Latest news with #StarlingBank
Forbes
2 days ago
- Business
- Forbes
U.K. Fintech Starling Bank Says ‘Historic Weaknesses' Caused Profit Drop
Starling Bank's CEO Raman Bhatia speaks at the Fintech Summit in Lisbon, Portugal. (Photo By Ramsey ... More Cardy/Sportsfile for Web Summit via Getty Images) Starling Bank managed to report its fourth consecutive year of profitability and revenue growth on Wednesday, although the fintech's 'legacy matters' weighed heavily on its bottom line. The bank said its pretax profit for the financial year fell to £223 million ($300 million), an almost 26% drop from a year earlier that was largely attributed to a regulatory fine for inadequate financial crime controls and a provision to cover issues with Covid-era loans. Starling was fined £29 million by the Financial Conduct Authority (FCA) in October after it had repeatedly breached an agreed requirement not to open accounts for high-risk customers. The watchdog said at the time that the bank's anti-money laundering controls and sanctions screening systems left the financial system "wide open to criminals." Starling also said it recognized a £28 million provision during the financial year after it voluntarily removed the government guarantee on some of the loans it had issued under the Bounce Back Loan Scheme (BBLS). The BBLS was a government-backed program launched in May 2020 that was aimed at helping small businesses exposed to the economic shock caused by the pandemic. The scheme allowed banks to quickly lend businesses up to £50,000 at low interest rates and with a 100% state guarantee. More than £46 billion in loans had been disbursed by various lenders through the scheme, according to the Department for Business and Trade, but the agency also admitted there had been more than 100,000 cases of loss due to fraud and error. The government's decision to streamline the loan process meant that it had "limited verification and no credit checks on borrowers, which made it vulnerable to fraud and losses," according to the National Audit Office. Starling's revenue growth slowed considerably last year. The bank's turnover rose 4.7% to £714 million, compared to a 51% jump in revenue that Starling posted in its 2024 fiscal year. Starling's Chairman David Sproud characterized the bank's latest results as 'a resilient financial performance amid challenging markets and as we resolved some important legacy matters." Founded in 2014 by veteran banker Anne Boden, Starling has grown rapidly as it aims to take on traditional banks with a mobile-only offering. Starling is one of a pack of digital banks, often described as neobanks or challenger banks, that emerged over the past decade and grabbed market share from legacy lenders. The likes of Starling, Monzo and Revolut have been attracting millions of customers with user-friendly apps and low fees. Starling was granted a banking license by the Bank of England in 2016. Boden stepped down as CEO in 2023, saying at the time she wanted to avoid any potential conflicts of interest with her stake in the fintech. Starling was approached by Shawbrook, another challenger bank, about a possible £5 billion merger earlier this year, Sky News reported in April. The approach was described as "highly preliminary," and did not involve any details about the proposed deal. Starling didn't comment on the prospects of a merger on Wednesday, but it did point to its Engine unit, which sells software to other companies, as a source of future growth for the bank. 'Our ambition is global, and with Engine we are now poised to bring our proprietary technology to a global addressable market of some £100 billon,' Starling CEO Raman Bhatia said. 'In the coming year we will expand Engine's unique Software-as-a Service (SaaS) proposition to new markets in North America and the Middle East.'
