February 14, 2020 / 3:15 PM / 6 days ago

UPDATE 2-BTG Pactual shares down on higher costs with retail unit

(Adds shares, CFO comments)

By Carolina Mandl

SAO PAULO, Feb 14 (Reuters) - Shares in Latin America's largest investment bank, Banco BTG Pactual SA, were down more than 4% after it reported a jump in costs related to its newly launched retail unit, although fourth-quarter profit rose more than 40% from a year earlier.

Recurring net income, excluding one-offs, was in line with analyst expectations at 1.010 billion reais ($232 million) as revenue soared by 61% year on year to 2.486 billion reais, boosted by all business units.

"Total revenues were the positive surprise but it was more than offset by the increase in operating expenses," UBS AG's analysts said in a note to clients. Fourth-quarter costs climbed 21%, to 982 million reais.

Chief Financial Officer Joao Dantas said the bank will speed up investments in its retail unit, as it sees good business opportunities.

The bank's main efforts now are concentrated in its digital retail platform, dubbed BTG Pactual Digital. BTG, which was founded as a purely investment bank and asset manager, is hoping to become Brazil's sixth largest retail bank by client total.

Dantas said BTG is testing debit and credit cards and other functionalities for individuals to launch all checking account features by year-end.

The Sao Paulo-based bank reported an annualized return on equity, a measure of profitability, of 19.1%, down slightly from the previous quarter.

The bank also continued to expand its loan book, with a fourth-quarter growth of 11.5% from the previous quarter to 43.8 billion reais, helped by lending outside Brazil and to small companies. In November BTG said it was planning to extend more loans in Chile and Colombia.

$1 = 4.3503 reais Reporting by Carolina Mandl Editing by David Goodman and Steve Orlofsky

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