Upcoming Privatizations Attract Swiss Banking Giant UBS to Brazil

RIO DE JANEIRO, BRAZIL – In its latest exclusive report Reuters says that Brazilian state-controlled lender Banco do Brasil SA and the world largest manager of private wealth, Zurich based UBS Group, are in advanced talks about an investment banking joint venture that could be signed as soon as next month.

The Swiss bank aims to take a controlling stake in the investment banking business of the state-owned bank, the report said. Both banks will, however, retain an equal say in the ensuing joint venture.

UBS is very successful in the management of private wealth, counting approximately half of the world’s billionaires among its clients. The bank’s placement power for share offerings worldwide is therefore unmatched.

Both companies refused to comment on the proposed deal, «Reuters» said. The Swiss bank hopes to use the local bank’s balance sheet as back up for investment-banking transactions, while Banco do Brasil expects to achieve a wider reach among foreign clients.

A deal would signify a substantial acceleration in UBS’s quest to gain a proper foothold in the Brazil-based investment business. The bank has had a license in the country since 2014, having suffered a severe setback in 2009. It was forced to sell Brazil-unit BTG Pactual to former owner Andre Esteves.

UBS since has expanded its position in the country but seems to have fallen behind U.S. rivals, the news agency said.  Despite its trimming of sell side operations, UBS is among the world’s nine “Bulge Bracket” investment banks and is considered a global primary market maker.

The Swiss bank is in ninth place so far this year in Brazil-related equity offerings and 21st place in M&A advisory, according to Refinitiv data. Banco do Brasil is in tenth place on managing share offerings, but has not been active in M&A advisory.

UBS would have a controlling stake to avoid operational hurdles that are common in state-controlled companies in Latin America’s biggest economy, but management would be shared, the sources added.

No payment is expected in the deal, which Banco do Brasil hopes will allow it to offer a broader variety of options to its corporate clients, including distribution of share offerings with European and U.S. investors, the two sources said.

The potential for the two banks would be considerable: just a few days ago Economic Minister Paulo Guedes said to Valor Econômico that he actually wanted to privatize all state-owned enterprises in Brazil.

For the full picture, see our Brazil Tax Reform: Complete Guide.