Starling Bank takes profit hit thanks to Covid loan issues and FCA fine
The digital bank said its profits were hit by having to set aside £28million to cover potential compliance issues on government-backed loans it issued during the pandemic.
Starling also had to pay a £29million FCA fine for 'shockingly lax' financial crime controls in October last year, which impacted its profits.
Revenues rose 3 per cent to £714million, up from £682million the previous year.
The bank determined some of the loans it issued under the government-backed Bounce Back Loan Scheme (BBLS) 'potentially did not comply with the guarantee requirement'.
The Government launched the scheme – which allowed small firms to borrow up to £50,000 with a 100 per cent guarantee from the British Business Bank, subject to eligibility – in May 2021.
As a result of issuing a number of non-compliant loans, Starling volunteered to remove the government guarantee on those loans, which resulted in it having to set aside a £28.2billion provision.
Raman Bhatia, chief executive, said: 'In the last year we demonstrated our commitment to addressing legacy matters.'
Bhatia did not rule out a potential initial public offering for Starling.
He said: 'It is logical to imagine Starling being a plc' but there are 'no firm plans' on the timeframe or location for an IPO.
'We are focused on writing the next chapter for this business.'
For Starling, this next chapter involves growing Engine, its software business.
Engine has been helping to expand Starling's business growth by selling its banking blueprint to start-ups around the world.
It has helped launch Salt Bank in Romania in April 2024 and it now has 500,000 customers.
AMP Bank in Australia was also launched using Engine's technology at the start of 2025.
Selling Engine's software to launch new banks has contributed £7.8million to Starling's fee income, growing from £2.3million in the 2024 financial year.
The next phases is expanding into the US.
In April, Engine announced it would be launching a subsidiary in the US to expand in the North American market where there is a 'huge opportunity for Engine' Bhatia said.
It believes Engine can help it achieve recurring revenues in excess of £100million in the 'short to medium term.'
Starling says it had a 10 per cent increase in open accounts in the year to the end of March to take it to 4.6million.
Customer deposits reached £12.1billion, up from £11billion the previous year.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
ITV News
4 minutes ago
- ITV News
Car finance: What is the court case about and what does it mean for me?
The UK's Supreme Court is set to give a long-waited judgment on a landmark case on the car finance commission saga on Friday. It is set to bring clarity over how the law should be applied to motor finance arrangements following a Court of Appeal decision last October. The ruling will have much wider ramifications for the industry, and the financial services sector, and could mean millions of motorists are due compensation as a result. What is the background to the case? The Supreme Court – the UK's highest court – is considering an appeal against a Court of Appeal ruling made in October last year, relating to three claimants who had each bought cars on credit. In each case, the car dealer made a profit on the sale of the car but also received a commission from the lender for introducing the business to them – which the three claimants argued they did not know about. The Court of Appeal found that 'secret' commission payments, as part of finance arrangements made before 2021 without the motorist's fully informed consent, were unlawful. The lenders, FirstRand Bank and Close Brothers, are challenging that decision. Why is this case so important? Wayne Gibbard, who leads the automotive finance practice at law firm Shoosmiths, said Friday's Supreme Court decision will be 'absolutely fundamental to what happens next' for the sector. He said it will inform the scale of potential compensation for customers, which will be overseen by the UK's Financial Conduct Authority (FCA). The FCA previously said that, if it thinks there was widespread harm to consumers as a result of commission payments, then it could set up an industry-wide redress scheme. It said it will confirm within six weeks of the Supreme Court judgment whether it is planning to launch such a scheme. Mr Gibbard stressed that this response will be particularly important going forward. He said: 'People can make an informed decision – the query is around their harm, have they been mis-sold something? 'And I think that's been absent in the conversation.' What does it mean for consumers? If Supreme Court judges side with the claimants then it could mean that many people who took out a car loan before 2021 may be due a payout, although it is difficult to say at this point how many. If it sides with the lenders, then it is likely to significantly limit the scope of potential payouts to motorists. However, the FCA is still looking at compensation for potential mis-selling of some types of motor finance arrangements – known as discretionary commission arrangements (DCAs) – so this could go ahead regardless. Does it mean I am entitled to compensation? If the FCA decides to proceed with a redress scheme, it is likely to clarify what type of motor finance arrangements it applies to – and potentially include all deals where people were not told clearly enough, or at all, that the car dealer was receiving commission. A scheme is intended to be simpler for consumers than making a direct complaint to providers. The watchdog said it would expect 'fewer consumers to rely on a claims management company, meaning they would keep all of any compensation they receive' and would be 'more orderly and efficient for firms than a complaint-led approach'. Mahesh Vara, a legal director for Shoosmiths, said a decision that secret commission payments were unlawful would 'naturally be a boon to claimants firms and consumers'. 'I think this is one of the first large-scale consumer mis-selling 'scandals' of the social media digital age,' he said. 'It's now leading to a greater expectation of there being almost a guaranteed payment. That is what the FCA will have to consider.' Adverts from claims management companies have sprung up significantly in the lead up to the court decision – but some regulators have been warning against using them as people may be charged for a service they ultimately do not need. What could it mean for the wider industry? About 80% of new cars are bought using motor finance in the UK – so the decision could have major consequences for this industry. Mr Gibbard said: 'The FCA has got to make sure the market is stabilised – this is the second biggest credit market outside of mortgages. 'This is more than provision of credit – this is people getting to work, taking somebody to hospital, taking the kids to the playground – so this is a real facilitator for the economy. 'I think there is a risk, but everybody is so acutely aware of that risk so hopefully it won't have that disruptive effect.' Mr Gibbard also said a decision could have 'far-reaching consequences' with other parts of the financial services sector also potentially coming under pressure for commission payments on loans.
