we are a highly motivated team and compromised with the ... · we are a highly motivated team and...

We are a highly motivated team and compromised with the companies principles.

Excelency, trust, transparency and efficency rule our ativities, through this we can

retribute with superior levels of satisfaction and quality service to our customers.

A N N U A L R E P O R T 2 0 0 5 • • • I N D E X

I N D E X

LETTER FROM THE CHAIRMAN 04

COMPANY INFORMATION 06

SHAREHOLDERS 07

Principal Shareholders 07

Material Changes in Share Ownership 09

BOARD OF DIRECTORS 11

Compensation 12

CORPORATE GOVERNANCE 13

Directors Committee 14

Audit Committee 15

MAIN OFFICERS OF CORPBANCA 20

Administrative Structure and Officers 20

BUSINESS OF CORPBANCA 24

Our Mission 24

Brief History 24

Economic and Financial Environment 26

Positive Results for the Financial System in fiscal year 2005 27

CORPBANCA IN 2005 32

Levels of Activity 32

Financing 34

Results 35

Risk Rating 36

Recognitions and Distinctions 38

Risk Factors 38

INVESTMENT AND FUNDING POLICIES 39

Gapping Management 39

Investment Policy 39

Funding Policy 40

Risk Analysis 40

PATENTS AND OTHER INTELLECTUAL PROPERTY 41

MAIN ASSETS 44

Network of Branches of CORPBANCA 44

Network of Branches of Bancondell 45

SUBSIDIARIES AND BUSINESS SUPPORT COMPANIES 47

DISTRIBUTION OF PROFITS 50

DIVIDEND POLICY 50

TRADING VOLUME AND PRICE HISTORY OF SHARES 51

ESSENTIAL FACTS 53

FINANCIAL STATEMENTS 56

It is our way of making business, project ourselves in a

long term relationship.

The consolidated balance sheet of CORPBANCA and its Affiliates

corresponding to fiscal year 2005 reported net income before

taxes of Ch$63,362 million, which represents a 10.6% increase

compared to net income before taxes for 2004. Net income after

taxes reported a nominal increase of 3.7% due to full utilization

of tax loss carryforwards relating to subordinated debt of

Corp Banca held by the Central Bank of Chile.

Fiscal year 2005 was a year of changes for CORPBANCA. During

the year, the Bank made an important effort to strengthen its

strategy for growth allowing the Bank to solidify itself as one of

the main financial institutions in the country.

As a result of the goals set forth by both the Board of Directors

and Management, CORPBANCA has significantly improved its

corporate governance practices. In fact, during the 2005, the Bank

hired external advisors to assist the Bank with fully complying

with the requirements of the Sarbanes-Oxley Act of 2002.

In addition, in order to further our strategy of increasing the value

to our relationship with our clients, CORPBANCA has invested

nearly Ch$1,800 million in branch offices. This investment, destined

to offices of Bancondell as well as of CORPBANCA, has resulted

in the refurbishment, movement and opening of new branches

throughout the country. In 2005, the Bank opened eight new

branches for service to clients.

The Bank also made a considerable investment in marketing with

the goal of strengthening our relationship with American Express.

During the year we implemented successful marketing campaigns

in the media and at our branches with positive results in our credit

cards operations. Important results have also been achieved in

the opening of current accounts, consumer credits, cash manage-

ment agreements, etc.

Our strategy as was implemented during 2005 resulted in the

growth of the Bank’s business segments financial margins. The

Personal Banking segment grew by 30% during the year while

Corporate Banking grew by 17%.

The Corporate Banking segment has been reorganized to increase

the focus on small- and medium-size enterprises.

The Personal Banking segment increased by 30% in terms of credit

card placements compared to 2004. The average balances

maintained by holders of current accounts have also increased,

by 8%. As a clear result of the campaigns of the Bank regarding

mortgage-secured loans, the average loans for housing increased

from the equivalent to 1.55 times the average for the sector in

2004 to 1.65 times at the end of 2005.

Finally, the Bank has implemented a successful strategy of cross-

selling of Personal Banking products, with 55% of new CORPBANCA

L E T T E R F R O M T H E C H A I R M A N

L E T T E R F R O M T H E C H A I R M A N • • • A N N U A L R E P O R T 2 0 0 5

04

A N N U A L R E P O R T 2 0 0 5 • • • L E T T E R F R O M T H E C H A I R M A N

05

clients having two or more products; 92% of new mortgage loans

clients having at least three products, and 50% of the new credit

card having at least one additional product.

In summary, with the changes introduced during 2005, there has

been a strengthening in the strategic position of CORPBANCA

which seeks, as always, the best relationship among the share-

holders, personnel and clients, in a context characterized by an

adequate level of profitability, portfolio quality, efficiency and

service excellence.

Carlos Abumohor Touma

Chairman of the Board

In 2005, the Bank opened eight newbranches for service to clients.

C O M P A N Y I N F O R M A T I O N • • • A N N U A L R E P O R T 2 0 0 5

C O M P A N Y I N F O R M A T I O N

06

• Corporate Name : CORPBANCA

• Domicile : Huérfanos 1072, Santiago

• Taxpayer Id. No. : 97,023,000-9

• Type of Company : Banking joint stock corporation

• Telephone – fax : 687 80 00 – 672 67 29

• P.O. Box : Casilla 80-D

• E-mail : [email protected]

• Web Address : www.corpbanca.cl

• Articles of Incorporation : CORPBANCA was organized by

means of a public deed dated

August 7, 1871 executed before

the notary public of Concepción

Mr. Nicolás Peña. The Executive

Decree that approved its exis-

tence was published in the

newspaper “El Araucano” on

Tuesday, February 20, 1872,

being its last reinstated text set

forth by the Extraordinary Ge-

neral Shareholders’ Meeting the

minute of which was trans-

cribed into a public deed on

May 28, 1992 in the notarial

office in charge of the notary

public of Santiago Mr. Gonzalo

de la Cuadra Fabres.

A N N U A L R E P O R T 2 0 0 5 • • • S H A R E H O L D E R S

S H A R E H O L D E R S

07

Principal Shareholders

The principal shareholders of CORPBANCA as of December 31,

2005, and their respective participation in the total number of

shares that form the share capital of the Bank, are the following:

As of December 31, 2005, the twelve main shareholders of the

Bank are indicated below along with the number of shares they

hold and the percentage of participation:

No. Name Shares % Ownership1 Corp Group Banking S.A. 112,530,207,591 49.592 Cía. Inmobiliaria y de Inversiones Saga S.A. 18,032,162,741 7.953 The Bank Of New York 8,217,100,000 3.624 Citibank Chile Cta. de Terceros Cap.XIV 7,716,400,346 3.405 Manufacturas Interamericana S.A. 5,413,342,266 2.396 Ucb Bancshares S.A. 4,285,534,265 1.897 Compañía de Seguros de Vida Consorcio Nacional 3,081,014,903 1.368 AFP Provida S.A. para Fondo de Pensión C 2,925,089,842 1.299 Inversiones y Valores S.A. 2,919,740,749 1.29

10 AFP Hábitat S.A. para Fondo de Pensión C 2,861,699,459 1.2611 Banchile Corredores de Bolsa S.A. 2,422,416,244 1.0712 Inmobiliaria e Inversiones Boquineni Ltda 2,294,225,537 1.01

Other 54,210,356,634 23.89TOTAL 226,909,290,577

49,59% Corp Group Banking S.A.

38,84% Others

07,95% Cía. Inmobiliaria y de Inversiones Saga S.A.

03,62% The Bank of New York

08

S H A R E H O L D E R S • • • A N N U A L R E P O R T 2 0 0 5

As of the end of 2005, the shareholder participation of Corp Group Banking, which controls the Bank, was the following:

The individuals with a direct or indirect shareholding participation in Corp Group Banking, the Bank’s controlling company, are listed below:

Name % OwnershipInternational Financial Investments Holdings Inc. 57.97Longford Worldwide Ltd. 8.57Watermill Overseas Limited 7.90Northgate Investments Holdings Ltd. 6.90SIF Investments Ltd. 6.22Sherbrooke Capital Ltd. 6.05Whistlebay Limited 4.59Aliestar S.A. 1.80

Name Taxpayer Id. No. % OwnershipAlvaro Saieh Bendeck and Family 5.911895-1 57.97Rene Abumohor Touma 3.065.693-8 7.90Domingo Díaz Pérez 2.158.001-5 5.93Espir Aguad Abusada 5.202.480-3 4.37Jorge Selume Atala 2.201.114-6 3.11Jorge Selume Zaror 6.064.619-8 3.11Fernando Aguad Dagach 6.867.306-2 3.02Juan Pablo Díaz Cumsille 4.886.312-4 2.11Amelia Cumsille Nuñez 2.470.918-3 1.90Alberto Muchnick Mlynarz 6.447.493-6 1.80Other shareholders 8.78

A N N U A L R E P O R T 2 0 0 5 • • • S H A R E H O L D E R S

09

The only individual who maintains a direct and indirect percentage in excess of 10% of the shares of the Bank is Mr. Álvaro Saieh Bendeck

and Family (Taxpayer Id. No.: 5.911.895-1), who is the holder of [36.69%] of the total shres of CORPBANCA.

