BTG Pactual's Q4 net income rises 15% despite macro challenges

Brazilian bank BTG Pactual BPAC11M reported on Monday a fourth quarter net income of 3.28 billion reais ($568.12 million), up 15% on a yearly basis, on the back of stronger revenues despite a worsening economic backdrop.

The bottom line came in slightly below market expectations of 3.43 billion reais in a poll by LSEG, but analysts noted the earnings miss should not affect positive prospects for the bank in coming quarters.

BTG shares BPAC11M gained 1% on Monday, whereas benchmark stock index Bovespa IBOV rose 1.3%.

As well as other financial firms such as Bradesco, BTG pointed to challenging economic trends in Latin America's largest economy, as Brazil now faces slower activity and interest rates are being hiked to tame rising consumer prices.

"Our ability to expand returns in this challenging scenario demonstrates our diversified and 'all-weather' business model," the investment bank said, citing a "macroeconomic environment deterioration over the course of the year."

Total revenues for the period reached a record 6.73 billion reais, the lender said in a securities filing, up 19% year-on-year. Analysts in the LSEG poll expected 6.96 billion reais.

Revenues in the fourth quarter were up in all of BTG's five main business areas, with corporate lending and business banking standing out with a 35% increase. The key sales and trading unit posted a smaller 10% year-on-year rise.

"We would add on any weakness today," JPMorgan analysts said. "The small miss is explained by sales & trading, which does not appear to reflect major gains from its power plants/Eneva deal, thus likely a tailwind for coming quarters."

Power firm Eneva, which has BTG as a top shareholder, agreed last year to buy thermoelectric plants owned by the bank.

BTG's return on average equity (ROAE), a gauge of profitability, was down 0.4 percentage point in the quarter to 23%. But full-year ROAE came in at 23.1%, meeting its previously released outlook of exceeding the 2023 level of 22.7%.

"We are confident in our ability to drive sustained growth and expand ROAE," the bank said. "We remain highly optimistic about the continued success of our business model."

BTG recently acquired brokerage Orama, U.S.-based lender MY Safra and Julius Baer's Brazil wealth business.

Citi analysts said the bank had a solid quarter as it delivered an "already demanding" ROAE guidance, which they noted speaks of the firm's diversified revenue stream.

"Although we anticipate a challenging macro scenario in 2025, results show a consistent delivery with improving fundamentals and growth in resilient business units," Citi said.

($1 = 5.8086 reais)