Edgar Filing: BANCO SANTANDER CHILE

FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

Commission File Number: 001-14554

Banco Santander Chile

Santander Chile Bank

(Translation of Registrant’s Name into English)

Bandera 140

Santiago, Chile

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F

Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

Table of Contents

Item
1.	4Q2011 Earnings Release

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BANCO SANTANDER-CHILE

	By:	/s/
	Name:	Juan Pedro Santa María
	Title:	General Counsel
Date: February 1, 2012

BANCO SANTANDER CHILE

FOURTH QUARTER 2011

EARNINGS REPORT

INDEX

SECTION		PAGE

SECTION 1: SUMMARY OF RESULTS		2

SECTION 2: BALANCE SHEET ANALYSIS		6

SECTION 3: ANALYSIS OF QUARTERLY INCOME STATEMENT		9

SECTION 4: CREDIT RISK RATINGS		16

SECTION 5: SHARE PERFORMANCE		17

ANNEX 1: NEW PROVISIONING MODEL FOR COMMERCIAL LOANS ANALYZED ON A GROUP BASIS		18

ANNEX 2: BALANCE SHEET		19

ANNEX 3: YEAR-TO-DATE INCOME STATEMENT		20

ANNEX 4: QUARTERLY INCOME STATEMENTS		21

CONTACT INFORMATION	Santiago, Chile
Robert Moreno	Tel: (562) 320-8284
Manager, Investor Relations Department	Fax: (562) 671-6554
Banco Santander Chile	Email: rmorenoh@santander.cl
Bandera 140 Piso 19	Website: www.santander.cl

SECTION 1: SUMMARY OF RESULTS

In 2011, Santander Chile’s ROE reached 23.0% with an efficiency ratio of 38.4%

In 2011 (12M11), Net income attributable to shareholders¹ totaled Ch$435,084 million (Ch$2.31 per share and US$4.60/ADR²) and decreased 8.8% compared to net income achieved in 2010. ROE reached 23.0% in 12M11, among the highest returns in the Chilean financial system. The Efficiency ratio in 12M11 reached 38.4%, one of the best in Chile.

4Q11: Net income up 35.9% QoQ, driven by solid operating trends

In 4Q11, Net income attributable to shareholders totaled Ch$102,121 million (Ch$0.54 per share and US$1.08/ADR). Compared to 3Q11 (from now on QoQ) Net income increased 35.9%. Compared to 4Q10 (from now on YoY) net income increased 8.8%. During the quarter, the Bank saw an important QoQ improvement in margins and profitability. Gross income net of provisions and costs, a good proxy for recurrent earnings growth, increased 27.1% QoQ and 24.6% YoY in 4Q11. ROE in the quarter reached 20.8% compared to 15.8% in 3Q11.

(Ch$ million)	4Q11			YoY Chg.			QoQ Chg.
Net interest income		264,146			13.9	%		13.8	%
Provision expense*		(86,607	)		(13.8	)%		(4.2	)%
Net interest income, net of provisions		177,539			35.1	%		25.3	%
Fee income		68,406			(1.8	)%		3.7	%
Financial transactions		15,927			(19.0	)%		(30.8	)%
Operating expenses		(131,815	)		13.3	%		2.7	%
Gross income, net of provisions & costs		130,057			24.6	%		27.1	%
Other operating and non-operating income, net**		(27,936	)		166.8	%		2.8	%

Net income attributable to shareholders		102,121			8.8	%		35.9	%

**Includes other operating income and expenses and non-operating items

Our outlook for Chile in 2012 continues to be positive, with GDP expected to grow between 3.8 - 4.0% and inflation to be close to 2.8%. Nonetheless, the Bank has been taking actions on 4 main points during the second half of 2011 in order to maintain sustainable levels of high profitability and efficiency in 2012 even if the external situation has a larger impact on this central scenario: (i) selective loan growth and spreads, (ii) prudent risk policies, (iii) high liquidity, and (iv) strong capital.

1 The results in this report are unaudited and are reported according to Chilean Bank GAAP.

2 Earnings per ADR was calculated using the Observed Exchange Rate of Ch$521.46 per US$ as of December 31, 2011.

Investor Relations Department	2
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

I. Net interest margin reached 5.3%, increasing 70bp QoQ

The Bank’s Net interest margin reached 5.3% in 4Q11, increasing 70 basis points compared to the net interest margin reached in 3Q11. Net interest income increased 13.8% QoQ and 13.9% YoY in 4Q11. The higher quarterly Net interest income and NIM was mainly due to higher inflation rates in the quarter, since the Bank has more assets than liabilities linked to inflation. Inflation, measured as the variation of the Unidad de Fomento (an inflation indexed currency unit), increased 1.28% in 4Q11 compared to 0.56% in 3Q11 and 0.54% in 4Q10. Higher loan spreads (excluding the impacts of mismatches in inflation indexed assets and liabilities) also helped to boost the Bank’s NIM in the quarter. Loan spreads in the quarter went up following the stricter pricing policy implemented in 3Q11 by the Bank.

Selective loan growth led by lending to individuals and SMEs

In 4Q11, total loans decreased 1.9% QoQ and increased 10.8% YoY. The Bank has been following a more selective approach to loan growth in recent quarters. In the quarter, the Bank focused on expanding its higher yielding credit card loan portfolio that increased 1.6% QoQ and 15.9% YoY. Lending to SMEs led growth in the loan book and expanded 1.5% QoQ (7.8% YoY), reflecting the Bank’s consistent focus on this expanding segment. Relatively low yielding corporate loans decreased 18.5% QoQ.

