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Fitch Rates Banco Santander Chile's CHF300M Senior Fixed Rate Notes Due 2017 'A+(exp)'

January 21, 2014

Fitch Ratings expects to rate Banco Santander Chile's (BSC) upcoming senior unsecured fixed rate notes 'A+(exp)'. The notes - for an amount of up to CHF300m - will mature on July 31, 2017 and carry a fixed annual interest rate of 1.00 percent; the notes will rank pari-passu with all of BSC's existing and future senior unsecured debt. The final rating is contingent upon the receipt of final documents conforming to information already received. KEY RATING DRIVERS The rating assigned to the notes is equal to BSC's long-term Issuer Default Ratings (IDRs) which are driven by its Viability Rating (VR) of 'a+' and do not factor in any extraordinary support from its parent, although BSC remains a strategically important subsidiary for Santander. BSC's VR and IDRs reflect its leading market position and strong franchise within Chile , whose economy continues to perform well. The ratings also reflect the bank's healthy asset quality, adequate - albeit pressured in the last two years - profitability, adequate funding and capital, as well as its independent management. BSC's liquidity benefits from a sizeable, historically stable, and well-diversified retail deposit base. In addition, BSC has significantly reduced refinancing risk and exposure to more price- sensitive institutional deposits by growing core deposits and building a liquidity cushion while maintaining access to capital markets without any apparent rise in funding costs. BSC's stand-alone capital is adequate for its rating category and its liquidity position is strong, while its exposure to the Santander group is negligible and constrained by stringent local regulations. RATING SENSITIVITIES Downward pressure for BSC's VR and IDRs could arise from sustained pressure on profitability stemming from a further rise in loan loss provisions or from markedly lower liquidity or capitalization. More specifically, BSC's VR could be downgraded if its ROAA consistently remains below 1.3 percent, its Fitch Core Capital to Weighted Assets ratio falls and is maintained below 9 percent, together with asset quality deterioration and/or if the bank reduces its liquidity cushion significantly and it remains well below its current levels. There is limited upside potential in the near future for BSC's VR . Fitch currently rates BSC as follows: --Foreign and local currency long-term IDRs 'A+'; Outlook Stable; --Foreign and local currency short-term IDRs 'F1'; --Viability rating 'a+'; --Support rating '1'; --Support rating floor 'A-'; --Long-term national rating 'AAA(cl)'; Outlook Stable; --Short-term national rating 'N1+(cl)'; --Senior unsecured bonds 'A+' and national long-term rating 'AAA(cl)'; --Subordinated bonds national long-term rating 'AA(cl)'; --National equity rating 'Primera Clase nivel 1'. Additional information is available at ' '. Applicable Criteria and Related Research : --'Global Financial Institutions Rating Criteria' ( Aug. 15 , 2012); --'Fitch Affirms Santander's Latin American Subsidiaries' ( May 28 , 2013); --'Rating FI Subsidiaries and Holding Companies'( Aug. 10 , 2012). Applicable Criteria and Related Research : Rating FI Subsidiaries and Holding Companies report_frame.cfm?rpt_id=679209 Global Financial Institutions Rating Criteria report_frame.cfm?rpt_id=686181 Additional Disclosure Solicitation Status solicitation?pr_id=815190 ((Comments on this story may be sent to ))

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