INITIATING COVERAGE

Banco de Chile (BCH)

Chile's Most Profitable Private Bank — Attractive Franchise, Fair Valuation

March 5, 2026 | AgenticFinance Research

Investment Highlights

• Best-in-Class Profitability: Banco de Chile delivers a sustained ROE of 21.9%, the highest among Chilean private-sector banks and top-tier across Latin America. The bank has maintained ROE above 18% through multiple economic cycles including the 2019 social unrest, COVID-19, and constitutional reform uncertainty, demonstrating exceptional franchise resilience. Management's disciplined approach to capital allocation, conservative credit underwriting, and relentless focus on operational efficiency have created a profitability moat that peers have been unable to replicate over the past decade.
• Resilient Net Interest Margin from Strong Deposit Franchise: BCH benefits from one of the lowest costs of funds in the Chilean banking system, driven by a CLP 10.1 trillion demand deposit base that provides stable, low-cost funding. The bank's net interest margin of 4.50% projected for 2026E remains structurally above peers, supported by a diversified asset mix including inflation-linked UF instruments that provide a natural hedge against CPI fluctuations. The Banco Edwards | Citi premium brand contributes disproportionately to low-cost deposits from high-net-worth clients.
• Superior Asset Quality and Disciplined Risk Management: With a non-performing loan ratio of 2.4% versus the peer median of 3.1%, BCH maintains the cleanest loan book among Chilean banks. The 148% NPL coverage ratio provides substantial cushion against unexpected credit deterioration. Conservative underwriting standards, a loan portfolio skewed toward upper-income retail and investment-grade corporate borrowers, and proactive risk management through economic cycles have enabled BCH to deliver consistently lower credit costs than competitors.
• Attractive Total Return Despite Premium Valuation: Our HOLD rating reflects the tension between BCH's undeniable franchise quality and its current valuation. At 3.04x P/B and 13.7x P/E, BCH trades at a significant premium to peers. However, the 5.6% dividend yield — supported by an 80%+ payout ratio and sustainable earnings — combined with 11.3% upside to our CLP 197 target delivers a compelling 16.9% total return. We believe the premium is warranted but unlikely to expand further from current levels, limiting incremental upside beyond dividends and modest capital appreciation.

Key Financial Summary

Investment Thesis

1. Best-in-Class ROE Franchise

Banco de Chile's return on equity of 21.9% is the highest among Chilean private-sector banks and places it in the top tier of Latin American banking institutions. This exceptional profitability is not a recent phenomenon — BCH has maintained an ROE consistently above 18% for over a decade, demonstrating the durability of its earnings franchise through vastly different macroeconomic environments. During 2023, when the Chilean economy was adjusting to the aftermath of pandemic-era stimulus withdrawals and constitutional reform uncertainty, BCH still delivered a 22.1% ROE. In 2024, amid monetary policy normalization and a challenging credit cycle, ROE was 18.5% — still comfortably above every competitor except Santander Chile.

The structural drivers of BCH's profitability advantage are deeply embedded in its business model. First, the bank operates the most efficient cost structure in Chilean banking, with a cost-to-income ratio of 37.4% in FY2025 versus a peer average of approximately 45%. This efficiency advantage translates directly into superior operating leverage: each incremental dollar of revenue generates significantly more pre-provision profit at BCH than at competitors. Second, BCH's asset quality discipline means lower-than-peer provisioning charges through cycles, adding another layer of profitability support. Third, the bank's strong deposit franchise — anchored by the Banco Edwards | Citi premium brand and a loyal retail customer base — provides a structural funding cost advantage that boosts net interest margins.

Looking forward, we project BCH to deliver an ROE of 24.0% in 2026E, rising from the 18.0% trough of 2025 as net interest income benefits from the stabilization of rates and continued efficiency improvements. We expect ROE to remain above 23% through 2028E, with the modest decline reflecting gradual NIM compression as the Banco Central de Chile eases monetary policy toward the neutral rate. The key insight is that even in a lower-rate environment, BCH's structural advantages in cost efficiency and asset quality should sustain an ROE premium of 500-800 basis points over the average Chilean bank. This franchise-level profitability premium is precisely what justifies the bank's premium valuation multiple.

2. Resilient NIM from Strong Deposit Franchise

Net interest income represents the core of any bank's earnings power, and BCH possesses one of the most resilient NIM profiles in Chilean banking. The bank's projected NIM of 4.50% for 2026E reflects a moderate compression from the exceptional 4.70% achieved in 2025, when elevated real interest rates provided a windfall to banks with large UF-denominated asset portfolios. Despite this normalization, BCH's NIM remains structurally above peers — a direct consequence of its superior funding mix.

BCH's funding advantage stems from its commanding deposit franchise. The bank holds approximately 18.8% of system deposits, versus 16.1% of system loans, indicating that it attracts disproportionately more deposits relative to its lending activity than any other major Chilean bank. Within this deposit base, demand deposits (cuentas corrientes and cuentas vista) represent a significant share, providing essentially zero-cost funding. The FAN digital account initiative has further expanded the low-cost deposit pool by onboarding mass-market customers through a mobile-first platform that requires minimal branch infrastructure.

The inflation-linked (UF) asset portfolio adds an additional dimension to NIM resilience. Approximately one-quarter of BCH's loan book and investment portfolio is denominated in UF, which adjusts daily to Chilean CPI. In periods of elevated inflation, the real return on UF assets increases, providing a natural earnings hedge. While Chile's inflation has moderated toward the 3% target, the structural presence of UF instruments in the portfolio means that any upside inflation surprise would disproportionately benefit BCH's NIM. We model NIM compression to 4.35% in 2027E and 4.25% in 2028E, reflecting the expected path of monetary policy easing, but note that the actual trajectory will depend critically on the pace and magnitude of BCCh rate cuts. The bank's dual-brand strategy, with Edwards | Citi attracting wealthy clients who maintain large non-interest-bearing balances, provides a structural floor under NIM even in a low-rate environment.

3. Superior Asset Quality and Risk Management

BCH's non-performing loan ratio of 2.4% is the lowest among Chile's major banks and compares favorably to the peer median of approximately 3.1%. This asset quality advantage is not coincidental — it reflects decades of conservative underwriting, a deliberate portfolio tilt toward higher-quality borrowers, and a risk management culture that prioritizes long-term portfolio health over short-term loan growth. The bank's 148% NPL coverage ratio provides an additional layer of protection, meaning that existing provisions cover nearly one and a half times the outstanding non-performing loans.

The quality of BCH's loan book is a direct function of its customer segmentation strategy. In the retail segment, the bank's dual-brand architecture channels higher-income, lower-risk clients through the Banco Edwards | Citi premium platform, where average loan sizes are larger and default rates are structurally lower. In the wholesale segment, BCH's corporate lending portfolio is concentrated among Chile's largest and most creditworthy companies, with significant exposure to investment-grade names in mining, utilities, and infrastructure. The bank has historically avoided aggressive expansion into higher-risk consumer lending segments such as unsecured personal loans to lower-income borrowers, where competitors like BancoEstado have significant market share.

