Banco de Chile (CHILE) Earnings Call Transcript

Good afternoon, and welcome to Banco de Chile's Third Quarter 2026 Results Conference Call. If you need a copy of the management's financial 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 would 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. Our projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's press beliefs regarding forward-looking statements. I will now turn the call over to Mr. Rodrigo Aravena. Please go ahead.

Good afternoon, everyone. Thank you for joining this quarterly conference call. where we will discuss the performance of the bank as well as the main trends observed in the business environment. We closed another solid quarter, delivering net income of CLP 288 billion and our return on average equity of 19.9%, well ahead of the industry. Over the first 9 months of the year, net income reached CLP 947 billion, up 2.2% year-on-year. And today, we are raising our full year profitability and efficiency guidance. During the quarter, we also regained market share in commercial loans, keep our leadership in local currency demand deposits and maintain the strongest capital position among our main peers with a CET1 ratio of 14.1%. In addition, we continue to make progress in digital adoption, new commercial alliances, productivity and sustainability, which we will cover through the presentation. As in previous conference calls before reviewing our performance, I'd like to briefly discuss the macroeconomic environment. Please turn to Slide 3. The can economy has experienced a temporary slowdown in 2026. GDP contracted 0.8% year-on-year in the third quarter after a 0.2% decline in the second quarter. At the chart on the other left shows, this weakness has been concentrated in mining, which fell 12.9% year-on-year in the third quarter, while the non-mining economy expanded 1.1%. The decline in mining was also affected by weather-related disruptions associated with Aluminum, bringing in production to its lowest level since the mid-90s. While declining in the mineral grade remain a structural challenge though El Nino fact reinforces our view that much of the recent weakness is condering. The chart on the other right illustrated how far these 2 parts of the economy have decoupled based on the seasonally adjusted, mining activity fell 11.5% between December 2025 and September 2026, while the rest of the economy has increased 0.8% over the same period. Other temporary factors have also affected the economy and the labor market. This includes fiscal adjustment implemented so far this year with a marked slowdown in government spending growth and the decline in household railposable income resulting from higher inflation. The labor market shown on the bottom right, has reflected this broader slowdown with the usual lag. The employment rate reached 9.8% in the 3 months ended in September, 130 basis points higher than a year earlier as employment fell 1.1%, while the labor force grew 0.3%. Please move to Slide 4. Despite the slowdown, there are good reasons to expect domestic demand to recover in coming quarters. On the consumption side, the chart on the other right shows that consumer imports have accelerated in rest months. import of durable goods grew 27.8% year-on-year in the 3 months to September, an encouraging signal for household expanded. On the investment side, shown on the left, gross fixed capital formation is not expected to grow this year, but this weakness is entirely explained by contraction. Matina equipment investment has remained dynamic since last year and continued to expand in the second quarter, growing 3.7% year-on-year, while construction declined 2.4%, and this trend reflects both the replacement of existing capital goods and companies preparing for a better economic cycle ahead. At the same time, this weaker economic cycle has helped improved macroeconomic balances, particularly by closing the current account deficit. As shown on the bottom right, the current account moved from a deficit of 2% of GDP in the 12 months to the third quarter of 2025, to a surplus of 0.2% in the 12 months to June 2026. This correction provides a more balanced starting point for the recovery in economic activity. Please move to the next slide. We expect investment to lead growth in 2027 for 2 reasons: our bank employee and the new reconstruction law. On the right, the investment plan registered by the Capital Goods Corporation, or CDC, for the next 5 years has reached a record of almost $100 billion, more than doubling since 2022. Mining accounts for the largest share accounting for 40% of the total. This is particularly relevant for offsetting the negative impact