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Banco Santander-Chile (NYSE:BSAC)
Q4 2020 Earnings Call
Feb 4, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the fourth Quarter 2020 Banco Santander Chile Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to the Chief Financial Officer, Mr Emiliano Muratore. You may begin sir.

Emiliano Muratore -- Chief Financial Officer

Good morning, everyone. Welcome to Banco Santander-Chile's fourth quarter 2020 Results Webcast and Conference Call. This is Emiliano Muratore, CFO and I'm joined today by Robert Moreno, Managing Director of Investor Relations and Sindy Olea our economic research team.

Thank you for attending today's conference call. We hope you all continue to stay safe on healthy during the Chile has began a grand reopening which so far has been working well to control the health situation. We have a lot to discuss today with various important messages. Sindy will start with an update on the economy and the macro scenario, then we will go into the results of the bank during the quarter. And finally we will explain how we continue to progress with our digital strategy and own initiatives.

So now I will hand the call over to Cindy.

Sindy Olea Guajardo -- Economist

Thank you Emiliano. As you can see on Slide 4, following main stake of the company the situation in Chile will improve although in recent weeks, the cases have been up to rise again. Chile has sanctioned restriction meaning much of the population, around 70% is with some lockdown level. However, this level still remain below the first wave.

In Slide 5 we show that in Chile, the process to vaccinate the population has begun with over 56,000 people already vaccinated. In the first weeks with their result of the latest shipments we had total shipment we had total of 2.8 million vaccine. A massive vaccination process has begun starting with the weaker segments such as the health workers. Each week it will include a broader segment of the population.

If we come down at those that have close contact with people in they work. Chile have to request vaccine from all the major laboratory. The target is to have 5 million vaccinated by the end of March. And 30 million by the end of June with account for 80% of the population. Once the vaccination process allows effect heard immunity which required between 65% and 70% of the population has been inoculated, The Chile begin a sustained recovery toward levels close to this before the pandemic.

On slide 6, we can see the Chilean economy continues recovery during the first quarter, and showed mixed progress across sectors. The recovery of the retail sector was supported by the pension fund fund with liquidity stuck. In December 2, we drove of pension fund was approved and liquidity of around $14 billion for at the end of January and boosted consumption and the end of the year. Business confidence returned to have levels, especially in the industrial sector and employment has also continued to improve, led by this. This has led some projects to resume the process with March projects the first 2021 previously. As long as the vaccination process are done the recovery should continue throughout the rest of the year.

Finally, as you can see on Slide 7, the economy will grow 4.5% this year and inflation will remain muted as low as gap in the economy are refraining inflationary pressures. With this we have place to be the low charges during 2021 and compare so disclaimer by 2022. And their be the scenario the central warehouse get its monetary policy rate at 7.5% and have signal that it would keep it at this level for a long period. Also the Central Bank Board announced new space of the loan of conditional facility by USD10 billion for Sycamore starting March 2021.

These Finance for steroids to further the SMEs. Overall, we expect a slow growth during the first quarter of 2021 on a strong recovery in the second half of the year, assuming that at least 80% of the total population around 13 million people we'd be vaccinating during this period.

Robert Moreno -- Manager, Investor Relations

Thank you, Cindy. We will now move on to explain our strong balance sheet and results which showed good and strong trends in the quarter. Moving on to Slide 9, net income in 4Q '20 totaled CLP183 billion and increased 74.5% compared to the 3Q '20% and 57% compared to the fourth quarter '19. It is important to point out that 4Q results included an additional voluntary provision of CLP50 billion recognized in order to increase coverage ratios considering uncertainty still surrounding the potential impacts on credit quality of the COVID crisis. The higher net interest income, a rebound in fees and improvement in asset quality and cost control drove our results in the quarter the bank's return on average equity reached 20.4% in 4Q. With these strong results in the last quarter net income for the year for 2020 totaled CLP517 billion and decreased 6.3% with an ROE of 14, 5% in the year.

This places us, as one of the best performing banks in the region during last year. As you can see on Slide 10, we also significantly outperformed our local peers in 2020. Not only do we regain our leading position in total earnings, but we also led our peers in ROE, net interest margin and efficiency. One of the most important drivers of our strong results in 2020, as can be visualized in Slide 11, was net interest income. Despite I growth being focused on lower yielding and less risky assets during the year, we still managed to retain a 12.5% increase and NII in 2020 with a flat NIM that closed the year at 4%. Specifically in the fourth quarter the variation of the U.S. of 1.3% also helped to boost margins to 4.3% in the third quarter.

As we can see on Slide 12, despite facing similar market conditions the bank outperformed the market and evolution of NIMs and NII, our NII increased at a rate of four times that of the system excluding Santander. On average the NIM in the banking system, fell 40 basis points compared to a fairly stable NIM for us. There were various reasons for this positive trend. Positive evolution of the bank's funding mix, correct management of our inflation gap and the strong growth of interest earning assets.