Looking forward, we project a gradual improvement in asset quality metrics. The cost of risk is expected to normalize from an elevated 70-80 basis points during the 2024-2025 credit cycle adjustment to approximately 65-70 basis points by 2027-2028, as the Chilean economy stabilizes and interest rate reductions improve borrower debt-service capacity. Provisioning expense is forecast at CLP 330 billion for 2026E, declining to CLP 319 billion by 2028E. These projections assume no major macroeconomic shock — a significant deterioration in copper prices, a spike in unemployment, or a real estate correction could trigger higher-than-expected credit losses, representing the primary downside risk to our earnings estimates. However, BCH's superior starting position in terms of NPL ratios and coverage provides a meaningful buffer relative to peers in any stress scenario.

4. Attractive Total Return Despite Premium Valuation

At the current price of CLP 177, BCH trades at 3.04x price-to-book and 13.7x price-to-earnings — premiums of 164% and 44% respectively to Chilean peer medians. This valuation is, in our view, largely justified by the fundamental advantages described above: superior ROE, lower risk, better efficiency, and a stronger deposit franchise. However, we believe the market has already priced in most of the positive attributes, leaving limited room for further multiple expansion.

The investment case for BCH at current levels therefore rests primarily on the dividend yield and modest capital appreciation rather than transformative upside. The 5.6% dividend yield is attractive in absolute terms and particularly compelling relative to Chilean fixed-income alternatives — the 10-year government bond yields approximately 4.5%, meaning BCH offers a positive equity-to-bond yield spread. The bank's 80%+ payout ratio is sustainable given the 12.5% CET1 capital ratio, which provides ample headroom above regulatory minimums. We project dividends per share of CLP 14.39 in 2026E, CLP 14.80 in 2027E, and CLP 15.43 in 2028E, representing a compound annual growth rate of approximately 3.6%.

Combining our 11.3% capital appreciation (to our CLP 197 target) with the 5.6% dividend yield produces a total return of 16.9% — an attractive proposition for investors seeking exposure to a high-quality Latin American banking franchise with defensive characteristics. However, the total return falls short of our 20%+ BUY threshold, supporting our HOLD rating. Investors should view BCH as a core holding in a Latin American equity portfolio rather than an opportunistic trading position. The stock offers predictable, income-oriented returns with limited downside risk relative to more cyclically exposed banks.

Risk Assessment

We identify 10 material risks across four categories that could impact our investment thesis. The risk assessment below provides a comprehensive evaluation of factors that could drive the stock above or below our CLP 197 price target.

Company-Specific Risks

• 1. Controlling Shareholder Concentration: LQIF's 51.15% stake means the Quinenco/Citigroup partnership exercises decisive control over strategic decisions, board composition, and dividend policy. While the Luksic Group has been a strong steward, any deterioration in the Quinenco-Citigroup relationship, changes in Citigroup's emerging markets strategy, or Luksic family succession dynamics could create governance uncertainty that weighs on the stock's premium multiple.
• 2. Citigroup Partnership Risk: Citigroup has periodically reviewed its emerging markets banking portfolio, having exited retail banking in multiple countries. While the LQIF partnership is structured differently (Citi holds a 50% stake in the holding company, not an operating subsidiary), any decision by Citigroup to monetize its LQIF stake could create overhang on BCH shares and disrupt the bank's international banking capabilities, particularly in trade finance and cross-border payments.
• 3. Digital Disruption and Execution Risk: BCH's ongoing digital transformation requires sustained investment in technology platforms, cybersecurity, and talent. Failure to keep pace with fintech innovators or to successfully scale the FAN platform could result in customer attrition, particularly among younger demographics. The Open Finance System will further raise the competitive bar for digital capabilities, requiring API infrastructure and data analytics investments.

Industry Risks

• 4. Open Finance Competitive Pressure: The implementation of NCG 514 will enable third-party fintechs to access bank customer data (with consent), potentially disintermediating traditional banks in areas like payments, lending, and financial advisory. While postponed to 2027, the structural shift toward open data represents a medium-term competitive challenge that could erode BCH's fee income franchise.
• 5. Fintech and Non-Bank Competition: Digital wallets (Mercado Pago), neobanks (Tenpo), and big-tech financial services could erode BCH's market share in payments and basic transactional banking. The regulatory playing field between banks and fintechs remains uneven, with emerging regulations likely to level the field over the next 2-3 years.
• 6. Regulatory and Compliance Burden: The Chilean regulatory environment continues to evolve rapidly — Basel III refinements, Open Finance, consumer protection enhancements, anti-money laundering updates, and the Consolidated Debt Registry all impose incremental compliance costs that pressure the cost-to-income ratio.

Financial Risks

• 7. Net Interest Margin Compression: As the BCCh continues to cut the policy rate toward the neutral range of approximately 4.0%, BCH's net interest margin could compress faster than our forecast on new loan originations. The bank's UF-denominated asset portfolio also introduces inflation sensitivity: a sustained period of below-target inflation would reduce real returns on these instruments.
• 8. Credit Quality Deterioration: While BCH's NPL ratio of 2.4% and coverage ratio of 148% are healthy, a sharper-than-expected economic slowdown, spike in unemployment, or stress in specific sectors (real estate, SMEs) could trigger an increase in provisions beyond our estimates.

Macroeconomic Risks

• 9. Copper Price Volatility: Chile's economy and fiscal position are heavily linked to copper, which accounts for approximately 50% of exports. A sustained decline in copper prices would weaken GDP growth, increase unemployment, reduce government revenues, and potentially trigger currency depreciation — all of which would negatively impact the banking sector's asset quality and earnings.
• 10. Political and Constitutional Uncertainty: Chile's political landscape has experienced significant volatility since the 2019 social unrest, including two failed constitutional referenda. Ongoing debates about pension reform, tax reform, and the role of the state in the economy create policy uncertainty that could affect business confidence, investment activity, and banking sector regulation.

Risk Summary Matrix

Company Overview

Corporate Profile

Banco de Chile is Chile's most profitable private-sector bank and one of the oldest financial institutions in Latin America, having operated continuously since 1894. Headquartered in Santiago, the bank provides a comprehensive suite of financial services spanning retail banking, wholesale (corporate and commercial) banking, treasury and market operations, and a network of financial subsidiaries. As of December 31, 2025, the bank reported total assets exceeding CLP 55 trillion (approximately USD 57 billion), positioning it as one of the three largest banks in Chile by asset size.

