27
Confidential Corporate Presentation
Estrictamente confidencial
Confidential
Corporate Presentation
Index
I. Executive Summary
II. Our Fundamentals & Strategy
III. Financials
3
Banco Internacional at a glance
• Founded in 1944 as Banco Israelita and renamed Banco Internacional in 1981
• In 2015, Inversiones La Construcción (ILC) acquires a controlling stake of 50.9%
• Main focus in commercial banking – especially SMEs and middle-market companies
• 5,800 commercial clients and 7,500 retail clients through Decembeer ‘16
I Region• Iquique• Iquique Zofri
II Region• Antofagasta
IV Region• La Serena
V Region• Viña del Mar
Metropolitana• 7 branches
VI Region• Rancagua
VIII Region• Concepción
IX Region• Temuco
BranchesOverview
Ownership Structure
Source: SBIF, Banco Internacional
(1) Gross Loans
(2) Commercial Loans
ILC50,5%
0,7%
48,8%
Otros
BI Holdco
Selected Indicators, December ‘16
A+ A+(stable) (positive)
Rating
Total Assets
US$ 2,007 MM
Net Income
US$ 14.1 MM
ROAE
10%
Total Loans(1)
U$ 1,378 MM
Market Share(2)
1.12%
Equity
U$ 210 MM
Equity / RWA
13.9%
# Branches
15
GORUS$ MM, December 2016
Total loansUS$ MMM, December 2016
Branches
Earning before taxesUS$ MM, December 2016
1512
+25%
201620154
One of the best turnaround stories of 2016: ROAE of 10% with 19% growthin GOR and 14% in loans
1,214
97.6%
1,378
95.8%Comerciales
2016
Otras
+14%
2015
ROE 0.1% 9.8%-2.3
+18.4
16.1
Eficiencia 64.4% 59.9%
+19%
59.671.0
Efficiency 64.4% 60.1%
Mega
Large
MidRetail
5
In 2016, Banco Internacional cut the profitability gap with the industry through good execution of a turnaround plan
Chilean Banks by ROE and Loans, December ‘16
2009 2010 2011 2012 2013 2014 2015 2016
18.6%
15.2%
18.0%
16.8%Industry
Banco
Internacional
14.6%
9.8%
14.3%
0.1%
17.2%
3.0%
14.8%
3.7%
14.7%
1.3%
17.5%
12.9%
ROE vs. Industry Loans Breakdown
Commercial
97.3%
Retail
0.7%Mortgage
2.1%
US$ 1.37
Bn
10 2015
15
20
25
25
30
10
5
50 30
-5
0
4535 40
ROE
(%) Security
Falabella
HSBC
Ripley SantanderConsorcio
Itaú-Corpbanca
BCI
EstadoBBVA
Chile
Banco Internacional
Gross Loans (US$ Bn)
Banco Internacional 2015
Bice Scotiabank
6
Additionally, 2016 was a commercially successful year despite marketheadwinds – 0.10pp gain in SOM
-4
-2
0
2
4
6
8
10
12
jul 13 jul 15 oct 15 abr 16 oct 16oct 14abr 13 oct 13 abr 15ene 15 ene 17jul 16ene 16jul 14ene 14 abr 14
Banco Internacional
Industria
1.10
1.15
1.05
1.00
0.95
0.90
1.03
Banco Internacional1.12
1.03
Commercial loans growth, real terms, 12 month moving average, %
Banco Internacional comercial loans market share, %
7
Our 2016 plan focused on improving profitability, capital and liquidity and evolving the organization
Record Net Income (CLP 9,449 MM) and ROE (10%) within
target
Definition of a new Corporate Strategy
Consolidation of a new management team, incentives and
management processes
Organization-wide incentive plan linked to overall
performance
1
3
5
Commercial network expansion by opening 3 business
centers in attractive and growing markets
6
Strong commercial loans growth (14%) and record new
clients (734)
2
4
Significant improvements in capital and liquidity:• Capital injection
• Improved coverage of wholesale deposits (LCR from ~20%
in 2015 to >100% by the end of 2016)
• Increase in portfolio duration
• Improved portfolio collateral
Introduction of leadership, business and onboarding
sessions and trainings
Focus on building the Banco Internacional culture
through improved plans and communications
Introduction of a world-class performance review process
7
9
11
Improved rating to A+ (ICR ’16 and Feller-Rate ‘15)8
10
8
Lowering risk-
provisions cost
• Reduced exposure to high-risk clients
• Increased collateralization
