BTG Misses Profit Estimates After Principal Investments Loss

Grupo BTG Pactual, Brazil’s only publicly traded investment bank, said fourth-quarter profit rose 10 percent, missing analysts’ estimates after a loss in its principal-investments business and higher bad-loan provisions.

Net income advanced to 848 million reais ($296 million), or 94 centavos a share, from 768 million reais, or 85 centavos, a year earlier, the Sao Paulo-based bank said Wednesday in a filing. That was less than the 1.02 real estimate of four analysts surveyed by Bloomberg.

BTG, controlled by Chief Executive Officer Andre Esteves, said market volatility affected “results of credit fixed-income strategies in emerging and global portfolios.” Principal investments, which include private equity, real estate and proprietary trading, posted negative revenue of 132 million reais in the fourth quarter. A year earlier, revenue from that business was 474 million reais.

BTG’s figures were “weak,” Bruno Chemmer, a Banco Bradesco SA analyst, wrote Thursday in a report to clients. “We are keeping our neutral view on the stock, as we believe the scenario for some of BTG’s business units is likely to remain challenging.”

BTG fell 1.4 percent to 27.12 reais at 3:23 p.m. in Sao Paulo, compared with a 0.8 percent decline for the Ibovespa benchmark index.

Corporate Loans

Earnings from corporate lending declined after the bank set aside more money for loan losses. The unit posted revenue of 97.1 million reais in the fourth quarter, down from 187.4 million reais a year earlier.

CEO Esteves said the provision increase of about 300 million reais was mostly related to its exposure to Eneva SA, the Brazilian utility controlled by EON SE and former billionaire Eike Batista. The company, formerly MPX Energia SA, filed for bankruptcy protection in December.

“We may have some good surprise on reversion of provisions in 2015,” Esteves said on a conference call with analysts Thursday.

BTG is joining with Brookfield Property Group to make a tender offer of as much as 3.58 billion reais to take BR Properties SA private, the Sao Paulo-based real estate company said in a separate filing Thursday. BTG owns 32 percent of BR Properties.

Equity and debt markets were “very weak” in 2014 due to uncertainties related to the U.S., the euro zone, China and the presidential election in Brazil, Esteves said in the statement, adding that 2014 “was a challenging year for capital markets in most emerging markets.”

Return on average equity, a measure of profitability, declined to 18.4 percent in the fourth quarter from 19.3 percent a year earlier.

Itau Unibanco Holding SA, Banco Bradesco SA and Banco do Brasil SA, the nation’s biggest retail banks, reported fourth-quarter net income that beat estimates after boosting lending margins and cutting expenses.

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