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UPDATE 1-BTG Pactual beats profit estimates on principal investments
August 10, 2012 / 2:19 AM / 5 years ago

UPDATE 1-BTG Pactual beats profit estimates on principal investments

* Net profit more than doubles, beats forecasts

* Principal investments surprise on the upside

* Value-at-risk stable despite market turmoil

By Guillermo Parra-Bernal

SAO PAULO, Aug 9 (Reuters) - BTG Pactual, Brazil’s sole listed investment bank, beat market estimates with a more than doubling of net profit in the second quarter as successful bets on equity, bond and real estate investments helped offset a surge in expenses.

BTG Pactual, controlled by billionaire financier André Esteves, earned 822 million reais ($407 million) in the quarter, up from 310 million reais a year earlier, a securities filing showed on Thursday. The result came in well above the average profit estimate of 586 million reais in a Reuters poll of five analysts.

Profit climbed 4.6 percent from 786 million reais in the first quarter, the filing said.

The results are the first since BTG Pactual became a listed company. Chief Executive André Esteves, 44, is steering the bank through turbulent times by using the bank’s strong franchise to bet more on risky investments and win more investment-banking mandates in segments where activity is stronger.

Revenue more than doubled year-on-year to 1.637 billion reais, beating the average estimate of 1.175 billion reais in the poll. Net revenue climbed 2.1 percent from the first quarter.

Esteves wagered more of the bank’s capital on local interest rate instruments, U.S. real estate investments and reinsurance deals, driving a 30-fold jump in revenue from so-called principal investments to 687 million reais. The number was five times the estimate of 131 million reais in the Reuters poll.

A repricing of real estate company BR Properties’ assets also brought in an undisclosed gain in principal investments. BTG Pactual has a 28 percent stake in BR Properties.

The bank, seeking to overcome a weak economy and global market turmoil, ramped up lending in the second quarter after gaining firepower from its successful initial public offering. The shop used some of the proceeds from its $1.96 billion IPO in April to grow the bank’s loan book as peers retrenched.

The expansion of BTG Pactual’s loan book, which expanded 11 percent on a quarter-on-quarter basis, helped interest income almost double to 232 million reais from 150 million reais a year earlier.

The quarterly performance of value-at-risk, or how much BTG Pactual traders might lose in one day, showed that Esteves and his partners were able to weather market turmoil and put a lid on risk in their trading strategies.

VaR, as the gauge is known, was 92 million reais, compared with 92.1 million reais in the first quarter but twice as much the 45.4 million reais reported on the second quarter of 2011.

Expenses limited the jump in profit. The indicator surged 138 percent to 732 million reais due to a jump in pay and the bank’s IPO drove spending higher.

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