(Adds details on value at risk)
By Guillermo Parra-Bernal
SAO PAULO, Aug 5 (Reuters) - Grupo BTG Pactual SA , the largest independent investment bank in emerging markets, reported its highest profit in 3-1/2 years in the second quarter after abnormally low taxes and rising revenue helped offset a surge in banker bonuses.
Net income at São Paulo-based BTG Pactual was 1.02 billion reais ($293 million) in the quarter, topping the 905 million reais estimated by five analysts in a Reuters poll. On a quarterly and annual bases, profit climbed 20.8 percent and 7.3 percent, respectively, according to a statement on Wednesday.
Interest on equity payouts and the sale of a stake in Rede D'Or São Luiz SA, Brazil's largest hospital chain, drove BTG Pactual's effective tax rate to less than 1 percent in the quarter. The bank booked a 1.3 billion one-time gain from the Rede D'Or deal, bolstering income at its proprietary investments unit, which had suffered losses in the global hedge funds and real estate segments.
Return on equity, a key gauge of profitability for banks, rose to 21 percent, beating the poll's 18.8 percent estimate.
BTG Pactual cut assets and loan disbursements as market turmoil led some of the bank's corporate borrowers to restructure their debt. Still, Chief Executive Officer André Esteves slightly ratcheted up risk-taking, to take advantage of mounting volatility in Brazilian interest rate, currency and equity markets.
Value at risk, a measure of how much a bank could lose in a trading session, rose to 0.60 percent of BTG Pactual's capital, up from 0.59 percent in the first quarter.
Net revenue reached 2.05 billion reais, topping the poll's forecast for 1.91 billion reais. Investment banking revenues surprisingly rose, while income from asset and wealth management remained largely stable.
Expenses surged after banker bonuses rose 61 percent on a quarterly basis, more than the poll's expectation of a 17 percent rise. Wages rose, too, as BTG Pactual said it hired more staff in the quarter.
BTG Pactual's loan book shrank 0.5 percent in the quarter, in a show of Esteves' prudent tack as Brazil heads to its steepest recession in 25 years.
Executives will discuss the second-quarter earnings on Thursday in a conference call.
$1 = 3.4865 Brazilian reais Reporting by Guillermo Parra-Bernal; Editing by Lisa Shumaker and Leslie Adler