Corpbanca focuses on efficiency savings

Further centralisation and roll-out of assistive technology
to bring further gains to $4bn market value


Corpbanca is Chile’s oldest operating private bank, with one of the fastest-growing loan portfolios in the country and one of the most successful stories of the Chilean banking industry. In 1995 the bank was bought by a group of investors who, led by Álvaro Saieh Bendeck, developed a strategic plan to grow the institution into a global bank across the entire spectrum of financial services. In 1995 the bank’s capital was $50m with a subordinated debt with the Central Bank of $600m; at the end of 2010 the bank had no debt with the Central Bank and its market value was over $4bn.

As of December 31, 2010, Corpbanca was the fourth largest private bank in Chile in terms of the size of its loan portfolio, with a 7.3 percent of market share. Corpbanca’s risk management strategy has enabled it to maintain favourable solvency ratios and risk indicators: throughout 2010 Corpbanca had a capital-weighted assets ratio of 13.4 percent and a risk indicator of 1.9 percent, lower than the industry’s average. Corpbanca provided an average annual return on equity of 25 percent in 2010, higher than the market average.

These results are explained by the banks:
– Strong risk management – the bank has one of the lowest risk indices of the major banks
– Efficiency – it’s a key driver in Corpbanca’s strategy, which explains why the bank has one of the lowest efficiency ratios of the industry
– Development of new innovative products
– Successful consolidation of wholesale business
– Focus on customer satisfaction

These have helped Corpbanca’s local stock achieve the highest return of a bank stock in the Santiago Stock Exchange during 2009 and 2010, of 79 percent and 129 percent respectively. In recognition of this strong performance, Feller Rate improved Corpbanca’s local risk classification from AA- to AA in May 2010.

Strategic overview
Corpbanca’s vision is to become the best bank in Chile: become the number one bank to its customers, increase its market share, systematically exceed the Chilean banking system’s ROE and be a great place to work, attracting and retaining talented employees. To achieve these goals the bank is focusing on four main strategies.

– Portfolio rebalancing. By innovating in first class products, focusing on the most profitable segments and utilising its aggressive sales force, the bank hopes to achieve organic growth by offering competitive products and services in all lines of its business. The bank’s strong franchise in the retail banking segment offers the potential for significant growth in its loan portfolio – and increased market share and profitability can be gained by continuing to cross-sell services and products to existing clients. It has also instituted processes to facilitate the offering of additional financial services to clients, with the aim of increasing revenues from fees for services.

– Maintaining first class risk standards. A dedicated risk management team monitors risks across all areas of the bank’s business, with robust valuation models and solid provision policies. The Retail Risk and Companies Risk divisions actively participate in establishing credit policies, approvals, monitoring, collections and operational risk associated with the business. The Risk Committee meets periodically to review and consider proposed loans – and the bank’s conservative credit approval standards and reserve policies help minimise the risk of ultimate loss.

– Continue with efficiency measures. This is a consequence of the bank’s cost control culture and the centralisation of all its processes. It seeks to increase operating efficiency by continuing to reduce costs, broadening its array of distribution channels and enhancing the network by adopting cost-saving technologies. Branch operations continue to be updated, allowing for an increased level of customer ‘self-help,’ and the bank is working to increase customers’ use of internet banking. Currently, customers can obtain account information, make bill payments, transfer funds and perform other transactions through the bank’s website. A central information system gives the bank efficient electronic access to up-to-date customer information in each of its business lines and calculates net earnings and profitability of each transaction, product and client segment.

– Lead on customer satisfaction. Quality of service is key to Corpbanca’s growth strategy, both in acquiring new customers, and establishing and strengthening long-term relationships. The bank continually develops new processes and technological solutions to understand the needs of clients and in turn measure their satisfaction – a new division exclusively focused on customer satisfaction was recently established.

Performance targets
Each commercial division also has its own specific strategies to help the bank achieve its key goals.

Consumer banking
The bank is striving to increase its retail loans portfolio in a profitable way. In retail banking this means focusing on clients that have a monthly income higher than CLP1.2m ($2,500). To achieve this, the bank has opened new branches located in geographical areas which are closer to the target market, designed products specifically to satisfy these clients’ needs, and established incentive programmes for its sales force and commercial staff to focus on this type of client.

For the low income segment, the Corpbanca brand Banco Condell is looking to consolidate its number of clients and offer a more personalised service – this new strategy and completely different management should help the brand achieve higher profits.

Wholesale banking
For corporate clients, Corpbanca is offering integrated solutions to provide more sophisticated products according to the client’s needs. This has been a key driver for the success of this area in the last two years. The commercial relationship has not been oriented only to the senior management of corporations but also to its owners, offering sophisticated products at all levels. To strengthen the transaction service of this segment, the bank is improving its cash management service products which imply an increase of the reciprocity index in order to reduce its funding cost.

Corpbanca is hoping to establish a more significant presence in the SME segment and increase its market share. For this purpose, the bank has significantly increased its sales force for 2011. The SME unit currently offers an array of products, including products (such as lines of credit) backed by governmental warranties created to develop small and medium sized businesses.