Starling Bank reports first full year of profit
Digital challenger bank Starling has reported its first full year of profitability, posting a pre-tax profit of £32.1m for the end of the financial year, compared to a loss of £31.5m at the same time last year.
While fintech firms in the UK have been raising huge amounts of funds from investors, profitability remains something of a rarity for the industry.
Quickly achieving profits has always been at the core of Starling’s focus, while profitability is further down the horizon for digital bank rivals like Monzo and Revolut.
“With our first full year of profitability, we’ve placed ourselves firmly in a category of one,” wrote Starling founder and chief executive Anne Boden in a memo published today.
“As an innovative digital bank with a sustainable business model and a strong balance sheet, we are generating our own capital and we stand apart from both the old banks and other challengers.”
By achieving profitability, Starling has joined the exclusive group of UK challenger banks posting positive financial returns. The first to reach that milestone was OakNorth, which reported full-year profit in 2018 just three years after launch.
Meanwhile, Zopa become profitable two years after gaining its banking licence and Atom Bank is on track to achieve full-year profitability.
Boden hits out at BNPL
Boden took aim at some of the more polarising sides of fintech, including buy now, pay later (BNPL) and cryptocurrencies.
“I’m often asked if we’re planning to move into the buy now pay later lending space. The answer is easy. No,” Boden wrote.
“BNPL lenders, just like many cryptocurrency players, have been engaging in regulatory arbitrage and exploiting the fact that this type of activity is still largely unregulated.”
Boden has regularly differentiated Starling from other neo banks by claiming its growth came in a profitable way because “we’ve focused on customers that actually generate income for us in the long term”.
Starling has been heading for profitability with some momentum, reporting revenue growth month by month.
The announcement of profit from Starling comes just three months after it closed a £130.5m funding round from Goldman Sachs Equity and the Qatar Investment Authority.
Starling recently announced it has scrapped a plan to begin banking operations in the Republic of Ireland, stating in a company memo that it would instead be focusing on developing its banking software product.