Back to top

Analyst Blog

The Goldman Sachs Group Inc. plans to expand its customer base in Brazil by 50% in 2013. The bank’s strategy is to increase corporate clients as corporate loans, structured finance and advisory services’ demand are mounting in the country.

Goldman aims to increase the number of companies it serves in Sao Paulo by 100 from the existing 200, by the end of Dec 2013. Last year, on the heels of fast-growing activities such as corporate lending and private equity fund-related investments in Brazil, Goldman doubled the capital to about $400 million in its Brazilian unit. These activities are yielding higher returns than equities and government debt.

Amid challenging market conditions, Goldman plans to expand its client base by hiring 50 or more bankers in credit and wealth management units by the end of 2013. With the ambition of consolidating its foothold in the country, Goldman almost doubled its workforce over the prior years, taking the total count to 300. In late 2009, it became a full-service bank in Brazil.

Despite the uncertainty related to taxes and exchange rates, transparency in regulations and an improving macro environment in Brazil will help Goldman achieve high returns.

With the gradual improvement in the global economy, Goldman targets to expand in the emerging markets. Notably, Goldman has acquired a license to work as a fully fledged bank in Mexico. Moreover, the bank is growing in Colombia, where revenue escalated by hundreds of millions over the past two years. Goldman also aims to further expand in Latin America including Chile and Peru, though its primary focus will remain on Brazil.

Based on well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy overshadows other South American countries. Also, it is gradually increasing its penetration in world markets. After reporting robust growth in 2007 and 2008, Brazil was hit hard by the onset of the global financial crisis in early 2009. However, the Brazilian market was the first to show signs of recovery.

With the expectation of a potential long-term GDP growth rate and conservative monetary policies, Brazil is a promising choice for investments and is attracting foreign investors. Therefore, with greater access to local knowledge and resources, the prospect of participating in emerging markets is encouraging for the firms.

Goldman currently retains a Zacks Rank #3 (Hold). Besides Goldman, other banks that are worth considering include, Duff & Phelps Corporation with a Zacks Rank #1 (Strong Buy), along with Knight Capital Group Inc. and Morgan Stanley with a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.