Banco Santander-Chile

NYSE:BSAC

Earnings Call Transcript 2019-Q2

[Operator]

Good day, ladies and gentlemen, and welcome to the Q2 2019 Banco Santander-Chile Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Emiliano Muratore, CFO. You may begin.

[Emiliano Muratore, executive]

Good morning, everyone. Welcome to Banco Santander-Chile's Second Quarter 2019 Results Webcast and Conference Call. This is Emiliano Muratore, CFO, and I'm joined today by Robert Moreno, Manager of Investor Relations; and our Chief Economist, Claudio Soto. Thank you for attending today's conference call.

As you will see in the rest of the presentation, after a challenging start of the year, the second quarter showed solid growth and good results. Here at the bank, we are excited with the recent and upcoming initiatives and new product launches.

First, Claudio will give us some insight into the macro environment and our expectation for the rest of the year.

[Claudio Soto, executive]

Thank you, Emiliano. After a strong 2018, the economy decelerated in the first part of this year. Activity grew only 1.6% in 2019 first quarter, and partial indicators point to a 2.2% year-on-year expansion in the second quarter.

Local activity has suffered the impact of the trade tensions between the U.S. and China, which have lowered the copper price and the external demand for non-mineral exports. The labor market remains relatively weak, and business confidence has deteriorated, reflecting the more challenging external outlook as well as the slow progress in the reform agenda of the government. As a result, global goods consumption and equipment investment have receded.

Going forward, we expect a moderated speed-up pushed by the maturization of large investment project, mostly in mining, infrastructure and forestry. We expect investment will grow at around 4% in 2019, slightly below last year. Export will expand only at 1.5%, reflecting the slow global demand and a limited capacity for mining expansion. Consumption, in turn, will expand at around 3% as the labor market gains some momentum in the months ahead.

Overall, the soft first semester has led us to further reduce our growth perspective for this year from 3% to 2.7%. During the second part of the year, annual growth will increase not only because of our rebound in investment but also due to favorable base effects.

As expected, inflation has remained low, reflecting still open output gaps and a muted pass-through from the exchange rate depreciation. We expect U.S. inflation to gradually pick up in the coming months to reach 2.3% by the end of this year. This figure implies a 0.6 average for the next 2 quarters.

In this context, the Central Bank of Chile has modified its policy study, introducing a dovish guidance. In an unexpected move, it lowered its monetary policy rate by 50 basis point in June, and market rates points to a 50 basis point further easing in the second part of the year. The rationale for such a change in strategy was an upward revision of potential output due to the large, recent immigration, a downward revision in the neutral interest rate and a downward revision in the growth outlook for the year. Accordingly, we expect the Central Bank might lower its policy rate by 25 or 50 basis points in the next policy meeting in September.

[Robert Moreno Heimlich, executive]

Thank you, Claudio. Now we'll move on to Slide 7 of the presentation. Despite the uneasiness in the macro outlook, the bank pushed ahead with its strategic plan with important advances in expanding digital services and maintaining high-quality service levels.

Moving on to Slide 8, we present here the commercial strategy of the bank, including the 3-year investment plan totaling $380 million for 2019-2021. As mentioned in our webcast for the first quarter results, investment plan covers different initiatives aimed at our target segments: the unbanked population, middle-income individuals, millennials, SMEs and high income.

During the second quarter, we have been very busy in advancing our strategy, and we would like to give you a quick update on our progress.

If you go to Slide 9, we are pleased to announce that we have now finished the internal pilot stage of Superdigital, and as of July 18, we performed a soft launch of this innovative prepaid platform to the market. Superdigital is a fully digital banking service that includes a prepaid credit card. As many of you know, Superdigital was designed and launched by Santander Brasil first, and we have been adapting this innovation to the Chilean market. Superdigital is also a social banking ecosystem for individuals to make payments to contacts via chats as well as online purchases and other features. Through Superdigital, we aim to increase financial inclusion to the Chilean population and reduce the use of cash in the system. This will allow the more than 4 million people in the workforce who do not have access to a credit card to access traditional banking service as well as the digital economy by enabling them to make online purchases, including subscriptions to platforms such as Spotify, Netflix, Uber, et cetera, with our prepaid digital credit card.

