Banco Santander-Chile

NYSE:BSAC

Earnings Call Transcript 2018-Q1

[Operator]

Good day, ladies and gentlemen, and welcome to the Q1 2018 Banco Santander-Chile Earnings Conference Call. [Operator Instructions] As a reminder, today's conference [may be] recorded. I would now like to turn the call over to Mr. Robert Moreno, Manager of Investor Relations. Sir, you may begin.

[Robert Moreno, executive]

Good afternoon, everyone. Welcome again to Banco Santander-Chile's First Quarter 2018 Results Webcast and Conference Call. As we stated before, I'm Robert, Manager of Investor Relations. I also have here with me today, Claudio Soto, our Chief Economist; our CFO, Emiliano Muratore, is currently attending an advanced program -- study program at Harvard, and I will be filling in for him today. He sends his regards, and he'll be back in our Investor Day and next earnings call. Thank you for attending today's conference call. We are very content with the performance of the bank in the first quarter of this year. I will first pass the call on to Claudio Soto for a brief review of the Chilean economy during the quarter, and our expectations for growth for the rest of the year. We are quite optimistic on the outlook for the economy. Claudio?

[Claudio Soto, executive]

Growth conditions have been favorable for Chilean economy. Solid growth by elementary partners, a high growth price and the lifting confidence have accelerated local activity. Employment has increased, with an important contribution of salary [product] jobs and consumption of global goods has been dynamic in recent months. Investment record indicators point towards an [indiscernible ] recovery. We estimate the economy will be at around 4% during the first quarter, slightly above our forecast a few months ago. Despite a more dynamic activity, inflation has remained limited, [indiscernible] below 2%, the lower part of the [indiscernible] rate of the Central Bank. Behind this low inflation, the rate is still open out of cap and the recent appreciation of the peso. Given the current dynamism of the economy and a favorable global outlook, we have revised upwards our GDP forecast for this year from 3% to 3.5%. In 2019, GDP will grow at 3.3% [as that favorable base effect fades away. An improvement will slightly decline] and stronger job creation will be coupled with an increasing labor force, especially, more women looking for jobs for the first time. We have also revised downward our inflation forecast for the end of the year, from 2.7% to 2.5% as the peso has remained stronger than what we were expecting at the beginning of the year. While it's still possible that the Central Bank might decide to increase the short-term interest rate at the end of this year, we expect the first increase to take place at the beginning of next year. We all remain optimistic about the economy. Happy sign of growth will, in turn, fuel domestic demand for loans.

[Robert Moreno, executive]

Thank you, Claudio. Now we will give further details into our results for the first quarter. Our net income attributable to shareholders in 1Q '18, totaled CLP 151 billion, increasing 12.1% compared to 4Q '17 and 6.1% compared to the same quarter of last year. The bank's return on average equity in the quarter reached 19.4%. The positive evolution of our results reflect solid operating trends in terms of business volume growth, strong growth of nonlending activities, a stable cost of credit and a tight control of costs. Overall, the year started out with results slightly higher than the market anticipated and should remain positive throughout the rest of the year, as the economy continues to gather pace. During the quarter, we are focused on growth in line with the economy, continuing the same strategy as other quarters of increasing client loyalty through an improved client experience and quality of the service, deepening our ongoing digital transformation like expanding the bank's digital banking capabilities and optimizing our profitability in capital use through increased shareholder value in time. Regarding business volumes, we will begin with our funding mix. In the first quarter, the bank's total deposits grew 2.3% quarter-on-quarter. Year-over-year total deposits growth was slower at 0.2% due to the bank's funding strategy in 2017, which focused on lowering deposit rates in tandem with the lower Central Bank rates and optimizing liquidity levels, leading to an improvement in the funding costs. The average cost of deposits, including demand and time deposits, decreased from 2.1% in the third quarter of last year to 1.7% in the current quarter. The bank also focused on increasing -- on improving the funding mix, leading to a 5.2% Q-on-Q and 10.4% year-on-year rise in noninterest bearing demand deposits. The bank's equity continued its positive growth trend, which, along with the increase in demand deposits, enabled our free funds, measured as noninterest-bearing demand deposits plus equity to interest-earning assets to go from 34.9% to 35.7%. All of these efforts can be clearly seen in the decrease of our year-to-date average time in deposit costs as mentioned.

