Earnings Call Transcript
BANK OF CHILE (BCH)
Earnings Call Transcript - BCH Q2 2025
Operator, Operator
Good afternoon, and welcome to Banco de Chile's Second Quarter 2025 Results Conference Call. If you need a copy of the financial management review, it is available on the company's website. Today with us, we have Mr. Rodrigo Aravena, Chief Economist and Institutional Relations Officer; Mr. Pablo Mejia, Head of Investor Relations; and Daniel Galarce, Head of Financial Control and Capital. Before we begin, I'd like to remind you that this call is being recorded, and the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed notes in the company's press release regarding forward-looking statements. I would now like to turn the call over to Mr. Rodrigo Aravena. Please go ahead.
Rodrigo Aravena, Chief Economist and Institutional Relations Officer
Good afternoon, everyone. Thank you for joining this conference call, where we will present the key results and developments achieved by our bank during the second quarter of this year. Once again, we are proud of Banco de Chile's overall performance during this period since our bank has demonstrated its strong position in the local market by delivering solid results across various areas. As of June 2025, we reported a net income of CLP 654 billion that represents a year-to-date growth of 2%, resulting in an ROAE of 21.9%. As we will discuss later, these outcomes were driven by strong customer income, improved asset quality, increased loan activity in targeted segments, and ongoing efforts in cost control and efficiency. As mentioned in previous calls, these results are particularly meaningful given the ongoing challenges and rising uncertainties in the global macroeconomic landscape. In circumstances like we currently face, solid long-term fundamentals truly stand out. In this context, it's worth highlighting the bank's key strengths, including best-in-class asset quality, a strong capital base, and a robust level of additional provisions. These elements set us apart not only in Chile but all across the region. Now I'd like to share a brief analysis of the macroeconomic environment. Please refer to Slide #3. The Chilean economy continues to show signs of recovery. As illustrated in the graph on the left, growth has followed an upward trend since the second half of 2024, beginning the fourth quarter with a 4% expansion. In the first quarter of this year, GDP grew by 2.3% year-on-year, still above the estimated long-term trend of around 2%. Although this represents a slowdown when compared to the previous quarter, it's important to note the improvement in certain components of domestic demand, such as double goods consumption up 10.9% year-on-year, and investment in machinery and equipment up 5.3% year-on-year, as shown in the upper right chart. Certainly, the strengthening observed in domestic demand could anticipate a better trend for loan growth. Preliminarily, data for the second quarter suggest a similar trajectory, according to the monthly Economic Index IMACEC. The economy expanded by 2.9% in the second quarter and 2.6% in the first half of this year, still above the long-term trend. The breakdown showed that the commerce sector was one of the main drivers of this expansion. The labor market continues to show mixed signals. In June, the unemployment rate stood at 8.9%, up 60 basis points from a year earlier and 20 basis points above the first quarter. This increase was driven by a 0.6% year-on-year rise in the labor force, while there were no changes in the number of employed individuals. As a result, the participation rate weighted 62%, still below the pre-pandemic peak of nearly 64%. On a positive note, employment rose by 3.6% year-on-year, well above the long-term average, providing additional support for private consumption. Please go to Slide #4 to review inflation and interest rate trends. Inflation has remained above the Central Bank's 3% target since late 2020, although it has been trending downward, as shown in the chart on the left. In June, the headline annual inflation rate stood at 4.1%, down from 4.9% in March. However, core inflation, which excludes volatile items, remained relatively stable, rising by just 10 basis points to 3.8%. This evolution suggests that the decline in inflation has been largely driven by volatile components, such as food, which fell from 5.4% in March to 1.9% in June and energy down from 14.2% to 9.9%. The supply index for goods excluding volatile items was 2.9% in June. Overall, various indicators point to easing inflationary pressures in recent months. In response, the Central Bank lowered the policy rate by 25 basis points to 4.75% in line with market expectations. The company's statement indicated that further rate cuts are likely this year if the fundamentals continue being consistent with a normal inflation rate towards the 3% target. In this context, the Central Bank suggested that the interest rate is expected to converge towards its neutral level, estimated at around 4% over the coming quarters. The Chilean peso has remained volatile by hovering around CLP 950 per dollar in recent months. However, as shown in the bottom right chart, the U.S. dollar measured by the DXY Index, which reflects the multilateral value of the dollar against our currency basket, has weakened significantly this year. A trend not yet reflected in the local exchange rate. This decoupling may be influenced by Chilean faster-paced interest rate cuts when compared to other countries. Now I'd like to present our base scenario for 2025. Please go to Slide #5. We have revised our GDP forecast for 2025 upward, from 2% in the previous call to 2.3% now. This adjustment reflects higher-than-expected growth at the beginning of this year rather than improved prospects. As a result, we anticipate that the economy will grow slightly below the 2.6% recorded last year due to weaker global activity, which is expected to dampen export growth. However, a stronger domestic demand should partially offset this external drag. This scenario should support a decline in year-end headline inflation to a level below 4% assuming no major external shock or significant depreciation of the Chilean peso. Under these conditions, the Central Bank would lower the monetary policy rate to around 4.25%. Finally, it's important to reiterate the unusually high levels of uncertainty we face, particularly regarding downside risks to growth stemming from global factors. Domestically, attention will also be focused on the upcoming presidential and parliamentary elections in November. Please turn to Slide 6, where we provide an overview of the latest trend in the Chilean banking industry. As shown in the chart on the top left, the industry posted another quarter of good results. Net income grew to CLP 1.4 trillion. This performance translated into a return on average equity of 16.3%. Operating revenues seem to be recovering on the grounds of the resilience of recurrent drivers associated with lending and deposit activity. After some years marked by a greater prominence of financial-related revenues, given important adjustments in key market drivers, such as inflation, interest rate, and the emergency of the FCIC funding. Regarding asset quality, the chart on the top right shows that nonperforming loans have remained stable at 2.4%, with a coverage ratio of 148% in line with recent quarters. These figures suggest that despite a challenging macroeconomic backdrop characterized by increased unemployment and higher-than-normal borrowing costs, banks have managed to maintain delinquency under control while keeping prudent provisioning levels and adequate buffers to absorb potential credit deterioration. In terms of loan growth, however, as illustrated in the bottom left chart, the loan to EBIT ratio continues to be below trend by reaching 77% as of June 2025. This reflects the subdued pace of credit expansion relative to the economic activity registered after the pandemic. This becomes clear in the chart on the bottom right, showing the persistent weakness in loan growth across all segments in real terms. Since 2019, total loans have contracted, with consumer lending showing the sharpest decline, followed by the commercial portfolio. Mortgage loans have shown some resilience but still remain weak considering the demand for housing given recent demographic, economic, and social changes. This slow demand for loans has been largely constrained by high-interest rates, cautious corporate borrowing due to uncertainty, as well as weak unemployment figures. In summary, while the industry has shown signs of recovery in profitability and maintained solid asset quality, credit activity remains soft. Nevertheless, as soon as some sources of uncertainty dissipate, such as the potential impact of external risk factors on the local economy and the outcome of the upcoming presidential and parliamentary elections, among other factors, the lending business should gradually return to long-term GDP multiples. Next, Pablo will share information regarding Banco de Chile's development and financial results.
