (in five-year intervals from 5 to 50) Colombia.
Financing: The projected unit credit method was used to determine the present value of the defined-benefit obligation and the corresponding service cost. For all active plan participants, the “projected accrued benefit” is based on the plan formula and years of service as of the date of calculation, but using an average salary and social security benefits, etc., projected to the age at which it is assumed that the employee will stop providing services. The total benefit is used for inactive members. The plan does not have any related policies (and therefore no reimbursements) or assets, but rather uses structured funding based on the entity's financial conditions
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 126 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 21 – Provisions, continued
The economic assumptions are summarized as follow:
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| % | | % |
Assumptions | | | |
Discount rate | 5.00 | | 6.25 |
Expected rate of salary increases | 4.50 | | 5.50 |
The movements of the present value of the obligation for this type of benefit and the amounts recognized in the Consolidated Statements of Income are determined using the projected credit unit method and it consist of the following:
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| MCh$ | | MCh$ |
Balances as of January 1, | 9,814 | | 8,298 |
Net cost of benefits (*) | 1,191 | | 1,490 |
Payments | (820) | | (815) |
Provisions recorded | — | | 278 |
Exchange differences | (885) | | 563 |
Balances as of December 31, | 9,300 | | 9,814 |
Detail of net cost of benefit is as follow:
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| MCh$ | | MCh$ |
Current cost of benefits | 681 | | 962 |
Interest expense on obligation | 510 | | 528 |
Totals | 1,191 | | 1,490 |
e.2) Pension plan
Description: Old-age pension or Survivors in accordance with the Social Security Law in Colombia and benefits acquired with the Entity.
Financing: The projected unit credit method is used to determine the present value of the benefit obligation and related service costs. Using this method the benefit obligation is determined as the present value of current benefits for past services, but calculating the plan benefit based on the salary projected to the date on which it is assumed that the participant receives the benefit. The plan has no policy (without refund) or associated assets, being a structured financing according to the financial conditions of the entity.
The summary of the economic assumptions is as follow:
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| % | | % |
Assumptions | | | |
Discount rate | 4.25 | | 6.50 |
Expected rate of salary increases | 3.00 | | 3.00 |
Inflation rate | 3.00 | | 3.00 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 127 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 21 – Provisions, continued
The detail of Pension plan balances movements is as follow:
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| MCh$ | | MCh$ |
Balances as of January 1, | 35,166 | | 30,908 |
Interest expense on obligation | 1,911 | | 2,120 |
Payments | (3,260) | | (3,768) |
Actuarial losses (gains) | 885 | | 4,512 |
Exchange differences | (3,171) | | 1,394 |
Balances as of December 31, | 31,531 | | 35,166 |
e.3) Retroactive unemployment plan
Description: Retroactive unemployment plan prior to Law 50 from 1990 in Colombia.
Financing: The projected unit credit method is used to determine the present value of the benefit obligation and related service costs. For all active plan participants, the “projected accrued benefit” is based on the plan formula and years of service as of the date of calculation, but using an average salary and social security benefits, etc., projected to the age at which it is assumed that the employee will stop providing services. The total benefit is used for inactive members. The plan does not have any related policies (and therefore no reimbursements) or assets, but rather uses structured funding based on the entity's financial conditions.
The economic assumptions are summarized as follow:
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| % | | % |
Assumptions | | | |
Discount rate | 4.25 | | 5.50 |
Expected rate of salary increases | 4.50 | | 5.50 |
Inflation rate | 3.00 | | 3.00 |
The details of movements for this benefits during years ended December 31, 2020 and 2019 are as follow:
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| MCh$ | | MCh$ |
Balances as of January 1, | 334 | | 373 |
Details of defined obligation | 87 | | 136 |
Current service costs | 15 | | 21 |
Actuarial gains | (29) | | (113) |
Payments of benefits | (80) | | (108) |
Exchange differences | (31) | | 25 |
Balances as of December 31, | 296 | | 334 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 128 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 21 – Provisions, continued
e.4) Retirement Bonus Plan
Description: Fixed payment upon retirement
Financing: The projected unit credit method is used to determine the present value of the benefit obligation and related service costs. Under this method, the benefit obligation is determined by the present value of the current benefits for past service but calculating the plan benefit based on the projected salary as of the date in which it is assumed that the participant will receive the benefit.
The economic assumptions are summarized as follow:
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| % | | % |
Assumptions | | | |
Discount rate | 5.50 | | 6.50 |
Expected rate of benefit increases | 4.00 | | 5.00 |
Inflation rate | 3.00 | | 3.00 |
The movements in amounts recognized for this benefit are as follow:
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| MCh$ | | MCh$ |
Balances as of January 1, | 687 | | 542 |
Current service costs | 46 | | — |
Interest expense on obligation | 39 | | 81 |
Actuarial gains (losses) | (13) | | 33 |
Payments of benefits | (7) | | (6) |
Exchange differences | (63) | | 37 |
Balances as of December 31, | 689 | | 687 |
The effect on Other Comprehensive Income is summarized as follow:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
| | MCh$ | | MCh$ |
Pension plan | (e.2) | 885 | | (4,512) |
Retroactive unemployment plan | (e.2) | (29) | | 113 |
Retirement bonus plan | (e.2) | 33 | | (33) |
Total recognition of obligations for defined benefits | | 889 | | (4,432) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 129 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 21 – Provisions, continued
Future payments
Future actuarial calculations may differ with respect to the calculations presented, due to the following factors:
● | The experience of the plans differs from those anticipated by the selected economic and demographic hypotheses. |
● | Changes in economic and demographic assumptions. |
● | Expected increases or decreases as a natural part of the functioning of the methodology for these calculations (for example, the end of the amortization period or additional costs based on the financing situation of the plan). |
● | Changes in the characteristics of the applicable plan or law, and with respect thereto, there are no significant events affecting the results presented since the last assessment |
The following is a detail of future payments for the year 2020 and 2019:
| | | | | | | |
| | | | | | | |
| Long-term | | | | Retroactive | | Retirement |
2020 | termination benefits | | Pension plan | | unemployment plan | | bonus plan |
| MCh$ | | MCh$ | | MCh$ | | MCh$ |
Year 2021 | 953 | | 2,614 | | 65 | | 72 |
Year 2022 | 1,105 | | 2,471 | | 56 | | 42 |
Year 2023 | 1,105 | | 2,410 | | 66 | | 48 |
Year 2024 | 877 | | 2,388 | | 29 | | 38 |
Year 2025 | 786 | | 2,360 | | 15 | | 40 |
Year 2026-2030 | 4,612 | | 11,161 | | 43 | | 197 |
| | | | | | | |
| | | | | | | |
| Long-term | | | | Retroactive | | Retirement |
2019 | termination benefits | | Pension plan | | unemployment plan | | bonus plan |
| MCh$ | | MCh$ | | MCh$ | | MCh$ |
Year 2019 | 948 | | 3,116 | | 69 | | 64 |
Year 2020 | 1,058 | | 2,960 | | 16 | | 28 |
Year 2021 | 1,250 | | 2,793 | | 70 | | 47 |
Year 2022 | 1,245 | | 2,725 | | 77 | | 50 |
Year 2023 | 915 | | 2,698 | | 29 | | 43 |
Year 2025 - 2029 | 5,134 | | 12,844 | | 71 | | 222 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 130 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
As of December 31, 2020 and 2019, composition of this item is as follows:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Accounts and notes payable (1) |
| 310,713 |
| 382,271 |
Collateral for financial transactions (threshold) |
| 308,674 |
| 116,654 |
Accounts payable through intermediaries |
| 24,572 |
| 140,799 |
VAT and other monthly taxes |
| 15,862 |
| 20,575 |
Deferred fees |
| 7,690 |
| 8,321 |
Unearned income (2) |
| 21,782 |
| 5,644 |
Dividends payable |
| 246 |
| 267 |
Other liabilities |
| 10,495 |
| 34,383 |
Totals |
| 700,034 |
| 708,914 |
(1) | Groups obligations that do not correspond to operations of the business, such as price balances for purchases of materials, price balance or obligations for leasing contracts for the acquisition of fixed assets or provisions for expenses pending payment. |
(2) | Corresponds to commissions associated with financial advisory and insurance brokerage businesses that must be deferred in accordance with applicable accounting standards. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 131 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 23 - Contingencies, Commitments, and Responsibilities
a)Lawsuits and Legal Proceedings
Lawsuits against the Bank with provision
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$545 and MCh$280 as of December 31, 2020 and December 31, 2019, respectively have been established in the Consolidated Financial Statements.
Other lawsuits against the Bank without provision
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$22,737 as of December 31, 2020 and MCh$22,207 as of December 31, 2019. However, in Management’s opinion based on reports from the Legal Division as of December 31, 2020, Considering the procedural status of said lawsuits, it is not possible at the moment to conclude whether a cause of these may 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$35,043 as of December 31, 2020 (MCh$38,503 as of December, 2019). According to the evaluation of the expected results in each lawsuits the Bank has recorded a provision of MCh$94 as of December 31, 2020 (MCh$141 as of December 31, 2019).
b)Commitments
Transaction Agreement
On January 29, 2014, Inversiones Corp Group Interhold Limitada, Inversiones Saga Limitada ( both together “CorpGroup”), Itaú-Unibanco Holding S.A., Corpbanca, and Banco Itaú Chile, 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 Chile, which was renamed “Itaú Corpbanca” and took place on April 1, 2016.
The Transaction Agreement (from January 2014 and its subsequent modifications) also contemplates that on January 28, 2022 Itaú Corpbanca will purchase from CorpGroup the 12.36% of shares in Itaú Corpbanca Colombia, equivalent to the participation that CorpGroup held (directly or through other entities) in said entity at the merger date, corresponding to 93,306,684 shares. The purchase price agreed will be US$3.5367 per share, amounting to US$329,997,749.30, 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 Itaú Corpbanca Colombia to CorpGroup for the corresponding shares. This agreement, as explicitly noted, is subject to the prior approvals from the regulators, as applicable, in Chile and abroad.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 132 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 23 - Contingencies, Commitments, and Responsibilities, continued
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 in Chile (currently CMF), 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 the 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).
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.
Acquisition of the MCC entities
In accordance with the Transaction Agreement executed on January 29, 2014 between Inversiones Corp Group Interhold SpA, Inversiones Saga Limitada (these last two, together “CorpGroup”), Itaú Unibanco Holding S.A., 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 to Itaú Corpbanca, and the latter the obligation to acquire, 100% of its shares in MCC Securities Inc., MCC Asesorías S.A., and MCC S.A. Corredores de Bolsa (herein “MCC entities”) in accordance with the terms agreed upon and subject to normal terms and conditions for this kind of transactions.
On May 28, 2019, the Board of Itaú Corpbanca approved to proceed with the acquisition of the MCC entities, 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 the MCC entities by Itaú Corpbanca is subject to the corresponding regulatory approvals, including approval from the Commission for the Financial Market.
Acquisition of 20% ownership in Itaú Corredor de Seguros Colombia S.A.
On November 5, 2019, Itaú Corpbanca committed to acquire 20% of the shares that Helm LLC holds in Itaú Corredor de Seguros de Colombia S.A.
The acquisition of the shares of Itaú Corredor de Seguros de Colombia S.A. by Itaú Corpbanca, is subject to the corresponding regulatory approvals, including the approval from the Commission for the Financial Market.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 133 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 23 - Contingencies, Commitments, and Responsibilities, continued
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:
| | | | | | | | |
| | | | | ||||
| | Contingent loans | | Provisions (*) | ||||
| | As of December 31, | | As of December 31, | ||||
| | 2020 | | 2019 | | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Collateral and guarantees |
| 437,396 |
| 548,521 | | 9,175 |
| 4,316 |
Confirmed foreign letters of credit |
| 2,207 |
| 509 |
| 1 |
| — |
Letters of credit issued |
| 136,561 |
| 97,553 |
| 685 |
| 318 |
Documentary letters of credit issued |
| 1,407,102 |
| 1,501,957 |
| 12,910 |
| 9,792 |
Available on demand credit lines |
| 2,656,219 |
| 2,623,744 |
| 11,833 |
| 12,601 |
Other credit commitments |
| 754,375 |
| 1,167,802 |
| 9,445 |
| 17,920 |
Totals |
| 5,393,860 |
| 5,940,086 |
| 44,049 |
| 44,947 |
(*) See Note 21, letter b.
d) Responsibilities
The Bank and its subsidiaries have the following responsibilities arising from its regular course of business:
| | | | |
| | | | |
| | As of December 31, | ||
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Third party operations |
| | |
|
Collections |
| 16,540 |
| 17,985 |
Transferred financial assets managed by the Bank |
| 1,183,053 |
| 1,200,155 |
Third party funds under management |
| — |
| 2,541,495 |
Subtotals |
| 1,199,593 |
| 3,759,635 |
Custody of securities |
| |
|
|
Securities held in custody |
| 2,269,967 |
| 5,229,078 |
Securities held in custody deposited in other entities |
| 259 |
| — |
Securities issued by the Bank held in custody |
| 105,585 |
| 131,648 |
Subtotals |
| 2,375,811 |
| 5,360,726 |
Commitments |
| |
|
|
Others |
| — |
| — |
Subtotals |
| — |
| — |
Totals |
| 3,575,404 |
| 9,120,361 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 134 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 23 - Contingencies, Commitments, and Responsibilities, continued
e) Guarantees, Contingencies and other
Itaú Corpbanca
As a result of the financial tensions generated by the pandemic, the Central Bank of Chile has made available to the banks the Conditional Credit Facility to Increase Loans (FCIC) and the Liquidity Credit Line (LCL). This special financial line FCIC is guaranteed by high quality credit and/or bonds issued by the Central Bank of Chile (BCCh). This measure includes the possibility of substituting the financial instruments on which the collateral was initially endorsed in favor of the Central Bank if requiered.
As of December 31, 2020, the bank has endorsed 162 loans to guarantee the use of the Facility of Credit Conditional on the Increase in Loans (FCIC) provided by the BBCC. The principal of the loans amounts to Ch $1,766,997 million, while the credit quality of the loans varies between A1 and A4. Additionally, the bank has also endorse as guarantee, financial instruments classified in the available for sale portfolio for an amount of Ch$319,213 million.
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), 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 insurance policies:
| | | | | | | | |
| | | | | | | | |
Entity |
| From |
| To |
| Amount (UF) |
| Beneficiary |
Consorcio Nacional de Seguros S.A. |
| 04-15-2020 |
| 04-14-2021 |
| 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 |
| 04-22-2020 |
| 04-22-2021 |
| 16,000 |
| Bolsa Electrónica de Chile |
Mapfre Compañía de Seguros S.A. |
| 04-22-2020 |
| 04-22-2022 |
| 4,000 |
| Bolsa de Comercio de Santiago |
Itaú Corpbanca |
| 04-22-2020 |
| 06-22-2021 |
| 10,000 |
| Comisión para el Mercado Financiero |
In addition, the Company has contracted a comprehensive insurance policy to provide for possible situations of operational fidelity. The detail of the comprehensive insurance policy is as follows:
| | | | | | | | |
| | | | | | | | |
Entity |
| From |
| To |
| Amount (UF) |
| Beneficiary |
Orión Seguros Generales S.A. |
| 06-15-2020 |
| 05-31-2021 |
| 5,000 and 10,000 |
| Bolsa Electrónica de Chile |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 135 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 23 - Contingencies, Commitments, and Responsibilities, continued
The Company pledged the shares of the Santiago Stock Exchange in favor of said company, to guarantee compliance with the obligations with respect to transactions carried out with other brokers. The amount amounts to MCh$5,325 as of December 31, 2020 (MCh$18,479 as of December 31, 2019).
The Broker is registered in the Registry of Portfolio Administrators since November 22, 2017, for which it maintains a guarantee ticket in Itaú Corpbanca with an expiration date of June 22, 2021, for an amount of UF 10,000 as representative of the beneficiaries of the guarantee in articles 98 and 99 of Law No. 20,172, in order to guarantee the faithful and full compliance of the Portfolio Administration obligations.
There are guarantees constituted of ThUS$100 equivalent to MMCh$71 to guarantee operations with foreign traders, Pershing.
As of December 31, 2020, the Broker maintains in the Santiago Stock Exchange, cash and fixed income securities to guarantee operations in the Securities Clearing and Settlement House for MCh$5,988 (MCh$9,067 as of December 31, 2019).
Itaú Administradora General de Fondos S.A.
On April 9, 2020, Itaú Administradora General de Fondos S.A. takes a new guarantee ballot for UF 10,000 in favor of Fundación DUOC Pontificia Universidad Católica de Chile, to guarantee faithful compliance with articles 12, 13 and 14 of Law No. 20,712 on Administration of Third Party Funds and Individual Portfolios, its maturity is January 10, 2021. Itaú Corpbanca is representative of its beneficiaries.
Below are the guarantee and beneficiary forms that Itaú Administradora General de Fondos S.A. maintains in effect to date, which were required to comply with the obligations of portfolio management contracts, their committees, funds, payment of labor and social obligations with the contractor's workers:
| | | | | | | | | | |
| | | | | | | | | | |
Entity |
| From |
| To |
| Amount (UF) |
| Amount (MCh$) |
| 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 |
| 07-02-2020 |
| 07-01-2021 |
| — |
| 50 |
| Ferrocarriles del Estado |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 136 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
a) | Movements in equity accounts and reserves (attributable to the equity holders of the Bank) |
As of December 31, 2020 and 2019, the paid capital of the Bank is represented by ordinary shares subscribed and paid, with no par value as presented below:
| | | | |
| | | ||
| | Common shares | ||
| | As of December 31, | ||
|
| 2020 | | 2019 |
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 December 31, 2020 and 2019, 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 years ended December 31, 2020 and 2019, there were no transactions to buy and sell shares of own issuance.
List of major shareholders
The shareholders list as of December 31, 2020 and 2019, is as follows:
| | | | | | | | | | |
| | |
| |||||||
| | Shares | | |||||||
Company name or shareholder name | | As of December 31, 2020 |
| | As of December 31, 2019 |
| ||||
|
| N° shares |
| Ownership % |
|
| N° shares |
| Ownership % |
|
Itaú Unibanco | | 200,966,823,626 | | 39.22 | % | | 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. |
| 62,567,655,359 | | 12.21 | % | | 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 |
| 3,651,555,020 | | 0.71 | % | | 3,651,555,020 |
| 0.71 | % |
| | | | | | | | | | |
Familia Saieh |
| 140,835,760,455 | | 27.49 | % | | 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 (1) |
| 4,707,910,382 | | 0.92 | % | | 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 | % |
Stockbrokers |
| 80,382,817,848 | | 15.69 | % | | 63,397,824,244 |
| 12.37 | % |
ADR holders and foreign investors |
| 35,127,077,810 | | 6.86 | % | | 50,376,882,652 |
| 9.83 | % |
Local institutional investors |
| 25,351,261,131 | | 4.95 | % | | 27,989,426,434 |
| 5.46 | % |
Other minority shareholders |
| 12,725,109,510 | | 2.47 | % | | 11,822,132,969 |
| 2.31 | % |
|
| | | | | |
|
|
| |
Totals |
| 512,406,760,091 | | 100 | % | | 512,406,760,091 |
| 100 | % |
(1) | As of december 31, 2019 includes 1,005,897,850 Saga shares in custody. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 137 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 24 - Equity, continued
At the Ordinary Meeting of the Shareholders of Itaú Corpbanca held on March 18, 2020, the shareholders agreed to distribute profits for MCh$127,065 representing 100% of the profits for 2019.
At the Ordinary Meeting of the Shareholders of Itaú Corpbanca held on March 19, 2019, the shareholders agreed to distribute profits for MCh$51,614 representing 30% of the profits for 2018.
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Income | | | | | | | | | | |
| | attributable to | | Allocated to | | | | | | | | Dividend per |
| | equity holders of | | reserves and | | Allocated to | | Percentage | �� | Number of | | share |
Exercise | | the Bank | | retained earnings | | dividends | | distributed | | shares | | (in pesos) |
|
| MCh$ |
| MCh$ |
| MCh$ |
| % | | N° |
| $ |
Year 2019 (Shareholders Meeting March 2020) | | 127,065 | | — | | 127,065 | | 100 | % | 512,406,760,091 | | 0.24798 |
Year 2018 (Shareholders Meeting March 2019) |
| 172,047 |
| 120,433 |
| 51,614 |
| 30 | % | 512,406,760,091 |
| 0.10073 |
For the year ended December 31, 2020 and 2019, the basic earnings and diluted earnings are as follows:
| | | | | | | | |
| | | | | ||||
| | As of December 31, 2020 | | As of December 31, 2019 | ||||
Basic earnings and diluted earnings | | N° shares | | Amount | | N° shares | | Amount |
|
| Millions |
| MCh$ |
| Millions |
| MCh$ |
Basic earnings per share |
| | | |
|
|
|
|
Net income for the year |
| — | | (925,479) |
| — |
| 127,065 |
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) |
| — | | (1.806) |
| — |
| 0.248 |
Diluted earnings per share |
|
| | |
|
|
|
|
Net income for the year |
| — | | (925,479) |
| — |
| 127,065 |
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) |
| — | | (1.806) |
| — |
| 0.248 |
During the years ended December 31, 2020 and 2019, there were no dilutive effects.
Available for sale investments: It includes accumulated net changes in the fair value of investments available for sale until the investment is disposed or any impairment must be recorded.
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 for the year.
Net investment in foreign operations hedge: Corresponds to adjustments for hedges of net investments in foreign operations.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 138 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 24 - Equity, continued
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).
Defined benefits obligations: This includes the effects of applying IAS 19 “Employee Benefits”.