In the first quarter of '18, total loans increased 3.2% year-over-year and accelerated to an annualized growth rate of almost 9% in the quarter. This was mainly driven by greater economic activity and business confidence, reflected in the strong growth of commercial loans in the quarter. Loans in Global Corporate Banking, or GCB, grew 15.5% Q-on-Q, after a 21% decrease in volumes in the fourth quarter.

Loans in the middle market increased 2.9% Q-on-Q and 6.7% year-on-year, indicating that this segment is also gradually gaining momentum. These loans are generally somewhat lower yielding than Retail loans but on the other hand, the greater demand for loans in this segment reflects that the investment [rate in the economy] is finally recovering after a prolonged deceleration. This should eventually fuel greater loan growth in higher-yielding segments such as SMEs and individuals. The reactivation of the corporate segment also generated a high level of non-lending income in the quarter, sustaining the bank's overall profitability levels.

Retail Banking loans increased 0.8% quarter-over-quarter and 3.8% year-over-year, with growth from loans to individuals increasing 1.6% Q-over-Q and 4.7% year-over-year. Mortgage loans increased 1.9% Q-over-Q and 6% year-over-year and consumer loans grew 0.8% Q-over-Q and 2.1% year-over-year. We continue to increase our exposure, not only to the high end of the market but to the middle-income earners as well, after the launch of Life. At the end of March 2018, Life already had more than 15,000 [clients, 60%] of which are new clients to the bank. Approximately, 30% of the new account plans sold to individuals are Santander Life ones.

Loans to SMEs decreased 2.5% Q-on-Q and relatively flat on a year-on-year basis and our SME segment, the bank continues to focus on growing among the larger, less-risky SMEs due to risk considerations. And as the year progresses, we should see SME loan growth begin to accelerate as well. As a result of loan growth and a positive evolution of our funding mix, net interest income rose 8.8% year-on-year and the bank's net interest margin rose 30 basis points to 4.5% in the quarter.

Average interest-earning assets increased 1.1% year-over-year. As mentioned, the cost of deposits decreased, driven by the strong rise in noninterest-bearing demand deposits in 1Q '18, compared to 1Q '17. Compared to 4Q '17, net interest income increased 0.1%. As mentioned in the loan section, loan growth in the quarter was mainly driven by the GCB in the middle market. At the same time, the change in the consumer loan mix has decreased the average yield earned in consumer loans. For this reason, the average return on interest-earning assets fell 10 basis points Q-over-Q to 6.9%, while the average cost of funds remained stable in the period.

The bank's NIM, therefore, decreased 10 basis points Q-on-Q. Going forward, we expect a similar trend in commercial lending but, accompanied by an acceleration of loan growth in Retail, which should sustain margins. In fact, in April, we are already seeing an important recovery in consumer loan growth. Our cost of credit remains stable in the quarter at 1.1%. Provision for loan losses increased 2.1% year-over-year and decreased 1.8% Q-over-Q. The bank's cost of credit remains, as we said, stable at 1% of loans, as the bank's loan loss allowance over total loans or the risk index remained stable at 2.9% in the quarter.

The total NPL ratio reached 2.3% as of March, flat compared to the fourth quarter and 10 basis points higher than in 1Q '17. The impaired loan ratio increased 30 basis points compared to 1Q '17 but decreased 10 points -- 10 basis points Q-over-Q to 6.4%. The year-over-year rise in both NPL and impaired loan ratio reflects the weak economic growth experienced throughout most of 2017. At the same time, the stable Q-over-Q evolution of asset quality is mainly a result of the better economic trends seen in the current quarter. A trend we expect to continue visualizing in the remainder of the year.

Regarding the second pillar of our strategy, to focus on increasing client loyalty through an improved client experience and quality of service, while expanding our digital banking capabilities, we also have seen important advances in the quarter. As mentioned in the previous webcast, at the end of last year, we launched a new series of products called Life. As a way of returning to the mass consumer market without significantly increasing our risk [profusely]. This product has had a very good response in the market, and as of March, we had 15,000 clients using at least one of the Life products.

Out of all these clients, 60% are new to the bank. They are in the first 3 months of the year, out of the new monthly total bank plans, about 28% were Life, Out of all the Life products, Life Credit Card has been the most used, with an average monthly transaction reaching almost 7 uses per month, showing that in this line of product, we are rapidly becoming these new clients' main bank.