The Guardian
3 days ago
- Business
- The Guardian
Starling's profits dip 25% as bank takes blame for Covid loan losses
Digital bank Starling has suffered a 25% drop in annual profits and announced it would turn down government guarantees on £28m of Covid loans losses after conceding its own weak controls were to blame. The admission stirs up a long-running controversy over Starling's handling of the government-backed bounce back loan (BBL) scheme, which was built to get money quickly to small businesses during lockdown. The scheme offered loans of up to £50,000 at 2.5% interest but carried little risk, with taxpayers picking up 100% of losses if the companies defaulted. On Wednesday, Starling's chief executive, Raman Bhatia, said the bank had proactively reviewed some of the BBLs on its books, and conceded that a tranche of loans had been granted to applicants without proper checks. That meant they were unlikely to qualify for government guarantees, which might have otherwise seen taxpayers foot the £28m bill. 'In some cases, we think we may not have met all the procedures, all the requirements, of the scheme,' Bhatia told journalists during the conference call. He did not confirm whether Starling had discovered fraud or financial crime within that tranche of loans. It comes just months after Starling was hit with a separate £29m fine for 'shockingly lax' financial crime controls, which the City regulator said had left the financial system 'wide open to criminals and those subject to sanctions'. Together, the fine and BBL loss reduced Starling's profit for the year to March to £223m, down 25% from £301m a year earlier. Bhatia said the bank may consider cutting or clawing back pay from executives if appropriate. 'We have discharged our duties to consider any impact on [remuneration] where appropriate. I can't share any further details.' It is not clear whether that might impact Starling's founder and former chief executive, Anne Boden, who stepped down in 2023 citing a 'conflict of interest' between being a boss and a large shareholder in the lender. Starling's distribution of Covid loans gained heightened attention in 2022 when former minister Theodore Agnew accused Starling of using the BBL scheme as a 'cost-free marketing exercise to build their loan book and so their company valuation', and failing to properly review borrowers before handing out taxpayer-backed loans. Boden at the time vehemently denied Agnew's claims. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Unlike large lenders, Starling opened BBL applications to new clients and saw its client base swell as a result. Its business customer base grew from 87,000 to 330,000: equivalent to adding 15,000 a month. And while the bank had only issued £23m of its own loans before the pandemic in November 2019, it had distributed £1.6bn in BBLs by the time the scheme closed in March 2021. Commenting on the Financial Conduct Authority (FCA) fine and the BBL loss on Wednesday, Starling's chief financial officer, Declan Ferguson, said: 'We continue to make significant investment into our financial crime resource to ensure our risk management and compliance capabilities are commensurate with the high-growth business and experience. 'Working closely with both the FCA and the British business bank, we have also sought to limit the impact of these issues and ensure they remain one-offs, but now we are now more confident we are moving forward into the next stage of our growth on much stronger foundations.'
Yahoo
3 days ago
- Business
- Yahoo
Starling Bank profits slide after FCA fine and Covid loan issues
Starling Bank has revealed its annual profit fell by a quarter after being hit with a fine for weak financial crime controls and setting aside cash to cover issues with Covid bounceback loans. The bank reported a pre-tax profit of £223 million for 2024, down 26% from the £301 million made the prior year. It marks the company's fourth year in a row of profitability since launching a decade ago. The drop in profit was partly driven by Starling being fined £29 million by the UK's Financial Conduct Authority last year. The regulator described the bank's financial crime screenings as 'shockingly lax', leaving the system 'wide open to criminals and those subject to sanctions'. It was also found to have repeatedly breached a requirement not to open accounts for high-risk customers. Starling said it has learned lessons from the investigation and has built a stronger framework – but it still faces some restrictions in relation to banking with higher-risk customers. Profits were also dragged lower by the bank putting aside £28.2 million to cover a group of bounceback loans which it said 'potentially did not comply with a guarantee requirement'. Starling offered the loans to struggling businesses during the Covid pandemic as part of the Government-backed lending scheme, which guaranteed to cover any losses incurred by lenders. The bank said it agreed to remove the Government guarantee on the group of loans that had potential issues. Meanwhile, Starling revealed its revenues rose to £714 million, from £682 million in 2023, with the amount deposited by customers topping £12 billion. It also highlighted growth of its banking software platform Engine after ramping up investment and signing Salt Bank in Romania and AMP Bank in Australia as its first two customers. The London-based bank, which also has UK offices in Cardiff, Manchester, and Southampton, hired about 3,940 people on average last year – some 700 more than in 2023. This drove up staff costs by nearly a third year-on-year, while marketing spending reduced as bosses focused investment on financial crime controls. Chief executive Raman Bhatia said: 'In the last year we demonstrated our commitment to addressing legacy matters, investing in our people and capabilities so we now move forward from a position of strength. 'We will leverage our robust capital position to continue to scale our growth in the UK by helping our customers become better with money. 'We will also make great strides in turning Engine by Starling into a global success.'
