* Profit at 650 mln reais misses estimates in poll
* Six out of eight main revenue lines post decline
* Principal investments surprisingly report a loss
By Guillermo Parra-Bernal
SAO PAULO, Aug 6 Net income at Grupo BTG Pactual
SA missed analysts' forecasts in the second quarter after
sagging global bond and equity markets weighed down revenue and
a weak economy in Brazil forced the country's largest
independent investment bank to rein in lending to clients.
São Paulo-based BTG Pactual earned 650 million
reais ($284 million), compared with 612 million reais in the
previous three months, according to a securities filing on
Tuesday. The result was below the average 775 million reais
estimate for net income in a Thomson Reuters survey of four
The result was BTG Pactual's second straight quarterly drop
- the first back-to-back decline in earnings since the second
and third quarters of 2011. Only two out of the bank's eight
main revenue lines rose on a quarter-on-quarter basis; profit
only did not fall further because losses in a real estate
subsidiary allowed BTG Pactual to claim a sizzling tax rebate.
A 23.4 percent drop in Brazil's stock market and a surge in
local bond yields hurt proceeds from trading of financial
securities. Widespread market turmoil took its toll on trading
of global currencies, commodities and bonds, driving the
so-called principal investment line to lose money for the first
time in more than two years, the filing added.
"In a very challenging market environment like this, we are
satisfied with the performance of some client lines," Chief
Executive Officer André Esteves was quoted in the filing as
As market conditions remained especially challenging in
Brazil, Esteves, 45, trimmed the bank's loan book for the first
time in at least two years. BTG Pactual's loan book fell 3.7
percent to 35.59 billion reais from the prior quarter.
Management will discuss results at a conference call on
Wednesday. The bank did not make any mention of its loan
exposure to Grupo EBX, the troubled mining and energy
conglomerate owned by tycoon Eike Batista. BTG was one of the
EBX's major creditors and its main financial advisor as of the
end of last quarter.
Compared with the first quarter, net revenue slumped 41
percent to 1.01 billion reais because of the 313 million reais
loss in principal investments and a 31 percent tumble in sales
and trading, the filing said. The poll expected net revenue at
1.65 billion reais.
Principal investments - or income from investing the bank's
own money on hedge funds, buyouts and real estate - swung to a
loss after global equity and interest rate markets flopped. The
poll had predicted 520 million reais in income from principal
investments in the quarter.
Sales and trading income fell to 462 million reais from the
prior quarter after growing risk aversion and volatility
hampered equity trading strategies. Such disappointing
performance offset an otherwise satisfactory performance in
local currency and interest rate trades, the filing added.
Profitability as measured by return on equity rose to 17.5
percent in the second quarter from 16.9 percent in the first
three months. The bank's ROE, as the indicator is known, missed
the 20.5 percent estimate in the poll and, like in the previous
quarter, failed to beat that of rivals despite Esteves'
deal-making expertise and focus on cost-efficiency.
Helping profit, banker compensation slumped 32 percent in a
quarter-on-quarter basis, to 265 million reais - usually bonuses
only rise when revenue increases. The number however came well
below the 495 million reais estimate in the poll.
In a separate statement, BTG Pactual approved the payment of
315.5 million reais in dividends to shareholders.