Finvest
BCH Banks · Chile · Banking · ADR · Thesis updated July 16, 2026

High returns meet tougher credit costs

01 Running thesis

Profitable, but less easy

Banco de Chile is still a high-return bank. Management wants it to be the most profitable bank among its peers, and 2025 guidance moved up through the year. By Q3 2025, management expected return on average capital near 22.5%.

The setup is less clean for 2026. High interest rates helped bank margins before, but that tailwind is fading as Chile’s central bank has eased policy. Management guided 2026 return on average capital to 19% to 21%, below the 2025 peak level.

Credit quality is the key swing factor. The 2025 20-F said delinquency stayed above historical average levels for longer than expected. That led to higher allowances for expected credit losses and pushed the risk-index ratio from 1.78% in 2024 to 1.81% in 2025.

Finn’s view is balanced. The bank has scale, strong profitability, and a growing digital account base. But the stock needs investors to believe that weaker rates and higher credit costs will not cut returns too far.

Apr 2026▼The 2025 20-F confirmed that delinquency stayed above historical average levels longer than expected. Allowances rose and the risk-index ratio increased from 1.78% in 2024 to 1.81% in 2025.
Feb 2026→Q4 2025 results stayed solid, but 2026 guidance pointed to lower returns and higher credit costs. Management guided return on average capital to 19% to 21% and cost of risk to 1.1% to 1.2%.
Nov 2025▲Management raised full-year 2025 guidance again, targeting about 22.5% return on average capital and cost of risk near 0.9%. A higher Chile GDP forecast also helped the case.
Aug 2025▲Q2 2025 guidance improved, with return on average capital lifted to about 21% and expected credit loss ratio lowered to about 1%. FAN was nearing 2 million customers, and Banchile Pagos was planned for launch.
May 2025▲Q1 2025 showed improving credit trends, with expected credit losses down 20% year over year. Management raised the 2025 return target to about 20%.
Apr 2025▼The 2024 20-F showed the rate tailwind fading after Chile’s policy rate fell to 5.0% in December 2024. It also showed higher provisions as past-due loan ratios stayed above normal for longer than expected.
Feb 2025▲Management described a strong balance sheet, including 265% NPL coverage at December 2024. It also pointed to a possible commercial loan recovery in 2025.
Nov 2024▲Q3 2024 highlighted very high NPL coverage of 262%, which could support future provision releases. Management also noted peso weakness as an inflation risk to watch.
02 Business model

Local loans, deposits, and fees

Banco de Chile takes deposits, makes loans, and earns the spread between what it pays savers and what borrowers pay the bank. It also earns fees from accounts, cards, payments, and wealth-related services.

The loan book is mostly domestic. That is simple to understand, but it also ties the bank closely to Chile’s jobs market, inflation, interest rates, and politics. If households or small businesses get squeezed, bad loans can rise.

Digital banking is becoming more important. FAN accounts act as a low-cost way to bring in new customers, open current accounts, and cross-sell other products. The 20-F said FAN reached about 2 million customers by December 2025, up 17.7% from December 2024.

The model breaks when credit losses rise faster than revenue. Management guided 2026 cost of risk to 1.1% to 1.2%, up from the roughly 0.9% 2025 guidance given in Q3. That means more of the bank’s income may go toward covering bad loans.

03 Product portfolio

What Banco de Chile sells

Cash cow

Retail banking

Retail banking covers individuals and SMEs. It represented 67.5% of total loans in Q4 2025, making it the center of both earnings and credit risk.

Steady

Wholesale commercial loans

The wholesale book serves larger companies. It is smaller than retail but still matters because company borrowing can recover when rates and uncertainty fall.

Steady

Mortgages

Mortgages are a standard bank product and usually move with household income, employment, and housing demand. They can be safer than unsecured loans, but they still weaken if the economy slows.

Steady

Consumer loans

Consumer loans can carry higher yields, but they are sensitive to unemployment and real wages. This is one place to watch if delinquency stays above normal.

Growth engine

FAN digital accounts

FAN is a digital account product that brings new customers into the bank. The 20-F reported about 2 million customers by December 2025, up 17.7% from December 2024.

Option

Banchile Pagos

Banchile Pagos is the bank’s acquiring business for SMEs and middle-market customers. It gives Banco de Chile a way to earn payment fees and deepen merchant relationships.

04 Business segments

Loan mix drives the story

Retail loans68%modest
Wholesale commercial loans32%flat

The mix is from management’s Q4 2025 comments on total loans. Retail loans were 67.5% of the loan book, while wholesale commercial loans made up the rest.

05 Risk factors

What could go wrong

Delinquency stays high

High impact · Medium odds

The 2025 20-F said delinquency stayed above historical average levels for longer than expected. That drove a 2.7% increase in allowances for expected credit losses and lifted the risk-index ratio to 1.81%. If this keeps going, profits can fall even if loan growth looks fine.

We watchRisk-index ratio, past-due loan ratios, and cost of risk versus the 1.1% to 1.2% 2026 guide.

Returns normalize faster than expected

Medium impact · High odds

Banco de Chile’s 2025 returns were helped by a strong rate and inflation backdrop. As that support fades, management expects 2026 return on average capital of 19% to 21%, below the 22.5% 2025 guidance given in Q3. A bigger drop would challenge the bull case.

We watchReturn on average capital and net interest margin each quarter.

Chile’s economy weakens

High impact · Medium odds

The bank is mainly exposed to Chile. Stable GDP growth helps, but high unemployment relative to growth can hurt borrowers. Retail loans are 67.5% of total loans, so household and SME stress would matter quickly.

We watchChile unemployment, GDP growth, retail loan delinquency, and SME loan growth.

Politics changes the bank rulebook

Medium impact · Medium odds

A new government can change taxes, regulation, or business confidence. Q3 2025 comments sounded calmer on tax risk, but this remains an open question because the bank is so tied to one country. Political shocks can also affect rates, inflation, and the peso.

We watchNew government banking policy, corporate tax proposals, and Central Bank of Chile rate decisions.

Digital growth does not pay off

Medium impact · Low odds

FAN accounts are useful only if they become deeper customer relationships. The user base is large, but account growth by itself does not prove high profits. The bank needs deposits, balances, card use, and cross-selling to follow.

We watchFAN account balances, current account originations, and fee income from digital customers.
06 Quick answers

In one breath

What does Banco de Chile do?

Banco de Chile is a Chilean bank. It makes loans, takes deposits, runs accounts, supports payments, and sells related financial services to people, SMEs, and larger companies.

Why is Banco de Chile profitable?

The bank has a large local franchise and focuses on high returns. Management guided 2025 return on average capital to about 22.5%, but 2026 guidance of 19% to 21% shows profits are likely normalizing.

What is the biggest risk for BCH stock?

Credit quality is the main risk. The 2025 20-F said delinquency stayed above historical average levels for longer than expected, which pushed allowances higher and raised the risk-index ratio to 1.81%.

Why does FAN matter to Banco de Chile?

FAN is the bank’s digital account product. It reached about 2 million customers by December 2025 in the 20-F, giving Banco de Chile a larger base for accounts, deposits, and cross-selling.