The following are the equity effects and income taxes for years ended December 31, 2020 and 2019:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | Net investments | | | | Exchange differences | | | | |
| | Available for | | in foreign | | Cash | | on investment | | Defined | | |
As of December 31, 2020 | | sale | | operations | | flows | | in Colombia | | benefits | | |
| | investments | | hedges | | hedges | | and New York branch | | obligations | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| | | | | | | | | | | | |
Other comprehensive income (loss) before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of January 1, 2020 |
| 35,170 |
| (822) |
| (17,383) |
| 35,283 |
| (6,484) | | 45,764 |
Effects for the year |
| (5,177) | | (7,799) | | 80,722 | | (61,609) | | (1,632) | | 4,505 |
Balances as of December 31, 2020 |
| 29,993 |
| (8,621) |
| 63,339 |
| (26,326) |
| (8,116) |
| 50,269 |
| | | | | | | | | | | | |
Income taxes related to components of other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of January 1, 2020 |
| (11,584) |
| (465) |
| 6,627 |
| — |
| 1,798 |
| (3,624) |
Effects for the year |
| 164 | | 425 | | (21,795) | | — | | 434 | | (20,772) |
Balances as of December 31, 2020 |
| (11,420) |
| (40) |
| (15,168) |
| — |
| 2,232 |
| (24,396) |
| | | | | | | | | | | | |
Net balances as of December 31, 2020 |
| 18,573 | | (8,661) | | 48,171 | | (26,326) | | (5,884) | | 25,873 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | Net investments | | | | Exchange differences | | | | |
| | Available for | | in foreign | | Cash | | on investment | | Defined | | |
As of December 31, 2019 | | sale | | operations | | flows | | in Colombia | | benefits | | |
| | investments | | hedges | | hedges | | and New York branch | | obligations | | Totals |
|
| MCh$ |
| 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 year |
| 18,833 |
| (6,381) |
| (46,786) |
| 54,402 |
| (3,248) |
| 16,820 |
Balances as of December 31, 2019 |
| 35,170 |
| (822) |
| (17,383) |
| 35,283 |
| (6,484) |
| 45,764 |
| | | | | | | | | | | | |
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 year |
| (5,209) |
| (185) |
| 14,373 |
| — |
| 1,109 |
| 10,088 |
Balances as of December 31, 2019 |
| (11,584) |
| (465) |
| 6,627 |
| — |
| 1,798 |
| (3,624) |
| | | | | | | | | | | | |
Net balances as of December 31, 2019 |
| 23,586 |
| (1,287) |
| (10,756) |
| 35,283 |
| (4,686) |
| 42,140 |
This item corresponds to “Other non-earnings reserves” corresponding to the adjustments recorded as a result of the business combination between Banco Itaú Chile and Corpbanca for MCh$744,838 as of December 31, 2020 and 2019, which additionally includes the effects of increase in the participation in Colombia, and “reserves from profits” for MCh$451,011 as of December 31, 2020 and 2019.
Corresponds to profits for the years ended December 31, 2020 and 2019 not distributed to shareholders for a total of MCh$156,342.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 139 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 24 - Equity, continued
In consideration to the net loss recorded as of December 31, 2020 and according to the requirements established in Chapter B-4 of the CAS, it is important to consider that the accumulated losses must be absorbed, at the time of the opening balance of the next year, against retained earnings and reserves, in case retained earnings are not sufficient.
Correspond to the net equity amount of the subsidiaries attributable to equity instruments which do not belong, either directly or indirectly, to the Bank, including the portion that has been attributed to the income (loss) for the year. The amounts and ownership percentage of the non-controlling interest in equity and income (loss) of the subsidiary are shown below.
As of December 31, 2020 and for the year ended that date
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | Non- | | | | | | Available for | | | | Cash | | Defined | | | | Total other | | Total |
| | controlling | | | | Net | | sale | | Conversion | | flows | | benefits | | Deferred | | comprehensive | | comprehensive |
Subsidiary | | interest | | Equity | | income | | investments | | differences | | hedges | | obligations | | taxes | | income | | income |
|
| % | | MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| | | | | | | | | | | | | | | | | | | | |
Itaú Corredor de Seguro Colombia S.A. |
| 20.015 | % | 404 | | (33) |
| — |
| — |
| — |
| — |
| — |
| — |
| (33) |
Itaú Corpbanca Colombia S.A. y filiales |
| 12.900 | % | 72,511 | | (13,105) |
| (3,915) |
| (8,090) |
| 2,117 |
| 1,629 |
| 29 |
| (8,230) |
| (21,335) |
Totals |
| — |
| 72,915 |
| (13,138) |
| (3,915) |
| (8,090) |
| 2,117 |
| 1,629 |
| 29 |
| (8,230) |
| (21,368) |
As of December 31, 2019 and for the year ended that date
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | Non- | | | | | | Available for | | | | Cash | | Defined | | | | Total other | | Total |
| | controlling | | | | Net | | sale | | Conversion | | flows | | benefits | | Deferred | | comprehensive | | comprehensive |
Subsidiary | | interest | | Equity | | income | | investments | | differences | | hedges | | obligations | | taxes | | income | | income |
|
| % | | MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| | | | | | | | | | | | | | | | | | | | |
Itaú Corredor de Seguro Colombia S.A. |
| 20.015 | % | 478 |
| 125 |
| — |
| — |
| — |
| — |
| — |
| — |
| 125 |
Itaú Corpbanca Colombia S.A. y filiales (*) |
| 12.900 | % | 93,805 |
| 5,274 |
| 675 |
| 17,922 |
| (411) |
| (1,184) |
| 332 |
| 17,334 |
| 22,608 |
Totals |
|
|
| 94,283 |
| 5,399 |
| 675 |
| 17,922 |
| (411) |
| (1,184) |
| 332 |
| 17,334 |
| 22,733 |
(*)On December 3, 2019 after obtaining regulatory approvals from banking supervisors in Chile, Colombia and Brazil, Itaú Corpbanca completed the acquisition of the shares of Itaú Corpbanca Colombia owned by Helm LLC and Kresge Stock Holding Company Inc., In relation to these transactions, Itaú Corpbanca acquired shares representing approximately 20.82% of the share capital of Itaú Corpbanca Colombia, for a total price of approximately US$334 million. As a result of these acquisitions, Itaú Corpbanca becomes the owner of 87.10% of the share capital of Itaú Corpbanca Colombia.
The following table shows the non-controlling interest movements for the years ended on December 31, 2020 and 2019, is as follows:
| | | | |
| | | | |
| | 2020 | | 2019 |
|
| MCh$ |
| MCh$ |
Balances as of January 1, |
| 94,283 |
| 223,081 |
Comprehensive income (loss) for the year |
| (21,368) |
| 22,733 |
Effects of change of ownership |
| — |
| (151,531) |
Balances as of December 31, |
| 72,915 |
| 94,283 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 140 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 24 - Equity, continued
Itaú Corpbanca’s main subsidiary with non-controlling interest is as follows:
| | | | | | | | | | | | | |
| | | | | | | | | | ||||
|
|
|
|
|
| As of December 31, 2020 |
| As of December 31, 2019 |
| ||||
Entity name | | | | | | |
| Non- | | |
| Non- | |
| | | | Main | | Ownership | | controlling | | Ownership | | controlling | |
| | Country | | Business | | percentage | | interest | | percentage | | interest | |
Itaú Corpbanca Colombia S.A. and subsidiaries | | Colombia | | Bank | | 87.100 | % | 12.900 | % | 87.100 | % | 12.900 | % |
Information that represents the non-controlling interest of the aforementioned company before the consolidation elimination adjustments is as follows:
| | | | |
| | | | |
|
| As of December 31, | ||
Statements of Financial Position summary | | 2020 | | 2019 |
| | MCh$ | | MCh$ |
| | | | |
Current assets |
| 5,177,419 |
| 5,385,982 |
Current liabilities |
| (3,184,281) |
| (3,112,252) |
Net current assets (liabilities) |
| 1,993,138 |
| 2,273,730 |
| | | | |
Non-current assets |
| 856,927 |
| 1,175,106 |
Non-current liabilities |
| (2,286,951) |
| (2,729,714) |
Net non-current assets (liabilities) |
| (1,430,024) |
| (1,554,608) |
| | | | |
Total net assets (liabilities) |
| 563,114 |
| 719,122 |
| | | | |
Accumulated non-controlling interest |
| 72,511 |
| 93,806 |
| | | | |
| | | ||
|
| For the years ended December 31, | ||
Statements of Income summary | | 2020 |
| 2019 |
| | MCh$ | | MCh$ |
Interest income |
| 418,477 |
| 493,629 |
Income (loss) for the year |
| (101,498) |
| 16,490 |
Non-controlling interest income (loss) |
| (13,104) |
| 5,274 |
| | | | |
| | | ||
|
| For the years ended December 31, | ||
Statements of Cash Flows summary | | 2020 |
| 2019 |
| | MCh$ | | MCh$ |
| | | | |
Net cash flows provided by (used in) operating activities |
| (109,188) |
| (359,168) |
Net cash flows provided by (used in) investing activities |
| 27,673 |
| 111,607 |
Net cash flows provided by (used in) financing activities |
| 74,137 |
| 115,303 |
Net increase (decrease) in cash flows |
| (7,378) |
| (132,258) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 141 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 24 - Equity, continued
| | | | | | | | | | | | |
| | | ||||||||||
| | For the years ended December 31, | ||||||||||
| | 2020 | | 2019 | ||||||||
| | Equity | | Non- | | | | Equity | | Non- | | |
| | holders of | | controlling | | | | holders of | | controlling | | |
Items |
| the Bank | | interest | | Totals | | the Bank | | interest | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Comprehensive income for the year |
| (925,479) | | (13,138) |
| (938,617) |
| 127,065 | | 5,399 |
| 132,464 |
| | | | | | | | | | | | |
Other comprehensive income (loss) before income taxes |
| | | | | |
| | | | | |
Available for sale investments |
| (5,177) | | (3,915) |
| (9,092) |
| 18,833 | | 675 |
| 19,508 |
Net investment in foreign operations hedges |
| 80,722 | | — |
| 80,722 |
| (6,381) | | (411) |
| (6,792) |
Cash flow hedges |
| (7,799) | | 2,117 |
| (5,682) |
| (46,786) | | — |
| (46,786) |
Exchange differences |
| (61,609) | | (8,090) |
| (69,699) |
| 54,402 | | 17,922 |
| 72,324 |
Defined benefits obligations |
| (1,632) | | 1,629 |
| (3) |
| (3,248) | | (1,184) |
| (4,432) |
Subtotals |
| 4,505 |
| (8,259) |
| (3,754) |
| 16,820 |
| 17,002 |
| 33,822 |
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale investments |
| 164 | | 1,614 |
| 1,778 |
| (5,209) | | (124) |
| (5,333) |
Net investment in foreign operations hedges |
| (21,795) | | — |
| (21,795) |
| 14,373 | | — |
| 14,373 |
Cash flow hedges |
| 425 | | (1,132) |
| (707) |
| (185) | | 23 |
| (162) |
Defined benefits obligations |
| 434 | | (453) |
| (19) |
| 1,109 | | 433 |
| 1,542 |
Subtotals |
| (20,772) |
| 29 |
| (20,743) |
| 10,088 |
| 332 |
| 10,420 |
Other comprehensive income (loss) for the year |
| (16,267) |
| (8,230) |
| (24,497) |
| 26,908 |
| 17,334 |
| 44,242 |
Comprehensive income (loss) for the year |
| (941,746) |
| (21,368) |
| (963,114) |
| 153,973 |
| 22,733 |
| 176,706 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 142 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
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, regardless if these are measured at fair value, as well as the effects from accounting hedges, which are part of the interest income and expenses included in the Consolidated Statement of Income for the year.
a) | The composition of interest income, including the effects related to hedge accounting, for the years ended December 31, 2020 and 2019, is as follows: |
| | | | | | | | | | | | | | | | |
| | | ||||||||||||||
| | For the years ended December 31, | ||||||||||||||
| | 2020 | | 2019 | ||||||||||||
| | | | Inflation | | | | | | | | Inflation | | | | |
| | | | indexation | | Prepayment | | | | | | indexation | | Prepayment | | |
Interest income |
| Interest |
| adjustment |
| fees |
| Totals |
| Interest |
| adjustment |
| fees |
| Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Investments under resale agreements |
| 3,567 | | — | | — |
| 3,567 |
| 4,996 | | (2) | | — |
| 4,994 |
Interbank loans |
| 1,541 | | — | | — |
| 1,541 |
| 4,361 | | — | | — |
| 4,361 |
Commercial loans |
| 703,120 | | 116,425 | | 4,656 |
| 824,201 |
| 797,242 | | 115,918 | | 11,903 |
| 925,063 |
Mortgage loans |
| 182,905 | | 116,993 | | 1,066 |
| 300,964 |
| 195,441 | | 104,970 | | 931 |
| 301,342 |
Consumer loans |
| 321,923 | | 130 | | 2,517 |
| 324,570 |
| 375,711 | | 135 | | 3,184 |
| 379,030 |
Financial investments |
| 58,083 | | 20,955 | | — |
| 79,038 |
| 79,114 | | 15,539 | | — |
| 94,653 |
Other interest income |
| 7,624 | | 1,821 | | — |
| 9,445 |
| 17,588 | | 2,543 | | — |
| 20,131 |
Gain (loss) from hedge accounting |
| 25,980 | | (49,905) | | — |
| (23,925) |
| 30,815 | | (40,449) | | — |
| (9,634) |
Totals |
| 1,304,743 |
| 206,419 |
| 8,239 |
| 1,519,401 |
| 1,505,268 |
| 198,654 |
| 16,018 |
| 1,719,940 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 143 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 25 – Interest Income and Interest Expense, continued
b) | Interest and readjustments subject suspensión of recognition of results, as indicated in letter m) of Note 1, are recorded in memorándum accounts, as long as they are not actually received. |
For the year ended December 31, 2020 and 2019, the detail of the amount due for interest and inflation - indexation adjustments is as follows:
| | | | | | | | | | | |
| | | | | | | | ||||
| For the year ended December 31, | ||||||||||
| 2020 | | 2019 | ||||||||
| Interest | | Inflation indexation adjustments | | Totals | | Interest | | Inflation indexation adjustments | | Totals |
| MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Commercial loans | 20,539 | | 4,328 | | 24,867 | | 40,151 | | 3,543 | | 43,694 |
Mortgage loans | 3,804 | | 2,545 | | 6,349 | | 6,573 | | 2,382 | | 8,955 |
Consumer loans | 220 | | — | | 220 | | 135 | | — | | 135 |
Totals | 24,563 | | 6,873 | | 31,436 | | 46,859 | | 5,925 | | 52,784 |
c) | Details of interest expenses and inflation-indexation adjustments including the effect related to hedge accounting, for the years ended December 31, 2020 and 2019 is as follows: |
| | | | | | | | | | | | |
|
| | ||||||||||
|
| For the year ended December 31, | ||||||||||
| | 2020 | | 2019 | ||||||||
| | | | Inflation | | | | | | Inflation | | |
Interest expenses and Inflation | | | | indexation | | | | | | indexation | | |
indexation adjustments |
| Interest |
| adjustment |
| Totals |
| Interest |
| adjustment |
| Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Deposits and other demand liabilities | | (46,530) | | (312) | | (46,842) | | (52,181) | | (220) | | (52,401) |
Obligations under repurchase agreements |
| (8,621) | | (1) |
| (8,622) |
| (26,349) | | — |
| (26,349) |
Time deposits and other time liabilities |
| (254,633) | | (7,764) |
| (262,397) |
| (369,048) | | (8,560) |
| (377,608) |
Interbank borrowings |
| (55,541) | | — |
| (55,541) |
| (81,557) | | — |
| (81,557) |
Debt instruments issued |
| (200,911) | | (129,539) |
| (330,450) |
| (212,346) | | (130,127) |
| (342,473) |
Other financial liabilities |
| (215) | | — |
| (215) |
| (501) | | — |
| (501) |
Lease obligations |
| (4,923) | | 4 |
| (4,919) |
| (5,034) | | (46) |
| (5,080) |
Other Interest expense |
| (84) | | (7,543) |
| (7,627) |
| (79) | | (3,273) |
| (3,352) |
Gain (loss) from hedge accounting |
| 33,376 | | — |
| 33,376 |
| 16,099 | | — |
| 16,099 |
Totals |
| (538,082) |
| (145,155) |
| (683,237) |
| (730,996) |
| (142,226) |
| (873,222) |
For purposes of the Consolidated Statement of Cash Flows, the net amount of interest and inflationindexation adjustments for the year ended December 31, 2020 is MCh$836,134 (MCh$846,718 as of December 31, 2019).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 144 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 26 - Fee and Commission Income and Expense
a)Fee and commission income
This item comprises the amount of all commissions accrued and paid in the year that generate the business segments, except for those that form an integral part of the effective interest rate of the financial instruments for income from ordinary activities.