of declining mineral grades, and addressing the structural challenges, the mining sector has faced in recent years. Investment in public world has also increased in the pipeline, which could provide a further boost to employment in the years ahead. This pipeline should be further supported by the reconstruction law, which was enacted on October 9, as summarized in the table on the left. Its main measures include rather reduction in the corporate income tax rate from 27% to 23% by 2029, improving project returns. Our permitting reform designed to shorten approval time and unlock delay projects and attacking variability regime that removes an important source of uncertainty by protected investment against potential tax increases by future government. The law also includes targeted measures on reconstruction, employment and capital market taxations. While these measures are not expected to have an immediate impact on activity, they should improve business sentiment and pave the way for a stronger growth for next year. Taken together, we see this investment boost as a structural rather than cyclical. By expanding productivity capacity and addressing long-standing constraints, it could lift Chile's trend GDP growth by 50 basis points over time. Please move to Slide 6 to review our baseline scenario. We have revised our GDP growth forecast for 2023 to 0.4% from 1.3% in our previous call. This revision reflects the weaker-than-expected mining output this year rather than a deterioration in the outlook. In fact, our forecast assumes a gradual recovery starting in the fourth quarter and for 2027, we expect GDP to grow 3%, led by investment, we should expand 7.5% and supported by a 2.8% increase in consumption. On prices, annually phase on reach 4.1% is at Tampa, above the Central Bank 3% target, mainly because of high international oil prices, which lifted the energy component by 10.2% year-on-year. Core measures, however, remains more contained with CPIs through volatile items at 3.2%. We don't expect inflation to close 2026 at 4.7%, up from 4% in our previous forecast and to convert to 3% in 2027 as energy-related effects paid and a flag in the labor market persist. In this context, we stated the Central Bank to keep the monetary policy rate at 4.5% through the end of this year and during 2027, although uncertainty remains unusually high. The main source of uncertainty continues to come from abroad, particularly the conflict in the state of Hormouz which could keep energy prices elevated for longer, affecting growth and inflation. Locally, the evolution of the labor market remains 1 of the key variables to monitor. Before moving to the bank's results, I'd like to review the main trends in the local banking industry. Please move to Slide 7. The industry continues to generate solid earnings in a context of weak credit demand. In the 9 months ended September, as shown on the other left, the banking system recorded net income of CLP 4.5 trillion, 6.9% higher than the same period of 2025, mainly supported by the effect of high inflation on indexes balance sheet positions. On a quarterly basis, net income moderated to CLP 1.2 trillion in the third quarter with a return on average equity of 12.2%, following an exceptional second quarter, driven by inflation and due to nonrecurring losses recorded by a local bank on the sale of part of its foreign loan portfolio. Altel quality has remained broadly stable, as shown on the other right, the 90-day NPL ratio stood at 2.5% with a governance ratio of 139%, including additional provisions. Credit activity, however, continues to be subdued. The loan to yield ratio on the bottom left stands at 74%, well above the 93% big rate before the pandemic. As of September, industry loans totaled CLP 260 trillion, growing 5.2% nominal terms and 1.2% in real terms compared with September 2025. By product, commercial loans grew only 0.4% in real terms, held back by lower trade finance balances, while consumer loans grew 1.2% and reseal mortgage 2.2%. the latter supported by government programs for lower and middle-income homebuyers. Looking forward, we have updated our baseline scenario for the industry. Due to high expected inflation, we now forecast nominal loan growth of approximately 5% by December 2026 compared with 4% last quarter, and we have raised our net interest margin estimate to a range between 4% to 4.2% from 3.6% to 3.8%. On asset quality, we expect NPLs at the upper end of the 2.3% to 2.4% rent and credit loss expenses between 1.2% and 1.3% on average lows. In this environment, Banco Chile continues to outperform the industry. Now I'll turn the call over to Paolo to discuss Banco Chile results.