Moving on to Slide 10, we also made important advances in our plans to enter the acquiring business in Chile. Our aim is to modernize and expand the payment system, bringing to the market not only innovative and improved POS technology but also the opportunity for building new and stronger relationships between the bank and SMEs. We started preparing for this strategy 2 years ago, and in June, we announced our agreement with Evertec, which has over 28 years of experience and processes around 2 billion transactions per year with a strong presence in Latin America. With Evertec, we have a complete, secure and efficient processing service with value-added solutions and advanced fraud protection. We expect to launch our POS system by the first quarter of 2020.

If you go to Slide 11, we will show you that for the middle-income segment, we have a program called Life, where the client accumulates merits for positive credit behavior. In June, we expanded the range of our Life products. We launched a parallel account, Life LATAM Pass, a plan where clients accumulate Life merits as well as LATAM airlines, an attractive attribute of our credit cards. We also launched Cuenta Life, a prepaid debit account. Cuenta Life is available for everyone with no minimum wage limit. This economical account gives individuals a chance to join a bank and a digital platform and to start to build a relationship with the bank. We also introduced in Life a program savings function that also accumulates merits, so clients are rewarded for paying their obligations on time and for saving on a consistent basis. As a result of all of the above, the amount of new clients signing up for Life doubled in the quarter.

Please move to Slide 12. In June, we also launched the Super 40 Hipoteca, the only bank in the Chilean market to offer a 40-year mortgage. The super mortgage is aimed at millennials, with a maximum age restriction of 35 and is only available for first buyers. With this product, we can offer financing of up to 90%. This product is very attractive to the segment and has offered them the chance to pay less in their monthly payments, and they no longer have to pay rent.

Moving to Slide 13. For our middle-income clients, we are also venturing into the auto financing business. As a reminder, earlier this year, we announced that we were buying the 49% stake of SKBergé in Santander Consumer Finance Chile. During the second quarter, we received the antitrust commission approval. We expect this deal to be finalized by the end of August. This unit continues to perform well. In the first quarter of 2019, the latest data available, Santander Consumer Chile's net profits was CLP 3.6 billion, increasing 61.9% compared to the first quarter of 2018. The ROE was 21.7%. And the loan book totaled CLP 407 billion, increasing 26.4%.

On Slide 14, we also show that our client service indicators continue to remain strong in the quarter. In order to measure our progress, the bank carries out various studies, including digital surveys involving a significant sample of our clients. For the 6-month period ended June 2019, we were top 3 for the net global network satisfaction of clients and top 2 in the Net Promoter Score that indicates a level of client recommendation. During the semester, there were tangible improvements in the ease of contacting an account executive, perception of integration of the bank's team and the bank's knowledge of the client's history. Noteworthy is that our Life clients have an overall Net Promoter Score of 67% and a net global satisfaction of 90%. Life clients, another segment that best evaluates the bank in service and recommendation.

On Slide 15, we show the evolution of client loyalty, which continues to grow steadily across our target segments. Our loyal and digital clients grow roughly 7% per year on average.

As you can see also on Slide 16, since December, our current account client base has been expanding, and we surpassed 1 million checking accounts this year. According to the CMF as of April, the last data available, we increased our market share by 8 basis points to 21.4%. Of the total amount of rise in checking accounts in the industry, 24.4% went to Santander, growing above the industry and maintaining our leadership in this product. This clearly reflects the positive service -- client service and recommendation indicators as well as the high acceptance of our new product offers.

On Slide 17, we show that we still have a total branch network of 380 points of sale, slightly above the figure 12 months ago. The composition of our network continues to change with 46 Work Café branches and 4 pilot branches of the Work Café 2.0. The latter have shown very promising productivity results. These branches are smaller with no back office or human tellers and incorporate machine learning and artificial intelligence.

Our other main strategic objectives, as shown on Slide 18, is to ensure that we are performing and growing while optimizing our risk return equation.

On slide -- sorry, on Slide 19, we show that our core capital ratio as of June 2019 reached 10.4%, 40 basis points higher than June 2018; and our BIS ratio reached 13.1%. As a reminder, we paid a dividend of 60% of 2018 earnings in April, representing a dividend per share of CLP 1.88 and a dividend yield of 3.7%. Risk-weighted assets increased 5.2% year-over-year compared to a growth of 9.5% in core shareholders' equity. The solid capital ratios at the end of the quarter give the bank room to grow and to continue implementing our investment plan.

