* 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 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
Management is scheduled to discuss fourth-quarter earnings
at a conference call on Wednesday.