Sweden’s biggest bank is expanding in Brazil with the aim of tapping into Latin America’s biggest and fastest growing economy.
UBS has announced that it is planning to start an investment bank in Brazil and has filed a letter of intent with the Brazilian Central Bank for the bank to be opened with an initial capital of 46 million reals.
The bank will be called UBS Brasil Banco de Investimento SA and will be run by UBS AG via a holding firm. Oswald Gruebel, UBS AG’s Chief Executive Officer, recently said that the Swedish banking giant regards emerging markets as being capable of generating considerable revenues.
UBS, which is based in Zurich, bought Link Investimentos in April in order to get licenses for undertaking business in Brazil. Link Investimentos is a Brazilian brokerage firm, and according to Gruebel, the investments are crucial in maintaining UBS AG’s foothold in Brazil given the forecasted future growth that is expected to come from Asia and Latin America.
Analysts said the company might be keen on taking advantage of the expected growth in Latin America, given the fact that it already has a considerable presence in Asia. Projections have placed Brazil’s economic growth at 7.2% this year.
The Swedish bank is number 13th amongst underwriters of equity and equity related offerings made by Brazilian firms in 2010. Even so, analysts are not so upbeat over the firm’s re-entry plans, reiterating that it will have to overcome some hurdles.
UBS sold its Pactual operations in Brazil to Andre Esteves for an estimated $2.5 billion last year in a bid to gain licenses for doing business in the country. UBS AG now faces competition from its sold unit, Pactual, and other rivals in the Brazilian banking industry.
UBS admitted that the Brazilian market was a hard one to re-enter but it believes that its strategy of buying small units and incorporating their employees into its line of business, management and operations will work.
It will be beneficial for UBS to be in Brazil, as growth in the future will come from Asia and Latin America, according to Teresa Nielsen, an analyst with Vontobel Holding AG in Zurich. ‘UBS has big operations in Asia already, but what they’re missing is Latin America,’ she explained.