We also continue to improve our app in the quarter, updating its interface in order to make it more user-friendly and adding other transactional capabilities, such as investing in time deposits and mutual funds. Last year and the year before, our app has been chosen as the best app in the Chilean banking industry.

We have a base of over 1 million digital clients, which is growing, and with all the app updates and new features during the last year, we have been able to increase the amount of monthly transactions made through digital channels for CLP 100 million to CLP 210 million monthly as of December '17. We continue to strive to look -- we continue to strive to make our app the best of the best, which is why we continue to introduce these new capability as well as improve its look and feel. In terms of client satisfaction, as measured by the Adimark survey, we followed our peer group trend and the gap between us and our main competitors in terms of clients, perception of quality has remained at the same level as our peers.

Regarding the level of complaints as measured by Sernac in the SBIF, the most recently public figure of client complaints showed a decrease of 18% in the last 12 months. Through better service, we look for our clients to choose us as the primary go-to-bank, measures to the amount of products they own, that are used a minimum amount of times with minimum profitability levels.

Compared to March 2017, for example, our loyal clients increased 11% in our high and middle-income segments. All of these initiatives -- and have in turn, showed positive results in our fee income, especially, in Retail and Corporate Banking. Credit and debit fees were the highest contributor areas of fee income during the first 3 months, followed by asset management and checking account fees. Higher consumer expenditure triggered a 23.2% rise in credit card fees compared to the last quarter. GCB had a good run in the first 3 months due to fees gained from financial advisory projects.

This also shows that the economy and investment projects are also gaining pace. This is evidence of a solid advantage in providing value-added, nonlending services, which should continue to drive fee income in the segment throughout the year. Other fees had a sharp decline compared to last year. This was mainly due to the fall in ATM fees. Remember that last year, we removed 1/3 of our ATM fees but this is having -- our ATM network, which is having a positive impact on cost and efficiency.

As of last year we aggressively closed branches and ATMs as well as reduced personnel, this year the focus has been improving distribution network and to continue to invest in IT. In the next 3 years, we will be investing [$360 million] in technology. We continue to close branches that are not strategically placed as well as transforming others into WorkCafés. In terms of ATMs, we decreased the amount compared to last year. However, in the last quarter, we started growing again. We increased the number of ATMs by 22, mainly located in our own branches or sectors that already had -- have a large security infrastructure and high traffic of people. Total head [indiscernible] count increased quarter-on-quarter due to an expansion of IT project teams. Previously, the bank outsourced a majority of the IT projects that will now be done in-house, producing cost savings and project efficiencies.

The cost of an IT employee who is working on a specific project is deferred and amortized over the life of the project. Therefore, the impact on personnel expenses of this rise in employees will be limited in personnel and may be some impact in amortizations. We continue to expand our WorkCafé network. Having opened 22 as of March and 1 one more during April.

At the end of this year, we plan to have a total of 40 throughout the country. Client satisfaction with this new model continues to be very high, showing savings of 200 basis points in direct cost income versus a traditional branch as well. The ratio of sales to administrative personnel is 3:1, thereby boosting sales per branch and enabling income to be 13% higher in a WorkCafé the growth versus a traditional branch. We continue to be the most cost-efficient bank in Chile, reaching an efficiency ratio of 38.7% during the first quarter.

This reflects the various initiatives the bank has been implementing to improve commercial productivity and efficiency. The decrease in personnel expenses is mainly due to less provisions and severance payments.

As a side note, in the first quarter of this year, we also concluded the negotiation of our new collective bargaining agreement with the bank's main unions. This contract will last for the next 3 years and was negotiated under an atmosphere of trust and respect that has characterized employee relations at Santander-Chile.

Administrative expenses increased 6.3% year-over-year in the quarter due to the ongoing investments in digitalization and branch restructuring, as mentioned. Our third objective in order to reach good-quality growth is to optimize our profitability and capital use to increase shareholder value in time. Our shareholders' equity increased by 6.8% compared to last year and 3.4% compared to the end of -- sorry, shareholders' equity increased 6.8% year-over-year, and our core capital ratio rose to 11.1%. This past April 24, we celebrated our annual shareholders' meeting, where our shareholders' approval -- approved the payout of 75% of 2017 earnings, which amounted to approximately CLP 2.25 per share. This is a 29% dividend growth compared to the dividend paid last year and the dividend yield, once again, was greater than 4%. In summary, the first 3 months of 2018 was a good reflection of what we want to achieve during the rest of the year.

