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Banco do Brasil, Banco Postal ink new deal, but long-term partnership in doubt

Banco do Brasil SA signed a temporary agreement under which Brazil's postal service will continue to provide correspondent banking services for three months, but their partnership in Banco Postal is reportedly nearing an end.

Under the temporary agreement, which can be extended for another three months, national postal service Correios will continue to offer basic services such as withdrawals, deposits and bill payments through Banco Postal in partnership with Banco do Brasil.

Meanwhile, state-run Banco do Brasil will look "for alternatives to reduce the eventual impacts on users of services provided by Banco Postal."

Correios has been unable to find a new banking partner from the private sector and appears to have given up on operating Banco Postal, Valor Econômico reported, citing an internal document.

In the document, Correios reportedly said high costs and litigation risks have negatively impacted the sustainability of Banco Postal's business model. In light of the proliferation of digital financial services in Brazil, Correios "considered the possibility of adopting new models of financial services after the closure of Banco Postal, but none proved viable," the company said in the document.

According to the Valor report, Banco do Brasil balked at certain costs associated with the Banco Postal partnership, although it wanted to continue the collaboration in regions where it does not have any branches.

Correios launched Banco Postal in 2002 in partnership with Banco Bradesco SA, with Banco do Brasil replacing Bradesco in 2011. The Correios-Banco do Brasil partnership was renewed for three years in December 2016.