• Revamped Risk Policies
Improvements in
Efficiency
• Migration of core IT architecture
• Execution of efficiency plan to bridge gap with
benchmarks by 2018
• Evolution of organizational model and focus by segment
• Introduction of incentives aligned with P&L
• Introduction of proven management processes
Growth and interest
margin improvements
Lowering of CoF and
efficiencies in funding
• Improvements in rating
• Increased focus on zero-cost deposits
• Introduction of online time deposits for non-clients
Opportunity Action Plan 2017
Ahead, our plan focuses on improving profitability by evolving core business foundations: growth, funding, risk and efficiency
Index
I. Executive Summary
II. Our Fundamentals & Strategy
III. Financials
Our Vision is to position the Banco Internacional franchise as the bestfinancial services provider for companies in Chile
To lead market
segments better
aligned with our
capabilities system
To lead the industry
in risk management
and efficiency
To maintain growth
and profitability
above what is
expected for our
scale
To be the best
financial services
provider for
companies in Chile
Our Vision
Motivators
Solid fundamentals and a robust strategy enable our vision for Banco Internacional
To be the best financial services
provider for companies in Chile
Ownership Committed to Our Long-term
VisionSolid Corporate Government
Consolidated Management Team with a
Proven Track-Record
Robust Strategy, Aligned with Our
Capabilities and Market Opportunities
• Financial and reputational backing of one of the
largest groups of Chile - ILC is the largest
manager of pension funds in Chile and one of the
largest in Latam with AUM of USD 50 bn
• Potential synergies to be
explored
• One of the most solid Board of Directors – 9 in
total, including 4 independent Board members
• Led by James Callahan, with more than 40 years of
experience in local and
international banking as Head
of BankBoston and Scotiabank
• Led by Mario Chamorro, with
over 30 years of experience in
local and international banks (CorpBanca
and Tanner)
• Supported by a solid and proven management
team
• Focus on market segments
better aligned with the Bank's
internal capabilities
1 2
3 4
• Based on growth and profitability aspirations
• Customers as the center of the strategy
• Cultural change as an enabler of the strategy
ILC is one of the leading Closed Private Equity Funds in Chile, with a portfolio of leading services companies…
* Excluding the accounting extraordinary effect related to the association of ILC with Prudential in AFP Habitat for US$336 million
Consolidated Net Income LTM*
US$ 117 million
AuM as of September 2016
US$56 billionin AFP Habitat and Inversiones
Confuturo
Risk Rating:
AA+
Market cap as of June 30th 2016
US$1.1 billion
ROE*
14.7%LTM September 2016
Consolidated Employees
12,900approximately in Chile and Perú
1
…and it manages its assets with a long-term value creation vision
ILC starts operationsAFP Habitat starts
operations in Chile
Isapre Consalud starts
operations in Chile
Red Salud is constituted as
a parent Company to
manage ILC’s healthcare
assets
Vida Cámara starts
operations, focused in the
D&S insurance in Chile
ILC completes its first
bond issuance
AFP Habitat and Vida
Cámara start
operations in Perú
ILC acquires 67% of
Inversiones Confuturo
Vida Cámara starts
operations, focused in the
D&S insurance in Chile
ILC has the largest
IPO in Chile
ILC acquires 50.9% of Banco
Internacional, entering the
Chilean banking industry
ILC executes a capital injection
in Inversiones Confuturo
ILC and Prudential become partners in AFP Habitat, in order to expand their footprint in Latam
