UBS Plans Brazil Investment Bank as Gruebel Builds Emerging-Market Revenue

UBS AG, Switzerland’s largest bank, plans to set up an investment bank in Brazil to rebuild its business in Latin America’s biggest economy after selling a unit in the country last year to raise capital.

The unit, with initial capital of 46 million reais ($26.2 million), will be called UBS Brasil Banco de Investimento SA and controlled by UBS through a holding company, according a letter of intent filed to Brazil’s central bank yesterday.

Chief Executive Officer Oswald Gruebel said last week the Zurich-based bank wants to generate “substantial revenues” from emerging markets in coming years. UBS agreed in April to buy Brazilian brokerage firm Link Investimentos to gain some licenses for doing business in the country.

“It will be beneficial for UBS to be in Brazil as growth in the future will come from Asia and Latin America,” said Teresa Nielsen, an analyst with Vontobel Holding AG in Zurich, who has a “buy” recommendation on the shares. “UBS has big operations in Asia already, but what they’re missing is Latin America.”

Brazil’s economy is expected to grow 7.2 percent this year, based on a central bank survey published Aug. 2. Sales of domestic debt by Brazilian companies this year amounted to 14.4 billion reais, exceeding the total for all of last year, which at 11.4 billion reais was double the level of 2008, data compiled by Bloomberg show. UBS ranks 13th among underwriters of equity and equity-linked offerings by Brazilian companies this year, down from seventh in 2008. Equity and equity-linked sales rose 21 percent in 2009 to $26.3 billion, the data show.

Photographer: Reto Andreoli/Bloomberg

UBS CEO Chief Oswald Gruebel said the Zurich-based bank wants to generate “substantial revenues” from emerging markets in coming years. Close

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Photographer: Reto Andreoli/Bloomberg

UBS CEO Chief Oswald Gruebel said the Zurich-based bank wants to generate “substantial revenues” from emerging markets in coming years.

‘Difficult’ to Re-enter

UBS has to regain licenses to do business in Brazil after selling its Pactual operations to Andre Esteves, the former head of the business, for $2.5 billion in 2009, less than three years after buying the unit. The Swiss bank will now have to compete with Pactual and other rivals, who are expanding in the country.

“This will be a difficult market to re-enter,” Nielsen said. “Perhaps the current set-up of buying a small unit and bringing its own people who are in agreement with management on business strategy will be a better solution for UBS than Pactual was.”

Banco Votorantim SA, the financial services division of Grupo Votorantim, plans to boost its investment-banking team by 50 percent this year, Alberto Kiraly, head of the unit, said in a June 2 interview in Sao Paulo. The lender was involved in mergers and acquisitions worth 16.7 billion reais in 2009, according to its annual report.

Biggest in a Decade

Banco Bradesco BBI SA, the investment-banking arm of Banco Bradesco, is seeking to hire as many as 45 people in 2010 to boost its team of 1,000, Valor Economico newspaper reported on June 28.

Banco Modal SA, a Brazilian bank that specializes in mid- cap companies, plans to boost its team by 12 percent this year to expand its international, private-equity and wealth- management businesses, according to Eduardo de Abreu Borges, head of the international and wealth-management divisions.

Petroleo Brasileiro SA, the state-controlled oil company planning to raise as much as $25 billion from investors, hired Banco do Brasil SA in June to manage its domestic share sale, which would be the biggest in the Western Hemisphere in at least a decade. Banco Bradesco SA, Citigroup Inc., Itau Unibanco Holding SA, Bank of America Corp. Merrill Lynch, Morgan Stanley and Banco Santander SA were chosen as the global coordinators of the sale.

Banco do Brasil, Latin America’s largest bank by assets, hired BB Investimentos SA, Banco BTG Pactual SA, Bank of America Merrill Lynch, Citigroup Inc. and JPMorgan Chase & Co. to help it sell 9.76 billion reais of shares last month, the biggest stock sale in eight months.

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

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