II. Lower provision expense in the quarter and a stable evolution of the Bank’s Risk Index

Provision for loan losses in the quarter decreased 4.2% QoQ and 13.8% YoY. For the full year, net provision expense increased 0% compared to a 10.8% rise in loans. In addition, during the quarter, the Bank upgraded its provisioning model for loans to SMEs (See Annex 1). This signified a one-time charge of Ch$16bn in 4Q11. This concluded the process started in 2010 of overhauling our retail banking credit risk models. This should permit the credit risk areas to increase feedback regarding potential growth opportunities to commercial teams and allow the Bank to allocate capital more efficiently among business segments.

The Risk Index, which measures the percentage of loans for which the Bank must set aside loan loss allowances, based on our internal models and Superintendency of Banks guidelines, remained stable at approximately 3% throughout 2011 (3.02% in 4Q11). The Bank’s Non-performing loans ratio (NPL) increased from 2.8% in 3Q10 to 3.0% in 4Q11. This was mainly due to the fall in large corporate loans and higher growth of the Banks’ retail activities. The Coverage ratio of total NPLs (loan loss allowances over non-performing loans) reached 102.4% as of December 2011.

Investor Relations Department	3
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

III. Solid growth of core deposits in the quarter

Customer funds (deposits + mutual funds) decreased 2.8% QoQ and increased 10.8% in the year. Core deposits (deposits from non-institutional clients) increased 2.8% QoQ and 29.2% YoY. As of December 2011, core deposits represented 74.6% of our total deposits compared to 67.0% as of December 2010. Our strategy of focusing on liquidity and core deposits in 2011 has resulted in an improved funding mix. The Bank’s loan to deposit ratio (measured as loans minus marketable securities that fund mortgage portfolio over total deposits) improved to 95.4% as of December 2011 compared to 99.8% as December 2010.

IV. Core capital at 11.0% in 4Q11, increasing 80bp QoQ

Shareholders’ equity totaled Ch$2,001,222 million (US$3.8 billion) as of December 2011. The Bank’s BIS ratio reached 14.73% as of December 31, 2011 compared to 13.94% as of September 2011 and 14.52% as of December 2010. The Bank’s core capital ratio reached 11.0% as of December 2011 compared to 10.2% at the end of 3Q11 and 10.6% in December 2010. Voting common shareholders’ equity is the sole component of our Tier I capital.

Investor Relations Department	4
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

Banco Santander Chile: Summary of Quarterly Results

	Quarter									Change %
(Ch$ million)	4Q11			3Q11			4Q10			4Q11 / 4Q10			4Q11 / 3Q11
Net interest income		264,146			232,057			231,865			13.9	%		13.8	%
Fee income		68,406			65,991			69,637			(1.8	)%		3.7	%
Core revenues		332,552			298,048			301,502			10.3	%		11.6	%
Financial transactions, net		15,927			23,001			19,661			(19.0	)%		(30.8	)%
Provision expense		(86,607	)		(90,372	)		(100,441	)		(13.8	)%		(4.2	)%
Operating expenses		(131,815	)		(128,356	)		(116,380	)		13.3	%		2.7	%
Operating income, net of provisions and costs		130,057			102,321			104,342			24.6	%		27.1	%
Other operating & Non-op. Income		(27,936	)		(27,168	)		(10,470	)		166.8	%		2.8	%
Net income attributable to shareholders		102,121			75,153			93,872			8.8	%		35.9	%
Net income/share (Ch$)		0.54			0.40			0.50			8.8	%		35.9	%
Net income/ADR (US$)¹		1.08			0.80			1.11			(2.3	)%		34.2	%
Total loans		17,347,093			17,680,356			15,657,556			10.8	%		(1.9	)%
Deposits		13,334,930			13,892,003			11,495,191			16.0	%		(4.0	)%
Shareholders’ equity		2,001,222			1,927,498			1,831,798			9.2	%		3.8	%
Net interest margin		5.3	%		4.6	%		5.4	%
Efficiency ratio		38.5	%		41.3	%		35.1	%
Return on average equity²		20.8	%		15.8	%		20.8	%
NPL / Total loans³		2.95	%		2.81	%		2.66	%
Coverage NPLs		102.4	%		104.8	%		115.6	%
Risk Index⁴		3.02	%		2.94	%		3.08	%
PDLs/ Total loans⁵		1.37	%		1.27	%		1.32	%
Coverage PDLs		220.43	%		232.45	%		233.10	%
BIS ratio		14.73	%		13.94	%		14.52	%
Branches		499			494			504
ATMs		1,920			1,892			2,018
Employees		11,566			11,706			11,001

1.	The change in earnings per ADR may differ from the change in earnings per share due to the exchange rate movements. Earnings per ADR was calculated using the Observed Exchange Rate Ch$521.46 per US$ as of December 31, 2011.

2.	Annualized quarterly Net income attributable to shareholders / Average equity attributable to shareholders.

3.	NPLs: Non-performing loans; full balance of loans with one installment 90 days or more overdue.

4.	Risk Index: Loan loss allowances / Total loans; measures the percentage of loans the banks must provision for given their internal models and the Superintendency of Banks guidelines.

5.	PDLs: Past due loans; all loan installments that are more than 90 days overdue.

Investor Relations Department	5
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

SECTION 2: BALANCE SHEET ANALYSIS

LOANS

Selective loan growth led by an increase in lending to individuals and SMEs

Loans	Quarter ended,				% Change
(Ch$ million)		Dec-11	Sep-11	Dec-10		Dec. 11 / 10		Dec. 11 / Sept. 11
Total loans to individuals1		9,287,585	9,187,526	8,407,416		10.5	%	1.1	%
Consumer loans		2,943,846	2,925,659	2,700,791		9.0	%	0.6	%
Residential mortgage loans		5,115,663	5,016,419	4,651,136		10.0	%	2.0	%
SMEs		2,560,736	2,522,698	2,375,192		7.8	%	1.5	%
Total retail lending		11,848,321	11,710,224	10,782,608		9.9	%	1.2	%
Institutional lending		355,199	351,644	331,153		7.3	%	1.0	%
Middle-Market & Real estate		3,650,709	3,731,980	3,288,107		11.0	%	-2.2	%
Corporate		1,494,752	1,905,005	1,293,305		15.6	%	-21.5	%
Total loans 2		17,347,094	17,680,356	15,657,556		10.8	%	-1.9	%

1. Includes consumer loans, residential mortgage loans and other commercial loans to individuals.

2. Total loans gross of loan loss allowances. Total loans include other non-segmented loans and excludes interbank loans.