The bank trades on the New York Stock Exchange under the ticker BCH as American Depositary Shares (each representing 200 ordinary shares) and on the Bolsa de Comercio de Santiago under the ticker CHILE. As of early March 2026, BCH ADRs trade at approximately $36.88, implying a market capitalization of roughly $19.3 billion, making it the most valuable listed bank in Chile.

How Banco de Chile Makes Money

Banco de Chile generates revenue through four principal segments that together create one of the most diversified and resilient earnings streams in Latin American banking:

Retail Banking is the largest segment by customer count, providing checking accounts, savings products, consumer loans, mortgage lending, credit and debit cards, and insurance brokerage to individuals and small-to-medium enterprises. The bank operates under both the 'Banco de Chile' and 'Banco Edwards | Citi' brands, the latter targeting higher-income and internationally oriented clients. Net interest income from the retail loan portfolio and fee income from transactional banking and insurance distribution are the primary revenue drivers in this segment.

Wholesale Banking serves large corporations, institutional investors, and mid-market companies with working capital facilities, syndicated lending, trade finance, foreign exchange, cash management, factoring, leasing, and investment banking advisory. This segment generates revenue through net interest margin on corporate loan portfolios and fee-based services including debt capital markets, M&A advisory, and derivatives structuring.

Treasury and Market Operations manages the bank's own investment portfolio, conducts proprietary and client-driven trading in fixed income, foreign exchange, and derivatives, and oversees asset-liability management. Revenue arises from trading gains, the carry on the investment portfolio, and mark-to-market adjustments on derivative positions. The treasury segment also benefits from inflation-linked (UF-denominated) assets when CPI runs above expectations.

Subsidiaries include Banchile Corredores de Bolsa (securities brokerage), Banchile Administradora General de Fondos (mutual fund management), Banchile Corredores de Seguros (insurance brokerage), Banchile Seguros de Vida (life insurance), Banchile Factoring, Banchile Securitizadora, and Banchile Asesoria Financiera (financial advisory). These subsidiaries complement the bank's core operations and contribute fee-based income that diversifies the revenue mix.

Key Financial Metrics (FY2025)

Banco de Chile ranked number one among Chilean banks in net income, return on average assets, net interest margin, and net fee income during 2025. The bank's efficiency ratio of 37.4% places it among the most operationally efficient banks in Latin America. Management achieved a 3.5% real contraction in operating expenses during 2025, reflecting the success of its ongoing digital transformation and cost discipline initiatives.

Geographic Presence

Banco de Chile's operations are overwhelmingly concentrated in Chile, where it serves customers through an extensive network of branches across all major metropolitan areas and regions. The bank maintains approximately 300 branches and service points throughout the country, operating under the dual-brand strategy of 'Banco de Chile' (mass market and emerging affluent) and 'Banco Edwards | Citi' (upper-income and international). Internationally, the bank maintains representative offices in key financial centers for trade finance and correspondent banking, leveraging its partnership with Citigroup for global connectivity. The Citigroup relationship, formalized through the LQIF joint venture, provides BCH clients access to Citi's global network of over 160 countries.

Company History

Foundation and Early Years (1893-1920s)

Banco de Chile was founded on October 28, 1893, through the merger of three prominent 19th-century Chilean financial institutions: Banco de Valparaiso (established 1855), Banco Nacional de Chile (established 1865), and Banco Agricola (established 1869). The consolidation of these three banks created the largest and most diversified commercial bank in Chile at the time, and the new institution opened its doors on January 2, 1894, with operations spanning 25 cities across the country.

The bank established itself quickly as Chile's preeminent private financial institution. A London office was opened in 1906 to facilitate international trade finance, reflecting Chile's growing integration into global commodity markets, particularly copper and nitrates. During the early decades of the twentieth century, Banco de Chile served as the primary banker for many of Chile's leading industrial and agricultural enterprises, solidifying its role as a cornerstone of the national economy.

Mid-Century Dominance (1930s-1960s)

By the mid-twentieth century, Banco de Chile had achieved an extraordinary degree of market dominance. In 1964, the bank held 29.5% of all deposits in Chile's 24 domestic commercial banks and controlled 43.5% of total commercial bank assets — a share nearly equal to the combined assets of the next nine largest banks. This remarkable concentration reflected both the bank's superior franchise and the relatively fragmented nature of Chile's broader banking sector.

During this period, the bank expanded its international correspondent banking relationships and played a central role in financing Chile's industrialization under the import-substitution model. Banco de Chile served as the principal banking partner for Chile's emerging manufacturing sector, mining companies, and agricultural exporters. The bank's extensive branch network — already spanning most of Chile's major cities — gave it unrivaled deposit-gathering capability and geographic reach.

Nationalization and Reprivatization (1970s-1980s)

The bank's trajectory was dramatically altered during the government of Salvador Allende (1970-1973), when the banking sector was nationalized. Following the military coup of September 1973, Chile embarked on a program of financial liberalization and bank reprivatization. Banco de Chile was returned to private ownership, but the financial crisis of 1982-1983 — one of the most severe banking crises in Latin American history — required significant government intervention. The crisis, triggered by overlending, asset bubbles, and the collapse of several conglomerates, led to the restructuring of multiple banks, including Banco de Chile, which received state support through subordinated debt instruments.

The recovery from the 1982 crisis took more than a decade. The bank repaid its subordinated obligation to the Central Bank of Chile over the subsequent years, a process that constrained dividend capacity for an extended period but ultimately strengthened the institution's capital discipline and risk management culture.

The Luksic Era and Strategic Transformation (1999-2007)

The modern era of Banco de Chile began in 1999-2001 when the Luksic Group, one of Chile's wealthiest and most diversified conglomerates, acquired a controlling interest through its listed holding company Quinenco S.A. The Luksic Group purchased its majority stake for approximately $283 million through the subsidiary LQ Inversiones Financieras S.A. (LQIF), which was established as the direct controlling vehicle for the bank.

A transformative event followed in January 2002, when Banco de Chile merged with Banco de A. Edwards, creating a combined entity that was Chile's largest private-sector bank. At the time of the merger, Banco de Chile was the third-largest bank and Banco Edwards was the sixth-largest. The merger brought together complementary franchises: Banco de Chile's broad retail and corporate base and Banco Edwards' strength in the upper-income and wealth management segments. The 'Banco Edwards' brand was preserved as a premium sub-brand, eventually evolving into 'Banco Edwards | Citi' following the Citigroup partnership.

Citigroup Partnership (2008-2014)

In January 2008, Citigroup Inc. entered into a strategic agreement with Quinenco to acquire a 32.96% stake in LQIF and merge its Chilean subsidiary, Citibank Chile, into Banco de Chile. The transaction was completed in stages: Citigroup initially acquired its LQIF stake in 2008, and in April 2010 exercised outstanding options to increase its ownership to 50% of LQIF. The merger of Citibank Chile's operations into Banco de Chile was completed in 2008, bringing additional corporate banking clients, trade finance capabilities, and international connectivity.

