Fitch Revises Outlook on Banco de Chile to Positive

Business Wire, Nov 22, 2004

NEW YORK -- Fitch Ratings has revised the Rating Outlook to Positive from Stable on the long-term foreign currency ratings of Banco Chile & Subsidiaries (BC), currently at the sovereign ceiling of 'A-' by Fitch.

The change in Rating Outlook of BC is supported by historically good financial performance, which weakened as a result of the integration of Banco de Chile and Banco de A Edwards in 2002 but has since returned closer to historical levels. Profitability rebounded in 2003 due mainly to a meaningful decline in provisions (69% contraction) and cost synergies attained following the merger, which allowed the bank to reduce its operating expenses 12% for the year. Recent trends continue to be positive as loan growth resumed with management focusing particularly in the profitable consumer loan segment. While asset quality deteriorated following the merger due to loan charge-offs (1.5%-2.5% of average loans), the strong economic recovery indicators have improved significantly and are now in-line with system averages. At the end of June 2004, the bank reported impaired loans of 1.6% of the total and a reserve coverage ratio of 167%. The funding mix has benefited from some growth in non-interest bearing liabilities, while liquidity is adequate considering the historical economic and deposit stability in Chile. Capital levels have softened in-line with the system due to resumption in lending and stood at 12.1% at the end of June 2004 on a risk-adjusted basis.

Fitch affirms Banco Chile & Subsidiaries' ratings as follows:

-- Long-term foreign currency 'A-';

-- Short-term foreign currency 'F2';

-- Long-term local currency 'A'/Stable Rating Outlook'

-- Short-term local currency 'F1';

-- Individual 'B/C';

-- Support '2'.