Estudios y Planificación CHILEAN BANKING INDUSTRY Arturo Tagle March 19, 2002

Estudios y Planificación Financial System Financial System Financial System Banking Industry US$45 Billion of loans Banking Industry US$45 Billion of loans Pension Funds US$36 Billion of funds under management Pension Funds US$36 Billion of funds under management Insurance Companies US$12 Billion of financial investments Insurance Companies US$12 Billion of financial investments

Estudios y Planificación Total Loans / GDP

Estudios y Planificación Total Loans / GDP (e) (As of December 31,2001)

Estudios y Planificación Number of Participants Loans (1) Net Income (1) Net of Interbank Loans Source: Superintendency of Banks. Chilean Financial System (As of December 31,2001)

Estudios y Planificación December 2001 December 1995 Share of Loans (1) held by Top five Private Banks December 2001 December 1995 Share of Loans (1) held by foreign Banks Source: Superintendency of Banks. (1) Exclude interbank loans. Industry’s Structural Change Banking Consolidation Underway...

Estudios y Planificación Loans Evolution (In Million of Nominal Ch$) CAGR: 9,1%

Estudios y Planificación Source: Superintendency of Banks. (1) Net of interbank loans. Loan Market Share (1) (As of December 31,2001)

Estudios y Planificación Deposits Evolution (1) (In Million of Nominal Ch$) CAGR: 10,4% (1) Time Deposits and Saving Account.

Estudios y Planificación Checking Account (In Million of Nominal Ch$) Source: Superintendency of Banks. CAGR: 9,1%

Estudios y Planificación System’s Loan Mix & Main Liabilities (As of December 31,2001) Source: Superintendency of Banks. (1) Exclude interbank loans. System’s Loan Mix (1) Main Liabilities

Estudios y Planificación Main Products and Services Loans Consumer Commercial Credit Lines Credit Cards Mortgage Lease Contracts Factoring Foreign trade Contingent Liabilities Time Deposits Saving Accounts Checking Accounts Retirement Saving Acc Bonds Services Stock Brokerage Mutual Fund Financial Advisory Investment Fund Previsional Fund Insurance Brockerage Automatic Bill Payments Collections Payroll Payments Financial Currency Forwards Swaps Interest rate Futures Currency trading Investments under agreements to resell or repurchase. Others Debit Cards On-Line Funds Transfers 24 hrs. Selfservice Sites ATM’s

Estudios y Planificación Credit Quality

Estudios y Planificación Basle’s Indicators 2001 (In Million of Ch$, except for percentages)

Estudios y Planificación Income Diversification & Efficiency

Estudios y Planificación Average interest rate spread (Interest rate charged - Interest rate paid) (1) (1) In terms of day real rates.

Estudios y Planificación Profitability Evolution

Estudios y Planificación Source: Superintendency of Banks. Unconsolidated data. (1) In US$ Millions as of December 31, 2001 (2) Data under 2001 correspond to June Chilean Financial System (3) Net Interes Revenue over Average Interest Earning Assets (4) Operating Expenses over Operating Revenues

Estudios y Planificación Banco de Chile: after the merger with Banco Edwards The largest bank in Chile

Estudios y Planificación The Chile Edwards transaction May -June ‘01: Studies were conducted by both banks. End of June ‘01: formal negotiations started. Each bank retained an investment bank as its advisor. August ‘01: -Boards of Directors announced they had reached an agreement. - Authorizations requests were presented (Central Bank, Superintendency of Banks and the SEC). - A team of executives and employees of both banks were appointed to establish the Merger Planning Office. October ‘01: Central Bank and Superintendency gave their approval December ‘01: after the approval by the SEC, the Shareholders Meetings of both banks voted in favor of the merger. January ‘02: The merger becomes effective

Estudios y Planificación The Chile - Edwards transaction: The financial merits of the merger: –The transaction was considered accretive to both banks’ shareholders at relative valuation agreed 34:66. An in-market combination between Banco de Chile and Banco Edwards is also expected to generate significant strategic value –Creation of the largest bank in Chile –Improve economies of scale and extract significant cost savings –Enhance access to capital by combining pools of stock liquidity The transaction is not only an offensive move but also defensive –Blocks the ability of BBVA, Citibank and HSBC to become serious players in Chile As in any merger, there are risks that need to be incurred to create the expected value

