BTG’s Biggest Bull Is Unfazed by Turmoil That Sent Shares Tumbling

(Bloomberg) -- Banco BTG Pactual SA’s most optimistic backers are standing by the investment bank as it grapples with a crisis echoing one four years ago that almost took down the firm.

“The company is currently in a much more solid, liquid and solvent situation than it was in 2015,” Henrique Navarro and Olavo Arthuzo, analysts at Banco Santander SA, wrote in a report late Monday. They reiterated their buy rating and a price target that’s the highest among sell-side analysts, according to data compiled by Bloomberg.

BTG, Latin America’s biggest stand-alone investment bank, rebounded as much as 11% Tuesday after plunging 31% the previous two days on news that police had searched the firm’s offices and the home of the bank’s founder and largest shareholder, Andre Esteves. A report Monday detailed separate allegations that the bank maintained a department to advise clients on money laundering.

BTG faced a liquidity crisis in 2015, when the long-running probe known as “Carwash” led to the arrest of Esteves, 51. This time the bank hasn’t experienced significant withdrawals, a person familiar with the situation said, asking not to be identified because the information is confidential. BTG denied any irregularities and called the money-laundering report “absurd.” Esteves was cleared of the 2015 charges.

Shares of the company climbed 9.2% to 50.71 reais at 12:09 p.m. in Sao Paulo, paring the decline since Thursday’s close to 25%. Santander left intact its price target of 88 reais.

BTG stock could also benefit from a share buyback program announced in October. “So far, the bank has repurchased 6.4 million units, representing 42% of the program,” the Santander analysts said, and BTG still has 8.6 million units eligible for the plan, according to a Tuesday regulatory filing. The bank’s own brokerage has accounted for most of the net buying of the bank’s shares since Friday, data compiled by Bloomberg show.

“We understand the negative pressure on the stock -- after all, banking is all about trust, and no one can predict how this situation will evolve,” Navarro and Arthuzo said in their report. “For the time being, we see no impact that would be material enough to bring it to a hold rating.”

To contact the reporters on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net;Felipe Marques in Sao Paulo at fmarques10@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Steve Dickson, Peter Eichenbaum

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