On Slide 20, regarding the implementation of Basel III, after the approval of the new banking law in January, the SBIF merged with the CMF as of June 1, 2019. The merger initiates the start of an 18-month period in which the regulator, the CMF, will work with the Central Bank to create draft regulations for discussion for the implementation of Basel III in Chile. We expect these drafts for consultation to begin to be published from here until the end of this year. First, the CMF will discuss the definition of systemic banks and additional capital requirements for these banks. We expect to be considered a systemic bank as we are leaders in the local market. We expect to have final regulations of the Basel III incorporated by December of 2020.

In Slide 21, we show the evolution of our ROE from 2015 to the current date compared to our main competitors. In the first half of the year, we continue to lead the main banks in ROE, with a solid ROE of 18.2%, in line with guidance and demonstrating the success of our growth strategy.

As indicated on Slide 22, we will now briefly discuss our most recent results. In Slide 23, we summarize the quarter. The net income attributable to shareholders in the second quarter totaled CLP 171 billion, increasing 36.5% compared to the first quarter and 10.8% compared to the second quarter of '18. The ROE in the second quarter was 21.1%. This was our highest quarterly result since the fourth quarter of 2013.

Moving on to Slide 24, let's begin with deposit growth. In the quarter, the bank's total deposits increased 5.9% year-over-year and 2.7% in the quarter. Demand deposits grew particularly strong at 4.5% in the quarter, in line with the increases we are seeing on a number of checking accounts. Considering that the bank does not pay interest on checking accounts, our strong market position in this product is a very cheap source of funding for the bank. Also as Claudio mentioned, the Central Bank reduced interest rates by 50 basis points to 2.5% in June. This led to a more moderate growth in time deposits as they became less attractive for our clients, and we saw a shift to mutual funds, which grew 7.7% in the quarter alone.

On Slide 25, we also show that the funding strategy was accompanied by strong liquidity levels. We are well above the 60% limit set by the Chilean regulator and above the average of our competitors regarding the LCR ratio, which was 123%. Our NSFR was also solid at 111% at the end of June.

On Slide 26, we can see our loan book grew 6.4% year-over-year and 1.6% in the quarter driven mainly by retail banking and offset by a fall in low-yielding corporate loans and a slow quarter for the middle market. Loans to individuals have been growing in our target segment, the growth of consumer loans of 7.5% year-over-year and 1.4% quarter-on-quarter. Mortgage loans continued to grow healthily as mortgage interest rates reached an all-time low in the Chilean market. We also saw a pick-up in loans to SMEs, which grew 2.2% quarter-on-quarter, mainly among larger SMEs with lower risk while the bank continues to maintain a conservative stance to lending to smaller SMEs. We maintain our guidance for loan growth of 8% to 10%, probably in the lower edge of that range, mainly driven by retail loans and the incorporation of Santander Consumer Finance.

After a weak first quarter, on Slide 27, you can see that our margins rebounded in the quarter. As a reminder, the bank has 2 major sensitivities in its balance sheet. We are asset-sensitive to inflation since the bank has more assets than liabilities linked to inflation, and we're liability-sensitive to short-term rates since the bank deposits are mainly denominated in nominal pesos and have a shorter duration than the interest-earning assets. The variation of the UF in the quarter was 1.2% compared to 0 in the first quarter, and in June, the Central Bank dropped the monetary policy rate by 50 basis points. Therefore, in the second quarter, the bank's NIMs went up. Going forward, we would expect inflation to normalize at around 0.6% per quarter. And lower interest rates will bring down our cost of funding, helping to sustain NIMs at around 4.2%, 4.3% in the coming quarters.

On Slide 28, we can see that asset quality also continued the positive evolution that we have seen in previous quarters. The NPL ratio improved to 1.9%, with the impairment ratio at 5.8% and the coverage ratio rising to 138%. In particular, we saw improvements in the consumer mortgage loans. These tendencies are reflection of our commitment to growing our loan book healthily, focusing on the overall profitability of our client base.

As we can see on Slide 29, our cost of credit remains stable at 1%, with provisions for loan losses decreasing in the quarter. In July, we will recognize the onetime provision for the new standardized model for commercial loans annualized on a group basis for a total of CLP 31 billion. Excluding this charge, the cost of credit should remain around 1%.

