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BCI tempers credit growth expectations on slower economy, sees 2020 recovery

Weaker economic growth led Banco de Credito e Inversiones SA to lower its loan growth targets for the year, though company executives noted that fiscal reforms and monetary easing should help Chile's economy regain strength in 2020.

Speaking during an Aug. 6 call to discuss the bank's quarterly results, Sergio Lehmann, the bank's chief economist, noted that BCI now expects Chile's GDP to grow by 2.8% in 2019, down from 3.5% estimated at the beginning of the year. Lehmann attributed the revision mainly to "a deceleration in private consumption."

With that slower growth, the bank lowered its loan growth estimates to between 8% and 9% from a prior range of 9% to 10%, CFO José Luis Ibaibarriaga said during the call. In the second quarter, total loan growth hit 7.9%. Commercial loan growth was particularly weak, with growth decelerating to just 2.1% year over year amid a "more competitive environment in terms of prices," Ibaibarriaga said.

Specifically, the CFO noted that capital markets have been increasingly more competitive, as companies have been able to issue bonds "at historically low rates" to garner funding.

However, BCI has a more positive outlook for 2020. It expects Chile's government to approve both pension reform and a tax modernization plan by the end of this year. Those legislative moves will improve investor confidence and strengthen GDP, Lehmann said during the call.

The bank also expects to see Banco Central de Chile, the central bank, cut rates again in September after it trimmed its monetary benchmark rate to 2.5% in June

BCI previously posted a 14.23% rise in second-quarter profit, hitting 112.36 billion pesos, driven by a marked increase in the bank's net fee income due to the incorporation of the Walmart Financial Services business.

As of Aug. 5, US$1 was equivalent to 721.55 Chilean pesos.