[LOGO OF CORP BANCA]
CORP BANCA: FIRST QUARTER 2006 RESULTS
Santiago, Chile, May 5, 2005 - CORP BANCA (NYSE: BCA), a Chilean financial
institution offering a wide variety of corporate and retail financial products
and services, today announced its financial results for the first quarter of
2006. This report is based on unaudited consolidated financial statements
prepared in accordance with Chilean generally accepted accounting principles.
Figures are expressed in Chilean pesos as of March 31, 2006 and percentages are
expressed in real terms. Solely for the convenience of the reader, U.S. dollar
amounts in this report have been translated from Chilean pesos at the rate of
Ch$527.7 per U.S. dollar, the Central Bank of Chile's observed exchange rate as
of March 31, 2006.
CONSOLIDATED RESULTS FOR CORP BANCA FIRST QUARTER 2006
o ANALYSIS OF RESULTS
CORP BANCA recorded net income of Ch$7,620 million for the first quarter of
2006. This represents a 31.8% decrease as compared to the same period in 2005,
and is mainly due to a Ch$2,629 million decrease in gross margin, a Ch$1,088
million increase in operating expenses and a Ch$1,421 million decrease in net
revenues from price-level restatement. In general, other key items remained
relatively stable as compared to the first quarter of 2005.
The following table shows certain information relating to the composition of our
consolidated net income for the first quarter of 2005 and 2006, in millions of
Chilean pesos (except percentages):
Change between Percentage change
Three months ended Three months ended 2005 and 2006 between 2005 and
March 31, 2005 March 31, 2006 periods 2006 periods
------------------- ------------------- --------------- ------------------
Gross margin 29,192 26,563 (2,629) (9.0)%
Operating expenses (13,606) (14,694) (1,088) (8.0)%
Provisions for loan losses (3,813) (3,762) 50 1.3%
Income attributable to investments
in other companies 63 85 22 34.8%
Other non-operating expenses (430) (227) 202 47.1%
Price-level restatement 2,605 1,184 (1,421) (54.5)%
Net income before taxes 14,012 9,149 (4,863) (34.7)%
Income tax provisions (2,836) (1,529) 1,308 46.1%
Net income 11,176 7,620 (3,556) (31.8)%
Gross Margin. The following table shows certain information relating to the
composition of CORP BANCA's gross margin for the first quarter of 2005 and 2006,
in millions of Chilean pesos (except percentages):
Change between Percentage change
Three months ended Three months ended 2005 and 2006 between 2005 and
March 31, 2005 March 31, 2006 periods 2006 periods
------------------- ------------------- --------------- ------------------
Net interest revenue 21,906 22,037 132 0.6%
Fees and income from services, net 4,442 6,218 1,776 40.0%
Gains from trading activities, net 5,633 998 (4,635) (82.3)%
Foreign exchange transactions, net (1,091) 91 1,183 108.4%
Other operating income, net (1,698) (2,782) (1,084) (63.8)%
Gross margin 29,192 26,563 (2,629) (9.0)%
Net interest revenue, as adjusted (*) 21,235 21,514 279 1.3%
Foreign Exchange rate earnings,
as adjusted (*) (421) 615 1,035 246.2%
(*) Includes exchange rate earnings derived from forward contracts held by
CORP BANCA for hedging purposes
www.corpbanca.cl Huerfanos 1072, Santiago, Chile 1
Phone: 56 (2) 687 8000
[LOGO OF CORP BANCA]
Our gross margin decreased by Ch$2,629 million, or 9.0%, in the first quarter of
2006 as compared to the first quarter of 2005. This decrease mainly reflects the
Ch$4,635 million, or 82.3%, decrease in gains from trading activities, net. In
prior periods, gains from trading activities, net, which reflects the results of
trading in our investment portfolio, have provided us with an important source
of cash flow.
However, due to increases in the prevailing interest rates in Chile toward the
end of 2005, our investment portfolio generated losses when marked to market,
which were recorded as reserves in shareholders' equity. Subsequently, we
voluntarily decided to gradually liquidate our investment portfolio, and,
accordingly, recognize the aforementioned losses.