On Slide 30, we present non-net interest income. In the second quarter, non-net interest income, which is the sum of fee income plus financial transactions, increased 6.8% quarter-on-quarter and 20.1% year-on-year but with different trends in fees and client treasury income. In the quarter, fee income decreased 3.8% compared to the first quarter and decreased 13.8% compared to the second quarter, mainly due to, first of all, lower fees from the collection of insurance fees due to a change in methodology implemented in the second -- sorry, in the first -- in the second half of 2018 for estimating refunds of insurance premiums collected; second of all, we had lower credit card fees in the quarter due to adjustments in the manner in which the costs of our cobranding agreement are recognized. Previously, clients received their air miles once a month, whereas now, they are recognized on a weekly basis. Therefore, in the quarter, the bank recognized a greater expense due to this of CLP 2 billion due to this change. Finally, there was a decrease in corporate banking fees due to lower income from financial advisory in general.

On the other hand, results from the financial transactions totaled CLP 49 billion, an increase of 164% compared to the second quarter of last year and an increase of 26% compared to the first quarter. Client treasury services revenues reached a gain of CLP 36 billion in the quarter, an increase of 52% compared to the second quarter and 18.8% compared to the first quarter. Demand for treasury and market-making products increased in the quarter with a greater recent uncertainty in global markets and volatility of rate and FX markets. While fee income has been weaker in the middle market and the corporate banking in the semester, the increase in demand for hedging products reflects a shift in the demand of our commercial clients and the bank's ability to capture these profits-generating business, strengthened by our good customer service and product offer.

If we go on to Slide 31, we see that operating expenses remained under control in the quarter. The -- in the first -- in the second quarter of 2019, operating expenses increased 3.0% and 6.4% quarter-on-quarter with the bank's efficiency ratio reaching 40.3% in the quarter and 41.4% in the first half. As a reminder, the quarter-on-quarter rise in expenses is mainly due to seasonal factors so we will focus on year-over-year trends. The 3.0% increase in cost year-over-year was mainly due to a rise in cost related to investments in technology and branch digitalization. Productivity continues to rise, with volumes, defined as loans plus deposits, per branch increasing 5% and volumes per employee rising 8.7% year-over-year.

Operating expenses to total assets reached 1.8% compared to 1.9% in the second quarter of 2018.

Personnel expenses increased 0.7% year-over-year in the second quarter. During the quarter, head count continued to decrease. However, this was partially compensated by the yearly adjustment of salaries for inflation.

Administrative expenses decreased 2.2%. This was mainly due to the change -- the accounting change that the bank adopted, IFRS 16. Without this effect, administrative expenses would have increased 10%. This rise is mainly due to greater marketing costs associated with our new product launches. We continue to spend on marketing, communication, cybersecurity and technology developments as well as improvements to our distribution network, which we reached a total of 46 Work Cafés by the end of the quarter.

Also in the quarter, we continued to pilot the Select private banking hubs and the Work Café 2.0. Our initial indicators show that the opening of account plans goes up 2x to 4x in the Work Café 2.0s compared to traditional branches, and the investment hub sells twice as many mutual funds.

Moving to Slide 32 and to finalize before questions, we will summarize the outlook for the rest of the year, which we'll see on Slide 33.

GDP expectations were lower, but we still see a better second half. Loan growth expectations remain in the 8% to 10% growth range for the year, especially in retail banking even though corporate banking -- in corporate banking, the figures could be lower, but the profitability of that segment remains strong.

Net interest margins bounced back in the second quarter as inflation rebounded and rates fell. In the second half, we expect inflation to be around 0.6% per quarter and a further 50-basis-point cut in rates is expected. This should keep NIMs in the -- at the 4.2%, 4.3% range in the second half.

Noninterest income should continue to grow, led by greater client loyalty and digitalization as well as strong demand for treasury products. While fee income will be lower-than-expected mainly due to lower corporate fees, retail fees should slowly recover, and client treasury results should remain strong.

Asset quality remains healthy with a cost of credit of 1%. Cost growth should stabilize at current levels, and the tax rate should average around 22% for the year.

And now the recurring ROE for the whole of 2018 should be around 18% and around that range in the second half. In the long term, we are still looking for ROEs around 19%.

At this time, we gladly will answer any questions you may have.

[Operator]

[Operator Instructions] And our first question is from Jorg Friedemann from Citibank.