In 4Q11, total loans decreased 1.9% QoQ and increased 10.8% YoY. The Bank has been following a more selective approach to loan growth given the market uncertainty while continuing to focus on high yielding retail lending activities.

Loans to individuals, which include consumer, mortgage and commercial loans to individuals, increased of 1.1% QoQ in 4Q11 and 10.5% YoY. By product, consumer loans increased 0.6% QoQ and 9.0% YoY. In the quarter, the Bank focused on expanding its higher yielding credit card loan portfolio that increased 1.6% QoQ and 15.9% YoY. Installment loans were flat QoQ. Residential mortgage loans increased 2.0% QoQ (10.0% YoY), as long-term rates remained attractive and demand for purchasing homes continued to rise.

Lending to SMEs (defined as companies that sell less than Ch$1,200 million per year) led growth in the loan book and expanded 1.5% QoQ (7.8% YoY), reflecting the Bank’s consistent focus on this expanding segment.

Lending in the middle market (companies with annual sales between Ch$1,200 million and Ch$10.000 million per year) and Corporate lending (companies with sale over Ch$10,000 million per year or that are part of a large foreign or local economic group), contracted as a result of the Bank’s focus on higher yielding businesses, especially non-lending activities, with our corporate customers. This in line with our objective of higher ROEs going forward.

Investor Relations Department	6
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

FUNDING

Core deposits grow 2.8% QoQ and 29.2% YoY

Funding	Quarter ended,									% Change
(Ch$ million)	Dec-11			Sep-11			Dec-10			Dec. 11 / 10			Dec. 11 / Sept. 11
Demand deposits		4,413,815			4,496,757			4,236,434			4.2	%		(1.8	)%
Time deposits		8,921,114			9,395,246			7,258,757			22.9	%		(5.0	)%
Total deposits		13,334,929			13,892,003			11,495,191			16.0	%		(4.0	)%
Mutual funds (off-balance sheet)		2,940,567			2,852,379			3,188,151			(7.8	)%		3.1	%
Total customer funds		16,275,496			16,744,382			14,683,342			10.8	%		(2.8	)%
Loans to deposits¹		95.4	%		94.8	%		99.8	%

1. (Loans - marketable securities that fund mortgage portfolio) / (Time deposits + demand deposits).

Customer funds (deposits + mutual funds) decreased 2.8% QoQ and increased 10.8% in the year. During 4Q11, local market rate for deposits increased as some of our competitors increased their liquidity buffers in light of the financial situation in Europe. As explained in our 3Q11 Earnings Report, Santander Chile had previously increased its own structural liquidity, thus allowing it to avoid paying higher deposit rates to institutional investors in the quarter. In fact, the Bank in December bought back in the secondary market approximately US$400 million of its own deposits given our solid liquidity position. This explains largely the fall in time deposits seen in 4Q11. On the other hand, Core deposits, which are deposits from non-institutional sources and, therefore, a cheaper and more stable funding source, continued to rise. Core deposits increased 2.8% QoQ and 29.2% YoY. As of December 2011, core deposits represented 74.6% of our total deposits compared to 67.0% as of December 2010. This should also have a positive impact on funding costs going forward.

This strategy of focusing on liquidity and core deposits in 2011 has resulted in an improved funding mix. The Bank’s loan to deposit ratio (measured as loans minus marketable securities that fund mortgage portfolio over total deposits) improved to 95.4% as of December 2011 compared to 99.8% as December 2010.

Investor Relations Department	7
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL

Core capital at 11.0%. ROAE in 2011 reached 23.0%

Shareholders' Equity	Quarter ended,									Change %
(Ch$ million)	Dec-11			Sep-11			Dec-10			Dec. 11 / 10			Dec. 11 / Sept. 11
Capital		891,303			891,303			891,303			0.0	%		0.0	%
Reserves		51,539			51,539			51,539			0.0	%		0.0	%
Valuation adjustment		2,832			593			(5,180	)		(154.7	)%		377.5	%
Retained Earnings:		1,055,548			984,063			894,136			18.1	%		7.3	%
Retained earnings prior periods		750,989			750,989			560,128			34.1	%		0.0	%
Income for the period		435,084			332,963			477,155			(8.8	)%		30.7	%
Provision for mandatory dividend		(130,525	)		(99,889	)		(143,147	)		(8.8	)%		30.7	%
Equity attributable to shareholders		2,001,222			1,927,498			1,831,798			9.2	%		3.8	%
Non-controlling interest		33,801			32,293			31,809			6.3	%		4.7	%
Total Equity		2,035,023			1,959,791			1,863,607			9.2	%		3.8	%
Quarterly ROAE		20.8	%		15.8	%		20.8	%

Shareholders’ equity totaled Ch$2,001,222 million (US$3.8 billion) as of December 2011. ROAE in 2011 reached 23.0%. During 2011, the Bank implemented a series of measures to boost core capital ratios by optimizing risk-weighted assets. As a result, the BIS ratio reached 14.73% as of December 31, 2011 compared to 13.94% as of September 2011 and 14.52% as of December 2010. The Bank’s core capital ratio reached 11.0% as of December 2011 compared to 10.2% at the end of 3Q11 and 10.6% in December 2010. Voting common shareholders’ equity is the sole component of our Tier I capital.

