Quarterly Earnings Report

First Quarter, 2014

March 2014

Investor Relations Area

Investor_Relations_Bci@Bci.cl

Quarterly Earnings Report

FIRST QUARTER March, 2014

Quarterly Earnings

Report

FIRST QUARTER 2014

March, 2014

Any reference to future events, forecasts or trends made by Banco de Crédito e Inversiones (hereinafter referred to as "the Bank") involves risks and is subject to the uncertainty of events that may occur and are not under the control of the Bank, and they may affect its performance and financial results. The Bank does not bind itself to update its references to future events, forecasts or trends, even if it is evident, based on past experience or certain indicative events, that theforecast made or inferred by the Bank will not be met.

Investor Relations Area


investor_Relations_Bci@Bci.cl

Quarterly Earnings Report

FIRST QUARTER, 2014

March, 2014

FINANCIAL HIGHLIGHTS

Table 1:

Main Indicators
Banco de Crédito e Inversiones

**Total Loans: Loans for clients plus interbank loans

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Quarterly Earnings Report

FIRST QUARTER 2014

March, 2014

Table 2: Consolidated Income Statement Banco de Crédito e Inversiones

Ch$ Million 1Q13 4Q13 1Q14 1Q14/

4Q13

Financial margin 154,187 179,552 190,454 6.1% Net fees 46,015 52,770 49,620 -6.0% Change result 17,617 -1,160 -33,172 -2759.7% Financial operating results 1,819 38,010 61,017 60.5% Written-off credit recovery 9,272 12,067 9,724 -19.4% Other net operating income -2,822 -5,244 978 118.6% Gross Margin 226,088 275,995 278,621 1.0% Provisions and write-offs -55,673 -35,962 -67,971 89.0% Operating expenses -106,509 -120,544 -111,140 -7.8% Operating Result 63,906 119,489 99,510 -16.7% Investment in companies 2,157 1,873 1,617 -13.7% Income before taxes 66,063 121,362 101,127 -16.7% Tax -12,017 -20,095 -15,723 -21.8%

Net Income 54,046 101,267 85,404 -15.7%

Table 3:

Ch$ Millions 1Q13 4Q13 1Q14

Consolidated Balance Sheet

Banco de Crédito e Inversiones

Cash and due from Banks

1,298,008

1,261,766

1,390,368

Interbank transactions

696,194

698,013

925,532

Trading Instruments

900,692

1,042,536

928,719

Repurchase agreements & securities loans

141,386

195,021

151,146

Derivative Instruments

535,284

1,269,280

1,774,066

Interbank Loans

83,466

106,151

125,041

Loans and Accounts Receivable

12,895,271

14,089,071

14,268,212

Investment Instruments Available for Sale

752,908

934,351

791,468

Investment Instruments held to Maturity

-

-

-

Investments in Companies

68,798

80,093

85,007

Intangibles

81,444

83,346

85,045

Fixed assets

213,461

233,019

232,186

Tax Receivable

4,116

-3,026

7,383

Deferred Tax

61,974

56,846

57,040

Other Assets

233,999

197,176

272,380

TOTAL ASSETS 17,967,001 20,243,643 21,093,593

Deposits and other Obligations

3,633,393

3,920,617

3,912,637

Interbank transactions

571,726

552,895

812,131

Repurchase agreements & securities loans

253,313

335,701

316,117

Time Deposits and other Borrowings

7,111,337

7,707,698

7,752,593

Derivative Instruments

476,677

1,232,264

1,804,598

Borrowings from Financial Institutions

1,470,513

1,504,728

1,493,855

Bonds Payable

2,409,694

2,908,623

2,979,063

Other Borrowings

109,330

71,860

67,009

Current tax

-

-

-

Deferred Tax

44,687

40,199

41,201

Allowances

183,195

181,359

114,294

Other Liabilities

250,376

205,599

215,692

Total Liabilities

16,514,241

18,661,543

19,509,190

Capital

1,202,180

1,381,871

1,547,126

Reserves

-

-

-

Equity Accounts

22,868

-9,978

-22,507

Retained Earnings

227,711

210,206

59,783

Minority Interest

1

1

1

Total Shareholders' Equity 1,452,760 1,582,100 1,584,403

TOTAL LIABILITIES & SHAREHOLDER EQUITY 17,967,001 20,243,643 21,093,593

* Results at: http://www.bci.cl/accionistas/eng/financial_statements_2014_q.html

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Quarterly Earnings Report

FIRSTR QUARTER 2014

March, 2014


Economic Summary



Internationally, during the first quarter, 2014, a continuation of the economic recovery path over the developed economies was observed, especially in the United States, as well as an increase in the concern by the evolution shown by the economic activity figures in the main emerging economies. On one hand, the economic weakness shown by the US economy by the end of 4Q13 and the beginning of 1Q14 was primarily caused by harsh climate conditions on the northern hemisphere, and they just were a specific break within the recovery trend shown by the economy. On the other hand, within emerging economies, the evolution as shown by the Chinese economy, a moderation which has seen on the business activity dynamism and, therefore, growth prospects for 2014 and
2015 has been reduced.
In the United States, growth prospects for 2014 and 2015 have increased, being most likely that a rise in the consumption growth pace to occur. The main concern generated in the quarter was given by the lower dynamism observed at the industrial sector and labor market early in the year; a fact that was strongly connected with harsh climate conditions during that period of time. On the other hand, the conviction from the Fed as to the dropping in the business activity was associated with specific and temporary causes, has motivated the continuing on the assets purchase pace reduction as set by the current quantitative loosening plan. Thus, at the closing of this review, the Fed has reduced its purchase program to US$55 billion, divided by US$25 billion associated with mortgage instruments, and US$30 billion in bonds from the Treasury. The continuing of cuts remains subject to periodical reviews, where -in words by the President of the Fed-, it is possible that they continue to be executed as economic indicators will remain healthy. Additionally, the message conveyed by the monetary authority has been emphatic about the need to keep interest rates at low levels.
In Europe, the business activity keeps on showing a slow exit from recession, where Germany importantly contributes to achieve this result, and the rest of the countries shows some improvement, even those economies which were most affected. However, a high heterogeneity persists among countries regarding business activity and employment figures. Particularly, low figures arising from industrial production and retail sales keep on sustaining the expectation about a persistent economic weakness that will be translated into a growth of around 1% this year. On the other hand, there is concern about the low inflation thas has been observed during the previous quarter, reaching a 0.5% YoY during March. Therefore, expectations about the need for any additional monetary stimulus by the BCE have increased. This lower inflationary rhythm has led to keep the policy rate in 0.25%, thus opening the chance for new reductions, if required.. The forecast as carried out by the monetary authority with regard to price evolution will discard the possibility of a deflationary widespread phenomenon, mainly due to a high heterogeneity on inflation figures among the countries of the Euro Area. Moreover, the lack of concrete encouraging measures has produced a steady Euro appreciation; a fact that should tend to be reversed within next quarters, particularly due to a supportive economic recovery expectation in the United States, along with a Dollar multilateral appreciation, accordingly.

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Quarterly Earnings Report

FIRST QUARTER 2014

March, 2014


Likewise, the landscape for banking at the Euro Area is particularly uncertain, where carrying out new stress tests by the end of 2014 seems to be like one of the main milestones of the year. On the fiscal front, there also persist a number of challenges, since although efforts to reduce expenditure, financial needs and the poor macroeconomic performance, have led the debt to PIB ratios continue to increase. Nevertheless, the economic situation in Europe projects a relatively long period of low growth and a high unemployment, where low inflation will be one of the main problems to be faced by the economy within next quarters.
Furthermore, emerging economies have been a cause for concern due to weak commercial activity figures observed during the last quarter. It particularly highlights the low economic dynamism as shown by the Chinese economy; a fact that has been especially followed due to its possible consequences which could generate a deepening scenario on the commodities market. The evidence of a downturn higher than expected in China, has caused concern in the market, since it cannot clearly be seen if the main emerging economy will be able to successfully carry out this transition toward a model focused on internal consumption, or if it will be able to solve structural problems affecting its economy, particularly the order of its financial system. In this context, the price of raw materials has shown a volatility higher than in previous quarters where, in the case of copper, the price has have fluctuations between US$2.9 and US$3.4/lb. Another emerging country that has been recently under question is Brazil, for which the consensus has reduced its growth expectations in 2014 until 1.8%. Among the factors affecting its economy are a large fiscal deficit; a moderated but persisting inflation of around 6.3% per year; a worrying social unrest; a low macroeconomic impact from multi-million dollar investments carried out as a preparation for the Olympic Games and the Soccer World Cup. Recently, higher costs for re-financing the foreign debt should be added. This was a consequence from the withdrawal of monetary stimulus in the United Sates. This worsening of the economic situation in emerging economies has triggered the departure of flows from these economies to developed markets, being particularly high the departure in Latin America countries, thus generating depreciations of their currencies.
In Chile, commercial activity and domestic demand indicators have had a behavior relatively aligned with expectations by public and private agents, thus ratifying the downturn as expected since mid-2013. This forecast has been shared by the monetary authority, where its IPoM (Monetary Policy Report) of March, has prospected a growth between 3% and 4% for this year. The Economic Expectations Survey prospects a 3.2% growth for this year. This downturn has taken place primarily on sectors associated with investments, like construction and part of retail and industry. Within demand components, the gross fixed capital formation has remained showing the higher downward adjustment.
On the other hand, the manufacturing sector has persistently showed year-on- year contractions, caused by the economic uncertainty abroad, and also been very affected by the closing of some tasks in the metallurgical segment. Banking loans have continued to show a steady downturn which will probably extend during the year.