As we can see and observe on Slide 13, non-interest bearing demand deposits increased 41% year-over-year due to high growth of retail checking accounts, continued strength in the bank's transactional banking services for companies and the positive impact of the second withdrawal from pension funds. On Slide 14 on the right hand side, we show how this growth of demand deposits occurred across all segments with demand deposits in retail banking leading the way increasing 9.1% Q-on-Q and 5.2% year-on-year.

Simultaneously, the bank continue to enforce strict price discipline and at CLP deposits, improving our time deposit funding costs to nominal pesos in absolute terms and compared to our main peers. In the fourth quarter, the average quarterly cost of our CLP time deposits was 0.4%, 0.49% falling below the monetary policy rate and opening a gap of 20 basis points compared to our main peers. On Slide 15, we review loan growth. Total loans increased 5% year-on-year and decreased 1.4% quarter-on-quarter. In the fourth quarter there was a slight uptick in higher yielding retail lending, consumer loans increased 0.3% Q-on-Q, which showed early signs of recovery after various quarters contracting. Mortgage loans increased 10.2% year-on-year and 2.5% quarter-on-quarter. Long-term interest rates have remained at attractive levels, contributing to the sustained growth of especially among high-income earners, the U.S. inflation rate of 1.3% in the quarter also resulted in a positive translation impact our mortgage loans, as most of these loans are denominated in U.S..

Loans to SMEs increased 0.4% Q-on-Q driven by FOGAPE loans. This program was launched at the beginning of May. Since then, demand has gradually been decelerating. The state guarantee covers on average around 78% of these loans. Loan demand remained sluggish in middle market and corporate segments, at the same time the 9.2% Q-on-Q appreciation of the Chilean peso against the dollar resulted in a translation loss of those loans denominated in dollars. Our strategy with these segments continues to focus on the overall profitability of clients focusing on non-lending activities, as well as lending.

As mentioned, this has resulted in an improved funding mix with high growth of demand deposits driving net interest income in the middle market and CIB, which increased 16% and 16.4% respectively despite the decrease in lending. Moving on to asset quality on Slide 16. In this slide, we show the breakdown of asset quality by loan-by-loan product. The NPL and impaired loan ratio continue to show positive trends after the expiration of payment holidays, especially in consumer mortgage loans. Only in commercial loans was there a slight uptick in impaired loans following the expiration of payment holidays this mainly occurred in the non-FOGAPE loans.

For this reason, the bank reassigned voluntary provisions from the consumer and mortgage loan book to the commercial loan book, thus increasing coverage. The coverage ratio for the loan book reached 227%, the NPL impaired loan ratio decreased to 5.2% and 1.4% respectively. Regarding the evolution of payment holidays on Slide 17, we show the evolution of these through December, which until now has been encouraging. As of year-end 2020, 33% of total loans were extended -- 32% of loans that were extended payment holiday and CLP2 trillion a FOGAPE loans were dispersed. Of these amount, the payment holiday for CLP8.4 trillion has expired at year-end and only 1% were overdue.

This included the expiration of a large portion of reprogram mortgage loans in October and November, a total of CLP4.6 trillion on mortgage loans with payment holidays expired with an early nonperformance ratio of 1%. FOGAPE payment holidays began to expire in December, where 50% had to begin payment. The payment behavior was also above expectations, with only 0.4% delay on their payments at the end of December. As we can see on Slide 18, by the end of February, 99% of the grace periods will have expired. So far in January, the positive trends we saw through December have continued.

On Slide 19, we show how these good asset quality indicators have led to a lower cost of credit in the fourth quarter of 1%, this includes in the quarter CLP50 billion of additional provisions. With this expense our year-to-date cost of credit reached 1.48%, and we now have in our balance sheet $126 billion in voluntary provisions to cover unexpected advance in 2021. In Slide 20, we take a quick look at non-interest income trends. Fee income increased 12% compared to the third quarter. Seasonal quarter showed healthy signs of pickup after low quarters affected by ongoing lockdowns, lower economic activity and regulatory impacts. This was mainly lend by card, checking account and insurance brokerage fees. Card fee -- card fees increased 9.8% quarter-on-quarter and 35% year-over-year due to the switch away from the 3-par interchange fee model commonly used in Chile to the 4-par Intergy fee model used more frequently worldwide.

The growth of our Life debit cards and Superdigital prepaid card, as well as a strong increase in online shopping also drove card usage and fees in the quarter. Insurance broker fees had a strong recovery, increasing 16.6% Q-on-Q after the bank has been heavily pushing its insurtech platforms. In April fair was officially launched and the bank online auto insurance broker -- brokerage business auto components is also gaining momentum and in the second half of this year. We became the number 1 auto insurance broker and Chile. The results from financial transactions totaled CLP4 billion in the quarter.

During the quarter, as we mentioned the peso appreciated 9.2%. This resulted in lower provision expense for loans denominated in dollars when translated to pesos. As this result is hedged, the counterbalance to the lower provision of CLP14 billion is recognized in this line item. The bank also continue to carry out various liability management operations to improve the cost of funds with initial loss recognized here, but a higher expected savings in interest expense going forward. The rebound in revenues in the quarter was also accompanied by good cost control as shown on Slide 21.