Capital Adequacy	Quarter ended,									Change %
(Ch$ million)	Dec-11			Sep-11			Dec-10			Dec. 11 / 10			Dec. 11 / Sept. 11
Tier I (Core Capital)		2,001,222			1,927,498			1,831,798			9.2	%		3.8	%
Tier II		686,171			715,184			672,099			2.1	%		(4.1	)%
Regulatory capital		2,687,393			2,642,682			2,503,898			7.3	%		1.7	%
Risk weighted assets		18,243,142			18,954,146			17,245,265			5.8	%		(3.8	)%
Tier I (Core capital) ratio		11.0	%		10.2	%		10.6	%
BIS ratio		14.73	%		13.94	%		14.52	%

Investor Relations Department	8
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

SECTION 3: ANALYSIS OF QUARTERLY INCOME STATEMENT

NET INTEREST INCOME

Net interest margin reaches 5.3% in the quarter due to higher inflation and loan spreads

Net Interest Income / Margin	Quarter									Change %
(Ch$ million)	4Q11			3Q11			4Q10			4Q11 / 4Q10			4Q11 / 3Q11
Interest income		497,457			420,729			367,381			35.4	%		18.2	%
Interest expense		(233,311	)		(188,672	)		(135,516	)		72.2	%		23.7	%
Net interest income		264,146			232,057			231,865			13.9	%		13.8	%
Average interest-earning assets		19,836,214			20,068,323			17,176,435			15.5	%		(1.2	)%
Average loans		17,494,801			17,460,992			15,470,132			13.1	%		0.2	%
Interest earning asset yield¹		10.0	%		8.4	%		8.6	%
Cost of funds²		5.0	%		4.4	%		3.2	%
Net interest margin (NIM)³		5.3	%		4.6	%		5.4	%
Avg. equity + non-interest bearing demand deposits / Avg. interest earning assets		32.0	%		31.3	%		34.1	%
Quarterly inflation rate⁴		1.28	%		0.56	%		0.54	%
Central Bank reference rate		5.25	%		5.25	%		3.25	%
Avg. 10 year Central Bank yield (real)		2.61	%		2.63	%		3.01	%

1. Interest income divided by interest earning assets.

2. Interest expense divided by interest bearing liabilities + demand deposits.

3. Net interest income divided by average interest earning assets annualized.

4. Inflation measured as the variation of the Unidad de Fomento in the quarter.

In 4Q11, Net interest income increased 13.8% QoQ and 13.9% YoY. The Net interest margin (NIM) in 4Q11 reached 5.3% compared to 4.6% in 3Q11 and 5.4% in 4Q11. The higher Net interest income and NIM was mainly due to higher inflation rates in the quarter, since the Bank has more assets than liabilities linked to inflation. Inflation, measured as the variation of the Unidad de Fomento (an inflation indexed currency unit), increased 1.28% in 4Q11 compared to 0.56% in 3Q11 and 0.54% in 4Q10. For every 100 bp change in inflation, net interest income varies by approximately Ch$25 billion. Higher loan spreads (excluding the impacts of mismatches in inflation indexed assets and liabilities) also helped to boost the Bank’s NIM in the quarter. Loan spreads began to rise in 3Q11 as the Bank implemented a stricter pricing policy in light of a potential deterioration of economic conditions. This should also help to sustain or improve margins in coming quarters.

Funding costs have also stabilized. Throughout 2011, the Bank’s funding costs have been negatively affected by rising short-term interest rates. The Bank’s liabilities have a shorter duration than assets and, therefore, re-price more quickly in a rising interest rate environment. This has increased funding costs as reflected in the 72.2% YoY rise in interest expense in 4Q11. In order to minimize this impact, the Bank in 2011 has focused its funding strategy on core deposits (See Funding). The Central Bank has also paused the tightening of its monetary policy and in 2012, rates are expected to decline.

Investor Relations Department	9
Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,
email: rmorenoh@santander.cl

In 2012, the evolution of margins will depend on various factors. On the one hand, the Bank will continue to focus on profitability over loan market share in order to support loans spreads. Loan growth in Individuals and SMEs is expected to be sound in 2012 and to outpace other lower yielding asset growth. Funding costs should continue to stabilize or eventually fall in line with the outlook for short-term interest rates. On the other hand, the uncertain evolution of inflation and the negative effects of possible regulations regarding maximum rates that can be charged on loans may have a negative impact on margins.

PROVISION FOR LOAN LOSSES

Provision expense decreases 4.2% QoQ

Provision for loan losses	Quarter									Change %
(Ch$ million)	4Q11			3Q11			4Q10			4Q11 / 4Q10			4Q11 / 3Q11
Gross provisions		(9,548	)		(18,628	)		(51,550	)		(81.5	)%		(48.7	)%
Charge-offs		(96,866	)		(77,466	)		(55,815	)		73.5	%		25.0	%
Gross provisions and charge-offs		(106,414	)		(96,094	)		(107,365	)		(0.9	)%		10.7	%
Loan loss recoveries		19,806			5,722			6,924			186.1	%		246.1	%
Net provisions for loan losses¹		(86,607	)		(90,372	)		(100,441	)		(13.8	)%		(4.2	)%
Total loans²		17,347,094			17,680,356			15,657,556			10.8	%		(1.9	)%
Loan loss allowances¹		523,687			520,566			481,581			8.7	%		0.6	%
Non-performing loans3 (NPLs)		511,357			496,786			416,739			22.7	%		2.9	%
Risk Index4		3.02	%		2.94	%		3.08	%
NPL / Total loans		2.95	%		2.81	%		2.66	%
Coverage ratio of NPLs⁵		102.4	%		104.8	%		115.6	%

4Q10 provision expense includes Ch$ 39,800 million in additional provisions for large commercial loans recognized as a result of a regulatory change passed in 4Q10. In said quarter, these provisions were recognized as Other operating expense and were reclassified to Provisions for loan losses as required by the Superintendency of Banks.