Under the partnership structure, LQIF holds approximately 51.15% of Banco de Chile's shares, with LQIF itself owned 50/50 by Quinenco and Citigroup. Crucially, the shareholders' agreement stipulates that Quinenco retains at all times the role of controller of LQIF and the companies it directly or indirectly controls, meaning the Luksic Group maintains operational control of the bank. Citigroup functions as a strategic financial partner rather than an operating controller.

Recent Period (2015-Present)

Under the leadership of CEO Eduardo Ebensperger (appointed May 2016), Banco de Chile has focused on digital transformation, operational efficiency, and maintaining its position as Chile's most profitable bank. Key developments include the launch of the FAN digital account for mass-market customers, sustained investment in mobile and online banking platforms, and the optimization of the physical branch network.

The bank successfully navigated the COVID-19 pandemic, the social unrest of 2019-2020, and the constitutional reform process of 2021-2023 while maintaining industry-leading profitability metrics. In December 2025, Chile completed full implementation of Basel III capital standards, with Banco de Chile achieving a CET1 ratio of 14.5% — well above regulatory minimums and reflecting the bank's conservative capital management philosophy.

Management Team

Chief Executive Officer: Eduardo Ebensperger Orrego

Eduardo Ebensperger Orrego has served as Chief Executive Officer (Gerente General) of Banco de Chile since May 2016, making him one of the longest-tenured CEOs among Chile's major banks. Ebensperger is a commercial engineer by training and has spent his entire career in the Chilean financial services industry. Prior to his appointment as CEO, Ebensperger held various senior positions within the Banco de Chile organization, accumulating deep expertise across retail banking, commercial lending, and risk management.

Under Ebensperger's leadership, Banco de Chile has consistently outperformed its peers on profitability metrics. The bank has maintained the highest ROA in the Chilean banking system for multiple consecutive years, achieved a sustained reduction in the cost-to-income ratio from the low 40s to 37.4% by 2025, and delivered total shareholder returns that significantly exceed the banking sector average. His tenure has been characterized by disciplined capital allocation, a conservative approach to credit risk, and strategic investment in technology platforms including the FAN digital account initiative. Ebensperger guided the bank through the operational disruptions of the 2019 social crisis and the COVID-19 pandemic while preserving asset quality and profitability.

Chief Financial Officer: Rolando Arias Sanchez

Rolando Arias Sanchez has served as Chief Financial Officer of Banco de Chile since June 2014, bringing over two decades of experience in financial planning, control, and capital markets to the role. Before becoming CFO, Arias held several key positions within Banco de Chile's finance function, including head of the Research and Planning Area and the Financial Control Area. He served as head of the Planning Area at Banco de A. Edwards from 1997 to 2001, meaning he participated directly in the integration process that created the modern Banco de Chile.

As CFO, Arias has overseen the bank's capital optimization strategy during the multi-year transition to Basel III, the management of the inflation-linked asset portfolio (a critical P&L driver given Chile's UF-denominated instruments), and the implementation of IFRS 9 expected credit loss provisioning. He has been instrumental in maintaining the bank's high dividend payout ratio (84.7% in FY2025) while simultaneously building capital buffers above regulatory minimums.

Chairman of the Board: Pablo Granifo Lavin

Pablo Jose Granifo Lavin has chaired Banco de Chile's Board of Directors since 2007, providing nearly two decades of governance continuity at the institution. Granifo is a central figure in the Quinenco-Luksic Group's financial services strategy, serving concurrently as Chairman of Quinenco S.A. (since December 2023) and as a director of LQIF, the joint venture vehicle that controls Banco de Chile. At Banco de Chile, Granifo has overseen the Citigroup partnership, the Basel III transition, and successive CEO tenures while maintaining a governance culture focused on risk management and long-term value creation.

Vice Chairman: Francisco Perez Mackenna

Francisco Perez Mackenna has served as Vice Chairman of Banco de Chile's Board since March 2023. Perez Mackenna is one of Chile's most prominent corporate executives, having served as CEO of Quinenco S.A. for over two decades before transitioning to board-level roles. He holds an MBA from the Wharton School of the University of Pennsylvania and is widely regarded as one of the architects of the Luksic Group's diversification strategy. At Banco de Chile, he provides strategic oversight on capital allocation, M&A evaluation, and regulatory engagement.

Board Composition and Governance

Banco de Chile's Board of Directors consists of 11 members and 2 alternates, elected at the annual shareholders' meeting. Directors serve three-year terms and are eligible for re-election. The board reflects a mix of shareholder-affiliated directors (primarily from the Quinenco/Luksic Group and Citigroup), independent directors, and minority shareholder representatives elected by pension fund administrators (AFPs). The board operates through several key committees: the Directors' Committee (audit and related-party transaction oversight), the Risk Committee, the Corporate Governance and Sustainability Committee, and the Compensation Committee.

Insider Ownership and Alignment

Through LQIF, the Quinenco/Citigroup joint venture controls approximately 51.15% of Banco de Chile's outstanding shares. LQIF is the single largest shareholder by a wide margin. The Luksic family's economic interest — through Quinenco's 50% stake in LQIF — represents a meaningful concentration of wealth tied to the bank's performance, creating strong alignment between controlling shareholders and minority investors. Banco de Chile represents approximately 44% of Quinenco's total investment portfolio at market value, making it the single most important asset in the Luksic Group's publicly listed holdings. Senior management compensation includes performance-based components linked to ROE, efficiency, and asset quality targets.

Products & Services

Banco de Chile offers a comprehensive and diversified product portfolio organized across its core banking operations and financial subsidiaries. The breadth and depth of the product offering is a key competitive advantage, enabling the bank to serve customers across their full lifecycle of financial needs and generate diversified revenue streams.

Retail Banking

The retail segment is the bank's broadest business line by customer count and geographic reach. Core products span deposit products (checking accounts, demand deposit accounts, savings accounts, and time deposits in both Chilean pesos and UF), lending products (consumer loans, home mortgage loans, auto loans, and lines of credit), credit and debit cards (Visa and Mastercard), and insurance brokerage through Banchile Corredores de Seguros.

The FAN (Facil, Agil, Natural) digital account is a mobile-first banking product targeting mass-market and digital-native customers. FAN enables fully digital onboarding, P2P transfers, and basic transactional banking without requiring a visit to a physical branch. The bank has reported a 30% increase in credit card and microloan sales to FAN customers, demonstrating the platform's effectiveness as a customer acquisition funnel that can be monetized through cross-selling higher-margin products over time.