For the whole year 2018, here is some further guidance. Loan growth should be in the upper range of our previous guidance of 6% to 8%, with acceleration of growth in Retail Banking following the strong growth of corporate loans in the quarter. This coupled with stable interest rates and a slightly higher inflation rate, bodes well for NIMs and net interest income. We expect NIMs to be relatively stable, similar to what we saw in the current quarter. The main potential downside for this outlook is if the peso continues to appreciate and the inflation expectations do not pick up. Signed loyalty and higher growth of total clients will continue to drive fee income. But remember that ATM fees will continue to fall. This, in turn, will be compensated with lower security and transportation costs. We expect the cost of credit to remain stable between 1.1% and 1.15% of loans. Finally, the efficiency ratio should reach levels between 40% to 40.5%, with cost growing in the low single-digit range.

Also, one thing to remember, there is always a seasonal effect in the first quarter so costs are always seasonally lower and efficiency ratio is usually the lowest in the first quarter, that's why the guidance for the full year is slightly above 40%. Our statutory tax rate increased this year to 27%. This should be the last increase in the statutory rate. So we should see our effective tax rate reach levels between 22% to 23%, similar to what we saw in the first quarter. All in, we maintain our guidance, expecting our lead to continue to be similar to those obtained in 2017. Finally, before we go to questions, Santander-Chile has decided to host our first Investor Day. Given the brighter outlook for Chile, we would like to present a thorough update on our business and digital strategy on behalf of our top management, including the Chairman of the Board, Claudio Melandri, and our CEO, Miguel Mata, and other top management members.

We will be hosting 2 events: One in the New York Stock Exchange on June 1 and another in Santiago on June 6. We already sent out the New York invitations and you can also find a link to sign up on our website. So please mark your calendars, we really hope you can attend. At this time, we will gladly answer any questions you may have.

[Operator]

[Operator Instructions] And our first question will come from Diego Ciconi with Scotiabank.

[Diego Ciconi, analyst]

I was wondering, on your outlook for NIMs, you mentioned that you expect it to be stable. Do you think that the Central Bank could maintain rates this low for how long? And, I mean, we see that the consensus for inflation is within the Central Bank's target but considering the increase in prices of oil and the reactivation of the economy, maybe it could be higher if rates continue to slow. So what do you think about that and how would that impact your NIMs?

[Robert Moreno, executive]

Okay. So as our economist mentioned, economy is gaining momentum. But we still see low inflation risk, with inflation this year. We're talking about UF inflation, the CPI is slightly different but marginally different around 2.5% with that level -- in fact, our inflation expectations actually came down. They were a little bit higher at the beginning of the year. So up to now, the effects of the appreciation of the peso have been more relevant than the reactivation of the economy and the increase of the price of oil, okay? So for this reason, we expect -- and the Central Bank has kind of stated the same thing. They are giving this message rather clearly in their minutes, of their policy meeting, that they want -- they expect the interest rate to remain stable, at least throughout the rest of this year, okay? Well, we changed that scenario? I would say, the price of oil maybe [indiscernible] [want to] change because the Central Bank sometimes tends to ignore this kind of shocks, okay? And so the only thing that would really make us change our view on rates, I think, is that the increase in inflation is due to the economy really gaining momentum more than an increase in the price of oil. Also, if the peso begins to depreciate again for some reason, that could change it. But overall, our main scenario is that we're not going to see any rise in rates. [And so] the beginning of next year maybe.

[Diego Ciconi, analyst]

Okay, great. And my second question, you did complete the downsizing of the Banefe brand. And at the same time, you introduced a new brand, Santander Life. What's the strategy there and how different is it from the strategy that you previously had for the [mass] segment and how do you plan to manage risk in this segment?