Material Changes in Share Ownership

During 2005, the material changes in the ownership of shares of CORPBANCA were the following:

Increases in the share participation in the Bank as of December 31, 2005

Taxpayer Share ShareName or Corporate Name Id. No. participation as % participation as %

of 12/31/2004 of 12/31/2005

Citibank NA for the account of third parties 97.008.000-7 3,897,905,927 1.72% 7,716,400,346 3.40%

Corp Group Banking S.A. 96.858.900-8 111,029,019.40 48.93% 112,530,207,591 49.59%

Cía. de Seguros de Vida Consorcio

Nacional de Seguros de Vida S.A. 99.012.000-5 1,838,400,886 0.81% 3,081,014,903 1.36%

Banco Santander Chile – Custodia 1 97.036.000-K 0 0.00% 974,052,906 0.43%

Soc. de Inv. y Rentas Megeve Ltda. 87.736.800-9 0 0.00% 929,731,575 0.41%

Commonwealth of Pennsylvania Public School 47.006.309-2 0 0.00% 669,102,633 0.29%

Bice Corredores de Bolsa S.A. 79.532.990-0 400,986,893 0.18% 1,007,332,987 0.44%

Fondo Mutuo Bice Acciones 96.514.410-2 70,836,612 0.03% 562,390,328 0.25%

Inversiones Siegel Ltda. 76.325.990-0 0 0.00% 404,505,365 0.18%

Adm. Fondos Mutuos Sudamer S.A. FM Patrimonio 96.634.320-6 62,198,927 0.03% 439,800,000 0.19%

10

S H A R E H O L D E R S • • • A N N U A L R E P O R T 2 0 0 5

Decreases in share participation in the Bank as of December 31, 2005

Taxpayer Share ShareName or Corporate Name Id. No. participation as % participation as %

of 12/31/2004 of 12/31/2005

The Bank of New York 59.030.820-K 13,626,260,000 6.00% 8,217,100,000 3.62%

Consorcio Corredores de Bolsa S.A. 96.772.490-4 1,885,822,497 0.83% 797,782,506 0.35%

Santander Investment Corredores de Bolsa S.A. 96.683.200-2 1,336,878,424 0.59% 482,988,555 0.21%

AFP SummaBansander F. de Pensión C 98.000.600-K 1,203,562,374 0.53% 633,478,045 0.28%

Celfin Gardeweg S.A. Corredores de Bolsa 84.177.300-4 1,887,628,336 0.83% 1,338,662,593 0.59%

AFP Santa Maria S.A. Fdo. Pensión C 98.000.000-1 1,635,649,916 0.72% 1,149,514,890 0.51%

Ureta y Bianchi Corredores de Bolsa S.A. 80.993.900-6 572,845,380 0.25% 235,341,032 0.10%

Valores Security S.A. Corredores de Bolsa 96.515.580-5 621,092,061 0.27% 307,245,189 0.14%

CN Life Compañía de Seguros de Vida S.A. 96.579.280-5 399,458,725 0.18% 97,700,087 0.04%

Deutsche Securities Corredores de Bolsa 78.221.830-1 289,152,664 0.13% 6,342,155 0.00%

A N N U A L R E P O R T 2 0 0 5 • • • B O A R D O F D I R E C T O R S

11

B O A R D O F D I R E C T O R S

President

Carlos Abumohor Touma

Taxpayer Id. Nº: 1.535.896-3

Businessman

Director

Jorge Selume Zaror


Commercial Engineer

Universidad de Chile

Director

Hernán Somerville Senn

Taxpayer Id: 4.132.185-7

Attomey


Director

Francisco Rosende Ramírez


Commercial Engineer


First Vice President

Álvaro Saieh Bendeck


Commercial Engineer


Director

Fernando Aguad Dagach


Businessman

Director

René Cortázar Sánz

Taxpayer Id: 5.894.548-K

Commercial Engineer

Pontificia Universidad Católica de Chile

Director

Julio Barriga Silva


Agronomist


Second Vice President

Jorge Andrés Saieh Guzmán


Commercial Engineer

Universidad Gabriela Mistral

Director

Carlos Massad Abud


Commercial Engineer


Director

Odde Rishmague Rishmague


Businessman

Alternate Director

Juan Rafael Gutiérrez Avila


Accountant - Auditor

The Board of Directors of the Bank is formed by eleven members and one alternate member as following:

B O A R D O F D I R E C T O R S • • • A N N U A L R E P O R T 2 0 0 5

The Board of Directors of CORPBANCA normally meets once a

month. At the monthly meetings, at the same time that it conducts

a follow up of the Bank’s results and a comparison of such results

with those of the financial industry, it determines the general

guidelines to be followed by the institution. In addition, the Board

of Directors determines the policies and procedures to be followed

in terms of Corporate Governance.

COMPENSATION

In accordance with votes taken at the Ordinary Shareholders’

Meeting held on February 21, 2005, the members of the Board of

Directors did not receive compensation for their services. The

directors who are members of the Committee of Directors received

compensation in a total amount of Ch$132 million while the

members of the Audit Committee received compensation for a

total sum of Ch$42 million, all as resolved by the Ordinary

Shareholders’ Meeting held February 21, 2005.

The directors of the Affiliated and Related Companies did not

receive compensation for their services during 2005.

The total compensation received by the managers and main

executives of CORPBANCA during 2005 amounted to Ch$4,141

million. In addition, bonuses were paid for the meeting of targets

to the executives of the Bank, pursuant to the policy of bonuses

set forth by the Division of Organizational Development together

with the General Management.

[Total indemnifications for years of service] received by the

managers and main executives of the Bank during fiscal year 2005

amounted to Ch$ 342 million.

12

A N N U A L R E P O R T 2 0 0 5 • • • C O R P O R A T E G O B E R N A N C E

C O R P O R A T E G O V E R N A N C E

Due to the interest of shareholders, the Board of Directors of

CORPBANCA has decided to officially make public the institutional

governance principles and policies that regulate the Bank and its

Affiliated Companies, the Mission of the Bank, the role of the

Board of Directors, its main powers and roles, the committees

formed by members of the Board of Directors itself and the policies

applicable to the transactions with related parties.

Such principles and policies apply to the executives and

management of CORPBANCA, to those who hold the positions of

seniority and to the main committees that participate in such

management, and are based on the ethical aspects that must

govern their acts relating to such management.

In addition, within the corporate structure of the Bank special

emphasis has been given to the office of the Officer of Compliance,

whose role includes securing compliance by the Bank with the

rules related to money laundering.

In connection with Assets Laundering and Terrorism Financing

Prevention, the area of Compliance performs direct control over

the Main Office, the Affiliates and the branches. For the control

of these matters and the performance of the relevant duties counts

with the appropriate organization and with the adequate

independence from the Administration of the Bank, reporting

directly to the Audit Committee, which is formed by four members

who are independent directors. In addition, it integrates the

Committee of Analysis of Suspicious Transactions formed by the

General Manager, Managers of Commercial Divisions, Managers

of Risk Divisions, Manager of Operations Division, Manager

Comptroller and Manager of the Legal Services Division.

In order to mitigate the risks associated to these matters, there

have been implemented policies, rules and procedures which

constitute a commitment on the part of the directors, executives

and all those persons that collaborate with the institution. These

guidelines, which are framed in international standards and set

forth directives issued in accordance with the same, cover matters

such as “Know your Client”, created on the basis of practices of

due diligence, “Control, Identification, Analysis and Communication

of Suspicious Transactions”, “Program of Training of Personnel”,

“Conduct and Ethical Behavior of Directives and Collaborators”,

“Persons Politically Exposed (PPE)”, “Policy of Acceptance of

Clients”, and “Activities Involving High Risk”, among others.

The Bank also has a software program for the detection of unusual

transactions which allows us to have a broad coverage of control

and monitoring over our clients, transactions and products subject

to criteria or analysis of risk, establishing parameters or the

generation of reports related to volume, amount, segments of

business, etc. It allows us to program and direct control procedures

carried out by the Area of Compliance toward areas of higher risk

13

14

such as Private Banking, Correspondent Banking, border zones,

tax free zones, etc.

For the Private Banking segment, the Area of Compliance applies

typing criteria in the analysis of its clients, which includes a policy

directed to those clients who engage in commercial activities,

which are considered of high risk. In terms of Correspondent

Banking, the Bank has a policy of obtaining the policies and

procedures of other banks for the prevention of assets laundering,

in order to maintain a good knowledge of the counterpart banks.

Finally, the Area of Compliance carries out a program of permanent

training and awareness, which it periodically updates in order to

respond to new criminal activities, the complexity and sophistication

of which is improving. There are various types of training: a basic

level training for personnel in the group and an advanced level

for those in areas of high exposure, such as the Private Banking,

Commercial Enterprises Banking, Personal Enterprises Banking

and Front Office.