2.	Excludes interbank loans.

3.	NPLs: Non-performing loans; full balance of loans with one installment 90 days or more overdue.

4.	Risk Index: Loan loss allowances / Total loans; measures the percentage of loans the banks must provision for given their internal models and the Superintendency of Banks guidelines.

5.	Loan loss allowances / NPLs.

Provision for loan losses in the quarter decreased 4.2% QoQ and 13.8% YoY. For the full year, net provision expense increased 0% compared to a 10.8% rise in loans. In 4Q11, the Bank set aside a further Ch$1,600 million in provisions for La Polar. Our total exposure is Ch$6.6 billion. In the quarter, the Bank recognized an extraordinary recovery of Ch$15bn from our mortgage portfolio.

In addition, during the quarter, the Bank upgraded its provisioning model for loans to SMEs (See Annex 1). This signified a one-time charge of Ch$16.6 billion in 4Q11. This concluded the process started in 2010 of overhauling our retail banking credit risk models. Now all retail loans are provisioned using statistical models that assign provisions to all clients performing or non-performing based on historical loss levels. The majority of the additional provisions recognized because of these changes were provisions for the performing portion of our retail loan book. This should allow the Bank to respond more quickly to clients, while pricing more accurately credit risk levels. This should also permit the credit risk areas to increase feedback regarding potential growth opportunities to commercial teams and to allocate capital more efficiently. In total, in 2011 the Bank recognized Ch$32 billion in one-time provision expenses directly related to the changes in provisioning models to mortgage loans (3Q11) and SMEs (4Q11).

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

For large corporate loans, it is also important to point out that the Bank recognized Ch$39.8 billion in additional provisions in 4Q10 due to regulatory changes adopted by the Superintendency of Banks (SBIF) in that quarter.

As a result, Santander Chile has continuously improved the coverage ratios of NPLs, since 2009.

	1)	B1 Regulation: Required banks to set aside loan loss allowances for unused credit card lines and lines of credit
	2)	B3 Regulation: Modified the loan loss allowance regulations for large corporate loans analyzed on an individual basis

The Risk Index, which measures the percentage of loans for which the Bank must set aside loan loss allowances, based on our internal models and Superintendency of Banks guidelines, remained stable at approximately 3% throughout 2011 (3.02% in 4Q11). The Bank’s Non-performing loans ratio (NPL) increased from 2.81% in 3Q11 to 2.95% in 4Q11. This was mainly due to the fall in large corporate loans and higher growth of the Banks’ retail activities. The Coverage ratio of total NPLs (loan loss allowances over non-performing loans) reached 102.4% as of December 2011.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

NET FEE INCOME

Fee income rebounds with higher retail activity and cross-selling

Fee Income	Quarter						Change %
(Ch$ million)	4Q11		3Q11		4Q10		4Q11 / 4Q10			4Q11 / 3Q11
Collection fees		15,416		14,684		16,764		(8.0	)%		5.0	%
Credit, debit & ATM card fees		14,276		14,383		14,677		(2.7	)%		(0.7	)%
Insurance brokerage		7,722		7,955		10,032		(23.0	)%		(2.9	)%
Asset management		7,690		8,796		10,841		(29.1	)%		(12.6	)%
Checking accounts		7,365		7,256		6,879		7.1	%		1.5	%
Guarantees and other contingent operations		6,539		6,335		5,501		18.9	%		3.2	%
Lines of credit		2,739		2,764		3,394		(19.3	)%		(0.9	)%
Fees from brokerage and custody of securities		2,193		2,469		2,698		(18.7	)%		(11.2	)%
Other Fees		4,466		1,349		-1,149		-%			231.1	%
Total fees		68,406		65,991		69,637		(1.8	)%		3.7	%

Net fee income was up 3.7% QoQ and decreased 1.8% YoY in 4Q11. The main reason for the QoQ increase was the 5.0% QoQ rise in collection fees, which is directly related to loan-related insurance premiums, as mortgage lending accelerated in the quarter. The Bank’s client base, especially cross-sold clients continued to grow at a solid pace. The amount of cross-sold clients increased 12.2% in 2011. Checking account fees increased 1.5% QoQ as the Bank continues to increase its client base and number of checking accounts. Total credit cards increased 9.8% and credit card purchases increased 17.8% YoY. Credit card fees were down QoQ due to a rise in credit card expenses paid to the credit card processors. Gross fees from credit cards were up 5.5% QoQ led by a 14.8% QoQ increase in merchant discount fees.

Finally, in the quarter the Bank recognized approximately US$3 million in fees from brokerage, custody and other advisory services from the 7.8% of the shares of the Bank in a secondary offering in which our local stock broker participated.

This was offset by the decrease in asset management fees that decreased 12.6% QoQ and 29.1% YoY in 4Q11. This was mainly due to weaker markets that have negatively affected fees from our equity mutual funds.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

NET RESULTS FROM FINANCIAL TRANSACTIONS

Positive results from client treasury services

Results from Financial Transactions*	Quarter									Change %
(Ch$ million)	4Q11			3Q11			4Q10			4Q11 / 4Q10			4Q11 / 3Q11
Net income from financial operations		17,322			102,133			(13,191	)		—	%		(83.0	)%
Foreign exchange profit (loss), net		(1,395	)		(79,132	)		32,852			—	%		(98.2	)%
Net results from financial transactions		15,927			23,001			19,661			(19.0	)%		(30.8	)%

* These results mainly include the mark-to-market of the Available for sale investment portfolio, realized and unrealized gains of Financial investments held for trading, the interest revenue generated by the Held for trading portfolio, gains or losses from the sale of charged-off loans and the mark-to-market of derivatives. The results recorded as Foreign exchange profits (loss), net mainly includes the translation gains or losses of assets and a liability denominated in foreign currency.