[Robert Moreno, executive]

Okay. So to make it simple. Banefe was a division and Santander Life is kind of -- is more integrated in the bank and is a new line of products with a completely different distribution model. So Santander Banefe had a, for example, at its peak, had its own sales force, 2,000 people, it had 100 branches. So it was a division for the mass consumer market based on -- heavily based on branches and sales force, okay? So when interest rates came down, the cap on interest rates [goes] slower, when there were restrictions on fees and the economy started to slow down, this like heavy cost model, you could say, high-yielding but heavy cost model, didn't have a future we believed. And there is also another very important thing here. We also believed that we made up this kind of Santander Banefe model that was copied in other banks. But we believe that the times were no longer for you to have -- for the bank to have like a separate unit for the mass market, okay? To say, okay, you are in the mass market, go to this branch or this client, go to the other branch. We decided that apart from the model being inefficient, the environment of like sociologically was for now -- for [earnings] mass consumer client that qualified to be a client of the bank to be integrated into the bank as any other client. So today, someone who takes the product in Santander Life, they can go to any branch, they can go to the WorkCafé. There's no differentiation and no distinction regarding income level, okay? And Santander Life, as we said, there is no branches, there's no sales -- additional sales force. Everything can be bought online. You can go to the branch, you can go to the WorkCafé. And also very importantly, Santander Life gives merits, okay? And another thing that our clients always stated that when you paid your obligations on time, they never felt they were recognized, and you were only recognized, you could say, when you didn't pay. Then the bank -- the view was that the banks would rapidly call the client to make sure they would get to date on their payments. But when the payments were made, there was no recognition. So with the Meritolife program, we also designed a system where, if you pay on time, you're going to get tangible benefits, instantaneously, mainly through a lower interest rate. And that's also a very good way to control the risk, okay? So interest rates are lower because of the caps. So therefore, you have to control cost, which is the new model, and you also had to control risk. And the risk is to make this a vicious -- a virtuous circle -- cycle, where with the more you pay on time, the better rates you get. So that's the Santander Life program, which I think, is a very good way to [tap] this new segment, kind of, fixing the problems that were in the old Banefe model.

[Diego Ciconi, analyst]

Great, perfect. If I may just, one last question, I see that Santander Spain started implementing, [as Mark read,] concept of branches a couple of years ago. And this is also being implemented in Mexico this year. How different is it from the WorkCafé branches that you have here in Chile?

[Robert Moreno, executive]

So the WorkCafé is thought up and born here in Chile, okay? So this is something we designed here locally. In the middle of 2016, our CEO [indiscernible] talked to the Head of Retail Banking and told them, design a branch in 4 months that make people want to come back to the branches, okay? We have a lot of branches still. A lot of them are in exceptional locations and it was, kind of, sad to see these excellent locations and no one inside them, okay? Well, the people inside them were doing unproductive tasks. So in a record time, with a very good work between the commercial teams here and the system's team administration, we designed the WorkCafé concept, locally. Which basically, is a concept where the branch has a co-working space, with very good cafe inside, and the cafe isn't run by us, it's run by a third party. And they also got rid of the majority of the back office. The vaults, the human tellers. So basically, the space we saved in -- from back-office functions, and we dedicated much more space to the front office. So in a normal branch, you have 3 or 4 account executives and relationship managers. In a WorkCafé, you can have up to 20. So the amount of people doing front office activities is 3x [to] 4x greater. And the other part of the space is dedicated to having a much nicer area for our clients and nonclients can come in. And this has been very successful. So branches, for example, you can see WorkCafés next to branches of our competitors and the competitor branches have the old, kind of, 1980s feel, where no one goes in and our branches, especially, WorkCafé are full of people, okay? So this is a concept that we designed that we are exporting. I believe that other areas of Santander are going to be opening them soon or maybe next year. But this is a concept we are exporting. And this is part of Grupo Santander, where if an idea works, you share it with the rest of the group, and I'm sure Mexico, Brazil also come up with our Santander poll and is also really doing interesting things in digital banking will adopt them if it works for our local market.

[Operator]

Our next question comes from the line of Chicago (sic) [ Thiago ] Batista with Itaú BBA.

[Thiago Bovolenta Batista, analyst]

So I have basically, 2 questions. The first one regarding the provisions that Santander-Chile is facing. Can you comment sort of the potential impacts of regional regulation? If I'm not wrong, we're talking about $100 million for the system. Can you comment [about this deceleration] and when do you believe this should impact the banks? I believe in [1920 but] want to double check. And also about the WorkCafé, if you can mention specifically a bit this is the second year of this, let's say, product or this type of branch for the bank. Is this a way to reduce the costs or will it increase the cross-selling with those new type of branches?

