Home Banking BancoEstado: Proud to Be an Innovative and Sustainable Public Bank That Contributes to Advancing an Entire Country

BancoEstado: Proud to Be an Innovative and Sustainable Public Bank That Contributes to Advancing an Entire Country

by internationalbanker

By Daniel Hojman, President, BancoEstado

 

BancoEstado stands for public banking in Chile. This declaration encompasses multiple dimensions, all involving the provision of financial services to foster the country’s integral development. We emphasize our social, cultural and environmental roles and history of innovation to promote social inclusion, universal access to banking services, productive development and implementation of public policies, along with our binding commitment to climate action.

As we approach 169 years of existence, our commitment throughout our history to all of Chile’s inhabitants has materialized in extending our reach to virtually every corner of the country to provide high-quality financial services.

Committed to the comprehensive development of Chile

Our country’s comprehensive development defines our raison d’être. In 2023, Chile experienced a significant economic deceleration. In response, BancoEstado provided support and financial solutions to individuals and businesses, thereby fulfilling a countercyclical role.

During this period, the Chilean banking system’s lending activity exhibited reduced dynamism compared to 2022, experiencing a credit contraction of 1.4 percent with a significant decline in commercial and consumer loans. In this context and in line with previous decelerations, BancoEstado’s activities exhibited countercyclical behavior: While loans across the banking system declined, BancoEstado’s total loans increased by 3.5 percent annually in real terms.

An example of this is our leadership in credit loans under the FOGAPE Chile Apoya and FOGAES programs, credit programs that provide state guarantees to support small and medium-sized businesses and construction firms, as well as guarantees to enable households to finance homeownership.

Mr. Daniel Hojman, President, BancoEstado

Our mission to support individuals in achieving their dreams of owning their own homes remains ongoing. In 2023, we spearheaded a series of mortgage campaigns that led to a historic milestone, granting 28,000 mortgage loans—32.7 percent of the banking industry—and providing funding totaling more than US$2,000 million. In summary, BancoEstado facilitated one out of every three mortgage operations in the Chilean banking industry.

The relentless pursuit of financial inclusion in Chile is another distinctive aspect of our mission. Nearly two decades ago, we developed a product aimed at ensuring the financial inclusion of all residents in the country: CuentaRUT. This is a sight account accessible to both Chilean citizens and foreigners with valid Chilean identification documents. Today, with 14,600,000 CuentaRUT accounts, we stand as the financial institution contributing the most to financial inclusion in the country, providing the primary and most popular digital account used as the main payment method in Chile. Furthermore, in 2023, this product underwent a comprehensive modernization. We digitized its processes and introduced a new digital wallet, BEPay, which allows users to easily manage all their debit and credit cards.

A universal banking

In November 2023, the bank’s board of directors traveled to the rural locality of Los Sauces, a small town with 7,000 inhabitants situated 600 kilometers south of Santiago, the capital of Chile. The purpose of the visit was to inaugurate a bank branch in this locality. While such a decision might seem counterintuitive in today’s digital era, a deeper analysis of Chile’s realities reveals it to be one of the most innovative moves.

The technology disruption in the industry and the effects of the COVID pandemic are associated with the office-closure trend. We decided to swim against the current by opening new branches nationwide. This decision stems from our understanding that the usage of digital technologies differs between urban and rural areas and that age remains a relevant factor in choosing between in-person and remote channels. At the same time, it can also become a strategic differentiating attribute to strengthen trust and bond with clients needing advice on financial decisions.

Our commitment to reaching every corner of Chile underscores our social responsibility and territorial coverage, with a total of 526 BancoEstado and BancoEstado Express offices spread all over our territory.

In 2024, we aim to incorporate 16 new branches into our service network. Looking ahead, we project beginning the construction of at least 23 additional branches in the coming years, prioritizing service points in geographically isolated areas.

Partners in implementing public policies in Chile

BancoEstado has always played a pivotal role in contributing to the implementation of public policies in the country. Our focus lies in supporting individuals and businesses, aligning ourselves with the state to carry out various measures adopted by the authorities and fostering an innovative, social and sustainable financial ecosystem.

BancoEstado Office, located on Huérfanos Street, Santiago, Chile

The challenging economic landscape following the pandemic has disproportionately affected the most vulnerable populations, including communities, local entrepreneurs and businesses of all sizes.

In response, we have assumed a leading role and directed our efforts towards supporting our customers with a range of products designed to address the crisis. In 2023, we facilitated the distribution of more than 50,000,000 payments to BancoEstado accounts, stemming from various social benefits, totaling more than US$6,300 million. These payments reached more than 4,500,000 individuals.

During the summers of 2023 and 2024, in the southern hemisphere, Chile experienced devastating forest fires in the central region, resulting in significant human and material losses. In response, we promptly stepped in to act as the paying agent for state assistance programs and to aid in subsequent reconstruction efforts.

In 2023, the Government of Chile enacted the Law on Economic Security Measures, which introduced new initiatives to bolster the economic stability of the country’s most vulnerable individuals. As part of implementing this law, we assumed the role of paying agent.

