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Industry Research Report on the Banking in Chile.

Value Chain outline

The banking industry value chain in Chile, while not having a universally agreed-upon, strictly linear model like a manufacturing process, can be understood as a series of interconnected activities that create and deliver financial products and services to customers. Based on the available information, a conceptual value chain for the banking sector in Chile involves several key stages:

  • Funding/Resource Gathering: This initial stage involves attracting funds from various sources.
  • Financial Intermediation/Transformation: This is the core function where gathered funds are transformed and allocated.
  • Product and Service Development & Delivery: This involves creating and distributing financial products and services to meet customer needs.
  • Relationship Management & Servicing: This focuses on managing customer interactions and providing ongoing support.
  • Risk Management & Compliance: This is an overarching function crucial to all stages, ensuring stability and adherence to regulations.

Identification and description of each step in the value chain

  • Funding/Resource Gathering: Banks obtain funds through various means, primarily deposits from individuals and corporations. This includes checking accounts, savings accounts, and time deposits. They also access funding through wholesale markets, issuing debt, and securing lines of credit.
  • Financial Intermediation/Transformation: The central activity where banks act as intermediaries. They take the funds gathered (primarily deposits) and transform them into loans and investments. This involves assessing credit risk, pricing financial products, and managing liquidity.
  • Product and Service Development & Delivery: Banks design and offer a wide range of financial products and services, such as loans (consumer, mortgage, commercial), credit cards, debit cards, investment products (mutual funds, stocks, bonds), insurance products, and payment processing services. The delivery of these products and services occurs through various channels, including physical branches, online banking platforms, mobile applications, ATMs, and call centers.
  • Relationship Management & Servicing: This step focuses on building and maintaining relationships with customers. It includes customer service, account management, financial advisory, and addressing customer inquiries and issues. Effective relationship management is key to customer retention and loyalty.
  • Risk Management & Compliance: This is a continuous process across the entire value chain. It involves identifying, assessing, and mitigating various risks, including credit risk (borrowers defaulting on loans), market risk (losses due to market fluctuations), operational risk (failures in internal processes or systems), and liquidity risk (inability to meet short-term obligations). Compliance ensures adherence to the extensive regulatory framework governing the banking sector in Chile, primarily overseen by the Comisión para el Mercado Financiero (CMF) and the Banco Central de Chile.

Identification and description of segments for each step of the value chain.

Within the broader value chain, banks typically segment their activities and customer base to tailor their offerings and strategies. Key segments include:

  • Retail Banking (Banca Minorista): Focuses on individual consumers and small businesses (SMEs).
    • Segments within Retail: Individuals (further segmented by income level, age, etc.) and Small and Medium-sized Enterprises (SMEs).
  • Commercial Banking (Banca Comercial): Serves larger businesses and corporations.
    • Segments within Commercial: Medium-sized companies, large corporations, and real estate/leasing companies.
  • Corporate and Investment Banking (Banca Corporativa y de Inversión): Caters to large corporations, financial institutions, and high-net-worth individuals, offering more complex financial solutions.
    • Segments within Corporate and Investment Banking: Large corporations, financial institutions, and high-net-worth individuals.
  • Private Banking (Banca Privada): Specifically targets high-net-worth individuals, providing wealth management and financial planning services.

List of types of players in each segment

  • Retail Banking:
    • Universal Banks (with a retail division)
    • Retail Banks (banks specifically focused on individuals and SMEs)
    • Credit Unions (Cooperativas de ahorro y crédito)
    • Fintech companies (offering specific retail services like payments or lending)
  • Commercial Banking:
    • Universal Banks (with a commercial division)
    • Branches of Foreign Banks
  • Corporate and Investment Banking:
    • Universal Banks (with a dedicated CIB division)
    • Investment Banks (divisions of large banks or specialized firms)
    • Financial Institutions
  • Private Banking:
    • Universal Banks (with a private banking division)
    • Wealth Management firms

Detailed description of the main activities within each segment.

  • Retail Banking:
    • Individuals: Offering and managing checking and savings accounts, issuing debit and credit cards, providing personal loans, mortgages, and various insurance products. Activities also include facilitating payments, both physical and digital. Digital channels and mobile banking are increasingly important in this segment.
    • SMEs: Providing financing (loans, lines of credit), treasury management services, factoring, leasing, and payment solutions tailored to business needs.
  • Commercial Banking: Providing financing to larger companies, managing corporate accounts, offering cash management solutions, trade finance, and other services related to the operational needs of mid-sized to large corporations.
  • Corporate and Investment Banking: Offering complex financial solutions including corporate finance advisory (mergers and acquisitions - M&A), debt and equity capital markets services (issuing bonds and stocks), structured finance, and sophisticated treasury and risk management products for large corporations and financial institutions.
  • Private Banking: Providing personalized financial advisory, wealth management, investment strategies, estate planning, and other tailored services for high-net-worth individuals.