Pablo Camilo Mejia Ricci, Head of Investor Relations
Thank you, Rodrigo. Let's review Slide 8, which outlines our strategic framework and aspirations. On the left side of the slide is our strategy, structured around three key elements: our purpose, strategic pillars, and strategic plan. Our purpose is straightforward: to support the development of Chile, its people, and its businesses. We achieve this by leveraging our long-standing competitive strength, trust stability, and deep relationships across every segment in which we operate. Our strategic pillars define how we operate with a strong focus on efficiency, collaboration, and a customer-first mindset. These principles guide both our short- and long-term decision-making, keeping us aligned with innovation and operational excellence. Our business scopes are defined as where we will operate and how we will deliver value, making us more agile, competitive, and responsive to a constantly evolving environment and to the needs of our clients. Through this strategic framework, we aim to meet our midterm targets as shown on the right-hand side of the slide. We aim to achieve sustainable long-term industry-leading profitability. We are also targeting market leadership in both commercial and consumer loans with a high Net Promoter Score, which reflects the strength of our customer relationships over time. Additionally, we aspire to rank among the top 3 in corporate reputation in Chile. On the cost front, we are committed to maintaining a cost-to-income ratio below 42%, reinforcing our focus on operational efficiency and disciplined execution to the development of digital capabilities and the continuous improvement of technological infrastructure. To summarize, our strategy is centered around long-term sustainability, with management incentives aligned with these strategic priorities, ensuring we continue to create value for all of our stakeholders. Please move to Slide 9, where we will go over our key business achievements. During the first half of this year, we made significant progress on several initiatives aligned with our strategic priorities. On the digital front, we launched multiple enhancements aimed at improving customer experience and supporting commercial activity. These included new authentication tools for individuals and companies, the integration of our payment app into the main banking platform, and the rollout of new credit simulators. In parallel, our fund digital accounts continued to perform strongly, achieving a 30% cross-sell rate to current accounts, reinforcing the fund's role as a key driver of customer acquisition. To further unlock its potential, we introduced credit cards and micro loans tailored to fund users. In terms of AI adoption, we expanded the capabilities of FANi, our virtual assistant, which now supports queries across all FAN accounts. We also extended the use of AI to internal operations, particularly within the commercial and technology teams, contributing to improved productivity. In addition, we continue to execute our efficiency and productivity agenda through targeted initiatives. These include IT cost control measures, such as the renegotiation of licensing agreements, and gains in productivity driven by digital sales and technology adoption. Likewise, we have captured significant value through initiatives aimed at centralizing subsidiary functions, optimizing organizational structure, reducing infrastructure expenses, and redesigning the service model. In line with this, we recently integrated our debt collection subsidiary called Socofin into the bank's operations, generating synergies and enhancing both operational efficiency and customer experience. In addition, we have made significant progress in the technological transformation process of some of our subsidiaries to continue leading the industry in both the mutual funds and securities brokerage business. On the sustainability front, we actively participated in the FOGAES state guarantee credit programs aimed at stimulating economic activity through housing construction and mortgage lending. Furthermore, we issued a $122 million bond in international markets to fund social initiatives, with a particular focus on supporting women-led small and medium-sized enterprises. Together, these initiatives reinforce our strategic positioning and strengthen our foundation to capture future growth opportunities. Please turn to Slide 11 to begin our discussion on our results. We continue to deliver strong results in the second quarter of 2025, posting a net income of CLP 305 billion, equivalent to a return on average capital of 23.3% and return on average equity of 20.5%, as shown on the chart and table to the left. Although these figures represent a slight decrease compared to the CLP 324 billion recorded in the same period last year, our profitability remains solid. It's important to mention that we outperformed our peers in both net income market share and return on average assets, as illustrated on the chart to the right. Specifically, in the first half of the year, our market share net income remained well above our competitors, and their return on average assets continues to lead the industry with a very wide gap to our competition, as illustrated on the chart. These results reflect our consistent focus on customer engagement, prudent risk management, disciplined cost control, and above all, the resilience of our core business and recurrent income-generating capacity, particularly focused on customer income. Our strategy remains centered on building a sustainable and profitable bank, and we continue to aspire to be the industry's benchmark in profitability. Let's take a closer look at our operating income performance on the next slide, Slide 12. We continue to demonstrate the strongest operating revenues in the local industry, reaffirming the resilience of our superior business model through market cycles. As shown on the charts to the left, operating income totaled CLP 763 billion in the second quarter of 2025, reflecting stable performance despite the context of subdued business activity. This figure was composed of a solid customer income of CLP 626 billion, up 2.7% year-on-year, and non-customer income of CLP 137 billion, which declined compared to CLP 161 billion recorded in the same period last year. The decrease in non-customer income was primarily attributable to lower inflation revenues on management of our structural U.S. net asset exposure and the maturity of FCIC funding from the Central Bank in July of 2024. These effects were partially offset by increased net revenues from the management of our investment portfolio that benefited from a downward trend in the second quarter of 2025. Customer income growth was driven by a 6.2% year-on-year increase in net income from loans and an 8.1% annual rise in fee income, which enabled us to offset the decline in the contribution of both demand and time deposits as a consequence of the annual decline in short-term interest rates, which naturally compressed profitability in both products. The annual rise in income from loans was primarily driven by the consumer loan book due to improved lending spreads and a 3.7% annual increase in average balances. Additionally, commercial loans and residential mortgages contributed to customer income growth, mainly thanks to greater average volumes on an annual basis. Taking a closer look at commercial loans, the SME portfolio continued to expand 4.8% year-on-year, supporting customer income growth as well. Notably, when accounting for FOGAPE loan amortization, the portfolio has been gaining momentum by rising 8.1% year-on-year, helping to