UK digital bank Starling cuts losses as revenues skyrocket to 600%

Starling Bank banking app on smartphone.

Adrien Dennis | AFP via Getty Images

LONDON – UK digital bank Starling announced a seven-fold increase in revenue in the 16 months ending March 2021 as lending soared, helping to halve losses.

After-tax losses totaled £ 23.3million ($ 32million) during the period, down from the £ 52.1million lost in its most recent annual accounts, which covered the 12 months up ‘to November 30.

Revenue, meanwhile, rose 600% to £ 97.6million, from £ 14million in its 2019 tax results.

Starling said it changed its year-end from November 30 to March 31 to make it easier for shareholders to compare results on a quarterly basis.

The London-based company has significantly increased its balance sheet amid rising lending thanks to government-backed funding programs aimed at helping businesses weather the coronavirus pandemic.

Starling said the amount of loans on its books had reached £ 2.2 billion “from a very low base”. This helped the bank break even for the first time in October 2020, Starling said, adding that she has made a profit every month since then.

In a business update on Thursday, Starling said sales reached £ 42.8million in three months to the end of June 2021, giving it an annual run rate of £ 170million .

Starling is now “on track to show our first full year of profitability” in its 2022 fiscal results, CEO and founder Anne Boden told reporters on Thursday on a call.

Stay away from rivals

The bank’s turn towards profitability marks a divergence from other fintechs Monzo and Revolut, which saw their losses increase in 2020.

Monzo has accumulated a loss after tax of £ 113.8 million in the 12 months to February 2020, up from £ 47.1million a year earlier. The London-based fintech, which saw its market value reduced by 40% to £ 1.25 billion last year, warned that disruption from Covid-19 had led to “significant doubt” over its ability to continue “as a business”.

Revolution reported annual losses of £ 167.8 million in 2020, higher than the £ 106.7million lost in 2019. However, Revolut said it was “highly profitable” in the first quarter of 2021. The company recently raised funds at a valuation of $ 33 billion, putting its market value ahead of the British banking giant NatWest.

Boden said that while Starling’s rivals have millions more customers than him, Starling users generally hold a lot more money. Starling has over 2 million users, while Revolut and Monzo have 16 and 4 million, respectively.

“They have seven times the number of clients we have and only 60% of deposits,” Boden said. According to Starling, personal banking customers have an average balance of £ 2,000 with the lender.

Starling is pushing hard in the small business banking market, now controlling a 6.3% share of the industry in the UK and planning to achieve double-digit market share in the next 18 months. As of June 30, Starling’s £ 3.9bn of deposits came from businesses, while £ 2.8bn came from retail users.

IPO plans

The company, which was latest private value valued at $ 1.5 billion, recently launched mortgage lending and is considering acquiring a lender to further strengthen its balance sheet. Regarding an initial public offering, Boden said she could launch the business by the end of 2022 or early 2023.

“We are going to do it in our time,” she said. “We’re not going to have to do it because it’s fashionable right now.”

Earlier this month, money transfer company Wise went public in a direct listing of blockbusters in London, valuing the company at $ 11 billion. The company’s shares have been steadily rising ever since, and are now worth $ 18.2 billion.

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