Brazilian Banking Star Puts $15 Billion Value to the Test

Agenda-Setting Financial Insight.
March 2 2012 11:10 AM

Brazilian Banking Star Puts $15 Billion Value to the Test

129180435
Brazilian banking Goliath Pactual will sell shares to the public later this year, opening itself up to potential gains as as well as investor scrutiny.

Photo by Dennis Grombkowski/Getty Images

Brazilian banking star André Esteves is ready to samba like it’s 1999. BTG Pactual’s boss and part-owner has just signaled his intention to sell shares in the investment bank to the public later this year. In just three short years since he bought the business back from UBS for $2.5 billion, Esteves has dealt his way to a six-fold increase in the firm’s price. At some three times book value, Pactual is on the same multiple Goldman Sachs fetched in its IPO 13 years ago.

Those were heady days before the dot-com bubble burst. Not only could Goldman command such a premium; a year later, Bear Stearns boss Jimmy Cayne claimed he would only sell his now-gone bank if offered four times book value. Share prices briefly touched those multiples in 2007, but these days Wall Street can only dream of such riches.

Goldman’s stock, for example, doesn’t even trade at the value of its assets minus liabilities. A combination of sluggish business, higher capital requirements and looming bans on risky, and lucrative, businesses like prop trading and private equity have undermined the earnings power of U.S. and European investment banks.

Pactual doesn’t have that problem. A booming local economy, no Volcker Rule and foreign investors stampeding into the country have propelled the firm. So have Esteves’ deal-making skills. In 2010, he sold almost a fifth of Pactual to a who’s who of international investors at an eye-watering $10 billion valuation.

And just last month, Esteves bought Chilean rival Celfin for $600 million. He funded $355 million of the deal with stock, giving Celfin’s owners a 2.4 percent stake in Pactual, which escalated Pactual’s market value to almost $15 billion. UBS executives must be quietly weeping over its all-but-forced sale of Pactual in 2009.

With an arguably higher-growth business than Brazilian universal banking rivals like Itaú Unibanco, which trades at 2.5 times book, Pactual could achieve its heady private value publicly. But the scrutiny of selling shares to a far broader base of investors will put the bank and its resident hotshot to the test.

Read more at Reuters Breakingviews.

Antony Currie has more than a decade of experience as a financial journalist, having worked with Euromoney since 1996, most recently as a US editor. He has worked on assignments in the major financial centres of Europe and the US and written stories on capital markets, global economies and the investment banking industry.

TODAY IN SLATE

Politics

Talking White

Black people’s disdain for “proper English” and academic achievement is a myth.

Hong Kong’s Protesters Are Ridiculously Polite. That’s What Scares Beijing So Much.

The One Fact About Ebola That Should Calm You: It Spreads Slowly

Operation Backbone

How White Boy Rick, a legendary Detroit cocaine dealer, helped the FBI uncover brazen police corruption.

A Jaw-Dropping Political Ad Aimed at Young Women, Apparently

The XX Factor
Oct. 1 2014 4:05 PM Today in GOP Outreach to Women: You Broads Like Wedding Dresses, Right?
Music

How Even an Old Hipster Can Age Gracefully

On their new albums, Leonard Cohen, Robert Plant, and Loudon Wainwright III show three ways.

How Tattoo Parlors Became the Barber Shops of Hipster Neighborhoods

This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century

Moneybox
Oct. 1 2014 8:34 AM This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century To undertake a massively ambitious energy project, you don’t need the government anymore.
  News & Politics
Politics
Oct. 1 2014 7:26 PM Talking White Black people’s disdain for “proper English” and academic achievement is a myth.
  Business
Buy a Small Business
Oct. 1 2014 11:48 PM Inking the Deal Why tattoo parlors are a great small-business bet.
  Life
Outward
Oct. 1 2014 6:02 PM Facebook Relaxes Its “Real Name” Policy; Drag Queens Celebrate
  Double X
The XX Factor
Oct. 1 2014 5:11 PM Celebrity Feminist Identification Has Reached Peak Meaninglessness
  Slate Plus
Behind the Scenes
Oct. 1 2014 3:24 PM Revelry (and Business) at Mohonk Photos and highlights from Slate’s annual retreat.
  Arts
Brow Beat
Oct. 1 2014 9:39 PM Tom Cruise Dies Over and Over Again in This Edge of Tomorrow Supercut
  Technology
Future Tense
Oct. 1 2014 6:59 PM EU’s Next Digital Commissioner Thinks Keeping Nude Celeb Photos in the Cloud Is “Stupid”
  Health & Science
Science
Oct. 1 2014 4:03 PM Does the Earth Really Have a “Hum”? Yes, but probably not the one you’re thinking.
  Sports
Sports Nut
Oct. 1 2014 5:19 PM Bunt-a-Palooza! How bad was the Kansas City Royals’ bunt-all-the-time strategy in the American League wild-card game?