One of Brazil’s Richest Bankers Wants BTG Pactual to Become Bigger than Itaú

Andre Esteves, chairman of BTG Pactual, has turned around his remarkable fortune and has grand ambitions to create the region’s biggest bank

Andre Esteves, here with Jane Fraser, CEO of Citigroup Global Markets Inc., is once again rubbing elbows with the world’s elite and making over-the-top claims that illustrate his grandiose ambitions.
By Cristiane Lucchesi and Felipe Marques
July 27, 2022 | 12:34 PM

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Bloomberg — Andre Esteves, the vaunted prodigy of Brazilian finance, is ready for his second act.

Back as chairman of Banco BTG Pactual SA (BPAC11), the financier is once again rubbing elbows with the world’s elite and making over-the-top claims that illustrate his grandiose ambitions. “Better Than Goldman” was the one he was best known for in banking circles in Sao Paulo and New York. This, he liked to joke, was what BTG stood for. And now? “Bigger than Itaú.”

In private, he says BTG wants to overtake Latin America’s biggest bank, no small feat given that BTG, which has long specialized in trading and investment banking, has one-fifth the assets of Itaú (ITUB4). And all the more surprising considering how close to the brink the bank and its founder were in 2015, when Esteves was ensnared in the greatest corruption investigation in the country’s history. Jailed and stripped of control of the bank that made him a billionaire at 37, he watched his partners unload assets, fire-sale-style, to stave off bankruptcy.

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Not only did BTG survive -- it’s thriving, with quarter after quarter of record profits. Esteves is too. Cleared of all charges, he’s back in control of the bank, hanging out with Elon Musk, Brazil’s President Jair Bolsonaro and giving advice to the nation’s central bank chief.

“Esteves is a great example of something you see a lot of in Brazil: this mix of economic power and political influence,” said Filipe Campante, Bloomberg Distinguished Associate Professor at Johns Hopkins University. “When you climb with politics, you also risk being taken down by politics. But Esteves is clearly very talented at managing that risk.”

Even before returning to his chairman role in April, Esteves was already coordinating the transformation he believes will put BTG on top, leapfrogging the nation’s “Big 5″ with the same unbridled ambition that marked his first ascension to the tight-knit group of top Brazilian financiers. It involves leaning heavily on a newly-developed digital bank, aggressive courting of high-income retail clients and an acquisition spree that’s included everything from brokerages to financial magazines.

“He’s an innovator, a business hunter, and that lands him more often on the spotlight than others,” said Roy Martelanc, a finance professor at FIA Business School, who was also a board member at Banco Pan SA alongside Esteves in the early 2010s.

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It all came crashing down early on Nov. 25, 2015, when police showed up at his apartment overlooking Rio de Janeiro’s Ipanema beach with an arrest warrant for alleged obstruction of justice as part of Brazil’s Carwash probe. BTG had to be bailed out by the nation’s privately-backed deposit insurance fund as clients pulled money at an unprecedented pace, and went on to sell more than $3.5 billion in assets to try to keep afloat.

Welcomed back as a senior partner two days after he was freed from house arrest in April 2016, Esteves and his partners were determined to make BTG less vulnerable to the kind of disaster it faced. Much like the US banks after the 2008 crisis, it started shoring up capital and diversifying into retail banking, a push that created an in-house digital investment platform. That made BTG a lot less dependent on wholesale funding from investors like pension funds, relying instead on a more diversified base of backers. Private equity investments now use only partner and client money, not the bank’s proprietary capital.

BTG also shed the global goals it once had in favor of conquering its home turf. In the past five years, Esteves coordinated the acquisition of two dozen companies in Brazil.

It’s worked out well so far. BTG had record sales and trading revenues in the first quarter of 2022, posting a 2.1 billion reais ($390 million) profit -- a 72% year-on-year jump. It also beat Goldman and Itaú on a key profitability measure. Esteves, 54, recovered too — he’s now worth $5.6 billion according to the Bloomberg Billionaires Index, more than double the $2 billion he was on the eve of his arrest.

Clients are investing with BTG  as never before | Bank manages more money now than in 2015, when Esteves went to jaildfd

“It’s definitely possible, even over the next decade or so,” Danielle Lopes, an analyst at Sao Paulo-based independent research firm Nord Research, said of the bank’s ambitions to overtake Itaú. “BTG is already more profitable and it still has an immense ocean of opportunities to explore in Brazil.”

In Brazil, the five biggest lenders — Itaú Unibanco Holding SA, Banco do Brasil SA, Caixa Economica Federal SA, Banco Bradesco SA and Banco Santander SA — account for 80% of personal loans and 60% of deposits, according to central bank data for 2021. An Oliver Wyman study published in 2019 estimated they had a 93% market share of the 8.6 trillion reais in investments held in the nation.

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Esteves’s web of influence extends beyond BTG. He’s provided capital to several former partners who’ve departed to start their own firms looking to capitalize on Brazil’s asset management industry boom.

And then there’s the politics. In an audio leaked last October to local media, he boasted to the crowd of a private event about how central bank chief Roberto Campos Neto called him to exchange ideas about Brazil’s interest rate, and bragged about how he scolded Lower House Speaker Arthur Lira for a decision that led to an exodus from the economic team.

The remarks almost landed him in hot water, with threats of an investigation into alleged undue influence. Nothing panned out, and Esteves continues to hold court at the bank’s swanky Faria Lima offices every day, steering the bank through what he tells people close to him is a once-in-a-generation transformation.

He’s also been focusing on another, more personal project: Instituto de Tecnologia e Lideranca, or Inteli, a non-profit, tech-focused college, which he and his wife Lilian donated 200 million reais to create. His unbridled bravado made it there too: Esteves wants Inteli to be “better than Stanford.”

Read more at Bloomberg.com