BTG Pactual IPO: carnival time for Brazilian banks?

Brazil’s largest independent investment bank BTG Pactual is set to offer the world’s fourth largest initial public offering for the year 2012 in Brazil this week. The bank is looking to raise around $2 billion in the oversubscribed offering.

Image courtesy Sergio Luiz:

Dress rehearsal for BTG Pactual's post IPO celebrations.

The IPO values the company at roughly $14-15 billion, depending on the final pricing of the IPO.

BTG Pactual’s head Andre Esteves has earned a reputation as something of an investment banking wunderkind. A mathematician who started from an entry-level position as a 21-year old, he quickly rose through the ranks, eventually taking over the firm. Now, the 43-year old looks to reap the rewards of his successful management.

The IPO has not been without scandal; Italian authorities have charged Esteves with insider trading stemming from a deal with Swiss bank UBS (quote). However, these allegations are unlikely to derail the proceedings as the penalty in question is relatively minimal.

Brazil market watchers are hoping that this deal will inject some life into a flailing Brazilian banking sector. Concerns over growth and interest rates have pushed the sector down: Itaú (ITUB, quote), Banco Santander Brasil (BSBR, quote), and Banco Bradesco (BBD, quote) are all down 16%, 12.8%, and 10% respectively over the past month.

While this newest IPO could spark interest in the Brazilian banking sector, investors must be aware of inflationary concerns and the indication from this week’s earnings reports of an increase in non-performing loans from the country’s major banks.

Disclosure: Author is long ITUB.


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