UBS Brazil unit sale to attract interest

By Todd Benson and Alberto Alerigi Jr - Analysis

SAO PAULO (Reuters) - A potential sale by UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz) of lucrative Brazilian division Pactual would likely attract significant interest from both big foreign and local banks, analysts said on Friday.

The beleaguered Swiss bank came under increased pressure to break up as activist investor and former chief executive Luqman Arnold demanded it overhaul its structure and governance to refocus on wealth management.

In addition to the ouster of UBS's newly named chairman, Arnold is pushing for the sale of Pactual, the highly profitable Brazilian investment bank that UBS bought in 2006 for $2.5 billion.

"It's a great franchise, been very profitable and a great earner for UBS," said Deval Kaloo, head of Global Emerging Markets Equities at Aberdeen Asset Managers Ltd in London.

UBS Pactual is the seventh-largest asset manager in Brazil, with a portfolio of 61.21 billion reais ($35.8 billion), according to the Brazilian investment banking association. It is also one of the leading underwriters of stock issues in Latin America's largest economy.

UBS Pactual downplayed the talk of a potential sale.

"UBS Pactual remains an integral part of UBS," it said in a statement, noting UBS CEO Marcel Rohner stressed in February that Pactual "fits perfectly" in the bank's strategy.

Given Pactual's size and the lofty price that UBS paid for it, analysts said only a handful of big players would be in a position to make a bid.