Directors Committee

The Committee of Directors of CORPBANCA is composed of the

following members of the Board of Directors: Carlos Massad Abud,

Taxpayer Identification Number: 2.639.064-8, Commercial Engineer

(Chairman of the Committee), René Cortazar Sánz, Taxpayer

Identification Number: 5.894.548-k, Commercial Engineer and

Francisco Rosende Ramírez, Taxpayer Identification Number:

7.024.063-7, Commercial Engineer. During fiscal year 2005 it met

on a monthly basis and has performed each of the activities

C O R P O R A T E G O B E R N A N C E • • • A N N U A L R E P O R T 2 0 0 5

15

required by numerals one through five of section 50 bis of Law

No. 18,046 which basically requires an examination of the Balance

Sheet and the Financial Statements of the Bank, including the

Notes thereto and the Report from the Independent Auditors and

issuing a statement with respect to the outcome of such review;

the proposal of an independent auditor which is submitted to the

consideration of the Shareholders’ Meeting; an examination of

the information related to the transaction covered by sections 44

and 89 of Law No. 18,046 and distribution of reports in connection

with such information, and an examination of the compensation

and plans for compensation that have been agreed upon with the

senior executives of the Bank, becoming acquainted with the

monthly results of the Bank; being familiar with the reports from

the rating agencies; following the progress by the Comptroller of

such office’s internal review; approving the general model of risk

proposed by the Comptroller; analyzing and became acquainted

with internal audits; examination of the Financial Statements of

the Bank, both at interim periods, as well as at the close of the

fiscal year; being familiar with the Reports of the Independent

Auditors and Reports of the inspective visits of the Superintendency

of Banks and Financial Institutions; being familiar with and

approving the answer of the Bank to the Reports of that

Superintendency and conducting a follow up of the commitments

of the Bank related thereto; approving and being familiar with

the the Sarbanes-Oxley Act Project; approving the issuance of

bonds by the Bank; being familiar with the different aspects of

the Financial Risk Division related to liquidity and market risk, the

tension tests on market risk and the new rules of the

Superintendency of Banks and Financial Institutions and the Central

Bank of Chile; being familiar with the report on management’s

self-evaluation report; being familiar with the different aspects of

management of the affiliates Corpbanca Corredora de Bolsa S.A.,

Corpbanca Administradora General de Fondos S.A., Corpbanca

Asesoría Financiera S.A. and Corpbanca Corredora de Seguros

S.A.; being familiar with and approving the by-laws of the Audit

Committee; being familiar with and tracking the business

continuance project; approving and being familiar with the disaster

recovery plan; being aware of aspects related to the laundering

of assets; being familiar with material litigation that represent

contingencies to the Bank; being familiar with the diverse aspects

of the Systems Division; being familiar with the report of the

independent auditors related to the controls and comments of

the administration to that report and being familiar with suspicious

transactions and ordering a report of such activities to the relevant

authorities in cases where it is considered appropriate.

Audit Committee

The Audit Committee is composed of directors Messrs. Hernán

Somerville Senn, Taxpayer Identification Number: 4,132,185-7,

Attorney (Chairman), Carlos Massad Abud, Taxpayer Identification

Number: 2,639,064-8, Commercial Engineer, René Cortazar Sánz,


16

C O R P O R A T E G O B E R N A N C E • • • A N N U A L R E P O R T 2 0 0 5

Taxpayer Identification Number: 5,894,548-k, Commercial Engineer

and Francisco Rosende Ramírez, Taxpayer Identification Number:

7,024,063-7, Commercial Engineer. The Committee regularly meets

twice a month but also meets whenever it is considered appropriate

by any of its members. In one of the two monthly meetings only

the Committee members and the Comptroller participate, without

the management of the Bank. At least one meeting is held with

the independent auditor in order to review the annual Balance

Sheet prior to its presentation to the Board of Directors, in addition

to any other meetings, which the independent auditor is required

to attend in order to render an account of its role as independent

auditor.

During fiscal year 2005, the Committee performed and carried out

every and each one of the functions and activities which the rules

of the Superintendency of Banks and Financial Institutions require,

in particular, proposing an independent auditor; becoming familiar

with the reports of the rating agencies; becoming familiar with

the plans of the Office of the Comptroller; approving of the general

risk model proposed by the Office of the Comptroller; analyzing

17


internal audits in all the matters of its adequacy; examining the

interim Financial Statements of the Bank, as well as those for the

end of the fiscal year; becoming familiar with the reports of the

Independent Auditors and Reports by the Superintendency of

Banks and Financial Institutions; becoming familiar with and

approving the Bank’s responses to such reports from the

Superintendency and overseeing any changes made based on

such comments; approval and oversight of the progress in the

Sarbanes-Oxley Act Project; becoming familiar with the different

aspects of the Financial Risk Division related to liquidity and

market risk, the tension tests on market risk and the new rules of

the Superintendency of Banks and Financial Institutions and the

Central Bank of Chile; becoming familiar with management’s self-

evaluation report and the amendments referred to this process

indicated in chapter 1 - 13, related to the area of audit and the

Audit Committee; becoming familiar with the different aspects of

management of our affiliates Corpbanca Corredora de Bolsa S.A.,

Corpbanca Administradora General de Fondos S.A., Corpbanca

Asesoría Financiera S.A. and Corpbanca Corredora de Seguros

S.A.; becoming familiar with and approving the by-laws of the

Audit Committee; approving and overseeing business continuance

projects; approving and overseeing the disaster recovery plan;

becoming informed with the aspects of laundering of assets;

becoming informed of material litigation causing a contingency

for the Bank, becoming familiar with the different aspects of the

Systems Division; becoming familiar with the report of the

independent auditors related to the controls and procedures and

oversight of the report; and becoming familiar with suspicious

transactions and ordering a report of such transactions in cases

where it is deemed necessary.

In order to adapt ourselves to our customer needs and give

real solutions to their finantial needs.

20

M A I N O F F I C E R S O F C O R P B A N C A • • • A N N U A L R E P O R T 2 0 0 5

M A I N O F F I C E R S O F C O R P B A N C A

Administrative Structure and Officers

The Bank is managed under the direction of the Board of Directors through the General Manager.

The following is the chart of the administrative officers of CORPBANCA as of December 31, 2005.

Support AreasCommercial Areas Subsidiaries

Chief Executive Officer

Christian Samsing

Retail Banking

Osvaldo Barrientos

Commercial Banking

Marcelo Achondo

Treassury and International

Christian Schiessler

Distribution Channels

Carlos Aracena

Mutual Funds

Pedro Silva

Securities Brokerage

Carlos Ubeda

Insurance Brokerage

Roberto Vergara

Financial Advisory

Roberto Baraona

Operations

Guido Silva

Information and Technology

Armando Ariño

Chief Financial Officer

Claudio Chamorro

Human Resources and Administration

Olivia Brito

Legal Counselor

Cristián Canales

Risk

Julio Henríquez

Credit Risk

Fernando Valdivieso

Marketing and Products

Enrique Martínez

A N N U A L R E P O R T 2 0 0 5 • • • M A I N O F F I C E R S O F C O R P B A N C A

21

Christian Samsing Stambuk

(Commercial Engineer Pontificia Universidad Católica de Chile;

Taxpayer Identification Number 6.731.190-6) has been the General

Manager of CORPBANCA since May of 2003; between January

and April of that year performed functions as Deputy General

Manager; as Manager of the Risk Division performed between

1996 and 2003. Previously, he held the office of Commercial

manager and Acting General Manager of Bank Boston Chile and

American Express Bank Ltda. (Chile).

Marcelo Achondo Larenas

(Commercial Engineer Universidad de Chile; Taxpayer Identification

Number 6.447.511-8) has been Manager of Enterprises Commercial

Division since the month of April of 2003; since 1996 and until

February of 2003 he performed the office of Manager of Large

Enterprises Division. In addition, he served in a similar position

with Banco Osorno y la Unión between 1994 and 1996.

Claudio Chamorro Carrizo


Taxpayer Identification Number 10.585.375-0) he performs the

office of Manager of the Planning and Management Control

Division since the month of November of 2005. Prior to that date,

he served as Manager of Financial Risk in CORPBANCA. Prior to

that date, he performed activities as Manager of Financial Risk in

CORPBANCA New York and as Director of Research in the

Superintendency of Banks and Financial Institutions.

Osvaldo Barrientos Valenzuela

(Civil Engineer Universidad de Chile; Taxpayer Identification Number

9.006.525-4) serves the office of Manager of the Individuals

Commercial Division since December of 2004. Between 1994 and

2004 he performed the office of Manager of Means of Payment

of Banco Santander Santiago.

Julio Henríquez Banto

(Commercial Engineer Universidad de Santiago de Chile; Taxpayer

Identification Number 8.943.341-K) is the Manager of the Risks

Division since the month of November of 2005. Since June 2004

and until October of 2005 he served the office of Manager of the

Office of the Comptroller Division. Between September of 2000

and May of 2004 he served as Manager of the Products Division.

Christian Schiessler García

(Commercial Engineer Universidad Federico Santa María; Taxpayer

Identification Number 7.277.278-4) has been the Manager of the

Finance and International Division since May of 1996. Prior to

that, he served similar positions in Banco Osorno y la Unión and

Banco Edwards.

Fernando Valdivieso Larraín


Taxpayer Identification Number 6.063.152-2) is the Manager of

the Enterprises Credit Risk Division since August of 2005. Since

the year 2002 and until the year 2005 he performed the office of

Manager of the Risk Division in Compañía de Seguros Vida Corp.

Previously to that, he served the position of Manager of the Credit

Division and Manager of the Risks Division of Banco Santiago.

The senior officers of the Bank are the following:

22

M A I N O F F I C E R S O F C O R P B A N C A • • • A N N U A L R E P O R T 2 0 0 5

Carlos Aracena Mellado

(Commercial Engineer Universidad de Santiago de Chile; Taxpayer

Identification Number 8.746.808-9) he performs as Manager of

the Channels Division since the month of December of 2004.

Between the months of April and December of 2004 he served

the office of General Manager of Instacob, a collections company

related to the Corp Group.

María Olivia Brito Bahamonde

(Commercial Engineer Universidad Gabriela Mistral; Taxpayer

Identification Number 10.006.501-0) serves the position of Manager

of the Organizacional Development Division since January of 2002.

