Starling Bank takes profit hit thanks to Covid loan issues and FCA fine
Starling Bank's pre-tax profits slumped 26 per cent to £223million in the year to March 2025, down from £301million the previous year.
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.
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