[Jorg Friedemann, analyst]

I have 2 questions. The first with relation to the fees merchant acquiring strategy. Just wondering if you could give us a bit more color whether the weakness on the fee income side for retail has something to do with the ATM networks that you reduced by the end of last year. And that agreement, I know, expired. Or it is also related at some extent to the exit of Transbank. And in that regard, with merchant acquiring, it would be great if you could give us a bit more color on this strategy and some of the goals that you want to achieve once the strategy is fully implemented. And the second question, with regards to your views about what should happen going forward in terms of new regulations for provisions, if you believe that the new regulator should evolve towards IFRS 9, more under expected loss, or if you believe that you could have any kind of additional update for -- no, provisioning requirements, such as the ones that we saw already taking place in mortgages and now in group basis for SMEs.

[Emiliano Muratore, executive]

Thank you, Jorg, for your question. This is Emiliano. Regarding fees, yes, definitely, the reduction of the ATMs' number last year is one of the main drivers for the performance of the fee line. Remember that those ATMs had a pretty high cost to income so although the fee line is suffering now, also we are getting some benefits on the cost side but it's not related to Transbank. It's related to commercial activity in part but also mainly by the ATM number are going down. And in terms of the acquiring business, as Robert mentioned, we are expected to be in the market by the beginning of next year, and we are very confident that our proposal to customers will be attractive, and we expect to be a main player in that market in the medium term.

Going to your second question in terms of regulation for provisioning, yes, I personally expect the regulator to move to IFRS in the medium term. They are now in the middle of the implementation of Basel III, so I don't think that maybe getting into the provisioning regulation is comfortable or easy for them in this -- during this time. But going forward, maybe in 2, 3 years, I could expect to be full IFRS, considering that the financial market commission, which is our new regulator, it's full IFRS for all the rest of the companies and players and their provisions. So that's what we expect. But it's not going to be, let's say, soon or fast. What you can imply from that is that the Consumer lending portfolio, which is now maybe the only one without the standardized provisional system, I don't see that coming into -- in place before the transition into Basel to IFRS 9. So it's -- I would say that maybe this one that was -- that the last before the move into IFRS 9. But definitely, that's a regulator's call, and this is just our view.

[Robert Moreno Heimlich, executive]

Sorry, just to complement one thing. Regarding the fees, sorry, one quick thing, also in the quarter, apart from the ATMs, we changed the way we -- how we recognize the miles that people go accumulating when they use the card. So that will cost us like CPL 2 billion more. We used to like recognize their miles on a monthly basis. Now it's every week. So we kind of put that up to date. I think that's important.

And so there is a decrease in ATM fees and a little bit in the credit card fees, but the usage of debit cards and credit cards is growing. So when you just look at the merchant discount part of debit and credit cards, that's growing very well, okay? So that's why we feel confident that the usage in the products are doing well, but we're making adjustments to the airline part. We made adjustments to the ATMs. But the actual usage of products is doing well, okay?

[Jorg Friedemann, analyst]

No, that's perfect. And just to follow up on the first question with regards to the merchant acquiring strategy, if you could remind us what is your market share in terms of credit card issuance and how long you believe that it should take for you to be able to achieve your natural market share also in the merchant acquiring business. And if you would have any kind of specific strategy for targeting that market, not sure if you are going to do more of the same as I know Getnet was able to escalate the business via bundled services for the SMEs or if you are targeting specific segments such as e-commerce, so on and so forth. So if you could give us just a bit more color on that, it would be great.

[Robert Moreno Heimlich, executive]

Okay. So regarding market share, we have like 10% of the plastic, but we have like 30% of the usage, okay? So if you look at -- so we're -- we have a very high market share in actual usage of credit cards. So that's a key thing, and one of the key drivers of why it's good to have our own acquiring. So we expect that to maintain because our cards are still very attractive. That's why we expanded the airline mile program to Life in the quarter, and we were launching new projects. We're launching Superdigital. We're launching Life, the Cuenta Única. So everything that's usage of credit cards and debit cards is roughly around 25% to 30% market share. That's in monetary purchases, and then we expect to maintain that even when we launch our acquiring business.