Thank you, Rodrigo. Please turn to Slide 9, which summarizes our strategy built to deliver sustainable results. Our strategy rests on 3 pillars: customer centricity, efficiency and productivity and sustainability. These pillars shape the way we work, how we allocate resources and how we create value for our stakeholders. They translate into 6 core priorities shown in the center of the slide from strengthening commercial activity and scaling digital solutions to developing culture and talent. Our midterm targets are shown at the bottom. We aim to lead the industry in profitability in local currency demand deposit and in commercial and consumer loans while keeping a cost-to-income ratio at or below 40% and internal Net Promoter Score of at least 73% and a top 3 position in corporate reputation. As of September, we are ahead of our target in customer satisfaction with an NPS of 77.5% and in efficiency with a year-to-date cost income of 35.9%. while we remain the leader among local banks, private banks and local currency demand deposits, with a 19.9% market share and continue to gain market share in commercial loans. Please turn to Slide 10, which summarizes our financial and commercial highlights. The metrics at the top of the slide provide an overview of the quarter, which we will discuss in more detail during the presentation. Let me highlight 3 points. First, loan growth accelerated to 3.5% year-on-year on a pro forma basis, led by commercial loans. Second, the net interest margin reached 4.4%, while cost of risk remained contained at 0.96%. Third, the efficiency ratio of 39.1% was temporarily affected by a nonrecurring bonus related to collective bargaining process completed this quarter as well as inflation-driven salary adjustments. As a result, net income reached CLP 288 billion, representing a return on average capital of 21.4% and a return on average equity of 19.9%. In the middle of the slide, we highlight several commercial and operational advances achieved so far this year. Commercial momentum continued to improve. origination of commercial loans to SMEs grew 18% year-on-year, outstanding commercial credit balances to SMEs increased 5% and total commercial loans rose 4%. Customer acquisition also remains strong. Origination of digital current accounts increased 37% year-on-year and openings of Pan and Brand accounts for small businesses rose 10%. while we launched a fully digital onboarding process for our planned implanted for SMEs. We also kept expanding our value proposition through new business initiatives, including B start-up, our service model for start-ups and technology-based companies. Our partnership with Fintech Bingo to broaden SME factoring solutions, our alliance with this peat to enhance our travel loyalty program and Visa Direct, which enables fast and fully digital international transfers. On efficiency, digitalization continues to drive productivity gains complemented by strategic negotiations with suppliers, including IT providers and the optimization of our infrastructure with 4.6% fewer branches than a year ago. At the bottom of the slide, we present our updated guidance for 2026. Given the weaker economic environment, we now expect nominal loan growth in the range of 5% to 6% compared with approximately 6% previously. Due to the higher expected inflation, we have raised our net interest margin forecast to 4.8% from 4.6%. Cost of risk should reach around 1.2%, including the additional allowances established in May, while our efficiency ratio should improve to around 36% from 37%, previously driven by stronger revenue generation and cost control. As a result, we project a return on average capital and reserves of 22% compared to the 21% to 22% range we provided last quarter. This guidance already incorporated an income tax charge of CLP 68 billion that we were recognized in October related to the impact of the lower corporate tax under deferred tax assets but excludes any potential changes in additional provisions. Please turn to Slide 11 to discuss the evolution of our loan portfolio. Total loans reached CLP 40.8 trillion in September, growing 1.2% quarter-on-quarter and 2.9% year-on-year or 3.5%, excluding the onetime credit card migration effect of CLP 210 billion we explained last quarter. The main driver this quarter was commercial lending. Commercial loans increased 2.7% compared to June and 4% year-on-year, reaching CLP 21 trillion. Compared with December 2025, they grew 7.8%, an annualized pace of 10.5%, most of this expansion came from our corporate banking unit, where loans increased 14.1% year-to-date supported by commercial credit ticket concession, natural resources and retail sectors as well as 90% year-on-year increase in factoring loans. As a result, our market share in commercial loans reached 15.7% in September, a gain of 30 basis points since December. In Personal Banking, growth has been more moderate. Consumer loans rose 4.1% year-on-year on a pro forma basis, in line with inflation, while residential mortgage loans increased 2.5% reflecting our selective approach to growth in this product where we're prioritizing better lending spreads over volumes. The chart on the bottom left shows growth by segment. SME loans increased 4.5% year-on-year or 9% when excluding the amortization of Borgata loans granted during the pandemic, while wholesale loans grew 4% and loans to individuals grew 1.9% or 2.9% on a pro forma basis. The chart on the upper right shows a balanced composition with retail banking representing 65.7% of total loans and wholesale banking, the remaining 34.3%. In addition, the chart on the bottom right shows our commercial portfolio is spread across a wide range of economic sectors with no single sector representing more than 20% of the total. This well-diversified mix allows us to capture opportunities across customer segments and economic cycles without depending on a single source of growth. This quarter is a good example as a recovery in corporate lending more than compensated with the slower growth in personal banking. Please turn to Slide 12. This growth is supported by solid funding and capital