Operating expenses increased 2.5% year-on-year and decreased 1% quarter-on-quarter with the bank's efficiency ratio reaching 38.3% in the fourth quarter and 39.8% for the full year. Regarding capital ratios on Slide 22. The bank finished the year with strong capital ratios even after the bank's second dividend payment in November. During 2020, our regulatory capital increased by 19.5% compared to 0.1% fall in risk-weighted assets, demonstrating our disciplined approach to capital management. As a result, our core capital reached 10.7% at the end of the year compared to -- sorry 10.2% at year-end 2019. The total BIS ratio reached 15.4% at year end, a record high level. With these strong ratios, we can expect to maintain a good dividend policy in 2021, similar to the payout ratio we paid in -- over 2019 earnings.

In the final portion of this presentation, starting on Slide 24, we would like to update everyone on our most significant strategic and business initiatives. The strength of our digital channel was a key for us in the year. During 2020, our total digital clients increased 24% and we saw a 33% increase in sales through digital channels. Our market share of digital channels among private banks increased 200 basis points to 34%. This was accompanied by strong improvement in our NPS score to 51 points at year end, not only improving significantly during the year, but also surpassing our main peers for the first time. This reflects that our strategy is working on all fronts in terms of client growth, client satisfaction, productivity and profitability.

As summarized in Slide 25, we continued to advance in our different strategic initiatives. During the quarter, in our Santander digital talk, we outlined the various digital initiatives we have been working on with a two-pronged approach, run the bank and change the bank. In this event, we also announced our new investment plan of CLP250 million for the years 2021 to 2023, which will enable us to continue expanding our digital initiatives. Regarding our run the bank strategy, as we can see on Slide 26, Santander Life has been a game changer in the local banking industry due to the success of this product, merit to life program and the digital on-boarding process.

Life is a completely digital low cost solution for middle income segment clients. In 2020, the amount of account opening in Life increased 259%. Life is also rapidly monetizing its product offer. In 2020, total revenues generated by Life clients increased 115% and totaled CLP43 billion. Due to the success of Life and the improvement in our NPS, as of November 2020 and this is on Slide 27, Santander Chile opened more than 3 times checking accounts compared to all the other banks in Chile combined. Overall, market participation in checking accounts increased to 25.3% and was up from 21.7% at the end of 2019.

On Slide 28, we can also see that in the fourth quarter, the bank accelerated the branch transformation plan based on the more profitable and client-friendly Workcafe format. At the close of 2020, we had a total of 59 workcafes and opened four in the quarter. In the fourth quarter, we continue to expand the Workcafe community platform and launched the Workcafe marketplace, which is aimed at becoming one of the largest marketplaces for entrepreneurs and small businesses in Chile. At the same time, we reduced the number of branches under the more traditional format. In total, in 2020, we closed 5% of our branches, including 50% of our Santander Select network.

On Slide 29, we show how our digital initiatives and changes in the branch format is resulting in large rises in productivity. Loans plus the deposit volumes per branch increased 11.5% and loans plus deposit volumes per employee rose 13% in 2020. Our run the bank strategy also includes initiatives to become more sustainable through eco-friendly products.

On Slide 30, we outlined the most important initiatives in this regard. One of the most important program is -- sorry, one of the most important is a program that calculates a clients' carbon footprint, which can be compensated by acquiring certified carbon credits or a donation to a Chilean environmental project. In 2020, clients compensated to this program 2,543 tons of CO2. Together with Santander Asset Management, we launched a Green Mutual Fund that invest in companies with strong ESG metrics. We also launched our Green Mortgage Loan to acquire -- that will permit persons to acquire sustainable home with a preferential rate. Finally, retail banking launched Green Benefit, a program that gives special discounts on eco-friendly products when you use your credit card.

More products such as these will be launched in 2021. These initiatives as well as the many advances of the bank -- the bank has made in the area of sustainability has led to ample recognition of our efforts as can be seen on Slide 31. Our most recent Vigeo Score is 58 point, which places us in eighth place among 270 retail banks globally. We are now included in all major stock indexes that track sustainable companies. In the fourth quarter, we were integrated into the Dow Jones Sustainability Index for emerging markets being the only Chilean bank in this category. We are rated A in the MSCI Sustainability Ratings and we are included in the FTSE4Good Global Emerging Market Index.

Santiago Stock Exchange just announced the creation of another local index based on sustainability metrics. We are the third most rated company in this index that tracks Chilean companies that are leaders in ESG. Regarding our strategy to change the bank, we also made important inroads in the fourth quarter. On Slide 32, we height Superdigital, which continue to open a record amount of debit accounts in the quarter, providing an attractive alternative for unbanked Chileans. At the end of December 2020, we already had close to 129,000 clients. According to a study by the CMF, Superdigital has a 16% market share in account balance volumes. This shows the strength of the transactionality features of Superdigital, which is key to the future growth and monetization of this product.

