BTG Revival Strategy Moves to Chile With Plans to Boost Lending

  • Brazil bank’s goal is to make ‘strategic’ loans, Aguero says
  • Rodrigo Oyarzo joins to lead the firm’s new credit business

Grupo BTG Pactual, the Brazilian lender that slashed its workforce in 2016 and sold off assets to survive a liquidity crisis, is investing in Chile with plans to start lending.

Rodrigo Oyarzo joined BTG to head the new credit business, according to Juan Guillermo Aguero, BTG’s chief executive officer for Chile. The idea is to use the Sao Paulo-based company’s banking license in Chile, obtained in 2014, to provide more “strategic” loans to clients tied to mergers and capital-markets transactions, Aguero said.

Juan Guillermo Aguero

Source: BTG Pactual

BTG cut about 100 employees in Chile, or 25 percent of its workforce there, after founder and former CEO Andre Esteves was arrested in November 2015 in connection with a corruption scandal in Brazil. Esteves, who was moved to house arrest from jail in December 2015 and released in April, has denied any wrongdoing through his lawyers.

“We decided to put the bank on hold when the Esteves case erupted until issues in Brazil were completely resolved and market conditions were there to issue deposits, finance the bank and lend money,” Aguero said. “We thought it was time to relaunch it at the end of last year.”

Among those who left during the crisis were four of the six founding partners of the Chilean brokerage Celfin Capital SA, which BTG acquired in 2012, including Alejandro Reyes. He created his own asset and wealth-management company, Toesca, along with Carlos Saieh, the former CEO of BTG’s local asset-management division.

BTG has rebuilt its Chile team, hiring Fernando Massu as chairman, as well as Pablo Bello, Andres Navarrete and Tomas Gonzalez for equities, Joaquin Lopez in fixed income, and Ignacio Guarda in corporate finance.

“We are hiring very selectively in the areas we want to focus on more strongly,” Aguero said. “There is an operational leverage -- we think we can do more and better with what we have.”

In Brazil, BTG agreed to buy 70 percent of Enforce Gestao de Ativos SA, a provider of services related to the recovery of defaulted corporate loans and distressed real estate portfolios. The company has about 50 employees now and the plan is to hire 20 more in coming months, Chief Financial Officer Joao Dantas said in a phone interview. The bank aims to invest 1 billion reais ($324 million) of its own capital on corporate non-performing loans, Alexandre Camara, head of special situations, said in an interview in October 2016.

With a rally in commodity prices and better growth prospects in Latin America, the region has seen a surge in foreign investment, which will probably help improve business for investment banks, according to Aguero.

“There is renewed interest from foreign investors, which explains why companies are thinking about doing IPOs, capital increases and bond sales,” Aguero said. “There’s a resurgence in the capital markets after two very weak years.”

BTG’s Chile mutual fund assets, which slumped 46 percent in the two months following Esteves’s arrest, rebounded to 666.2 billion pesos ($1.04 billion) at the end of January from as low as 464.8 billion pesos in July, according to the country’s mutual funds association. They were at 990.4 billion pesos in October 2015.

Chile could see more mergers in the electricity sector, especially as lower economic growth forces projects under development to recalculate demand estimates and as wholesale energy prices fall.

“There has to be some sort of adjustment,” Aguero said. “The spot price is lower, there is less growth in demand as activity remains sluggish, and investment costs have fallen. It’s an area in which many projects might not be viable or have to consolidate with others.”