Daily Mail
5 minutes ago
- Daily Mail
One in five don't know where all their pensions are: How to track them down
More than a fifth of people don't know where their pension pots are held, data shows - meaning they risk missing out on their own money in retirement. As many as 21 per cent say they don't know where all of their pensions are, according to figures from Hargreaves Lansdown, while a further 14 per cent said they were unsure. Just 65 per cent said they did know, rising to 72 per cent of people over the age of 55. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: 'Over time even the smallest pension will grow, so not tracking it down risks you missing out on thousands of pounds.' The average person has quite a number of pension pots too, with Charles Stanley estimating that people will have between 10 and 12 employers across their whole working life, all with separate pension schemes. > Could I give £250 gifts to 400 people who then pay them to my daughters to beat inheritance tax on £100,000? While older generations do appear to be better at tracking their pensions, almost a third still can't say for certain that they know where all of their pots are Dean Butler, managing director for Retail Direct at Standard Life, says: 'For many, a job change marks the start of an exciting new chapter, bringing new opportunities, fresh challenges, and often an increased pay packet. 'Amid all this change, some considerations like your old pension can get forgotten about, particularly as new employers will likely be automatically enrolling you into a new pension plan.' 'While this may seem like a stress-free process, switching jobs several times throughout your working life could leave you with quite a few pension pots to keep track of.' According to Pensions and Lifetime Savings Association figures, some 3.3million pension pots, worth an average of £9,470 and a total of more than £31.1billion, have been 'lost' in the UK. How can you find lost pots? Luckily, it isn't too difficult to find a lost pension in most cases. This is especially the case if you have retained old paperwork from these pension pots. Morrissey says: 'Tracking them down is a relatively straightforward process that you will thank yourself for. Make a list of everywhere you've worked where you think you may have had a pension, and then check to see if you have paperwork for them. 'If you don't, then give the Government's pension tracing service a call. If you can't remember the name of the provider, then you can still give the name of the company you worked for, and the service can give you contact details so you can track down the pension.' The Government's pension tracing service can also be accessed online. If you can't find your scheme, it might be because your employer has been taken over. You can find out if they were by searching on Companies House or the Government's Charity Register if you worked for a charity. However easy it may be to find a lost pension, it is of course better to keep track of your pots in the first place. Butler says: 'With multiple job moves over a career, it's not uncommon to accumulate several pension pots, and managing them can become increasingly complex if they're scattered across different providers. 'When you leave a job, your pension doesn't disappear - it stays invested. However, your own and your employer's contributions stop, and although your savings may still grow through investment performance, ongoing charges can gradually eat into your pot. That's why it's important not to neglect these pensions.' Butler recommends ensuring that you have up-to-date contact information for your pension provider. Should you combine your pension pots? Over the course of a 40-year career, it would be easy to rack up an extensive list of past employers, and as many pension pots to go with them. Even if you are keeping a track of all of your pots, it can be a tough task to properly manage more than a handful. Morrissey said: 'You may decide that the best thing to do is consolidate them all in one place. This can save you a lot of time, admin and even cost. You can do this manually, by requesting pension transfer forms form your providers, but there are also a number of pension consolidation firms that can help you to do so. 'You also get to see how your pension is growing more easily, so you can see if you are meeting your goals. However, before you do so, you need to make sure you aren't potentially falling foul of things like expensive exit fees that you might get with older products,' Morrissey added. Butler said: 'Keep in mind that consolidation isn't right for everyone. Some older pensions may include valuable benefits that could be lost if you transfer them, so it's essential to do your research and weigh the pros and cons before making a decision.' These benefits could include guaranteed annuity rates, that you would lose out on by moving your pension. There are potential drawbacks though. The most important of these is likely to be fees. Some pension schemes will have exit fees, switching costs or adviser fees, which could eat into the value of your pension, so it is important to consider the potential costs of consolidation and weigh them up with the savings it could offer. Speaking to a financial adviser could help you to work out what the best option is for you, though this also comes with its own costs.
Daily Mail
5 minutes ago
- Daily Mail
Rolls-Royce's value rockets to £100B, up 1,000% since 'turbo tufan'
Rolls-Royce shares soared to a record high yesterday as its value hurtled towards £100billion for the first time. On a blockbuster day for investors, the stock rose as much as 12 per cent, taking gains for the year to more than 85 per cent. Rolls is up more than elevenfold – or more than 1,000 per cent – since 'Turbo' Tufan Erginbilgic (pictured) took over as chief executive at the start of 2023 when the engineer was worth just £7.9billion. Last night it was valued at £89.5billion, making it the fifth-biggest London-listed company. The rally came as growing demand for its engines, which power commercial aircraft and military fighter jets, led it to upgrade profit forecasts. Erginbilgic, who has been credited with turning the 119-year-old company around, now expects profits of between £3.1billion and £3.2billion, having previously targeted £2.7billion to £2.9billion. It came after the Derby firm reported a 50 per cent leap in first-half profits to £1.7billion, while revenues rose 11 per cent to £9.1billion. 'Having already delivered a stellar turnaround, Rolls is showing no signs of taking its foot off the pedal,' said Russ Mould of AJ Bell. 'Rolls is the poster child for what's capable on the stock market – a welcome reminder that Britain has plenty of business champions.' Erginbilgic said it had overcome supply chain and tariff challenges, and was on target for profits of up to £3.9billion by 2028. Demand has been boosted by the recovery of international travel since the pandemic. In the first six months of the year, Erginbilgic said it improved the time its engines spend 'on wing' – meaning the hours engines spend powering planes before needing maintenance. That lifts profits, as Rolls makes money from its engines' flying hours. By increasing durability, Rolls is expecting a more-than-80 per cent improvement in flying time for its Trent engines by 2027.