Foreign exchange transactions, net increased by Ch$1,183 million, or 108.4%, in
the first quarter of 2006 as compared to the same period in 2005, reflecting the
effective management of our foreign currency-denominated asset and liability
positions through forward contracts.
Other operating income, net, decreased by Ch$1,084 million, or 63.8%, in the
first quarter of 2006 as compared to the same period in 2005, due largely to a
Ch$340 million increase in sales force expenses relating to the growth in our
consumer loan and residential mortgage loan portfolios.
Operating Expenses. The following table shows certain information relating to
the composition of CORP BANCA's operating expenses for the first quarter of 2005
and 2006, in millions of Chilean pesos (except percentages):
Change between Percentage change
Three months ended Three months ended 2005 and 2006 between 2005 and
March 31, 2005 March 31, 2006 periods 2006 periods
------------------- ------------------- --------------- ------------------
Personnel salaries and expenses (8,718) (9,370) (653) -7.5%
Administrative and other expenses (3,628) (4,064) (436) -12.0%
Depreciation and amortization costs (1,260) (1,260) 0 0.0%
Total operating expenses (13,606) (14,694) (1,088) -8.0%
Our operating expenses increased by Ch$1,088 million, or 8.0%, in the first
quarter of 2006 compared to the first quarter of 2005. This increase was
attributable to higher personnel salaries and expenses, which rose by Ch$653
million, or 7.5%, from Ch$8,718 million in the first quarter of 2005 to Ch$9,370
million in the first quarter of 2006, reflecting our hiring of additional
personnel to handle increased business activity. In addition, administrative and
other expenses increased by Ch$436 million, or 12.0%, in the same period due
primarily to increased expenditures on marketing campaigns. These increased
operating expenses had a negative impact on the efficiency ratio of the bank,
which reached 55.3% as of March 31, 2006, as compared to 46.6% as of March 31,
2005.
Price-level restatement. During the first quarter of 2006, we recorded net
revenues from price-level restatement of Ch$1,184 million, representing a
decrease of Ch$1,421 million, or 54.5%, as compared to net revenues from
price-level restatement of Ch$2,605 million in the first quarter of 2005. This
decrease reflects the negative inflation rate in Chile in the 2006 period as
compared to higher inflation rates in the 2005 period.
Other Indicators. CORP BANCA's annualized return on equity slid from 12.6% in
the first quarter of 2005 to 7.9% in the first quarter of 2006 due to the
negative impact of the liquidation of the majority of our investment portfolio
and the increase in our equity base resulting from the capitalization of 50% of
our 2005 net income. On a pre-tax basis, our return on equity in the first
quarter of 2006 would have been 9.5%.
www.corpbanca.cl Huerfanos 1072, Santiago, Chile 2
Phone: 56 (2) 687 8000
[LOGO OF CORP BANCA]
Meanwhile, our net interest margin ratio (net interest revenue over
interest-earning assets) remained relatively flat, falling from 2.8% as of March
31, 2005 to 2.7% as of March 31, 2006.
o BUSINESS ACTIVITY
Loan Portfolio. Our total loan portfolio (net of interbank loans) amounted to
Ch$2,853,704 million as of March 31, 2006, representing 7.8% growth in real
terms during the 12-month period then ended, which was lower than the 13.7%
growth recorded by the Chilean banking sector for the same period. In addition,
our loan portfolio market share in Chile decreased from 6.5% as of March 31,
2005 to 6.2% as of March 31, 2006. On the other hand, this decrease also
reflects the results of our strategy of targeting loans to small- and
medium-sized businesses. While loans in this sector tend to be for lower amounts
than loans to larger corporations, they generate more favorable financial
margins for us.