[Robert Moreno, executive]

Okay. So regarding your first question, just so everyone is on board. In the beginning of this year, the Superintendency of banks published a new provisioning rule for -- the exact title is Commercial Loans Analyzed on a Group Basis, okay? So you basically, in Chile, have 2 types of provisioning models: You have loans that are [analyzed] on a group basis, meaning you group together a bunch of loans. This is mainly done for individuals and SMEs. And according to some type of profile that you group together with the loans, you give them -- you calculate the expected loss in the provision. And then you have another group of loans which are annualized -- analyzed, sorry, on a case-by-case basis. [indiscernible] very large loans, okay? So -- and another thing I want to mention real quickly is, we are not adopting IFRS 9. That's not in the SBIF's plans, according to last I heard. But what the SBIF does is, they publish the models for doing your expected loss. So, I don't know if you remember, but a couple of years ago, they published the expected loss -- the new expected loss model for mortgages, which mainly included the loan to values as part of the expected loss. And now they are doing the next phase, which is publishing the expected loss models for basically, SMEs or commercial loans analyzed on a group basis. So if you read through this new guideline, you will see that one of the things that they do is, they kind of attach a certain expected losses depending on NPLs but also depending [on lateral growth of] collateral, okay? We don't have yet an estimate of what the impact will be because we believe this is still under analysis and we'll go through a lot of discussions still. As Thiago said, there have been some reports of this costing CLP 100 million in the banking system. I would say those numbers are very preliminary because we think there's going to be still a lot of discussion regarding how the final version, the draft, of this provisioning requirement. I also believe this [will not be] discussion that last throughout the remainder of this year, and we won't have an impact until probably next year, okay? Said that probably, by the end of this year or next year, they are going to publish the final one, which is the provisioning model for consumer loans annualized -- analyzed on a group basis. So that will probably be published in 2019 and impacting in 2020. So then, we'll have all 3 models published and then also, we'll be adopting Basel III. So we'll have a more robust provisioning model, expected loss models, okay? And then, we'll have a new Basel III law hopefully passed, and we'll also have a new risk [weights], okay? So we might have maybe more provisions under the new models, that's still to be seen. But on the other hand, we also think that the risk [weighting] should be more in line with Basel III around the world and there will be lower so that will be the positive effect. So this is just the beginning of the journey, you could say, and we'll have an impact on provisions probably next year, still not decided. And also, remember this will be in parallel with the new banking law and hopefully, the reduction in the risk weights for credit risk. And the WorkCafé. So the idea of the WorkCafé is both, actually. We have -- the WorkCafé has 3, let's say, 3 models: first-in-class experience, more efficient and more selling, okay. And I think, until now, we are achieving that. The client satisfaction is over 90%, and the cost-to-income ratio of a WorkCafé branch is 2 percentage points lower than the direct cost income of our normal branch and the opening of a WorkCafé which we already have some experience, is 10%, it costs 10% less than opening a normal branch, okay? So the opening cost is -- the investment is also lower now. And the cross-selling and the selling [newer] branches, they're selling -- the income is growing like 6%, 5%, 6%, in the WorkCafé, the income is growing around 10%, 13%. So until now, the WorkCafé is meeting those 3 requirements: Better experience, more efficient and selling more. Of course, the WorkCafé is more efficient because you don't have the back office and you still need tellers. So some of the branches are getting a more flow of human tellers, of people, and so -- and the WorkCafé doesn't have that because, okay? But overall, we think that the WorkCafé should be a better, cheaper and a more selling experience. And in the rest of the year, in the next 3 years, [approximately], WorkCafé we're going to continue to work on the efficiency of the other branches. The other branches are not going to disappear, they might be less, they're going to be modernized. There's a lot of digital processing that can be done still so that is also an investment still pending.

[Operator]

Our next question comes from Alonso Garcia with Credit Suisse.

[Alonso Garcia, analyst]

My first question is regarding competition. I mean, first, do you think this quarter, you grew in line with the market or you think you might have outgrown the overall system. And in general how do you expect to grow this year with respect to the system after losing some market share last year? And my second question is more on the economic side. Have you seen the improvement in overall activity of the economy and improvement in sentiment translating into increased spending from the households and increased demand for consumer or do you think that should be like a second-round effect to be seen only in the next few quarters?