Prior to that, he served as Manager of the Planning and

Management Control Division.

Cristián Canales Palacios

(Attorney Universidad Chile; Taxpayer Identification Number

9.866.273-1) is, since the month of April of 2003 the Manager of

the Legal Services Division. Between 2002 and March of 2003 he

performed as Manager in the Legal Services Area.

Armando Ariño Joiro

(Civil Engineer Universidad INCCA, Colombia; Taxpayer Identification

Number 14.726.855-6) has been the Manager of Systems Division

since the month of November of 2000. Prior to that date, between

1995 and 2000 he performed as senior consultant of systems and

technology in Coinfin (Colombia).

Guido Silva Escobar

(Commercial Engineer Universidad de Chile; Taxpayer Identification

Number 5.774.598-3) is since November of 2005 the Manager of

the Operations Division. Previously he performed as the General

Manager of Skandia Chile S.A. and Manager of Operations and

Technology of Banco Edwards.

In addition, and reporting to the Audit Committee:

Silvia Quintard Flehan

(Accountant – Auditor Universidad Diego Portales; Taxpayer

Identification Number 9.819.257-3) has been since the month of

December of 2005 the Manager of the Office of the Comptroller.

Prior to that he performed the office of Manager of Operations

of the Bank and its Affiliates and as Manager of Operations of

Corp Corredores de Bolsa.

A N N U A L R E P O R T 2 0 0 5 • • • M A I N O F F I C E R S O F C O R P B A N C A

23

As of December 31, 2005, CORPBANCA and its affiliates had a total working force of 2,170 employees, the distribution of which is the

following:

Company Senior Professionals Workers TotalExecutives and Technicians and Others

CORP BANCA 116 1,035 883 2,034CORP BANCA Mutual Funds S.A. 3 24 20 47CORP BANCA Securities Brokerage S.A. 4 24 15 43CORP BANCA Insurance Brokerage S.A. 3 14 25 42CORP BANCA Financial Advisory S.A. 3 1 0 4

24

B U S I N E S S O F C O R P B A N C A • • • A N N U A L R E P O R T 2 0 0 5

Our Mission

“To be an important actor in the financial market, offering to our

clients, both individuals and companies, a variety of competitive

products and services, generated by a teams of persons highly

motivated and committed to the highest standards of excellence

and efficiency in management, and to deliver superior levels of

profitability to our shareholders”.

Brief History

In 1871, a group of neighbors in Concepción headed by Mr. Aníbal

Pinto, who would later become President of the Republic, transcribed

into a public deed the by-laws of Banco de Concepción. On

October 6 of that year, the Bank commenced operations, which

have continued in an uninterrupted manner until now, becoming,

therefore, the oldest bank in the country. In 1971, the Bank

underwent a change in its ownership structure, the result of a

confiscation of the private banking industry. Control passed to the

CORPORACIÓN DE FOMENTO DE LA PRODUCCIÓN (CORFO). That

very same year, Banco Concepción acquired Banco Francés e

Italiano in Chile, which brought the Bank to Santiago. Later, in

1972, the Bank acquired Banco de Chillán and, in 1975, Banco de

Valdivia. In November of 1975, CORFO sold its shares to private

entrepreneurs, who took control of the Bank in 1976. In 1980,

and as a result of its growth, Banco de Concepción became a

national bank, changed its corporate name to that of Banco

Concepción and moved the General Management from Concepción

to Santiago. In 1986, Sociedad Nacional de Minería (SONAMI)

acquired the Bank. Since the acquisition, the Bank took special

interest in the financing of small and medium size mining companies

increased its capital and sold its risky portfolio to the Central Bank

of Chile.

Toward the end of 1995, SONAMI sold a majority interest in the

Bank to a group of investors headed by Mr. Alvaro Saieh B., through

INFISA, a holding company (currently Corp Group). Since the

acquisition, the controlling shareholders of the Bank defined a

strategy of growth, re-positioning and restructuring of the

operations in order to place it among the important actors of the

national financial system. As part of the strategy of growth that

the controlling shareholders changed the Bank’s strategy to focus

on small and medium sized companies. During the first quarter

of the year 1997, the shareholders of Banco Concepción reached

an agreement with the Central Bank of Chile in order to extinguish

the subordinated debt that the Bank held since the early 1980s.

Also in 1997, as part of the Bank’s re-positioning plan, the

controlling shareholders changed the Banks name to CORPBANCA.

In 1998, the Bank acquired the loan portfolio of Corfinsa, which

B U S I N E S S O F C O R P B A N C A

A N N U A L R E P O R T 2 0 0 5 • • • B U S I N E S S O F C O R P B A N C A

25

was the consumer loan division of Banco Sudamericano, formerly

of Financiera Condell, both of which today comprise Bancondell,

and thereby began participating in the market aimed at the low-

medium-segment of the population. Such strategy has allowed

CORPBANCA to be the second bank in the banking sector in terms

of growth in loans in the last seven years. It also allowed for the

reversal of losses suffered in 1999 and the high profitability over

average capital and reserves starting in December of 2001 and

continuing until now.

In November of 2002, CORPBANCA issued shares in the local

market for a total of US$250 million. The issuance was made in

the Emerging Stock Market, being the first issuer to issue

instruments in such market.

Subsequently, in November of 2004, CORPBANCA took a big step

toward internationalization when it completed the process of

listing its American Depositary Receipts (ADRs) on the New York

Stock Exchange. The process had started in November of 2003,

with the issuance of shares in the United Status pursuant to Rule

26

144A under the Securities Act of 1933, as amended, to Qualified

Institutional Buyers.

In November of 2004, 2,701,040 ADRs which had been issued

pursuant to Rule 144A in 2003 where exchanged for ADRs registered

with the U.S. Securities and Exchange Commission (each ADR

represents five thousand shares in CORPBANCA). The aggregate

number of ADRs represents 5.95% of the Bank’s shares outstanding.

The exchange allowed the ADRs to be listed on the New York

Stock Exchange, enhancing the liquidity of the shares. CORPBANCA

at the same time began compliance with certain disclosure

requirements, which provide for greater transparency, as well as

with international standards in matters of accounting and corporate

governance.

Economic and Financial Environment

In 2005, GNP reached 6.3% per annum, which completed the

economic recovery of the country. Inflation increased, mainly, due

to the impact of the price of the oil. During the year, the consumer

price index increased by 3.7%, falling within the targeted range

for inflation set by the Central Bank of Chile. The unemployment

rate steadily decreased to 6.9%.

During 2005, the Central Bank of Chile cautiously increased the

interest rate, following the trend of the Federal Reserve of the

United States of America. In November of 2005, the Central Bank

increased the interest rate by 25 basis points to 4.5% per annum,

after a series of increases which started at 1.75%.

Economic growth was, once again, driven by exports, which were

US$39,536 million in 2005, or 35% of the Chilean GNP. Also, the

price of the main export product, copper, surpassed US$2 per

pound by the end of 2005. The large volume of exports has been

accompanied, this time, by a large increase in investments, which

exceeded the record levels registered prior to the recession of

1999.

Also, the balance of commercial trade (FOB) was approximately

US$9,200 million in 2005 compared with US$9,019 million for

In November of 2002, CORPBANCAissued shares in the local market for atotal of US$250 million. The issuancewas made in the Emerging Stock Market,being the first issuer to issue instrumentsin such market.


27

2004; exports increased from US$32,000 million in 2004 to

US$39,536 million in 2005, while imports increased from US$23,000

million in 2004 to US$30,300 million in 2005.

Positive Results for the Financial System in fiscal year

2005

The banking sector closed 2005 in a situation of financial strength

having had important growth in terms of activity, access to new

clients, efficiency and transparency.

The dynamic nature of the economy can be seen in the increase

in loans, as well as the increase in liabilities and borrowings

obtained by customers (time deposits). Loans increased by 13%

in 2005, the highest increase since 1998. Time deposits in turn

increased by 23%, surpassing in a considerable way the growth

experienced during the last seven years.

The Chilean banking sector is considered the strongest among

those of emerging countries and is in third place within industrialized

countries, being surpassed only by the United States and Canada.


Total Loans(Annual change as of December each year)

1997

14,0%

12,0%

10,0%

8,0%

6,0%

4,0%

2,0%

0,0%

1998 1999 2000 2001 2002 2003 2004 2005

Time Deposits(Annual change as of December each year)

25,0%

20,0%

15,0%

10,0%

5,0%

0,0%

-5,0%

-10,0%%

1998 1999 2000 2001 2002 2003 2004 2005

13,2%12,5%

10,4%

4,6%

1,6%

4,6%4,3%

2,7%

4,8%

10,7%

22,5%

17,1%

-4,1%

2,3%4,5%

2,1%

12,0%

28It should be noted that, despite the significant increase in the loan

base, the quality of the portfolio of the banking sector remains at

adequate levels, with a risk index that was lower than that of

previous years. Also, the percentage of overdue loans dropped as

compared to the total portfolio.

In addition, the sector continues increasing its operational efficiency

related to operating expenses, reaching 53%.

Fiscal year 2005 was also characterized by increased competition

from inside the banking sector particularly with the expansion of

support networks, such as automated teller machines and credit

cards and from outside the banking sector from other credit

providers. In fact, almost one third of all loans are made by non-

bank entities, such as department stores and insurance companies.

