* Profit at 854 mln reais, beats poll estimate
* Asset management proceeds triple in quarter
* Return on equity tops forecasts
By Guillermo Parra-Bernal
SAO PAULO, Feb 20 (Reuters) - BTG Pactual Group's fourth-quarter profit beat analysts' estimates as a surprising jump in asset management proceeds helped offset rising expenses and weak advisory and trading revenues at Brazil's sole listed investment bank.
São Paulo-based BTG Pactual earned net income of 854 million reais ($436 million) in the fourth quarter, up 7.7 percent from the prior three months, the bank said in a securities filing late on Tuesday. A Thomson Reuters poll of five analysts had forecast profit of 677.5 million reais in the quarter.
Total revenue rose 12 percent on a quarter-on-quarter basis to 1.891 billion reais, topping the 1.35 billion reais estimate in the poll. Receipts from asset management services more than tripled in the quarter, offseting an 18 percent fall in investment banking fees, a 47 percent drop in sales and trading income and a decline in revenue from principal investments of about 9.5 percent.
The results signal that BTG Pactual's activity in 2013 might be bolstered as risk aversion eases amid escalating confidence in the developed world. Chief Executive André Esteves has moved to aggressively expand BTG Pactual's involvement in risky trades in U.S. real estate markets, emerging market bonds and equities and other investments in Europe.
A sagging deal flow for mergers and acquisitions, and for bond and equity sales in Brazil in the quarter hurt BTG Pactual's revenue but helped keep compensation expenses in check. Revenue from sales and trading fell for the second quarter in three.
In addition, principal investments - or gains from investing the bank's own money on hedge funds, buyouts and real estate - fell to the lowest in a year after BTG Pactual's merchant banking unit failed to make a relevant divestment in the quarter. Still, the so-called global markets segment showed robust results stemming from "successful developments" in global credit, emerging markets and strategic equity investments as global economic conditions improved during the quarter.
Compensation expenses fell 21 percent, a little more than the 20 percent drop estimated in the poll of analysts, as tumbling fees from debt and equity sales and M&A deals led to a cut in the value of banker bonuses. Sales, general and administrative expenses rose 52 percent in the quarter, in line with estimates in the poll.
Annualized return on equity, a widely followed gauge of profitability among banks, unexpectedly rose to 25.1 percent at the end of December from 24.9 in September. The poll had predicted ROE at 20.6 percent.
However, the quarterly performance of value-at-risk, or how much BTG Pactual traders might lose in one day, was far worse than expected. VaR, as the gauge is known, jumped to 109.2 million reais in the fourth quarter, from 88 million reais in the third quarter.
Bolstering profit, BTG Pactual's loan book rose 60 percent in 2012, ending the year at 33.77 billion reais. Esteves, 44, has used proceeds from a $1.96 billion initial public offering last year to extend more lending to BTG Pactual's growing portfolio of corporate clients in Brazil and other Latin American countries.
Management is scheduled to discuss fourth-quarter earnings at a conference call on Wednesday.