UBS begins to strengthen Brazil links

UBS is returning to Brazil a year after the global crisis forced it to sell its local investment bank and reduce its presence in one of the world’s fastest growing markets to a skeleton staff.

The Swiss bank said it would buy Link Investimentos, a broker dealer with offices in São Paulo and Curitiba, for R$195m ($112m). It described the deal – a small fraction of its previous investment in Brazil – as the first step in rebuilding its physical presence in the country.

In 2006, UBS bought Pactual, an aggressive, fast-growing Brazilian investment bank, for $2.6bn. Three years later, at the height of the global crisis, it sold it back to a group of Pactual’s partners for $2.5bn, even though Pactual’s book value had grown considerably in the interval.

“The sale of Pactual was not a decision to exit Brazil but the result of a need to raise capital at a particularly critical time in the global crisis,” said Raul Esquivel, head of Latin America for UBS Investment Bank.

“The firm’s view of Brazil, not just in investment banking but across the group, is that it is a very significant opportunity and we aim to have a full service business.”

Link is one of the largest independent broker-dealers in Brazil. It offers equities, equity research and equity derivatives as well as exchange traded foreign exchange products, fixed income and commodity products. It also offers wealth management and asset management services.

Under the deal, expected to be approved by Brazil’s central bank by the end of this year, the Link brand will be replaced by the UBS one. Pending approval, UBS said it would also apply for separate asset management and banking licences in Brazil, allowing it to distribute its own research products in the country.

“Brazil is one of UBS’s most significant opportunities worldwide,” Mr Esquivel said. “We will continue investing to grow the business and offer the full complement of products, not just across investment banking but also wealth management and asset management.”

He stressed that UBS had not exited Brazil altogether since it sold Pactual but had put people on the ground to retain client relationships. UBS had taken part on a dozen transactions in Brazil over the past year including debt and equity and M&A advisory services.

Daniel Mendonça de Barros, chief executive of Link, said the deal would allow Link to offer many more products to local customers.

“What is really exciting is to have all the global products and distribution that UBS can offer,” he said. “We are very happy to be able to offer products spread around the world to our institutional and wealth management clients.”