The following table sets forth certain information with respect to CORP BANCA's
loan portfolio, by loan type, as of the dates indicated, in millions of Chilean
pesos (except percentages):
Percentage change
As of March 31, As of March 31, Change from March from March 31, 2005
2005 2006 31, 2005 to 2006 to 2006
------------------ ------------------ ----------------- -------------------
Commercial(*) 1,247,104 1,302,821 55,717 4.5%
Consumer(*) 307,304 369,123 61,819 20.1%
Foreign trade 233,750 222,925 (10,825) (4.6)%
Residential mortgages 88,291 115,061 26,770 30.3%
Commercial mortgages 198,157 191,617 (6,540) (3.3)%
Other commercial mortgages 1,454 879 (576) (39.6)%
Other Residential mortgages 101,901 123,427 21,525 21.1%
Leasing contracts 186,565 214,173 27,608 14.8%
Factored receivables 49,671 51,030 1,359 2.7%
Contingent 206,495 239,578 33,083 16.0%
Past due loans 25,730 22,833 (2,898) (11.3)%
Other outstanding loans 482 238 (244) (50.6)%
Total loans (excluding interbank loans) 2,646,907 2,853,704 206,797 7.8%
(*) Includes overdrafts
The loan types that demonstrated the highest growth in relative terms were
residential mortgage loans, with a 25.4% increase as of March 31, 2006 as
compared to March 31, 2005, and consumer loans, with a 20.1% increase during the
same period. The 25.4% increase in residential mortgages easily outpaced the
16.8% growth reported for this loan type in the Chilean banking sector for the
same period. This growth allowed us to increase our residential mortgage market
share in Chile from 2.3% as of March 31, 2005 to 2.5% as of March 31, 2006.
Other Indicators. For the first quarter of 2006, we had a risk index (allowances
for loan losses over total loans) of 1.5%, which compares favorably to the 1.7%
risk index for the first quarter of 2005 and the 1.6% risk index for the Chilean
banking sector in the first quarter of 2006. The improvement in the risk index
was due mainly to changes in the composition of our loan portfolio, including a
decrease in past due loans from 1.0% of total loans (net of interbank loans) in
the first quarter of 2005 to 0.8% for the first quarter of 2006. Reported past
due loans over total loans (net of interbank loans) for the Chilean banking
sector were 0.9% for the first quarter of 2006.
Our coverage ratio, measured as allowances for loan losses over past due loans,
stayed flat at 196.1% as of March 31, 2006 when compared to March 31, 2005. We
believe that this ratio indicates a healthy amount of coverage and it compares
favorably to the 178.0% recorded by the Chilean banking sector as of the same
date.
www.corpbanca.cl Huerfanos 1072, Santiago, Chile 3
Phone: 56 (2) 687 8000
[LOGO OF CORP BANCA]
o FINANCING
The following table sets forth certain information with respect to CORPBANCA's
sources of financing as of the dates indicated, in millions of Chilean pesos
(except percentages):
Percentage
Change from change from
As of March 31, As of March 31, March 31, 2005 March 31, 2005
2005 2006 to 2006 to 2006
- ---------------------------------------- ------------------- ------------------- --------------- ------------------
Saving accounts and time deposits 1,823,102 1,519,918 (303,185) (16.6)%
Current (checking) accounts 142,641 150,065 7,424 5.2%
Banker's drafts and other sight deposits 146,699 57,150 (89,550) (61.0)%
Mortgage bonds 284,554 285,887 1,333 0.5%
Domestic borrowings 89,995 125,550 35,555 39.5%
Foreign borrowings 236,006 215,622 (20,384) (8.6)%
Funds in process of settlement 91,826 21,041 (70,785) (77.1)%
Current (checking) accounts + other sight
deposits(*) 197,515 186,174 (11,340) (5.7)%
(*) Net of funds in process of settlement
Our domestic and other borrowings (saving accounts and time deposits, current
(checking) accounts, banker's drafts and other sight deposits, mortgage bonds
and domestic borrowings) decreased by Ch$348,421 million, or 14.0%, as of March
31, 2006 as compared to March 31,2005. This decrease was primarily due to a
decrease of Ch$303,185 million, or 16.6%, in saving accounts and time deposits.