base, 1 of the most important competitive advantages that we have. As shown on the upper left, loans represented 72.9% of our total assets. On the funding side, demand deposits accounted for 26% of the total liabilities and equity, complemented by time deposits, long-term debt and our strong capital base. The chart on the upper right shows that our ratio of demand deposits to total loans reached 35.7%, the highest among our main peers and close to the levels seen before 2020, which is 1 of the main reasons behind our lower funding costs and superior margins. On a pro forma basis, our demand deposits grew 3.1% year-on-year, driven by retail banking where they rose 7.9%. This reflects the strength of our value proposition for current account holders and the growth of our final ecosystem, which added 444,000 new account holders over the last 12 months. As a result, as shown on the bottom left, as of September, we continue to lead the industry in local currency demand deposits, among private banks with a market share of 19.9%, 120 basis points ahead of the closest competitor. Finally, our capital position remains the strongest among our main peers. As shown on the bottom right, our total capital ratio reached 17.9%, including a CET1 ratio of 14.1%. well above regulatory requirements and the industry average. This gives us ample room to finance the loan growth we expect as economic activity recovers while continuing to create value for our shareholders. In short, the combination of a leading deposit franchise, a diversified funding structure and a best-in-class capital position remains a key differentiator for Banco de Chi. Please turn to Slide 13. This solid balance sheet translates into consistent revenue generation and superior margins. Total operating revenues reached CLP 758 billion in the third quarter, a 3% increase compared to the same period last year. Compared with the second quarter, revenues normalized as quarterly inflation measured by the U.S. variation declined from 2.5% to 0.6%. For the first 9 months, operating revenues amounted to CLP 2.4 trillion, 6.6% above last year. The year-on-year increase in the quarter was mainly explained by higher customer income coming from loans and fees, together with nonrecurring income of CLP 10.9 billion, mainly related to the sale of Nexus, our former credit card processor, which more than offset lower treasury revenues. As a result, our operating margin shown on the right, reached 6.6% year-to-date, well above our main competitors. More importantly, this leadership is not a word. It has been consistent over the years, reflecting a business model that combines stable and resilient customer income with the ability to capture opportunities from changes in market conditions. Please turn to Slide 14. Let me now go into the drivers of our net interest margin. Our NIM reached 4.4% in the third quarter, up from 4.3% a year earlier and 4.7% year-to-date, well above our peers. As shown on the upper left chart, net income totaled CLP 559 billion in the third quarter, broadly stable year-on-year, reflecting 2 opposing trends. On the 1 hand, customer financial income increased 1.4% year-on-year to CLP 477 billion, primarily supported by loan growth. Income from loans rose CLP 14.5 billion or 5.5%. Consumer loans were again the main contributor, adding CLP 7.3 billion, driven by a 39 basis point increase in lending spreads. Commercial loans added CLP 5 billion, benefiting from a shift in the mix towards higher spread loans. These drivers more than offset the lower contribution from demand deposits given lower short-term interest rates. On the other hand, non-customer financial income decreased 9.7% year-on-year. This was mainly explained by lower treasury revenues as the increase in local long-term interest rates during the quarter with 5-year pencil rates moving from 5.2% to 6.1%, affected the valuation of fixed income securities, together with a high comparison base from the gains on the sale of securities in the third quarter of 2025. The chart on the bottom left shows the evolution of our U.S. GAAP in the banking book, which reached CLP 9.1 trillion in September. This position includes both our structural exposure, which protects the real value of our shareholders' equity and the directional positions taken by our treasury. To put this into perspective, a 100 basis point change in inflation translates into a CLP 91.1 billion in net interest income. while a 100 basis point change in interest rates represents approximately 30 basis points in net interest margin once all assets and liabilities are fully repriced in about 3 years. In summary, growing customer income and a leading funding base continue to support margins that consistently outperform our peers. Please turn to Slide 15. Fees are another recurring source of revenues, supported by our growing customer base and the contribution of our subsidiaries. Net fee income reached CLP 174 billion in the third quarter, an 8.4% increase year-on-year, bringing the 9-month total to CLP 514 million, up 8.6% from last year. This performance is rooted in our expanding customer base. we reached 3 million active customers, 2.7 million prime accounts and 1.7 million current accounts while maintaining the highest standards of service quality. The main drivers are listed on the left. Fees from transactional services increased CLP 3.8 billion or 7.1%, including a CLP 2.4 billion from our acquiring and processing business as Bunteagos continues to execute its business plan. as CLP 0.8 billion from current accounts and overdrop supported by 30,000 new current accounts opened during the quarter, among others. Also, mutual fund fees rose CLP 3.6 billion, up 8.2%, in line with an 11% increase in average assets under management. as customers continue to favor balanced funds and equity funds. Likewise, fees from financial advisory services increased CLP 2.3 billion, reflecting our participation in relevant transactions including M&A advisory in the telecom sector. To a lesser degree, credit-related fees grew CLP 1.3 billion due to higher loan prepayments and securities brokerage added CLP 