Loans increased by 13% in 2005,the highest increase since 1998.


Financial Strength(Emerging countries)

0

Malasia

Rusia

India

Hungría

Estonia

7010 20 30 40 50 60

35,2%

10,0%

11,0%

18,3%

24,2%

57,8%

45,0%

45,8%

46,7%

Financial Strength(Industrialized countries)

0

EE.UU.

Canadá

Chile

México

Italia

10020 40 60 80

77,0%

20,6%

75,0%

72,5%

57,8%

45,8%

41,7%

47,2%

63,3%

29

From a regulatory perspective, a number of changes took place

during 2005, mainly, changes to the rules that govern the transfer

of assets received by banks and the treatment of capital in relation

to the accounting treatment of financial instruments.

Finally, 2005 witnessed important changes in payment systems,

demonstrated by the fact that 77% of all payment transactions

(Ch$ 951 million) were done through non-traditional means, such

as the internet or telemarketing. In 1999, only 35% of all

transactions were realized by these methods.

Non Performing Loans and Risk Index

Efficiency Ratio(Operating Expenses / Gross Margin)

Dec-97

3,0%

2,5%

2,0%

1,5%

1,0%

0,5%

0,0%

Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05

Allowances / Total Loans Past Due / Total Loans

1.4%

1,0%0,9%

1,5%1,7% 1,7% 1,6% 1,8% 1,6%

1,2%

1.9%

2,5% 2,5% 2,4%2,3%

1,6%

2,1% 2,0%

Dec-97

70%

65%

60%

55%

50%

45%

40%

Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05

63%

53%

59% 59% 58%55% 54%

53%56%


Optimize the use of capital and human resources.

32

C O R P B A N C A I N 2 0 0 5 • • • A N N U A L R E P O R T 2 0 0 5

Fiscal year 2005 was, without a doubt, a redefining year for

CORPBANCA. During 2005, the Bank commenced a new phase of

its long-term strategy, dedicating resources to restructuring its

mix of assets and increasing the number of personnel. The long-

term strategy, however, is grounded in three basic strategies for

growth, which are, efficiency in terms of expenses, controlled

credit risk and profitable growth.

Levels of Activity

In 2005, the loan portfolio (net of inter-bank loans) grew by 12.3%

to Ch$2,818,614 million.

One of the strategies established by CORPBANCA was to change

its mix of financial products and focus on those with a higher

return and larger financial spread. As a result of the implementation

of such strategy, the products that were the most important in

2005 were consumer credits, which grew by 19% as compared

with fiscal year 2004. In addition, placements associated with

individual consumers, such as home mortgage loans, grew by 27%

in twelve months.

Furthermore, the placement of credit cards during 2005 was a

complete success, reporting an increase of 108% (Individual

Banking) as compared with fiscal year 2004. One of the main

factors that explain the substantial increase in credit card

placements is the aggressive campaign carried out by CORPBANCA

in connection with American Express cards (which experienced

an increase of approximately 70% in twelve months). Finally, the

total balance of cards as of December 31, 2005 was 115,214

cards, which is 25% higher than at the amount as of December

31, 2004. In terms of sales, the Bank surpassed U.F. 2 million in

2005.

C O R P B A N C A I N 2 0 0 5

A N N U A L R E P O R T 2 0 0 5 • • • C O R P B A N C A I N 2 0 0 5

33

Commercial loans grew by Ch$139,451 million or 12% as compared

with fiscal year 2004. It must be noted that, notwithstanding this

increase, an important part of the new businesses focus during

2005 was guided toward the segment of medium sized enterprises.

As discussed above, home mortgage-secured loans reported an

increase of 27% in twelve months. That allowed CORPBANCA to

increase its market share in this type of placements, from 2.3%

as of the month of December of 2004 to 2.5% as of the

month of December of 2005, which falls within the strategic

framework established by the Bank in accordance with the

importance that has been given to this type of transactions.

The growth of the loan portfolio (12% in twelve months), compared

to the slight increase reported of provisions for loans (2.8%),

affected the risk index (allowanves for loan losses over total loans)

in a positive way, which went from 1.70% in the month of December

of 2004 to 1.56% at the closing of 2005.

The following chart shows the changes in placements of consumer credits for the years 2004 and 2005:

Year 2005 Year 2004

Jan Feb Mar Apr May Jun Jul Aug

25,000

20,000

15,000

10,000

5,000

0Sep Oct Nov Dec

MM

$

9,899

10,249 8,302

8,40914,244

13,088

11,540

10,228

8,393

11,723

8,863

14,402

15,223

19,578

14,822

17,680

15,041

21,289

15,364

17,240

14,373

17,342

14,451

15,392

34

Even though the amount of non performing loans increased by

almost Ch$4,600 million, their percentage within the total loan

portfolio is within reasonable levels (0.88%). In addition, provisions

on overdue loans of CORPBANCA were 177% at the end of 2005.

The following chart shows changes in the risk index (allowances

for loan losses over total loans), during the last eight years:

As a result of the capital expansion in 2002, and our dividends

policy, CORPBANCA has a significant amount of financial

investments, which prove to be a profitable use of capital. At the

end of 2005, investments formed 10% of our total assets. Such

investments are mainly in instruments with low credit risk.

Financing

In addition to the capitalization of profits, and the adecuate capital

base it creates, the growth of assets of the Bank was financed

mainly by deposits, borrowings obtained in the local market and

funds obtained from the placement of bank bonds during the first

six months of 2005.

Borrowings and other local obligations increased by Ch$55,769

million, due mainly to the increase in time deposits and borrowings.

Banking bonds issued by CORPBANCA, at the close of fiscal year

2005 amounted to Ch$144,762 million.

In addition to the above, it is important to note the increase by

Ch$14,398 million (11%) reported in current accounts. This growth

is critical to CORPBANCA because such liabilities constitute an

important source of funding which does not have a related financial

cost.

On the other hand, and in order to diminish the gaps between the

average terms of our assets and liabilities, during the month of

April of 2005, CORPBANCA placed $250 million dollars, in a

banking bond with an interest rate of 3.0% per annum. The bond

matures in five years. Principle is paid in full at maturity.


1998 1999 2000 2001 2002 2003 2004 2005

2.60%

2.40%

2.20%

2.00%

1.80%

1.60%

1.40%

1.20%

1.00%

Corp Banca Chilean Banking Sector

1.90%

1.60%

1.61%

1.56%

35

In addition, it should be noted that, beginning in October of 2005,

CORPBANCA has been measuring its required liquidity under an

“adjusted” scheme, pursuant to an authorization granted by the

Superintendency of Banks and Financial Institutions in order to

allow the Bank to operate with fewer restrictions. Such

authorization was granted on the basis of the accuracy of the

Bank’s liquidity model, which was rigorously evaluated by the

analysts of the Superintendency. The liquidity model is capable

of calculating detailed estimates of the Bank’s income (for instance,

payment of credits, payment of credit cards, sale of investment

products and deposits) and disbursements of cash (for instance,

new credits, new investments, payments of dividends and no-

renewal of deposits). The creation of the model required information

and experience from diverse areas of the Bank.

The authorization was also granted based on the fact that the

Bank is able to generate the required information on a daily basis.

In order to generate such information, the Information and

Technology Area required special servers and, more importantly,

it required the design of a procedure, which minimized the time

needed to gather such information. At present, the calculation is

made daily; through a process that is almost 100% automated,

and which has a minimal degree of error.

In accordance with the relevant regulation, a bank would be

authorized to operate with the adjusted model if, in the opinion

of the Superintendency, the institution counts with a solid

management of financial risks.

Results

CORPBANCA’s consolidated net income before taxes as of December

31, 2005 as Ch$63,362 million, a nominal increase of 10.6% as

compared to the preceding year. Consolidated net income for the

year was Ch$52,633 million. The difference between net income

and pre-tax net income reflects the establishment by CORPBANCA

of an income tax provision at the beginning of the second half of

2004 following the full utilization of tax loss carryforwards relating

to subordinated debt of Corp Banca held by the Central Bank of

Chile.

Gross margin grew by Ch$5,611 million for 2005. This increase

was due mainly to the increase reported in fee income and gains

from trading activities. The increase in fee income is very important

to CORPBANCA because it demonstrates that the Bank is delivering

value to its clients and thereby becoming a significant supplier of

financial services.

During 2005, CORPBANCA experienced an increase of 12% in the

amount of total loans which was partially offset by smaller financial


36spreads as a result of an increase in interest rates. Given the

foregoing, interest and net adjustments remained practically the

same when comparing 2005 and 2004.

Even though operating expenses increased by Ch$3,412 million

as compared to 2004, CORPBANCA had a consolidated efficiency

ratio of 40.0% as of December 31, 2005, thereby becoming one

of the most efficient banks in the local banking sector. It’s important

to note that the increase in operating expenses was mainly due

to a raise in salaries and increased hiring of personnel needed to

meet the Bank’s higher levels of activity. In fact, the total number

of employees of the Bank and of its affiliates went from 1,963 as

of December 31, 2004 to 2,170 as of December 31, 2005.

The charge to income on account of provisions and charge-off

expenses, net of recoveries, dropped by Ch$4,941 million (26%),

in line with the Bank’s objective of maintaining a portfolio with

an adecuate level of risk. The level of expenses for provisions and

net charge offs over loans portfolio decreased to 0.5% by the

end of 2005, contrasting with 0.7% of the previous year.