improve lending spreads in this segment. As a result, our net interest margin reached 4.7% this quarter and 4.8% as of June, maintaining a leading position in the industry. Fee growth was led by mutual fund management and transactional products. Fee income from mutual fund management rose 23.8% year-on-year, driven by a solid 16.6% increase in assets under management. In addition, fees from transactional products were driven by both checking fees that posted an 11.2% year-on-year increase, supported by a 4.9% rise in total account holders, and fee income from debit accounts growing 6.9% year-on-year, largely fueled by the success of our FAN product, which contributed to an 8.2% increase in the volume of debit card transactions on an annual basis. In this regard, it's worth noting that our FAN product has been a key driver of current account originations, accounting for approximately one-third of all new current account customers. The strong performance in operating revenues translated into an operating margin of 6.6% for the first half of the year. These figures underscore the strength of our business strategy and our ability to consistently deliver value to our premium customer base across both lending and non-lending products regardless of the prevailing economic environment. Please turn to Slide 13, where we will review the evolution of our loan portfolio. As illustrated on the slide on the left, total loans reached CLP 39.4 trillion as of June 2025, reflecting an annual increase of 3.9%. This credit expansion continues to reflect subdued business dynamics across the industry lagging the pace of economic activity. This trend aligns with the Central Bank's latest credit survey, which confirms that overall credit demand remains soft, which, in our view, continues to be primarily driven by low consumer and business confidence. Breaking it down by segment, mortgage loans grew 8.1% year-over-year, supported by demand from upper income clients. In particular, the origination in the segment was dynamic, growing 14.1% in the first half of the year compared to the same period last year. Meanwhile, consumer loans rose 4.5% annually amid a cautious borrowing environment and interest rates that remain above historical averages. As for commercial loans, they posted a moderate increase of only 1% constrained by weak investment and ongoing political uncertainty. When analyzing the real loan growth relative to pre-pandemic levels, distinct patterns emerge compared to the industry. As illustrated on the right of the slide, we've delivered stronger growth in consumer loans, a segment where we aim to lead, while maintaining a comparable pace of expansion in commercial loans. In the mortgage loan segment, the industry has outpaced us, which is consistent with our strategic focus as this is not a segment where we aspire to gain market leadership. It's also important to note that loan volumes remain well below pre-pandemic levels in real terms, indicating room for future faster growth on the grounds of more favorable financial conditions for borrowers, a rebound in domestic demand, and a decline in interest rates. In terms of portfolio composition, our commercial loans remain well diversified across sectors as of June 2025; the largest exposures are in social and personal services, financial services, and retail, hotels, and restaurants, all representing 45% of the commercial loan portfolio, while the real estate and construction sectors jointly represent only 11%. This distribution reflects our prudent risk management approach and our continued commitment to supporting key sectors of the Chilean economy. Please turn to Slide 14 to discuss our competitive balance sheet structure. As depicted in the charts on the top left, our assets and liability structure remains solid and aligned with our strategic focus on commercial banking. As of June 2025, loans represented 73.8% of our total assets. Financial instruments, in turn, including trading and AFS and held-to-maturity portfolio, jointly accounted for almost 12%, with held-to-maturity assets representing a minor portion of this figure. It's important to highlight that we exchanged bonds denominated in U.S. dollars during the quarter issued by the Chilean government that were close to maturity and formerly booked as held to maturity. For newly issued bonds, the nominal pesos maturing in 2027 were booked as available for sale with changes in market value reflected in equity. On the liability side, deposits remain our primary source of funding, representing 54.8% of total assets. Within this, time deposits and saving accounts accounted for 28.7%, while demand deposits reached 26.1%. As shown on the chart to the right, our non-interest-bearing demand deposits fund 35.4% of our loan book, which represents a significant advantage over our peers in terms of cost of funding. This balance sheet structure continues to be one of the key drivers of our outstanding net interest margin. Moving to liquidity, our ratios remain well above regulatory requirements. As of June 2025, our liquidity coverage ratio stood at over 195%, comfortably above the 100% regulatory limit. The liquidity coverage ratio is designed to ensure that banks hold sufficient high-quality liquid assets to withstand a 30-day stress scenario. Accordingly, our current level reflects the strength of our liquidity position. Similarly, our net stable funding ratio reached 117%, exceeding the minimum requirement by 27 percentage points. The net stable funding ratio measures the stability of a bank's funding over a one-year horizon, ensuring that long-term assets are backed by stable funding sources. These figures reflect our prudent liquidity management and strong funding profile. In addition, our U.S. GAAP reached CLP 9 trillion by the end of June 2025, implying the sensitivity of approximately CLP 90 billion in net interest income for every 1% change in inflation. It's important to recall that this gap is composed of both our structural U.S. position, which serves as an economic hedge against inflation for our equity and directional positions managed by treasury to capitalize on short-term rate differentials between the peso and the U.S. Given the persistence of inflation above the Central Bank's target range and the view of our treasury on the evolution of key market factors, we increased our inflation index exposures for a period of time. Although this exposure came down in the second quarter of 2025, as inflation expectations seemed to normalize. We firmly believe that income generated from this strategy has effectively offset the associated risks over time, as demonstrated by the market-leading position we have held in terms of profitability over the last years. Please turn to Slide 15 to review our capital position. As shown on this slide, Banco de Chile continues to maintain a solid capital base well above the regulatory requirements and our peers. As of June 2025, our common equity Tier 1 ratio reached 14%, positioning us among the top performers in the industry, including additional Tier 1 and Tier 2; our total Basel III capital ratio stood at 17.8%, significantly above the regulatory minimum and providing a strong capital buffer to support future growth. This robust capital position is the result of a combination of factors, including consistently high profitability and solid earnings retention practices over time. In addition, our positive capital gaps have also resulted from subdued loan growth. Our strong capital strategy is designed to face regulatory changes stemming from the final phase of Basel III implementation while maintaining enough business flexibility to address