Banco BTG Pactual SA: Risk Reward Update

Research evidence excerpt

Banco BTG Pactual SA: Risk Reward Update

UpdateM

RiskRisk RewardReward– Banco-BTGBancoPactualBTGSA (BPAC11.SA)Pactual SA (BPAC11.SA)

Diversified & Resilient EPS Underscores our OW Rating

PRICE TARGET R$65.00 OVERWEIGHT THESIS

Our valuation work and price targets are based on residual income analysis. In our residual BTG's diversified and resilient business

income model, the value of the firm is mainly a function of the magnitude of the spread model should allow it to deliver sound

between return on equity and cost of equity (performance spread) and the time period in earnings growth throughout the cycle (even

which management can generate returns in excess of the cost of equity (economic growth if rates stay higher for longer). Meanwhile,

horizon). Our valuation uses a discount rate of 13.4%, and long-term ROE of 21%. on a multi-year basis the top line growth

story continues to look attractive driven by

R$66.00 rising penetration and sophistication of

Consensus Price Target Distribution R$55.00 R$74.00 Brazil's capital markets and asset mgmt

MS PT industry, where BTG has a strong franchise

Source: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates and leading market share. Digital initiatives

could also be important drivers for the bank

to capture opportunities in alternative

RISK REWARD CHART AND OPTIONS IMPLIED PROBABILITIES (12M) segments, expanding the client base.

BRL Consensus Rating Distribution

70% Overweight

100 R$86.00(+50.98%)R$86.00R$86.00(+50.98%)(+50.98%) ProbProbProb (>86.00)~11.3%(>86.00)~11.3%(>86.00)~11.3% 30% Equal-weight

0% Underweight

MS Rating

R$65.00(+14.12%)R$65.00R$65.00(+14.12%)(+14.12%) Source: Refinitiv, Morgan Stanley Research

ProbProbProb (>65.00)~44.0%(>65.00)~44.0%(>65.00)~44.0%

R$56.96R$56.96R$56.96

50 Risk Reward Themes