| | | | |
|
| | ||
|
| For the years ended | ||
| | December 31, | ||
Fee and commission income | | 2020 |
| 2019 |
|
| MCh$ | | MCh$ |
Fees and commissions from lines of credits and overdrafts |
| 1,990 |
| 1,553 |
Fees and commissions from guarantees and letters of credit |
| 20,043 |
| 15,147 |
Fees and commissions from card services |
| 58,359 |
| 75,574 |
Fees and commissions from accounts management |
| 12,438 |
| 15,406 |
Fees and commissions from collections and payments |
| 24,419 |
| 23,921 |
Fees and commissions from brokerage and securities management |
| 9,365 |
| 9,844 |
Fees and commissions from asset management |
| 23,086 |
| 25,845 |
Compensation for insurance brokerage |
| 30,097 |
| 35,783 |
Investment banking and advisory fees |
| 7,471 |
| 20,657 |
Fees and commissions from student loans ceded |
| 5,639 |
| 5,735 |
Commissions on loan transactions |
| 742 |
| 893 |
Commissions from mortgage loans |
| 39 |
| 1,300 |
Other fees from services rendered |
| 6,838 |
| 10,321 |
Other commissions earned |
| 3,852 |
| 2,217 |
Totals |
| 204,378 |
| 244,196 |
b)Fee and commission expense
This item includes expenses for commissions accrued during the year, according to the following detail:
| | | | |
|
| | ||
|
| For the years ended | ||
| | December 31, | ||
Fee and commission expense | | 2020 |
| 2019 |
|
| MCh$ | | MCh$ |
Compensation for card operation |
| (38,822) | | (43,287) |
Fees and commissions for securities transactions |
| (4,660) | | (2,716) |
Commissions paid for foreign trade transactions |
| (2,438) | | (2,300) |
Commissions paid for customer loyalty program benefits |
| (11,082) | | (15,670) |
Commissions paid for services to customers management |
| (1,808) | | (3,905) |
Other commissions paid |
| (4,569) | | (1,914) |
Totals |
| (63,379) |
| (69,792) |
Commissions earned on mortgage finance loans are recorded in the Consolidated Statement of Income under “Interest income”.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 145 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
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 Consolidated Statements of Income for the year is as follows:
| | | | |
|
| | | |
|
| For the year ended | ||
| | December 31, | ||
Net Income (Loss) from Financial Operations | | 2020 |
| 2019 |
|
| MCh$ | | MCh$ |
Trading investments |
| 24,073 | | 15,919 |
Financial derivative contracts (trading) |
| 40,714 | | 77,380 |
Sale of loans and accounts receivable from customers (*) |
| 6,476 | | 14,588 |
Available for sale investments |
| 56,666 | | 34,317 |
Net result of ineffective hedging and decommissioning | | (19,890) | | (2,597) |
Others |
| 1,799 | | 1,827 |
Totals |
| 109,838 |
| 141,434 |
(*) See detail in Note 10, letter d).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 146 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
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 by non-monetary assets in foreign currency at the time of their disposal. Net foreign exchange gains (losses) details are as follows:
| | | | |
| | | ||
| | For the year ended | ||
Net Foreign Exchange Income (Loss) | | December 31, | ||
| | 2020 |
| 2019 |
|
| MCh$ | | MCh$ |
Net foreign exchange gain (loss) |
|
|
|
|
Gain (loss) on net foreign currency exchange positions |
| (50,822) |
| 37,404 |
Other foreign currency Exchange gains (losses) |
| 2,651 |
| 4,128 |
Subtotals |
| (48,171) |
| 41,532 |
Net exchange rate adjustments gain (loss) |
|
|
|
|
Adjustments for loans and accounts receivable from customers |
| (538) |
| 702 |
Adjustment for other assets and liabilities |
| (4) |
| 2 |
Net gain (loss) from hedge accounting |
| (25,751) |
| (14,610) |
Subtotals |
| (26,293) |
| (13,906) |
Totals |
| (74,464) |
| 27,626 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 147 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 29 - Provision for Loan Losses
a) | The movement registered in income for the year related to allowances and impairment due to credit risk, for the year ended December 31, 2020 and 2019, is summarized as follows: |
7 | | | | | | | | | | | | | | | | |
|
| | ||||||||||||||
|
| For the years ended December 31, 2020 | ||||||||||||||
| | | | | | | | | | | | | | Minimum | | |
| | | | Loans and accounts receivable from customers | | | | | | normal | | | ||||
| | Interbank | | Commercial | | Mortgage | | Consumer | | Contingent | | Additional | | portfolio | | |
Provision for Loan Losses | | loans | | loans | | loans | | loans | | loans | | provisions | | provisions | | Totals |
|
| MCh$ | | MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Provisions established | |
| |
| |
| |
| |
| |
| |
| |
|
Individually assessed | | (407) | | (411,540) | | — | | — | | (16,148) | | — | | — | | (428,095) |
Collectively assessed |
| — | | (66,929) | | (20,126) | | (211,295) | | (361) | | (148,148) | | — |
| (446,859) |
Income (loss) for provisions established (*) |
| (407) |
| (478,469) |
| (20,126) |
| (211,295) |
| (16,509) |
| (148,148) |
| — |
| (874,954) |
Provisions released |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
Individually assessed |
| 800 | | 134,114 | | — | | — | | 14,445 | | — | | — |
| 149,359 |
Collectively assessed |
| — | | 26,503 | | 9,667 | | 86,312 | | 1,920 | | 11,886 | | — |
| 136,288 |
Income (loss) for provisions released (*) |
| 800 |
| 160,617 |
| 9,667 |
| 86,312 |
| 16,365 |
| 11,886 |
| — |
| 285,647 |
Recovery of loans previously charged-off |
| — | | 25,511 | | 2,558 | | 32,779 | | — | | — | | — |
| 60,848 |
Net charge to income |
| 393 |
| (292,341) |
| (7,901) |
| (92,204) |
| (144) |
| (136,262) |
| — |
| (528,459) |
| | | | | | | | | | | | | | | | |
| | | ||||||||||||||
| | For the years ended December 31, 2019 | ||||||||||||||
| | | | | | | | | | | | | | Minimum | | |
| | | | Loans and accounts receivable from customers | | | | | | normal | | | ||||
| | Interbank | | Commercial | | Mortgage | | Consumer | | Contingent | | Additional | | portfolio | | |
Provision for Loan Losses |
| loans | | loans | | loans | | loans | | loans | | provisions | | provisions | | Totals |
| | MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Provisions established | | | | | | | | | | | | | | | | |
Individually assessed |
| (507) | | (299,980) | | — | | — | | (14,345) | | — | | — |
| (314,832) |
Collectively assessed |
| — | | (73,934) | | (25,511) | | (275,056) | | (1,510) | | (6,001) | | — |
| (382,012) |
Income (loss) for provisions established (*) |
| (507) |
| (373,914) |
| (25,511) |
| (275,056) |
| (15,855) |
| (6,001) |
| — |
| (696,844) |
Provisions released |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually assessed |
| 574 | | 163,789 | | — | | — | | 24,459 | | — | | — |
| 188,822 |
Collectively assessed |
| — | | 14,454 | | 9,102 | | 89,247 | | 1,118 | | 12,743 | | — |
| 126,664 |
Income (loss) for provisions released (*) |
| 574 |
| 178,243 |
| 9,102 |
| 89,247 |
| 25,577 |
| 12,743 |
| — |
| 315,486 |
Recovery of loans previously charged-off |
| — | | 22,213 | | 2,791 | | 33,661 | | — | | — | | — |
| 58,665 |
Net charge to income |
| 67 |
| (173,458) |
| (13,618) |
| (152,148) |
| 9,722 |
| 6,742 |
| — |
| (322,693) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 148 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 29 - Provision for Loan Losses, continued
(*) The amounts in the Consolidated Statements of Cash Flows for the year are as follows:
| | | | |
| | | ||
| | For the years ended | ||
| | December 31, | ||
|
| 2020 |
| 2019 |
|
| MCh$ | | MCh$ |
Charge to income for provisions established | | 874,954 | | 696,844 |
Credit to income for provisions used |
| (285,647) | | (315,486) |
Totals |
| 589,307 | | 381,358 |
b) | The detail by type of loans, analyzed collectively and individually, which were constituted and released by way of provision, is as follows: |
| | | | | | | | | | | |
| | | | | | | | ||||
| For the years ended December 31, 2020 | ||||||||||
| Establishment of provisions | | Release of provisions | ||||||||
| Individual | | Group | | Totals | | Individual | | Group | | Totals |
| MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Commercial loans | (411,540) | | (66,929) | | (478,469) | | 134,114 | | 26,503 | | 160,617 |
Mortgage loans | — | | (20,126) | | (20,126) | | — | | 9,667 | | 9,667 |
Consumer loans | — | | (211,295) | | (211,295) | | — | | 86,312 | | 86,312 |
Subtotals | (411,540) | | (298,350) | | (709,890) | | 134,114 | | 122,482 | | 256,596 |
Interbank loans, net | (407) | | — | | (407) | | 800 | | — | | 800 |
Subtotals | (411,947) | | (298,350) | | (710,297) | | 134,914 | | 122,482 | | 257,396 |
| | | | | | | | | | | |
| | | | | | | | | | | |
| For the years ended December 31, 2019 | ||||||||||
| Establishment of provisions | | Release of provisions | ||||||||
| Individual | | Group | | Totals | | Individual | | Group | | Totals |
| MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Commercial loans | (299,980) | | (73,934) | | (373,914) | | 163,789 | | 14,454 | | 178,243 |
Mortgage loans | — | | (25,511) | | (25,511) | | — | | 9,102 | | 9,102 |
Consumer loans | — | | (275,056) | | (275,056) | | — | | 89,247 | | 89,247 |
Subtotals | (299,980) | | (374,501) | | (674,481) | | 163,789 | | 112,803 | | 276,592 |
Interbank loans, net | (507) | | — | | (507) | | 574 | | — | | 574 |
Subtotals | (300,487) | | (374,501) | | (674,988) | | 164,363 | | 112,803 | | 277,166 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 149 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 30 - Personnel Salaries and Expenses
Personnel salaries and expenses for the years ended December 31, 2020 and 2019, are broken down as follows:
| | | | |
| | | ||
| | For the years ended | ||
Personnel Salaries and Expenses | | December 31, | ||
| | 2020 |
| 2019 |
|
| MCh$ | | MCh$ |
Personnel compensation |
| (185,677) |
| (181,431) |
Bonuses and gratifications |
| (68,154) |
| (82,129) |
Compensation for years of service |
| (17,292) |
| (12,830) |
Training expenses |
| (931) |
| (825) |
Health and life insurance | | (2,831) | | (2,910) |
Other personnel expenses |
| (17,306) |
| (18,084) |
Totals |
| (292,191) |
| (298,209) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 150 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Neta 31 - Administrative Expenses
For the years ended as of December 31, 2020 and 2019, the composition of this item is as follows:
| | | | |
| | | | |
| | For the years ended | ||
Administrative Expenses | | December 31, | ||
| | 2020 |
| 2019 |
|
| MCh$ | | MCh$ |
Administration expenses |
| (181,514) |
| (177,919) |
Maintenance and repair of fixed assets |
| (32,637) |
| (35,213) |
Insurance payments |
| (17,428) |
| (16,389) |
Office supplies |
| (1,756) |
| (1,679) |
IT and communications expenses |
| (53,839) |
| (47,878) |
Utilities and other services |
| (3,931) |
| (4,558) |
Security and transportation of securities services |
| (6,754) |
| (5,232) |
Representation and personnel travel expenses |
| (1,263) |
| (3,345) |
Legal and notarial expenses |
| (21,675) |
| (20,384) |
Technical reports fees |
| (13,180) |
| (13,647) |
Professional services fees |
| (1,629) |
| (1,656) |
Other expenses of obligations for lease agreements |
| (207) |
| (341) |
Expenses for lease contracts |
| (1,478) |
| (1,376) |
Fines applied by other agencies | | (133) | | (230) |
ATM maintenance and management services |
| (2,460) |
| (2,436) |
Temporary external services |
| (372) |
| (1,032) |
Postage and mailing expenses |
| (1,752) |
| (1,110) |
Internal events |
| (330) |
| (648) |
Donations |
| (5,354) |
| (2,279) |
Hired services |
| (5,595) |
| (5,808) |
Other services |
| (273) |
| (317) |
Miscellaneous contributions | | (706) | | (1,246) |
Credit card management services |
| (1,180) |
| (4,051) |
Other administrative expenses | | (7,582) | | (7,064) |
| | | | |
Outsourced services |
| (28,539) |
| (22,134) |
Data processing |
| (10,929) |
| (12,990) |
Products sales | | (865) | | — |
Others |
| (16,745) |
| (9,144) |
| | | | |
Board expenses |
| (1,310) |
| (1,350) |
Board of Directors compensation |
| (1,310) |
| (1,350) |
Other expenses of the Board |
| — |
| — |
| | | | |
Marketing and advertising expenses |
| (11,914) |
| (13,353) |
| | | | |
Non income taxes and contributions |
| (34,476) |
| (34,125) |
Real estate contributions |
| (347) |
| (286) |
Patents | | (1,353) | | (1,206) |
Contributions to the CMF |
| (9,116) |
| (8,166) |
Other taxes (*) |
| (23,660) |
| (24,467) |
Totals |
| (257,753) |
| (248,881) |
(*)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 – Consolidated Financial Statements – December 31, 2020 | 151 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 32 - Depreciation, Amortization, and Impairment
a) | Depreciation and amortization |
The values corresponding to charfes to income for depreciation and amortization for the years ended December 31, 2020 and 2019, are detailed below:
| | | | | |
| | | | | |
| | | For the years ended | ||
Depreciation and amortization | | Note | December 31, | ||
| | | 2020 |
| 2019 |
|
| | MCh$ | | MCh$ |
Amortization of intangible assets | | 13 | (74,625) |
| (74,140) |
Depreciation of fixed assets | | 14 | (14,178) |
| (13,982) |
Depreciation of right-of-use assets under lease agreements | | 15 | (37,641) |
| (39,044) |
Totals | | | (126,444) |
| (127,166) |
b) | Impairment |
The composition of the impairment expense, for the years ended December 31, 2020 and 2019, is as follows:
| | | | | | |
| | | | | | |
| | | | For the years ended | ||
| | Note | | December 31, | ||
| | | | 2020 |
| 2019 |
|
| |
| MCh$ | | MCh$ |
Impairment of financial assets available for sale |
| 11 |
| — |
| — |
Impairment of financial assets held to maturity |
| 11 |
| — |
| — |
Subtotals financial assets |
|
|
| — |
| — |
Impairment of intangible assets (1) | | 13 | | (38,849) | | — |
Impairment of intangibles generated in business combinations (2) | | 13 | | (113,911) | | — |
Goodwill Impairment (3) | | 13 | | (694,936) | | — |
Impairment of property, plant and equipment (4) (5) |
| 14 |
| (891) |
| (489) |
Impairment of improvements in leased properties (6) | | 15 | | (9,403) |
| (239) |
Subtotals non-financial assets |
|
|
| (857,990) |
| (728) |
Totals |
|
|
| (857,990) |
| (728) |
(1) Impairment of intangibles due to the integration of the systems in Chile, MCh$31,426 million for systems and MCh$3,098 million for projects. It also includes deterioration of systems and software in Colombia for MCh$4,325 million.
(2) Impairment of intangibles generated in business combinations includes MCh$113,138 from Itaú Corpbanca Colombia and MCh$773 from Itaú Corredor de Seguros Colombia.
(3) Impairment of Goodwill for MCh$448,273 million in Chile CGU and MCh$246,663 million in Colombia CGU.
(4) Impairment of ATM equipment for MCh$24.
(5) Impairment of fixed assets due to restructuring due to the Covid-19 Pandemic and digitization for MCh$867.
(6) Impairment of improvements in leased properties due to restructuring due to the Covid-19 Pandemin and digitization for MCh$9,403.
Itaú Corpbanca and its subsidiaries assess at the end of each reporting period, whether there is any indication of impairment in the value of any asset. If this indication exists, or when an impairment test is required, the entity will estimate the recoverable amount of the asset.
The Bank has defined two CGUs: CGU Chile (Itaú Corpbanca and its Chileans subsidiaries and the New York branch) and CGU Colombia (Itaú Corpbanca Colombia and its subsidiaries and Itaú Corredor de Seguros S.A.). These CGUs were defined based on their main geographic areas. Their cash flow generation and performance are analyzed separately by Top management because their contributions to the consolidated entity may be identified independently. It is worth mentioning that these CGUs are consistent with the Bank’s operating segments (see Note 4).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 152 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 32 - Depreciation, Amortization, and Impairment, continued
The book value of both UGEs on an after-tax basis, before recording impairment losses, is as follows:
| | | |
| | | |
Cash generating units | As of June 30, 2020 | | As of December 31, 2019 |
| MCh$ | | MCh$ |
Chile (*) | 2,419,497 | | 2,456,253 |
Colombia | 949,717 | | 984,132 |
(*) Includes the effects of the acquisition of minority interests in Colombia that took place on December 3, 2019. See Note 1, letter c)
b.1) Results and impairment loss as of June 30, 2020
i. | Evaluation results |
As a result of the impairment testing process described above, management concludes that the relation of the recoverable amount and its carrying amount for both the CGUs as of June 30, 2020, is as follow:
| | | | |
| | | | |
| | As of June 30, 2020 | ||
Main assumptions | | Chile | | Colombia |
Recoverable amount / Book value | (%) | 81.37 | | 54.45 |
The recoverable amount fot each CGU corresponds to the value in use, since it is the highest amount when comparing the fair value less costs to sell and the value in use.
ii. | Assumptions used in calculations of the recoverable amount |
The key assumptions used in calculating the recoverable amount, defined as those to which the calculation is most sensitive, are presented below:
| | | | |
| | | | |
| | As of June 30, 2020 | ||
Main assumptions | | Chile | | Colombia |
Perpetuity rates | (%) | 5.20 | | 6.50 |
Projected inflation rates | | 3.00 | | 3.00 |
Discount rates | | 10.40 | | 12.31 |
Loans Growth | (%) | 5.67 – 7.41 | | 6.25-8.82 |
Solvency ratio limit | (%) | 10.81– 12.12 | | 10.00-11.70 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 153 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 32 - Depreciation, Amortization, and Impairment, continued
iii. | Goodwill impairment loss |
As a result of the recent development events described in Note 3 “Significant events”, at the end of the second quarter, the recoverable amount for the CGUs was estimated, resulting in the recognition of an ampairment loss of Ch$808,857 million on the following assets of the respective CGUs as of June 30, 2020:
| | | | | | |
| | | | | | |
Impairment of intangible assets (1) | | CGU Chile | | CGU Colombia | | Total |
| | MCh$ | | MCh$ | | MCh$ |
Goodwill impairment loss | | 448,273 | | 246,663 | | 694,936 |
Intangibles assets generated in a business combination impairment loss | | — | | 113,911 | | 113,911 |
Total impairment of CGU Chile and Colombia | | 448,273 | | 360,574 | | 808,847 |
(1)As reported in 2016 in the original recognition of the business combination between Banco Itaú Chile and Corpbanca described in Note 1, resulted with a registration of a goodwill not deductible for income tax purposes, therefore the recognition of impairment loss does not generate effects on tax results. On the other hand, the intangibles assets generated in a business combination had an associated deferred tax liability of Ch$34,547 million, which generated an impact on income tax results equivalent to that amount, by recognizing the impairment. Considering the above, the effect on income net of taxes generated by the recognition of the impairment loss amounts to Ch$774,300 million, distributed between Ch$764,024 million attributable to the owners of the Bank and Ch$10,276 million attributable to non-controlling interest.
As of December 31, 2020, the Bank performed the impairment test, consistent with the periodicity of its annual test, in order to determine its recoverable amount at the end of this fiscal year.
b.2) Goodwill impairment test as of December 31, 2020
i. | Allocation of goodwill |
The Goodwill allocated to each of the identified CGUs1 generated in the reverse acquisition described in Note 1, section “General Information” Background of Itaú Corpbanca and subsidiaries, and the movements experienced during the year, are presented below:
| | | | |
| | | | |
| | UGE Chile | | UGE Colombia |
Goodwill | | MM$ | | MM$ |
Balances as of January 31, 2020 | | 940,785 | | 253,546 |
Conversion difference | | — | | (6,883) |
Impairment | | (448,273) | | (246,663) |
Balances as of December 31, 2020 | | 492,512 | | — |
1 Goodwill generated by the acquisition of a business abroad (Colombia case) is expressed in the functional currency of the aforementioned business (Colombian peso), converted at the closing exchange rate (exchange rate COP to CLP for the purpose of accounting recognition in Chile) in accordance with IAS 21 "Effects of Changes in Exchange Rates of the Foreign Currency" (see Note 13). Figures presented as of June 30, 2020 have been adjusted to their recoverable amount, recognizing an impairment loss in accordance with the aforementioned information.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 154 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 32 - Depreciation, Amortization, and Impairment, continued
ii. | Methodology used by the Bank |
Consistent with the prior year, the recoverable amounts of CGU Chile and CGU Colombia have been determined using the dividend discount model. This methodology considers the cash flows that would be generated by dividends distributed to shareholders with at perpetuity, discounted to their cost of capital rate as of the valuation date. Therefore, the economic value of equity can be estimated using cash flow projections derived from financial budgets and other assumptions approved by management.
In testing goodwill for impairment, management considered different sources of information, including:
● | Historical information existing for both banks post-merger and, if relevant, pre-merger. Historical information for events judged to be one-time and non-recurring was excluded. |
● | Assumptions approved by management. |
● | Information from external sources such as analyst reports, regulators, central banks and press releases. |
● | Observable market information such as rate curves, inflation and growth projections. |
● | The competitive strategy defined for both banks. |
● | The projected funding structure and its impact on the Bank's capital requirements and internal policy. |
iii. | Assumptions used in calculations of the recoverable amount |
The key assumptions used in calculating recoverable amount, defined as those variables to which the calculation is more sensitive, are presented below:
| | | | | | | | |
| | | | | | | | |
| | As of December 31, 2020 | | As of December 31, 2019 | ||||
Assumptions | | Chile | | Colombia | | Chile | | Colombia |
Perpetuity rate | (%) | 5.20 | | - | | 5.20 | | 6.50 |
Projected inflation rate (*) | (%) | 3.00 | | - | | 3.00 | | 3.00 |
Discount rate | (%) | 9.50 | | - | | 10.00 | | 11.30 |
Loans growth | (%) | 7.00 – 10.00 | | - | | 9.05 – 10.28 | | 9.70 – 10.30 |
Solvency index limit | (%) | 12.77 – 13.11 | | - | | 11.40 – 12.40 | | 10.60 – 14.00 |
(*) Corresponds to the projected long-term inflation rate.
● | Projection period and perpetuity |
Cash flow projections are prepared for a period of 5 years from 2020 to 2025. After this period, the present value of cash flows for the year 2025 is calculated, projected to perpetuity using GDP growth rates expected for the markets in which the aforementioned CGUs opérate.
● | Loans and deposits |
Loans were projected considering an increase of around 7.3% per year in Chile. Anticipated changes in the product mix were also modeled for both countries. The deposit portfolio was projected using target reciprocity established as a goal, both concepts aligned to market and market growth expectations target share.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 155 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 32 - Depreciation, Amortization, and Impairment, continued
● | Income |
The projected net income was estimated based on the sensitization of the GDP growth and the effects of inflation with respect to the banking industry (both in Chile and Colombia) with which the projected growth rate was obtained, also based on products (consumer, mortgage and commercial loans) and in the target market set by the administration. Projection of financing costs is determined mainly by the average balances of demand deposits, to term and other liabilities.
● | Discount rate |
Cost of own capital (Ke) in local currency was used as the discount rate to discount the cash flows of each CGU. This calculation considered a premium for the particular country risk of each CGU.
● | Perpetuity rate |
A growth rate was considered in perpetuity according to the rates observed in the market where each CGU operates. Consequently, they were built considering local inflation and GDP growth projections
● | Dividend payments |
The payment of dividends was carried out by maximizing the results of the share box, as a ratio of technical equity with risk-weighted assets, not beyond the limits required by the regulatory entities. In this way a dividend is given for the CGU of 30% for the first 5 years and 50% in perpetuity.
iv. | Outcome of impairment testing |
As a result of the impairment testing process described above, management concludes that the relation of the recoverable amount and its carrying amount for both the CGUs as of December 31, 2020 and December 31, 2019, is as follow.
| | | | | | | | |
| | | | | | | | |
| | As of December 31, 2020 | | As of December 31, 2019 | ||||
Assumptions | | Chile | | Colombia | | Chile | | Colombia |
Recoverable Amount/ Carrying Amount (RA/CA) | (%) | 138.47 | | - | | 116.95 | | 104.45 |
The recoverable amount for each CGU corresponds to the value in use, the highest comparing the fair value less costs to sell and the value in use.
As of December 31, 2020, Management carried out an impairment test, concluding that the recoverable amount exceed its carrying value, thus no further impairment is requiered, other than the impairment reported in the Interim Financial Statements as of June 30, 2020.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 156 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 32 - Depreciation, Amortization, and Impairment, continued
v. | Reconciliation of rates before and after taxes |
The Bank has used the cost of own capital (Ke) rate as a discount rate in its calculation of the recoverable amount, a rate that is observable after taxes. The following table shows the effect of considering the flows and the discount rate before taxes.