Net results from financial transactions totaled a gain of Ch$15,927 million in 4Q11, a decrease of 20.9% QoQ and an increase of 5.9% YoY. In order to comprehend more clearly these line items, we present them by business area in the table below.

Results from Financial Transactions	Quarter							Change %
(Ch$ million)	4Q11			3Q11		4Q10		4Q11 / 4Q10			4Q11 / 3Q11
Santander Global Connect¹		15,281			16,259		13,585		12.5	%		(6.0	)%
Market-making		5,931			4,958		1,560		280.2	%		19.6	%
Client treasury services		21,212			21,217		15,145		40.1	%		(0.0	)%
Non-client treasury services		(5,286	)		1,784		4,516		—	%		—	%
Net results from financial transactions		15,927			23,001		19,661		(19.0	)%		(30.8	)%

1. Santander Global Connect is the Bank’s commercial platform for selling treasury products to our clients.

Client treasury services, which totaled Ch$21,212 million in 4Q11, were flat QoQ and increased 40.1% YoY. This was mainly due to an increase in client treasury services with corporate clients and reflects our focus on higher yielding non-lending products in this business segment.

The Bank recognized a Ch$5,286 million loss from Non-client treasury services in the quarter. This was mainly due to a Ch$11 billion one-time charge related to the change in valuation methodology of derivatives, which now includes an estimate of counterparty credit risk. This regulatory change negatively affected our non-client treasury income.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

OPERATING EXPENSES AND EFFICIENCY

Operating expenses growth driven by investment projects

Operating Expenses	Quarter									Change %
(Ch$ million)	4Q11			3Q11			4Q10			4Q11 / 4Q10			4Q11 / 3Q11
Personnel salaries and expenses		(73,233	)		(73,884	)		(65,344	)		12.1	%		(0.9	)%
Administrative expenses		(44,747	)		(41,041	)		(37,600	)		19.0	%		9.0	%
Depreciation and amortization		(13,828	)		(13,354	)		(13,176	)		4.9	%		3.5	%
Impairment		(7	)		(77	)		(260	)		(97.3	)%		(90.9	)%
Operating expenses		(131,815	)		(128,356	)		(116,380	)		13.3	%		2.7	%
Efficiency ratio¹		38.5	%		41.3	%		35.1	%

1.	Operating expenses / Operating income. Operating income = Net interest income + Net fee income+ Net results from Financial transactions + Other operating income and expenses.

Operating expenses in 4Q11 increased 2.7% QoQ and 13.3% YoY. The Efficiency ratio improved in the quarter to 38.5% in 4Q11 compared to 41.3% in 3Q11. Personnel expenses decreased 0.9% QoQ as headcount decreased 1.2% QoQ. As of December 31, 2011, headcount totaled 11,566 employees. The 12.1% YoY increase in personnel expenses in the quarter was mainly due to higher salary expenses as headcount increased 5.1% in the year.

Administrative expenses increased 9.0% QoQ and 19.0% YoY as the Bank continued with its projects of investing in a new Client Relationship Management system and other IT projects to enhance productivity in future periods. These projects should drive revenue growth going forward while increasing productivity. The Bank also opened 5 branches and 28 ATMs in the quarter.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

OTHER INCOME AND EXPENSES

Other Income and Expenses	Quarter									Change %
(Ch$ million)	4Q11			3Q11			4Q10			4Q11 / 4Q10			4Q11 / 3Q11
Other operating income		19,047			2,194			20,042			(5.0	)%		768.1	%
Other operating expenses		(24,989	)		(12,156	)		(9,403	)		165.8	%		105.6	%
Other operating income, net		(5,942	)		(9,962	)		10,639			—	%		(40.4	)%
Income from investments in other companies		467			546			(4	)		—	%		(14.5	)%
Income tax expense		(20,907	)		(16,629	)		(18,927	)		10.5	%		25.7	%
Income tax rate		16.8	%		17.9	%		16.5	%

Other operating income, net, totaled Ch$-5,942 million in 4Q11. The lower loss compared to 3Q11 was mainly due to Ch$11.1 billion gain recognized from the sale of 8 branches in the quarter. This gain was partially offset by higher charge-off of fixed assets and higher provisions for non-credit contingencies recognized as other operating expenses.

The higher income tax expense was mainly due to the higher net income before taxes. This was partially offset by the higher CPI inflation rate in the quarter, which increased the tax loss recognized from the price level restatement of the Bank’s capital. The statutory corporate tax rate should decline to 18.5% in 2012 and to 17% in 2013. However, there are discussions in Congress to maintain the tax rate at 20%.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

SECTION 4: CREDIT RISK RATINGS

International ratings

The Bank has credit ratings from three leading international agencies. S&P and Fitch both placed the Bank’s ratings on Credit watch negative in December 2011, following a similar action on our controlling shareholder, Banco Santander.

Moody’s (Outlook stable)		Rating
Foreign currency bank deposits		Aa3
Senior bonds		Aa3
Subordinated debt		A1
Bank Deposits in Local Currency		Aa3
Bank financial strength		B-
Short-term deposits		P-1

Standard and Poor’s (Credit watch negative)		Rating
Long-term Foreign Issuer Credit		A+
Long-term Local Issuer Credit		A+
Short-term Foreign Issuer Credit		A-1
Short-term Local Issuer Credit		A-1

Fitch (Credit watch negative)		Rating
Foreign Currency Long-term Debt		A+
Local Currency Long-term Debt		A+
Foreign Currency Short-term Debt		F1
Local Currency Short-term Debt		F1
Viability rating		a+

Local ratings:

Our local ratings, the highest in Chile, are the following:

Local ratings	Fitch Ratings	Feller Rate
Shares	1CN1	1CN1
Short-term deposits	N1+	N1+
Long-term deposits	AAA	AAA
Mortgage finance bonds	AAA	AAA
Senior bonds	AAA	AAA
Subordinated bonds	AA	AA+
Outlook	Stable	Stable