The other areas of success in our change the bank strategy are our insurtech platform, as we can see on Slide 33. Klare continues to perform well, not only financially but the NPS score reached an all time high of 95. Autocompara broke new record for autoinsurance policies sold in November, reaffirming our leadership position in this product, driven by a 52% growth in autoinsurance policies sold. This bodes well for insurance brokerage fees in 2020. Finally, Getnet just received the go ahead from the CMF to begin operations. So we are finally able to launch our acquiring business, which should also help to boost fees -- to boost fee revenues in coming periods.

To conclude, some guidance for 2021 on Slide 34. 2020 ended on a high note, not just because of the high profitability levels, but also due to the success of the bank in 2020 and our digital efforts, client service management of asset quality and outpacing our peers in almost all financial metrics. This permits us to be cautiously optimistic for 2021. There are still many risks in -- sorry, there are still risks mainly the velocity of the economic recovery, the threats of new ways of COVID, political noise and as always regulatory risks. Taking all these factors into account, we see 2021 as a transition year. We expect loan growth to remain in the mid-single digits accelerating as the year progresses and with stronger growth in higher yielding retail segments like consumer loans.

We seen NIM stable with improvements in the asset mix as a tailwind but it will be difficult to sustain the current levels of demand deposit growth. Given the ongoing uncertainties surrounding the pandemic, we still do not see the cost of credit in 2021 going back to pre-COVID levels of 1% just yet. An initial estimate of 1.3% to 1.4 %is still more realistic at this time. Fee growth should be another important driver due to the reopening of the economy and the high growth of client growth in recent quarters. We expect costs to grow in line with inflation and an efficiency ratio slightly below 40%. Finally, all this said, we expect an ROE of 15% to 16% for 2021.

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

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Ernesto Gabilondo with Bank of America. Your question, please.

Ernesto Gabilondo -- Bank of America -- Analyst

Hi, good morning, Emiliano, Claudio and Robert. Thanks for your presentation, and for the opportunity. My first question is on fee income. Is it reasonable to expect fee income growth similar to your loan growth expectations or do you think it could be slightly better? And then my second question is on your operating expenses. You mentioned that you are expecting opex growth in line with inflation, but is this considering your transformation plan, just want to know that. And my last question is your expectations for net income, when interpreting your guidance is it reasonable to reach pre-COVID levels for '21 in income? Thank you.

Robert Moreno -- Manager, Investor Relations

Hello, Ernesto, and thank you for your question. Regarding fees, I think that it's fair to expect to have fees growing at loan growth speed or slightly better. I mean, there are many initiatives with Life and also business that should help us to sustain the fee growth. So I think it's -- yes, it's I would say from loan growth speed to the upside.

In terms of opex, yes, that is still lean. I mean, considering the the deformation, the Promissao plan. I mean, we always try to grow at most at inflation speed or slightly lower. So yes, that's considering all the factors. And in terms of of the net income well, that's I think 15% to 16% ROE guidance gives you like the ballpark that could be around the pre-COVID levels that we had in 2019.

Ernesto Gabilondo -- Bank of America -- Analyst

Thank you very much.

Operator

Thank you. Our next question comes from the line of Jason Mollin with Scotiabank. Your question please.

Jason Mollin -- Scotiabank -- Analyst

Hello, everyone. Can you hear me?

Robert Moreno -- Manager, Investor Relations

Yes.

Emiliano Muratore -- Chief Financial Officer

Yes.

Jason Mollin -- Scotiabank -- Analyst

Great. My first question is related to the 245,000 new Life clients that you showed in 2020 as well as the data on the almost 272,000 current account openings through November and that is impressive that is 3 times more than the rest of the banks in the system. Are these new Life clients included in the current account openings, and can you provide some color on these new clients in both either Life and/or current accounts? Are these clients that have accounts in other banks, are they new to the system, what kind of products are they using, deposits, loans cards, etc. and is there a time period you think it takes for these clients to mature and be profitable for the bank?

Robert Moreno -- Manager, Investor Relations

Okay...

Jason Mollin -- Scotiabank -- Analyst

Thanks.

Robert Moreno -- Manager, Investor Relations

Hi, Jason. Sure. So in the total checking account figures that includes Life. Okay, so Life is a fully digital on-boarding process for checking accounts. Superdigital is a prepaid debit card is not there, so I think one of the advantages of Life is that there's various products coming out in the Chilean system that capture kind of the middle income or the unbanked population. I think the big advantage of life is that it's a full-blown checking account and has no restrictions.

A lot of competing products and other banks put restrictions on how much you can deposit, how much you can transfer. They have fees for transferring, for transactionality. Santander Life's business model is a little bit difference. We don't have any type of minimum income you need to become a Life client but once you're in, you have a full-blown checking account but you do have a fee. You have a fee roughly of CLP2,000 a month but no other type of transactionality fee and no restrictions on how much you can take out of your account per day or how much you can transfer or deposit. So I think Life in that sense is becoming the go-to-product for -- especially for people who do a lot of transactions, OK.

