By Nathan Gill

Aug. 27 (Bloomberg) — Chilean banks’ combined profit increased 35 percent in July from the previous month as greater confidence in the South American country’s economy boosted consumer lending.

Net income this year through July was 634 billion pesos ($1.2 billion), the banking regulator wrote in a report e-mailed today, without giving the monthly figure. July profit rose to 112.6 billion pesos, according to Bloomberg calculations. Consumer lending increased 0.5 percent and the combined interest margin, a measure of lending profitability, rose 17.5 percent, the report said.

Increased consumer loans may signal confidence in South America’s fifth-largest economy is improving and that lenders are responding to the central bank’s record low 0.5 percent overnight interest rate by cutting their own rates, Ruben Catalan, an analyst at BCI Corredor de Bolsa, said today in an interview.

“What’s increasing the most is on the mortgage side,” Catalan said from his office in Santiago. “Banks are joining with construction companies to create incentives for people to take on these types of products, and greater confidence encourages people to begin longer-term projects.”