0.9 billion. The chart on the bottom left shows the diversification of our fee base. where transactional services represent 32.6% of total fees, followed by mutual funds with 27.4% and insurance brokerage with 15.1%. Finally, the chart on the bottom right show our fee margin over interest-earning assets, which reached 1.4% year-to-date, ahead of our main peers, reflecting the strength of our cross-selling capabilities. Please turn to Slide 16. Prudent credit management continues to keep expected credit losses under control. As shown on the left, expected credit losses reached CLP 96 billion in the third quarter, equivalent to a cost of risk of 0.96%, 21 basis points below the industry. Excluding the CLP 50 billion in additional provisions established in May, ECLs declined 16.2% compared to the second quarter. Compared to the third quarter of 2025, ECLs increased 21.2% from a cost of risk of 0.8%. This increase was mainly related in retail banking, where delinquency rose from 1.87% to 2.15% over the last 12 months. reflecting higher unemployment and the effect of inflation on household disposable income. To a lesser extent, it also reflected lower than normal ECLs in the third quarter of 2025, together with greater exposure to cross-border loans. These effects were partly offset by higher recovery of written-off loans, which increased 62% year-on-year. Turning to the chart on the upper right. Our NPL ratio reached 1.7% in September, below our peers and remains the lowest among our main competitors. Our coverage level remained robust. loan loss allowances cover 122% of past due loans, a ratio that rises to 221% when additional allowances are included providing a meaningful buffer to absorb potential deterioration without compromising our earnings capacity. On the turn on the bottom right shows our net operating margin reached 5.6% year-to-date, the highest among our peers, reflecting our strong revenue generation and disciplined credit management. Looking ahead, we expect delinquency to stabilize and gradually improve as the economy recovers, although the labor market may continue to weigh on individual portfolios in the coming months. Please turn to Slide 17. Cost discipline and digitalization continue to enhance our operational efficiency. Total operating expenses reached CLP 296 billion in the third quarter, a 7.2% increase year-on-year. This increase was mainly explained by inflation-driven salary adjustments and nonrecurring expense related to the recognition of a part of a special bonus associated with the collective bargaining agreement reached with most of our unions and a comparison base effect of Banchile filers. On the chart on the bottom left is a breakdown of operating expenses adjusted for these bonuses and the comparison base effect of binoculars. As you can see, the rise in expenses is more moderate. Looking at the first 9 months, total expenses reached CLP 873 billion, which represents a nominal increase of 4.1% or just 0.1% in real terms. Our year-to-date efficiency ratio improved 87 basis points to 35.9%. These results reflect the benefits of a broad set of initiatives listed on the left. These include the redesign number service model and branch network with 4.6% fewer branches than a year ago, the automation and digitalization of customer processes, the rationalization of IT infrastructure, cloud and licensing including 13 technology initiatives deployed this year and improved vendor management and organizational simplification. Our activity indicators reflect this progress. Our loans per employee ratio have increased 3% to CLP 3.7 billion, and their fees to expense ratio rose 245 basis points to 59%, showing our ability to support business growth with other proportional increase in costs. Please turn to Slide 18. As we have shown throughout this presentation, our core competitive advantages continue to deliver solid profitability. Net income reached CLP 288 billion in the third quarter and for the first 9 months, net income amounted to CLP 947 billion, up 2.2% year-on-year. These fundamentals continue to translate into superior year-to-date returns. Our return on average equity reached 21.9% and a return on average assets, 2.3%, both well above industry levels and among the highest in the Chilean banking system. Importantly, these results do not depend on a single business line. They reflect a diversified franchise supported by a leading funding base, growing fee generation, sound asset quality and a steady focus on productivity. Please turn to Slide 19. Before taking your questions, I'd like to highlight 4 key messages from this presentation. First, on the economy. we expect an investment-led recovery after a transitory slowdown, amid inflation that remains elevated. We forecast GDP growth of 0.4% for 2026 mainly affected by mining and a rebound of 3% in 2027, supported by a strong investment pipeline and the reconstruction law. We expect the monetary policy rate to remain at 4.5% through 2027. Second, on profitability. Our core competitive advantages continue to drive returns well above the industry. We delivered net income of CLP 288 billion this quarter with a year-to-date return on average equity of 21.9% and we raised our return on average capital guidance to 22% for the full year. Third, on efficiency and productivity. ongoing digital transformation and cost discipline are generating lasting gains. Our year-to-date efficiency ratio reached 35.9% and we have improved our full year guidance to 36%. Finally, on growth, superior asset quality and capital adequacy provides the basis to accelerate loan expansion. With the cost of risk this quarter only 0.96%, the lowest NPL ratio among our peers and a CET1 ratio of 14.1%, we are well positioned to capture recovery in corporate lending that we are already seeing and that we expect to strengthen in 2027. Our strategy is straightforward, serve our customers well, operate efficiently, manage our balance sheet prudently and maintain a solid capital position. This quarter's results reflect the consistency of that approach. Thank you. And if you have any questions, we'd be happy to answer them.

