6 things we learnt from Starling’s 2022 Annual Report

No more personal loans, Boden’s £1m payday, Starling now bigger than Monzo and much more.

Image source: Anne Boden/Starling Bank.

Last week Starling Bank published its seventh Annual Report, covering the 12 months between March 2021 and March 2022.

We’ve already covered the headline figures, including the bank’s first full year of profitability as its bet on mortgages paid off but, with such a detailed 175-page report on the business, there’s a massive amount of fascinating detail on the state of this digital bank.

Here are the top 6 interesting nuggets we learnt:

1. Starling is now bigger than Monzo (by headcount)

While both Monzo and Starling have continued to grow their headcounts, Starling has narrowed and now overtaken its hot coral rival by sheer number of staff.

In the year to March 2022, Starling has increased its headcount from 1,245 to 1,941, while at Monzo, hiring wasn’t quite able to keep up. Its 2021 lead of 1,332 staff grew slower than Starling, ending the year with a headcount of 1,879.

What’s phenomenal is that just a few years earlier, at the start of 2018, Monzo’s headcount was nearly 3x larger than Starling’s, with over 300 employees versus Starling’s 125, a gap which has now been firmly closed.

And that’s not the only metric where Starling has pulled ahead of its rival…

2. Average customer deposits jumped another 11 per cent

Starling has always banged the drum that its customers are more valuable than those of its competitors, Boden going so far as to describe them as “prime customers” during the bank’s results call last week.

Well, the bank’s numbers certainly back her up.

Average deposits per retail customer at Starling grew by 11 per cent in 2022 to £2,139 (up from £1,874 the previous year), compare that to Monzo, which just reported its average deposit size in 2022 was only £793 (up from £650 in 2021).

3. Starling’s SME lending is declining

While Starling’s headline figures show an explosion in mortgage lending, boosting the bank’s overall loan book to £3.3bn, beneath the surface it appears Starling’s SME and Consumer lending is slowing down.

SME lending at the bank actually fell from £2.18bn during the year to March 2021—when it was boosted by the UK government’s Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS)—down to £2bn during the year to March 2022.

Starling explained that this was due to their business customers having started repaying their loans, and that any decline in interest income on that lending was more than offset by its move into mortgages.

4. No more personal loans for retail customers(!)

Now, this is a real surprise.

Starling has stopped offering personal loans for its Retail customers and, according to the report, has placed its existing “term lending portfolio in run-off”.

The bank has offered personal loans alongside its overdrafts since 2018, and built a loan book that peaked in 2021 at £71.8m.

However, that number is now falling rapidly, ending at just £45m in Starling’s latest results, and surely falling further if the bank continues to wind down its book.

With only overdrafts now available to retail customers, and the bank clearly more focused on its mortgage and SME lending, one wonders if Starling has any future plans to lend to consumers (like a credit card!), or if it’ll just leave that market entirely.

5. We’re starting to learn more about Engine by Starling

The first nugget about Engine tucked into the report is that it has 23 banking-as-a-service clients including Shoal, Standard Chartered’s new ‘green’ fintech brand.

In the past, Starling’s ‘as-a-service’ offering was run through a subsidiary called Starling FS Services Limited, which was also responsible for providing the bank’s own technology.

This led to a complicated trail of charges between Starling and FS Services for staff, licencing costs, etc, all of which obscured the true value of the bank’s external client work.

In the last few months, Engine has been set up as a new subsidiary dedicated to licensing out banking-as-a-service tech, so next year in Starling’s 2023 annual report we should get a far more accurate picture of what this business looks like.

6. Anne’s shareholding fell to 5.5% (but she got a big pay rise!)

As part of Starling’s blockbuster £272m Series D in March 2021, it appears CEO and founder Anne Boden’s equity stake and voting rights in the company declined further.

Last year you might remember we discovered Boden held an 8.5 per cent stake and was entitled to 22 per cent of the voting rights, well those figures had fallen to 5.5 per cent and 19.6 per cent respectively, as of March 2022.

Also, in April Starling raised a £130.5m “war chest” from existing investors, which may gave reduced Boden’s stake even further, but we’ll have to wait until Starling’s 2023 annual report to find out.

But it’s anything but doom and gloom for the CEO. 

Starling’s annual report also notes that the highest-paid director of the bank, assumed to be Boden, got another 50 per cent pay rise in 2022, taking home £1.02m in base salary, up from £681,000 in 2021.