And so it's been key in the opening of the current accounts. As we also show on slide -- in the presentation on the slide of Life, I think it's Slide 26. Given that Life clients most of them enter the bank with a checking account. If you qualify in terms of credit behavior, Life also does an automatic credit assessment of the person and if they qualify they are able to access either a credit card or line of credit. Life also gives you merits for saving, so there is program savings through a simple money market fund. And Life also clients can access a mortgage product in the rest of the bank. So Santander Life is fully integrated into the rest of the bank's product.

So for that reason Life clients in 2020 generated revenues between the fee and the net interest margin -- the net interest income through loans and savings of CLP43 billion. And last year that figure was CLP20 billion. So I think one of the good differentiating factors of Life compared to other products and other banks is that its business model is very low cost, but it also is a very high quality, but also monetizes very quickly.

The average client -- the client that's entering Life, the majority around 70% are new, OK. And I would say they're from all types. There are people who are unbanked, people who are switching over from other banks but there is a really a big group of people who before the COVID didn't really need a bank account or had or what I would call semi-unbanked. They would have a simple product maybe in the state-owned bank and this is basically the jump up a step to really having a full-blown account. A lot of people who are taking money from the pension funds or receiving funds from the right transfers from the government started finding a surprised that there are accounts within other banks and other products didn't support the amount of money that was flowing in because of these caps while Life has no caps of how much you can deposit.

So I would say, a big group of Life is semi-banked clients who are moving up a standard in the sense that Santander Life is a much better product without restrictions, it's monetizing quickly. And I would say, for example, the average Life client has an average amount in the checking account of around CLP300,000 to CLP400,000 per month and that's rather, rather high. If you look at the average in Superdigital and match these other kind of prepaid debit cards the average volume is significantly less. So the time to profitability, I would say, if they maintain these levels plus the fee is roughly a year or so.

Jason Mollin -- Scotiabank -- Analyst

That's very helpful. Maybe as a second question, you mentioned potential uncertainty related to regulatory changes, what kind of potential changes does Santander Chile see in the future and how are you preparing for them?

Emiliano Muratore -- Chief Financial Officer

Hello, Jason. I mean, in terms of regulation basically the things we have some visibility on is well the project of the government sent to regulate interchange fees that's in COVID, I mean was sent by the former Minister of Finance, so we are not sure how fast we'll now move. With the new minister that will potentially affect our issuer business because at the end data should be is what the the issuer bids and that's -- but we -- let's say we are following that but we think that we have different levers to rebound in the business in the way we sell and we offer the products depending on the outcome of the regulation.

Apart from that well now Basel III is, let's say it's not uncertain anymore because the regulation is known and is starting in December, and we are still fairly comfortable with that. We don't see an impact on our strategy and our capital strategy going forward coming from there. And apart from that, there were some indication in the Congress regarding insurances, but that like didn't move forward and and as well I said it's a matter of uncertainty of you never know what kind of initiatives can be here in Congress or from the government, but so far, those are the things we have a relatively visibility on.

Jason Mollin -- Scotiabank -- Analyst

Thank you very much.

Operator

Thank you. Our next question comes from Tito Labarta with Goldman Sachs. Your question please.

Tito Labarta -- Goldman Sachs -- Analyst

Hi, good morning, Miguel and Robert, thank you for the call. My question in terms of your guidance for cost of risk of 1.3 to 1.4, just looking at this quarter, seems a bit conservative. You mentioned you already booked 103 billion in additional provisions and 50 billion in this quarter. If we back that out, we estimate the cost of risk with a well below 1% this quarter. So just to understand, what's driving that 1.3 to 1.4, just seems relatively conservative given asset quality has held up well. I mean, I understand that was likely to deteriorate from here, but just wanted to get a sense, and what sort of behind that increase in the cost of risk from the current levels that we saw this quarter. Thank you.

Emiliano Muratore -- Chief Financial Officer

So Tito, thank you for the questions. Yes, I mean I think that's basically been like a conservative and especially thinking about the future and starting second quarter, so, I mean as you said, when you look at the last quarter of last year performance and what we have seen in January' so far, I mean it's so conservative, I mean the behavior of the portfolios are doing much better than expected.

The point is that it is still early in the year to assess that situation will be -- will stay as it is right now. I mean the vaccination process has just began and I would say that cost of risk, the guidance is being prudent and are factoring and the deterioration from where we are now started maybe several quarter and going forward. We don't know yet if we are going to a land above pre-COVID levels or in line or slightly below but that guidance is basically being conservative on that assessment of the future.

Tito Labarta -- Goldman Sachs -- Analyst

Okay. Thanks, Emiliano, that's helpful. And I guess maybe just a follow-up thinking also about ROE, the 15% to 16% guidance, I assume that's also because because of the relatively high cost of risk, I guess. When do you think you can get back to normalized levels of ROE and I guess, normalized cost of risk that probably second half of the year than more 2022? And when would you say is a normalized ROE or sustainable long-term level of ROE, can you get back to 17%, 18%, if you can give any range on that would be helpful. Thank you.