Our foreign borrowings decreased by Ch$20,384 million, or 8.6%, reflecting the
decrease in the value of the U.S. dollar as compared to the Chilean peso.
Although these decreases have reduced the amount of available cash, the
liquidation of the majority of investments in our treasury portfolio, described
above, provided us with cash to finance a significant part of our growth and to
service our liabilities.
o SHAREHOLDERS' EQUITY
The capitalization of 50% of our 2005 net income at the beginning of 2006, in
the amount of Ch$26,316 million, enhanced our ability to cause our loan
portfolio to grow and to maintain favorable solvency ratios.
With capital and reserves of Ch$384,861 million as of March 31, 2006, we ranked
as the fourth largest private bank in Chile as of March 31, 2006 and had an
equity market share in Chile of 7.8% as of that date.
Our Basle Index for the first quarter of 2006 was 15.1% compared to 14.1% for
the first quarter of 2005.
www.corpbanca.cl Huerfanos 1072, Santiago, Chile 4
Phone: 56 (2) 687 8000
[LOGO OF CORP BANCA]
Change
-------------------------------------
Three months ended Three months ended
March 31, 2005 March 31, 2006 Ch$ millions %
------------------- ------------------- --------------- ------------------
OPERATING INCOME
Net interest revenue 21,906 22,037 132 0.6%
Gains from trading activities 5,633 998 (4,635) (82.3)
Fees and income from services, net 4,442 6,218 1,776 40.0%
Foreign exchange transactions, net (1,091) 91 1,183 108.4%
Other operating income (loss), net (1,698) (2,782) (1,084) (63.8)%
Gross margin 29,192 26,563 (2,629) (9.0)%
Personnel salaries and expenses (8,718) (9,370) (653) (7.5)%
Administrative and other expenses (3,628) (4,064) (436) (12.0)%
Depreciation and amortization (1,260) (1,260) 0 0.0%
Total operating expenses (13,606) (14,694) (1,088) (8.0)%
Net operating income 15,586 11,869 (3,717) (23.8)%
Provisions for loan losses (*) (3,813) (3,762) 50 1.3%
Operating income 11,773 8,107 (3,667) (31.1)%
OTHER INCOME AND EXPENSES
Non-operating income 606 495 (110) (18.2)%
Non-operating expenses (1,035) (722) 313 30.2%
Income attributable to
investments in other companies 63 85 22 34.8%
Price level restatement 2,605 1,184 (1,421) (54.5)%
Total other income and expenses 2,239 1,042 (1,197) (53.4)%
Income before income taxes 14,012 9,149 (4,863) (34.7)%
Income taxes (2,836) (1,529) 1,308 46.1%
Income after income taxes 11,176 7,620 (3,556) (31.8)%
Minority interest -- -- -- --
Net income 11,176 7,620 (3,556) (31.8)%
(*) Under new regulations effective since January 1, 2004 provisions for loan
losses are stated net of recoveries of previously charged off loans
www.corpbanca.cl Huerfanos 1072, Santiago, Chile 6
Phone: 56 (2) 687 8000
[LOGO OF CORP BANCA]
As of March 31, 2005 As of March 31, 2006
or for the three or for the three
Selected Performance Ratios months then ended months then ended
- ----------------------------------------------------------------- --------------------- ---------------------
SOLVENCY INDICATORS
Basle index 14.1% 15.1%
Shareholders' equity/Total assets 10.2% 11.7%
Shareholders' equity/Total liabilities 11.4% 13.2%
CREDIT QUALITY RATIOS
Risk index (1) 1.7% 1.5%
Past due loans/Total loans 1.0% 0.8%
Allowances/Total loans 1.7% 1.5%
Allowances/Past due loans 172.6% 196.1%
Provisions for loan losses/Total loans 0.6% 0.5%