both organic and inorganic growth opportunities in the future. It's also important to note that Chile operates under one of the most stringent regulatory frameworks with higher risk-weighted asset density in comparison with other countries operating under Basel III, where internal models have a key role. In summary, risk-weighted assets under Basel III in Chile are comparable to those formerly existed in the Basel I framework. On top of that, local regulations have basically imposed the same capital requirements on the Chilean banking system as those existing countries that present lower risk-weighted asset density, including the systemic and Pillar 2 capital charges, together with conservation and countercyclical capital buffers. Despite this, we continue to exceed all capital requirements, underscoring the strength and resilience of our balance sheet. Please turn to Slide 16 to review our asset quality. Banco de Chile continues to demonstrate leading asset quality, supported by prudent risk management and a conservative provisioning strategy. During the second quarter of 2025, expected credit losses totaled CLP 96 billion, reflecting a 1.5% increase compared to the same period last year. This figure remains positive, particularly in the context of a still normalizing credit cycle marked by higher-than-normal delinquency in some business segments. This translates into a cost of risk of only 0.98%, which is slightly below our long-term level and stable versus recent quarters, demonstrating the strength of our loan portfolio diversification and effective risk management. Regarding delinquency, it's important to note that nonperforming loans remained above pre-pandemic levels, as shown in the chart on the top right. This trend is observed across the banking industry. However, past due loans seem to begin to gradually return to more normal levels as credit conditions continue to ease, particularly in certain lending products, as illustrated in the chart on the bottom right. In this environment, our delinquency ratio stood at 1.47% in June 2025, which is well below the levels posted by our peers. Looking ahead, we expect to see a gradual improvement in asset quality as economic conditions continue to strengthen across all lending categories. In terms of provisions, we maintained the strongest coverage level in the industry. As of June 2025, our total provisions amounted to CLP 1.5 trillion, composed of CLP 825 billion in allowances for loan losses and CLP 631 billion in additional provisions, which provide a robust buffer to potential credit deterioration. Accordingly, our coverage ratio stands at 252% in June 2025, reflecting a conservative and forward-looking approach to credit risk management that will significantly outpace our peers. Overall, our strong asset quality metrics, high coverage levels, and disciplined risk management continue to differentiate us from peers and position us well to navigate evolving credit conditions. Please turn to Slide 17. Operating expenses totaled CLP 281 billion in the second quarter of 2025, remaining flat compared to the first quarter of 2025 and increasing 3% year-over-year. It's important to mention this growth remains below the inflation rate that accumulated 4.5% over the past 12 months. The modest increase in operating expenses demonstrates both our ongoing efforts in cost control initiatives and the sustained focus on driving efficiency across the corporation through the adoption of digital solutions. In the top right chart on the slide, we can see a detailed breakdown of the change in operating expenses between the second quarter of 2024 and the second quarter of 2025. Personnel expenses rose by 0.8%, primarily due to higher severance payments and increased one-off bonuses following collective bargaining processes conducted during the quarter by two of our subsidiaries. Administrative expenses went up by 4.3%, mainly driven by higher IT-related costs associated with enhancements to our IT infrastructure, internal initiatives aimed at boosting operational efficiency, and marketing expenses aligned with our commercial strategy. As shown in the chart at the bottom right, our efficiency level reached 36.4% this quarter, a notable achievement driven by a sustained focus on productivity across the organization, which has significantly improved efficiency compared to pre-pandemic levels that averaged nearly 45%. Looking ahead, we remain confident that our strong cost control, branch optimization efforts, and ongoing efficiency initiatives will support our mid-term target of maintaining efficiency levels below 42%. Please turn to Slide 18 for key takeaways. On the macroeconomic front, we have raised our GDP forecast for 2025 to 2.3%, up from the 2% projected last quarter. This revision is mainly explained by stronger-than-expected economic performance in the early part of the year. However, it doesn't reflect an improvement in the outlook for the remainder of 2025, given the deterioration in global conditions, particularly rising trade and geopolitical tensions. As for Banco de Chile, given the solid performance achieved in the first half of the year, we have also updated our baseline scenario for the full year 2025. From a revenue perspective, we expect the net interest margin to remain around 4.7% by year-end, supported by an inflation rate measured as a U.S. variation of 3.4%, which remains above the midpoint of the Central Bank's target range, and steepened local yield curves as the monetary policy rate continues to decline. In terms of credit risk, we now forecast an expected credit loss ratio of approximately 1% for the year, below the 1.1% projected in the prior quarter based on slightly better-than-expected credit charges posted during the first half of the year. We also anticipate a gradual improvement in their past-due loan ratio as economic activity gains momentum. In operating expenses, we continue to benefit from productivity gains and a strong cost control culture. As a result, we have revised our efficiency ratio forecast down to approximately 38% for the full year compared to the 39% previously forecasted. Based on these drivers and the absence of non-recurring factors, we have increased our full year return on average capital estimate to approximately 21%, up from 20% in the prior guidance. In summary, we remain confident in our ability to continue delivering industry-leading results and to maintain our position as the most profitable and well-capitalized bank in Chile over the long term, as shown on the chart on the left. Thank you. And if you have any questions, we'd be happy to answer them.
Operator, Operator
Our first question is from Ernesto Gabilondo from Bank of America.
Ernesto María Gabilondo Márquez, Analyst
Thanks for the opportunity to take questions. My first question will be on the political landscape. I would appreciate, Rodrigo, if you can give us your two cents on the presidential costs and potential regulation related to taxes, interchange rates, and mortgage that could have potential impacts for Banco de Chile. My second question will be on NIMs. As you have explained in your presentation for every change of 1% in interest rates, NIM has an impact of around CLP 9 billion. But I'm just wondering, looking beyond this year, how do you see the overnight rate next year? And also, how should we think about NIM next year? And for my last question, as you said, in terms of the ROE you're expected to be around 21% this year. But I just wanted to double check how you are seeing the ROE for the medium term and what will be the minimum common equity Tier 1 ratio you would like to have under that scenario?