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Quarterly Earnings Report

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March, 2014


Within this context, consumption pattern has continued to show downturn signs. Although labor market remains narrow, real salaries have started to show some downturn, which has had its first effects on the reduction of the current and dynamic course of consumption. In particular, actual retail sales have grown around 5.5% year-on-year in 1Q13, a figure primarily driven by the dynamism of durable goods sales. Given the increasingly widespread downturn of the commercial activity, the consensus aims at a consumption slowdown during the first half of 2014. However, the GDP figures have shown a 2.7% YoY growth during 4Q13, and for 1Q14 the expansion is expected to be near 2.5%.
With regard to inflation, it showed an important acceleration during the first half of the year, increasing from 2.8% by the beginning of the year to 4.3% during April. Similarly, just during the first months of the year, a 1.5% was accumulated. The explanation for this fast advance is on the accelerated Exchange depreciation, and second order effects associated with this phenomenon. Nevertheless, new inflationary surprises are not expected for the rest of the year, primarily due to an exchange rate normalization, which will probably contribute to decrease inflationary speed over next months. This, plus a less expansive view of the economy, has led inflation expectations -implicit in financial instruments- to be at a level about 3.7% for 2014 and 3.1% for 2015.
In terms of monetary policy, the Central Bank has continued to cut the monetary policy rate during 1Q14, taking it to 4.0%, and maintained that level during the monetary policy meeting of May, reflecting the effect of a higher inflationary spread and implicitly acknowledging that the inflationary phenomenon is not just because of the Peso depreciation, which of course will not be an easy task for monetary policy during next months, especially in a context where figures from commercial activity and labor market are expected to get worse in the next few months. Lastly, it is remarkable that in spite of important downward corrections on growth projections, the Central Bank of Chile (BCCh) clearly points out that the commercial activity has performed in line with expectations in the IPoM; what means to expect an important upswing on economic activity by the end of the year.

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Quarterly Earnings Report

FIRST QUARTER 2014

March, 2014

Chart 1:

Quarterly Net Income and ROE of the Banking
Industry

700,000

600,000

500,000

400,000

300,000

366,599

407,654

470,913

613,965

573,804

200,000

100,000

0

1Q13 2Q13 3Q13 4Q13 1Q14

Net Income

ROE (Excluding Corpbanca in Colombia)

Chart 2:

Total Loans of the Banking Industry

Table 4:

Main Figures of the Banking Industry

Net Income 366,599 613,965 573,804 -6.5%

*Note: Loan items, NIBDS, Time Deposits and Profits do not take into account the Corpbanca investment in Colombia.

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Quarterly Earnings Report

FIRST QUARTER 2014

March, 2014



Bci Highlights

Bci obtains local authorizations to carry out the purchase of City National

Bank of Florida (CNB)

As a part of the approval process to purchase the City National Bank of Florida, in March of this year, Bci has received the authorization from the Central Bank of Chile; thus completing the approval process by the national authorities. Consequently, the Bank now remains waiting for the decision by the US authorities.
It should be noted that on last February 18th, the Bank was notified by the Superintendency of Banks and Financial Institutions (SBIF) about its approval for the CNB purchase.
This transaction is within Bci's decision to deepen its internationalization process by increasing its presence in Miami where there already exists a branch from 1999, with US$3,000 million assets. This purchase would allow diversifying Bank operations and expanding its services to Florida clients.

