(Adds share performance, comments throughout)
By Guillermo Parra-Bernal
SAO PAULO Feb 15 Grupo BTG Pactual SA will keep
high capital ratios in coming quarters to prepare Latin
America's No. 1 independent investment bank to grow in core
activities, following a dramatic balance sheet downsizing last
year, Chief Executive Officer Roberto Sallouti said on Thursday.
The regulatory capital ratio at BTG Pactual's core banking
unit rose to 21.5 percent in the fourth quarter, the highest
among Brazil's top banks. Such a level is key to promote
expansion in investment banking and money management without
straining costs, Sallouti said on a conference call to discuss
Sallouti, who became CEO late last year after a broad
management reshuffle, reiterated a long-term target for
annualized return on equity above 20 percent. He expects organic
growth to help triple assets under management and double the
bank's loan book over the coming years.
His remarks highlighted how BTG Pactual is trying to
reassure investor confidence after the November 2015 arrest of
former CEO and billionaire founder André Esteves in a corruption
probe in Brazil. The scandal sent the lender's shares and bonds
into a tailspin, forcing it to dismantle trading positions and
sell assets to cope with massive client fund
"Little by little, our strategy has taken shape, and we can
now say that we're ready to undertake growth in each of our main
business franchises without triggering expenses," Sallouti said.
Fourth-quarter profit fell as revenue in most core
activities declined following the year-long balance sheet
downsizing triggered by the arrest. Net income totaled 652
million reais ($211 million) in the quarter, down 1 percent from
the prior three months and 47 percent from the same quarter of
Revenue fell 35 percent, touching a five-year low, after
both income from trading and fees from wealth management sank 90
percent. While Sallouti managed to cut expenses sharply, the
spin-off of a commodities unit and the sale of Swiss private
bank BSI Ltd hurt BTG Pactual's ability to generate revenue.
Analysts had warned that fourth-quarter results would make
it clear whether BTG Pactual was on track to return to healthy
recurring operational numbers.
"Despite the miss, results provided a clearer picture of the
what should be the forward path of earnings for BTG Pactual,"
said Carlos Macedo, an analyst with Goldman Sachs Group Inc.
Return on equity rose slightly to 12.7 percent in the fourth
quarter, after a large interest-on-equity payment and the
spin-off of the commodities unit led to a 17 percent reduction
in shareholder equity.
BTG Pactual's capital ratio could at some point return to
historical levels around 15 percent, Sallouti said, without
specifying a timetable.
Units, a blend of common and preferred shares in BTG
Pactual's investment banking and private equity divisions, shed
0.7 percent to 17.62 reais.
The stock is up 29 percent this year, in light of an
expected segregation of shares of the two divisions, Banco BTG
Pactual SA and BTG Pactual Participations Ltd.
Late on Tuesday BTG Pactual laid out the basics for a
segregation of stock trading of its two main business divisions
in order to enhance transparency and regain investor
Under the plan, units of Banco BTG Pactual and BTG Pactual
Participations would be offered to holders of Grupo BTG
Pactual's units. Investors can opt for the split or keep their
current Grupo BTG Pactual units.
The plan underscores Grupo BTG Pactual's steps to reignite
growth and boost trading of its stock, Sallouti said.
For years, many investors criticized Grupo BTG Pactual's
structure, saying it encouraged Esteves and his partners to take
on excessive risk in sectors highly exposed to Brazil's
Some questioned whether the investment bank and the private
equity divisions incurred conflicts of interest with clients
that they advised or with which they competed for deals.
($1 = 3.0840 reais)
(Reporting by Guillermo Parra-Bernal; Editing by Leslie Adler
and Meredith Mazzilli)