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

SECTION 5: SHARE PERFORMANCE

As of December 2011

ADR price (US$) 12M11
12/31/11:			85.00
Maximum (12M11):			96.44
Minimum (12M11):			62.69

Market Capitalization: US$13,730 million

P/E 12 month trailing*:	17.5
P/BV (12/31/11)**:	3.80
Dividend yield***:	3.7	%

* Price as of Dec. 31, 2011 / 12mth. earnings

** Price as of Dec. 31, 2011 / Book value as of 12/31/11

*** Based on closing price on record date of last dividend payment.

Local share price (Ch$) 12M11
12/31/11:			40.32
Maximum (12M11):			43.65
Minimum (12M11):			31.94

Dividends:

Year paid	Ch$/share		% of previous year earnings
2007:		0.99		65	%
2008:		1.06		65	%
2009:		1.13		65	%
2010:		1.37		60	%
2011:		1.52		60	%

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

ANNEX 1: NEW PROVISIONING MODEL FOR COMMERCIAL LOANS ANALYZED ON A GROUP BASIS

As of November 2011, the estimated incurred loss for all commercial loans that were analyzed on a group basis (the majority of SMEs and approximately 9% of the Bank’s loan book) is now obtained by multiplying all risk factors defined in the following equation:

EIL	=	EXP X PNP x SEV

EIL	=	Estimated Incurred Loss
PNP	=	Probability of Non-Performing
EXP	=	Exposure
SEV	=	Severity

EL = Estimated Incurred Loss. The estimated incurred loss is how much could be lost in the event a debtor does not perform the obligations under the loan.

EXP = Exposure. This corresponds to the value of commercial loans without discounting the value of guarantees or collateral.

PNP = Probability of Non-Performing. This variable, expressed as a percentage, indicates the probability that a debtor will default in the next period. In order to calculate this, the Bank sub-divided this portfolio in the following way:

For each of these categories the Bank takes into account the client’s negative credit behavior in the system, positive credit information in the system, deposit relation with the Bank and the client’s sub-segment, which is in most cases a function of the size of the client or economic sector.

SEV = Severity. This is the effective loss rate for debtors in the same segment, which is determined statistically based on the historical effective losses for us for each segment. The severity mainly depends on if the client has a mortgage collateral and in what stage of non-performing or collections the client is in.

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

ANNEX 2: BALANCE SHEET

Unaudited Balance Sheet	Dec-11			Dec-11			Dec-10			Dec. 11 / Dec. 10
	US$ths			Ch$ million						% Chg.

Assets
Cash and balances from Central Bank		5,368,888			2,793,701			1,762,198			58.5	%
Funds to be cleared		531,285			276,454			374,368			(26.2	)%
Financial assets held for trading		787,476			409,763			379,670			7.9	%
Investment collateral under agreements to repurchase		24,845			12,928			170,985			(92.4	)%
Derivatives		3,099,585			1,612,869			1,624,378			(0.7	)%
Interbank loans		168,235			87,541			69,672			25.6	%
Loans, net of loan loss allowances		32,330,945			16,823,407			15,175,975			10.9	%
Available-for-sale financial assets		3,192,680			1,661,311			1,473,980			12.7	%
Held-to-maturity investments		0			0			0			—	%
Investments in other companies		16,773			8,728			7,275			20.0	%
Intangible assets		155,163			80,739			77,990			3.5	%
Fixed assets		294,146			153,059			154,985			(1.2	)%
Current tax assets		71,592			37,253			12,499			198.0	%
Deferred tax assets		283,951			147,754			117,964			25.3	%
Other assets		1,050,197			546,470			640,937			(14.7	)%
Total Assets		47,375,761			24,651,977			22,042,876			11.8	%

Liabilities and Equity
Demand deposits		8,482,396			4,413,815			4,236,434			4.2	%
Funds to be cleared		171,973			89,486			300,125			(70.2	)%
Investments sold under agreements to repurchase		1,046,182			544,381			294,725			84.7	%
Time deposits and savings accounts		17,144,449			8,921,114			7,258,757			22.9	%
Derivatives		2,483,229			1,292,148			1,643,979			(21.4	)%
Deposits from credit institutions		3,690,001			1,920,092			1,584,057			21.2	%
Marketable debt securities		8,884,864			4,623,239			4,190,888			10.3	%
Other obligations		339,385			176,599			166,289			6.2	%
Current tax liabilities		2,879			1,498			1,293			15.9	%
Deferred tax liability		10,214			5,315			5,441			(2.3	)%
Provisions		442,568			230,290			235,953			(2.4	)%
Other liabilities		766,747			398,977			261,328			52.7	%
Total Liabilities		43,464,887			22,616,954			20,179,269			12.1	%

Equity
Capital		1,712,891			891,303			891,303			0.0	%
Reserves		99,047			51,539			51,539			0.0	%
Unrealized gain (loss) Available-for-sale financial assets		5,442			2,832			(5,180	)		—	%
Retained Earnings:		2,028,535			1,055,548			894,136			18.1	%
Retained earnings previous periods		1,443,238			750,989			560,128			34.1	%
Net income		836,137			435,084			477,155			(8.8	)%
Provision for mandatory dividend		(250,841	)		(130,525	)		(143,147	)		(8.8	)%
Total Shareholders' Equity		3,845,915			2,001,222			1,831,798			9.2	%
Minority Interest		64,958			33,801			31,809			6.3	%
Total Equity		3,910,873			2,035,023			1,863,607			9.2	%
Total Liabilities and Equity		47,375,761			24,651,977			22,042,876			11.8	%

Figures in US$ have been translated at the exchange rate of Ch$520.35

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

ANNEX 3: YEAR-TO-DATE INCOME STATEMENTS

YTD Income Statement Unaudited	Dec-11			Dec-11			Dec-10			Dec. 11 / Dec. 10
	US$ths.			Ch$ million						% Chg.