However, we didn’t stop there. In collaboration with the relevant state authorities, we introduced the new, innovative Bolsillo Familiar Electrónico (BFE, translated as Digital Family Wallet), a significant internal technological advancement. This system facilitates access to public-program payments, streamlining the delivery of state supplementary contributions for purchases in the food sector. Under this initiative, individuals received nearly $14 per dependent, with more than 1,700,000 people benefiting promptly from this state contribution through their CuentaRUT accounts with high standards of transparency and efficiency.

Connected to sustainability

Recognizing the significant impacts of climate change worldwide, BancoEstado is committed to serving as a cornerstone for sustainable development in Chile. To fulfill this commitment, we integrate environmental, social and governance (ESG) considerations into our activities, products and services. To accomplish this, we have established a sustainability strategy with a clear trajectory aimed at managing the effects of climate change. As an enabling actor, we strive to contribute to emissions reductions within our territory.

We have maintained an increasingly active approach to developing sustainable financial products, including loans, investments and securities. These products are designed to reduce the carbon emissions financed by the bank while simultaneously promoting adaptation to climate change and mobilizing projects with positive environmental and community impacts.

In taking on the responsibility of contributing to sustainable development, we created Mundo Verde. This platform enables us to offer products tailored to support customers in environmental conservation and protection efforts. Mundo Verde promotes energy efficiency and the use of clean energies through products and services such as green loans, securities and investments, which are available to individuals and businesses across all sectors.

BancoEstado’s Executive Team (see full description at the end of article)

In 2023, BancoEstado established goals for reducing carbon emissions in its loan and investment portfolios, which are publicly accessible. These goals were developed by identifying the most carbon-intensive economic activities in alignment with the guidelines of the Science Based Targets initiative (SBTi) for the financial sector. This initiative ensures that BancoEstado’s decarbonization goals are scientifically supported to limit global temperature increases to within 1.5 degrees Celsius (°C) of pre-industrial levels.

The Mundo Verde platform provided loans totaling almost US$315 million in 2023, supporting individuals, micro, small and medium-sized enterprises (MSMEs) and large businesses. While there is still much more to accomplish, the path forward today is clearer than ever.

In alignment with these efforts, BancoEstado secured a €200-million loan from the European Investment Bank (EIB). This funding aims to support mortgage loans for approximately 2,600 new homes, focusing on energy efficiency.

Because of these initiatives, BancoEstado’s actions have been reflected in our inclusion in the Dow Jones Sustainability Indices. This prestigious, globally renowned index has ranked us within the top 5 percent of the most sustainable banks worldwide. This achievement is a source of immense pride for BancoEstado.

Committed to innovation as a tool for modernization

BancoEstado has made a significant investment in fostering innovation and its role in driving productive transformation in the country.

One notable initiative is our new specialized platform for startups, through which we have provided funding for 30 businesses totaling more than US$9.5 million. Looking ahead to 2024, we have set a goal of founding 130 new startups, with a target coverage of US$50 million in loans.

Another significant pillar contributing to the innovative ecosystem we are cultivating is BancoEstado’s entrance into the ScaleX market as a sponsor. ScaleX is the first alternative-funding market for startups, a public-private initiative between the Santiago Stock Exchange and CORFO (Chilean Economic Development Agency, or Corporación de Fomento de la Producción) facilitated by Start-Up Chile. This initiative aims to promote venture capital (VC) as an investment mechanism, foster entrepreneurship and position Chile as a regional investment hub. As part of this innovation, we are actively developing various initiatives involving artificial intelligence (AI) to position ourselves at the forefront of Chile’s financial industry.

In 2023, we harnessed the power of AI to enhance our responsiveness to customers through a collaborative effort with Microsoft, Amazon Web Services (AWS), Google and IBM.

The future holds challenges for Chile’s public bank. Nevertheless, we remain steadfastly committed to the country’s development and its inhabitants’ well-being.

BancoEstado is a bank for everyone and each of us.

 

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BancoEstado’s Executive Team Photo Captions

(Back row, from left to right):

Camilo Vio, Planning and Management Control Manager; María Dolores Peralta, Personal Banking Division Manager; Aubrey Robinson, Corporate Risk Manager; Alexis Genskowsky, Retail Commercial Division Manager; Jaime Fernández, Finance General Manager; Verónica Pinilla, Public Affairs and Sustainability Manager; Pablo Mayorga, Compliance Director; Antonio Bertrand, Administration General Manager; Soledad Ovando, Credit General Manager; Marcelo Hiriart, Savings and Housing Division Manager.

(Front row, from left to right):

Pablo Lagos, BancoEstado’s General Counsel; From the Executive Committee: Verónica Kunze, BancoEstado’s Vice President; Daniel Hojman, BancoEstado’s President; Óscar González, BancoEstado’s Executive General Manager; Victoria Martínez, Manager of the Internal Control Division; and Eduardo de las Heras, Manager of the Operations and Technology Division.

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