And regarding the services, yes, we're going to do -- we want to really expand e-commerce. That's a key thing. And we also want to expand the part of bundling services for SMEs. So the idea is to expand in all of those areas. We haven't -- we're not going to give any specific figures, but the idea there is to really expand the usage of e-commerce, the usage of the number of POSs in the system. And hopefully, increase our market share in purchases, which is already very high. But more importantly, it's to expand the size of the market. So we have 30% of purchases in our market. We still -- there's a lot of room for credit card usage to grow in Chile, okay?

[Jorg Friedemann, analyst]

Perfect. So that does not contemplate specifically the micro merchant in all segment, is that correct?

[Robert Moreno Heimlich, executive]

It does include like small merchants, okay?

[Emiliano Muratore, executive]

Yes.

[Robert Moreno Heimlich, executive]

But today, we don't have it because there are a lot of left out. But in the future, we want to incorporate as many merchants as possible that today are left out, okay?

[Emiliano Muratore, executive]

Yes, we are expecting in the future to have merchants who today don't have a POS to have it. So it's a -- the market should expand in terms of the number of merchants and their coverage.

[Operator]

Our next question is from Jason Mollin from Scotiabank.

[Jason Mollin, analyst]

I wanted to see if you can comment, Emiliano and Robert, on the implications of the record-low, long-term interest rates in Chile -- on Santander Chile and perhaps on the banking sector in general. I mean does the bank believe that the cost of equity calculations are at record lows as well? Is there a shift in reducing, let's say, target profitability levels with how low rates really are looking at the long bond yields? The last I was looking at on Bloomberg -- it actually was below 3%.

[Emiliano Muratore, executive]

Yes. Okay. Yes, thank you for your question, Jason. Yes, definitely, I mean I think that with this new, let's say, rates environment, cost of equity will -- or it is lower, I mean, in terms of the cost of equity in peso for asset. We are basically at Chilean pesos share.

So -- and for the banks, although the first impact is, I would say, relatively positive because the Central Bank -- well, the loan rates are, let's say, showing a more dovish scenario from the Central Bank. So that potential further cuts on short-term rates will help our NIM, and also that should help to -- should help the inflation to pick up, and that is also positive. So I would say that the first 1 year or 2 years, it's, I would say, positive scenario for banks.

In the long run, it makes, let's say, tougher to sustain NIMs if this new level of rates will stay like by forever, and there are a lot of macro and global things affecting the Chilean rate scenario. But I would say that in the long run, the reduction in cost of equity kind of compensates the potential reduction in long-term ROE. If you think that banks will have say, more problems, it will be tougher for them to sustain NIMs with interest rates lower than in the past. They have those 2 long-term effects kind of counterbalance each other.

[Jason Mollin, analyst]

That's helpful. I mean the way we look at bank valuations, it's hard to assess what the implications of a long-term ROE. But we took ours down, but the cost of equity is so low now that valuations look really compelling to us when we compare the returns then. And even if you don't get to your long-term -- you're talking about ROE of 19%, even if you use something in the 18% range, I'm just curious if the banks will start to actually be more aggressive in pricing because you don't need to -- with the lower cost of equity, you won't need to generate as much profitability. Or is that -- you're not seeing that in the short term like really repricing?

Because rates are very low, so it seems like returns, if you can generate 18%, 19% ROE when the 10-year is below 3, that's very attractive returns relative to the base rate or to the long bond rate.

[Emiliano Muratore, executive]

Yes, I mean considering the competitive environment today, I don't expect that kind of pricing tensions in the market. We do expect some repricing on the balance sheet because of clients refinancing or prepaying, taking advantage of lower rates. That's part of the typical game. But I don't expect like a change in -- at least for the next 12 months, 18 months, I don't expect a change in the pricing from competitors.

[Operator]

Our next question is from Alonso Garcia from Crédit Suisse.

[Ricardo Garcia, analyst]

My first question is regarding the investment plan that you announced for 2019 and in 2021. I don't know if you could give some guidance on how would this plan translate into OpEx growth in the 3 coming years or what kind of efficiency goal during this period and what would be a stable level of OpEx growth or efficiency ratio after the end of this plan? And my second question would be on loan growth. First, just on competition, if you could discuss the competitive landscape in Chile given the lower-than-expected GDP growth rates. And also just to clarify if Santander Consumer Finance will be consolidated or not in your financial statements.

[Robert Moreno Heimlich, executive]

Okay. So regarding the first question, Alonso, we're investing, but idea is to have these investments obviously generate efficiencies relatively quickly, especially the parts regarding branch transformation and technology.

