© Reuters. File photo: BTG Pactual Bank Headquarters was taken on October 3, 2019 in Sao Paulo, Brazil. REUTERS/Amanda Perobelli/File Photo
Authors: Tatiana Bautzer, Carolina Mandl and Jessica DiNapoli
São Paulo/New York (Reuters)-23 days in prison in Rio de Janeiro and deprived of the CEO position, this is enough for billionaire banker Andre Esteves to consider Leaving Brazil and his investment bank BTG Pactual.
Four sources with direct knowledge of the situation told Reuters that six years later, Esteves’ stake in the bank is worth about 40 billion reais ($7.89 billion) and is about to make a comeback.
The source said that although Esteves did not have a formal management position in the bank, he did not give up. He increasingly controlled the bank’s key decisions, thereby shaping the publicly held BTG. Goldman Sachs Group Inc (NYSE:) in its days as a private partnership.
In July 2018, after he was acquitted for the first time in a corruption investigation into a “car wash” in Brazil, Esteves’ revival gained strength. He has now left most other legal issues behind and will soon obtain final regulatory approval to rebuild his controlling stake. First class.
In the two years since Brazilian regulators allowed him to rejoin a partner group called “G7” (which holds a majority stake in BTG but is different from the board), Esteves has overseen the promotion of the retail banking industry , And led the negotiations for the two acquisitions, the source said, and worked directly with customers for initial public offerings and other transactions.
Sources said that some of the bank’s partners, including former co-CEO Marcelo Kalim, have left because they either rejected his return or disagreed with his strategic push.
Kalim left in December 2018, founded his own online bank, and declined to comment on his withdrawal.
Although the bank’s stock price has risen 130% in the past two years, some corporate governance experts say Esteves’s control over strategic decisions as a shareholder without any management role is disturbing. They say this is not well reflected in the overall standards of the bank’s board of directors and Latin America’s largest economy.
Francisco Reyes Villamizar, an expert in Latin American corporate law and a visiting professor at the University of Fribourg in Switzerland, said that the board should raise questions about Esteves’s role in the bank. “They began to tolerate this behavior, and this is when things go wrong,” Villamizal said.
BTG’s board of directors is under pressure. The agency ISS and Glass Lewis suggested in April to vote against some directors and stated that the number of independent directors on the board of directors was less than the company claimed. A major shareholder of Norges Bank in Norway has followed this advice and has voted against some nominees in the past few years, saying it lacks independence.
However, BTG defended its corporate governance arrangements. It said: “About 70% of the company’s shares are owned by its managing partners, which brings unprecedented long-term alignment of benefits to its shareholders.” Plank.
A person familiar with the matter said that Esteves is also happy to take over control because he owns about 25% of the total capital of BTG, and as a major shareholder under the supervision of the Brazilian Central Bank, he can take responsibility if any problems arise.
The person familiar with the matter added that he has no plans to assume a formal management position or become the chairman of the bank because “everyone” knows that he is the person in charge, including a public investor in BTG.
The US Federal Reserve recently approved Esteves’ request to regain a controlling stake, and the Brazilian Central Bank approved the request at the end of 2019. The last piece of the puzzle, the European Central Bank approved to allow Esteves to regain its 61.55% voting rights. Two sources close to the organization said that G7 may arrive in a few weeks.
The European Central Bank and the Federal Reserve declined to comment.
(For BTG asset diagram, please click https://datawrapper.dwcdn.net/gYEE5/4)
‘WITCH HUNT’ Esteves told friends and clients that his arrest in 2015 was “ridiculous” and was part of a “witch hunt” based on false accusations by politicians. Former Congressman Delcidio Amaral (Delcidio Amaral) accused bankers of paying witnesses during car wash investigations to prevent them from reaching plea deals. Amaral later withdrew his testimony, acknowledging that he was not sure about any proposal made by Esteves to pay witnesses’ fees, and said he had just “heard” about it.
BTG’s stock price fell 21% on the day of his arrest and expanded the decline to about 50% in the first month after his arrest. Facing the liquidity crunch, BTG obtained loans from Brazilian deposit insurance institutions and sold assets.
The bank eventually raised enough cash to pay a large number of investors eager to redeem their deposits. And the deposit insurance fund loan was returned in advance. The 53-year-old Rio is known as a Rio, and he has been under house arrest for the first four months after he was released from prison.
Two sources said that the man who joined Banco Pactual as an intern in 1989 reappeared and was resisted by former chairman Persio Arida and other partners worried about the potential impact on the bank’s reputation.
Arida, who left the bank in 2017, declined to comment.
According to two sources, BTG partner Marcelo Kalim (Marcelo Kalim) became co-CEO after his arrest and hopes to establish a full-service retail digital bank, strategically There was a conflict.
Esteves wants to launch a digital broker dedicated to the development of the bank’s existing wealth management business. When co-CEO Roberto Saluti was on his side, Kalim resigned.
According to people familiar with the matter, Esteves believes that it is natural for some partners to leave the bank.
Owners like SAFRA
Two sources said that now, with or without Salouti, Esteves has attended most meetings on BTG’s retail banking strategy and led two roadshows for the BTG stock issuance.
A source said that he recently told investors that he hopes BTG’s funding from retail investors will roughly triple to 40%.
In order to compete with Brazil’s large retail banks, Esteves hopes to use its Banco Pan division to target low-income customers seeking credit and BTG+ (its digital banking division, which serves high-income people and competes more directly with competitors) to target the individual For example, according to a person familiar with his ideas, Itau Unibanco.
If it needs more cash to fund its retail expansion, despite the high valuations of its digital peers, Esteves would rather issue more shares in parent company BTG than IPO its digital bank.
Esteves himself has no doubt about his role. Three sources said that he privately compared himself with the founders and owners of other Brazilian companies, including the late Joseph Safra of Banco Safra, who believed his Control is good for BTG.
“Let the owner define the strategy is a clear advantage,” he told colleagues at a meeting in September.
(1 USD = 5,0706 reais)