Rodrigo Aravena, Chief Economist and Institutional Relations Officer
Thank you very much for your question. This is Rodrigo Aravena. Well, on the political scenario and macro concerns, we have different things to consider. First of all, I think that it's very important to be aware that according to different surveys, it's very likely that there will be a second round in Chile, which will be by the end of this year, since there is not any candidate with more than 50% of the votes. And it is very important to remember that in Chile, when there is any candidate with more than 50% of the votes, there is a second round, which is scheduled for December of this year. Even though it's not clear who is going to compete in the runoff, there are some topics where there is a broad consensus in Chile that are very important to address in terms of the discussion of the value policy in Chile for the next presidential term. One of them is related to the dynamic growth, so we have seen a growing concern among different candidates in terms of the need to improve growth in the future. It's very important to remember that in Chile, the average economic growth since 2014 until now has been only 2%, which is below the average global economic growth. So that's why we've seen some proposals related to lower corporate tax rates. We've seen some different proposals aimed at improving, for example, to reduce the bureaucracy and improve the system related to environmental licenses and permits. So what we've seen in general is that there is a consensus in terms to address the different challenges related to growth, employment, and fiscal debt as well. One of the measures that is gaining more popularity in Chile is the possibility to reduce taxes in the future, but it's important additionally to be aware that any change related to taxes has to be approved by the Congress in both chambers. And so that's why it's also important to analyze the results of the parliamentary elections in Chile for the next year. When we consider all the valuable information, I mean, the weak global environment in Chile is a very open economy, so this is negative news for Chile. But on the other hand, we've seen more dynamism in domestic demand in terms of deployment, investment, and durable consumption, for example. So that's why we feel comfortable with the forecast of 2.3% for the year, and it's reasonable to take a similar number for the next year. In terms of the overnight rate, which was your second question or part of your question, we are expecting lower interest rates in the future. The Central Bank reduced the rate by 25 basis points in the latest monetary policy meeting to 4.75%. It is reasonable to expect an interest rate of around 4.25% or even 4% at some point next year, but it's going to depend on the evolution of global inflation and exchange rates, etc. Of course, these market drivers and factors will be very important in terms of the final stability ROE of the bank. And Pablo, do you want to go into that?
Pablo Camilo Mejia Ricci, Head of Investor Relations
So in terms of your second question, regarding net interest margins, what we currently have is a level of around 4.8% for net interest margin, which will depend on how the inflation level evolves in the next couple of months. This will significantly influence the evolution of that figure for the rest of the year, especially for the third quarter. Because as you know, we had negative inflation a couple of months ago. So that would be an important driver to see how inflation will be for the remainder of this year while we're expecting a level of inflation slightly above the long-term level target of the Central Bank. We expect that this should continue to align more closely with the Central Bank in the medium term. Currently, we have a slightly higher level of net interest margin today because of about 0.5%, which generates, as you mentioned, about CLP 40 billion more in net interest income, which is equal to around 10 basis points of NIM. In the medium term, we think a reasonable level for NIM is somewhere around 4.5% to 4.7%, as we've said in prior calls. Obviously, that depends on various factors, including the mix. If we see a recovery in the loan mix, we need to consider how this impacts the segments we target, which include consumer loans, SME loans, but we also aim to be leaders in commercial corporate banking. Therefore, the evolution of NIM will depend on these factors along with interest rate movements in the future. Currently, we're in a much better position than before the pandemic, but this will be dependent on these conditions. In terms of ROEs, our aspiration is to be the leader in the industry, so we think we have all the tools to do this. We've been enhancing all of our digital platforms, improving productivity across the bank, and focusing on growing in the most attractive segments in the industry. This should allow us to maintain very attractive return on assets and also return on average capital. It's also important to note that when we calculate the traditional calculation of return on average equity, we tend not to include the AT1 bonds. It's important to remember that the interest rates of these bonds are actually recorded in retained earnings and not in net interest expense, as you would see in the profit and loss of any other bonds. By admitting the issuance of AT1 bonds, we can see that the capital in retained earnings is coming down, so that actually helps ROE. Currently, we don't have AT1 bonds. So this is something to consider when comparing us to other banks in the industry or globally. As for the capital adequacy ratios, I will pass that to Daniel Galarce.
Daniel Ignacio Galarce Toro, Head of Financial Control and Capital
This is Daniel Galarce. As you probably know, our CET1 ratio is 4% or 5% above regulatory limits today. This is basically due to the subdued economic growth, of course, and also the excellent financial results we have achieved this year. By the end of the year, we also expect to maintain the current levels of capital adequacy ratios. Loan growth has been below expectations, and accordingly, it's probably to remain like that over the rest of the year. But as we have said in the past, we expect to use our existing capital buffers to support future loan growth in the coming years as long as the economy gains some momentum. Also, our current capital position should allow us to not only comply with capital requirements associated with Pillar 1, but also any requirement related to Pillar 2, if any. So as long as the economy reactivates and we need more capital to operate in the normal course of business, we expect to always maintain a favorable gap of at least 1% in terms of capital adequacy when compared to regulatory limits.
Ernesto María Gabilondo Márquez, Analyst
No, yes, I agree, and thank you very much. I interrupt you, sorry. So I just had a follow-up, a couple of follow-ups. One is if you can give us also a comment related to potential regulatory changes related to taxes, the interchange rate, the mortgages, any updates on that would be helpful. And the other one is a follow-up on your ROE over the medium term. In the past, you have said it could be around 18%. I just want to double check if it's no longer 18%, it could be more around 20%. I just also wanted to have that.
Rodrigo Aravena, Chief Economist and Institutional Relations Officer
This is Rodrigo Aravena. In terms of the regulations, what we've seen so far is that most of the discussions in Chile are more related to the macro policies, related to corporate tax rates, and related to some adjustments in fiscal spending, and other similar matters. But in terms of any material regulation affecting the banking industry and more idiosyncratic regulation, we don't have any different updates to provide here today. Most of the discussion is related to macroeconomic analysis in Chile. However, again, it will depend on who is going to be leading Chile and the composition of Congress as well. In terms of ROE, as I mentioned, our aspiration is to be the most profitable bank in terms of profitability on return on average capital, and it really depends when asking that question in what scenario and what context we are operating.
Pablo Camilo Mejia Ricci, Head of Investor Relations
Our goal is to be the most profitable bank regarding return on average capital. We believe we have the necessary tools to reach this goal. Currently, or over the last few years, we have been among the most profitable banks in the industry while maintaining a high level of capital. We have substantial regulatory and total capital, which gives us the capacity to grow further. Looking ahead, we are confident that we have what it takes to achieve the highest profitability, but this is largely contingent on the economic cycle.
Rodrigo Aravena, Chief Economist and Institutional Relations Officer
So let me just reinforce one idea. The main difference in terms of the evolution of ROE in the future is more related to macro factors rather than specific aspects of the bank. Our strategy is very clear. We have been mentioning different presentations today, which are our main resources, and we've been discussing that. But the main source of uncertainty in terms of long-term ROE is related to the final level of the interest rate, the final level of inflation in Chile, and the final elasticity in terms of loans compared to GDP. So my point here is that the main sources of uncertainty are related to macro factors, which will affect all the banks in Chile, not only us, but in our case, the strategy is very clear, and we have differentiating factors as well. So that's why, as Pablo said, we are confident in terms of our fundamentals to be the leader in stability.
