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UBS-Banco do Brasil Partner for Investment Banking Services

Zacks Equity Research

UBS Group AG UBS and Banco do Brasil have inked a deal to provide investment banking services and institutional securities brokerage in Brazil and some countries in South America.

Per the terms, UBS will hold the controlling stake with 50.01% ownership interest. Also, the investment bank will be fully incorporated into UBS' Global Banking and Global Markets platforms.

The partnership seeks to provide clients with M&A and advisory capabilities, debt and equity capital markets, a broad network of corporates and investors as well as institutional securities brokerage and research.

The combined investment bank will consist of UBS’ operational investment banking platform in Brazil and Argentina, as well as its institutional brokerage business in Brazil. Banco do Brasil will offer the exclusive access rights to its corporate clients.

Both the companies will appoint three board members. Banco do Brasil will select the Chairperson, whereas UBS will appoint the Vice Chairperson and CEO. Banco do Brasil will also appoint an Officer whose many responsibilities will include managing the relationship among Banco do Brasil's customer base, corporate bankers and the newly formed investment bank.

Sergio P. Ermotti, CEO at UBS said, "This transaction captures a unique opportunity to combine two strong partners with complementary strengths,". Further, Sylvia Coutinho, UBS Country Head in Brazil, commented, "This endeavor is a clear demonstration of UBS's commitment to expanding our business in South America with a bank that has a strong track record partnering with financial services firms.”

With this deal, UBS seeks to benefit from Banco do Brasil’s strong client relationships and local corporate and investment banking expertise. Also, the proven track record of Brazilian ECM, project finance and M&A advisory transactions impressed UBS. Notably, the partnership will strengthen UBS' position in the region with support from Banco do Brasil's capital markets distribution platform.

Though the company is focused on building capital levels, global expansion and executing restructuring initiatives, its net interest income remains under pressure due to negative interest rates in the domestic economy. Also, involvement in several lawsuits and regulatory probes is likely to keep costs elevated.

The stock has lost 12.6% over the past year compared with 1.4% decline of the industry it belongs to.

Currently, UBS carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the finance space are First Horizon National Corporation FHN, Bank of Montreal BMO and Carolina Financial Corporation CARO. All these stocks carry a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for First Horizon has been raised 1.3% for the current year in the past 30 days. The company’s share price has gained 30.5% so far this year.

Bank of Montreal has witnessed slight upward revision in earnings estimates for 2019 in the past 30 days. Its share price has risen 15.4% year to date.

Carolina Financial’s shares have gained 29.4% year to date. Its earnings estimates for 2019 have moved up 3.2% in the past 30 days.

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