As for the risk index, CORPBANCA, as well as the whole of the

banking sector, experienced a favorable trend. However, in the

specific case of the Bank, our stronger focus on the housing mort-

gages portfolio and direct payment agreements (for the consumer

product and large enterprises) has resulted in a reduction of

exposure to risk.

Return of equity dropped from 15.6% for 2004 to 14.8% for 2005.

This decrease was due in part to the increase in CORPBANCA's

capital base as a result of the capitalization of 50% of its 2004

net income and to the impact of the recordation of tax provisions

in the second half of 2004 following the full utilization of tax loss

carryforwards. On a pre-tax basis, CORPBANCA's return on equity

for 2005 was 17.9% compared to 17.6% for 2004.

Risk Rating

During 2005, CORPBANCA maintained its national and international

risk rating for its debt instruments and shares over the course of

2005, which reflects the Bank’s good financial condition, in terms

of solvency, good financial results and control risk. It must be

noted that the Feller Rate rating agency revised its rating of the

Bank from Stable to Positive.

CORPBANCA had a consolidated efficiencyindex of 40.0% as of December 31, 2005,thereby becoming one of the most efficientbanks in the local banking sector.


37

International Ratings

Local Ratings


FITCHSovereign RiskLong term foreign currency ALong term local currency A+CORPBANCAIndividual CSupport 3Foreign CurrencyShort term F2Long term BBB+Local CurrencyShort term F2Long term BBB+NationalShort term F1 (CHL)Long term AA- (CHL)

STANDARD & POOR'SBBB+/Stable/A-2

FITCH FELLER-RATELess than 1-year deposits Level 1 Level 1+More than 1-year deposits AA- AA-Letters of Credit AA- AA-Bonds AA- AA-Subordinated Bonds A+ A+Shares Level 2 1 Class Level 2

38

Recognitions and Distinctions

According to a survey carried out by the specialty magazine

“América Economía”, seven Chilean banks were in the 25 better

managed banks in Latin America. In the survey, CORPBANCA

ranked in seventh place. Also, CORPBANCA ranked 31st in the

ranking of the 250 largest banks of the Continent’s Southern Tip.

In April of 2005, “Emerging Markets” (an affiliate of Euromoney

Institutional Investor) published the results of a survey of Latin

American banks; CORPBANCA was part of the group of institutions

that lead the ranking.

Risk Factors

The risk factors associated to the business of CORPBANCA and

the banking business in general are, mainly, four. The first risk is

the volatility created by inflation because projected inflation rates

are absorbed into the marketing and pricing of banking products.

The second risk is created by variations in the exchange rate,

because of the Bank’s exposure to foreign currencies, directly

affecting the results of the Bank. The third risk is created by

variations in the interest rate because such variations affect the

pricing of the Bank’s products, which are adjusted to track the

movements in interest rates. The fourth risk is the general

performance of the economy. In general terms, CORPBANCA and

the banking sector as a whole have the tendency to move in the

same direction followed by the economy of the country, that is,

when the economy slows down, the projected growth of banks

tends to be less. A natural consequence of this development is

variations in credit risk, which constitute one of the principal

elements in evaluating the financial position of a bank.

CORPBANCA currently has a risk index (allowances for loan loses

over total loans) lower the risk index of the Chilean banking sector

as whole. In order to adequately cover the risks indicated above,

current regulation establishes maximum allowable mismatches,

a policy which forms an integral part of CORPBANCA’s exposure

policy.

Changes in the Risk Index

(Allowances over total loans)


1998 1999 2000 2001 2002 2003 2004 2005

2.60%

2.40%

2.20%

2.00%

1.80%

1.60%

1.40%

1.20%

1.00%

Corp Banca Chilean Banking Sector

1.90%

1.60%

1.61%

1.56%

39

I N V E S T M E N T A N D F U N D I N G P O L I C E S

The Bank’s Finance and International Division specializes in financial

management. It is charged with a large part of the decision making

process in terms of investments and funding for the Bank, as well

as the proper treatment of mismatches on the balance sheet.

There is also a committee, which is formed with representatives

from the various groups involved in the management of the Finance

Division, which is charged with the planning, supervision and

management risk using meticulous risk analysis. The Committee

of Assets and Liabilities meets on a weekly basis in order to stay

informed of overall long-term trend, as well as up-to-date potential

high risks.

The Committee has a Manual that establishes guidelines for the

direction of the Finance Area created by the senior management

of the Bank.

The Committee of Assets and Liabilities analyzes the main concerns

related with the financial management of the Bank, including,

among others, the following:

• Gapping Management,

• Investments,

• Financing, and

• Risk Analisis.

More detailed descriptions of the policies of the Bank can be

found below.

Gapping Management

The Bank allows itself to have its balance sheet in foreign currency

unbalanced, in such a manner as to seek profits before movements

of the parities in the foreign currency markets.

In addition, CORPBANCA manages the balance sheet in respect

of the mix of assets and liabilities in terms of period and indexation.

In order to obtain the best possible level of profitability from this

situation, the area of Finance handles this mismatch through an

active administration of the Gapping.

Investment Policy

The Bank maintains three investment portfolios in Fixed Income:

- Investments to Due Date,

- Trading Investments, and

- Investments Available for Sale.

Each one of these investment portfolios has different objectives,

and therefore their management policies differ.

Investments to Due Date: This is an investment portfolio, which

was formed to hold investments through the length of their term,

until final maturity. The main objective of this portfolio is to obtain

the benefits of positive financial margins, considering that the

portfolio has been removed from movements of the main financial

variables that could affect its yield as reflected in the Statement

of Income of the Bank.

A N N U A L R E P O R T 2 0 0 5 • • • I N V E S T M E N T A N D F U N D I N G P O L I C E S

40

Trading Investments: The Trading portfolio is basically aimed at

realizing on short-term arbitrages of movements of interest rates

to generate a profit for difference of prices. The composition of

this portfolio counts both with fixed income instruments and

interest rate derivative contracts.

Investments Available for Sale: This portfolio is formed exclusively

by Fixed Income instruments, which would not be classified in the

portfolios referred above. It is structured with medium term

interest rate instruments, which must be kept for a period in excess

of that considered in the trading portfolio. Notwithstanding the

foregoing, the portfolio is also expected to produce positive

financial margins while the instruments are kept in the balance

sheet.

Funding Policy

The Funding of the Investments and, in general, of all the areas

of the Bank, is the responsibility of the Area of Finance. Through

financial tools, which are available mainly in the local market, the

Area of Finance must optimize the structure of the Balance Sheet,

particularly with a focus to reduce costs. For these purposes, the

Bank generally uses credit instruments such as time deposits,

funding forward contracts and structured bonds.

Risk Analysis

The Bank has an Area of Financial Risks, which oversees the

effectiveness of the Treasury Division’s measurements and estimate

of risk.

The Area of Financial Risks reports to the Committee of Assets

and Liabilities, same as the Treasury Division, on a weekly basis.

For each one of the different lines of business of the financial area

of the Bank that has been described above, the Financial Risks

Division measures the exposure on the capital of the Bank based

on the management by Treasury. Different indicators have been

created for the different types of exposure.

The most common risk is the mismatch of foreign currency and

Financial Investments. The Bank counts with an internal model

of measurement of market risk, which adopts a VaR – Value at

Risk methodology– for the estimate of losses in respect of the

capital assigned to the different financial positions assumed. In

this manner, the Area of Financial Risks guards against inopportune

losses that may occur.

I N V E S T M E N T A N D F U N D I N G P O L I C E S • • • A N N U A L R E P O R T 2 0 0 5

A N N U A L R E P O R T 2 0 0 5 • • • P A T E N T S A N D O T H E R I N T E L L E C T U A L P R O P E R T Y

41

All the trademarks used by the Bank are duly registered in the Register of Marks and Patents of the Chilean Department of Industrial

Property.

P A T E N T S A N D O T H E R I N T E L L E C T U A L P R O P E R T Y

As a permanent way to comunicate with our customers

and on line advisory for their requires.

44

M A I N A S S E T S • • • A N N U A L R E P O R T 2 0 0 5

M A I N A S S E T S

The main fixed assets owned by CORPBANCA as of December 31, 2005 were its Main Office located at Huérfanos 1072, Santiago, and

32 branches throughout the entire country.

Following is a listing of the branches of the Bank, including those that are owned and leased by the Bank.