Value Chain Summary Table

Value Chain Step Key Activities Main Segments Served Types of Players
Funding/Resource Gathering Receiving deposits (checking, savings, time), issuing debt, accessing wholesale markets. Individuals, SMEs, Corporations, Financial Institutions. Universal Banks, Retail Banks, Credit Unions.
Financial Intermediation Credit assessment, loan origination (consumer, commercial, mortgage), investment management. Individuals, SMEs, Corporations, Financial Institutions. Universal Banks, Retail Banks, Commercial Banks, Investment Banks, Credit Unions.
Product & Service Development & Delivery Designing financial products, managing delivery channels (branches, online, mobile, ATM). Individuals, SMEs, Corporations, High-Net-Worth Individuals, Financial Institutions. Universal Banks, Retail Banks, Commercial Banks, Corporate & Investment Banks, Private Banks, Fintechs.
Relationship Management & Servicing Customer service, account management, financial advisory, issue resolution. All Segments. Universal Banks, Retail Banks, Commercial Banks, Corporate & Investment Banks, Private Banks, Credit Unions, Fintechs (customer support).
Risk Management & Compliance Credit risk assessment, market risk management, operational risk management, regulatory compliance. All Segments and Internal Operations. All Financial Institutions, Regulatory Bodies (CMF, Banco Central).

Examples of Main Players

Chile's banking sector is concentrated, with a few large institutions dominating the market. The key players operate across multiple segments of the value chain.

  • Banco de Chile: A major private bank active in both retail and wholesale banking. It serves individuals, SMEs, large corporations, and institutional clients. Its activities span deposit taking, lending across various categories (consumer, mortgage, commercial), offering investment products through subsidiaries like Banchile, and providing treasury services.
  • Santander Chile: A significant subsidiary of the global Santander Group, with a strong presence in retail and commercial banking, as well as wealth management and corporate and investment banking. It provides a wide range of services to individuals, SMEs, and large corporations, and is a leader in consumer and mortgage lending.
  • BCI (Banco de Crédito e Inversiones): A leading private bank with segments covering retail banking (individuals and SMEs), commercial banking, and corporate and investment banking. BCI offers a broad suite of products including accounts, cards, loans, leasing, factoring, and investment solutions.
  • BancoEstado: The state-owned bank, playing a crucial role in providing financial services across the country, particularly to individuals and smaller businesses, and also serves the government. It is the second largest bank by assets and is actively developing digital banking services like Cuenta FAN.
  • Scotiabank Chile: A prominent foreign bank with operations in retail, commercial, and corporate and investment banking, serving a diverse customer base.
  • Itaú CorpBanca: Formed by a merger, this bank serves personal, private, and business clients, demonstrating the trend of consolidation in the market.
  • Grupo Security: A financial group including Banco Security, offering banking and financial services to individuals and businesses. It is in the process of merging with Bicecorp, which will further impact the market structure.
  • Bicecorp: A financial holding that includes Banco BICE, considered a moderately systemically important bank. Its merger with Grupo Security is expected to create a larger entity.

Volumes and Sizes

The Chilean banking sector is characterized by the significant market share held by a few large banks. As of August 2024, BCI held the largest share of total loans among sampled banks at 20.15%, followed by Santander Chile at 15.58%, Banco de Chile at 14.96%, and Itaú CorpBanca at 10.60%. In February 2024, BancoEstado had a 14.9% market share in loans, and Scotiabank Chile held 13.7%.

In terms of total assets as of April 2023, BCI reported US$ 85,012 million, Santander Chile US$ 69,767 million, Scotiabank Chile US$ 57.72 billion, Banco de Chile US$ 53,091 million, and BancoEstado US$ 51,123 million. As of March 2024, BCI's total assets were around US$ 90,453 million.

The profitability of the major private banks was positive in 2024. Banco de Chile reported profits of $1,207,392 million Chilean pesos, Santander Chile $864,509 million, BCI $801,718 million, Itaú CorpBanca $376,627 million, and Scotiabank Chile $457,323 million.

The concentration in the market is evident, with the four largest banks accounting for a significant portion of assets and loans.

Specific volume estimates for each step of the value chain (e.g., total volume of deposits, total volume of loans by type, transaction volumes) across the entire industry for 2024-2025 are not comprehensively available in the provided sources in a single, aggregated format. However, individual bank reports provide some insights into their specific volumes within certain segments, such as Banco de Chile's managed demand deposits in their Wholesale and Retail segments in December 2024.

References