UPDATE 2-Goldman to boost Brazil client base to meet high demand

Wed Apr 3, 2013 5:04pm EDT

* Client coverage in Brazil seen up by 50 percent this year

* COO Cohn sees signs global economy recovering "gradually"

* Lender plans to expand in Colombia, is "bullish" on Brazil

By Guillermo Parra-Bernal

SAO PAULO, April 3 (Reuters) - Goldman Sachs Group Inc plans to increase the base of corporate clients it covers in Brazil by half this year as demand for corporate loans, structured finance and advisory services grows in Latin America's largest economy, President and Chief Operating Officer Gary Cohn said on Wednesday.

The New York-based firm expects to serve around 300 companies by December, about 100 more than currently, Cohn said at a news conference in São Paulo. Over the past year, Goldman Sachs has doubled the capital base of its Brazilian unit and hired aggressively to expand in the country to take on tough local rivals, even as competition from international financial firms wanes.

To step up client coverage, Goldman Sachs could hire 50 or more bankers to work in credit and wealth management - a pair of fast-growing market segments, he said. Growth will take place despite the increased state presence in the economy because the firm's ability to adapt to tough market conditions helps it find business opportunities as most global rivals retreat.

"We are very happy with our results in Brazil," Cohn said. "We are more bullish on Brazil than many people out there. We have a multi-year plan top build our Brazil business."

Cohn said that most big investment banks with the exception of Goldman and JPMorgan Chase & Co are taking "a substantial step back" from capital markets as a result of heavy losses suffered during the global financial crisis. Competition in Brazil is getting tougher by the day, he said, as it is in some Asian markets such China and Hong Kong.

Goldman Sachs is seeking fast growth in Brazil, where demand for debt and hedging instruments has swelled as interest rates have fallen to all-time lows this year. Companies and investors are stepping up demand for corporate bonds, asset-backed securities and private equity fund-related vehicles that post higher returns than equities and government debt.

The bank, which increased the capital of its Brazilian unit to $400 million last year, has doubled its workforce there over the past two years to about 300 people. Currently, Goldman Sachs's wealth management division in Brazil has about $1 billion in assets, he noted.

Expansion in Brazil will depend on local and global growth conditions, said Cohn, who has been a president of the investment bank since 2006.

MEXICO, COLOMBIA

Global growth is accelerating gradually, which should help business. But despite of the improving outlook, rivals, including UBS AG, are shrinking in size and exposure to cut risks and adapt to tougher capital rules, he added.

Cohn, speaking at the bank's São Paulo headquarters with Stephen Scherr, the firm's chief for Latin America and global head of the investment bank's financing group, said Goldman Sachs's plan is to keep expanding its revenue pool in so-called growth markets, although he declined to say by how much.

Goldman Sachs's acquisition of a license to operate as a fully fledged bank in Mexico should be seen "as part of an ongoing commitment to the country. Don't read it as a new commitment."

The bank is likely to keep growing in Colombia, where it rose "from zero to hundreds of millions in revenue" over the past two years, with a representative office there. Other targets for expansion in Latin America include Chile and Peru.

Still, the focus remains on Brazil, he noted. Foreign investment banks such as Goldman Sachs and Credit Suisse Group AG have faced increased competition from local rivals in Brazil as demand for wealth-management and advisory services for takeovers and capital market transactions rise.

"Brazilian banks could be the strongest in the world. They have capital, they are good, they are doing well," Cohn said, highlighting the recent work of BTG Pactual Group, the nation's largest independent investment bank.

Unlike their counterparts in other emerging markets such as China, Brazilian banks have consistently bested foreign rivals over the past two years in funding deals, forging stronger client ties and setting up distribution networks similar to those of global banks. In the quarter ended in March, six local investment banks were among the Top 10 M&A advisors in Brazil for the first time ever, according to Thomson Reuters data.

Goldman Sachs ranked fourth in mergers and acquisitions in Brazil in the first quarter, with $704 million worth of advisory work, the report showed.

Last month, Goldman Sachs named bankers Fabio Bicudo and Antonio Pereira as co-heads of investment banking in Brazil after the division's chairman, Daniel Wainstein, retired.

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