Network of Branches of CORPBANCA

Region IArica 21 de Mayo 115Iquique Av. Serrano 280Iquique (C.Aux.) Recinto Zofri

Region IIAntofagasta Av. San Martín 2668

Region IIICopiapó Av. Chacabuco 481Vallenar Av. Arturo Prat 1070

Región IVLa Serena Balmaceda 540Coquimbo Av. Aldunate 795Ovalle Victoria 271

Region VValparaíso Av. Arturo Prat 737Viña del Mar Av. Ecuador 104

Region VIRancagua Independencia 699San Fernando M. Rodríguez 840

Region VIITalca Uno Sur 1132Curicó Estado 370

Region VIIIChillán Constitución 550Los Angeles Colón 398Concepción Av. B. O´Higgins 612Barrio Universitario Galería El Foro s/n, Barrio UniversitarioTalcahuano Av. Colón 657Base Naval Av. Jorge Montt 102El Trébol Autopista Concepción 8671 L-B5

Region IXTemuco Arturo Prat 743

Region XValdivia Av. Picarte 370Osorno Manuel A. Matta 624Puerto Montt Av. Urmeneta 541

Region XIIPunta Arenas Av. Magallanes 944

45

A N N U A L R E P O R T 2 0 0 5 • • • M A I N A S S E T S

Region IArica 21 de Mayo 115Iquique Av. Serrano 280Iquique (C.Aux.) Recinto Zofri

Region IIAntofagasta Av. San Martín 2668


Región IVLa Serena Balmaceda 540Coquimbo Av. Aldunate 795Ovalle Victoria 271

Region VValparaíso Av. Arturo Prat 737Viña del Mar Av. Ecuador 104

Region VIRancagua Independencia 699San Fernando M. Rodríguez 840

Region VIITalca Uno Sur 1132Curicó Estado 370

Region VIIIChillán Constitución 550Los Angeles Colón 398Concepción Av. B. O´Higgins 612Barrio Universitario Galería El Foro s/n, Barrio UniversitarioTalcahuano Av. Colón 657Base Naval Av. Jorge Montt 102El Trébol Autopista Concepción 8671 L-B5

Region IXTemuco Arturo Prat 743

Region XValdivia Av. Picarte 370Osorno Manuel A. Matta 624Puerto Montt Av. Urmeneta 541

Region XIIPunta Arenas Av. Magallanes 944

Metropolitan RegionMain Office Huérfanos 1072Alameda Av. Bernardo O´Higgins 2206Apoquindo Av. Apoquindo 4759Bernardo O´Higgins Av. Bernardo O´Higgins 1228El Bosque El Bosque Norte 0137Gran Avenida Av. José Miguel Carrera 5120La Dehesa Av. José Alcalde Délano 10682 L/2Maipú Av. Pajaritos 1783Ñuñoa Av. Irarrázaval 3333Panamericana Norte Av. Pdte. Eduardo Frei Montalva 1788Plaza Vespucio Froilan Roa 7205 L.121 al 124Providencia Av. Providencia 1422Puente Alto Concha y Toro 1149 L/59San Bernardo Arturo Prat 495San Borja Av. Bernardo O´Higgins 288San Joaquín Av. Vicuña Mackenna 4860Santiago 2000 Huérfanos 770-BSanta Elena Av. Santa Elena 2340Suecia Suecia 024Vitacura Av. Vitacura 6635El Golf Av. Apoquindo 3500

Network of Branches of Bancondell

Region IArica 21 de Mayo 115Iquique Serrano 280

Region IICalama Almirante Latorre 1925Antofagasta Antonio Matta 2537


Region IVLa Serena Balmaceda 540Coquimbo Aldunate 795Ovalle Victoria 271

Region VQuillota Maipú 352San Felipe Arturo Prat 177Viña del Mar Arlegui 176Valparaíso Cochrane 754San Antonio Centenario 127

46

M A I N A S S E T S • • • A N N U A L R E P O R T 2 0 0 5

Region VIRancagua Campos 381

Region VIITalca Uno Sur 1132Curicó Estado 370Linares Independencia 634-A Region VIIIChillán Constitución 550Concepción I Barros Arana 428Talcahuano Colón 657Los Angeles Colón 398 Region IXTemuco Arturo Prat 743 Region XValdivia Av. Picarte 370Osorno Av. Matta 624Puerto Montt Av. Urmeneta 541Castro Blanco 208

Region XICoyhaique Francisco Bilbao 204

Region XIIPunta Arenas Magallanes 944

Metropolitan RegionAgustinas Agustinas 799Ahumada Ahumada 252Estación Central Av. Lib. Bernardo O´Higgins 3015Mapocho Puente 731Maipú Av. Pajaritos 1783Moneda Moneda 893Ñuñoa Irarrázaval 2440Plaza Vespucio Vicuña Mackenna 7110 Loc. 1-2-3

BoulevardSan Bernardo Arturo Prat 495Estado Estado 350Puente Alto Concha y Toro 286 Loc. 12 - 17

47

A N N U A L R E P O R T 2 0 0 5 • • • S U B S I D I A R I E S A N D B U S I N E S S S U P P O R T C O M P A N I E S

CORPBANCA participates in a series of companies, which are

divided in Affiliate Companies and related Business Support

Companies. As of the end of the fiscal year 2005, these companies

provided CORPBANCA with net income of Ch$7,707 million, an

increase of 33% as compared to 2004.

Subsidiaries Companies

1.Corpbanca Administradora General de Fondos S.A.:

The company’s corporate purpose is to manage the assets of

mutual funds for the accounts of their participants. The

investments are made both in fixed income instruments and

variable income instruments and in the local and foreign markets.

During fiscal year 2005. The company generated a net income

of Ch$1,325 million, with a rate of profitability of 45.8% on

the capital invested. As of December 31, 2005, the subscribed

for and paid in capital was Ch$1,570 million; the participation

of CORPBANCA in the ownership of the company reached

99.996%, an investment equal to 0.05% of the total assets of

the Bank. Management of the company is the following:

Board of Directors

President : Cristian Canales Palacios (2)

Director : Osvaldo Barrientos Valenzuela (2)

Director : Guido Silva Escobar (2)

Director : Enrique Martinez Figueroa (2)

Director : Fernando Serrano Gutierrez (2)

General Manager : Pedro Silva Yrarrazaval

2.Corpbanca Corredores de Bolsa S.A.: The company’s

corporate purpose is to intermediate securities for the account

of third parties, as well as administer a portfolio of fixed income

investments and act as a foreign currencies broker. As of

December 31, 2005, the company had Ch$3,685 million, which

translated into in a profitability of 22.5% on the capital invested.

As of December 31, 2005, the subscribed for and paid up capital

of Corpbanca Corredores de Bolsa S.A. amounted to Ch$12,701

million, and the participation of CORPBANCA in the ownership

of the company reached 99.992%, which investment was

equivalent to 0.37% of the total assets of the Bank. Management

of the company the following:

Board of Directors

President : Pablo de la Cerda Merino (3)

Director : Nazir Alberto Selman Hasbún (2)

Director : Jorge Franetovic Yob (2)

Director : Claudio Chamorro Carrizo (2)

Director : Armando Ariño Joiro (2)

General Manager : Carlos Ubeda Pashold

3.Corpbanca Corredores de Seguros S.A.: The company’s

corporate purpose is brokering insurance to its clients, as well

as those of the Bank. As of December 31, 2005, the company

reported income of Ch$2,286 million, with a subscribed for and

paid up capital of Ch$54 million. The participation of

CORPBANCA in the ownership of the company reached 99.99%,

which investment was equivalent to 0.002% of the total assets

S U B S I D I A R I E S A N D B U S I N E S S S U P P O R T C O M P A N I E S

Region VIRancagua Campos 381

Region VIITalca Uno Sur 1132Curicó Estado 370Linares Independencia 634-A Region VIIIChillán Constitución 550Concepción I Barros Arana 428Talcahuano Colón 657Los Angeles Colón 398 Region IXTemuco Arturo Prat 743 Region XValdivia Av. Picarte 370Osorno Av. Matta 624Puerto Montt Av. Urmeneta 541Castro Blanco 208

Region XICoyhaique Francisco Bilbao 204

Region XIIPunta Arenas Magallanes 944

Metropolitan RegionAgustinas Agustinas 799Ahumada Ahumada 252Estación Central Av. Lib. Bernardo O´Higgins 3015Mapocho Puente 731Maipú Av. Pajaritos 1783Moneda Moneda 893Ñuñoa Irarrázaval 2440Plaza Vespucio Vicuña Mackenna 7110 Loc. 1-2-3

BoulevardSan Bernardo Arturo Prat 495Estado Estado 350Puente Alto Concha y Toro 286 Loc. 12 - 17

48

S U B S I D I A R I E S A N D B U S I N E S S S U P P O R T C O M P A N I E S • • • A N N U A L R E P O R T 2 0 0 5

of the Bank. Management of the company is as follows:

Board of Directors

President : Olivia Brito Bahamonde (2)


Director : Carlos Aracena Mellado (2)


Director : Pablo de la Cerda Merino (2)

General Manager : Roberto Vergara Kyling

4.Corpbanca Asesorías Financieras S.A.: The company’s

corporate purpose is to conduct studies for, provide assistance

to and carry out restructuring for its clients. As of December

31, 2005, Corpbanca Asesorías Financieras S.A. reported income

of Ch$250 million, which represented a yield on investment of

62.01%. The subscribed for and paid up capital of the company

amounted to Ch$153 million. The participation of CORPBANCA

in the ownership of the company reached 99.99% and the

investment was equivalent to 0.005% of the total assets of the

Bank. Management of the company is as follows:

Board of Directors

President : Christian Schiessler García (2)

Vice President : Christian Samsing Stambuk (1)

Director : José Francisco Sánchez Figueroa (2)

Director : Héctor Valdés Ruiz

Director : Cristián Canales Palacios (2)

General Manager : Roberto Baraona Undurraga

Business Support Companies

1.Nexus S.A.: The company’s corporate purpose is the processing

of credit and debit cards as efficiently as possible. As of December

31, 2005, the subscribed for and paid up capital in the company

was of Ch$3,727 million. The participation of CORPBANCA in

the ownership of Nexus is 12.90%, which investment represents

0.01% of the total assets of the Bank. Management of the

company is as follows:

Board of Directors

President : Jorge Díaz Vial

Vice President : Mario Gaete Hörmann

Director : Jeremy Pallant

Director : Fernando León Sade


General Manager : Carlos Johnson Lathrop

CORPBANCA participates in a series of companies, which are

divided in Affiliate Companies and related Business Support

Companies. As of the end of the fiscal year 2005, these companies

provided CORPBANCA with net income of Ch$7,707 million, an

increase of 33% as compared to 2004.