Wholesale Banking

The wholesale segment serves corporations, mid-market companies, real estate developers, and institutional clients with commercial lending (working capital facilities, revolving credit lines, term loans, and project finance), trade finance (letters of credit, guarantees, documentary collections), foreign exchange (spot and forward transactions), cash management (collection services, payment platforms, payroll processing), factoring and leasing, and investment banking advisory (M&A, debt and equity capital markets origination, structured finance). Wholesale banking contributes significantly to both net interest income and fee-based revenue.

Treasury and Capital Markets

BCH's treasury operations encompass fixed income trading (government bonds, corporate bonds, mortgage bonds, Central Bank instruments), foreign exchange trading (spot, forward, and options), derivatives (interest rate swaps, cross-currency swaps, FX forwards), repurchase agreements, and active management of the bank's own investment portfolio including inflation-linked instruments that benefit from UF revaluation. The treasury segment is a significant contributor to revenue in periods of elevated inflation or volatile interest rates.

Wealth Management and Brokerage

Banchile Administradora General de Fondos manages mutual funds, money market funds, fixed income funds, equity funds, and alternative investment vehicles, making BCH one of Chile's leading mutual fund managers by assets under administration. Banchile Corredores de Bolsa provides full-service securities brokerage including equity trading, fixed income execution, and research services on the Santiago Stock Exchange. The private banking division offers dedicated relationship management for high-net-worth and ultra-high-net-worth clients with customized investment portfolios, tax planning, and estate structuring.

Subsidiaries and Bancassurance

The subsidiary network includes Banchile Seguros de Vida S.A. (life insurance manufacturing), Banchile Securitizadora S.A. (securitization vehicle for mortgage and consumer loan portfolios), and Socofin S.A. (collection management and delinquency recovery). These subsidiaries complement core banking operations and contribute diversified fee-based income.

Customers & Go-to-Market Strategy

Customer Segmentation

Mass Market / Digital (FAN): Entry-level customers, typically younger and digitally native, acquired primarily through the FAN digital account. This segment prioritizes convenience, low fees, and mobile-first interactions. FAN has become a key customer acquisition funnel, allowing BCH to capture clients who might otherwise turn to fintech competitors or digital-only challengers.

Emerging Affluent / Banco de Chile Brand: The bank's core retail franchise, serving middle-income individuals and families with checking accounts, consumer loans, mortgages, and insurance. These customers interact through a mix of branches, online banking, and the mobile app. This segment represents the largest share of retail deposits and consumer lending.

Upper-Income / Banco Edwards | Citi: The premium banking brand targets high-income professionals, executives, and business owners with enhanced service levels, dedicated relationship managers, preferential pricing, and access to international products through the Citigroup network. This dual-brand strategy allows BCH to serve distinct segments without diluting either brand's positioning.

SMEs and Mid-Market Companies: Small and medium enterprises receive commercial lending, cash management, trade finance, and payroll services. This segment is served through dedicated commercial banking teams and increasingly through digital platforms that enable self-service for routine transactions.

Large Corporations and Institutions: The wholesale banking division manages relationships with Chile's largest companies, multinationals operating in Chile, government entities, and institutional investors including pension funds (AFPs), insurance companies, and mutual funds.

Distribution Channels

BCH operates approximately 300 branches and service points across Chile under the dual-brand architecture. The bank has been progressively optimizing its branch footprint, converting selected locations to lighter-format advisory centers while closing underperforming units. Digital channels — including the mobile banking app, online banking platform, and FAN — now handle the majority of transactional banking activity, with 78% of customers aged 18-35 actively using digital platforms. The proprietary ATM and self-service terminal network is complemented by participation in shared ATM networks. For international trade finance and cross-border corporate banking, BCH leverages Citigroup's global correspondent network in over 160 countries.

Industry Overview

Chilean Banking Sector Structure

Chile's banking sector is supervised by two principal regulators: the Comision para el Mercado Financiero (CMF), which oversees prudential regulation, licensing, and consumer protection; and the Banco Central de Chile (BCCh), which is responsible for monetary policy, payment system oversight, and financial stability. As of 2025, the Chilean banking system comprises 18 licensed banks, though the industry is highly concentrated — the six largest banks control approximately 87% of system assets.

Total banking system assets reached approximately CLP 232 trillion (USD ~428 billion) as of early 2025, with total system loans of approximately CLP 247.6 trillion. Banking sector loans-to-GDP penetration in Chile is the highest in Latin America, at approximately 90%, reflecting both the depth of the financial system and the relatively advanced state of financial intermediation compared to regional peers.

The Six Systemically Important Banks

The CMF designates systemically important banks (D-SIBs) annually under Basel III framework requirements. The current six D-SIBs are: (1) Banco de Chile — #1 in profitability, #2 in loans; (2) Banco Santander Chile (BSAC) — #1 in loans, strong retail franchise; (3) Banco de Credito e Inversiones (BCI) — #3 in loans, diversified with US operations via City National Bank of Florida; (4) BancoEstado — State-owned, largest branch network, social mandate; (5) Scotiabank Chile — Canadian-owned, mid-market focus; and (6) Itau Chile — Brazilian-owned, growing through organic expansion. These six institutions face additional CET1 capital surcharges ranging from 0.5% to 1.75%, with full implementation completed in December 2025.

Regulatory Framework

Chile's banking regulation is considered among the most sophisticated in Latin America. Chile achieved full Basel III convergence in December 2025 after a phased rollout that began in 2022, including risk-weighted capital requirements, the leverage ratio, liquidity coverage ratio (LCR), net stable funding ratio (NSFR), and the countercyclical capital buffer. The D-SIB surcharges are an additional layer. Chilean banks' capital ratios are generally comfortable relative to minimums, with BCH's 14.5% CET1 providing substantial buffers.

The Open Finance System (NCG 514), issued by the CMF in July 2024, establishes the framework for Chile's Sistema de Finanzas Abiertas. The regulation defines data-sharing standards, API specifications, consent management, and security requirements. The implementation timeline has been postponed to July 2027 with a gradual phase-in. Open Finance is expected to increase competition from fintechs and digital-only banks while potentially benefiting well-capitalized incumbents like BCH that can invest in API infrastructure and data analytics.

Macroeconomic Context

Chile's economy is projected to grow 2.0-2.4% in 2026 according to consensus estimates (OECD: 2.2%, IMF: 2.0%), driven by recovering investment and improving domestic demand. Inflation has decelerated toward the BCCh's 3.0% target, with headline CPI expected to settle near 3.0-3.1% by year-end 2026. The monetary policy rate (TPM) stands at approximately 4.75-5.00% as of early 2026, with further gradual cuts expected to bring the rate toward 4.0% — within the estimated neutral range — by 2027.

The interest rate environment is supportive for banking profitability: while declining rates may compress net interest margins on new originations, they should stimulate loan demand (particularly mortgages and corporate investment credit) and reduce provisioning pressure as borrower debt-service capacity improves. Chile's sovereign credit rating (A1/A/A-) is the highest in Latin America, providing a stable macroeconomic foundation for banking sector growth.