| | | | | | | | |
| | | | | | | | |
| | As of December 31, 2020 | | As of December 31, 2019 | ||||
| | Chile | | Colombia | | Chile | | Colombia |
Discount rates | (%) | 10.52 | | - | | 12.55 | | 16.90 |
Recoverable Amount/ Carrying Amount (RA/CA) | (%) | 160.71 | | - | | 145.80 | | 134.43 |
In accordance with the requirements set forth on IAS 36, and as a consequence of this analysis, Management has recognized impairment losses, based on the determination of the recoverable amount as of June 30, 2020 as indicated above.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 157 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 33 – Other Income and Operating Expenses
a) | Other operating income |
Other operating income is detailed as follows:
| | | |
| | | |
| For the years ended December 31, | ||
| 2020 | | 2019 |
| MCh$ | | MCh$ |
Income from assets received in lieu of payment | | | |
Gain on sales of assets received in lieu of payment | 3,287 | | 5,671 |
Other income | 30,622 | | 13,163 |
Subtotals | 33,909 | | 18,834 |
Release of provisions for contingencies | | | |
Country risk provisions | 318 | | 708 |
Subtotals | 318 | | 708 |
Other income | | | |
Compensations from insurance companies | 693 | | 6 |
Income other than interest and commissions from the lease | 320 | | — |
Income from sale of fixed assets | 14 | | 2,248 |
Recovery of leasing assets | 59 | | 73 |
Other subsidiary operating income | 4,604 | | 3,020 |
Gain on sale of leasing goods | 688 | | 1,914 |
Other operating income leasing | 933 | | 432 |
Revenue from insurance companies agreements | 1,537 | | 4,538 |
Recoveries for operational losses | 366 | | 3,968 |
Other operating income from lease | 499 | | 267 |
Revenue recovery of expenses abroad | 895 | | 747 |
Minor income | 481 | | 154 |
Provision refund | 15,739 | | 7,243 |
Other income | 4,841 | | 1,750 |
Subtotals | 31,669 | | 26,360 |
Totals | 65,896 | | 45,902 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 158 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 33 – Other Income and Operating Expenses, continued
b) | Other operating expenses |
During the years ended December 31, 2020 and 2019, the Bank presents other operating expenses according to the following:
| | | |
| | | |
| For the years ended December 31, | ||
| 2020 | | 2019 |
| MCh$ | | MCh$ |
Provisions and expenses for assets received in lieu of payment | | | |
Provisions for assets received in lieu of payment | (4,006) | | (18,062) |
Write-offs of assets received in lieu of payment | (3,025) | | (4,442) |
Maintenance expenses for assets received in lieu of payment | (1,086) | | (1,663) |
Subtotals | (8,117) | | (24,167) |
Provisions for contingencies | | | |
Country risk provisions | — | | — |
Other provisions for contingencies | (3,119) | | (507) |
Subtotals | (3,119) | | (507) |
Other expenses | | | |
Loss on sale of fixed assets | (145) | | (655) |
Expenses for restructuring plan | (7,190) | | — |
Operating loss expenses | (5,219) | | (17,468) |
Expenses and provisions associated with Law 20,027 credits | (35,400) | | — |
Insurance expense (law 20,027) | (675) | | (802) |
Provision expense for recovered leased assets | (1,191) | | (3,105) |
Expenses loss on sale of assets | (16,262) | | (9,386) |
Banking expenses | (2,754) | | (1,932) |
Fines and penalties | (4,502) | | (2,454) |
Loss on damaged assets | — | | (696) |
Other expenses | (8,962) | | (4,819) |
Subtotals | (82,300) | | (41,317) |
Totals | (93,536) | | (65,991) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 159 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 34 - Related Party Transactions
In accordance with the provisions set forth in the Chilean General Banking Law and the instructions issued by the CMF, 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 sociedades anónimas abiertas (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 December 31, 2020 and 2019, the loans granted to related persons are detailed below:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | As of December 31, 2020 | | As of December 31, 2019 | ||||||||
| | Productive | | Investment | | | | Productive | | Investment | | |
| | companies | | companies | | Individuals | | companies | | companies | | Individuals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Loans and accounts receivable from customers |
| | | | | |
|
|
|
|
|
|
Commercial loans |
| 150,796 | | 10,037 | | 6,517 |
| 109,840 |
| 11,910 |
| 5,054 |
Mortgage loans |
| — | | — | | 30,124 |
| — |
| — |
| 29,419 |
Consumer loans |
| — | | — | | 7,189 |
| — |
| — |
| 8,987 |
Gross loans and accounts receivable from customers |
| 150,796 |
| 10,037 |
| 43,830 |
| 109,840 |
| 11,910 |
| 43,460 |
Allowance for loan losses |
| (6,333) | | (885) | | (348) |
| (1,705) |
| (134) |
| (283) |
Net loans and accounts receivable from customers |
| 144,463 |
| 9,152 |
| 43,482 |
| 108,135 |
| 11,776 |
| 43,177 |
Contingent loans |
|
|
|
|
|
|
|
|
|
|
|
|
Contingent loans |
| 6,785 | | 22,520 | | 12,222 |
| 9,624 |
| 17,220 |
| 18,117 |
Provisions for contingent loans |
| (8) | | (334) | | (17) |
| (5) |
| (320) |
| (24) |
Net contingent loans |
| 6,777 |
| 22,186 |
| 12,205 |
| 9,619 |
| 16,900 |
| 18,093 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 160 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 34 - Related Party Transactions , continued
b)Other transactions and contracts with related parties
Below are the balances as of December 31, 2020 and 2019, for transactions with related parties and the impact on results for the years ended December 31, 2020 and 2019:
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| |
|
| 2020 |
| 2019 | ||||||||
| | | | Balances | | | | Balances | | | | | ||
| | | | receivable | | Effect on income | | receivable | | Effect on income | ||||
| | | | (payable) | | Income | | (Expense) | | (payable) | | Income | | (Expense) |
|
| |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Adexus S.A. |
| Data transmission services |
| — | | — | | (8) |
| — |
| — |
| (567) |
Bcycle Latam SPA |
| Other services |
| — | | — | | (2,165) |
| — |
| — |
| (1,518) |
CAI Gestión Inmobiliaria S.A. |
| Retail |
| — | | — | | — |
| — |
| — |
| (3) |
Combanc S.A. | | Data transmission services | | — | | — | | (472) | | — |
| — |
| (366) |
Comder Contraparte Central S.A. |
| Bank services |
| — | | — | | (826) |
| — |
| — | | (910) |
Compañía Chilena de Televisión S.A. |
| TV broadcasting services |
| — | | — | | (8) |
| — | | — | | (47) |
Corp Group Holding Inversiones Ltda |
| Advice |
| — | | — | | (537) |
| — | | — | | (382) |
Corp Imagen y Diseños S.A. |
| Other services |
| — | | — | | — |
| — | | — | | (101) |
Corp Research S.A. |
| Administrative advice |
| — | | — | | — |
| — |
| — |
| (474) |
Hotel Corporation of Chile S.A. |
| Accommodations, events |
| — | | — | | (8) |
| — |
| — |
| (39) |
Inmetrics Chile S.A | | Other services | | — | | — | | (1,470) | | | | | | |
Inmobiliaria Edificio Corpgroup S.A. |
| Office lease and common expenses (*) |
| (14,175) | | — | | (4,693) |
| (15,625) |
| — |
| (1,994) |
Inmobiliaria Gabriela S.A. |
| Leases (*) |
| (708) | | — | | (128) |
| (809) |
| — |
| (121) |
Inversiones Corp Group Interhold Ltda. |
| Financial services |
| — | | — | | (2,613) |
| — |
| — |
| (2,537) |
Itaú Chile Cía. de Seguros de Vida S.A. |
| Life insurances |
| — | | — | | — |
| — |
| 46 |
| (248) |
Itaú Chile Inv. Serv. y Administración S.A. |
| Leases (*) |
| (198) | | — | | (1,143) |
| (441) | | — | | (220) |
Itaú Unibanco |
| Business management reimbursement |
| 1,549 | | 2,213 | | — |
| 349 |
| 2,051 |
| — |
Operadora Tarjeta de Crédito Nexus S.A. | | Credit card administration |
| — | | — | | (3,319) |
| — |
| — |
| (3,037) |
Pulso Editorial S.A. |
| Publishing services |
| — | | — | | (24) |
| — |
| — |
| (23) |
Redbanc S.A. |
| ATM network management |
| — | | — | | (3,094) |
| — |
| — |
| (3,388) |
SMU S.A., Rendic Hnos. S.A. |
| ATM space rentals | | 991 | | — | | (2,388) | | 3,379 |
| — |
| (2,319) |
Transbank S.A. |
| Credit card administration |
| — | | — | | (13,177) |
| — |
| — |
| (14,208) |
(*) As of and for the year ended December 31, 2019, due to the adoption of IFRS 16, leases are recognized as a financial obligation and a right-of-use asset. See Note 1 letter r). For disclosure purposes we have included the unpaid balance of the liability and the interest expense.
These transactions were carried out at normal market prices prevailing on the date of the transactions.
c) | Donations |
| | | | | | |
| | | | | | |
| | | | For the years ended | ||
Name or corporate Name | | Description | | December 31, | ||
| | | | 2020 | | 2019 |
|
| |
| MCh$ |
| MCh$ |
Foundation Corpgroup Centro Cultural |
| Donations |
| 1,556 |
| 1,325 |
Foundation Descúbreme |
| Donations |
| 235 |
| 204 |
Foundation Itaú |
| Donations |
| 196 |
| 170 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 161 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 34 - Related Party Transactions , continued
d)Other assets and liabilities with related parties
| | | |
| | | |
| As of December 31, | ||
| 2020 | | 2019 |
| MCh$ | | MCh$ |
ASSETS | 34,416 | | 28,474 |
Derivative instruments | 33,875 | | 27,458 |
Other assets | 541 | | 1,016 |
LIABILITIES | 447,306 | | 420,273 |
Derivative instruments | 2,778 | | 1,565 |
Demand deposits | 179,067 | | 34,416 |
Savings accounts and time deposits | 239,709 | | 354,794 |
Other liabilities | 25,752 | | 29,498 |
e)Results of transactions with related parties
| | | | | | | |
| | | | | | | |
| For the years ended December 31, | ||||||
Type of income or recognized expense | 2020 | | 2019 | ||||
| Income | | Expenses | | Income | | Expenses |
| MCh$ | | MCh$ | | MCh$ | | MCh$ |
Income and interest expenses and inflation-indexed adjustments | 8,532 | | 4,955 | | 11,269 | | 7,328 |
Income and expenses for commissions and services | 504 | | — | | 3,232 | | — |
Profit and loss from trading | 26,636 | | 10,033 | | 2,585 | | 888 |
Operational support expenses | 500 | | — | | 901 | | — |
Other income and expenses | 211 | | 310 | | 207 | | 327 |
Totals | 36,383 | | 15,298 | | 18,194 | | 8,543 |
f)Payments to Board of Directors and key management personnel
Compensation received by key personnel of Management is as follow:
| | | |
| | | |
| For the years ended December 31, | ||
| 2020 | | 2019 |
| MCh$ | | MCh$ |
Short-term employee benefits | 31,868 | | 31,364 |
Termination compensation | 931 | | 799 |
Totals | 32,799 | | 32,163 |
As of December 31, 2020, The total compensation received during 2020 by the managers and top executives of Itaú Corpbanca amounts to MCh$22,054 (MCh$23,315 during 2019).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 162 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 34 - Related Party Transactions , continued
g)Conformation of key personnel
As of December 31, 2020 and 2019, the formation of the Bank's key staff is composed as follows:
| | | |
| | | |
| Number of executives | ||
| As of December 31, | ||
Position | 2020 | | 2019 |
Directors | 16 | | 16 |
Chief Executive Officer | 10 | | 10 |
Division Manager | 24 | | 25 |
Area manager | 146 | | 161 |
Manager | 128 | | 143 |
Vice-Presidents | 13 |
| 14 |
h)Transactions with key personnel
The next transactions has been realized during the years ended December 31, 2020 and 2019:
| | | |
| | | |
| For the years ended December 31, | ||
Income | 2020 | | 2019 |
| MCh$ | | MCh$ |
Credit cards | 115 | | 122 |
Consumer loans | 389 | | 421 |
Commercial loans | 534 | | 546 |
Mortgage loans | 366 | | 826 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 163 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – Fair Value of Financial Assets and Liabilities
This disclosure was prepared based on the application of the local regulatory guidelines stated in Chapter 712 "Fair value of financial instruments" of the SBIF and IFRS 13 "Fair value measurement". These standards have been applied to both financial assets and non-financial assets measured at fair value (recurring and non-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 principal3 or most advantageous4 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:
(i) | They are independent of each other, i.e. they are not related parties as defined in IAS 24 “Related 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. |
(ii) | 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. |
(iii) | They are able to enter into a transaction for the asset or liability. |
(iv) | 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.
2. | The market with the greatest volume and level of activity for the asset or liability |
3. | 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 – Consolidated Financial Statements – December 31, 2020 | 164 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – Fair Value of Financial Assets and Liabilities, continued
Highest and best use of non-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:
(i) | 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. |
(ii) | 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. |
Default risk. The fair value of a liability reflects the effect of the default 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:
(i) | 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). |
(ii) | 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. |
(iii) | 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 – Consolidated Financial Statements – December 31, 2020 | 165 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – 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:
(i) | An estimate of future cash flows for the asset or liability being measured. |
(ii) | Expectations about possible variations in the amount and timing of the cash flows representing the uncertainty inherent in the cash flows. |
(iii) | 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). |
(iv) | The price to bear the uncertainty inherent in the cash flows (i.e., a risk premium). |
(v) | Other factors that market participants would take into account in these circumstances. |
(vi) | For a liability, the default 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 December 31, 2020 and 2019, including those that are not presented at fair value in the Consolidated Statement of Financial Position
| | | | | | | | | | | | |
| | | | | ||||||||
| | As of December 31, 2020 | | As of December 31, 2019 | ||||||||
| | | | Estimated fair value | | | | Estimated fair value | ||||
| | Book value | | Recurring | | Non-recurring | | Book value | | Recurring | | Non-recurring |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
ASSETS |
| | |
|
|
|
|
|
|
|
|
|
Cash and deposits in banks | | 3,089,072 | | — | | 3,089,072 | | 1,009,681 |
| — | | 1,009,681 |
Cash items in process of collection | | 173,192 | | — | | 173,192 | | 231,305 |
| — | | 231,305 |
Trading investments | | 580,369 | | 580,369 | | — | | 181,402 |
| 181,402 | | — |
Investments under resale agreements | | 105,580 | | — | | 105,580 | | 75,975 |
| — | | 75,975 |
Financial derivative contracts | | 3,982,803 | | 3,982,803 | | — | | 3,154,957 |
| 3,154,957 | | — |
Interbank loans, net | | 7,115 | | — | | 7,115 | | 56,205 |
| — | | 56,205 |
Loans and accounts receivable from customers, net | | 21,685,269 | | — | | 22,876,758 | | 22,373,638 |
| — | | 23,413,152 |
Available for sale investments | | 3,964,720 | | 3,964,720 | | — | | 3,593,204 |
| 3,593,204 | | — |
Held to maturity investments | | 111,643 | | — | | 110,709 | | 115,682 |
| — | | 114,175 |
Totals | | 33,699,763 | | 8,527,892 | | 26,362,426 | | 30,792,049 |
| 6,929,563 | | 24,900,493 |
LIABILITIES | | | | | | | |
|
|
| |
|
Deposits and other demand liabilities | | 6,197,406 | | — | | 6,197,406 | | 4,873,448 |
| — | | 4,873,448 |
Cash in process of being cleared | | 154,232 | | — | | 154,232 | | 164,573 |
| — | | 164,573 |
Obligations under repurchase agreements | | 638,851 | | — | | 638,851 | | 559,457 |
| — | | 559,457 |
Time deposits and other time liabilities | | 11,433,064 | | — | | 11,574,924 | | 11,620,187 |
| — | | 11,692,076 |
Financial derivative contracts | | 3,673,591 | | 3,673,591 | | — | | 2,938,034 |
| 2,938,034 | | — |
Interbank borrowings | | 3,798,978 | | — | | 3,794,375 | | 2,646,756 |
| — | | 2,646,176 |
Debt instruments issued | | 6,204,856 | | — | | 7,330,126 | | 6,408,356 |
| — | | 7,244,551 |
Lease contracts liabilities | | 151,885 | | — | | 164,304 | | 172,924 |
| — | | 175,263 |
Other financial liabilities | | 13,123 | | — | | 13,123 | | 12,966 |
| — | | 12,966 |
Totals | | 32,265,986 | | 3,673,591 | | 29,867,341 | | 29,396,701 |
| 2,938,034 | | 27,368,510 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 166 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – Fair Value of Financial Assets and Liabilities, continued
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.
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). |
| | | | |
| | | | |
| | As of December 31, | ||
Measurement at fair value of items that are not valued | | 2020 | | 2019 |
recurrently | | MCh$ | | MCh$ |
ASSETS |
|
|
|
|
Cash and deposits in banks |
| 3,089,072 |
| 1,009,681 |
Cash items in process of collection |
| 173,192 |
| 231,305 |
Investments under resale agreements |
| 105,580 |
| 75,975 |
Interbank loans, net |
| 7,115 |
| 56,205 |
Loans and accounts receivable from customers, net |
| 22,876,758 |
| 23,413,152 |
Held to maturity investments |
| 110,709 |
| 114,175 |
Totals |
| 26,362,426 |
| 24,900,493 |
LIABILITIES |
|
|
|
|
Deposits and other demand liabilities |
| 6,197,406 |
| 4,873,448 |
Cash in process of being cleared |
| 154,232 |
| 164,573 |
Obligations under repurchase agreements |
| 638,851 |
| 559,457 |
Time deposits and other time liabilities |
| 11,574,924 |
| 11,692,076 |
Financial derivative contracts |
| 3,794,375 |
| 2,646,176 |
Interbank borrowings |
| 7,330,126 |
| 7,244,551 |
Lease contracts liabilities |
| 164,304 |
| 175,263 |
Other financial liabilities |
| 13,123 |
| 12,966 |
Totals |
| 29,867,341 |
| 27,368,510 |
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 – Consolidated Financial Statements – December 31, 2020 | 167 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – Fair Value of Financial Assets and Liabilities, continued
Financial instruments held to maturity
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 |
● | Borrowings from financial institutions |
● | Debt instruments issued |
| | | | |
| | | | |
| | As of December 31, | ||
Measurement at fair value of items on a recurring basis | | 2020 | | 2019 |
|
| MCh$ | | MCh$ |
ASSETS |
|
|
|
|
Trading securities |
| 580,369 |
| 181,402 |
Chilean Central Bank and Government securities |
| 108,042 |
| 80,898 |
Other securities issued locally |
| 271 |
| 23,123 |
Foreign government and central bank instruments |
| 432,178 |
| 67,088 |
Other securities issued abroad |
| 4,861 |
| 4,390 |
Investments in mutual funds |
| 35,017 |
| 5,903 |
Available for sale investments |
| 3,964,720 |
| 3,593,204 |
Chilean Central Bank and Government securities |
| 3,056,179 |
| 2,174,278 |
Other securities issued locally |
| 296,665 |
| 536,576 |
Foreign government and central bank instruments |
| 217,185 |
| 165,927 |
Other securities issued abroad |
| 394,691 |
| 716,423 |
Financial derivative contracts |
| 3,982,803 |
| 3,154,957 |
Forwards |
| 472,208 |
| 454,300 |
Swaps |
| 3,509,315 |
| 2,696,635 |
Call options |
| 195 |
| 3,805 |
Put options |
| 1,085 |
| 217 |
Totals |
| 8,527,892 |
| 6,929,563 |
LIABILITIES |
|
|
|
|
Financial derivative contracts |
| 3,673,591 |
| 2,938,034 |
Forwards |
| 433,863 |
| 504,276 |
Swaps |
| 3,238,371 |
| 2,431,435 |
Call options |
| 271 |
| 1,758 |
Put options |
| 1,086 |
| 565 |
Totals |
| 3,673,591 |
| 2,938,034 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 168 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – 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 portfolio |
● | Financial instruments available for sale |
Financial derivatives 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 credit risk of each counterparty.
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 December 31, 2020, the portfolio of derivative contracts both in Chile and Colombia have an aggregate effect of MCh$40,382 (MCh$27,727 as of December 31, 2019), due to CVA and DVA adjustments. The following table presents composition of CVA and DVA as of December 31, 2020 and 2019:
| | | | | | | | |
| | | | | ||||
| | Credit Value Adjustment (CVA) | | Debit Value Adjustment (DVA) | ||||
| | As of December 31, | | As of December 31, | ||||
| | 2020 | | 2019 | | 2020 | | 2019 |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Derivatives held for hedging |
| — |
| (2) |
| — |
| 1 |
Fair value hedge |
| — |
| — |
| — |
| — |
Currency forwards |
| — |
| — |
| — |
| — |
Currency swaps |
| — |
| — |
| — |
| — |
Interest rate swaps |
| — |
| — |
| — |
| — |
Cash flows hedge |
| — |
| (2) |
| — |
| 1 |
Currency forwards |
| — |
| (2) |
| — |
| 1 |
Currency swaps |
| — |
| — |
| — |
| — |
Interest rate swaps |
| — |
| — |
| — |
| — |
Net investment in a foreign operation hedge |
| — |
| — |
| — |
| — |
Currency forwards |
| — |
| — |
| — |
| — |
Currency swaps |
| — |
| — |
| — |
| — |
Interest rate swaps |
| — |
| — |
| — |
| — |
Derivatives held for trading |
| (40,971) |
| (28,172) |
| 589 |
| 446 |
Currency forwards |
| (443) |
| (341) |
| 205 |
| 123 |
Interest rate swaps |
| (36,363) |
| (23,189) |
| 37 |
| 28 |
Currency swaps |
| (4,165) |
| (4,642) |
| 347 |
| 295 |
Call currency options |
| — |
| — |
| — |
| — |
Put currency options |
| — |
| — |
| — |
| — |
Totals financial derivatives |
| (40,971) |
| (28,174) |
| 589 |
| 447 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 169 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – 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 in over-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 a zero-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 from other-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 – Consolidated Financial Statements – December 31, 2020 | 170 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – 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 (camera), 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 Chilean peso-US dollar curve. 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 December 31, 2020 | | As of December 31, 2019 | ||||||||
| | American | | | | | | American | | | | |
Impact calibration | | Forward | | Basis TAB | | Basis TAB | | Forward | | Basis TAB | | Basis TAB |
| | USD-CLP | | CLP | | CLF | | USD-CLP | | CLP | | CLF |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Volatility exchange rate USD-CLP | | | | | | | | | | | | |
TAB 30 |
| — | | 76 | | — |
| — |
| 98 |
| — |
TAB 90 |
| — | | 1 | | — |
| — |
| 4 |
| — |
TAB 180 |
| — | | 33 | | 15 |
| — |
| 39 |
| 18 |
TAB 360 |
| — | | — | | 3 |
| — |
| — |
| 4 |
Totals |
| — |
| 110 |
| 18 |
| — |
| 141 |
| 22 |
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 |
| CMF |
| 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 of TAB-Chamber spread. |
|
| Derivatives, American forwards |
| N/A |
| Bloomberg |
| Black and Scholes with inputs from European options. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 171 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – 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 with the fair value hierarchy established in IFRS 13 for the years ended December 31, 2020 and 2019.
| | | | | | | | |
| | | ||||||
| | As of December 31, 2020 | ||||||
| | | | Market value of the | | Other observable | | Non-observable |
| | Fair | | asset for identified | | significant inputs | | significant inputs |
Measurement at fair value of instruments on a recurring basis using | | value | | assets (Level 1) | | (Level 2) | | (Level 3) |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
ASSETS |
|
|
|
|
|
|
|
|
Trading securities | | 580,369 | | 575,237 | | 5,132 | | — |
Chilean Central Bank and Government securities | | 108,042 | | 108,042 | | — | | — |
Other securities issued locally | | 271 | | — | | 271 | | — |
Foreign government and central bank instruments | | 432,178 | | 432,178 | | — | | — |
Other securities issued abroad | | 4,861 | | — | | 4,861 | | — |
Investments in mutual funds | | 35,017 | | 35,017 | | — | | — |
Available for sale investments | | 3,964,720 |
| 3,608,717 |
| 356,003 |
| — |
Chilean Central Bank and Government securities | | 3,056,179 | | 3,056,179 | | — | | — |
Other securities issued locally | | 296,665 | | — | | 296,665 | | — |
Foreign government and central bank instruments | | 217,185 | | 217,185 | | — | | — |
Other securities issued abroad | | 394,691 | | 335,353 | | 59,338 | | — |
Financial derivative contracts | | 3,982,803 |
| — |
| 3,955,538 |
| 27,265 |
Forwards | | 472,208 | | — | | 468,632 | | 3,576 |
Swaps | | 3,509,315 | | — | | 3,485,626 | | 23,689 |
Call options | | 195 | | — | | 195 | | — |
Put options | | 1,085 | | — | | 1,085 | | — |
Totals | | 8,527,892 |
| 4,183,954 |
| 4,316,673 |
| 27,265 |
LIABILITIES | | | | | | | | |
Financial derivative contracts | | 3,673,591 |
| — |
| 3,672,751 |
| 840 |
Forwards | | 433,863 | | — | | 433,747 | | 116 |
Swaps | | 3,238,371 | | — | | 3,237,647 | | 724 |
Call options | | 271 | | — | | 271 | | — |
Put options | | 1,086 | | — | | 1,086 | | — |
Totals | | 3,673,591 |
| — |
| 3,672,751 |
| 840 |
| | | | | | | | |
| | | ||||||
| | As of December 31, 2019 | ||||||
| | | | Market value of the | | Other observable | | Non-observable |
| | Fair | | asset for identified | | significant inputs | | significant inputs |
Measurement at fair value of instruments on a recurring basis using | | value | | assets (Level 1) | | (Level 2) | | (Level 3) |
|
| MCh$ | | MCh$ | | MCh$ | | MCh$ |
ASSETS | |
|
|
|
|
|
|
|
Trading securities | | 181,402 |
| 177,009 |
| 4,393 |
| — |
Chilean Central Bank and Government securities | | 80,898 |
| 80,898 |
| — |
| — |
Other securities issued locally | | 23,123 |
| 23,120 |
| 3 |
| — |
Foreign government and central bank instruments | | 67,088 |
| 67,088 |
| — |
| — |
Other securities issued abroad | | 4,390 |
| — |
| 4,390 |
| — |
Investments in mutual funds | | 5,903 |
| 5,903 |
| — |
| — |
Available for sale investments | | 3,593,204 |
| 3,009,607 |
| 583,597 |
| — |
Chilean Central Bank and Government securities | | 2,174,278 |
| 2,174,278 |
| — |
| — |
Other securities issued locally | | 536,576 |
| — |
| 536,576 |
| — |
Foreign government and central bank instruments | | 165,927 |
| 165,927 |
| — |
| — |
Other securities issued abroad | | 716,423 |
| 669,402 |
| 47,021 |
| — |
Financial derivative contracts | | 3,154,957 |
| — |
| 3,127,525 |
| 27,432 |
Forwards | | 454,300 |
| — |
| 449,240 |
| 5,060 |
Swaps | | 2,696,635 |
| — |
| 2,674,263 |
| 22,372 |
Call options | | 3,805 |
| — |
| 3,805 |
| — |
Put options | | 217 |
| — |
| 217 |
| — |
Totals | | 6,929,563 |
| 3,186,616 |
| 3,715,515 |
| 27,432 |
LIABILITIES | |
|
|
|
|
|
|
|
Financial derivative contracts | | 2,938,034 |
| — |
| 2,936,915 |
| 1,119 |
Forwards | | 504,276 |
| — |
| 504,095 |
| 181 |
Swaps | | 2,431,435 |
| — |
| 2,430,497 |
| 938 |
Call options | | 1,758 |
| — |
| 1,758 |
| — |
Put options | | 565 |
| — |
| 565 |
| — |
Totals | | 2,938,034 |
| — |
| 2,936,915 |
| 1,119 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 172 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – Fair Value of Financial Assets and Liabilities, continued
d) | Transfers between level 1 and level 2 |
For the years ended December 31, 2020 and 2019, there were no transfers between levels 1 and 2.