ILC reaches 100% stake in Red Salud and Inversiones Confuturo
Inversiones Confuturo acquires 10 shopping centers from Walmart Chile for US$640 million
ILC sells its participation in iConstruye (IT) and its stake in Desarrollos Educacionales (schools) to consolidate its
presence and focus in the financial and healthcare industries
1980 1981 1984 2008 2009
2011 2012 2012 / 2013 2013 2014
2015 2016
1
Banco Internacional counts some of the most respected executives in Chile in its Board and Management Team
2
3
James Callahan
Ferry
Chairman
• CEO Scotiabank
Chile (‘04 – ‘13)
• CEO BankBoston
México (‘98 – ‘04)
• CEO Banco de
Boston Chile (‘86 –
‘97)
• Committees:
Business,
Operational Risk,
AML/CFT
Andrés Solari
Urquieta
Vice-president
Universidad Adolfo
Ibáñez
• CEO Algeciras
• Board of Directors at
Hortifrut, Auto
Summit, Atton,
Bredenmaster,
among others
• Audit Committee
Pablo Ihnen de la
Fuente
Director
Universidad Católica
Master in University of
Chicago
• CEO AFP Habitat
(‘04 – ‘08)
• CEO AFP Habitat
(‘99 – ‘00)
• CEO Enersis (‘97 –
‘99)
• Committees:
Business, Assets
and Liabilities
Francisco Vial
Bezanilla
Director
Universidad Católica
• Co-funder of
Ingevec SA
• Audit Committee
Andrés Navarro
Betteley
Director
Universidad Católica
• Director of Viña
Santa Rita and
Sudmaris Chile
• Committees:
Business,
Operational Risk,
AML/CFT
Fernando Lefort
Gorchs
Director
Universidad Católica
PhD in Economics,
Harvard
• Audit Committee
Carlos Brito
Claissac
Director
Universidad de
Concepción
• Committees:
Operational Risk,
AML/CFT, Credit
Risk, Superior Credit
Juan Antonio
Minassian Baloian
Director
Universidad Católica de
Chile
• Committees:
Business, Credit
Risk, Superior Credit
Guillermo Larrain
Rios
Director
Universidad Católica
PhD in Economic,
EHESS
• Vice-president of
Banco Estado (‘14 –
‘15)
• SVS Superintendent
(‘07 – ‘10)
• AFPs
Superintendent
(‘03 – ‘06)
• Assets and Liabilities
Committee
Mario Chamorro
CEO
Universidad de Chile
MBA at UCLA
• CEO CorpBanca (‘01-’11) and CEO Tanner (‘14 –’15)
• Voted one of the Top 50 CEOs in Latin America in profitability and efficiency over a period of 10-year study by Harvard Business Review in 2012
Hernán Cerda
SMEs
Javier Barrenechea
Treasury
Hector Neira
CRO
Ezequiel Iturain
CFO
Natalia Madrid
HR
Armando Ariño
COO & CTO
Marta Cea
Controller
Sebastian Salgó
Legal
Marco Bravo
Compliance
Our mid-term strategy is to develop a strong position in the SME and middle-market segments through outstanding execution
To be the best financial services provider for
companies in Chile
Profitable
growth with
focus on
SMEs and
middle-market
companies
and solid risk
management
Develop our
capabilities to
deliver a
differentiated
value
proposition
Design the
most agile,
innovative
and efficient
sales and
operations
model
Lead in
customer
experience,
positioning
the Banco
Internacional
Franchise
I II III IV
Evolve our culture and organizational model, in line with the changes neededV
4
12.212.213.213.413.413.913.914.014.015.518.1
-5.6-0.1
9.79.811.012.412.613.514.816.419.1
18.624.64.44.54.75.510.112.0 1.31.62.2
50
60.159.355.950.550.148.744.639.929.8
17.0+9%
Industry2016
18.6
2015
34.3
Our short-term turnaround plan has succeeded and positions Banco Internacional to tackle ambitious mid-term goals
Turnaround – Achievements KPIs, % December 2016
Equity / RWA
Efficiency Index
Profitability Improvements
High Capital Adequacy
Proven Efficiency Opportunities
to Close Gap with Benchmarks
Growth and Market Share in Target
Segments
Solid Risk Management
Provision Expenses / GOR
ROE Ranking
SMEs + Middle-market Loans Ranking, SOM
• Improved flow and stock
• Improved collateral levels: 70% vs.
