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BTG Pactual joins Brazilian lenders hit by post-Americanas provisions

BTG Pactual bank headquarters is pictured in Sao Paulo

By Gabriel Araujo

SAO PAULO (Reuters) - Banco BTG Pactual SA on Monday became the latest Brazilian lender to be affected by bad credit provisions due to what it called a "specific, widely publicized event," likely referring to the bankruptcy of Americanas SA.

BTG, which was among the most exposed lenders to the Brazilian retailer's debt, echoed measures taken by some of Latin America's largest banks and set aside billions of reais in the fourth quarter, leading to a lower-than-expected net profit.

Shares in the lender rose more than 3% after the report, placing it among the top gainers on Brazil's Bovespa benchmark stock index, as it pledged to improve results this year and the provisions were somewhat expected.

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Analysts at Guide Investimentos highlighted BTG's "better operating results" despite a troubled macroeconomic scenario, forecasting higher figures in the coming quarter as provision levels fall.

BTG reported a quarterly net profit of 1.64 billion reais ($314.5 million), slightly down from 1.74 billion a year earlier and below the market consensus of 2.27 billion, according to analysts polled by Refinitiv.

The "specific event," BTG said in a securities filing, led its Corporate & SME Lending unit to make provisions of 1.12 billion reais for bad credit, with the total negative effect on the bottom line reaching 580 million reais.

The bank said it remained confident in the quality of its credit portfolio, and the "isolated incident" didn't reflect the overall state of its lending unit.

Santander Brasil, Itau Unibanco and Bradesco had similar setbacks in the quarter, increasing loan-loss provisions after Americanas' bankruptcy, which was triggered by what the retailer described as multi-billion-real "accounting inconsistencies."

Analysts at JPMorgan estimated BTG's provisions to have reached around 30% of its gross exposure to Americanas, in line with the amount set aside by Santander. Meanwhile, Itau and Bradesco decided to provision 100% of their exposure.

BTG's "good cost discipline" in the quarter helped reduce the impact of the provisions, JPMorgan said.

On the bright side, BTG also said two key metrics - revenue and adjusted net profit - hit fresh records for the full year, largely boosted by higher sales and trading revenue.

The return on average equity (ROAE), a gauge of profitability, hit 16.7% in the quarter but 20.8% in the full year, above its "soft guidance" of more than 20% for the long term.

"Despite all the challenges, we expect higher returns in 2023, with greater operating leverage and possibly even higher capital and liquidity levels," BTG Chief Executive Officer Roberto Sallouti said.

($1 = 5.2151 reais)

(Reporting by Gabriel Araujo; Editing by David Holmes, Kirsten Donovan and Paul Simao)