Goldman-backed Starling digital bank reports first annual profit

Starling Bank banking application on a smartphone.

Adrian Dennis | AFP via Getty Images

British digital bank Starling reported its debut full-year profit on Thursday as the firm’s revenue nearly doubled.

The lender moved to a pre-tax profit of £32.1m ($38.3m) in the fiscal year ending March 2022, having lost £31.5m a year earlier.

Revenue at launch reached £188m, up almost 93% from 2021.

This is a rare show of strength in the fintech sector at a time when some companies in the field are facing lower grades and suffer heavy losses.

Klarna, the Swedish “Buy Now, Pay Later” firm, recently saw her review. dive 85% while a public competitor Confirm fell 69% since the beginning of the year.

“We are seeing a correction in fintech stocks that are losing money,” Starling CEO Anne Boden told reporters Thursday.

“If you look at the registered markets and some of the organizations, like buy now, pay later and things like that, we can see that there is a huge correction going on there.”

Some fintechs are also postponing their initial public offering plans as fears of a possible recession are around the corner stumbling markets.

In the case of Starling, the company likely won’t list its shares until 2023 or 2024, Boden said.

Starling, based in London, is one of the many digital banks that have flooded the UK over the past decade. Startups in the space continue to attract millions of customers and high valuations, with Revolut now valued at $33 billion and Monzo at $4.5 billion.

Starling itself was last privately valued at £2.5bn in a funding round closed earlier this year. The firm’s shareholder base includes: Goldman SachsFidelity and Qatar Investment Authority.

The firm has benefited from a surge in mortgage lending following the acquisition of specialist lender Fleet Mortgages. Its loan portfolio increased by 45% to £3.3bn in fiscal 2022.

As of June 2022, Starling’s total gross loan was £4bn, of which £2bn was mortgages.

Starling has also received support from government-supported lending schemes introduced in the wake of the coronavirus pandemic, in particular a loan-back scheme.

Lord Agnew, the former UK Fraud Minister, accused the bank of not doing enough to crack down on the use of the scheme by fraudsters.

Boden said that Starling wrote to Agnew asking for a meeting, but declined.

“He’s just wrong,” she said Thursday. Starling did a fantastic job [job] to make sure we’ve done all the necessary checks and more.”

Monday Starling abandoned plans to obtain a banking license with the Irish Central Bank four years after application. The move would allow Starling to offer its services to customers throughout the European Union.

Boden said the turnaround was “tough”, but from a strategic standpoint, launching in Ireland anytime soon would be “the wrong decision”.

Starling remains open to the idea of ​​expanding by acquiring a European lender, she added, but “it needs to be in a larger country.”