Despite an economic slowdown in Chile, bank earnings in the country recovered in 2017 with consolidated net income rising 13.8% year over year, Fitch Ratings said Feb. 14.
The rating agency noted that the results were underpinned by strict credit discipline and retail lending growth.
Increased revenues from wider net interest margins, higher fee income and local currency appreciation also helped offset slow corporate and commercial loan growth and higher loan-loss provisions.
Fitch also believes in the soundness of Chilean banks' asset quality, which is believed to see improvement this year, or at least be maintained. Banks will likely also strengthen their reserves for loans to small and medium-sized enterprises, ahead of higher regulatory requirements that come into effect in 2019.
Meanwhile, higher domestic investment and consumer confidence should lead to a pick-up in loan growth in 2018, which should boost bank earnings in the near term. Annual inflation will average 2.4% and economic growth will be 3.0% next year.