BTG Plans to Hold On to `Core' Businesses, Including Commodities

  • Sees real estate, proprietary trading becoming less relevant
  • Bank is reducing focus on private equity as it sell assets

Grupo BTG Pactual, the Brazil investment bank that’s selling assets to shore up cash, plans to retain key businesses that are among its most profitable: commodities, asset and wealth management, investment banking, sales and trading, and brokerage.

“The bank as a whole is not for sale,” Persio Arida, chairman of the Sao Paulo-based firm, said in an interview at the World Economic Forum in Davos. “We’re going to keep the core business.” The principal-investments operation, which includes proprietary trading, private equity and real estate, is less critical, Arida said.

BTG has sold assets and secured a credit line from Brazil’s deposit-insurance fund, FGC, in an effort to stay liquid after the November arrest of then-Chief Executive Officer and Chairman Andre Esteves in connection with a nationwide corruption scandal. Shares of the company have lost more than half their value since, and its most-traded bond has fallen to about 75 cents on the dollar, compared with 90 cents.

“We’re deleveraging the bank, and confidence naturally takes some time to come back," Arida said. “The situation has stabilized, but we want to be in a very comfortable position as it takes some time to recover the confidence levels counterparties previously had.”

Esteves, who was moved from jail to house arrest last month, has denied any wrongdoing through his lawyers. BTG said it isn’t part of the investigation.

Preliminary Results

Revenue at the bank’s sales-and-trading unit, which includes commodities, fixed income and foreign exchange, almost doubled to 5.21 billion reais ($1.3 billion) last year from 2.83 billion reais in 2014, according to unaudited fourth-quarter results reported this week. Principal investments posted 1.18 billion reais in losses in 2015 after negative revenue of 485 million reais in 2014.

Net income advanced to 1.23 billion reais, or 1.34 real a share, in the fourth quarter from 848 million reais, or 94 centavos, a year earlier. That was above the 1.18-real average estimate in a survey of analysts by Bloomberg.

BTG is in talks to sell its Swiss bank BSI to EFG International AG, a person with knowledge of the matter said earlier this week. It previously agreed to sell its distressed asset-management firm, Recovery do Brasil Consultoria SA, to Itau Unibanco Holding SA for 640 million reais, and sold its remaining stake in hospital chain Rede D’Or Sao Luiz SA to Singaporean sovereign-wealth fund GIC Pte for 2.38 billion reais.

No Rush

“We don’t want to sell assets in a rush, because that would compromise price," Arida said, adding that “some assets require more due diligence, others less due diligence, and it’s only natural that sale process would take longer."

BTG wants to pay back the credit line from FGC “as soon as we can, of course, but it’s very hard to establish a timeline for this,” Arida said.

BTG’s parking-lot company, Allpark Empreendimentos Participacoes e Servicos SA, known as Estapar, has attracted interest from private-equity investors, people with knowledge of the matter said in December. It could fetch 1.5 billion reais, two other people said at the time.

“The strategy is to be able to have sufficient cash to meet all of our maturing liabilities over the next 12 months, and we’re 90 percent of the way there,” Huw Jenkins, the firm’s vice chairman, said in the joint interview with Arida.

Before it's here, it's on the Bloomberg Terminal.