Operator, Operator
Our next question is from Lindsay Shima from Goldman Sachs.
Unidentified Analyst, Analyst
I was wondering if you could expand on what cost control initiatives particularly have driven the lower-than-expected expense growth. And then looking forward, should we start to see expenses accelerate towards inflation levels? And if so, what would that timeline look like?
Pablo Camilo Mejia Ricci, Head of Investor Relations
If we look at the evolution of Banco de Chile, I think we can see some very important changes over the last, let's say, 10 or 15 years, where at one point, we had efficiency levels worse than the average of the industry. And today, we're among the leaders. One of the things that we've implemented are many cost controls across the bank, leading to improved incremental changes across different levels, which help us utilize our resources better. One of the key changes we've seen recently is a reduction in the branch network. Before the pandemic in 2018, we had 390 branches; today, we have 224 branches. The increased use of digital tools, especially through digital enhancements within Banco de Chile in terms of front office and back office, has allowed us to operate as a much more efficient bank, growing with less operational expenses. In the very short term, we've reviewed our loyalty programs in line with adjustments in acquiring reduction fees for the credit card business. We've optimized areas of the bank in terms of, for example, reducing telemarketing expenses. We've shifted marketing efforts to more digital channels, which we've seen an improvement in terms of costs as well over the last period. This whole initiative started very easily, where you could find a lot of simple areas to reduce expenses. However, today it’s becoming more challenging to find significant improvements quickly as we did in the past. We have a streamlined branch network, and we have implemented a lot of digital solutions. However, we believe we can continue to maintain very good efficiency indicators despite the high operating income that we've had, thanks to inflation and other one-off effects. In the long term, we believe that we should maintain an efficiency ratio better than 42%, and that's our aspiration. I hope that addresses your question, but there is a second part to your question which I didn't catch.
Unidentified Analyst, Analyst
It was just how long should it take for us to see the efficiency ratio get towards that 42%. And when should we start to see expenses growing sort of in line with inflation?
Pablo Camilo Mejia Ricci, Head of Investor Relations
Well, the aspiration is less than 42%, so we're well below that. Probably what I would say is this year, we have an expected efficiency ratio of 38%. Our aspiration is to be below 42%. It’s something that we've, over the last few years, been well below that, so we won't necessarily return to 42%. That’s something that's reviewed on an annual basis. No change will depend on the evolution of the bank, especially today, with so many changes over the last, let's say, 5 years with all the digital initiatives that the bank can operate much more efficiently. It's important to take that into consideration. So the target isn't to increase expenses; we’ll continue to look for new areas where we can improve, and we’re doing that. But it’s more incremental changes. Today, we've implemented a lot of changes even in purchasing areas concerning how we buy different products and services from other companies. We've implemented many changes, which has helped improve the indicator, but not necessarily we’re planning to move to 42%. We'll continue looking for improvements.
Operator, Operator
Our next question is from Yuri Fernandes from JPMorgan.
Yuri Rocha Fernandes, Analyst
Thank you, Pablo, and congratulations on another very good quarter. I have a few questions as well. Maybe I would like to start with your loan growth outlook. I know you have guidance to grow slightly above the industry, and for the industry, you're talking about 4%. This is below the nominal GDP rate, right? You just revised the GDP up to 2.3%, and inflation should be, I don't know, 3% or 4%. So the industry is still growing below nominal GDP in Chile, and maybe you grow slightly above the industry. My question is, why not higher guidance? When should we start to see better loan growth here for you? Because my concern is that once inflation normalizes and you are growing your loans at a very limited pace like 4%, I don't know where the revenue will come from? And then I have my second question regarding fees. Fees have been saving the day. These are growing around 8% year-over-year, which is well above the number of client growth. So I would like to explore the fee line a bit more. Do you believe this can continue to grow above loan growth and above the number of clients? I think this year, it has been a lot driven by our mutual funds, right? I think you mentioned this in the release, and even in the mutual funds, we see fees growing faster than AUM. So maybe there's price competition regarding your mutual funds, but also for checking accounts, right? Checking accounts have been growing a lot, like 11%. It is also above the number of clients. I don't know; I think there is a component of pricing in most of these. So if you can help me to understand 1) loan growth because I think this is the model of many of the revenue lines, and 2) fees and how they can evolve going forward, because Chile has been doing very good, and congrats on that. But my concern is how sustainable this good pace is? And if I may, just a follow-up on fees regarding the costs. We saw an increase in your credit card loyalty fees, if you can explain a little bit what those campaigns were, and what is your credit card strategy? I think this is an entirely different topic, but I would love to hear your view on the credit card operation as well.
Rodrigo Aravena, Chief Economist and Institutional Relations Officer
Hi, Yuri, this is Rodrigo Aravena. Thank you very much for your question. I'm going to take the first question. In terms of loan growth, what we have today and what we also believe is that there is like a decoupling between the loan cycle compared to the GDP growth. If you analyze, for example, the loans to GDP rate in Chile, that number today is around 76% to 77% in terms of the nominal loans compared to the nominal GDP in pesos. This number is well below the numbers that we used to have in the past. It's worth mentioning, for example, that because of the pandemic, the number was higher than 80%. During the pandemic, the number was even close to 90%. But we acknowledge the season of temporary factors that increased that temporarily, the ratio between loans and GDP. But we think that 76% to 77% is below the numbers consistent with the fundamentals, but there are some explanations behind that. When we analyze the chart that we showed in the presentation, we can see that there is a significant delay in terms of consumer loans, which are nearly 20% in real terms below the level we had by 2019. However, there are explanations for that, for example, the very high levels of interest rates that we had until the previous year and also the excess liquidity that negatively affected the demand for consumer loans. We also have seen an important delay for commercial loans, as explained by the weak investment growth we've seen during the last year. It is also important to keep in mind that despite the positive economic growth we had last year, the main driver of that growth was related to exports rather than domestic demand. In that aspect, we have to remember that the key driver for loans is related to domestic demand. This year, we are expecting better domestic demand, which should at least partially offset the weakness in total exports. That's why we're expecting a gradual recovery in loans for the future. What is reasonable to expect in the long term? It's reasonable to see an elasticity of loans to GDP of a number around 1.5x like that, and sometimes it could be higher in more challenging times; it could be a bit lower. However, the elasticity that we have today is not sustainable in the long term. In the future, a recovery in both commercial loans and consumer loans is expected, which are our main targets.