Subsidiaries Companies

1.Corpbanca Administradora General de Fondos S.A.:

The company’s corporate purpose is to manage the assets of

mutual funds for the accounts of their participants. The

investments are made both in fixed income instruments and

variable income instruments and in the local and foreign markets.

During fiscal year 2005. The company generated a net income

of Ch$1,325 million, with a rate of profitability of 45.8% on

the capital invested. As of December 31, 2005, the subscribed

for and paid in capital was Ch$1,570 million; the participation

of CORPBANCA in the ownership of the company reached

99.996%, an investment equal to 0.05% of the total assets of

the Bank. Management of the company is the following:

Board of Directors

President : Cristian Canales Palacios (2)


Director : Guido Silva Escobar (2)

Director : Enrique Martinez Figueroa (2)

Director : Fernando Serrano Gutierrez (2)

General Manager : Pedro Silva Yrarrazaval

2.Corpbanca Corredores de Bolsa S.A.: The company’s

corporate purpose is to intermediate securities for the account

of third parties, as well as administer a portfolio of fixed income

investments and act as a foreign currencies broker. As of

December 31, 2005, the company had Ch$3,685 million, which

translated into in a profitability of 22.5% on the capital invested.

As of December 31, 2005, the subscribed for and paid up capital

of Corpbanca Corredores de Bolsa S.A. amounted to Ch$12,701

million, and the participation of CORPBANCA in the ownership

of the company reached 99.992%, which investment was

equivalent to 0.37% of the total assets of the Bank. Management

of the company the following:

Board of Directors

President : Pablo de la Cerda Merino (3)


Director : Jorge Franetovic Yob (2)

Director : Claudio Chamorro Carrizo (2)

Director : Armando Ariño Joiro (2)

General Manager : Carlos Ubeda Pashold

3.Corpbanca Corredores de Seguros S.A.: The company’s

corporate purpose is brokering insurance to its clients, as well

as those of the Bank. As of December 31, 2005, the company

reported income of Ch$2,286 million, with a subscribed for and

paid up capital of Ch$54 million. The participation of

CORPBANCA in the ownership of the company reached 99.99%,

which investment was equivalent to 0.002% of the total assets

A N N U A L R E P O R T 2 0 0 5 • • • S U B S I D I A R I E S A N D B U S I N E S S S U P P O R T C O M P A N I E S

49

of the Bank. Management of the company is as follows:

Board of Directors

President : Olivia Brito Bahamonde (2)


Director : Carlos Aracena Mellado (2)


Director : Pablo de la Cerda Merino (2)

General Manager : Roberto Vergara Kyling

4.Corpbanca Asesorías Financieras S.A.: The company’s

corporate purpose is to conduct studies for, provide assistance

to and carry out restructuring for its clients. As of December

31, 2005, Corpbanca Asesorías Financieras S.A. reported income

of Ch$250 million, which represented a yield on investment of

62.01%. The subscribed for and paid up capital of the company

amounted to Ch$153 million. The participation of CORPBANCA

in the ownership of the company reached 99.99% and the

investment was equivalent to 0.005% of the total assets of the

Bank. Management of the company is as follows:

Board of Directors

President : Christian Schiessler García (2)

Vice President : Christian Samsing Stambuk (1)

Director : José Francisco Sánchez Figueroa (2)

Director : Héctor Valdés Ruiz

Director : Cristián Canales Palacios (2)

General Manager : Roberto Baraona Undurraga

Business Support Companies

1.Nexus S.A.: The company’s corporate purpose is the processing

of credit and debit cards as efficiently as possible. As of December

31, 2005, the subscribed for and paid up capital in the company

was of Ch$3,727 million. The participation of CORPBANCA in

the ownership of Nexus is 12.90%, which investment represents



Board of Directors

President : Jorge Díaz Vial

Vice President : Mario Gaete Hörmann


Director : Fernando León Sade


General Manager : Carlos Johnson Lathrop

2.Combanc S.A.: The company’s corporate purpose is to provide

payment clearing services and other activities related or

complementary to the banking business. As of December 31,

2005, the subscribed for and paid up capital of the company

was Ch$1,673 million. The participation of CORPBANCA in the

property of Combanc is of 13.67%, which investment represents



Board of Directors

President : Mario Duque A.

Director : Alejandro Alarcón P.

Director : Segismundo Schulin-Zenthen S.

Director : Joaquín Cortez H.

Director : Héctor Valdes R.

Director : Roberto Busto K.

Director : Carlos Budnevich L.

Director : Patricio Claro G.

Director : Andrés Sanfuentes V.

General Manager : Felipe Ledermann B.

3.Transbank S.A.: is a support company to the banking business

whose shareholders are the most important banking and financial

entities of the country. The company’s corporate purpose is to

provide support in the management of credit cards (Visa,

Mastercard, Magna, American Express and Diners Club) and

debit cards Redcompra (Electron and Maestro). In addition, it

handles internet payments systems, Webpay, which allows for

a safe exchange of information. As of December 31, 2005, the

subscribed for and paid in capital of the company was Ch$4,348

million. The participation of CORPBANCA in the property of

Transbank is of 8.72%, which investment represents 0.01% of

the total assets of the Bank. Management of the company is

as follows:

Board of Directors

President : Hernán Somerville Senn

Vice President : Roberto Bustos Kaempffer

Director : Alejandro Cuevas Merino

Director : Sebastián del Campo Edwards

Director : Jorge Díaz Vial

Director : Adolfo García-Huidobro Ochagavía

Director : Jorge Lafrentz Fricke


Director : Gerardo Sapag Álvarez

Director : Héctor Valdés Ruíz

General Manager : Felipe Brahm Garcia

(1) Corp Banca‘s Chief Executive Officer.

(2) Manager of Corp Banca.

(3) Legal Counselor of Corp Banca.

50

D I V I D E N D S P O L I C Y • • • A N N U A L R E P O R T 2 0 0 5

The policy of dividends set forth by CORPBANCA and adopted by the Shareholders’ Meeting is to capitalize 50% of the previous year’s

net income. The policy began in 2002 with the net income of 2001. At the Shareholders’ Meeting held in February of 2005, the Bank

paid a dividend in the aggregate of Ch$25,383.6 million, corresponding to 50% of the net income of 2004 (Ch$50,767.3 million).

D I S T R I B U T I O N O F P R O F I T S

D I V I D E N D P O L I C Y

Year Profit available Profits Attributed Percentage Div. per Sharefor distribution (previous year) to Fiscal Year of profit (Ch$ of

(Ch$ Million) (Ch $Million) distributed each year)2002 14.221,7 28.443,4 2001 50,0% 0,0834372003 17.776,5 35.553,0 2002 50,0% 0,0783422004 25.061,7 50.123,5 2003 50,0% 0,1104482005 25.383,6 50.767,3 2004 50,0% 0,111866

A N N U A L R E P O R T 2 0 0 5 • • • T R A D I N G V O L U M E A N D P R I C E H I S T O R Y O F S H A R E S

51

The following table shows the trading volume and price history of the shares of CORPBANCA on the Santiago Stock Exchange during 2004

and 2005:

T R A D I N G V O L U M E A N D P R I C E H I S T O R Y O F S H A R E S

Year 2003 N° Trans. Average Closing High Low Average U / P Stock Volume Amount Market Cap.

First Quarter 232 1,445,575,707 2.15 2.18 2.1 3,088,136,891 11.24 367,034,139,042Second Quarter 484 2,292,091,176 2.63 2.74 2.4 5,840,844,819 12.61 498.534.598.519Third Quarter 505 1,898,942,348 2.79 2.88 2.6 5,208,733,919 15.00 632,320,556,408Fourth Quarter 1,807 26,173,992,996 3.11 3.30 2.8 76,689,429,674 15.48 706,444,257,996

Year 2004 N° Trans. Average Closing High Low Average U/P StockVolume Amount Market Cap.

First Quarter 1,570 10,947,679,957 3.14 3.21 3.0 34,454,375,694 14.55 712,495,172,412Second Quarter 1,018 5,215,106,389 2.97 3.10 2.9 15,406,969,204 13.21 673,920,593,014Third Quarter 1,401 4,703,949,655 3.18 3.21 3.0 14,875,841,293 13.92 722,327,908,337Fourth Quarter 1,379 4,825,028,916 3.20 3.32 3.1 15,441,130,072 14.05 726,109,729,846

Year 2005 N° Trans. Average Closing High Low Average U/P StockVolume Amount Market Cap.

First Quarter 3,737 7,095,175,134 3.03 3.21 3.0 21,968,454,844 13.54 687,535,150,448Second Quarter 3,218 5,719,405,525 3.05 3.10 2.9 17,120,306,404 14.29 691,846,426,969Third Quarter 3,127 5,314,861,895 3.19 3.22 3.0 16,544,638,023 14.75 722,706,090,488Fourth Quarter 2,042 3,587,103,889 2.80 3.20 2.8 10,781,665,652 12.07 635,346,013,616

Durante el año 2005, las transacciones de acciones de CORPBANCA efectuadas por el principal accionista, directores y principales ejecutivos,

son las siguientes:

Corp Group Banking S.A.

Fecha Compra Fecha Venta Cantidad Precio Valor totalde la Inversión

0

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