| | | | | | | | | | | |
| | | | | | | | | | | |
| As of December 31, 2020 | | As of December 31, 2019 | ||||||||
Fair value measurement of instruments that are measured on a recurring basis | Fair value | | Level 1 to 2 | | Level 2 to 1 | | Fair value | | Level 1 to 2 | | Level 2 to 1 |
| MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
Assets | | | | | | | | | | | |
Trading instruments | 580,369 | | — | | — | | 181,402 | | — | | — |
Instruments available for sale | 3,964,720 | | — | | — | | 3,593,204 | | — | | — |
Financial derivate contracts | 3,982,803 | | — | | — | | 3,154,957 | | — | | — |
Totals | 8,527,892 | | — | | — | | 6,929,563 | | — | | — |
Liabilities | | | | | | | | | | | |
Financial derivate contracts | 3,673,591 | | — | | — | | 2,938,034 | | — | | — |
Totals | 3,673,591 | | — | | — | | 2,938,034 | | — | | — |
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 – Consolidated Financial Statements – December 31, 2020 | 173 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – 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 December 31, 2020 and 2019:
| | | | | | | | | | | | |
| | | ||||||||||
| | As of December 31, 2020 | ||||||||||
| | | | Gain (loss) | | Gain (loss) | | Purchases, | | | | |
| | Opening | | recognized in | | recognized in | | sales and | | Transfers from | | Ending |
Level 3 reconciliation | | balance |
| profit or loss |
| equity |
| agreements | | level 1 or level 2 | | balance |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
ASSETS | |
|
|
|
|
|
|
|
|
|
|
|
Financial derivative contracts | | | | | | | | | | | | |
Forwards | | 5,060 |
| 23,803 | | — | | (25,287) | | — | | 3,576 |
Swaps | | 22,372 |
| 4,800 | | — | | (3,483) | | — | | 23,689 |
Call options | | — |
| — | | — | | — | | — | | — |
Put options | | — |
| — | | — | | — | | — | | — |
Totals | | 27,432 |
| 28,603 |
| — |
| (28,770) |
| — |
| 27,265 |
LIABILITIES | |
|
|
|
|
|
|
|
|
|
|
|
Financial derivative contracts | | | | | | | | | | | | |
Forwards | | 181 |
| 2,397 | | — | | (2,462) | | — | | 116 |
Swaps | | 938 |
| (1,672) | | — | | 1,458 | | — | | 724 |
Call options | | — |
| — | | — | | — | | — | | — |
Put options | | — |
| — | | — | | — | | — | | — |
Totals | | 1,119 |
| 725 |
| — |
| (1,004) |
| — |
| 840 |
| | | | | | | | | | | | |
| | | ||||||||||
| | As of December 31, 2019 | ||||||||||
| | | | Gain (loss) | | Gain (loss) | | Purchases, | | | | |
| | Opening | | recognized in | | recognized in | | sales and | | Transfers from | | Ending |
Level 3 reconciliation |
| balance |
| profit or loss |
| equity |
| agreements | | level 1 or level 2 | | balance |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Financial derivative contracts |
|
|
|
|
|
|
|
|
|
|
|
|
Forwards |
| 618 |
| 12,398 |
| — |
| (7,956) |
| — |
| 5,060 |
Swaps |
| 26,538 |
| 4,930 |
| — |
| (9,096) |
| — |
| 22,372 |
Call options |
| — |
| — |
| — |
| — |
| — |
| — |
Put options |
| — |
| — |
| — |
| — |
| — |
| — |
Totals |
| 27,156 |
| 17,328 |
| — |
| (17,052) |
| — |
| 27,432 |
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Financial derivative contracts |
|
|
|
|
|
|
|
|
|
|
|
|
Forwards |
| 49 |
| 2,565 |
| — |
| (2,433) |
| — |
| 181 |
Swaps |
| 520 |
| 643 |
| — |
| (225) |
| — |
| 938 |
Call options |
| — |
| — |
| — |
| — |
| — |
| — |
Put options |
| — |
| — |
| — |
| — |
| — |
| — |
Totals |
| 569 |
| 3,208 |
| — |
| (2,658) |
| — |
| 1,119 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 174 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 35 – 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 December 31, 2020 and 2019:
| | | | | | | | |
| | | ||||||
| | As of December 31, 2020 | ||||||
| | | | Market value of | | | | |
| | | | the asset for | | Other observable | | Non-observable |
Measurement at fair value of items on a non-recurring basis |
| Estimated fair |
| identified assets |
| significant inputs |
| significant inputs |
| | value | | (Level 1) | | (Level 2) | | (Level 3) |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
ASSETS | |
| |
| |
| |
|
Cash and deposits in banks | | 3,089,072 | | 3,089,072 | | — | | — |
Cash items in process of collection | | 173,192 | | 173,192 | | — | | — |
Investments under resale agreements |
| 105,580 | | 105,580 | | — | | — |
Interbank loans, net |
| 7,115 | | 7,115 | | — | | — |
Loans and accounts receivable from customers, net |
| 22,876,758 | | — | | — | | 22,876,758 |
Held to maturity investments |
| 110,709 | | 110,709 | | — | | — |
Totals |
| 26,362,426 |
| 3,485,668 |
| — |
| 22,876,758 |
LIABILITIES |
|
|
|
|
|
|
|
|
Deposits and other demand liabilities |
| 6,197,406 | | 6,197,406 | | — | | — |
Cash in process of being cleared |
| 154,232 | | 154,232 | | — | | — |
Obligations under repurchase agreements |
| 638,851 | | 638,851 | | — | | — |
Time deposits and other time liabilities |
| 11,574,924 | | — | | 11,574,924 | | — |
Interbank borrowings |
| 3,794,375 | | 3,794,375 | | — | | — |
Debt instruments issued |
| 7,330,126 | | — | | 7,330,126 | | — |
Lease contracts liabilities |
| 163,748 | | — | | 164,304 | | — |
Other financial liabilities |
| 13,123 | | 13,123 | | — | | — |
Totals |
| 29,867,341 |
| 10,797,987 |
| 19,069,354 |
| — |
| | | | | | | | |
| | | ||||||
| | As of December 31, 2019 | ||||||
| | | | Market value of | | | | |
| | | | the asset for | | Other observable | | Non-observable |
Measurement at fair value of items on a non-recurring basis |
| Estimated fair |
| identified assets |
| significant inputs |
| significant inputs |
| | value | | (Level1) | | (Level 2) | | (Level 3) |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ |
ASSETS | |
| |
| |
| |
|
Cash and deposits in banks | | 1,009,681 | | 1,009,681 | | — | | — |
Cash items in process of collection | | 231,305 | | 231,305 | | — | | — |
Investments under resale agreements |
| 75,975 |
| 75,975 |
| — |
| — |
Interbank loans, net |
| 56,205 |
| 56,205 |
| — |
| — |
Loans and accounts receivable from customers, net |
| 23,413,152 |
| — |
| — |
| 23,413,152 |
Held to maturity investments |
| 114,175 |
| 114,175 |
| — |
| — |
Totals |
| 24,900,493 |
| 1,487,341 |
| — |
| 23,413,152 |
LIABILITIES |
|
|
|
|
|
|
|
|
Deposits and other demand liabilities |
| 4,873,448 |
| 4,873,448 |
| — |
| — |
Cash in process of being cleared |
| 164,573 |
| 164,573 |
| — |
| — |
Obligations under repurchase agreements |
| 559,457 |
| 559,457 |
| — |
| — |
Time deposits and other time liabilities |
| 11,692,076 |
| — |
| 11,692,076 |
| — |
Interbank borrowings |
| 2,646,176 |
| 2,646,176 |
| — |
| — |
Debt instruments issued |
| 7,244,551 |
| — |
| 7,244,551 |
| — |
Lease contracts liabilities |
| 175,263 |
| — |
| 175,263 |
| — |
Other financial liabilities |
| 12,966 |
| 12,966 |
| — |
| — |
Totals |
| 27,368,510 |
| 8,256,620 |
| 19,111,890 |
| — |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 175 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
The Bank and its subsidiaries, through their activity, are exposed to several types of risk mainly related to loans portfolio and financial instruments. Risk management policies are established in order to identify and analyze the risks faced by the Bank, set limits and adequate controls, monitor risks and comply with limits. The risk management policies and risk administration structures are reviewed periodically in order to reflect changes in the institution's activities. The Bank, through its rules and procedures, intends to develop an appropriate control environment, in which all employees understand their roles and responsibilities.
The following is a description of the main business activities and policies of the Bank in terms of risk management.
A) | Risk Management Structure |
A.1) Board
At the Bank and its Subsidiaries, the Board of Directors plays a leading role in corporate governance, since it is responsible for establishing and monitoring the Bank's risk management structure, for which it has a corporate governance system aligned with international best practices and Chilean regulations, mainly from the CMF. One of the principal functions of the Board of Directors is to ensure that measures are in place to monitor, evaluate and guide senior management to ensure that their actions are in line with best practices and defined risk appetite levels. To accomplish this, it has been implemented a governance structure composed by several committees, that lay out behavioral guidelines for the Bank’s associates and assist them in carrying out their functions related to controlling and managing the Bank's risk.
A.2) Audit Committee
The Audit Committee objective is to monitor the efficiency of the Bank’s internal control systems and compliance with regulations and other internal standards. It is also responsible for supervising the different aspects of maintenance, application and function of the Bank's internal controls, closely monitoring compliance with standards and procedures required by its practices, and having a clear understanding of the risks that can arise from the business conducted by the Bank.
The committee is linked to the Board through the participation of at least two board members named by the Board itself. These members must report to the Board situations and events analyzed by the Committee, thus holding the Bank's board members responsible for complying with both self-control policies established and practiced by the entity as well as laws and regulations to which it is subject.
The Audit Committee must reinforce and support both the function of the Bank’s Office of the Comptroller and its independence from management and serve, at the same time, as a link between the internal audit department and the independent auditors as well as between these two groups and the Board of Directors.
A.3) Board Committee
The Director Committee objective is to strengthen the self-regulation of the Bank and other entities under its control, making the Board's work more efficient through the increased oversight of management’s activities.
It is also responsible for making the necessary agreements to protect shareholders, especially minority shareholders, reviewing executive compensation systems and analyzing and the record report on the transactions referenced in title XVI of Law 18,046. A copy of this report is sent to the Board so in this instance it will be approved or rejected each respective transaction.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 176 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36– Risk Management, continued
A.4) Corporate Governance Committee
For the purposes of this committee, which is aware of how difficult it is to bring together all aspects of good corporate governance under one definition, corporate governance will be defined as the set of institutional organization and practices that impact a company's decision-making process, contributing to sustainable value creation in a transparent framework, proper management, risk control and corporate responsibility towards the market.
Therefore, appropriate corporate governance in a bank must align organizational incentives and promote the rights of shareholders and other direct or indirect stakeholders. This committee is a consultation body of the Board of Directors, whose mission is to ensure the existence and development within the Bank of the best corporate governance practices for financial entities. To this end, it will evaluate the current practices and policies, it will propose and make recommendations to the Board of Directors on improvements, reforms and adjustments that it deems appropriate and it will work to ensure proper implementation and application of these corporate governance practices and policies defined by the Bank's Board.
A.5) Assets and Liabilities Committee
The Assets and Liabilities Committee (ALCO) is the next highest body involved in managing the institution's financial policies. The committee's main purpose is to comply with the financial guidelines set by the Board. In this spirit, it must 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.
It will consider the diverse alternatives available to make decisions that ensure the highest and most sustainable returns with financial risk levels that are compatible with the business, current regulations and internal standards.
A.6) Anti Money Laundering and Terrorism and Bribery Financing Committee
This committee main purpose is to plan and coordinate activities to comply with policies and procedures to prevent asset laundering, terrorism financing and bribery, to maintain itself informed of the work carried out by the Operational Risk and Compliance Division Manager, which have also been designated as the head of prevention in conformity with Law No. 20,393, as well as to adopt agreements to improve prevention and control measures proposed by the Compliance Officer.
A.7) Operational Risk Committee
This committee's objective is to evaluate the status of key processes that are directly related to the Bank's Operational Risk and Internal Controls, in accordance with current regulatory standards in order to improve any weaknesses that the Bank may present and ensure proper implementation of regulatory changes.
It is also responsible for attaining critical processes under an internal control environment that enables the Bank to operate stably and consistently, thus procuring desired levels of reliability, integrity and availability for information resources.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 177 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36– Risk Management, continued
A.8) Compliance Committee
The Compliance Committee main purpose is to define, promote and ensure that the conduct of all Itaú Corpbanca employees meets the highest possible standards of personal and professional excellence. Employee conduct should, at all times, be guided by the principles and values that embody our organization’s spirit, philosophy and good business practices. Its purpose is also to ensure the application of the Regulatory Compliance Model, within the context of the definitions established by this committee, and acknowledge the work developed by the Operational Risk and Compliance Manager in this area, as well as adopt agreements for improving the control measures proposed.
A.9) Risk Methodologies Committee
The Risk Methodology Committee objective is to ensure the quality of all methodologies used by the Bank to estimate provisions (group and individual) for all business segments. This committee, which covers the Bank, its divisions and subsidiaries, is responsible for corporate aspects such as policies, manuals and procedures related to group provisioning methodologies as well as statistical models for loan origination, behavior and provisions. Its main members are: Corporate Risk Manager, Risk Control Manager, Retail Credit Manager, Financial Risk Manager, Head of Monitoring and Control and Head of Risk Models.
A.10) Portfolio Committee
The Portfolio Committee is responsible for monitoring the evolution of the Bank’s wholesale and retail portfolios in terms of risk-return ratio, adherence to the defined risk appetite and progress on strategies or short and long-term instructions defined by this committee.
To accomplish this, it analyzes competitors, movements in major market players and the main risks that can affect portfolio management, as well as projects that could have an impact on portfolios.
Its main members are: CEO, Corporate Risk Manager, Risk Control Manager, Wholesale Credit Manager, Wholesale Banking Manager, Retail Credit Manager, Retail Banking Manager, Planning and Financial Control Manager and Product and Marketing Manager.
A.11) Internal Audit
Internal Auditing works independently from management and reports to the Board through the Audit Committee. It is responsible for independently evaluating the activities carried out by Itaú Corpbanca and subsidiaries, in order to allow management to assess the adequacy of controls, the effectiveness of risk management, the reliability of reporting and compliance with standards and regulations.
A.12) General Code of Conduct and Manual of Information Management of Interest for Market
The objective of these documents are to continue complying with the best international practices and to have first-rate human capital. All associates, directors and Subsidiaries must adhere to ethical standards based on principles and values designed to guide and maintain the highest possible standards.
In response to our clients' trust and recognition, which are vital to our success, all associates and directors should strive to retain this trust, strictly complying with the General Code of Conduct.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 178 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
B) | Main Risks and Requirements affecting the Bank and its subsidiaries |
B.1) 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. Both the credit risk originated from portfolio loans and contingent loans are managed as described.
The Credit Managements have autonomy vis-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.
b.1.1) Individual portfolio risk assessment
The Bank’s risk management tool divides its portfolio into the following categories:
● | Normal Risk Portfolio |
● | Substandard Portfolio |
● | Default 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.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 179 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
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 agreedupon 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 past due that can be attributed to the company's performance.
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 made up 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.
Contingent Commitments
The Bank operates with diverse instruments that, although they are exposed to credit risk, are not reflected in the balance sheet. These include co-signatures and guarantees, documentary letters of credit, performance and bid bonds and commitments to grant loans, among others.
Co-signatures and guarantees represent an irrevocable payment obligation. In the event that a customer with a co-signer does not fulfill its obligations with third parties guaranteed by the Bank, this will affect the corresponding payments so that these transactions represent the same exposure to credit risk as a common loan.
Documentary letters of credit are commitments documented by the Bank on behalf of a customer that are guaranteed by merchandise on board, which therefore have less risk than direct indebtedness. Performance and bid bonds are contingent commitments that take effect only if the customer does not comply with a commitment made with a third party, guaranteed by them.
b.1.2) Risk assessment group portfolio
To determine the provisions, group evaluations require 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.
The non-performing portfolio includes all placements 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) | Arrears 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. |
All other credits that do not meet the definitions indicated above for the group portfolio are considered part of the normal portfolio.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 180 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
b.1.3) 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 December 31, 2020 and 2019, for the different components of the balance sheet, including derivatives, without deducting the collateral or other credit enhancements received.
| | | | | | |
| | | | | | |
| | | | As of December 31, | ||
Maximum exposure | | Notes | | 2020 | | 2019 |
|
| |
| MCh$ |
| MCh$ |
Interbank loans |
| 9 |
| 7,115 |
| 56,205 |
Loans and accounts receivable from customers |
| 10 |
| 21,685,269 |
| 22,373,638 |
Financial derivative contracts (*) |
| 8 |
| 3,674,129 |
| 3,038,303 |
Investments under resale agreements |
| 7 |
| 105,580 |
| 75,975 |
Available for sale investments |
| 11 |
| 3,964,720 |
| 3,593,204 |
Held to maturity investments |
| 11 |
| 111,643 |
| 115,682 |
Other assets |
| 17 |
| 602,769 |
| 783,447 |
Contingent loans |
| 23 |
| 5,349,811 |
| 5,895,139 |
Totals |
|
|
| 35,501,036 |
| 35,931,593 |
(*) Consider the guarantees received under agreements to constitute collateral.
For more details of the maximum exposure to credit and concentration risk for each type of financial instrument, refer to the specific Notes of the Consolidated Financial Statements.