Robert Moreno -- Manager, Investor Relations

Yeah. So basically the way we see it -- we still, everything is, as Emiliano said and as you saw in the quarter is going in the right direction, absolutely. And remember, we did have two big withdrawals of the pension fund. So what we need now is the vaccinations to come through quickly, the economy to stay before people -- there isn't much money for a third withdrawal, OK, so you kind of have to factor in.

With this, if everything goes as things have gone and so, now by the second half, the cost of risk should be decelerating, the ROE should be improving, OK, and we think that 2020 year -- 2022 should be the year where we surpassed or so how we go back to ROEs more in line with pre-COVID levels around 17% or so. So I think everything is going in the right direction, we just have to see how these next six months go.

Things are going well, but there is still some uncertainty. If everything goes as planned as Cindy laid out in the economic forecast, yeah, then 2022 should be a year, going back to pre-COVID ROE levels.

Tito Labarta -- Goldman Sachs -- Analyst

Okay. Thank you, Robert, that's helpful.

Operator

Thank you. Our next question comes from Yuri Fernandes with J.P. Morgan. Your question please.

Yuri Fernandes -- JPMorgan Chase & Co. -- Analyst

Hi, gentlemen. Good morning and congratulations on the results. I have a question regarding your acquire units like Getnet. Can you provide an update on Transbank> I think you you already release you last there, but can you provide like an update on how Getnet should evolve now, like any update on the global global plan of Santander is paying to have like a global payments units just for us to have an update on the acquired. Thank you.

Emiliano Muratore -- Chief Financial Officer

Okay. Thank you Yuri your question. I mean, rather than acquiring, as Robert commented, the good news is that we finally got regulatory approvals, so we are ready to go. I mean, the commercial launch of the product will be in the coming days. We are, let's say, still very optimistic about the future, I mean, we are targeting to reach 15% market share in the -- maybe during 2022, in the next 12 to 24 months. I think we have there a good opportunity to to complement the offering we do to our existing -- current existing clients in the SMEs merchants, but also add new clients. I mean, we definitely believe that the -- that working capital solution, we will be able to offer to our clients, including the acquiring service is very compelling and competitive to what the market has as today.

In terms of the global platform, as you know, I mean that we will be developing this by next global platform and that's -- the addition for that is to be the global backbone of the different payment solution of the group, for us it's really positive to have that global initiative, also supporting our local effort. We began the acquiring business with Evertec as our process, but definitely in the long run, the idea is to integrate and to be part of the of the global solution for the brand, that, as I said, it's a very competitive advantage for us that we will be significant part of the working capital cycle for our clients with a local approach to a local products, but with supported and sustained by with lower backbone developed by the group. So it's completely in line and a complemented by the group's initiatives.

Yuri Fernandes -- JPMorgan Chase & Co. -- Analyst

And in the case of Brazil, we are seeing -- and it's been of the acquiring activity like it's still ongoing, but there are discussions in that like that, like there are studies on that regard like to spin-off in the least a new company just like for payments. Is there anything like that in Chile?

Robert Moreno -- Manager, Investor Relations

I mean it's really not like that, I mean basically today would have nothing to spin out, because the business has...

Yuri Fernandes -- JPMorgan Chase & Co. -- Analyst

It is difficult...

Robert Moreno -- Manager, Investor Relations

I think that basically our focus now is to grow the business, to grow fast, to gain market share, and after that, I mean we can review and discuss what to do in terms of the spin-off and ownership, but so far, our main focus is to grow the business, been in the market and grab market share.

Yuri Fernandes -- JPMorgan Chase & Co. -- Analyst

Super clear, thank you very much.

Operator

Thank you. Our next question comes from Alonso Garcia with Credit Suisse. Your question please.

Alonso Garcia -- Credit Suisse -- Analyst

Good morning, everyone. Thank you for taking my question. My question is regarding dividends. I mean last year you paid your dividends in two installments as opposed to one, previously. So my question is for this year, should we expect a single due impairment or in two installments and what is the expect this timing for it? And my second question is on the mean, I mean, what are the potential sources of risk both to the downside and to the upside to your stable mean guidance? Thank you.

Emiliano Muratore -- Chief Financial Officer

Hello, Alonso, so thank you for your questions. I will take the first one and I'll let Robert deal with the second one. In terms of dividends, as you said, I mean, last year, we split the payment basically because by April when we usually pay uncertainty about COVID around the pandemic was really high. So we decided to split it and basically due to complete the 60% payout in November with the second payment. That's a flexibility that definitely, we don't want to lose. I mean we have, I mean, we've had so far, I wouldn't expect kind of a split, I mean for this year with the information we have, it was expect to go back to normal in terms of one payment in April by the end of April. That's subject to what's going on in the macro scenario in general if the bank balance sheets progresses.

