* Q1 profit doubles on sales, trading gains
* Investment banking revs off 50 pct; private equity up
* Return on equity at 35 pct; efficiency improves
* Qtrly results reflect business before April IPO
By Guillermo Parra-Bernal
SAO PAULO, May 11 (Reuters) - BTG Pactual, Brazil's largest listed investment bank, reported first-quarter net income more than doubled as successful bets on equity and interest rate investments helped offset rising payroll expenses and lower advisory fees.
The São Paulo-based bank, controlled by Brazilian billionaire André Esteves, earned 786 million reais ($401 million) in the quarter, up about 140 percent from a year earlier, according to a statement.
Profit fell 25 percent from 1.054 billion reais in the fourth quarter.
The quarterly results are the first that BTG Pactual disclosed since raising about $1.96 billion from an initial public offering last month.
Revenue rose in all of its businesses except investment banking as uncertainty over the euro zone debt crisis weighed on demand for mergers and acquisitions and capital markets advising.
BTG Pactual and Esteves himself have become symbols of Brazil's growing economic might, competing head-to-head with global investment banks in a country with bustling capital markets. The IPO should help the bank continue expanding at home and abroad in coming years.
Return on equity, a gauge of profitability in the banking industry, jumped to 35 percent in the first quarter from 18 percent a year earlier and 24 percent in the fourth quarter.
The strong revenue gains allowed BTG Pactual to improve its efficiency ratio -- a measure of how costs stack up against revenue -- to 33 percent from 42 percent a year ago.
Net revenue almost doubled to 1.603 billion reais, bolstered by a 303 percent gain in private equity-related activities and a 170 percent jump in sales and trading of securities -- accounting for more than two-thirds of revenue in the quarter.
"Our revenue in the sales and trading segment reacted well in the face of a significant improvement in market conditions as well as the convergence in local interest rates and rising volumes in the Bovespa equity market," the statement said.
BTG Pactual has been on a dealmaking binge in Brazil and beyond in recent years as Esteves tries to make it the largest investment bank in emerging markets by 2020.
The bank has spent at least $2.5 billion on acquisitions in real estate, finance and services -- all areas that have blossomed in recent years along with Brazil's economy.
Units of BTG Pactual, a blend of common and preferred shares from the its investment bank and private equity units, tumbled 1.9 percent to 30.38 reais. Friday's decline was the steepest intraday drop in three sessions.
Interest income in the consumer finance segment, mainly represented by its stake in Banco PanAmericano, posted a shortfall of 21 million reais.
BTG Pactual and state-controlled Caixa Econômica Federal are shoring up PanAmericano, which almost went bankrupt at the end of 2010 in the face of losses related to accounting fraud.
Expenses rose 57 percent from a year earlier after bonus payments to employees jumped 123 percent to 333 million reais. Fixed compensation such as wages rose 30 percent.
Management will discuss results at a conference call with investors later in the day.