Estudios y Planificación Acquisition premium for Edwards was 32% Distribution of control premiums 3 (U.S.) Number of transactions Acquisition premiums over market price 2 – Chilean transactions % U.S. acquisition premiums Median (%) Implied premium over Edwards’ price 1 = 32.3% Average: 35.6% 1 Implied premium over 30 days average price based on 34:66 relative valuations 2 Market price calculated as average of share price one month prior to announcement 3 Premium: final offe r vs. price five days prior to announcement Source: JP Morgan

Estudios y Planificación The transaction strategic value Economies of scale Cost synergies Stock liquidity Improved Subordinated debt servicing

Estudios y Planificación Scale and profitability in Latin América 1 Assets value adjusted for international accounting standards 2 In the case of Inverlat, ROE was used instead of ROAE Source: superintendencies, JPMorgan research Brazil ROAE (%) Assets (US$MM) Chile 1 Santander Santiago Chile BCI Edwards BHIF Security Sudamericano BICE ROAE (%) Assets (US$MM) Argentina ROAE (%) Assets (US$MM) Mexico 2 ROAE (%) Assets (US$MM) As of December 2000 Economies of scale

Estudios y Planificación Cost sinergies Cost synergies Synergies and restructuring charges 1,2 US$MM 37% of Edwards’ 2001E operating expenses 4

Estudios y Planificación Stock liquidity Stock liquidity 1 Calculated as average trading volume from 01/02/01 to 7/31/01 Average daily trading volume 1 US$ thousands

Estudios y Planificación Header (14pt Bold)27 Property structure of the Bank ( )

Estudios y Planificación Header (14pt Bold) % 8.88% 38.96% 100.0% 52.16% 8.88% 38.96% 100.0% LQ (Luksic Group) J.Ergas Others (Float) TOTAL 10.42% Direct Float Ownership of Banco de Chile after the merger

Estudios y Planificación Header (14pt Bold)29 Learning from previous experiences TECHNOLOGY Early option for one of the existing platforms. Two-Step Technologic Integration:  interconnection of two platforms  full integration in one platform TECHNOLOGY Early option for one of the existing platforms. Two-Step Technologic Integration:  interconnection of two platforms  full integration in one platform CLIENT SERVICE client retention incentives. early definition of account officer for each client. Account officer maintained in segments of Indiv.& Middle Mkt. Co. CLIENT SERVICE client retention incentives. early definition of account officer for each client. Account officer maintained in segments of Indiv.& Middle Mkt. Co.

Estudios y Planificación Header (14pt Bold)30 Resulting Mainframe Loans (Net) Mill.US$ 8, % Deposits Mill.US$ 10, % Allowances Mill.US$ % Investments Mill.US$ 2, % BCH+BE Mkt share ROAE15.9%15.8% ROAA 1.2% 1.2% NIM 4.2% 4.6% Efficiency (*) 54.9% 52.0% Past Due / Total Loans 2.1% 1.6% Allowances/ PD 186% 166% BCH + BE System’s average Branches # % ATM # % ATM Transac. #Th. 3, % Current Accounts #Th % Credit cards #Th % (*) Efficiency without depreciation & amortization. Source: Superintendency of Banks and Financial Institutions.

Estudios y Planificación Header (14pt Bold)31 BANCO DE CHILE (100%) BANCO DE CHILE (100%) Large Corporations 14% Large Corporations 14% Other Financial Services 9% Other Financial Services 9% International Banking 5% International Banking 5% Treasury and Money Mkt. Oper. 14% Treasury and Money Mkt. Oper. 14% Middle Market Banking 24% Middle Market Banking 24% Retail Banking 34% Retail Banking 34% Consolidated Gross Margin (%) Business Structure

Estudios y Planificación Header (14pt Bold)32 Large Companies Middle Mkt Companies Individuals CrediChile (Consumer) Outstanding Loans BCH+BE By Market Segment (Jan.’02) Loan Portfolio Allocation

Estudios y Planificación Header (14pt Bold)33 Net Interest Revenue Fees Oth. Op. Inc., net Total 100% 573 Mill.US$ Operating Revenues & Expenses (BCh+BE) 51.1% 41.1% 51.1% 41.1% 7.8% Salaries & Personnel Admin. Expenses Deprec.& Amortization Total 100% 342 Mill.US$ Operating Revenues Operating Expenses Efficiency Merger costs deducted (1) 82.8% 14.7% 2.5% 59.6 % 51.5% 56.2 % 54.9 %