So to make it very simple, we want to look at OpEx growth around 3% to 4%. I think this year, it will be closer to 4%. And the next few years, idea is to be roughly around 3%. And so I think that includes the higher investment but also includes the efficiencies we start to generate.

And the efficiency ratio obviously depends on the growth of income, how much there is an inflation. But it should be an efficiency ratio next year around 40% and possibly slightly lower going forward if we are accompanied by good income growth, okay?

And then the -- regarding the loan growth, so we had an estimation of 8% to 10% growth. Given that the economy has been a little slower, we're probably going to be around closer to 8%, 8% to 9% for this year. It would be difficult to reach the 10% unless there is a major shift in the large corporate lending, which doesn't have us that worried because that usually is the lowest yielding part of the loan book.

We are going to consolidate Santander Consumer. So since we're going to control that entity, it's going to be fully consolidated, and the part we don't own is going to be kind of removed in the minority interest. So there's going to be a line for line consolidation of Santander Consumer. And as I said, that transaction will be probably finalized by the end of this month.

[Emiliano Muratore, executive]

Next month.

[Robert Moreno Heimlich, executive]

On August, the end of August, sorry. And in -- if you go to santanderconsumer.cl, they have a long -- we can also send them to anyone who needs them. They have all the historical financials. So Santander Consumer has a loan book of around up CLP 407 billion. It's like 1.5% of our loan book, and that should be added in beginning in the third quarter. And Santander Consumer makes more or less roughly CLP 1 billion a month, more or less. So that should be also beginning to add in into the results in the third quarter.

[Operator]

Our next question is from Sebastián Gallego from CrediCorp Capital.

[Sebastian Gallego, analyst]

I have a couple of questions. The first one, a bit of a follow-up on Evertec. I know you mentioned you will be launching this 2020. But can you provide a bit more color on the competitive advantages of this alliance and the new system you're proposing compared to the current season of Transbank? And second question is related to the focusing on growth that you previously had in your presentation and was part of your strategy. Can you comment on whether we should expect a new refocusing on growth for Santander, along with the [ system ] for 2020 or whereas you were cautious for both 2019 -- the rest of 2019 and 2020?

[Robert Moreno Heimlich, executive]

Okay. So regarding the agreement with Evertec, given their very strong performance and their knowledge in the market, we see definitely that with the agreement with them that we should be giving a better service than what exists today in the Chilean market, especially everything that is digital services and especially things regarding, for example, fraud, cybersecurity. So I think it's a good package where the technology is better, the support is better and everything regarding fraud and cybersecurity is much better. When we start launching this in the next year, I think it'll be more apparent. But we definitely feel with this agreement, we're going to have a top-notch systems in the acquiring business.

And the other question was?

[Sebastian Gallego, analyst]

Growth on the...

[Robert Moreno Heimlich, executive]

Oh, yes. So yes, that's -- so we continue to move forward on our growth plan and idea that, yes, if the economy rebounds next year, our next year we should see loan growth picking up again. That's been the story we've been trying to tell. We're definitely moving in that direction. Obviously, if things once again don't pick up and things might go again slower, but right now, the way we're planning our budget and all of our internal targets is to have a very good growth year next year, with loans growing closer to 10% and a higher ROE as well.

[Sebastian Gallego, analyst]

And if I may ask another question. You are presenting on Slide 8 a very innovative proposal for middle income, millennials, high income and unbanked information. Are you planning to launch new products? Or should we think about this proposal as the proposal going forward? Or should we expect any new launches?

[Emiliano Muratore, executive]

The -- what you see on that slide is a good summary of what we have now in the pipeline and what we are thinking of launching in the market. I mean you should expect that further, let's say, launches or new products are uplift in the next 6 months to 12 months because that's the kind of horizon that is covered with those products.

[Robert Moreno Heimlich, executive]

So I think every product we see there is going to be improved. Like Life, we've been adding on new things. And the acquiring is going to come, and then there's going to be new things coming. Superdigital is very new, just launched, and that is probably going to improve over time. So -- but the basis -- as Emiliano said, the basis is what you see there.

[Operator]

[Operator Instructions] And our next question is from Neha Agarwala from HSBC.