60% in 2015
A
B
E
D
C
4
2016 results show key improvements in magnitude and revenue – focus in GOR growth through SOM
Fees and other income
GOR
Provision Expenses
Operating Expenses
Net Income
13.90(+6,950.0%)
Tax
Pre - tax
2016
14.1
-2.0
16.1
2015
0.2
2.5
-2.3
+11.40(+19.1%)
71.059.6
-10.00(-49.0%)
10.4
14.6%
20.4
34.2%
2015
41.5
69.6%
3.00(+7.2%)
2016
44.5
62.7%
–
–
Net Interest Income
+4.50(+11.8%)
42.5
59.9%
38.0
63.8%
Average LoansUS$ MM
+5.50(+78.6%)
12.5
17.6%7.0
11.7%
1,2791,141
+12.1%
Average Net Interest
Income %
2016
3.3%
2015
3.3%
x
Treasury
+1.50(+10.3%)
2016
16.1
22.7%
2015
14.6
24.5%
+
+
Net Income Breakdown, December 2015/6, Constant US$ MM
Source: Banco Internacional
2016 results show key improvements in magnitude and revenue – focus in GOR growth through SOM
• Growth in loans accounted for 39% of GOR growth
• Improvements in operating model allowed for improved fee revenue
• Reduced reliance on Treasury revenues
• Increased collateral of loans portfolio (60% 70%)
• Reduced exposure to high-risk clients
One time costs account for 100% of expense growth:
• 2015 bonus
• Collective agreement
• 2016 bonus
• Organizational restructuring costs
18Source: Banco Internacional
Net Income Breakdown, December 2015/6, Constant US$ MM
GOR
Provision Expenses
Operating Expenses
Net Income
13.90(+6,950.0%)
Tax
Pre - tax
2016
14.1
-2.0
16.1
2015
0.2
2.5
-2.3
+11.40(+19.1%)
71.059.6
-10.00(-49.0%)
10.4
14.6%
20.4
34.2%
–
–
2015
41.5
69.6%
3.00(+7.2%)
2016
44.5
62.7%
Our target markets – SMEs and middle-market clients – account for 1/3 of total commercial loans and have growth upsides
6570
76
8589
33% 31%33%
+4.5%
33%
+10.4%
32%32%
Micro 64%
65%
dic-16
64%
65%
dic-15
66%
SMEs +
Middle-Market
3%
dic-14
57
Corporate
3%
dic-11 dic-12
65%
3%
3%
3%
3%
dic-13
Commercial Loans Market, December 2016, MMxMM CLP$
9,6%
3,1%
6,9%
Note: Segmentation based on SBIF debt: Micro until MMCLP$ 13; Wholesale between MMCLP$ 13 and 5.200; Corporate more than MMCLP$ 5.200
64%
38%
33%
53%
9%
Corporate
100%
Micro
SMEs +
Middle Market
Loans
(US$ MM)
3%
# companies
(’000)
1,375
3
398
974
Gross Margin
(US$ MM)
3,322132,220
Source: Banco Internacional
Note: Segmentation based on SBIF debt: Micro until MMCLP$ 13; Wholesale between MMCLP$ 13 and 5.200; Corporate more than MMCLP$ 5.200 Note: Gross Margin calculated respect Banco Internacional’s Gross Margin
Average Debt (US$ ‘000) Strategic focus BI
980
17,564
3
SMEs 37
Middle-
Market
Our target markets are the most profitable – they account for 53% of Gross Margin – and are aligned with our capabilities
Corporate
Wholesale clients market, December 2016
-5.6
Potential
50.8%
Expenses gap
3.7%
GOR improvements
54.5%
Commercial
Improvements
(spreads, fees, etc.)
