CUSTOMERS IN THE HISTORY OF A STATE-OWNED BANK

The First Steps

In 1856 the first two loans were approved. It was on 16 January and José Ignacio Izquierdo asked for 40 thousand pesos, giving as guarantee and mortgage his farm Los Nilches in Curicó, while José Miguel Salinas asked for 6 thousand pesos guaranteed with his small farm in San Felipe. Both transactions were approved. This is how the history of the bank began: always willing to collaborate with entrepreneurship and the needs of its customers.

At that time –the beginning of the current BancoEstado– the Caja de Credito Hipotecario (Mortgage Bank) had been in business for a year, under the guidance of the State and thanks to the undertakings of President Manuel Montt, together with the Minister of the Interior, Antonio Varas.

The main target of the Caja was to offer loans and receive deposits from both individuals and the production sectors at a time when Chile lacked banks. It was the first bankarisation event of the institution.

In 1877, the Board of Directors of the Caja de Crédito Hipotecario decided to create the Caja de Ahorros de Santiago (Savings Bank) to encourage workers to save. It was founded on 6 September 1884 by Luis Barros Borgoño, and on that day it opened its doors with two employees. A young customer, a six-year-old, was the holder of the first account: he deposited 100 pesos. A year later, the Caja de Ahorros de Santiago managed 45 thousand accounts.

By 1905, there were savings banks in twelve cities nationwide. In 1910, all the savings Banks merged into the Caja Nacional de Ahorros (National Savings Bank). Meanwhile, Santiago continued to have its own savings bank, which promoted housing for workers, and therefore implemented the construction of urban housing. The customers paid a 25% down payment and the rest in annual installments.

The bank continued to grow steadily. In 1927, the Board of Directors of the Caja de Crédito Hipotecario integrated the Caja de Santiago into the Caja Nacional de Ahorros. At that time, Chile had four million inhabitants and the Caja Nacional de Ahorros managed 1,400,000 accounts and had 147 branches nationwide. That same year, the Caja de Crédito Agrario (Agricultural Credit Bank) was opened, and a year later the Instituto de Crédito Industrial (Industrial Credit Institute) was created.

The social role of this bank, a value that goes back to its origins, became evident after the 1939 earthquake in Chillán where the death toll was over 30 million. The Caja Nacional de Ahorros actively contributed to the reconstruction of the devastated area and implemented a generous loan policy for the victims.

In 1942, to continue improving the quality of life of its customers, the Caja Nacional de Ahorros created “marriage loans” to help newly weds to equip their homes with the necessary furniture and appliances.

A year later, on 24 July 1953, President Carlos Ibáñez del Campo merged Caja de Crédito Hipotecario, Caja Nacional de Ahorros, Caja de Crédito Agrario and the Instituto de Crédito Industrial, founding the Banco del Estado de Chile, what today is known as BancoEstado. On 1 September 1953, it began its first transactions as an autonomous company of the State, with legal capacity and its own equity.

Bankarisation and Changes in the 20th Century

Six departments – banking, savings, agricultural, industrial, mortgage and investment – were the backbone of the new institution.

The social mission and the universality that characterize BancoEstado were also present in this process. The fundamental task of a financial entity is to give loans in an organized and efficient manner, targeting the production sectors and the individuals that private banking does not consider.

It also had to take the benefits of banking to the rest of the country, to the most remote areas, even though it was not commercially advisable. In other words, its mission was to create access to banking facilities or “bankarisation”.

During its first twenty years, the bank of all Chileans became consolidated as the largest bank in Chile. It steadily grew in the areas that each management considered most important.

As of 1973, the entity underwent radical changes because the policies favoring the intervention of the State in the economy were no longer applied; the state intervention system was restricted. This reduced the social role of bank with its customers and it privileged the private aspect of the financial system.

With the return to democracy, the new authorities implemented a Project to improve the commercial and social aspects of Banco del Estado, based on four pillars during its first phase (1990 to 1995): improve the presence of the bank; reaffirm it condition as a state-owned bank; strengthen its social role and streamline its management systems.

Subsequently, during the second phase (1996 a 2000), a strategic plan was developed in order to achieve four goals: combine economic efficiency with more social efficiency; significantly improve customer services; introduce a style of management that aims for results, achieves stability and progress for bank employees and to promotes competitiveness.

The turn of the century brought a change in image. The Banco del Estado became BancoEstado and subsequently was recognized as a modern institution, but with the same mission and values, so that any Chilean, anywhere in the country, would be able to keep up with progress and develop.

Bankarisation was enhanced. In 2002 the automated teller machines of BancoEstado and the Redbanc network were interconnected, providing to all banking customers more than 3,500 ATM’s nationwide. That year, the bank’s branch network increased by 45%.

Approaching the Bicentenary

Customers have shaped the paths that BancoEstado has travelled to the present day. It is their needs - during the different stages of Chile’s development - that have guided the steps taken by this universal bank.

Today, the institution is present in 99% of the districts nationwide, through branches and CajaVecina points. CajasVecina points operate at stores where a technological tool is installed enabling our customers to conduct bank transactions. Before a customer had to travel several kilometers to get to the closest branch, today a person can go to their neighborhood store to do financial transactions. There are currently 2,000 CajaVecina points nationwide and for 2010 we expect to have more than 3,000.

Also in 2008, we reached our goal of 300,000 microentrepreneur customers - a significant group of entrepreneurs - who have strived to give their families a better quality of life.

Finally, a milestone in the history of BancoEstado has been the US$ 500 million capitalization undertaken by the government, which has enabled the bank to give more loans to individuals and more funding to micro, medium and small enterprises.