[Robert Moreno, executive]

Okay. So in this quarter, I think, we started out a little slow in January and February, and then we really gathered pace in March. I think, idea is not to lose market share this year. So, I think, by the end of the quarter, we believe we gained market share both in loans and in noninterest-bearing and checking accounts, and that was really good evolution. Not only of loans but of the funding side as well, okay? And this also ties in to your second question. Loan growth, as we said, was really a little bit more focused, and we're accustomed not including last few years in the corporate segment in the middle market, okay? So this has like a short-term effect where it didn't have a very positive impact on margins. But I think, if you look at the projects, the clients coming in, we're optimistic because it really shows the companies are beginning -- the large ones are beginning to gain momentum, okay? So regarding your second question, I think, you don't see the household spending much more yet, you don't see wage growth, okay? But that definitely is going to come because the companies are coming to us with really good projects. So think of it this way, the large corporates are coming with interesting things, GCB grew 15% quarter-on-quarter after falling 20% last year. This is fueling in for the middle markets. Think of the middle market as kind of like the service providers. They're hiring trucks, they're hiring consultants, engineers, and then, that's going to fuel into wages employment, okay? So -- and that you should see in the second round. And then I think you going to start to see that already in the beginning a little bit in the second quarter. So even though, loan growth was good, we're not going to lose market share. It wasn't the most highest yielding loan growth, but I think, it's a really good sign because it means the rest of the economy is going to start to grow. And if this fuels into checking accounts and it fuels [into] fee income. So the lower yield was offset by basically fee income and then later on, we should see good retail loan growth, okay?

[Alonso Garcia, analyst]

Perfect, thank you. And just a follow-up on the fee income side. How do you expect the lower ATM network to balance out with this increase in client activity and also, in the number of clients for this year?

[Robert Moreno, executive]

Yes, there will be lower ATM fees -- direct ATM fees but people are using more of their cards. So you look at retail, they grew like 15%, 16% year-over-year, I think, a little more. Basically, because people are using more their credit cards and debit cards. So on the one hand, people -- the ATM fee is mainly a fee we charge the other banks it's like a clearing house, okay? So obviously -- but the fees we that get on cards is because they are spending more. So consumer loans didn't grow very much, credit card loans didn't grow very much but usage is growing a lot. So I think it's a very good secondary effect, don't go to the ATM for cash use your cards. Net-net, I think, it's a positive. We did open some ATMs as well, because we saw some good locations, okay?

[Alonso Garcia, analyst]

Do you think, at the end of the day, fee growth can be roughly in line with overall growth in loans for the year?

[Robert Moreno, executive]

I think so. There's always a question mark of the corporates because they tend to be a little lumpy. But, I think, overall, given that we started out strong, we should see fees growing in line with loan growth. I think, loan growth is going to be closer to 8% this year. So I think, fee should grow similar. Also considering that we started out really good last year [indiscernible] fees and then it slowed down, but I think this year, it should be more stable, the level of fees throughout the year.

[Operator]

[Operator Instructions] And our next question comes from Sebastián Gallego with CrediCorp Capital.

[Sebastian Gallego, analyst]

Just a question on the OpEx front. You mentioned during the presentation, Robert, something about an investment in IT for $360 million. Can you provide more color on the distribution per year of that investment and whether or not this investment should or may cost deterioration on the efficiency ratios?

[Robert Moreno, executive]

Okay. No, it shouldn't. It shouldn't have the -- an impact on efficiency, it's included in our guidance. It's part of -- in fact the last 4 years, I think we invested like CLP 500 million. So more or less in line with what we have really been doing. And the idea of these investments, as I said, it's IT. And with the idea of keeping very good levels of efficiency. Mainly, IT regarding the digitalization of processes and improving efficiency at the branches. So -- I also think, on Investor Day, we're going to give you a little more light into that. I think that should be an interesting part of the Investor Day. With a lot of really interesting things that still can be done at the branch level, the back-office level in terms of IT. We also, kind of, in-house -- a lot of the IT personnel, which is also part of trying to make this IT investment more efficient, okay? To make it simple, when you outsource it, you're paying the cost of the person plus the markup of the outsourced company, the idea is to kind of save that. So we're trying to make the process of investing in the whole IT process more efficient as well. So that is a reflection. So overall, no. I think, these investments are positive for efficiency, and we maintain our outlook for cost and efficiency.

[Operator]

And I'm showing no further questions at this time. I would now like to turn the call back to Mr. Robert Moreno for closing remarks.

[Robert Moreno, executive]

Okay, thank you very much. I hope to see everyone at the Investor Day and where you'll also get a chance to interact with the President, the CFO the CEO. So thank you for being in our call today bye.

[Operator]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.