LatinFinance - January/February 2015 - 17

the bank's own equity with clients will become a smaller part of the
bank's focus, he says.
"On a relative basis [merchant banking] will shrink in comparison
to wealth management and asset management, or corporate
lending, or sales and trading," he says. "The direction is clear, no
doubt about it. Most of our capital is used in the banking part of the
business and in the future it [will be] even more."
Calling the reduced role of principal investments "a natural
evolution", a pattern that's already apparent over the past five years,
Esteves says that does not mean merchant banking will shrink on a
nominal basis.
Yet BTG is tweaking its business model to reflect the changed size
of its groups, and those changes are - at the same time - helping
BTG cope with the more difficult environment in Brazil. "Keeping
the high return on equity that we have, on a larger capital base: that's
the challenge, and that's what we're delivering and will still deliver,"
says Esteves.
Part of the bank's diversification drive has been to expand outside
Brazil in investment banking. After buying Chilean brokerage and
asset management firm Celfin in 2012, BTG now has a top-five
position in the league table in the Andean country. It bought a
similar business, Bolsa y Renta, in Colombia in 2012.
Given the smaller size of the Andean markets and its natural
home-market strengths, Brazil has still accounted for around three
quarters of fees over the past two years, according to Paes. "The
deals in Brazil are still big, especially in M&A," he says.
Brazil will continue contributing most of BTG's investment
banking fees, but it is likely to be increasingly balanced by other
markets, Paes says. The institution is seeking banking licenses in

GUILHERME PAES

"THERE'S NO LINK BETWEEN HOW
WE USE OUR EQUITY AND HOW
WELL WE PERFORM IN
INVESTMENT BANKING"
Chile and Colombia, which should help win mandates outside the
home turf, Paes adds. BTG Pactual opened a broker-deal operation
in Mexico in early 2014 and plans to expand in asset and wealth
management.
The bank could make an acquisition in Mexico, as it did in Chile
and Colombia, says Esteves: "We feel that we have more space for
growth [in Mexico]."
Regulatory chance
Esteves does not plan to venture outside Latin America in
investment banking "in the foreseeable future". But in other areas,
the bank is going global. Merchant banking investments in 2013
included the $1.5 billion acquisition of a 50% stake in an African oil
and exploration and production venture alongside Petrobras, and
the purchase of the timber division of US-based Regions Bank.
The global expansion takes advantage of being less restricted by
the evolving regulations that have curtailed some activities of BTG's
US and European competitors. The bank's expansion into physical
commodities trading globally is the starkest example. As regulatory
shifts pushed US and European banks to exit physical commodities

January/February 2015 - L ATINFINA NCE.COM 17
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LatinFinance - January/February 2015

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