UPDATE 2-BTG Pactual says relying less on principal investments for revenue
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By Guillermo Parra-Bernal
SAO PAULO Nov 5 (Reuters) - Grupo BTG Pactual SA reiterated a pledge to deliver return on equity of at least 20 percent a year as it shrinks the role of principal investments on revenue, speeds up geographic expansion and taps more stable sources of income.
With the purchase of Swiss private bank BSI Group, BTG Pactual is shifting its revenue mix to money management, which produce higher multiples, from capital-internsive activities like principal investments, executives said on a conference call on Wednesday to discuss third-quarter results.
Chief Executive Officer André Esteves said the share of principal investments, or income from investing the bank's own money in hedge funds, private-equity investments and real estate, in BTG Pactual revenues "is shrinking relative to other business areas."
Esteves' remarks came after the bank reported quarterly net income at the São Paulo-based bank fell for the first quarter in six, driving down return on equity (ROE) to the lowest level since the first quarter of 2013. ROE, a widely watched gauge of profitability in the banking industry, fell to 17.3 percent last quarter, below expectations of 19.4 percent.
Esteves has repeatedly pledged to deliver ROE of 20 percent annually, even under tough market and economic conditions.
BTG Pactual earned 769 million reais ($308 million) in the quarter, below the average analyst estimate of 864 million reais, according to a Reuters poll.
Bets on risky investments and complex securities fell in the quarter as market aversion jumped. As such, value at risk, or the maximum level of risk that a financial firm can take in a specific period, fell to 88.5 million reais in the quarter. Continuación...