UK fintech Starling’s profit tumbles as regulatory failings linger
UK fintech veteran Starling recorded a drop in annual profit for the financial year as it battled with a more competitive fintech landscape and mounting costs.
The neobank recorded £223m in pre-tax profit, which was down from £301m the previous year.
This came as operating costs ramped up to £403m, from £332m, helping offset modest revenue growth of £32m to £714m.
Starling cited staff costs as a major expense factor, with it surging 31.8 per cent to £303.7m. The fintech’s increase in average headcount jumped 708 to 3,939.
Engine – the company’s software-as-a-service (SaaS) subsidiary – was outlined as a key driver for ramping up staff numbers.
The operations’s fee income contribution to the group was £8.7m which marked a 284 per cent year-on-year increase.
‘Shockingly lax’ regulation haunts Starling
The group said profit was also hit by “legacy matters” which were resolved over the last 12 months. Underlying profit was £281m, still marking a drop from its previous performance.
The fintech was slapped with a £29m fine by the Financial Conduct Authority (FCA) in 2024 after “measures to tackle financial crime did not keep pace with its growth.”
The City regulator called the firm’s failings “shockingly lax”.
The FCA found the bank had opened more than 54,000 accounts for 49,000 “high-risk customers” between September 2021 and November 2022.
The fine was reduced from £40.96m after Starling agreed to resolve the issues.
In its report, Starling said it had recruited Darren Pope to its board, to bring his “in-depth understanding of financial and risk matters” due to his experience at Lloyds Banking Group and TSB Bank.
Declan Ferguson, the group’s finance boss, 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 experience.”
Starling’s momentum slows
David Sproud, Starling’s chair, said the firm had a “resilient financial performance amid challenging markets.”
The fintech hit a record high in open accounts of 4.6 million, a ten per cent increase on the prior year. But this halved the momentum of the previous year, when new accounts jumped 20 per cent.
Customer deposits topped a record-breaking £12.1bn, increasing from £11bn.
Raman Bhatia, group chief executive, said: “These results represent an important milestone, marking the Group’s fourth consecutive year of profitability and revenue growth.
“This performance derives from our commitment to providing customers with innovative banking solutions and exceptional service. We are particularly pleased with Starling Bank’s success in attracting new customers, as evidenced by the continued growth in our deposit base and open accounts.”