Spare capital to give BTG Pactual chance to grow, boost returns

miércoles 10 de agosto de 2016 17:07 GYT

By Guillermo Parra-Bernal

SAO PAULO Aug 10 (Reuters) - Grupo BTG Pactual SA, a Brazilian investment bank that has slashed assets by one-fourth since the November arrest of founder André Esteves, is considering share buybacks or even takeovers after the cutbacks will leave it with $1 billion in excess capital.

Executives at BTG Pactual said on Wednesday they are open to all options to deploy spare capital and boost returns, once cash from a slew of asset sales enters the coffers of the company, Latin America's largest independent investment bank.

The spinoff of BTG Pactual's commodities trading unit, the sale of control in Swiss private bank BSI SA for about $1.1 billion, and this week's disposal of a stake in a Brazilian parking garage company will likely boost the bank's core capital ratio to 20 percent by year-end from 14.2 percent in the second quarter, they said.

The transactions are expected to be concluded by early October.

Esteves, who steered the bank through an aggressive global expansion, was arrested in November on allegations that he colluded with a senator to obstruct an ongoing probe. He was later released, but subsequent surge in client withdrawals forced his former partners and successors to shed assets and dismantle risky but profitable trading positions.

A source familiar with the bank's strategy told Reuters recently that failing to address BTG Pactual's excess capital could limit its return on equity. "Staying open to any use of excess capital will allow BTG Pactual to grow without incurring too much risk in the process," said the source.

BTG Pactual could expand segments including distressed-loan books and trading, money management and investment-banking operations, said the source, who requested anonymity because the strategy remains private.

The bank will further cut private equity investments, as agreed when it took a 6 billion-real ($1.9 billion) lifeline from a financial industry-backed deposit guarantee fund last year, the source said.   Continuación...