UBS's Brazil unit to make quiet return to investment banking: sources

SAO PAULO (Reuters) - UBS (UBSN.CH)AG will restart investment banking operations in Brazil as early as next week, sources said, almost five years after Switzerland's biggest bank sold its highly profitable securities unit there following the global financial crisis.

Two sources, who are not authorized to speak publicly on the matter, said on Friday that UBS and Brazil's central bank agreed on setting March 12 as the date to activate the investment-banking license.

Sought for comment, UBS said it would continue to focus on wealth management, client solutions and its sales and trading business, including equity research, in Brazil.

UBS lost its investment banking license in 2009 after selling Banco UBS Pactual back to its original owners, a group led by billionaire financier Andre Esteves. The sale price of$2.5 billion was about $600 million less than what the Swiss lender paid for the unit in 2006.

Months after the UBS Pactual buyback, Esteves created Grupo BTG Pactual SA , which is now Latin America's largest independent investment bank.

UBS's Brazilian unit is unlikely to prospect for new investment banking clients before receiving authorization from its parent in Zurich, one of the sources said. The team has 16 bankers and could hire two or three more, the source noted, adding that the unit will probably not lend money in order to win investment banking business.

UBS is also trying to expand its financial advisory business in Brazil despite Chief Executive Officer Sergio Ermotti's push to focus on wealth management globally and limit the use of lending to fetch deals.

The license, which took three years to be approved, comes at a time when foreign investment banks are losing ground to their local counterparts amid sluggish capital markets activity in Brazil since 2011.

Some of UBS's foreign rivals have been reducing the size of their Brazilian units because of almost four years of weak growth, rising costs and flagging deal flow.

Goldman Sachs Group Inc cut its roster of investment bankers in Brazil to about 20 from 45 a year ago, while Barclays Plc and Deutsche Bank AG reduced its research, sales and trading staff as competition mounted and business faltered, sources told Reuters.

UBS itself plans to give up one floor of its office space in Sao Paulo's upscale Faria Lima financial district, one of the sources said.

The other source said UBS at some point had held talks about forming a joint venture with state-run Banco do Brasil SA , the nation's largest lender. The Brasilia-based bank, which declined to comment, has struggled for years to start a full-fledged investment-banking unit.

Limiting loans in Brazil should help UBS reduce risk-taking and leverage after it had global trading losses of more than $50 billion in the aftermath of 2008's financial crisis.

The company has been cutting fixed-income operations and returning to its private banking roots. For example, it has formed a wealth management unit in China.

In January 2013, UBS completed its takeover of Link Investimentos, a brokerage specialized in equities and derivatives trading, and integrated it into its Brazilian wealth management operations.

According to one of the sources, UBS is counting on the brokerage unit to attract new business in investment banking, which will mainly cater to the company's wealth management clientele.

(Editing by Lisa Von Ahn)

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