?
Deposit funding in
line with benchmarks
2.9%
Improvement of rating
to AA (from A+)
2.7%
Dec 2016
60.1%
Considering GOR improvement opportunities, we can achieve 50% efficiency by reducing costs by CLP$ 2,000 MM / year
Rating gap Deposit Funding gap (1)
Spread
AA vs. A+
0,24%
x
987,714
Term
deposit
(MM$)
2,371
Rating gap
64,227
Gap vs.
benchmarks
(5pp of
liabilities)
x
Cost
4,3%
=
2,762
Deposit
funding gap
Efficiency gap
54,809
GOR with
improvements
YTD July
x
Expenses
gap
3,7%
=
2,028
Annualized
expenses
gap (MM$)
(1) BICE, BBVA, ITAU, Security, Scotiabank.
=
Bridge of efficiency with benchmarks, MM CLP$ December 2016
Our short-term efficiency agenda focuses on 5 improvement objectives: costs, operating model, control, value proposition, innovation
Short-term action plan
Improve quality and risk ensuring a robust and scalable TI architecture
Facilitate the development of flexible value proposals
Build capabilities to take the next step in innovation and digitization
Seize efficiency opportunities by aprox. MM$ 1,900 / year – 1,9pp ROE
Develop an innovative and efficient operating model
C
D
E
A
B
Co
rrel
ated
ch
alla
ng
es
Key-Takeways
Robust, simple and proven strategy
Consolidate team focused on leveraging and
developing our differential advantages
Reinforce the cultural changes to maintain the
organization to our strategy
YTD Results in line with improvements in solvency; risk
and commercial management; efficiency; and culture
Index
I. Executive Summary
II. Our Fundamentals & Strategy
III. Financials
Balance Sheet
2015 2016 YoY growth
Total Assets 1.809 2.019 12%
Cash and Cash Equivalent 76 147 94%
Total Net Loans 1.246 1.338 7%
Trading Assets 276 220 -20%
High Liquidity Assets 31 155 398%
Derivatives, Net 3 6 78%
Other Assets, Net 75 53 -30%
Total Liabilities and Shareholder's Equity 1.809 2.019 12%
Total liabilities 1.668 1.874 12%
Current accounts and other demand deposits 136 118 -13%
Time Deposits and Borrowings 1.205 1.480 23%
Obligations with financial institutions 111 50 -55%
Debt instruments issued 115 125 9%
Total Shareholder´s Equity 141 145 3%
Income Statement
Gross Operating Margin 63,1 71,0 12%
Net Interest margin 44,6 41,4 -7%
Profits/losses financial operations 14,3 18,8 31%
Net Commisions 4,6 6,1 34%
Other profits/losses 0,4- 4,7 -1316%
Recoveries from charges-off 5,1 3,4 -33%
Loan loss provision 26,8- 13,9- -48%
Non-interest expenses 44,0- 44,7- 2%
Net Operating Margin 2,5- 15,9 -732%
Other non-operating income, net 0,0 0,3 423%
Income before taxes 2,5- 16,1 -755%
Income tax 2,6 2,0- -175%
Net income 0,1 14,2 9515%
Efficiency Ratio 65,5% 60,1%
Loan loss provisions*/ Gross Operating Margin 37,6% 19,5%
UF var. (%) 4,07% 2,80%
ROE 0,10% 9,75%
ROA 0,01% 0,70%
Dec-15 Dec-16 YoY growthUS$ MM
