UBS reportedly in talks to acquire Brazil's biggest asset manager

Talks to buy a controlling stake in BB DTVM are preliminary and no agreement has been reached

UBS has a joint venture with Banco do Brasil for investment banking in South America and brokerage business in Brazil. Reuters

UBS Group is in discussions to buy a controlling stake in BB DTVM, competing with Franklin Templeton and BlackRock as a potential acquirer of Brazil’s biggest asset-management company, according to people familiar with the matter.

Talks for the company, which has 1.2 trillion reais ($217 billion) in assets under management, are preliminary and no agreement has been reached.

The sale process will probably be delayed because state-owned Banco do Brasil, the company’s parent, is in the process of replacing its chief executive. Fausto de Andrade Ribeiro was nominated to take over for Andre Brandao, who had made the sale a priority. But Mr Brandao quit last week after clashing with Brazilian President Jair Bolsonaro over austerity measures.

Investors are now questioning if Mr Ribeiro, who’s been working at Banco do Brasil for more than 20 years, will continue Mr Brandao’s asset-sale agenda.

The chief executive swap “could create uncertainty around the bank’s strategy to deliver efficiency improvements", Goldman Sachs Group analysts led by Tito Labarta wrote in a note to clients last week.

UBS, Franklin Templeton and BlackRock declined to comment, as did Banco do Brasil.

Rothschild & Co. is advising Banco do Brasil on a potential deal, which would give the buyer control over BB DTVM, according to the people, who said several different deal structures are being considered.

The fund-management business generated more than 6.85bn reais in revenue last year for Brasilia-based Banco do Brasil, up 7.2 per cent from 2019. Rothschild declined to comment.

UBS already has a joint venture with Banco do Brasil for investment banking in South America and brokerage business in Brazil, as well as a commercial agreement with Banco Patagonia in Argentina.

Unloading a piece of the asset-management business is part of a larger effort by Banco do Brasil to reach profitability levels similar to what non-state-owned banks regularly post in Brazil. The plan involves selling assets, moving away from riskier loans and closing branches.

But that landed the company in Mr Bolsonaro’s crosshairs. The president bashed an initiative announced by the former chief executive to shutter some 200 branches and eliminate more than 5,000 employees.

Banco do Brasil’s shares have dropped almost 27 per cent in dollar terms this year, while UBS’s stock rose 14 per cent.

Mr Ribeiro, who holds a post-graduate degree in economics from George Washington University, joined Banco do Brasil in 1988, and has been responsible for businesses including third-party channels and the operations in Spain and Morocco.

“Fausto de Andrade Ribeiro is a qualified candidate given his solid track record inside the bank,” Citigroup analysts led by Jorg Friedemann wrote in a report. “Nevertheless, the news reflects poorly on Banco do Brasil, although already expected, as it demonstrates a clear political interference.”