Top 1000 World Banks – BTG Pactual proves size isn't everything in Brazil

Size is not everything, not even for Latin America’s largest banking market. While Itaú Unibanco remains Brazil’s and the region’s biggest player by Tier 1 capital, it is a smaller competitor that scores the best performance.

Out of Brazil’s five largest banks, BTG Pactual tops the overall performance ranking, which takes into consideration a variety of factors, from assets and loan portfolio growth, to operational efficiency and capital soundness.

This result should not surprise anyone, as BTG Pactual expanded its activity swiftly in 2019. Based on the latest available annual financial results, the bank’s Tier 1 capital grew by nearly a third between 2018 and 2019, while its assets rose by a fifth. 

BTG Pactual is growing after a tumultuous few years that saw a dramatic leadership change against the backdrop of a region-wide corruption scandal and a dire recession. As Brazil began to recover in 2019, the coronavirus pandemic has since darkened the country’s immediate and future economic prospects. Analysts expect a severe gross domestic product contraction in 2020, with some going as far as -8%.

While BTG Pactual focuses on investment banking, wealth management and asset management, macroeconomic troubles may be harsher still for its universal banking competitors.

But even with a worrying future ahead, Brazil’s top lenders entered 2020 in relatively good shape. All top names closed the 2019 financial year with largely stable Tier 1 capital and assets figures – BTG Pactual being the outlier in terms of growth.

Pre-tax profits, however, were more varied, ranging from BTG’s 88% expansion to Banco Bradesco’s 34% contraction. Lower levels of profitability and efficiency hold back Bradesco in the overall performance ranking, where it sits in fourth place. However, the bank does better in terms of leverage, where it has the best score out of Brazil’s largest names, and in terms of soundness, where it scores second. (The former measure is calculated by combining the total liabilities to total assets ratio with its annual change; the latter looks at the capital-to-assets ratio and its annual change.)

Banco do Brasil, in fifth place in the overall performance table, finds some bright spots in its liquidity performance, the best of the group as calculated by the loans-to-assets ratio, the loans-to-deposits ratio and their movement from the previous year.

Caixa Econômica Federal is in second place in the best-performance table, driven mainly by its top performance in asset quality and return on risk. Itaú Unibanco, on the other hand, has an homogeneous, middle-of-the road performance across most individual indicators, placing it third in the overall performance table.