UK digital bank Starling cuts losses as revenue soars 600%

The Starling Bank banking app on a smartphone.

Adrian Dennis | AFP via Getty Images

LONDON – British digital bank Starling reported a seven-fold increase in revenue in the 16 months ending March 2021 as its loans soared, helping cut losses in half.

After-tax losses totaled £ 23.3 million ($ 32 million) in the period, down from the £ 52.1 million that Starling lost in its latest annual accounts, which covered the 12 months to November 30.

Meanwhile, revenue soared 600% to £ 97.6 million from £ 14 million in its 2019 tax results.

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

The London-based firm has been significantly increasing its balance sheet amid a surge in lending thanks to government-backed financing schemes aimed at helping companies weather the coronavirus pandemic.

Starling said the amount of loans on his books soared to 2.2 billion pounds “from a very low base.” This helped the bank break even for the first time in October 2020, Starling said, adding that it has made a profit every month since then.

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

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

Diverging from rivals

The bank’s shift to profitability marks a divergence with fintechs Monzo and Revolut, which saw their losses grow in 2020.

Monzo accumulated an after-tax loss of 113.8 million pounds in the 12 months to February 2020, up from 47.1 million pounds the previous year. London fintech, which saw its market value reduced by 40% to £ 1.25bn last year, warned that the Covid-19 outage had led to “significant doubts” about its ability to continue “as a ongoing business ”.

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

Boden said that while Starling’s rivals have millions more customers than they do, Starling users tend to have much more money. Starling has more than 2 million users, while Revolut and Monzo have 16 million and 4 million, respectively.

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

Starling is pushing hard on the small business banking market, it now has a 6.3% share of the sector in the UK and plans to hit a double digit market share in the next 18 months. As of June 30, £ 3.9 billion of Starling’s deposits were from businesses, while £ 2.8 billion were from retail users.

IPO plans

The company, which was last privately valued at $ 1.5 billion, recently launched mortgages and plans to acquire a lender to further bolster its balance sheet. As for an initial public offering, Boden said it could float the business in late 2022 or early 2023.

“We will do it in our time,” he said. “We are not going to be forced to do it because it is fashionable at the moment.”

Earlier this month, money transfer firm Wise went public on a highly successful direct listing in London, valuing the business at $ 11 billion. The company’s stock has risen steadily since then and is now worth $ 18.2 billion.

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