[Operator Instructions] Our first question comes from Ernesto Gabilondo from Bank of America.

Thank you. Good morning, Rodrigo, Pablo and Amil, thanks for the opportunity to ask questions. I have a couple from my side. The first 1 is on your loan growth expectations for next year. So we have seen this year, the economy and unemployment continue to be weak. But as you mentioned, there are hopes and expectations that next year, the economy could be growing again, 3%, especially supported by the execution of the reforms. So how do you see long road for next year? Do you think it could be returning to the high single digit or low double digit? If you can walk us through the year will be very helpful. And then my second question is on NIMs. So their expectations of low inflation, but at the same time, you have going to accelerate loan growth. So how do you see the evolution for NIMs next year? I was a little surprised that you're expecting stable interest rates despite the war continues, and that maybe could translate into higher oil and gas prices. So just wanted to hear your thoughts on this.

Thank you very much for your question. This is Aravena, and I'm going to take the first part of the question, then Palo here, and I'll go to the second part. So let me -- just put on the table a couple of ideas about the economy. First of all, we are aware of the lower-than-expected GDP growth this year. However, it's very important to keep in mind that most of the slowdown in Chile has been explained by temporary factors, including, for example, the important adjustments in the mining sector. But at the same time, we analyzed the pipeline of investment in Chile most of the new projects are mining projects, which will be positive for the perspective for the mining activity in the next year, especially considering that the only way to offset the deterioration in the mineral rates is by increasing the investment in the sector. Also, it's very important to be aware about the important fiscal adjustment that we've seen during this year, the fiscal -- the total spending growth this year between January and September was 1.2% in real terms, which is well below the levels that we -- so in previous year. And also the important increase in inflation during this year, which has negative impact in disposable income for the household. However, for the next year, we are expecting a normalization of our business scenario is based on the expectation of a more normalized or lower levels of international oil prices, which has an important impact on inflation. Also, we are expecting a strengthening of the 3M peso because of the expectation for the 10 economy. So that's why we are expecting an inflation rate falling to a number of around 3%. We can rule out our bias in the -- in our forecast for inflation for the next year. But when we consider the normal state oil prices, the strengthening in the trend as is consistent with a lower inflation rate for the next year. So in this environment, we are not expecting changes in the interest rate. We are aware of the higher-than-expected inflation this year. However, we have to remember that the Central Bank has a target, which is based in 2 years horizon. So that's why if this increase in inflation is only temporary, led by supply factors rather than the man factors, we think that there is room to continue waiting for the evolution of the economy for the central bank. My last thought on the -- to your question is that we have a positive view for the Seleneconomy for the next year, mainly in terms of the key drivers because we are expecting that the main driver of the growth in 2027 will be investment. So that's why also we have a more positive view about the recovery in loan growth. So this is our main basis for the basin.