So if at that moment we -- I don't make it, not we, I mean it's basically a Board proposal and the AGM decision but if we think that the best option is also to go with a split payment we could do it, but it's not what we are foreseeing at this moment.

Robert Moreno -- Manager, Investor Relations

And regarding the NIMs, the potential downside I would say is on the loan mix. So we are expecting loan growth to pick up. I think that's a key component, which even though we started with a good asset quality and we continue to see it. As you see in the fourth quarter still loan growth really hasn't picked up at that rate base, but we are expecting eventually that to kick in, especially in the retail side. For example, last year, consumer lending fell 10%, so we think when people start to really feel more confident to go outside, to start spending again and that's going to boost retail lending and that's going to be a potential a supporter of NIMs. But if tomorrow that gets behind track, that's I would say the main potential downside to NIMs.

On the upside, I would say it's inflation, yeah. We have a 2.6% U.S. inflation forecast. I would say, market, if you look at the Bloomberg estimates and so forth or different economists, some people are talking about U.S. inflation or inflation above 3% and there is mixed feelings about inflation. On the one hand, there is a view that people are going to be reopening and spending a lot and there's going to be some pressure on prices. On the other hand, we do still see a lot of output gaps in Chile, that's why this time we're a little more conservative on our inflation outlook. But if inflation does go to work, the market is more expecting the levels above 3%, for the year that would be a nice upside for our NIMs.

That's why we, overall, we have more or less NIM flat, OK.

Alonso Garcia -- Credit Suisse -- Analyst

Understood. Thank you, Robert. Thank you, Emiliano.

Operator

Thank you. Our next question comes from Jorg Friedemann with Citibank. Your question please.

Jorg Friedemann -- Banco Santander-Chile -- Analyst

Hi, thank you very much for the opportunity. Can you hear me?

Emiliano Muratore -- Chief Financial Officer

Yeah.

Robert Moreno -- Manager, Investor Relations

Yeah.

Operator

Yes.

Jorg Friedemann -- Banco Santander-Chile -- Analyst

Perfect. Thank you very much. So I have a couple of doubts with regards to the numbers for provisions because it hasn't been impressive for me that I know you posted approximately CLP90 billion of provisions this quarter being less than that. And you highlighted that you had CLP50 billion in additional provisions. When you look into the numbers, even before 2009 that were marked by the extraordinary provisions on the regulatory changes, you had levels between CLP75 million, CLP80 million per quarter. So how do you attribute such an improvement for the level of provisions taking into consideration the pandemic and the NPL creation?

And associated to that question, I just wonder if I know the levels of 1.3 to 1.4 of cost of risk for 2021 already taking into consideration the ongoing pressures and what they show at decent operators from the pandemic, so you continue constituting I know higher provisions to face this challenge. Any special because I could be wrong and you correct me if I am, but recoveries are not normalized during the pandemic, they came down 10% approximately year-over-year. So they should be improving as we are in 2021, so this makes your cost of risk guidance even more conservative in that regard because you quote recoveries should be helping a bit more now. Thank you.

Emiliano Muratore -- Chief Financial Officer

Thank you, Jorg. And going into the cost of risk for last quarter, as you said, I mean, basically more than half of the total charge was coming from one day provisions and that -- leaving aside, there's one-day provisions, the level is really, really low. The reason behind that, it's -- I think it's a combination because when -- as you know we had been getting our portfolio much more geared to middle to high income pension funds, so I would say that the overall quality of the portfolio got better sequentially in the last few years. So the underlying quality is playing the role but also the withdrawals from the pension funds in Chile have been a very critical driver for many of the figures we have seen in the economy as a whole as -- and in the terms of asset quality for banks.

That's why we kind of used voluntary provisions to cover a potential deterioration, I mean, as -- and now go into the guidance, I would say, that we are proud to remain at the duration from where we are now not because we are seeing it, but we want to be prudent, I mean the figures from that January are in line with what we saw last quarter been -- so far, the information is supportive and encouraging, but we don't think that the pandemic is over and the sky is so clear. So we are at the same time maybe having a prudent approach to getting worse from where we are now and also not factoring in any reversals from both our provisions.

I mean, like we said that that is also like an important point to highlight that having the voluntary provisions already built and is at the moment of time, the potential duration could be absorbed by reversal of those. That's something we are not factoring in in the guidance, basically it's a guidance covering or basically implying a potential deterioration and without using the voluntary provision as a way to counterbalance that. I don't know Bob if you want to...

Robert Moreno -- Manager, Investor Relations

Yeah, I think that's what was really important what Emiliano said that in -- that idea here is to keep a high collar, OK. So I think we're in a good position. Everything is going in the correct direction. We hopefully do not want to reverse the voluntary provisions and as we said, as the year goes on, everyone is -- we're very optimistic, obviously about this year, but we have to see how the first half goes, OK. There is -- it comes end up being a really clear sunny skies or again the things get cloudy again.

We're -- as we said in the call, we're cautiously optimistic, but we can and rule out and add something with what's happened now in Chile, there are a lot more lockdowns and stuff, it's not even near what it was before. But that risk is always still there and until we have a lot more certainty about the end of that risk, we have to be prudent.