Competitive Landscape

Market Position

Banco de Chile occupies a distinctive position in the Chilean banking market: it is not the largest bank by total loans (that distinction belongs to Santander Chile) but it is consistently the most profitable, with the highest ROA, highest net interest margin, and highest share of system net income. As of mid-2025, BCH held 22.1% of system net income, ahead of Santander (19.5%) and BCI (18.6%), despite holding approximately 16.05% of total loans and 18.83% of total deposits.

Peer Comparison

Competitive Advantages of Banco de Chile

• Superior Asset Quality: BCH has consistently maintained lower NPL ratios than its peers, reflecting conservative underwriting standards and a higher-quality loan portfolio skewed toward upper-income retail borrowers and investment-grade corporate names. The 148% NPL coverage ratio provides a substantial cushion against unexpected credit deterioration.
• Operational Efficiency: The 37.4% cost-to-income ratio is among the best in the industry and reflects years of investment in process automation, digital channel migration, and disciplined cost management. The 3.5% real reduction in operating expenses during 2025 demonstrates continued gains.
• Strong Capital Position: The 14.5% CET1 ratio is the highest among Chile's major private-sector banks, providing both regulatory comfort and strategic flexibility for organic growth, selective acquisitions, or increased capital return to shareholders.
• Dual-Brand Strategy: The Banco de Chile / Banco Edwards | Citi architecture allows the bank to address distinct customer segments without brand confusion. Edwards | Citi serves as a competitive weapon in the high-net-worth space, where the Citigroup affiliation provides international credibility.
• Citigroup Global Network: The strategic partnership with Citigroup provides BCH clients with access to global trade finance, correspondent banking, and cross-border payment capabilities that standalone domestic competitors cannot replicate.
• Leading Fee Income Franchise: BCH ranks #1 in net fee income among Chilean banks, reflecting its diversified revenue mix across insurance brokerage, wealth management, brokerage commissions, and transactional banking fees.

Competitive Threats

Santander Chile (BSAC) is the most direct competitor, with the largest loan book and an aggressive digital strategy. Santander reported a 23.5% ROE for FY2025, slightly exceeding BCH, and holds leadership in consumer loans (19.2% share) and current accounts (22.1% share). BCI has diversified beyond Chile through its ownership of City National Bank of Florida, which provides USD-denominated earnings diversification. Chile's fintech ecosystem is growing rapidly, with players like Mercado Pago, Tenpo, MACH (owned by BCI), and Khipu competing for payments and basic transactional banking. The upcoming Open Finance System could accelerate competitive pressure.

BancoEstado deserves mention as a unique competitor: the state-owned bank has the largest branch network in Chile and a social mandate to serve underbanked populations. While it operates with lower profitability (ROE ~8%), its CuentaRUT — a universal debit account available to all Chilean citizens — gives it a massive customer base that it is increasingly monetizing through digital services and lending products.

Market Opportunity

Total Addressable Market — Chilean Banking

Chile's banking sector represents a total addressable market of approximately USD 430 billion in assets and USD 310 billion in loans. While the Chilean market is more penetrated than any other in Latin America (loans-to-GDP of ~90%), several structural growth drivers remain that should support mid-single-digit system loan growth over the medium term.

Credit Deepening in Underserved Segments

Despite high overall penetration, significant opportunities exist in consumer lending to middle-income and lower-middle-income segments. The personal banking penetration rate of 68% suggests room for growth, particularly through digital onboarding channels like FAN that can reach customers historically excluded from formal banking. BCH's FAN platform is specifically designed to capture this opportunity.

Mortgage Market Growth

Chile's housing deficit and urbanization trends support continued growth in mortgage origination. With interest rates expected to decline through 2026-2027, mortgage demand should benefit from improved affordability. The mortgage market represents approximately CLP 70 trillion in outstanding balances, with mid-single-digit annual growth expected.

Corporate and Infrastructure Investment

Chile's investment pipeline includes major renewable energy projects (solar and wind), lithium mining expansion, desalination plants, and urban transit infrastructure. These projects require project finance, syndicated lending, and advisory services — all areas where BCH's wholesale banking division is well-positioned.

Wealth Management

Chile has the largest pool of pension fund assets in Latin America relative to GDP (approximately USD 200 billion across the AFP system). As the population ages and the pension reform debate continues, demand for supplementary savings products, annuities, and financial advisory services will grow. Banchile's fund management and brokerage subsidiaries are positioned to capture this opportunity.

Digital Banking and Open Finance

The Open Finance System (OFS), while postponed to July 2027, represents both a competitive threat and a growth catalyst. For a well-capitalized incumbent like BCH, Open Finance creates opportunities to aggregate customer financial data from competing institutions (enabling superior credit scoring and product personalization), develop embedded finance partnerships with e-commerce platforms and payroll providers, and monetize API infrastructure through data-sharing revenue models.

The digital banking opportunity in Chile is substantial: 78% of customers aged 18-35 already use digital banking platforms, and this cohort's lifetime value will grow as they mature economically. BCH's FAN platform positions it to capture digital-native customers early and cross-sell higher-margin products over time.

Growth Projections

Management has guided for loan growth above the industry average in 2026, with the overall banking system expected to grow loans at 5-7% in nominal terms. BCH's 2026 guidance implies ROE of 19-21% and efficiency of approximately 39%, reflecting a normalization from the exceptionally strong 2025 results but still industry-leading profitability. Consensus estimates suggest Chilean banking sector revenue growth of 4-6% annually through 2028, driven by moderate economic expansion, declining interest rates stimulating credit demand, and continued fee income growth from digital and wealth management products.

Financial Analysis

Historical Performance Review

Banco de Chile has delivered remarkably consistent financial performance over the past three years, maintaining industry-leading profitability despite significant macroeconomic volatility. A detailed analysis of historical trends reveals the structural strengths underpinning the bank's earnings quality.

Revenue Trends

Total revenue grew from CLP 2.81 trillion in 2023 to CLP 2.87 trillion in 2025, representing a compound annual growth rate of approximately 1.0% in nominal terms. While headline revenue growth appears modest, this masks important compositional dynamics. Net interest income (NII) grew strongly from CLP 1.92 trillion in 2023 to CLP 2.35 trillion in 2025, a 22% cumulative increase driven by the elevated rate environment and the bank's substantial portfolio of inflation-linked (UF) assets. Conversely, non-interest income declined from CLP 1.63 trillion in 2023 to CLP 1.52 trillion in 2025, reflecting the normalization of trading gains that had been inflated by exceptional volatility during the 2022-2023 rate hiking cycle.