[Neha Agarwala, analyst]

My first question is on the $380 million IT investment that you have. Should we expect that a good chunk of that would be expensed in 2019 since you're making the investments in all the new platforms? The second question is in terms of revenue contribution. What kind of -- how should we think about the revenue contribution from these new launches like the Superdigital or the Life program? I understand the acquiring will start next year, so that will probably come later on. But from all these other initiatives that you have taken, how should we think about the -- do you have any contribution from them? And the last question is on the acquiring platform. Could you give us some sense of the gross MDR that is charged to merchants today in Chile? And what is the interchange fee, which goes to the bank for credit and debit transactions? Any rough breakdown in the proportion of interchange fee and net MDR would be very helpful.

[Robert Moreno Heimlich, executive]

Okay. So regarding the IT expenses, well, this year, we started recognizing IFRS 16. So when you look at the cost, it's kind of confusing. But as we said in the call, our administrative expenses on a comparable basis went up by 10%. So personnel went up like a little bit above 0, and administrative expenses went up 10%. That's a very good reflection of what is happening. So administrative expenses went up because we launched the product within marketing. We've been investing a lot in cybersecurity. But on the other hand, all of these digital platforms have required very little investment in branches and personnel, and so there's productivities growing on that side. So they more than balance out, and we end up with a cost growth of around 3% to 4%. And that's the idea going forward.

Going forward, and probably we're -- Superdigital, they'll probably be more expenses regarding that. Some of the other products, a little less. We're going to continue transforming branches, a big cost that's still beginning is the digitalization of the branches. We've moved a lot in the Work Cafés and so forth, but the more standard branches have a lot of work to do. So -- but we also think that will cause efficiencies. That's why in the end, this should all translate in 3% to 4% cost growth.

And regarding the acquiring business, if my memory doesn't fail me, the gross MDR's around 2% or so in the Chilean...

[Emiliano Muratore, executive]

A bit lower.

[Robert Moreno Heimlich, executive]

A little bit lower, 1 point -- yes.

[Emiliano Muratore, executive]

For credit and around 1 for debit.

[Robert Moreno Heimlich, executive]

1 for debit. And...

[Neha Agarwala, analyst]

That's the gross MDR, 1 and 1 point...

[Robert Moreno Heimlich, executive]

Okay. And I don't have the figure here at the top of my mind. I'll get it to anyone who needs it for the interchange. I forgot what that figure was, I'm sorry.

[Neha Agarwala, analyst]

Okay. I was asking because you already received the interchange fee on your credit cuts. The additional revenue...

[Robert Moreno Heimlich, executive]

For some of the transactions, yes, yes, okay? What I can say is that in the quarter, we are paying more on -- in the end we're making a little bit more money than we were before when we started working with interchange, okay? So there hasn't been a big impact on the economics, which is a good thing. And the quarterly fees and credit cards, the lower income was more due to the -- was totally due to the change in the LATAM agreement...

[Emiliano Muratore, executive]

Rate environment.

[Robert Moreno Heimlich, executive]

Rate environment, and the timing, yes. But everything regarding -- starting to leave Transbank and going to the 4-part system, the economics are different, but they're slightly more favorable for us. That's why we -- and given that credit card usage is growing as well as debit card usage, we think those economics will become more and more apparent as the year goes on, okay?

[Operator]

And our next question is from Michael Brcic from National Security.

[Michael Brcic, analyst]

I just had a general question on Slide 16, where you talk about the checking accounts, and they have grown very well. It seems like everyone's checking accounts seem to be growing. I would've thought with the expansion of digital accounts, et cetera that the growth of checking accounts would slow down. Is that because the digital is not picking up as fast as it has in other places? Or can you just give me an idea of what's going on?

[Robert Moreno Heimlich, executive]

That includes the digital accounts. So what's happening is that a lot of people who don't have a checking account in Chile are accessing an account for the first time via digital, okay? That's the simple answer. So you have people opening accounts at the bank, but you also have the Life account, which is totally digital. So it's without the checkbook, but it's still a checking account. You see what I'm saying? So basically, what we're seeing in Chile is like a lot of people, even in the state-owned bank, opening more accounts than in the past, which is a very good thing. That means like a lot of the unbanked population is slowly moving into the formal banking sector.

[Operator]

Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Emiliano Muratore for closing remarks.

[Emiliano Muratore, executive]

So thank you all very much for taking the time to participate in today's call. We look forward to speaking with you again soon.

[Operator]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.