Goldman’s Leme Says Brazil Unit Returned to Profitability

Goldman Sachs Group Inc.’s Brazil unit returned to profitability in the fourth quarter as the departure of several managing directors helped cut costs and fixed-income gains offset an investment-banking revenue drop.

“We made the right decision in anticipating that this year would be less vibrant for investment banking, and had some opportunities for cost reductions when some executives left after receiving good job offers,” Paulo Leme, named Goldman Sachs’s president and chief executive officer for Brazil today, said in an interview in Sao Paulo. Leme, 59, didn’t say how long the New York-based company had been losing money in Brazil.

Goldman Sachs eliminated bonuses for some bankers in Brazil this year, contributing to the departures of five executives in January, people familiar with the matter said in February. The company reduced employees in investment banking to 25 from 45, the people said. Fabio Bicudo, the former co-head of investment banking, left in January to become CEO of Rio de Janeiro-based power company Eneva SA, Leme said.

Goldman Sachs began trading Brazil Treasury bonds in the second half of last year, “and now we are the most active bank in the primary market and one of the top four in the secondary market, competing head-to-head with local players,” Alejandro Vollbrechthausen, whom Leme is replacing, said in an interview.

Vollbrechthausen will move to New York after Leme’s appointment is approved by Brazil’s central bank, to become Goldman Sachs’s head of fixed-income, currencies and commodities sales for Latin America. Leme was previously chairman for Brazil, a position that will be eliminated.

Private Equity

The drag from lower investment-banking revenue is also being offset by gains in private equity, structured credit, mezzanine financing and non-performing loan acquisitions, said Vollbrechthausen, who is a Goldman Sachs partner, a nod to the firm’s history as a private partnership before going public in 1999. Leme is a managing director, one level below partner.

With about 300 employees in Brazil, about the same as the level at the start of last year, the bank is “well-staffed” for now, Leme said.

At least nine managing directors in Brazil left Goldman Sachs during 2013 after the bank halted its growth plans when the economy expanded less than analysts estimated. Goldman Sachs’s revenue from investment banking had been falling in Brazil while trading and wealth-management fees increased, people familiar with the matter said last year.