BCH · Banco de Chile

Banco de Chile’s Q1 2026 results reflect a contraction in profitability amid shifting macroeconomic conditions in Chile. Net income declined 18.4% year-over-year to MCh$268.6 million, primarily driven by a 26.6% increase in credit loss expense — rising to MCh$114.2 million — despite only modest growth in loan balances (e.g., commercial loans up 4.8%, residential mortgages nearly flat). The sharp 77.6% drop in net inflation indexation income (to MCh$26.1 million) reflects both lower inflation-indexed revenue (down 76.4%) and higher inflation-linked expenses (up 144.5%), consistent with Chile’s decelerating inflation environment and reduced pass-through to indexed loan portfolios. While net interest income improved 3.6% to MCh$445.0 million — aided by higher yields on new lending and stable funding costs — this gain was insufficient to offset the deterioration in non-interest income streams. Balance sheet growth remained measured: total assets expanded 2.4% sequentially to MCh$55.4 billion, supported by strong deposit inflows (time deposits up MCh$1.1 billion quarter-over-quarter), but CET1 capital declined 5.8% to MCh$5.46 billion, and RWA rose 2.6% — resulting in a modest compression of regulatory capital ratios. No forward guidance or capital return actions were disclosed in Exhibit 99.1 or the main filing, indicating management is maintaining a cautious stance amid uncertain inflation and credit dynamics. Investors should monitor upcoming quarterly trends in inflation-indexed revenue recovery and whether credit loss provisioning stabilizes in H2 2026.