The Independent
3 days ago
- Business
- The Independent
Starling Bank profits slide after FCA fine and Covid loan issues
Starling Bank has revealed its annual profit fell by a quarter after being hit with a fine for weak financial crime controls and setting aside cash to cover issues with Covid bounceback loans. The bank reported a pre-tax profit of £223 million for 2024, down 26% from the £301 million made the prior year. It marks the company's fourth year in a row of profitability since launching a decade ago. The drop in profit was partly driven by Starling being fined £29 million by the UK's Financial Conduct Authority last year. The regulator described the bank's financial crime screenings as 'shockingly lax', leaving the system 'wide open to criminals and those subject to sanctions'. It was also found to have repeatedly breached a requirement not to open accounts for high-risk customers. Starling said it has learned lessons from the investigation and has built a stronger framework – but it still faces some restrictions in relation to banking with higher-risk customers. Profits were also dragged lower by the bank putting aside £28.2 million to cover a group of bounceback loans which it said 'potentially did not comply with a guarantee requirement'. Starling offered the loans to struggling businesses during the Covid pandemic as part of the Government-backed lending scheme, which guaranteed to cover any losses incurred by lenders. The bank said it agreed to remove the Government guarantee on the group of loans that had potential issues. Meanwhile, Starling revealed its revenues rose to £714 million, from £682 million in 2023, with the amount deposited by customers topping £12 billion. It also highlighted growth of its banking software platform Engine after ramping up investment and signing Salt Bank in Romania and AMP Bank in Australia as its first two customers. The London-based bank, which also has UK offices in Cardiff, Manchester, and Southampton, hired about 3,940 people on average last year – some 700 more than in 2023. This drove up staff costs by nearly a third year-on-year, while marketing spending reduced as bosses focused investment on financial crime controls. Chief executive Raman Bhatia said: 'In the last year we demonstrated our commitment to addressing legacy matters, investing in our people and capabilities so we now move forward from a position of strength. 'We will leverage our robust capital position to continue to scale our growth in the UK by helping our customers become better with money. 'We will also make great strides in turning Engine by Starling into a global success.'
CNBC
3 days ago
- Business
- CNBC
Goldman-backed Starling Bank reports 26% drop in annual profit as it flags Covid loan fraud issue
LONDON — British online lender Starling Bank on Wednesday reported a sharp drop in annual profit, citing an issue with Covid-era business loan fraud and a regulatory fine over financial crime failings. Starling, which offers fee-free current accounts and lending services via a mobile app, posted profit before tax for the year ending March 31, 2025 of £223.4 million ($301.9 million), down nearly 26% year-over-year. Revenue at the bank totalled £714 million, up about 5% from £682 million a year ago. However, that marked a slowdown from the more than 50% revenue growth Starling saw in its 2024 fiscal year. Profits for the year were impacted by a £29 million fine by the U.K.'s Financial Conduct Authority over failings related to Starling's financial crime prevention systems. Starling also flagged an issue with the Bounce Back Loan Scheme (BBLS) that was designed to provide firms with access to cash during the coronavirus pandemic. Starling was one of several banks that were approved to lend cash to firms during the Covid-19 outbreak in 2020. The scheme provided a 100% guarantee to lenders, making the government responsible for covering the full outstanding loan amount if a borrower defaulted. However, Starling said it has since "identified a group of BBLS loans which potentially did not comply with a guarantee requirement" due to weaknesses in its historic fraud checks. After flagging this to the state-owned British Business Bank, the firm subsequently "volunteered to remove the government guarantee on those loans." "As a result, we have taken a £28.2m provision in this year's accounts," the bank said, referring to both the FCA fine and BBLS issue. However, Starling said it held an Expected Credit Loss provision of £800,000 as of March 31 in relation to certain BBLS loans "where the guarantee provided under the BBLS guarantee agreement may no longer be available to the Company." "This is a legacy issue which we dealt with transparently and in full cooperation with the British Business Bank," Declan Ferguson, Starling's chief financial officer, said on a media call Wednesday. Starling has operated as a licensed bank in the U.K. since 2018. It counts the likes of Goldman Sachs, Fidelity Investments and the Qatar Investment Authority as shareholders. The firm, which was last privately valued in 2022 at £2.5 billion, faces hefty competition from both incumbent banks and rival fintechs like Monzo and Revolut.
