UK digital bank Starling trims losses as revenue skyrockets 600%

The Starling Bank banking app on a smartphone.

Adrian Dennis | AFP via Getty Images

LONDON – UK digital bank Starling reported a seven-fold increase in revenue in the 16 months to March 2021 when its lending skyrocketed, which helped cut losses in half.

After-tax losses for the period were £ 23.3 million (US $ 32 million) compared to the £ 52.1 million Starling lost in its most recent annual financial statements, which covered the 12 months ended November 30th.

Revenue, meanwhile, rose 600% to £ 97.6 million from £ 14 million in fiscal 2019

Starling said it had moved fiscal year-end from November 30 to March 31 to make it easier for shareholders to compare results on a quarterly basis.

The London-based company has grown its balance sheet significantly amid a surge in lending thanks to government-backed funding programs designed to help businesses through the coronavirus pandemic.

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

In a trading update Thursday, Starling said sales reached £ 42.8 million in three months to the end of June 2021, representing an annual running rate of £ 170 million.

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

Deviating from rivals

The bank’s shift towards profitability marks a departure from the other fintechs Monzo and Revolut, whose losses rose in 2020.

Monzo recorded an after-tax loss of £ 113.8 million for the 12 months ended February 2020, up from £ 47.1 million the previous year. The London-based fintech, whose market value had fallen 40% to £ 1.25 billion last year, warned that the Covid-19 disruption had created “significant doubts” about its ability to “continue to operate.”

Revolut reported annual losses of £ 167.8 million in 2020, up from £ 106.7 million in 2019. However, Revolut said it was “highly profitable” in the first quarter of 2021. The company recently raised funds valued at $ 33 billion. its market value ahead of that of the British banking giant NatWest.

Boden said that Starling users tend to have a lot more money, even though Starling’s competitors have millions more customers than they do. Starling has over 2 million users while Revolut and Monzo have 16 million and 4 million respectively.

“You have seven times as many customers as we do and only 60% of the deposits,” said Boden. According to Starling, private banking customers have an average balance of £ 2,000 with the lender.

Starling is entering the small business banking market heavily, now owning 6.3% of the sector in the UK and planning to achieve double-digit market share in the next 18 months. As of June 30th, £ 3.9 billion of Starling’s deposits were in corporate and £ 2.8 billion in retail deposits.

IPO plans

The company, most recently privately valued at $ 1.5 billion, recently took out mortgages and plans to acquire a lender to further strengthen its balance sheet. As for an IPO, Boden said she could go public by late 2022 or early 2023.

“We’ll do it in our time,” she said. “We’re not going to be forced to do it because it’s fashionable at the moment.”

Earlier this month, money transfer company Wise went public on a blockbuster direct listing in London and valued the deal at $ 11 billion. Since then, the company’s shares have risen steadily, and are now worth $ 18.2 billion.

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