Provisions for loan losses/Gross margin 13.1% 14.2%
Provisions for loan losses/Net income 34.1% 49.4%
PROFITABILITY RATIOS
Net interest revenue/Interest-earning assets (2) 2.7% 2.8%
Net interest revenue, as adjusted (3)/Interest-earning assets (2) 2.8% 2.9%
Gross margin/Total assets 3.4% 3.2%
Gross margin/Interest-earning assets (2) 3.6% 3.4%
Provisions and charge-off expenses/Total assets 0.4% 0.5%
ROA(before taxes), over total assets 1.6% 1.1%
ROA(before taxes), over interest-earning assets (2) 1.7% 1.2%
ROE(before taxes) 15.8% 9.5%
ROA, over total assets 1.3% 0.9%
ROA, over interest-earning assets (2) 1.4% 1.0%
ROE 12.6% 7.9%
Earnings from subsidiaries/Investment in subsidiaries 14.3% 19.0%
EFFICIENCY RATIOS
Operating expenses/Total assets 1.6% 1.8%
Operating expenses/Total loans 2.0% 2.0%
Operating expenses/Gross margin 46.6% 55.3%
EARNINGS
Earnings per share before taxes (Chilean pesos per share) 0.25 0.16
Earnings per ADR before taxes (U.S. dollars per ADR) 2.11 1.53
Earnings per share (Chilean pesos per share) 0.20 0.13
Earnings per ADR (U.S. dollars per ADR) 1.68 1.27
(1) New risk index includes total loan loss allowances
(2) Interest-earning assets: Total loans and financial investments
(3) Includes exchange rate earnings from forward contracts
www.corpbanca.cl Huerfanos 1072, Santiago, Chile 7
Phone: 56 (2) 687 8000
[LOGO OF CORP BANCA]
Consolidated Balance Sheets (unaudited)
(In millions of Chilean pesos as of March 31, 2006, except percentages)
Change
-------------------------------------
Three months ended Three months ended
March 31, 2005 March 31, 2006 Ch$ millions %
------------------- ------------------- --------------- ------------------
ASSETS
Cash and due from banks 133,770 80,033 (53,737) (40.2)%
Total Loans 2,646,803 2,853,704 206,901 7.8%
Provisions (44,405) (44,777) (372) 0.8%
Loans, net 2,602,398 2,808,927 206,529 7.9%
Loans to financial institutions 20,822 40,638 19,817 95.2%
Securities trading 7,809 13,973 6,164 78.9%
Investments 574,466 220,456 (354,010) (61.6)%
Other assets 95,404 101,949 6,545 6.9%
Fixed assets 34,295 33,886 (409) (1.2)%
Total assets 3,468,963 3,299,863 (169,100) (4.9)%
LIABILITIES
Current (checking) accounts 142,641 150,065 7,424 5.2%
Saving accounts and time deposits 2,525,941 2,166,249 (359,692) (14.2)%
Subordinated bonds 48,789 191,704 142,915 292.9%
Borrowings from domestic
financial institutions 89,995 125,550 35,555 39.5%
Foreign borrowings 236,006 215,622 (20,384) (8.6)%
Other borrowings 60,106 58,191 (1,915) (3.2)%
Total liabilities 3,103,478 2,907,382 (196,096) (6.3)%
Shareholders' equity 365,486 392,481 26,996 7.4%
Total liabilities and
shareholders' equity 3,468,963 3,299,863 (169,100) (4.9)%
www.corpbanca.cl Huerfanos 1072, Santiago, Chile 8
Phone: 56 (2) 687 8000
[LOGO OF CORP BANCA]
FORWARD-LOOKING INFORMATION
Certain statements contained herein constitute forward-looking statements. Such
statements are based on the point of view and the assumptions of management and
involve known and unknown risks and uncertainties. Results may be materially
different from those expressed or implied in such statements.
Contacts - CORP BANCA:
Claudio Chamorro C.
Planning and Development Manager
(56 - 2) 687-8114
claudio.chamorro@corpbanca.cl
Raul Rubel B.
Investor Relations
(56 - 2) 687-6075
raul.rubel@corpbanca.cl
www.corpbanca.cl Huerfanos 1072, Santiago, Chile 9
Phone: 56 (2) 687 8000