Varengold Financial institution has slashed its revenue steering, amid an ongoing compliance probe referring to Iran-connected transactions.
The Hamburg-based financial institution had beforehand guided to pre-tax income ranging between €40m (£34.3m) and €50m for its fiscal 12 months 2023, however has now lowered this to the vary of €10m to €15m.
For the years 2024 to 2026, the financial institution expects pre-tax income to fall even decrease, to €5m to €10m annually.
Earlier this month, it emerged that the German Federal Monetary Supervisory Authority (BaFin) is investigating Varengold’s fee transaction enterprise in its industrial banking division, as a result of doable compliance violations.
Right now, Varengold revealed that the regulator’s audit pertains to funds related to Iran.
“The financial institution has acted in a legally and politically troublesome space by processing funds for transactions related to Iran,” it stated. “This operation is just not prohibited by sanction legislation in Germany and the complete EU, it’s fairly desired as a result of humanitarian causes, on condition that the fee transactions contain the supply of meals or medical merchandise to Iran – this was completely the case at Varengold Financial institution previously.”
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The financial institution, which has funding agreements with peer-to-peer lending platforms throughout Europe, stated that the present scenario “got here very unexpectedly” as its industrial banking enterprise had been audited repeatedly by exterior professionals with no points.
The regulator’s actions – which included elevating the lender’s capital necessities and freezing some worldwide consumer transactions – result in a “vital lack of fee revenue” and require “short-term restructuring measures”, Varengold stated.
The financial institution stated it’s shedding 22 per cent of employees and stopping varied initiatives to chop prices.
It’s reorganising the industrial banking enterprise “with the very best precedence”, to discover new earnings potential and develop {the marketplace} banking enterprise division.
Final week, Varengold cancelled its dividend fee for 2022 to guard its capital base.
The regulator has imposed additional reporting necessities on the financial institution, referring to liquidity, financials and capital reserves.
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