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BTG Pactual Shares Fall as Bank Posts 22% Profit Decline

Grupo BTG Pactual SA, Brazil’s second- biggest equity underwriter, fell as much as 3.3 percent in Sao Paulo after the bank reported a bigger profit decline than analysts estimated.

The shares dropped 1.9 percent to 33.33 reais at 11:37 a.m., after falling to 32.88 reais earlier today, the biggest intraday drop in two weeks. The benchmark Ibovespa index gained 0.4 percent.

BTG’s adjusted net income slid 22 percent to 611.6 million reais ($305.5 million), or 68 centavos a unit, from 786 million reais, or 98 centavos, a year earlier, according to a regulatory filing yesterday from the Sao Paulo-based company. The average estimate of three analysts surveyed by Bloomberg was 86 centavos.

The results marked the first time return on average equity, a gauge of profitability, dropped below 20 percent since the bank’s initial public offering a year ago, “which could lead to some stock price pressure in the short term,” Deutsche Bank AG analysts including Mario Pierry wrote in a note to clients today.

BTG’s annualized return on shareholders’ equity fell to 16.9 percent in the first quarter from 35.2 percent a year earlier. Chief Executive Officer Andre Esteves, 44, said in February that the bank can continue to deliver ROE above 20 percent.

The company spent 419.1 million reais on income taxes in the first quarter, or 47 percent more than a year earlier, according to the filing. The effective income tax rate climbed to 41 percent in the first quarter from 27 percent in the same period last year.

The bank said the effective tax rate increased as the earnings contribution from private-equity division BTG Investments declined and its real estate unit, BR Properties, had a loss. The two divisions aren’t subject to the income tax.

The firm and its shareholders raised 3.66 billion reais in an IPO in April 2012, the first time a standalone investment bank in Brazil listed itself on a stock exchange.

To contact the reporter on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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