Goldman gears up for Brazil growth with new bank

By Elzio Barreto

SAO PAULO, March 15 (Reuters) - Goldman Sachs (GS.N), the biggest U.S. securities firm by market value, is building up its team of research analysts and trading business in Brazil as it gears up for a growing business in the country, a senior executive said on Thursday.

The firm has been operating a full bank in Brazil since December, when it received its license from the central bank. The new bank marked Goldman's biggest move in Brazil since talks broke down in late 2005 to buy local investment bank Pactual.

Goldman, which had no equity research analysts focused on Brazilian companies, has hired a team of eight people to increase its presence in the country's booming equity market, said Eduardo Centola, co-head of Latin America for Goldman.

The move follows a surge in stocks sales in Brazil, a business dominated by Credit Suisse (CSGN.VX) and UBS (UBSN.VX). Share offerings reached a record 31.2 billion reais ($14.9 billion) in 2006 and have broken record volumes yearly since 2004, when they totaled 9.15 billion reais.

So far in 2007, nine companies have sold 7.13 billion reais worth of stock, putting share sales on pace to rise 35 percent from last year. Another 25 companies have filed to sell shares.

"This is an extraordinary business in Brazil given the timing of the market," Centola told Reuters.

Last year, Goldman worked on the initial public offering of electricity company Terna Participacoes (TRNA11.SA) and on the secondary offering of Internet retailer Submarino SUBA3.SA. The firm was also hired to prepare the IPO of the Sao Paulo stock exchange.

AGGRESSIVE MOVE

Goldman opened its first office in Brazil in 1995, focusing on merger and acquisitions advisory.

The firm has led the M&A ranks the past years, but with the full banking license Goldman will be able to offer a wide range of broker-dealer services and venture into the profitable business of trading local securities, Centola said.

Trading of fixed income, currencies and commodities make up most of Goldman's revenue globally and generate most of its profits.

Goldman has already moved part of its proprietary trading business to Brazil and may have around 120 traders at the local unit solely focused on that, said a source with knowledge of the plans.

In a letter to shareholders in its 2006 annual report, Goldman said it is "moving aggressively to build a significant sales and trading operation." The company put Brazil among the main regions for growth, together with Russia, India and the Middle East.

"There is a commitment by our CEO to our shareholders to focus growth in these places and Brazil is one of them," Centola said.