‘Back to where he never left’: founder of Brazil’s BTG Pactual returns to fold

A self-made billionaire by the age of 40 and the face of an institution once described as the “Goldman of the Tropics”, at one time André Esteves was the wunderkind of Latin American finance.

Then the Brazilian suffered a dramatic fall. Arrested in connection with a sprawling political corruption scandal, in November 2015 he resigned as chair and chief executive of the investment bank he founded, plunging it into turmoil.

Almost four years after his name was cleared, Esteves has returned to the board of BTG Pactual. He is, as the company’s acronym reputedly spells out, now officially ‘back to the game’.

Shareholders approved him as chair of the $22bn-valued group at the end of April. On paper it was the final step in a long journey by one of Brazil’s highest-profile business figures to restore his commanding position.

But in reality, the elevation merely bestowed a formal rank on what was already the de facto situation, according to several people familiar with the business.

Before the new appointment, Esteves’s name did not appear alongside BTG’s main executives in corporate presentations. Yet on Avenida Faria Lima, São Paulo’s answer to Wall Street, the 53-year-old’s continued stature and influence within BTG has been less of an open secret and more an acknowledged fact.

“André is back to where he never left,” said a former colleague, who asked not to be named. “He’s always been incredibly present. The title of chairman is irrelevant.”

Esteves declined an interview request.

As the single biggest owner of BTG’s equity, indirectly controlling a roughly 25 per cent stake, Esteves held the status of “regulated person”, giving the right to enter its offices and take part in its activities, according to an insider. Even if only symbolic, his comeback captures an ebullient mood at an investment bank that calls itself the largest in Latin America.

BTG’s share price has outperformed the local stock index with a 21 per cent gain so far in 2022, delivering a more than fivefold increase over the past five years. The company last week posted quarterly revenue of R$4.35bn ($840mn) and net income of R$1.94bn — both all-time highs.

Alongside debt and equity markets, mergers and acquisitions and trading, BTG is active in corporate lending and wealth and asset management. It also runs a retail investment platform.

As financial technology start-ups such as Nubank boom in a region where millions of people have gone underserved by mainstream lenders, BTG is now making a big push into consumer banking, with Esteves playing a strategic role.

UBS analyst Thiago Batista said BTG’s business model had undergone a “transformation” in the past few years towards “a kind of complete bank with all services”. “Their P&L tend to be more stable than now in the past,” he added. “They were very successful in this diversification of the business, while maintaining their profitability among the first tier of Latin American banks.”

BTG’s partners hold about 70 per cent of its stock. The internal culture, which employees past and present say emphasises meritocracy and entrepreneurialism, is shaped in the mould of Esteves.

“He really gave the face and spirit to a bank [with] very aggressive targets,” said Claudia Yoshinaga, assistant professor of finance at the Fundação Getúlio Vargas school of business administration. “He’s an iconic figure”. 

Raised by his university professor mother in Rio de Janeiro, Esteves graduated in mathematics and computing. He began his career at the age of 21 as an intern in the IT department of Banco Pactual, making partner within four years.

Those who know Esteves describe him as smart, driven, hardworking and charismatic. “He has a very deep technical knowledge. He is a mathematician with an analytical mind, but at the same time very commercial and a good salesperson,” said Marcelo Mesquita, who worked with Esteves for three years.

“He knows everything that is happening in the bank down to the details,” added Mesquita, founder of asset manager Leblon Equities. “Ultimately, he is the owner and runs things.”

At Pactual, Esteves excelled as a trader and was among a group of younger partners who in 1999 ousted the founder to take control of the firm. As Brazil rose on the global stage in the first decade of the 21st century as one of the so-called Bric economies, Pactual was purchased by UBS for $2.6bn in 2006, netting Esteves a fortune.

He left the Swiss bank two years later to set up investment group BTG with ex- Pactual partners and others. In the aftermath of the global financial crisis, Esteves pounced to buy back his old outfit for slightly less than it was originally sold for.

The merged BTG Pactual had dealings with Petrobras, the state-controlled oil producer at the centre of the huge anti-graft operation that rocked Brazil known as Lava Jato, or “Car Wash”.

Held on suspicion of obstructing the probe, Esteves spent three weeks in Rio’s notorious Bangu prison before being transferred to house arrest.

Although BTG was not under investigation, its share price dropped about a third in a single day. As investors yanked money out of funds, the lender resorted to a fire sale of assets, axed jobs and tapped emergency funding from a deposit guarantee fund.

Once released from domestic detention in April 2016, Esteves returned to the bank as a senior partner and adviser. The charges were later dropped and he was exonerated by a judge. Police raids on Esteves’s home and BTG’s office in 2019, related to the bank’s acquisition of stakes in African oilfields from Petrobras, went no further.

At the end of last year Esteves formally rejoined a controlling group of partners following a series of regulatory approvals.

Retail banking will offer the next big test of his Midas touch. But competition in the sector is stiff and the five traditional lenders that dominate the Brazilian high street are modernising. Meanwhile, double-digit interest rates from the country’s central bank could damp net new money flows to investment platforms such as BTG’s, say analysts, and the prospect of a polarised presidential election in October may rattle investors.

Additional reporting by Carolina Ingizza