Bci launches a brand new strategy for relations with its providers

This initiative intends to consolidate not only an operating procedure, but to deepen the vision the bank is working today with.

Among the procedures the providers will be benefited with is the payment seven days after receiving the invoice

With the presence of the Undersecretary of Economy, Tomás Flores and more than 200 providing companies, Lionel Olavarría, CEO of Bci, has launched the Bci Provider Experience Strategy as a measure of corporate Transparency, unprecedented in the financial sector.
"With our providers, we are seeking to generate mutual benefit relationships by appreciating their loyalty in time, as well as their high quality, compliance and transparency standards. Through their support and commitment, we will be able to generate the best client experience in the Region, which can be achieved through emotional connection and also the creation of lasting bonds of confidence with our Employees, Clients and, certainly, Providers", said the CEO during the ceremony.
Bci already had a good manual for practices with providers, but to update these practices was a need, by taking into account international trends. In this context, the Bank posed itself the challenge of being the company delivering the Best Provider Experience in the Region.
The initiative consists of 3 pillars: "Long-Term Relations", which includes to specify rights and obligations of both parties, and to create contact channels; "Transparency on Processes", including a payment process on a term not longer than seven days after receiving the invoice, besides developing periodic training and the delivery of timely Feedback;

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Quarterly Earnings Report

FIRST QUARTER 2014

March, 2014


and "Acknowledgements", where awards for outstanding providers are given; all with the purpose of encouraging them to continue to have a good performance.
Likewise, Bci will be able to require its providers to be aligned with its corporate values; to actively commit to CSR principles of the company; to deliver highest quality products and services; to have high subcontracting standards, and to respect principles in the Global Covenant -the Bank has adhered to in 2007-, among other elements.

Bci inaugurates a new corporate building, the first semi-suspended building in Chile

The ten-story building at Alcántara 99 is structurally held by a steel cable system instead of slabs used on traditional construction.

In a ceremony led by the Chairman of Bci, Luis Enrique Yarur, the first semi- suspended building in the country was inaugurated, which stands out by its innovation and by meeting standards of the Interministry Sustainable Construction Agreement from the MOP (Ministry of Public Works), Minvu (Ministry of Real Estate), Ministry of Energy and Environment, on Sustainable Construction.
"As Corporate Citizens, we are constantly challenged to demonstrate our commitment on many scopes: Economic, Social and Environment. The Alcántara
99 building is the response to this call from the care for our resources view", has said Yarur in his keynote address.
Among its brand new features, the Alcántara 99 ten floors are structurally held by a steel cable system, instead of slabs use on traditional construction.
Moreover, the external pillars of the building allow having a number of wide spaces and a lot of daylight, thus giving well-being for employees working there.
The building, that was under the responsibility of Borja Huidobro and A4
Arquitectos Studio, has 22,102 sq.mt., hosting nine floors for offices, meeting rooms, four underground parking lots, cafeterias at floors -1 and -2 and a hall. Its capacity is for around one thousand people.
The sustainable and innovative Alcántara 99 building is within the Environment Strategy as developed by Bci, that it already includes other initiatives, as well. Among these initiatives, the first branch as certified with the Passivhaus German energy-efficiency label stands out. Furthermore, the creation of an Energy Efficiency Committee, besides the Carbon Footprint Offsetting on all events with more than 300 guests in 2012, through the tree plantation and execution of well- being initiatives in communities surrounding reforested areas, is also remarkable.

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Quarterly Earnings Report

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March, 2014

Chart 3:

Net Income

120,000

100,000

80,000

60,000

40,000

20,000

0

54,046

14.88%

58.0%

101,267

18.98%

85,404

21.56%

1Q13 4Q13 1Q14

Net Income (Ch$ million) ROE

Other

Chart 4:

Gross Margin

13.83%

Net Fees

17.81%

1Q14

68.36%

Financial

Margin

Table 5:

Gross Margin

Other

Net Fees

11.45%

20.35%

1Q13

68.20%

Financial

Margin

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