Prosecutors are preparing to file charges against the billionaire dealmaker, whom they suspect, along with a senator, of trying to obstruct a long-running graft probe at state-controlled Petroleo Brasileiro SA, or Petrobras. Esteves, through his lawyer, has denied the allegations.
In a new twist to the nearly two-year probe, Brazilian newspapers said police found documents allegedly linking BTG Pactual to the payment of bribes to ruling coalition lawmakers. Shares plummeted in São Paulo, while bonds recovered slightly from their plunge last week.
It is the first time the bank, whose public face has for years been Esteves, was directly implicated in the bribery scandal. Prosecutor General Rodrigo Janot used evidence and testimony from others under investigation to persuade the country’s Supreme Court to extend Esteves’ detention.
The documents said BTG Pactual paid 45 million reais ($11.7 million) to Eduardo Cunha, speaker of the lower house of Congress, in exchange for passing legislation favouring the bank, the newspapers said.
BTG Pactual denied the payments in a statement on Sunday and pledged to cooperate with authorities. A source familiar with the matter said the revelations and the extension of Esteves’ detention convinced him and his business partners that he had to resign.
“It’s hard to separate the bank’s image from Esteves," said Paulo Petrassi, who oversees 600 million reais in assets at Leme Investimentos in Florianópolis, Brazil. “So far, the market seems to have given the bank the benefit of the doubt, but that may not necessarily last long."
Esteves still owns more than 28% of the bank, and his stake includes a “golden share" giving him veto rights on any board decisions.
BTG Pactual named two founding partners, chief operating officer Roberto Saloutti and chief financial officer Marcelo Kalim, as co-CEOs. Persio Arida, who became acting CEO after Esteves’ arrest on Wednesday, is now chairman, with Huw Jenkins, head of the bank’s international arm, becoming vice chairman.
BTG Pactual has almost 70 partners, including Esteves, who control a combined 80% of the bank’s capital, according to bank data. New co-CEOs Kalim and Saloutti each have about 5.5%.
The main partners, a group of seven executives including Kalim, Saloutti and Jenkins with whom Esteves founded the bank in 2008, are considering buying their former leader out, the source said. Esteves’ stake is valued at around 6 billion reais. Over the past year, Esteves, 47, had steered BTG Pactual through Brazil’s deepest recession in a quarter-century. He engineered last year’s purchase of Swiss private bank BSI Group to cut BTG Pactual’s reliance on Brazil and invested heavily in global commodities trading as rivals retreated from the segment.
Shareholder returns have long outperformed those of Wall Street rivals, and internally, the longstanding joke has been that “BTG" stands for “Better than Goldman," a reference to Goldman Sachs Group Inc.
While Esteves sat in a jail cell in the Bangu VIII prison north of Rio de Janeiro, the bank’s main partners gathered on Sunday to finalize the sale of a 12% stake in Rede D’Or São Luiz SA, Brazil’s largest hospital chain, to Singapore sovereign wealth fund GIC Pte Ltd.
The stake will be sold for almost 2.5 billion reais, a source directly involved in the deal told Reuters. The bank had been negotiating the Rede D’Or deal since August, but Esteves’ arrest sped up talks, two other sources said.
GIC had paid 3.3 billion reais for a 16% stake of Rede D’Or in May. The new deal could help shore up BTG Pactual’s balance sheet after Esteves’ arrest prompted clients to pull more than $1 billion in investments held at the bank’s asset management division.
Heavily dependent on short-term market funding and with about 55% of its banking arm’s funding due for refinancing over the next 90 days, BTG Pactual has tried to assure clients that it is operating normally. Worries about liquidity and funding availability after Esteves’ arrest led Moody’s Investors Service and Fitch Ratings to put the bank’s investment-grade rating on review for a possible downgrade. Shares and bonds of BTG Pactual have skidded since Esteves’ detention, as investors fretted about its ability to thrive in his absence.
Units, a blend of common and preferred shares in BTG Pactual’s investment banking and private equity divisions, shed as much as 11% to 20.16 reais in early trading on the São Paulo Stock Exchange.