ZIMBABWE – Deutsche Bank has cut correspondent banking ties with Standard Bank Group’s Zimbabwean unit, dealing a body-blow to one of the few remaining international banking providers operational in the southern African nation, reports Blomberg.

Stanbic Bank Zimbabwe, as the local unit is known, is the latest lender to have its US dollar correspondent banking services – which are key to facilitating foreign currency exchange and payments – terminated by an international bank. 

“Deutsche Bank was no longer able to support the clearing of a few of our US dollar-based services,” the lender said in an August 30, 2021, emailed response to questions.

No reasons were given for the termination. Deutsche Bank declined to comment. 

The Reserve Bank of Zimbabwe estimates that at least 102 correspondent banking relationships were lost over the last decade because of the country’s perceived high risk due to sanctions.

Stanbic Bank, which counts among its clients major exporters, non-governmental organizations and embassies, said it now operates a U.S. dollar correspondent banking relationship through its parent company in South Africa. 

Deutsche Bank for years has been pulling back from offering correspondent banking as the costs to ensure compliance with know-your-clients rules have increased.

It has also been exposed to regulatory actions for acting as a correspondent bank for Danske’s Estonia unit while suspicious transactions from Russia were flowing through that lender.

“Deutsche Bank were no longer able to support the clearing of a few of our US dollar based services”

This comes as the lender defied macro-economic challenges by posting a profit after tax of $1.2 billion (US$3.7 million) which saw the group sustaining a profitable position since 2019.

Presenting the financial performance covering the first half of 2021, Stanbic chairperson Gregory Sebborn said the current profit margins are slightly lower than the figure of $1.3 billion (US$4 million) recorded during a comparable period in 2020.

He attributed the decline in profits to the depressed performance of the trading revenue line owing to subdued activities during the interim period.

“The foreign currency shortages in the market combined with periods of lockdown also contributed to the marginal reduction in profit for the Standard Bank Group subsidiary. In addition, operating expenses increased in comparison to the prior year driven by the expenditure of $430 million (US$1.3 million) in the staff optimization exercise,” Sebborn said.

The bank ended the six months period to June 2021 with a qualifying core capital of $5.7 billion (US$17.7 million) outpacing the local currency equivalent of the required US$30 million (US$93,167) regulatory minimum set by the Reserve Bank of Zimbabwe.

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