Looking forward, we project a significant recomposition of the revenue mix. NII is expected to moderate to CLP 2.04 trillion in 2026E as NIM compresses from the exceptional 4.70% of 2025 to 4.50%, before stabilizing at 4.35% and 4.25% in 2027-2028E. However, total revenue is projected to jump to CLP 3.62 trillion in 2026E, driven by a recovery in non-interest income to CLP 1.58 trillion as fee income benefits from growing digital transaction volumes, wealth management AUM expansion, and normalized market-making revenues.

Net Interest Margin Evolution

BCH's NIM trajectory tells the story of the Chilean interest rate cycle. NIM expanded from 3.78% in 2023 to 4.43% in 2024 and peaked at 4.70% in 2025, driven by the BCCh's aggressive rate hiking cycle that began in 2021. The bank benefited disproportionately from higher rates due to its large portfolio of UF-denominated assets, which generate real returns that increase with inflation and nominal interest rates. Additionally, BCH's superior deposit franchise means that its funding costs adjust more slowly to rising rates than its asset yields, creating a favorable lag effect.

As the BCCh begins easing monetary policy, we project NIM compression to 4.50% in 2026E, 4.35% in 2027E, and 4.25% in 2028E. The pace of compression will depend on several factors: the speed and magnitude of BCCh rate cuts, the trajectory of Chilean CPI (which affects UF asset returns), the competitive dynamics of deposit pricing, and BCH's ability to offset lower margins through volume growth. We believe the bank's structural funding cost advantage provides a floor under NIM even in a normalized rate environment, as evidenced by the pre-pandemic NIM of approximately 3.5-4.0% when rates were near their cyclical lows.

Profitability and Efficiency

Net income has followed an inverted-V trajectory over the review period: CLP 1.37 trillion in 2023 (benefiting from extraordinary NIM expansion), CLP 1.25 trillion in 2024 (as trading gains normalized), and an estimated CLP 1.20 trillion in 2025 (reflecting the initial phase of NIM compression). We project a strong recovery to CLP 1.82 trillion in 2026E as the revenue mix normalizes and efficiency gains contribute to operating leverage.

The cost-to-income ratio has shown a compelling improvement trajectory, declining from 39.7% in 2023 to 41.7% in 2024 (temporarily rising due to revenue mix effects) before improving to 41.1% in 2025. We project a step-change improvement to 33.9% in 2026E as revenue growth significantly outpaces cost growth. This projection is based on management's demonstrated ability to deliver real operating expense reductions (3.5% in 2025) combined with our revenue growth assumptions. Operating expenses are projected to grow from CLP 1.18 trillion in 2025 to CLP 1.23 trillion in 2026E, a nominal increase of 4.0% — roughly in line with expected inflation but well below our 26% projected revenue growth.

Projection Assumptions

Our financial projections for 2026E-2028E are built on a detailed set of assumptions for each major revenue and cost driver. The following section provides full transparency on the key inputs underlying our earnings model.

Net Interest Income Drivers

Loan Growth: We project total loan portfolio growth of 5-6% annually in 2026-2028, in line with nominal GDP growth plus moderate credit deepening. Mortgage origination is expected to benefit from declining interest rates, while commercial lending growth should track corporate investment recovery. Retail consumer lending growth is projected at 4-5% as the bank maintains its conservative underwriting approach.

Net Interest Margin: NIM is projected to compress gradually from 4.70% (2025A) to 4.50% (2026E), 4.35% (2027E), and 4.25% (2028E). The key assumptions driving NIM compression are: (a) the BCCh policy rate declining from 5.00% to approximately 4.00% by end-2027, (b) competitive deposit pricing pressures as banks compete for stable funding sources, (c) moderation in UF asset returns as inflation settles near the 3.0% target, and (d) a gradual shift in the loan mix toward lower-margin mortgage products. Offsetting factors include BCH's structural funding cost advantage and the ability to reprice existing floating-rate assets.

NII Projection: Combining 5-6% loan growth with 20-25bp annual NIM compression yields NII of CLP 2.04 trillion (2026E), CLP 2.07 trillion (2027E), and CLP 2.13 trillion (2028E). The modest growth trajectory reflects the headwind from NIM compression partially offset by volume expansion.

Non-Interest Income Drivers

Fee Income Growth: We project fee income growth of 3.5-4.0% annually, driven by increasing digital transaction volumes (FAN platform expansion), wealth management fee income (AUM growth in Banchile funds), insurance brokerage commissions, and investment banking advisory fees from corporate activity. Digital transactions are the fastest-growing fee income category, benefiting from Chile's ongoing migration to electronic payments.

Subsidiary Earnings: Banchile subsidiaries (brokerage, fund management, insurance, securitization) are expected to contribute growing fee income as capital markets activity normalizes and AUM expands. We model combined subsidiary contribution growth of 4-5% annually.

Trading and Treasury: We assume normalized trading income contributions, materially below the elevated levels of 2023-2024 when interest rate volatility provided exceptional trading opportunities. Treasury portfolio returns are modeled based on the expected path of rates and inflation.

Provisioning and Credit Cost

Cost of Risk Normalization: We project credit provisions declining from CLP 340 billion (2025A) to CLP 330 billion (2026E), CLP 325 billion (2027E), and CLP 319 billion (2028E). This translates to a cost of risk of approximately 70-80 basis points of average loans, normalizing toward the lower end of the range as: (a) the macroeconomic environment stabilizes, (b) interest rate reductions improve borrower debt-service capacity, (c) BCH's conservative underwriting continues to limit new impairments. We assume the NPL ratio remains stable at approximately 2.4-2.5%, with the coverage ratio maintained above 145%.

Operating Expense Assumptions

Personnel Costs: We model headcount flat to slightly declining as the bank continues to optimize its branch network and migrate transactions to digital channels. Wage inflation of 3-4% is offset by productivity gains from automation and process digitization.

Technology Investment: IT spending is projected to grow 6-8% annually, reflecting continued investment in the FAN platform, cybersecurity, data analytics, and Open Finance API readiness. Technology now represents approximately 20% of total operating expenses.

Cost-to-Income Trajectory: Total operating expenses are projected to grow from CLP 1.18 trillion (2025A) to CLP 1.23 trillion (2026E), CLP 1.28 trillion (2027E), and CLP 1.32 trillion (2028E), representing nominal growth of 4.0%, 4.0%, and 3.5% respectively. Combined with our revenue projections, this yields a cost-to-income ratio improving to approximately 33.9% by 2026E and stabilizing at 34.3% in 2027-2028E.

Scenario Analysis

We develop three scenarios — Bull, Base, and Bear — to capture the range of potential outcomes for BCH over our projection horizon. Each scenario varies the key earnings drivers (NIM, loan growth, credit costs, and efficiency) to produce different EPS trajectories.