Pablo Camilo Mejia Ricci, Head of Investor Relations
In terms of fees, what we've always mentioned is that fees should grow in the mid- to high-single digits, which aligns with customer growth plus low inflation. Customers have been growing around 5% to 7% over the last decade, and that continues to be the case. If we look at current accounts, we continue to grow strongly. One of the reasons we’re very optimistic about the fund account is precisely to expand our customer base so that we could avail ourselves of new customers entering the bank to cross-sell other products and services. In fact, 30% of the new current accounts come from fund accounts, reinforcing this. So these customers are also being offered credit cards, and they receive a current account package. All of these help drive fees. So in this quarter or the first half of the year, the fees have been driven really by AUM growth because customers are searching for higher profitability from their investments, coming from a high inflationary period. Their time deposits, for example, were earning close to 11%, and today the overnight rate is around the 5% level. So these changes have reflected in customer behavior regarding investments, with many moving into the mutual fund business, and we've created new products to enhance that offering. So moving forward, what we see is a customer base that should continue to grow and continue to be driven in part by new fund customers moving into Banco de Chile as well as cross-selling across the bank. So the 8% growth that we've seen year-to-date is reasonable in terms of the level of customer growth, particularly in light of our cross-selling efforts. It’s also important to note that these are charged based in U.S. dollars. Therefore, inflation plays a role as well. We anticipate mid- to high-single-digit growth overall.
Yuri Rocha Fernandes, Analyst
If I may, just a follow-up on fees because it's one of your strategies. And I think part of the confidence you have is that you always create new avenues even whenever we don't see loan growth. I think this also forms part of your answer. Just on the acquirer of Banchile Pagos like the Pagos. I think it's the target for the year-end. Is there any update on that? Like any KPIs you can share, like any goals you have? I think I read an interview, and given you are entering the game a little bit late, maybe you were less positive, but this can also be good for fees.
Pablo Camilo Mejia Ricci, Head of Investor Relations
So yes, Banchile Pagos is an important initiative that we're planning to launch in the last quarter of this year. This strengthens our position as a full-service functional institution to all of our customers. Obviously, now we can provide them with a complete suite of products and services to these business customers. The focus is on SMEs and middle market companies, where we have a very strong position. This is an area where we can cross-sell and provide value-added products to these customers using Banco de Chile's infrastructure. This is very important for us. Our SME book consists of about 15%, a little under 15%, of total loans, with approximately 150,000 customers, representing a huge growth potential for Banchile Pagos. In terms of KPIs, we don't have anything to share at the moment, but we don’t think we’ve entered the market late; we have been waiting to better understand the risks and potential regulatory changes that could impact our business and how we could implement our own acquiring business. Similar to the fund account, which was also seen as entering late but proved very successful, we now have almost 2 million customers from FAN, making it a key driver of current accounts growth.
Rodrigo Aravena, Chief Economist and Institutional Relations Officer
Just to clarify and reinforce the idea, despite the decoupling that we have this year in terms of loan growth compared to GDP growth, we expect a normalization in the future. If we assume an elasticity of 1.5 times, for example, of loans compared to GDP, it is reasonable to expect that if the economy grows, for example, by a number between 2% and 2.5% in real terms and an inflation rate between 3% and 3.5%, we would reasonably expect that in that scenario, loan growth in nominal terms would be high single digits. Just to be clear, what we expect for the future.
Operator, Operator
Our next question is from Daniel Mora Ardila from CrediCorp.
Unidentified Analyst, Analyst
Thank you for the opportunity to ask questions. I have just one question regarding loan growth, considering that we are in a challenging scenario for loan dynamics. I would like to understand what is the short-term strategy to grow above the industry level, what segments or products are you planning to grow? And also, given the recovery that we are expecting in the future, do you plan to change the longer strategy? Or will it be maintained as the same as we should see in the short term?
Pablo Camilo Mejia Ricci, Head of Investor Relations
In terms of loan growth, our focus is on high-potential segments, such as SMEs and consumer lending. In terms of SMEs, we're targeting businesses with scalable models and strong credit profiles. This is a segment that, as I mentioned earlier, we have only just under 15% of the total loan book dedicated to. We have very high-quality customers here, a customer base that we're interested to continue growing. We've worked a lot with these customers and hold a variety of conferences, maintaining strong relationships in Banchile Pagos is another tool that we'll be offering in the fourth quarter for these customers, which will continue to strengthen these relationships. This is an area that historically has been less penetrated in Chile. It became a little bit more penetrated during the pandemic, but we still consider it to be one of the areas that will experience the fastest level of growth in the future. Today, the demand is somewhat slower, but as the economy improves, we expect improvement in this segment together with the corporate segment. In consumer lending, we focus on the more affluent segments with stronger operating incomes and middle-income segments. We aim to provide high-quality services to these customers, while also using a lot of digitalization to grow consumer loans across the board. In summary, these initiatives should help drive growth. I've shared that previously with you, regarding the type of services we offer these customers and how they're offered. We've implemented a lot of digital initiatives to ensure we provide high-quality service across all channels. Today, we're a bank that has implemented many front-office digital solutions, with most transactions being done online. For example, over 90% of time deposits are done digitally. In fact, we have an application level for mortgage loans that has received high application rates online. This digital approach has allowed us to grow more efficiently.
Unidentified Analyst, Analyst
Perfect. Considering would you expect that this change in the loan mix to be significant and offset the normalization of inflation and also the normalization of interest rates? On margins, if we see that we are planning to grow in SMEs and consumer, I wonder if we could see that NIM could be maintained around 4.7%, 4.8% even with the normalization of inflation and interest rates.
Pablo Camilo Mejia Ricci, Head of Investor Relations
Remember that this year, we're expecting only inflation of 3.4% in terms of variation of the U.S. That 0.4% or 0.5% above the long-term target only represents around 10 basis points. So our expectation is that net interest margin should be around the levels we have today, maybe slightly less than 4.8%, around 4.5% to 4.7% seems reasonable, depending on inflation. Moreover, it also depends on loan mix, which is very important. We've seen a lot of growth in the industry, particularly in mortgage loans, which traditionally have lower net interest margins. Over the past 15 years, the mortgage portfolio grew significantly, which helped bring down net interest margins alongside other market factors to the levels we’ve observed prior to the pandemic. However, thanks to market factors, we have higher levels of net interest margins at present. Despite the expectation that interest rates will remain higher for longer, which was noted by Rodrigo, our combined strategies continue to anticipate recovery in loan growth, so we expect that these trends will allow us to maintain relative stability in net interest margin levels.