The following is the concentration of credit risk by industry of financial assets:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | As of December 31, 2020 | | As of December 31, 2019 | ||||||||
| Notes | Maximum exposure gross | | Maximum exposure net | | Concentration gross | | Maximum exposure gross | | Maximum exposure net | | Concentration gross |
| | MCh$ | | MCh$ | | % | | MCh$ | | MCh$ | | % |
Manufacture | | 1,061,166 | | 1,004,437 | | 4.69% | | 1,099,739 | | 1,039,545 | | 4.75% |
Mining | | 534,989 | | 465,405 | | 2.37% | | 551,615 | | 480,239 | | 2.38% |
Electricity, gas and water | | 1,099,845 | | 863,573 | | 4.87% | | 1,125,541 | | 991,598 | | 4.86% |
Agriculture and livestock | | 494,754 | | 470,250 | | 2.19% | | 483,943 | | 456,840 | | 2.09% |
Forest | | 56,022 | | 54,607 | | 0.25% | | 53,328 | | 51,978 | | 0.23% |
Fishing | | 35,734 | | 30,882 | | 0.16% | | 46,902 | | 46,093 | | 0.20% |
Transport | | 587,013 | | 527,557 | | 2.59% | | 559,271 | | 511,450 | | 2.41% |
Telecommunications | | 56,165 | | 53,659 | | 0.25% | | 34,926 | | 33,794 | | 0.15% |
Construction | | 1,837,683 | | 1,799,216 | | 8.14% | | 2,106,829 | | 2,081,213 | | 9.10% |
Trade | | 2,211,152 | | 2,099,734 | | 9.79% | | 2,129,179 | | 2,024,056 | | 9.20% |
Services | | 3,601,051 | | 3,527,342 | | 15.94% | | 3,944,571 | | 3,916,553 | | 17.04% |
Others | | 3,252,320 | | 3,237,323 | | 14.40% | | 3,343,942 | | 3,314,628 | | 14.44% |
Commercial loans | 10.b | 14,827,894 | | 14,133,985 | | 65.64% | | 15,479,786 | | 14,947,987 | | 66.85% |
Mortgage loans | 10.b | 5,267,924 | | 5,225,837 | | 23.32% |
| 4,876,041 | | 4,830,748 | | 21.06% |
Consumer loans | 10.b | 2,493,253 | | 2,325,447 | | 11.04% | | 2,798,229 | | 2,594,903 | | 12.09% |
Totals | | 22,589,071 | | 21,685,269 | | 100% | | 23,154,056 | | 22,373,638 | | 100% |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 181 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
b.1.4) Guaranties
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 | | - Urban plots or land |
- Buildings for specific purposes under construction | | |
- Agricultural land | | |
- Maritime ships and aircrafts | | |
- Mining infrastructure | | |
- Inventory | | |
- Agricultural assets | | |
- Industrial assets | | |
- Biological assets | | |
Other warranties | | |
The guarantees taken by the Bank to ensure the collection of the rights reflected in its portfolio of loans corresponding to real guarantees of the mortgage type and pledges.
b.1.5) Credit quality of loans by loan portfolio
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 December 31, 2020 | As of December 31, 2019 |
| |||||||||||||
| | Individually | | % over total | | | | Coverage | | Individually | | % over total | | | | Coverage | |
Categories | | assessed | | portfolio | | Allowance | | ratio | | assessed | | portfolio | | Allowance | | ratio |
|
|
| MCh$ |
| % |
| MCh$ |
| % |
| MCh$ |
| % |
| MCh$ |
| % |
|
A1 |
| 163,981 |
| 0.73 | % | 59 | | 0.04 | % | 111,490 |
| 0.48 | % | 40 |
| 0.04 | % |
A2 |
| 514,946 |
| 2.28 | % | 237 |
| 0.05 | % | 657,039 |
| 2.84 | % | 358 |
| 0.05 | % |
A3 |
| 2,182,085 |
| 9.66 | % | 3,708 |
| 0.17 | % | 3,370,264 |
| 14.55 | % | 4,742 |
| 0.14 | % |
A4 |
| 4,223,518 |
| 18.70 | % | 35,304 |
| 0.84 | % | 4,635,425 |
| 20.02 | % | 36,473 |
| 0.79 | % |
A5 |
| 2,952,521 |
| 13.07 | % | 60,288 |
| 2.04 | % | 2,978,849 |
| 12.86 | % | 61,587 |
| 2.07 | % |
A6 |
| 920,044 |
| 4.07 | % | 35,739 |
| 3.88 | % | 618,793 |
| 2.67 | % | 15,461 |
| 2.50 | % |
Normal risk portfolio |
| 10,957,095 |
| 48.51 | % | 135,335 |
| 1.24 | % | 12,371,860 |
| 53.42 | % | 118,661 |
| 0.96 | % |
B1 |
| 431,934 | | 1.91 | % | 9,868 | | 2.28 | % | 216,493 |
| 0.93 | % | 7,249 |
| 3.35 | % |
B2 |
| 161,455 | | 0.71 | % | 11,899 | | 7.37 | % | 91,612 |
| 0.40 | % | 7,309 |
| 7.98 | % |
B3 |
| 163,779 | | 0.73 | % | 14,573 | | 8.90 | % | 43,672 |
| 0.19 | % | 6,696 |
| 15.33 | % |
B4 |
| 208,409 | | 0.92 | % | 50,590 | | 24.27 | % | 245,773 |
| 1.06 | % | 58,553 |
| 23.82 | % |
Substandard portfolio |
| 965,577 |
| 4.27 | % | 86,930 |
| 9.00 | % | 597,550 |
| 2.58 | % | 79,807 |
| 13.36 | % |
C1 |
| 98,267 | | 0.44 | % | 1,966 | | 2.00 | % | 125,258 |
| 0.54 | % | 2,505 |
| 2.00 | % |
C2 |
| 64,065 | | 0.28 | % | 6,407 | | 10.00 | % | 32,658 |
| 0.14 | % | 3,266 |
| 10.00 | % |
C3 |
| 166,851 | | 0.74 | % | 41,712 | | 25.00 | % | 60,370 |
| 0.26 | % | 15,093 |
| 25.00 | % |
C4 |
| 186,406 | | 0.83 | % | 74,562 | | 40.00 | % | 68,805 |
| 0.30 | % | 27,522 |
| 40.00 | % |
C5 |
| 129,078 | | 0.57 | % | 84,403 | | 65.39 | % | 154,075 |
| 0.67 | % | 100,148 |
| 65.00 | % |
C6 |
| 189,123 | | 0.84 | % | 172,051 | | 90.97 | % | 107,979 |
| 0.47 | % | 97,182 |
| 90.00 | % |
Non-compliant portfolio |
| 833,790 |
| 3.69 | % | 381,101 |
| 45.71 | % | 549,145 |
| 2.38 | % | 245,716 |
| 44.75 | % |
Subtotals |
| 12,756,462 |
| 56.47 | % | 603,366 |
| 4.73 | % | 13,518,555 |
| 58.38 | % | 444,184 |
| 3.29 | % |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 182 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
|
| | As of December 31, 2020 | | As of December 31, 2019 | |||||||||||||
| | | | % over total | | | | Coverage | | | | % over total | | | | Coverage |
|
Categories | | Group | | portfolio | | Allowance | | ratio | | Group | | portfolio | | Allowance | | ratio |
|
|
| MCh$ |
| % |
| MCh$ |
| % |
| MCh$ |
| % |
| MCh$ |
| % |
|
Normal risk portfolio |
| 1,846,763 | | 8.18 | % | 32,656 |
| 1.77 | % | 1,737,978 |
| 7.51 | % | 29,672 |
| 1.71 | % |
Non-compliant portfolio |
| 224,669 | | 0.99 | % | 57,887 |
| 25.77 | % | 223,253 |
| 0.96 | % | 57,944 |
| 25.95 | % |
Commercial portfolio |
| 2,071,432 |
| 9.17 | % | 90,543 |
| 4.37 | % | 1,961,231 |
| 8.47 | % | 87,616 |
| 4.47 | % |
Normal risk portfolio |
| 5,035,914 | | 22.29 | % | 17,096 |
| 0.34 | % | 4,644,274 |
| 20.06 | % | 18,798 |
| 0.40 | % |
Non-compliant portfolio |
| 232,010 | | 1.03 | % | 24,991 |
| 10.77 | % | 231,767 |
| 1.00 | % | 26,494 |
| 11.43 | % |
Mortgage portfolio |
| 5,267,924 |
| 23.32 | % | 42,087 |
| 0.80 | % | 4,876,041 |
| 21.06 | % | 45,292 |
| 0.93 | % |
Normal risk portfolio |
| 2,327,922 | | 10.31 | % | 77,431 |
| 3.33 | % | 2,623,064 |
| 11.33 | % | 97,319 |
| 3.71 | % |
Non-compliant portfolio |
| 165,331 | | 0.73 | % | 90,375 |
| 54.66 | % | 175,165 |
| 0.76 | % | 106,007 |
| 60.52 | % |
Consumer portfolio |
| 2,493,253 |
| 11.04 | % | 167,806 |
| 6.73 | % | 2,798,229 |
| 12.09 | % | 203,326 |
| 7.27 | % |
Total portfolio |
| 22,589,071 |
| 100.00 | % | 903,802 |
| 4.00 | % | 23,154,056 |
| 100 | % | 780,418 |
| 3.37 | % |
Below an overdue analysis is disclosed for each type of asset:
| | | | | | | |
| | | | | | | |
| As Of December 31, 2020 | ||||||
| Less than 30 days | | Between 30 and 89 days | | More than 90 days | | Total overdue debt |
| MCh$ | | MCh$ | | MCh$ | | MCh$ |
Interbank loans | — | | — | | — | | — |
Loans and accounts receivable from customers | | | | | | | |
Commercial loans | 195,865 | | 260,792 | | 381,611 | | 838,268 |
Mortgage loans | 87,946 | | 37,084 | | 77,175 | | 202,205 |
Consumer loans | 78,573 | | 50,275 | | 45,096 | | 173,944 |
Financial instruments | — | | — | | — | | — |
Totals | 362,384 | | 348,151 | | 503,882 | | 1,214,417 |
| | | | | | | |
| | | | | | | |
| As Of December 31, 2019 | ||||||
| Less than 30 days | | Between 30 and 89 days | | More than 90 days | | Total overdue debt |
| MCh$ | | MCh$ | | MCh$ | | MCh$ |
Interbank loans | — | | — | | — | | — |
Loans and accounts receivable from customers | | | | | | | |
Commercial loans | 542,648 | | 134,505 | | 490,641 | | 1,167,794 |
Mortgage loans | 166,105 | | 88,072 | | 102,650 | | 356,827 |
Consumer loans | 152,507 | | 73,347 | | 60,373 | | 286,227 |
Financial instruments | — | | — | | — | | — |
Totals | 861,260 | | 295,924 | | 653,664 | | 1,810,848 |
This information includes obligations with interest and indexation accrued as agreed and excludes penalty interest for default. Consequently, they do not consider the values of the mentioned assets but rather the debts due, which excludes those obligations for transferred assets that have not been derecognized for financial or accounting reasons and of which the bank or its subsidiaries are not creditors, and includes those obligations for acquired loan titles that are calculated as financing for the transferor in the Statement of Financial Position.
B.2)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.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 183 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
B.2.1) 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.2.1.1) 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.2.1.2) Inflation and other indexes adjustments Risk
The risk of readjustment is the exposure due to changes in the units or indexes of readjustment (such as UF, UVR or others) defined in national or foreign currency, in which some of the instruments, contracts or other operations registered in the balance with such characteristics
B.2.1.3) 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/or non-parallel yield shifts with the effects reflected in the prices of instruments, the financial margin, equity and economic value.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 184 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36– Risk Management, continued
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 re-pricing 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 re-pricing/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 at the end of the years ended December 31, 2020 and 2019:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | As of December 31, 2020 | ||||||||||
| | Up to | | 1 to 3 | | 3 months | | 1 to 3 | | More than | | |
Positions | | 1 month | | months | | to 1 year | | years | | 3 years | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Assets |
| 9,817,266 |
| 2,565,202 |
| 5,585,956 |
| 5,174,445 |
| 9,793,262 |
| 32,936,131 |
CLP |
| 4,885,891 | | 845,251 | | 2,289,124 | | 2,252,567 | | 1,918,038 |
| 12,190,871 |
CLF |
| 539,004 | | 502,506 | | 1,683,797 | | 1,586,457 | | 6,989,721 |
| 11,301,485 |
USD |
| 2,523,089 | | 571,066 | | 885,045 | | 123,608 | | 201,009 |
| 4,303,817 |
COP |
| 1,869,282 | | 646,379 | | 727,990 | | 1,211,813 | | 684,494 |
| 5,139,958 |
Liabilities |
| (15,149,162) |
| (2,808,356) |
| (4,363,629) |
| (1,818,488) |
| (7,983,018) |
| (32,122,653) |
CLP |
| (10,169,966) | | (1,637,063) | | (2,477,283) | | (661,668) | | (1,950,514) |
| (16,896,494) |
CLF |
| (223,471) | | (14,789) | | (284,994) | | (768,465) | | (5,616,883) |
| (6,908,602) |
USD |
| (2,152,414) | | (884,847) | | (939,496) | | (3,590) | | — |
| (3,980,347) |
COP |
| (2,603,311) | | (271,657) | | (661,856) | | (384,765) | | (415,621) |
| (4,337,210) |
Derivative |
| (149,153) |
| (133,655) |
| (133,194) |
| (376,852) |
| 949,461 |
| 156,607 |
CLP |
| 830,637 | | 1,429,392 | | 516,336 | | 272,765 | | 24,985 |
| 3,074,115 |
CLF |
| (1,263,538) | | (795,275) | | (662,416) | | (444,847) | | 1,001,038 |
| (2,165,038) |
USD |
| 103,599 | | (24,269) | | 87,848 | | (24,433) | | (12,182) |
| 130,563 |
COP |
| 180,149 | | (743,503) | | (74,962) | | (180,337) | | (64,380) |
| (883,033) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | As of December 31, 2019 | ||||||||||
| | Up to | | 1 to 3 | | 3 months | | 1 to 3 | | More than | | |
Positions | | 1 month | | months | | to 1 year | | years | | 3 years | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Assets |
| 15,718,342 |
| 5,631,115 |
| 9,384,357 |
| 8,943,449 |
| 12,031,089 |
| 51,708,352 |
CLP |
| 3,507,091 |
| 965,331 |
| 2,382,124 |
| 1,924,539 |
| 1,365,975 |
| 10,145,060 |
CLF |
| 536,885 |
| 595,857 |
| 1,670,189 |
| 2,172,579 |
| 6,662,306 |
| 11,637,816 |
USD |
| 2,038,658 |
| 911,154 |
| 1,892,712 |
| 88,532 |
| 125,788 |
| 5,056,844 |
COP |
| 9,635,708 |
| 3,158,773 |
| 3,439,332 |
| 4,757,799 |
| 3,877,030 |
| 24,868,642 |
Liabilities |
| (20,036,030) |
| (5,142,757) |
| (10,375,645) |
| (3,733,426) |
| (7,301,728) |
| (46,589,586) |
CLP |
| (8,633,088) |
| (2,251,174) |
| (3,200,762) |
| (632,972) |
| (215,000) |
| (14,932,996) |
CLF |
| (432,799) |
| (47,785) |
| (655,079) |
| (752,948) |
| (5,426,561) |
| (7,315,172) |
USD |
| (1,305,440) |
| (1,418,654) |
| (3,610,341) |
| (69,784) |
| — |
| (6,404,219) |
COP |
| (9,664,703) |
| (1,425,144) |
| (2,909,463) |
| (2,277,722) |
| (1,660,167) |
| (17,937,199) |
Derivative |
| 1,881,267 |
| (1,765,659) |
| (205,036) |
| (425,285) |
| 540,733 |
| 26,020 |
CLP |
| 988,919 |
| 1,140,587 |
| 900,023 |
| 664,608 |
| (407,679) |
| 3,286,458 |
CLF |
| (936,785) |
| (814,209) |
| (485,247) |
| (904,781) |
| 910,135 |
| (2,230,887) |
USD |
| 787,971 |
| 524,265 |
| 806,558 |
| 77,221 |
| 15,380 |
| 2,211,395 |
COP |
| 1,041,162 |
| (2,616,302) |
| (1,426,370) |
| (262,333) |
| 22,897 |
| (3,240,946) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 185 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36– 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.2.1.4) Volatility Risk
In addition to the exposure related to the underlying asset, issuing options has other risks. These risks arise from the non-linear relationship between the gain generated by the option and the price and level of the underlying factors, as well as exposure to changes in the price volatility of the underlying asset.
B.2.2) 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.
Appropriately managing funding liquidity risk not only allows contractual obligations to be met in a timely manner, but also enables:
● | The liquidation of positions, when it so decides, to occur without significant losses. |
● | The commercial and treasury activities of the Bank and its subsidiaries to be financed at competitive rates. |
● | The Bank to avoid fines or regulatory penalties for not complying with regulations. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 186 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36– Risk Management, continued
Normative Measurement of Contractual Liquidity GAP
According to chapter 12-20 of the RAN, all the items on and off the balance sheet that contribute cash flows are analyzed. The consolidated non-discounted contractual cash flows of financial assets and liabilities of the Bank as of December 31, 2020 and 2019:
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | As of December 31, 2020 | ||||||||||||||
| | Up to 1 | | 1 to 3 | | 3 to 6 | | 6 months to 1 | | 1 to 3 | | 3 to 5 | | More than 5 | |
|
| | month | | months | | months | | year | | years | | years | | years | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Assets |
| 7,853,977 |
| 1,865,203 |
| 2,064,325 |
| 2,165,434 |
| 6,585,579 |
| 5,404,123 |
| 8,427,539 |
| 34,366,180 |
Cash |
| 2,944,906 | | — | | — | | — | | — | | — | | — |
| 2,944,906 |
Financial instruments recorded at market value |
| 2,710,090 | | 132,637 | | 166,319 | | 47,348 | | 620,662 | | 179,215 | | 72,984 |
| 3,929,255 |
Loans to local banks without credit lines |
| 14,021 | | 40,648 | | 20,577 | | 23,369 | | — | | — | | — |
| 98,615 |
Credit lines granted to local banks |
| 1,060,762 | | 1,500,138 | | 1,541,130 | | 1,394,347 | | 3,650,372 | | 3,456,582 | | 3,338,541 |
| 15,941,872 |
Commercial loans without credit lines |
| (37,094) | | — | | — | | — | | — | | — | | — |
| (37,094) |
Commercial credit lines and overdrafts |
| 52,522 | | 124,295 | | 196,045 | | 345,728 | | 1,005,486 | | 544,448 | | 221,770 |
| 2,490,294 |
Consumer loans without credit lines |
| (66,702) | | — | | — | | — | | — | | — | | — |
| (66,702) |
Consumer credit lines and overdrafts |
| 71,013 | | 77,691 | | 84,836 | | 230,582 | | 914,108 | | 854,341 | | 4,655,995 |
| 6,888,566 |
Residential mortgage loans |
| 352,299 | | — | | 27,972 | | 57,051 | | 16 | | 319,235 | | 1,829 |
| 758,402 |
Other transactions or commitments without credit lines |
| 745,736 | | 4,995 | | 195 | | — | | 377,022 | | — | | — |
| 1,127,948 |
Derivative contracts |
| 6,424 | | (15,201) | | 27,251 | | 67,009 | | 17,913 | | 50,302 | | 136,420 |
| 290,118 |
Liabilities |
| (14,834,148) |
| (2,840,448) |
| (2,489,871) |
| (1,897,454) |
| (2,147,037) |
| (3,269,878) |
| (4,467,535) |
| (31,946,371) |
Checking accounts and demand deposits |
| (7,101,902) | | — | | — | | — | | — | | — | | — |
| (7,101,902) |
Term savings accounts - unconditional withdrawal |
| (19,403) | | — | | — | | — | | — | | — | | — |
| (19,403) |
Obligations with the Chilean Central Bank without credit lines |
| (636,894) | | (1,101) | | — | | — | | — | | — | | — |
| (637,995) |
Credit lines obtained from the Central Bank of Chile | | — | | — | | — | | — | | (418,140) | | (1,843,405) | | — | | (2,261,545) |
Deposits and time deposits |
| (4,612,696) | | (2,441,779) | | (2,184,091) | | (1,173,416) | | (660,888) | | (98,316) | | (658,778) |
| (11,829,964) |
Foreign borrowings without credit lines |
| (561,978) | | (375,610) | | (241,040) | | (377,311) | | (23,861) | | — | | — |
| (1,579,800) |
Foreign loans without credit lines |
| (120) | | — | | — | | — | | — | | — | | — |
| (120) |
Letter of credit obligations |
| (1,305) | | (364) | | (1,567) | | (3,294) | | (12,132) | | (9,208) | | (6,325) |
| (34,195) |
Bonds payable |
| (938,590) | | (17,783) | | (57,672) | | (332,658) | | (961,623) | | (1,289,654) | | (3,776,161) |
| (7,374,141) |
Other credit lines obtained |
| (961,260) | | (3,811) | | (5,501) | | (10,775) | | (70,393) | | (29,295) | | (26,271) | | (1,107,306) |
Net |
| (6,980,171) |
| (975,245) |
| (425,546) |
| 267,980 |
| 4,438,542 |
| 2,134,245 |
| 3,960,004 |
| 2,419,809 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 187 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36– Risk Management, continued
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | As of December 31, 2019 | ||||||||||||||
| | Up to 1 | | 1 to 3 | | 3 to 6 | | 6 months to 1 | | 1 to 3 | | 3 to 5 | | More than 5 | |
|
| | month | | months | | months | | year | | years | | years | | years | | Totals |
|
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Assets |
| 7,290,597 |
| 2,513,201 |
| 2,329,329 |
| 2,269,276 |
| 6,174,755 |
| 3,642,796 |
| 8,876,481 |
| 33,096,435 |
Cash |
| 840,950 |
| — |
| — |
| — |
| — |
| — |
| — |
| 840,950 |
Financial instruments recorded at market value |
| 2,988,831 |
| 16,339 |
| 1,009 |
| 21,989 |
| 34,114 |
| 4,797 |
| 39,752 |
| 3,106,831 |
Loans to local banks without credit lines |
| 73,871 |
| — |
| — |
| — |
| — |
| — |
| — |
| 73,871 |
Credit lines granted to local banks |
| 1,351,426 |
| 1,837,226 |
| 1,768,810 |
| 1,711,296 |
| 3,862,542 |
| 2,202,170 |
| 4,077,052 |
| 16,810,522 |
Commercial loans without credit lines |
| 133,856 |
| — |
| — |
| — |
| (4) |
| — |
| — |
| 133,852 |
Commercial credit lines and overdrafts |
| 460,594 |
| 134,413 |
| 209,720 |
| 351,216 |
| 1,074,368 |
| 613,673 |
| 156,218 |
| 3,000,202 |
Consumer loans without credit lines |
| 278,985 |
| — |
| — |
| — |
| — |
| — |
| — |
| 278,985 |
Consumer credit lines and overdrafts |
| 36,184 |
| 72,739 |
| 109,834 |
| 219,880 |
| 863,034 |
| 809,263 |
| 4,490,805 |
| 6,601,739 |
Residential mortgage loans |
| 228,588 |
| 432,020 |
| 99,920 |
| 23,239 |
| 19 |
| 12 |
| — |
| 783,798 |
Other transactions or commitments without credit lines |
| 973,966 |
| 6,489 |
| 125,128 |
| — |
| 248,169 |
| — |
| — |
| 1,353,752 |
Derivative contracts |
| (76,654) |
| 13,975 |
| 14,908 |
| (58,344) |
| 92,513 |
| 12,881 |
| 112,654 |
| 111,933 |
Liabilities |
| (10,209,490) |
| (3,277,951) |
| (3,007,364) |
| (3,804,062) |
| (2,201,789) |
| (1,525,066) |
| (5,089,316) |
| (29,115,038) |
Checking accounts and demand deposits |
| (4,718,777) |
| — |
| — |
| — |
| — |
| — |
| — |
| (4,718,777) |
Term savings accounts - unconditional withdrawal |
| (20,016) |
| — |
| — |
| — |
| — |
| — |
| — |
| (20,016) |
Term savings accounts - deferred withdrawal |
| (164,524) |
| (396,408) |
| — |
| — |
| — |
| — |
| — |
| (560,932) |
Obligations with the Chilean Central Bank without credit lines |
| (3,969,193) |
| (2,489,593) |
| (1,984,846) |
| (2,051,001) |
| (832,938) |
| (89,695) |
| (703,836) |
| (12,121,102) |
Deposits and time deposits |
| (232,236) |
| (360,526) |
| (784,211) |
| (1,133,943) |
| (82,368) |
| (96,272) |
| (44,589) |
| (2,734,145) |
Foreign borrowings without credit lines |
| (47,728) |
| — |
| — |
| — |
| — |
| — |
| — |
| (47,728) |
Letter of credit obligations |
| (1,467) |
| (327) |
| (1,679) |
| (3,314) |
| (11,501) |
| (9,366) |
| (10,265) |
| (37,919) |
Bonds payable |
| (53,876) |
| (31,097) |
| (236,628) |
| (615,804) |
| (1,214,851) |
| (1,329,733) |
| (4,330,626) |
| (7,812,615) |
Other obligations or payment commitments without credit lines |
| (1,001,673) |
| — |
| — |
| — |
| (60,131) |
| — |
| — |
| (1,061,804) |
Net |
| (2,918,893) |
| (764,750) |
| (678,035) |
| (1,534,786) |
| 3,972,966 |
| 2,117,730 |
| 3,787,165 |
| 3,981,397 |
The grouping corresponds to the regulatory categories, which bring together financial ítems with similar characteristics from the point of view of liquidity risk.
