UPDATE 3-Brazil's BTG bank reports record income, revenue driven by client fees

(Adds CEO comments)

By Andre Romani and Gabriel Araujo

SAO PAULO, Aug 9 (Reuters) - Brazilian lender Banco BTG Pactual SA expects a rise on investment banking revenues on the second half of the year, after reporting record second-quarter net income on Tuesday due to a strong performance in fee-based business units.

BTG's second-quarter net income hit 2.07 billion reais ($405.01 million), a rise of 23.2% year-on-year. Total revenue rose by 19.7% to 4.51 billion reais, despite what it referred to as volatile international markets and a challenging local macroeconomic scenario.

BTG's closely-watched sales and trading unit posted a 4% rise in revenue to 1.31 billion reais as market volatility increased the activity of the bank's institutional client base.

Its asset management unit posted its best performance in seven years, while the wealth management area reached record revenue for the 14th quarter in a row. Adjusted return on equity remained flat at 21.6%.

Revenue from the Corporate and SME Lending unit jumped 34% to a record 877.5 million reais, as BTG's loan book rose 5.6% quarter-on-quarter.

Both units offset a 29% yearly drop in investment banking revenue due to weak equity capital markets activity, which is expected to remain muted through the end of the year, BTG Chief Executive Roberto Sallouti told analysts on Tuesday.

But debt issues and mergers and acquisitions are expected to improve earnings at the investment banking unit, he added.

The resumption of share offerings will depend on the macroeconomic scenario, said Sallouti, adding he does not expect great changes in economic policy after the presidential elections.

"We expect the next government, no matter who wins the election, to keep committed to public finance sustainability", he said.

Units in the bank erased earlier gains and were down 2.8% in mid-afternoon trading. On Monday peer Itau Unibanco https://www.reuters.com/business/finance/brazils-itau-unibanco-beats-profit-expectations-2022-08-08 beat profit expectations and substantially raised its loan growth forecast for this year, while Banco Bradesco SA https://www.reuters.com/article/bradesco-results-idUKL1N2ZG2J3 last week also delivered a profit beat.

($1 = 5.1110 reais) (Reporting by Andre Romani and Gabriel Araujo; Editing by Louise Heavens, Kirsten Donovan, Barbara Lewis and Mike Harrison)