Unidentified Analyst, Analyst
Our next question is from Neha Agarwala from HSBC.
Neha Agarwala, Analyst
Congratulations on the results and thank you for the detailed answers throughout the call. Just a quick one.
Operator, Operator
It looks like Neha dropped. Perhaps we can take her question once she dials back. Our next question is from Andres Soto from Santander. Please go ahead.
Andres Soto, Analyst
Most of my questions have been already addressed, but I still have a question regarding dividends and capital position. Previously, on this call, you mentioned that your target for core equity Tier 1 ratio was to be 100 basis points above the minimum regulatory requirement or at least 100 basis points, and you are way above that level at this point. In addition to the additional reserves you have in your balance sheet, which is as you mentioned, CLP 600 million. So I would like to understand your thoughts around the possibility of an extraordinary dividend and what will need to happen for that to be considered as a potential for investors.
Daniel Ignacio Galarce Toro, Head of Financial Control and Capital
Andres, this is Daniel Galarce. Well, an extraordinary dividend or a payout ratio higher than 60%, which is our long-term view with respect to dividends, would only be possible under some specific circumstances like we've had in recent years. It would be only feasible under consistently lower-than-expected growth and also higher-than-normal net income. It's also important to note that at least we will always retain the inflation effect on equity or capital every year. So if economic activity and private investment in particular remain subdued in the midterm, and our financial performance stays strong, we cannot rule out temporarily decoupling from our midterm view in terms of dividend distribution, as we've done in recent years. During 2025, our results have remained consistent with our expectations and loan growth also remains subdued. However, any change from this baseline scenario regarding dividend payout is something that needs to be determined by our shareholders every year.
Andres Soto, Analyst
Absolutely, Daniel. And regarding the additional reserves that you guys have in the balance sheet. It's much higher than any other bank in Chile and despite having much better asset quality indicators. What are your thoughts around that position? Is it going to be released gradually to manage the cost of risk pressure? Or is that a potential source of dividends for shareholders?
Pablo Camilo Mejia Ricci, Head of Investor Relations
The idea behind the additional provisions is to use them in negative cycles. We did release some earlier this year for the change in models for the consumer loan book. Looking forward, the board of directors makes these decisions and analyzes them based on circumstances that we're seeing. As we've mentioned in the past, if we don't need these additional provisions, then a portion of these could potentially be reversed and paid out. However, there's no clear timeline regarding that. Today, there's still a lot of uncertainties in terms of economic global macro scenarios, geopolitical factors, etc. So we don’t have any new information at the moment, but it’s something we have to keep an eye on moving forward.
Operator, Operator
Thank you. We'll get back to Neha Agarwala from HSBC.
Neha Agarwala, Analyst
Congratulations on the results, and thank you for the detailed answers throughout the call. Just a quick one. What kind of cadence should we expect in the coming two quarters for this year? Any significant moves that we should be mindful of to create opportunity? And second, just on the upcoming election, is there any uncertainty that you see depending on which candidate finally gets through the elections? Any kind of risk that you see from the upcoming elections?
Pablo Camilo Mejia Ricci, Head of Investor Relations
I think one of the things to consider is how inflation will evolve from here. The last figure we had was a negative level of inflation. So, it will be interesting to see the next print coming out in a couple of days to see how that will affect our third-quarter results. This will be very important. Depending on that, we'll see how our bottom line will be affected for us in the industry in terms of interest income from inflation. I think that's the most crucial area. Other than that, what we're expecting in line with what we mentioned in the guidance includes a return on average capital of around 21%, a net interest margin that could drop a bit, as we expect the inflation number to drop, and a cost of risk which we've reduced to around 1%, due to very good performance in the first half of the year. We expect this trend to remain similar. We don't foresee large changes in the immediate term in terms of risk. The U.S. variations are what we've taken into consideration for our guidance this quarter.
Rodrigo Aravena, Chief Economist and Institutional Relations Officer
Sure, thanks for the question, Neha. We recognize that the political environment is becoming increasingly significant. In our situation, it’s critical to understand that the political system in Chile is based on important counterweights between the government and Congress. Also, it’s important to remember that any vital performance in Chile must be approved by Congress in both chambers, which can significantly influence the political landscape. Thus far, we've seen a broad consensus in the country that it is vital to address the pressing challenges regarding economic growth, especially today, given the increasing uncertainty we face worldwide. Additionally, we must also focus on labor market challenges and improving bureaucracy. While we have not seen structural changes in the economy play out so far, the main uncertainty presently lies with global economy influences, the evolution of copper prices, and developments in our primary trading partners—specifically China and the U.S. Locally, it is essential to evaluate not only who will be leading in Chile but also the composition of Congress.
Operator, Operator
Our next question is from Ewald Stark from BICE Inversiones.
Unidentified Analyst, Analyst
Well, your current basic capital ratio is indeed high, especially compared with what's required by the regulator. This is basically a result of almost 0 loan growth in the past couple of years. So my question is, what's your targeted basic capital ratio once loan growth reactivates?
Daniel Ignacio Galarce Toro, Head of Financial Control and Capital
This is Daniel Galarce. Well, basically, as the economy reactivates in the future, we expect to utilize our capital for business activities. Accordingly, we aim to always maintain a favorable gap of at least 1% above the regulatory limit for all of our capital adequacy ratios. This is what we foresee for the future, but there is no specific timeframe for that.
Unidentified Analyst, Analyst
Okay, but Banco de Chile has traditionally maintained robust capital ratios and requirements well above the regulatory necessity. Do you have any guidance about where the basic capital ratio might be in the next couple of years?
Daniel Ignacio Galarce Toro, Head of Financial Control and Capital
In the next couple of years, that will depend on economic growth and also loan growth, and how we can utilize our capital for doing business. But if everything works as we expect, especially with the anticipated reactivation of the economy, we project a minimum capital ratio to comply with requirements of at least 1% above the total regulatory limits.
Operator, Operator
Thank you very much. We would like to thank everyone for their participation today. I will now hand it back to the Banco de Chile team for the closing remarks.
Pablo Camilo Mejia Ricci, Head of Investor Relations
Well, thanks for listening to the call today, and we look forward to discussing our third-quarter results with you in the future. Have a good day.
Operator, Operator
That concludes the call. Thank you, and have a nice day.