Emiliano Muratore -- Chief Financial Officer

Yeah, it's also just I think, mentioned in that, when you look at the profile during the year, I would say first quarter and even the second quarter in a whole, we are already seeing in asset quality and even in inflation, the names -- I mean, the first part looks relatively positive with a higher level of certainty than thinking about the second half that is the thing to consider. I mean like the first part is relatively visible and it looks encouraging, but then we don't know how the situation would fall with all the vaccination and the rest of the year. That's perfect. Very clear. Thank you very much.

Operator

Thank you. And our last question comes from the line of Neha Agarwala with HSBC. Your question please. Congratulations on result thank you for taking my question. Very quickly, could you please tell us what the macro expectations that you're working with and your outlook on the political situation the elections, and the change in the constitution that is ongoing. Secondly, given the strong growth in in the life product in Superdigital, is it fair to expect double-digit fee income growth in the coming years, not just in 21 but it's product for the medium term. We could see strong fee income growth and lastly, any change in the competitive landscape. Thank you so much.

Robert Moreno -- Manager, Investor Relations

Okay. So on regarding macro expectations and as we one second let me. So this year, we obviously expecting a rebound in GDP, and I think this year we are expecting GDP to grow 4, 5%. Obviously, I think the external sector continues to be beneficial for Chile, in terms of export growth and so forth.

Also in Chile, We are also should expect a rebound in investment. I think it was on Slide 6. One of the graph we show on Slide 6, we have something called the capital goods inventory, which is basically the large investment projects that are plan for the future. And then and what we're seeing this year is a big pick up in some of the projects that were, that were kind of those frozen last year. Okay. And I would say the only weakness here is the reopening. I think investment will slowly pick up the external scenario doing well, but we have to see how quickly economy is able to reopen and that is that kind of the big and uncertainty.

But as we said, Chile has a are really well organized vaccination program that if all of goes well, that should really help to to easily reach our macro expectations and the other thing the political situation, it's no mystery that this is an intense political year in Chile. Remember, in April we have elections to the Constitutional Convention. We also have an April elections for mayors and governance. And then in November we have elections for President and for Congress. So we're going to spend a lot of time at the polls and I would say here the situation is rather calm, I think in Chile has strong institutions, but obviously you always have to keep a look out on what happens on the political front even, I would say compared to where we were at the end of 2019, the situation here is, has been much more institutionalized and things are running their course in a democratic way.

So, but obviously that's something you have to have to keep and eye on. And regarding Life and so whole, yeah, I think an important thing here is that in the outlook for fees we think is quite good. remember last year, the first quarter of last year. It started out very strong. Okay. We have like CLP74 billion in fees in the first quarter and the fourth quarter we had 69, which was a was much better than, than the second and third. So if we continue this speeding up fees. I think we should be close to the, to the low-teens this year of growth. Maybe between 8% and 10% and idea obviously is with the new businesses in new initiatives and new clients is to keep a fee growth above loan growth for the next 3 years.

Neha Agarwala -- HSBC -- Analyst

Perfect. And competition, any change there.

Robert Moreno -- Manager, Investor Relations

No, it remains very competitive. A lot of banks non-banks are launching there there digital debit cards. Similar to Super Ticket and somewhat similar to Life. But I still think life is superior to all those products but definitely we moved ahead, I think quicker than most banks in Chile. But obviously, everyone is starting to catch up on the digital front. So that's why we have to continue innovating because a lot of competing products are coming out now.

Emiliano Muratore -- Chief Financial Officer

And also I think it's important in the competitive environment to consider the Basel III implementation that it's finally going to take place although there is a phasing period that we see that as a point that could affect or modified growth strategy from some of the players who need to close the gap. To the minimums that Basel III requires. In our case, it's a kind of non-issue. I mean, we don't see any, any impact on our strategy or business, growth prospects, but I think that for some other players might be a think could, that would make them reassess some of their segments or pricing strategy that it's going to be positive for us in the relative term.

Neha Agarwala -- HSBC -- Analyst

Great, thank you so much for these answers.

Operator

Thank you. And this ends our Q&A for today. I would like to turn the call back to Robert Moreno for his final remarks.

Robert Moreno -- Manager, Investor Relations

Okay, thank you very much for participating. I hope to speak to you soon again during the quarter. Thanks.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Emiliano Muratore -- Chief Financial Officer

Sindy Olea Guajardo -- Economist

Robert Moreno -- Manager, Investor Relations

Ernesto Gabilondo -- Bank of America -- Analyst

Jason Mollin -- Scotiabank -- Analyst

Tito Labarta -- Goldman Sachs -- Analyst

Yuri Fernandes -- JPMorgan Chase & Co. -- Analyst

Alonso Garcia -- Credit Suisse -- Analyst

Jorg Friedemann -- Banco Santander-Chile -- Analyst

Neha Agarwala -- HSBC -- Analyst

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