B.3 Financial Risk Management
Continuous and interconnected process that originates in the first instance with the identification of the risks to which the Institution is exposed, in order to then quantify the potential impact as a result of said exposure and to limit it to the level desired by the Bank. The above implies an active monitoring of the risks, studying their temporal evolution. The risk management process can be subdivided into the following stages:
B.3.1) Identification of Financial Risks
The Financial Risk Management has a high-level technical team that constantly monitors the activities of the bank transfer and its subsidiaries in search of potential unquantified and controlled risks. In addition, the Bank Treasury as the first line of defense also plays a fundamental role in the detection of risks. Itaú Corpbanca provides a structure that facilitates this risk identification role by maintaining independence in its tasks and ensuring the active participation of management in the creation / modification of products. After a risk is identified, it is quantified to see the potential impact on the creation of value of the Institution.
B.3.2) Quantification and Control of Exposure to Financial Risk
Once the risk has been identified, the Financial Risk Management is in charge of mapping it into the appropriate metrics for its quantification. The way to measure the exposure is the knowledge of top management and the Board of Directors from which the appetite for risk desired for the Institution and the different openings thereof (business unit, manager, risk factor, area, etc.) always taking into account not to transgress the current norms. The process of establishing limits is the instrument used to establish the assets available to each activity. The determination of limits is conceived as a dynamic process that responds to the level of risk considered acceptable by top management.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 188 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
The Financial Risk Management requests and proposes a framework of limits and warnings, quantitative and qualitative that affect the liquidity and market risk; this request must be authorized by the ALCO and the Board of Directors. In addition, it carries out periodic measurements of the risk incurred, develops tools and valuation models, conducts periodic stress analysis, measures the degree of concentration with inter-bank counterparts, draws up the policy and procedures manual, as well as the monitoring of authorized limits and alerts, which are reviewed at least annually.
The structure of limits requires carrying out a process that takes into account, among others, the following aspects:
● | Identify and delimit efficiently and comprehensively the financial risks incurred, so that they are consistent with the management of the business and with the defined strategy. |
● | Quantify and communicate to the business areas the levels and the risk profile that Top management considers acceptable, in order to avoid incurring unwanted risks. |
● | Give flexibility to the business areas in the taking of financial risks in an efficient and timely manner according to changes in the market and in business strategies, always within the levels of risk that are considered acceptable by the entity. |
● | Allowing business generators to take prudent but sufficient risks to achieve the budgeted results. |
● | Delimit the range of products and underlying assets in which each Treasury unit can operate, taking into account characteristics such as the model, valuation systems and the liquidity of the instruments involved, among others. |
The metrics, by type of risk, used to quantify the exposures or demonstrate a materialization of the same are detailed below:
Metrics and limits of Market Risk
According to the complexity and relevance of the portfolios managed by Itaú Corpbanca, different instruments have been established to control market risks, according to the characteristics of the financial products of the Trading Book and Banking Book. The following are the normative and internal metrics used for the monitoring and control of market risk:
Normative Risk Measures for the Negotiation Book and Banking Book
The Bank measures regulatory exposure in line with the standardized methodology set forth by the Central Bank of Chile (Chapter III-B-2.2 "Standards on the measurement and control of market risks of banking companies" of the Compendium of Financial Regulations) and complemented by the Superintendency of Banks and Financial Institutions (Chapter 12-21 "Norms on measurement and control of market risks"), which corresponds to a risk measure based on the standard methodology of the Basel Committee, which look for quantify exposure to market risks for the Negotiation Book and the Banking Book.
The normative measurement of the market risk of the Trading Book allows estimating the potential loss that the Bank could face from fluctuations standardized by the regulator. The regulatory limit corresponds to the sum of this risk (also called Market Risk Exposure or MRE) and 10% of the Weighted Assets for Credit Risk; Said sum may in no case be greater than once the effective Equity of the Bank.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 189 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
The Bank, must permanently observe these limits and the data in turn to the CMF on the positions in the risk and compliance with said limits (regulatory report C41). It must also inform the Superintendency monthly about the positions in the consolidated risk with the subsidiaries and foreign branches (regulatory report C43).
The consumption of regulatory limit of market risk, specifically for the Trading Book as of December 31, 2020 and 2019, is presented below:
| | | | | |
| | | | | |
Limit consumption | As of December 31, | | |||
| 2020 | | | 2019 | |
Market risk exposure (MRE) | 83.34 | % | | 80.10 | % |
The regulatory risk measurement for the Banking Book (C40 regulatory report) is used to estimate the Bank's potential losses from standardized adverse movements in interest and exchange rates. It is important to specify that for regulatory reporting purposes, the Trading Book includes the interest rate risk of derivatives managed in the Banking Book.
The standardized regulatory report for the Banking Book (C40 regulatory report) is used to estimate the Bank's potential economic losses from standardized adverse movements in interest rates defined by the regulator. Currently, limits for short-term exposure (STE) to interest rate and indexation risk in the Banking Book must not exceed 35% of annual operating income (LTM moving period) and long-term limit consumption (LTE) must be less than 20% of the Bank's regulatory capital.
The following table details regulatory limit consumption for market risk, specifically for the Banking Book as of December 31, 2020 and 2019:
| | | | | |
| | | | | |
Limit consumption | As of December 31, | | |||
| 2020 | | | 2019 | |
Short-term exposure to interest rate risk | 62.99 | % | | 48.92 | % |
Long-term exposure to interest rate risk | 63.86 | % | | 57.82 | % |
Value at Risk (VaR)
● | Calculation of Historical Value at Risk (Non-parametric). This measurement provides the maximum potential economic loss at a certain confidence level and a given time horizon. Historical VaR, as opposed to Statistical or Parametric VaR, is based on the observed distribution of past returns, does not need to make assumptions of probability distributions (frequently normal distribution) and, therefore, does not need a mean (assumed 0), standard deviation and correlations across returns (parameters). The Bank's uses a 99% confidence level and a time horizon of 1 day. |
● | Calculation of Volatility-Adjusted Historical Value at Risk (Non-parametric). This measurement is based on the above and the profit and loss vector is adjusted according to whether it is facing a period of greater or less volatility. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 190 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
The Board of Directors and senior management define the limits on the Value at Risk, which is monitored on a daily basis. In turn, the measurement is subjected to retrospective tests that allow verifying that the losses actually incurred do not exceed the VaR, more than once every 100 days. The result is monitored daily to test the validity of the assumptions, hypotheses and the adequacy of the parameters and risk factors used in the calculation of the VAR.
The Bank in turn calculates VaR for sub/portfolios and risk factors, which allows it to quickly detect pockets of risk. Since VaR does not consider stress scenarios, it is complemented by stress testing. Specifically, the Bank uses metrics that take into account prospective, historical and standardized scenarios.
Although the Value at Risk model is one of the models most frequently used by the local financial industry, like any model it has limitations that must be considered:
● | It does not take into account the expected loss in the event that the portfolio return is above the confidence level defined in the VaR. In other words, in the Bank's case it does not reflect what happens in the 1% of the tail. This is mitigated with the stress measures detailed below. |
● | It does not consider intraday results, but only reflects the potential loss given current positions. |
● | It does not take into account potential changes in the dynamics of movements in market variables (i.e. potential changes in the matrix of variance and covariance). |
Sensitivity Measurements
The Bank uses stress testing as a sensitivity analysis tool in order to control financial risk. This measurement is performed separately for the Trading and Banking Books.
Sensitivity is estimated using the DV01 indicator, which is a measure of sensitivity of portfolio results if the zero coupon interest rate of the risk factor increases by 1 basis point (0.01%) for different maturities and in annualized terms. Although the use of DV01 to estimate potential impacts on the economic, book and equity value is easy to understand and implement, it excludes both correlations among risk factors and secondorder effects.
In accordance with IFRS 7, the following table presents an estimate of the likely, but reasonable impact of fluctuations in interest rates, exchange rates and implicit volatilities (market factors) that would impact the Trading and Banking Book.
The fluctuations in market factors correspond to highly probable scenarios chosen from among a set of scenarios agreed upon based on the opinions of specialists in economics and financial risk and operators. In order to estimate sensitivity, sensitivity (DV01) and the reasonably likely scenarios must be multiplied by market factor.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 191 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
Interest rate scenarios - Chile (basis points – 0.01%)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Scenarios for impacts on P&L | | Scenarios for impacts on AFS | ||||||||||||||||||||
Tenor | Chamber | | Government | | Chamber | | Government | | | | | | Chamber | | Government | | Chamber | | Government | | | | |
| CLP | | CLP | | CLF | | CLF | | Curve USD | | Curve MX | | CLP | | CLP | | CLF | | CLF | | Curve USD | | Curve MX |
1 day | (39) | | 39 | | 87 | | 162 | | (51) | | 51 | | 39 | | 39 | | (87) | | 162 | | 51 | | (51) |
3 months | (39) | | 39 | | 87 | | 162 | | (51) | | 51 | | 39 | | 39 | | (87) | | 162 | | 51 | | (51) |
6 months | (39) | | 39 | | 87 | | 162 | | (51) | | 51 | | 39 | | 39 | | (87) | | 162 | | 51 | | (51) |
9 months | (36) | | 42 | | 87 | | 159 | | (67) | | 67 | | 36 | | 42 | | (87) | | 159 | | 67 | | (67) |
1 year | (33) | | 46 | | 93 | | 155 | | (86) | | 86 | | 33 | | 46 | | (93) | | 155 | | 86 | | (86) |
2 years | (37) | | 39 | | 70 | | 93 | | (101) | | 101 | | 37 | | 39 | | (70) | | 93 | | 101 | | (101) |
3 years | (47) | | 52 | | 68 | | 88 | | (103) | | 103 | | 47 | | 52 | | (68) | | 88 | | 103 | | (103) |
4 years | (57) | | 65 | | 68 | | 83 | | (105) | | 105 | | 57 | | 65 | | (68) | | 83 | | 105 | | (105) |
5 years | (67) | | 77 | | 67 | | 79 | | (106) | | 106 | | 67 | | 77 | | (67) | | 79 | | 106 | | (106) |
7 years | (65) | | 66 | | 74 | | 81 | | (103) | | 103 | | 65 | | 66 | | (74) | | 81 | | 103 | | (103) |
10 years | (63) | | 50 | | 83 | | 85 | | (98) | | 98 | | 63 | | 50 | | (83) | | 85 | | 98 | | (98) |
20 years | (63) | | 50 | | 80 | | 81 | | (115) | | 115 | | 63 | | 50 | | (80) | | 81 | | 115 | | (115) |
| | | | | | | |
| | | | | | | |
| Scenarios for impacts on AFS | ||||||
Tenor | Chamber CLP | | Chamber CLF | | Curve USD | | Curve MX |
1 day | 39 | | 87 | | 51 | | 51 |
3 months | 39 | | 87 | | 51 | | 51 |
6 months | 39 | | 87 | | 51 | | 51 |
9 months | 36 | | 87 | | 67 | | 67 |
1 year | 33 | | 93 | | 86 | | 86 |
Exchange rate scenarios Chile
| | | | | | |
| | | | | | |
Exchange rate | Scenario impact P&L | | Scenario impact AFS | | Scenario impact accrual book | |
| % | | % | | % | |
USD - CLP | (10.86) | % | (10.86) | % | (10.86) | % |
USD - COP | 10.42 | % | 10.42 | % | 10.42 | % |
Interest rate scenarios - Colombia (basis points – 0.01%)
| | | | | | | | | | | |
| | | | | | | | | | | |
| Scenarios for impacts on P&L | Scenarios for impacts on AFS | |||||||||
Tenor | Government | | | | | | Government | | | | |
| COP | | Swap IBR | | Curve USD | | COP | | Swap IBR | | Curve USD |
1 day | 137 | | 37 | | (13) | | 137 | | 37 | | (13) |
3 months | 133 | | 40 | | (6) | | 133 | | 40 | | (6) |
6 months | 130 | | 78 | | (10) | | 130 | | 78 | | (10) |
9 months | 126 | | 77 | | (10) | | 126 | | 77 | | (10) |
1 year | 122 | | 75 | | (9) | | 122 | | 75 | | (9) |
2 years | 108 | | 96 | | (14) | | 108 | | 96 | | (14) |
3 years | 93 | | 94 | | (21) | | 93 | | 94 | | (21) |
4 years | 85 | | 95 | | (19) | | 85 | | 95 | | (19) |
5 years | 86 | | 96 | | (17) | | 86 | �� | 96 | | (17) |
7 years | 88 | | 98 | | (20) | | 88 | | 98 | | (20) |
10 years | 91 | | 101 | | (25) | | 91 | | 101 | | (25) |
20 years | 93 | | 111 | | (41) | | 93 | | 111 | | (41) |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 192 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
| | | | |
| | | | |
| Scenarios for impacts in accrual book | |||
Tenor | Government | | Curve | |
| COP | | USD | |
1 day | 37 | | 13 | |
1 months | 79 | | 14 | |
3 months | 40 | | 17 | |
6 months | 78 | | 19 | |
9 months | 77 | | 27 | |
1 year | 75 | | 35 | |
Exchange rate scenarios Colombia
| | | | | | |
| | | | | | |
Exchange rate | Scenario impact P&L | | Scenario impact AFS | | Scenario impact accrual book | |
| % | | % | | % | |
USD - COP | (5.08) | % | (5.08) | % | (5.08) | % |
The following table presents the impact of movements or reasonably likely scenarios applied to positions in the Trading Book that affect P&L as of December 31, 2020 and 2019:
| | | |
| | | |
| As of December 31, | ||
Potential impact on P&L | 2020 | | 2019 |
| MCh$ | | MCh$ |
CLP rate risk | (8,403) | | (4,881) |
Derivatives | (8,403) | | (4,879) |
Debt instruments | — | | (2) |
CLF rate risk | (8,488) | | (5,130) |
Derivatives | (8,488) | | (5,130) |
Debt instruments | — | | — |
COP rate risk | (3,104) | | (1,200) |
Derivatives | (2,508) | | (1,086) |
Debt instruments | (596) | | (114) |
UVR rate risk | (133) | | (108) |
Derivatives | 3 | | (102) |
Debt instruments | (136) | | (6) |
USD rate risk | (2,648) | | (2,711) |
Other currencies rate risk | (249) | | (177) |
Total rate risk | (23,025) | | (14,207) |
Exchange rate risk | (163) | | (763) |
Options risk | 16 | | 89 |
Total impact | (23,172) | | (14,881) |
It is important to note that the Option Risk includes the risks of volatility (Vega) and Gamma.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 193 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
The following table presents the impact on the margin of movements or reasonably likely scenarios on positions in the Accrual Book as of December 31, 2020 and 2019:
| | | |
| | | |
| As of December 31, | ||
Potential impact on Accrual Book | 2020 | | 2019 |
Impact of base interest rate shock | (9,626) | | (13,981) |
The impact on the Banking Book does not necessarily mean a gain/loss but it does mean smaller/larger net income from the generation of funds (net funding income, which is the net interest from the accrual portfolio) for the next 12 months.
In line with the effects on P&L of positions accounted for at fair value and amortized cost, the changes in market factors because of reasonably possible movements in interest and exchange rates also generate impacts on equity accounts as a result of the potential change in market value of the portfolio of availablefor-sale instruments and the portfolios of cash flow and net foreign investment hedges, which are presented in the following table:
| | | | | | | | | | | |
| | | | | | | | | | | |
| Potencial impact on AFS | ||||||||||
| As of December 31, 2020 | | As of December 31, 2019 | ||||||||
Rate risk | DV01 + (1 bps) | | Impact for interest rate | | DV01 + (1 bps) | | Impact for interest rate | ||||
| US$ | | ThUS$ | | MCh$ | | US$ | | ThUS$ | | MCh$ |
CLP | (707,409) | | (40.13) | | (28,609) | | (377,765) | | (31.16) | | (23,334) |
CLF | (201,548) | | (23.15) | | (16,505) | | (221,758) | | (49.07) | | (36,744) |
COP | 35,889 | | (8.13) | | (5,780) | | (49,254) | | (1.37) | | (1,023) |
UVR | (36,520) | | (3.88) | | (2,755) | | (142,663) | | (5.25) | | (3,981) |
USD | (42,030) | | (4.36) | | (3,107) | | (2,353) | | (0.14) | | (105) |
Others | 11,624 | | (0.59) | | (419) | | 888 | | (0.08) | | (56) |
Total rate risk | (939,994) | | (80.24) | | (57,175) | | (792,905) | | (87.07) | | (65,243) |
| | | | | | | |
| | | | | | | |
| Impact to change in prices | | | | | ||
Exchange rate | As of December 31, 2020 | | As of December 31, 2019 | ||||
| ThUS$ | | MCh$ | | ThUS$ | | MCh$ |
USD | (67.25) | | (47,942) |
| (134.51) | | (100,719) |
COP | (63.65) | | (45,380) |
| (146.36) | | (109,591) |
Total risk exchange rate | (130.90) | | (93,322) |
| (280.87) | | (210,310) |
Total impact | (211.13) | | (150,498) |
| (367.94) | | (275,553) |
The Bank uses accounting hedges to efficiently manage accounting asymmetries present in financial risk exposure.
The use of accounting hedges is subject to the limits defined by the Board of Directors, the definitions of the Assets and Liabilities Committee (ALCO) and the Hedging Policy.
The Treasury is responsible for designing and implementing the strategies and the Financial Risk Management is responsible for measuring and monitoring the effectiveness of the hedges, generating indicators of effectiveness that are constantly monitored. (For more detail on the accounting hedging strategies, review Note 8) Financial Derivatives Contracts and Hedge Accounting.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 194 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
B.4 LIBOR discontinuity (London Interbank Offered Rate)
The LIBOR has been the main reference to determine prices of financial instruments ranging from mortgages, loans, bond, derivatives, as well an input on the construction of discount rates and transfer prices. However, it has recently been challenged its reliability and methodological definition, prompting the UK's Financial Conduct Authority (FCA) to dictate in 2017 and propose the cesation of the LIBOR benchmart December 31, 2021 as the deadline for LIBOR.
By virtue of the foregoing, as of December 31, 2020, the bank has completed the diagnostic phase to determine the impact of transitioning to an alternative rate and is in the process of drawing up a plan for its implementation.
The following table details the exposure based on financial instruments subject to the reform of the reference interest rate, the following table presents the balances as of December 31, 2020:
| | | |
| | | |
Financial instruments based on libor | |||
| Exposition | ||
Nature of the games | Assets | | Liabilities |
| MCh$ | | MCh$ |
Non-derivative financial instruments | 1,632,335 | | 1,107,483 |
Credits and accounts receivable from customers | 1,632,335 | | — |
Interbank borrowings | — | | 1,107,483 |
Financial derivative contracts (1) (2) | 12,988,222 | | 9,228,125 |
Totals | 14,620,557 | | 10,335,608 |
| | | |
(1) Correspond to the fair value of the operations.
(2) The total notional associated to derivative operations corresponds to MCh$32,966,228
Loans and accounts receivable from customers includes mainly loans to finance working capital, while Interbank borrowings item comprise mainly of COMEX operations. The derivative items are mainly composed of interest rate and currency swaps.
Additionally, based on the diagnosis, no risks have been identified that imply a modification in the risk management strategy implemented by the bank.
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
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 195 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
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 through face-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.
d) | Cybersecurity |
The Bank collect, process personal and confidential information from its clients as an integral part of its banking process and the diverse services offered through internet and other digital channels. The secure transmission of information through the different digital channels is essential to maintain the trust of our customers in online services. The use of the internet and digital channels exposes the Bank to risks associated with Cybersecurity.
Cybersecurity is defined as the act protecting of digital assets, as well as the infrastructure that supports it, has the objective of preventing or mitigating the adverse effects of its inherent risks and threats, on information security and the continuity of the Bank's business.
Given the importance of cybersecurity and security of our clients' information, the Bank has stablished a Cybersecurity and Fraud Management, which reports directly to the Corporate Risk Manager.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 196 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
The Bank's Cybersecurity Management model is based on four (4) main processes:
1) | Security and Cybersecurity Governance: focused on risk management, regulatory framework, supplier cybersecurity management and; culture and awareness of Cybersecurity culture, for clients and collaborators. |
2) | Information security: Responsible for the identification, classification, protection and authorization of access to information |
3) | Systems security: Defining security architecture and adherence to cybersecurity guidelines in the technological environment. |
4) | Cyber defence: Application of industry leading practices in security and assurance of technological equipment (Baseline), detection and remediation of vulnerabilities and detection and response to cybersecurity incidents; evaluation of the Bank's current cybersecurity controls and detection of cybersecurity breaches, evaluation of response to a crisis scenario through cybersecurity exercises and ethical hacking. |
e)Shareholders’ equity 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 December 31, 2020 and 2019, 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 SBIF 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 Chapter 12-1 “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 weight ponderation 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 traded off-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.
The shareholders' agreement established an “Optimal Regulatory Capital” with respect to Itaú Corpbanca Chile and Colombia, which must be, at any date, the higher of the 120% of the minimum regulatory capital ratio established by the respective legislation and the ratio of Regulatory capital 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, as of a date that is one year from the last day of the most recent fiscal year , assuming that the assets weighted by their risk level grow during that year at a rate equal to the Minimum Growth Rate (corresponds to the minimum growth rate of the total assets of Itaú Corpbanca Chile and Itaú Corpbanca Colombia necessary to maintain the participation market, determined by the Administration, which in no case may exceed the forecast growth of the system of each country).
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 197 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 36 – Risk Management, continued
Bank, in consolidated terms (owners of the Bank), maintains a total equity of MCh$ 2,315,411 as of December 31, 2020 (MCh$ 3,346,102 million as of December 31, 2019).