Thank you, Rodrigo. And so in terms of loan growth expectations, what we're seeing -- well, I think it's important to take into consideration that we're currently in the process of budgeting. So it's something that we're evaluating at this time. But in the preliminary, what we're seeing is a more active year like Rodrigo said an investment and activity in Chile, and this should begin to drive loan growth. Up to date, what we've seen is very weak demand in all customer segments, driven by the high inflation also in the consumer segment. In the corporate segment, all those years of uncertainty has led to less demand in commercial lending. So for next year, what we're expecting for Banco de Chile is that we should be growing what we can say is we should be growing above the level of the industry, gaining market share, especially because of our capital position. This allows us to have a strategic position in order to -- we take growth in the future cycles in this current future cycle. In terms of net interest margin, as Rodrigo has mentioned as well, we're ending the year at a very high level of inflation higher than expected. 4.7% versus what we're expecting for next year of 3%. So this has an impact, but it's a limited impact because we're in a year that will have greater volumes, so more activity, a better mix in terms of our total asset mix, improved spreads and steeper yield curves. So there's a limited impact, which we think will be offset by growth in the portfolio. So maybe 20 basis points, but no more than that in terms of the impact for -- around that range for the impact of lower inflation.

Just a follow-up in terms of your longer expectations. Again, it's not that you were giving a guidance, but this year, longer was around 5%. You mentioned you expect this year to be growing above the industry. You're seeing better economic activity, supported by reforms. So should we think it could be more maybe going from a mid to high single digit next year? Would that be reasonable?

We're currently in the budgeting process, so we're evaluating what we think is reasonable is more activity in terms of 2027 loan growth and picking up speed in the following years as well. So it should be a gradual improvement.

So probably in the long term, it's reasonable to expect a higher acceleration in terms of the loan growth, but we need to see some improvement in the labor market, in activity, the reform that was approved in the Congress kind of take a positive impact in the economy in the future. So probably, in the next years, we're going to see loan growth in high single digits, but we are aware about that like a transition period this year, but we are more optimistic for the next year because of the recovery in investment. But the trend is clear. We have good reason to expect a positive trend in terms of the loan growth, but we are expecting a better number for the Chile for the industry and for us as well. But in the long term, probably we're going to see a more stable growth of high single digit in nominal terms.

Perfect. -- very, very has a grade improvement trend throughout the year, subject to the labor market and the execution of the reforms.

Our next question comes from Juliana Ohara from Goldman Sachs.

I have to -- the first one, if you could share more color on the transition as CEO with Eduardo stepping down. And stepping up next year. I wanted to get a bit more on the strategic thinking and the timing. So that's the first one. And the second 1 if you are -- you have an efficiency ratio target, a midterm efficiency ratio target of 40%, which are already running below that level. So should we -- is it fair to assume that you have a more aggressive long-term target since you're already below that level? Or should we expect maybe an increase in the next few years since you have to invest more from the growth.