BTG Profit Misses Estimates as Principal Investments Fall

Grupo BTG Pactual, Brazil’s biggest merger adviser, said third-quarter profit fell 6 percent, missing analysts’ estimates, as revenue from principal investments dropped.

Net income declined to 746 million reais ($326 million), or 82 centavos a share, from 793 million reais, or 90 centavos, a year earlier, the Sao Paulo-based bank said yesterday in a statement. The result fell short of the 88-centavo estimate of four analysts surveyed by Bloomberg.

Principal investments, which includes private equity, real estate and proprietary trading, posted 292 million reais of revenue in the third quarter, according to the statement. That compares with a loss of 313 million reais in the second quarter and a gain of 566 million reais a year earlier.

“BTG generates a substantial portion of profits from businesses that, in our view, warrant relatively low valuation multiples,” JPMorgan Chase & Co. analysts including Saul Martinez wrote in a note to clients yesterday. “Revenue momentum was sluggish.”

BTG slid 0.7 percent to 30.20 reais at 10:21 a.m. in Sao Paulo, while the Ibovespa benchmark index declined 0.1 percent.

Revenue from investment banking fell 12 percent to 131 million reais in the third quarter from a year earlier, while sales and trading was down 37 percent to 258 million reais, according to the statement. The bank advised on 42 acquisitions in Brazil this year, totaling $27.1 billion, including the purchase of Portugal Telecom SGPS SA by Oi SA, the nation’s biggest transaction, according to data compiled by Bloomberg.

Provisions for bonuses declined for a second consecutive quarter to 121 million reais, according to the statement. The awards are paid in a lump sum at the start of the year. Return on average equity, a measure of profitability, fell to 19.4 percent in the third quarter from 24.9 percent a year earlier, according to the statement.

“Markets continued to present challenges in an uncertain environment,” Chief Executive Officer Andre Esteves, 45, said in the statement.

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