As of December 31, 2020 and 2019, the relation between assets and risk weighted assets is as follow:
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Consolidated assets | | Risk-weighted assets | ||||
| | Note | | As of December 31, | | As of December 31, | ||||
| | | | 2020 | | 2019 | | 2020 | | 2019 |
|
| |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Asset balance (net of allowances) |
|
|
|
|
|
|
|
|
|
|
Cash and deposits in banks |
| 5 |
| 3,089,072 |
| 1,009,681 |
| — |
| — |
Cash items in process of collection |
| 5 |
| 173,192 |
| 231,305 |
| 30,919 |
| 40,916 |
Trading investments |
| 6 |
| 580,369 |
| 181,402 |
| 90,149 |
| 21,755 |
Investments under resale agreements |
| 7 |
| 105,580 |
| 75,975 |
| 97,525 |
| 57,622 |
Financial derivative contracts (*) |
| 8 |
| 1,302,692 |
| 1,674,743 |
| 859,464 |
| 1,215,171 |
Interbank loans |
| 9 |
| 7,115 |
| 56,205 |
| 7,115 |
| 56,205 |
Loans and accounts receivable from customers |
| 10 |
| 21,685,269 |
| 22,373,638 |
| 18,634,870 |
| 20,112,889 |
Available for sale investments |
| 11 |
| 3,964,720 |
| 3,593,204 |
| 334,632 |
| 387,692 |
Held to maturity investments |
| 11 |
| 111,643 |
| 115,682 |
| 49,627 |
| 52,527 |
Investments in companies |
| 12 |
| 11,983 |
| 14,938 |
| 11,983 |
| 14,938 |
Intangibles |
| 13 |
| 718,683 |
| 1,617,745 |
| 226,171 |
| 423,414 |
Fixed assets |
| 14 |
| 56,020 |
| 57,962 |
| 56,020 |
| 57,962 |
Right of use asset under lease agreements |
| 15 |
| 170,603 |
| 204,559 |
| 170,603 |
| 204,559 |
Current taxes |
| 16 |
| 64,699 |
| 85,516 |
| 6,470 |
| 8,552 |
Deferred taxes |
| 16 |
| 314,112 |
| 184,167 |
| 31,411 |
| 18,417 |
Other assets |
| 17 |
| 602,769 |
| 783,447 |
| 410,854 |
| 698,801 |
Off-balance sheet assets |
|
|
| |
|
|
| |
|
|
Contingent loans |
|
|
| 2,381,233 |
| 2,647,938 |
| 1,428,740 |
| 1,588,763 |
Totals |
|
|
| 35,339,754 |
| 34,908,107 |
| 22,446,553 |
| 24,960,183 |
(*) | Items presented at their Equivalent Credit Risk value, in accordance with the provisions of Chapter 12-1 "Equity for Legal and Regulatory Effects" of the RAN, issued by the Superintendency of Banks and Financial Institutions. |
| | | | | | | | | |
| | | | | | | | | |
| | Amount | | Ratio |
| ||||
| | As of December 31, | | As of December 31, |
| ||||
| | 2020 | | 2019 | | 2020 | | 2019 |
|
|
| MCh$ |
| MCh$ |
| % |
| % | |
Basic capital |
| 2,315,411 |
| 3,346,102 | (a) | 6.54 |
| 9.57 | (c) |
Effective equity |
| 3,044,661 |
| 3,280,569 | (b) | 13.56 |
| 13.14 | (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. |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 198 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 37 – Asset and Liability Maturities
The main financial assets and liabilities grouped according to their remaining terms are shown below, including accrued interest until December 31,2020 and 2019:
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| As of December 31, 2020 | |||||||||||||
| Notes | Up to 1 month | | From 1 month to 3 month | | From 3 month to 1 year | | From 1 year to 3 year | | From 3 years to 6 years | | Over 6 years | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
ASSETS | | | | | | | | | | | | | | |
Trading investments | 6 | 53,175 | | 65,370 | | 77,021 | | 176,681 | | 192,719 | | 15,403 |
| 580,369 |
Retro-purchase agreements and securities loans | 7 | 19,933 | | 40,540 | | 43,631 | | 691 | | 785 | | — |
| 105,580 |
Financial derivate contracts | 8 | 173,313 | | 10,258 | | 526,205 | | 639,459 | | 918,637 | | 1,714,931 |
| 3,982,803 |
Interbank loans (*) | 9 | — | | 7,131 | | — | | — | | — | | — |
| 7,131 |
Loans and accounts receivable from customers (**) | 10 | 1,976,366 | | 1,457,765 | | 2,260,671 | | 2,834,187 | | 3,928,113 | | 10,131,969 |
| 22,589,071 |
Commercial loans | | 1,406,164 | | 1,436,296 | | 2,167,838 | | 2,258,716 | | 2,769,842 | | 4,789,038 |
| 14,827,894 |
Mortgages loans | | 1,962 | | 416 | | 2,925 | | 25,913 | | 180,168 | | 5,056,540 |
| 5,267,924 |
Consumer loans | | 568,240 | | 21,053 | | 89,908 | | 549,558 | | 978,103 | | 286,391 |
| 2,493,253 |
Available for sale investments | 11 | 1,121,131 | | 97,970 | | 486,354 | | 870,028 | | 1,312,994 | | 76,243 |
| 3,964,720 |
Held to maturity investments | 11 | 18,298 | | — | | 92,698 | | 647 | | — | | — |
| 111,643 |
Totals | | 5,338,582 | — | 3,136,799 | | 5,747,251 | | 7,355,880 | — | 10,281,361 | — | 22,070,515 | — | 53,930,388 |
LIABILITIES | | | | | | | | | | | | | | |
Obligations under repurchase agreements | 7 | 637,751 | | 1,100 | | — | | — | | — | | — |
| 638,851 |
Time deposits and other time liabilities | 18 | 4,627,676 | | 2,385,542 | | 3,311,082 | | 661,139 | | 123,689 | | 323,936 |
| 11,433,064 |
Time deposits and other time liabilities | 8 | 171,119 | | 18,551 | | 483,102 | | 669,539 | | 878,157 | | 1,453,123 |
| 3,673,591 |
Interbank borrowings | 19 | 103,194 | | 119,061 | | 719,886 | | 970,810 | | 1,874,093 | | 11,934 |
| 3,798,978 |
Debit Instruments issued | 20 | 1,640 | | 545 | | 326,088 | | 838,032 | | 1,873,627 | | 3,164,924 |
| 6,204,856 |
Lease obligations | 15 | 2,927 |
| 7,258 |
| 20,645 |
| 51,861 |
| 49,170 |
| 20,024 |
| 151,885 |
Totals | | 5,544,307 | — | 2,532,057 | | 4,860,803 | | 3,191,381 | — | 4,798,736 | — | 4,973,941 | — | 25,901,225 |
| | | | | | | | | | | | | | |
(*)Loans and advances to banks are presented gross. The amount of provisions corresponds to MCh$16.
(**) Loans are presented gross. Provisions by loan type are detailed as follows: Commercial MCh$693,909, Mortgage MCh$42,087 and Consumer MCh$167,806.
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| As of December 31, 2019 | |||||||||||||
| Notes | Up to 1 month | | From 1 month to 3 month | | From 3 month to 1 year | | From 1 year to 3 year | | From 3 years to 6 years | | Over 6 years | | Totals |
| | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ | | MCh$ |
ASSETS | | | | | | | | | | | | | | |
Trading investments | 6 | 18,165 | | 54,382 | | 39,730 | | 39,822 | | 26,703 | | 2,600 | | 181,402 |
Retro-purchase agreements and securities loans | 7 | 75,975 | | — | | — | | — | | — | | — | | 75,975 |
Financial derivate contracts | 8 | 151,952 | | 160,523 | | 306,284 | | 602,190 | | 662,530 | | 1,271,478 | | 3,154,957 |
Interbank loans (*) | 9 | 55,881 | | — | | 754 | | — | | — | | — | | 56,635 |
Loans and accounts receivable from customers (**) | 10 | 1,641,747 | | 2,723,742 | | 2,796,805 | | 2,578,181 | | 3,781,189 | | 9,632,392 | | 23,154,056 |
Commercial loans | | 1,443,106 | | 2,209,777 | | 2,694,271 | | 1,964,142 | | 2,518,804 | | 4,649,686 | | 15,479,786 |
Mortgages loans | | 3,040 | | 550 | | 2,760 | | 22,657 | | 115,878 | | 4,731,156 | | 4,876,041 |
Consumer loans | | 195,601 | | 513,415 | | 99,774 | | 591,382 | | 1,146,507 | | 251,550 | | 2,798,229 |
Available for sale investments | 11 | 253,157 | | 151,014 | | 609,862 | | 1,515,340 | | 896,383 | | 167,448 | | 3,593,204 |
Held to maturity investments | 11 | 29,029 | | 7,543 | | 78,154 | | 956 | | — | | — | | 115,682 |
Totals | | 3,867,653 | — | 5,820,946 | | 6,628,394 | | 7,314,670 | — | 9,147,994 | — | 20,706,310 | — | 53,485,967 |
LIABILITIES | | | | | | | | | | | | | | |
Obligations under repurchase agreements | 7 | 559,457 | | — | | — | | — | | — | | — | | 559,457 |
Time deposits and other time liabilities | 18 | 3,946,542 | | 2,432,029 | | 3,913,833 | | 827,802 | | 128,756 | | 371,225 | | 11,620,187 |
Time deposits and other time liabilities | 8 | 235,652 | | 145,905 | | 283,404 | | 580,829 | | 703,285 | | 988,959 | | 2,938,034 |
Interbank borrowings | 19 | 52,557 | | 208,520 | | 1,736,674 | | 526,692 | | 96,281 | | 26,032 | | 2,646,756 |
Debit Instruments issued | 20 | 30,419 | | 378 | | 620,711 | | 959,369 | | 1,375,639 | | 3,421,840 | | 6,408,356 |
Lease obligations | 15 | 1,177 | | 76,333 | | 52,074 | | 14,561 | | 20,734 | | 8,045 | | 172,924 |
Totals | | 4,825,804 | — | 2,863,165 | | 6,606,696 | | 2,909,253 | — | 2,324,695 | — | 4,816,101 | — | 24,345,714 |
| | | | | | | | | | | | | | |
(*)Loans and advances to banks are presented gross. The amount of provisions corresponds to MCh$430.
(**) Loans are presented gross. Provisions by loan type are detailed as follows: Commercial MCh$531,800, Mortgage MCh$45,292 and Consumer MCh$203,326.
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 199 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
In the Consolidated Statements of Financial Position as of December 31, 2020 and 2019, assets and liabilities are included in local and foreign currency, as well as inflation-indexation adjustable and adjustable by the variation of the exchange rate, for the amounts indicated below:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Others | | Exchange rate | | |
As of December 31, 2020 |
| Note | | CLP | | UF | | USD | | COP | | EUR | | currencies | | indexed | | Totals |
| | |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Cash and deposits in banks |
| 5 |
| 1,232,614 | | — | | 1,501,888 | | 294,522 | | 28,315 | | 31,733 | | — |
| 3,089,072 |
Cash items in process of collection |
| 5 |
| 110,503 | | — | | 61,819 | | 93 | | 9 | | 768 | | — |
| 173,192 |
Trading investments |
| 6 |
| 142,975 | | 355 | | — | | 437,039 | | — | | — | | — |
| 580,369 |
Investments under resale agreements |
| 7 |
| 84,173 | | — | | — | | 21,407 | | — | | — | | — |
| 105,580 |
Financial derivative contracts |
| 8 |
| 2,529,980 | | 387,035 | | 1,039,536 | | 19,967 | | 6,285 | | — | | — |
| 3,982,803 |
Interbank loans, net |
| 9 |
| — | | — | | 7,115 | | — | | — | | — | | — |
| 7,115 |
Loans and accounts receivable from customers, net |
| 10 |
| 5,853,231 | | 8,959,138 | | 2,852,755 | | 3,986,849 | | 23,704 | | — | | 9,592 |
| 21,685,269 |
Available for sale investments |
| 11 |
| 2,553,429 | | 696,307 | | 103,503 | | 611,481 | | — | | — | | — |
| 3,964,720 |
Held to maturity investments |
| 11 |
| — | | — | | 7,297 | | 104,346 | | — | | — | | — |
| 111,643 |
Investments in companies |
| 12 |
| 8,710 | | — | | — | | 3,273 | | — | | — | | — |
| 11,983 |
Intangibles |
| 13 |
| 682,535 | | — | | 172 | | 35,976 | | — | | — | | — |
| 718,683 |
Fixed assets |
| 14 |
| 31,833 | | — | | 335 | | 23,852 | | — | | — | | — |
| 56,020 |
Right of use assets under lease agreements |
| 15 |
| 135,625 | | — | | 7,082 | | 27,896 | | — | | — | | — |
| 170,603 |
Current taxes |
| 16 |
| 43,533 | | — | | 1,844 | | 19,322 | | — | | — | | — |
| 64,699 |
Deferred taxes |
| 16 |
| 245,271 | | — | | 18,739 | | 50,102 | | — | | — | | — |
| 314,112 |
Other assets |
| 17 |
| 145,705 | | 11,883 | | 388,141 | | 56,770 | | — | | — | | 270 |
| 602,769 |
TOTAL ASSETS |
|
|
| 13,800,117 |
| 10,054,718 |
| 5,990,226 |
| 5,692,895 |
| 58,313 |
| 32,501 |
| 9,862 |
| 35,638,632 |
| | | | | | | | | | | | | | | | | | |
Deposits and other demand liabilities |
| 18 |
| 3,186,296 | | 13,448 | | 737,892 | | 2,238,247 | | 21,435 | | 88 | | — |
| 6,197,406 |
Cash in process of being cleared |
| 5 |
| 82,287 | | — | | 52,244 | | 1 | | 1,528 | | 18,172 | | — |
| 154,232 |
Obligations under repurchase agreements |
| 7 |
| 399,593 | | — | | — | | 239,258 | | — | | — | | — |
| 638,851 |
Time deposits and other time liabilities |
| 18 |
| 8,042,117 | | 402,118 | | 1,539,760 | | 1,449,054 | | 14 | | — | | 1 |
| 11,433,064 |
Financial derivative contracts |
| 8 |
| 2,031,193 | | 476,910 | | 986,508 | | 170,598 | | 8,382 | | — | | — |
| 3,673,591 |
Interbank borrowings |
| 19 |
| 2,257,226 | | — | | 1,384,248 | | 47,768 | | 368 | | 109,368 | | — |
| 3,798,978 |
Debt instruments issued |
| 20 |
| 835,961 | | 4,636,431 | | 122,734 | | 609,730 | | — | | — | | — |
| 6,204,856 |
Other financial liabilities |
| 20 |
| 13,123 | | — | | — | | — | | — | | — | | — |
| 13,123 |
Lease contracts liabilities |
| 15 |
| 561 | | 118,189 | | 6,987 | | 25,992 | | — | | — | | 156 |
| 151,885 |
Current taxes |
| 16 |
| 596 | | — | | — | | 1,170 | | — | | — | | — |
| 1,766 |
Deferred taxes |
| 16 |
| — | | — | | — | | 237 | | — | | — | | — |
| 237 |
Provisions |
| 21 |
| 174,417 | | — | | 6,953 | | 100,913 | | — | | — | | — |
| 282,283 |
Other liabilities |
| 22 |
| 175,812 | | 159,834 | | 274,827 | | 79,442 | | 66 | | — | | 10,053 |
| 700,034 |
TOTAL LIABILITIES |
|
|
| 17,199,182 |
| 5,806,930 |
| 5,112,153 |
| 4,962,410 |
| 31,793 |
| 127,628 |
| 10,210 |
| 33,250,306 |
Assets (liabilities), net |
|
|
| (3,399,065) |
| 4,247,788 |
| 878,073 |
| 730,485 |
| 26,520 |
| (95,127) |
| (348) |
| 2,388,326 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 200 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Note 38 – Foreign Currency, continued
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Others | | Exchange rate | | |
As of December 31, 2019 |
| Note | | CLP | | UF | | USD | | COP | | EUR | | currencies | | indexed | | Totals |
| | |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
| MCh$ |
Cash and deposits in banks |
| 5 |
| 262,828 |
| - |
| 364,594 |
| 379,706 |
| 2,553 |
| - |
| - |
| 1,009,681 |
Cash items in process of collection |
| 5 |
| 150,463 |
| - |
| 80,132 |
| 710 |
| - |
| - |
| - |
| 231,305 |
Trading investments |
| 6 |
| 109,924 |
| - |
| - |
| 71,478 |
| - |
| - |
| - |
| 181,402 |
Investments under resale agreements |
| 7 |
| 46,686 |
| - |
| - |
| 29,289 |
| - |
| - |
| - |
| 75,975 |
Financial derivative contracts |
| 8 |
| 2,278,658 |
| 324,414 |
| 536,936 |
| 14,035 |
| 914 |
| - |
| - |
| 3,154,957 |
Interbank loans, net |
| 9 |
| - |
| - |
| 35,753 |
| 20,452 |
| - |
| - |
| - |
| 56,205 |
Loans and accounts receivable from customers, net |
| 10 |
| 5,722,955 |
| 8,749,298 |
| 3,492,562 |
| 4,397,334 |
| 841 |
| - |
| 10,648 |
| 22,373,638 |
Available for sale investments |
| 11 |
| 1,600,147 |
| 1,023,726 |
| 124,310 |
| 845,021 |
| - |
| - |
| - |
| 3,593,204 |
Held to maturity investments |
| 11 |
| - |
| - |
| 30,132 |
| 85,550 |
| - |
| - |
| - |
| 115,682 |
Investments in companies |
| 12 |
| 11,166 |
| - |
| - |
| 3,772 |
| - |
| - |
| - |
| 14,938 |
Intangibles |
| 13 |
| 1,443,761 |
| - |
| 1,104 |
| 172,880 |
| - |
| - |
| - |
| 1,617,745 |
Fixed assets |
| 14 |
| 35,648 |
| - |
| 422 |
| 21,892 |
| - |
| - |
| - |
| 57,962 |
Right of use assets under lease agreements |
| 15 |
| 158,359 |
| - |
| 7,936 |
| 38,264 |
| - |
| - |
| - |
| 204,559 |
Current taxes |
| 16 |
| 30,773 |
| - |
| - |
| 54,743 |
| - |
| - |
| - |
| 85,516 |
Deferred taxes |
| 16 |
| 158,174 |
| - |
| 18,522 |
| 7,471 |
| - |
| - |
| - |
| 184,167 |
Other assets |
| 17 |
| 284,599 |
| 91,456 |
| 359,198 |
| 47,924 |
| - |
| - |
| 270 |
| 783,447 |
TOTAL ASSETS |
|
|
| 12,294,141 |
| 10,188,894 |
| 5,051,601 |
| 6,190,521 |
| 4,308 |
| — |
| 10,918 |
| 33,740,383 |
| | | | | | | | | | | | | | | | | | |
Deposits and other demand liabilities |
| 18 |
| 2,255,736 |
| 2,855 |
| 534,005 |
| 2,079,465 |
| 1,387 |
| - |
| - |
| 4,873,448 |
Cash in process of being cleared |
| 5 |
| 100,395 |
| - |
| 64,178 |
| - |
| - |
| - |
| - |
| 164,573 |
Obligations under repurchase agreements |
| 7 |
| 499,136 |
| - |
| - |
| 60,321 |
| - |
| - |
| - |
| 559,457 |
Time deposits and other time liabilities |
| 18 |
| 7,952,973 |
| 391,679 |
| 1,356,132 |
| 1,919,402 |
| - |
| - |
| 1 |
| 11,620,187 |
Financial derivative contracts |
| 8 |
| 1,960,447 |
| 402,899 |
| 476,568 |
| 97,212 |
| 908 |
| - |
| - |
| 2,938,034 |
Interbank borrowings |
| 19 |
| - |
| - |
| 2,563,630 |
| 83,126 |
| - |
| - |
| - |
| 2,646,756 |
Debt instruments issued |
| 20 |
| 763,503 |
| 4,924,260 |
| 129,281 |
| 590,471 |
| 841 |
| - |
| - |
| 6,408,356 |
Other financial liabilities |
| 20 |
| 12,956 |
| 10 |
| - |
| - |
| - |
| - |
| - |
| 12,966 |
Lease contracts liabilities |
| 15 |
| 659 |
| 129,034 |
| 7,689 |
| 35,273 |
| - |
| - |
| 269 |
| 172,924 |
Current taxes |
| 16 |
| 13 |
| - |
| - |
| - |
| - |
| - |
| - |
| 13 |
Deferred taxes |
| 16 |
| - |
| - |
| - |
| 263 |
| - |
| - |
| - |
| 263 |
Provisions |
| 21 |
| 111,796 |
| - |
| - |
| 82,311 |
| - |
| - |
| - |
| 194,107 |
Other liabilities |
| 22 |
| 265,814 |
| 268,685 |
| 115,196 |
| 54,446 |
| - |
| - |
| 4,773 |
| 708,914 |
TOTAL LIABILITIES |
|
|
| 13,923,428 |
| 6,119,422 |
| 5,246,679 |
| 5,002,290 |
| 3,136 |
| — |
| 5,043 |
| 30,299,998 |
Assets (liabilities), net |
|
|
| (1,629,287) |
| 4,069,472 |
| (195,078) |
| 1,188,231 |
| 1,172 |
| — |
| 5,875 |
| 3,440,385 |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 201 |
Itaú Corpbanca and subsidiaries | |
Notes to the Consolidated Financial Statements | |
As of and for the years ended December 31, 2020 and 2019 | |
| |
Discontinued Hedge of Net investment Itaú Corpbanca Colombia |
During January 2021, by decision of the Management, the hedge of net investment structured on Itaú Corpbanca Colombia was discontinued . The impact of ending the hegde relationship was reclassified from valuation accounts to reserves, without generating an effects on the Consolidated Statements of income.
Changes in the Directory |
Changes in the Board of Directors |
In ordinary session held on January 27, 2021, the Board of Directors of Itaú Corpbanca was informed and resolved to accept the resignation of the director, Mr. Caio Ibrahim David, effective as of the same date. In his replacement, the Board of Directors agreed to appoint Mr. Matias Granata, who will exercise his duties until the next Ordinary General Shareholders' Meeting, in which the definitive director will be appointed.
Others |
In the period between January 1 and February 24, 2021, date of issuance of these Consolidated Financial Statements, no other subsequent events have occurred that could significantly affect them.
| |
Roxana Zamorano | Gabriel Moura |
Chief Accounting Officer | Chief Executive Officer |
| |
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2020 | 202 |