Interest income		3,399,126			1,768,735			1,412,983			25.2	%
Interest expense		(1,530,576	)		(796,435	)		(473,264	)		68.3	%
Net interest income		1,868,550			972,300			939,719			3.5	%
Fee and commission income		697,686			363,041			338,183			7.4	%
Fee and commission expense		(163,746	)		(85,205	)		(74,601	)		14.2	%
Net fee and commission income		533,941			277,836			263,582			5.4	%
Net income from financial operations		328,350			170,857			38,755			340.9	%
Foreign exchange profit (loss), net		(147,324	)		(76,660	)		57,233			—	%
Total financial transactions, net		181,026			94,197			95,988			(1.9	)%
Other operating income		52,080			27,100			47,596			(43.1	)%
Net operating profit before loan losses		2,635,597			1,371,433			1,346,885			1.8	%
Provision for loan losses		(542,956	)		(282,527	)		(282,561	)		(0.0	)%
Net operating profit		2,092,641			1,088,906			1,064,324			2.3	%
Personnel salaries and expenses		(539,277	)		(280,613	)		(250,265	)		12.1	%
Administrative expenses		(320,602	)		(166,825	)		(147,343	)		13.2	%
Depreciation and amortization		(102,750	)		(53,466	)		(49,403	)		8.2	%
Impairment		(223	)		(116	)		(4,925	)		(97.6	)%
Operating expenses		(962,852	)		(501,020	)		(451,936	)		10.9	%
Other operating expenses		(127,910	)		(66,558	)		(55,366	)		20.2	%
Total operating expenses		(1,090,762	)		(567,578	)		(507,302	)		11.9	%
Operating income		1,001,880			521,328			557,022			(6.4	)%
Income from investments in other companies		4,113			2,140			1,171			82.7	%
Income before taxes		1,005,992			523,468			558,193			(6.2	)%
Income tax expense		(160,379	)		(83,453	)		(78,959	)		5.7	%
Net income from ordinary activities		845,614			440,015			479,234			(8.2	)%
Net income discontinued operations		0			0			0			—	%
Net income attributable to:
Minority interest		9,476			4,931			2,079			137.2	%
Net income attributable to shareholders		836,137			435,084			477,155			(8.8	)%

Figures in US$ have been translated at the exchange rate of Ch$520.35

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl

ANNEX 4: QUARTERLY INCOME STATEMENTS

Unaudited Quarterly Income Statement	4Q11		4Q11		3Q11		4Q10		4Q11 / 4Q10		4Q11 / 3Q11
	US$ths.		Ch$mn						% Chg.
Interest income	956,005		497,457		420,729		367,381		35.4	%	18.2	%
Interest expense	(448,373	)	(233,311	)	(188,672	)	(135,516	)	72.2	%	23.7	%
Net interest income	507,631		264,146		232,057		231,865		13.9	%	13.8	%
Fee and commission income	175,843		91,500		87,651		90,837		0.7	%	4.4	%
Fee and commission expense	(44,382	)	(23,094	)	(21,660	)	(21,200	)	8.9	%	6.6	%
Net fee and commission income	131,462		68,406		65,991		69,637		(1.8	)%	3.7	%
Net income from financial operations	33,289		17,322		102,133		(13,191	)	—	%	(83.0	)%
Foreign exchange profit (loss), net	(2,681	)	(1,395	)	(79,132	)	32,852		—	%	(98.2	)%
Total financial transactions, net	30,608		15,927		23,001		19,661		(19.0	)%	(30.8	)%
Other operating income	36,604		19,047		2,194		20,042		(5.0	)%	768.1	%
Net operating profit before loan losses	706,305		367,526		323,243		341,205		7.7	%	13.7	%
Provision for loan losses	(166,440	)	(86,607	)	(90,372	)	(100,441	)	(13.8	)%	(4.2	)%
Net operating profit	539,865		280,919		232,871		240,764		16.7	%	20.6	%
Personnel salaries and expenses	(140,738	)	(73,233	)	(73,884	)	(65,344	)	12.1	%	(0.9	)%
Administrative expenses	232,688		(44,747	)	(41,041	)	(37,600	)	19.0	%	9.0	%
Depreciation and amortization	(26,574	)	(13,828	)	(13,354	)	(13,176	)	4.9	%	3.5	%
Impairment	(13	)	(7	)	(77	)	(260	)	(97.3	)%	(90.9	)%
Operating expenses	(253,320	)	(131,815	)	(128,356	)	(116,380	)	13.3	%	2.7	%
Other operating expenses	(48,023	)	(24,989	)	(12,156	)	(9,403	)	165.8	%	105.6	%
Total operating expenses	(301,343	)	(156,804	)	(140,512	)	(125,783	)	24.7	%	11.6	%
Operating income	238,522		124,115		92,359		114,981		7.9	%	34.4	%
Income from investments in other companies	897		467		546		(4	)	—	%	(14.5	)%
Income before taxes	239,420		124,582		92,905		114,977		8.4	%	34.1	%
Income tax expense	(40,179	)	(20,907	)	(16,629	)	(18,927	)	10.5	%	25.7	%
Net income from ordinary activities	199,241		103,675		76,276		96,050		7.9	%	35.9	%
Net income discontinued operations	0		0		0		0
Net income attributable to:
Minority interest	2,986		1,554		1,123		2,178		-28.7	%	38.4	%
Net income attributable to shareholders	196,254		102,121		75,153		93,872		8.8	%	35.9	%

Figures in US$ have been translated at the exchange rate of Ch$520.35

Investor Relations Department

Bandera 140 19^th Floor, Santiago, Chile, Tel: 562-320-8284, fax: 562-671-6554,

email: rmorenoh@santander.cl