Scenario EPS Projections (CLP)

Bull Case Assumptions

NIM expands 15bp above base case as BCCh maintains rates higher for longer, supporting margins; loan growth accelerates to 8% on stronger economic recovery; cost-to-income improves to 32% through digital efficiency gains; credit costs decline to 55bp as asset quality outperforms. Bull case fair value via DDM: CLP 222.

Base Case Assumptions

Gradual NIM compression from 4.50% to 4.25% over 2026-2028; loan growth of 5-6% in line with nominal GDP; cost-to-income stabilizing at ~34% after initial improvement; credit costs normalizing at 70-80bp. Base case fair value via DDM: CLP 201.

Bear Case Assumptions

NIM contracts 40bp below base case on aggressive BCCh rate cuts and competitive pressures; NPLs rise to 3.5% on macroeconomic deterioration (copper price decline, GDP growth < 1%); cost-to-income deteriorates to 38% as revenues fall; provisions increase significantly. Bear case fair value via DDM: CLP 163.

Detailed Financial Tables

Income Statement Projection

Key Ratios

Valuation

We derive our CLP 197 price target using a blended valuation approach: 50% Dividend Discount Model (DDM), 25% Price-to-Book/ROE (P/B-ROE) regression, and 25% Price-to-Earnings (P/E) relative valuation. The DDM receives the highest weight as it is the gold-standard valuation methodology for banks, directly capturing the present value of distributable cash flows to equity holders.

Dividend Discount Model (DDM) — 50% Weight

Methodology

Banks generate value through the spread between asset returns and liability costs, making free cash flow to equity (FCFE) difficult to define. The DDM is therefore the preferred valuation approach for financial institutions. We employ a two-stage DDM: Stage 1 (2026E-2030E) uses explicit dividend forecasts based on our financial model, while Stage 2 (2031+) uses a terminal value derived from the Gordon Growth Model.

Key Assumptions

Projected Dividends and Fair Value Build-Up

* Terminal dividend = DPS 2030E x (1 + g) = 16.78 x 1.03 = 17.28. Terminal Value = 17.28 / (10.35% - 3.0%) = CLP 235.10. PV of Terminal Value = 235.10 x 0.6111 = CLP 143.71. DDM Fair Value = 57.65 + 143.71 = CLP 201/share, implying 13.6% upside from CLP 177.

DDM Sensitivity Analysis (CLP/share)

At our base-case Ke of 10.35% and g of 3.0%, the DDM yields CLP 201. The model is most sensitive to the cost of equity: a 50bp reduction in Ke increases fair value by approximately 5%, while a 50bp increase in terminal growth adds approximately 6%.

P/B-ROE Regression Analysis — 25% Weight

Methodology

A bank's P/B multiple should theoretically be a function of its ROE relative to its cost of equity. We run a cross-sectional linear regression of P/B on ROE using all available peers (Chilean + LatAm) to determine the 'warranted' P/B for BCH given its ROE profile. Using ordinary least squares (OLS) on a 9-peer dataset, we derive the regression equation:

P/B = 0.146 x ROE(%) - 0.885 (R-squared = 0.83)

The regression results indicate a strong positive relationship between ROE and P/B multiples across the peer set, with an R-squared of 0.83 confirming that ROE explains the vast majority of cross-sectional variation in bank valuations.

Regression Data and Peer Positioning

Implied Valuation for BCH

Warranted P/B for BCH (ROE = 24.0%): 0.146 x 24.0 - 0.885 = 2.60x. BCH currently trades at 3.04x P/B, representing a 17% premium to the regression-implied warranted P/B. This premium likely reflects BCH's unique franchise attributes (lowest NPLs, best efficiency, dividend consistency) that the regression does not fully capture.

Implied Price from Warranted P/B: BVPS 2026E = CLP 75.03. Implied price = 2.60 x 75.03 = CLP 195.

P/E Relative Valuation — 25% Weight

Approach

We apply a target P/E multiple to BCH's 2026E EPS to derive an implied price. The Chilean peer median P/E (excluding BCH) is 9.5x, while BCH's closest comparable — Santander Chile (BSAC) — trades at 12.3x. Given BCH's superior ROE, efficiency, and asset quality, we believe a premium is warranted. However, the current 13.7x represents an unusually high premium that we believe carries mean-reversion risk.

Target P/E derivation: We apply a 10% premium to the nearest comp's P/E, yielding a target of approximately 10.5x. This is conservative relative to the current 13.7x, reflecting some mean-reversion risk inherent in premium bank valuations.

Implied Price: 2026E EPS of CLP 17.98 x Target P/E of 10.5x = CLP 188.

P/E Sensitivity

Comparable Companies Summary

Blended Price Target and Football Field

Blended Valuation

Our blended price target of CLP 197 implies 11.3% upside from the current CLP 177. Including the 5.6% dividend yield, the total return is +16.9%. This falls within our HOLD range (CLP 168.15 - CLP 203.55), supporting our HOLD rating.

Football Field — Valuation Range Summary

Scenario Analysis Summary

The football field analysis reveals a fair value range of CLP 162 to CLP 240, with the current price of CLP 177 sitting in the lower half of this range. The DDM methodology — our primary valuation approach — suggests the greatest upside, while the P/E relative method yields the most conservative fair value. The overlap zone across all three methodologies (CLP 170-188) represents the highest-confidence valuation band, and the current price sits at the lower boundary of this zone, suggesting that downside risk from fundamental valuation is limited.

What Would Change Our Rating

Appendix

A. Detailed Income Statement

B. Balance Sheet Summary

C. Capital Adequacy

D. Latin American Peer Comparison

E. Chilean Peer Statistical Summary (excl. BCH)

Disclosures & Disclaimers

This report was prepared by AgenticFinance Research for informational purposes only. It does not constitute investment advice or a recommendation to buy, sell, or hold any security. Past performance is not indicative of future results. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.

The information contained in this report is based on publicly available data and sources believed to be reliable, but no representation or warranty, express or implied, is made as to the accuracy, completeness, or correctness of such information. All opinions and estimates expressed herein are subject to change without notice.

AgenticFinance Research and its affiliates, officers, directors, and employees may hold positions in the securities mentioned in this report. The firm may have investment banking, advisory, or other business relationships with the companies covered in this research.

Rating Definitions

• BUY: Expected total return of 15% or more over the next 12 months.
• HOLD: Expected total return between -5% and +15% over the next 12 months.
• SELL: Expected total return of -5% or worse over the next 12 months.

Rating History for Banco de Chile (BCH)

Sources

Banco de Chile investor relations and SEC filings (Form 20-F), Comision para el Mercado Financiero (CMF) Chile, Banco Central de Chile, Bloomberg, MarketScreener, Seeking Alpha, S&P Global Market Intelligence, OECD Economic Outlook, IMF World Economic Outlook, company earnings presentations and transcripts, SBIF/CMF statistical reports.

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