Starling Bank’s 2022 results include first full year of profitability as mortgages pay off

CEO Anne Boden tells AltFi that she would consider buying a European bank in order to secure a licence to expand across Europe.

Image source: Anne Boden/Starling Bank.

Digital bank Starling is in a “category of one” according to CEO and founder Anne Boden, as the bank reports its first full year of pre-tax profitability this morning.

As part of its results to 31 March 2022 the bank posted a pre-tax profit of £32.1m on revenues of £188m, swinging from a pre-tax loss of £31.5m last year.

Boden said the results marked a “landmark year” with profitability achieved just five years after launching with the bank now having “a sustainable business model”.

Indeed, Starling also published a trading update showing that its annualised pre-tax profit run rate had continued to improve since March, rising to £92m as of June 2022.

A key driver of growth in the last year, according to Boden, has been Starling’s push into mortgage lending, she described it as “really the year where we’ve gone into the mortgage market, building on our acquisition of Fleet Mortgages”.

The bank’s deposit base grew by 55 per cent to £9bn, up from £5.8bn in 2021, and overall lending rose 45 per cent to £3.3bn.

Mortgages accounted for £1.2bn of Starling’s loan book as of March 2022, but as of June that figure has already grown to over £2bn.

“I think we have placed ourselves in the category of one,” the CEO told journalists on a results call this morning. “I think we are very different from other banks, both old banks and new banks.”

On the topic of Starling’s recent decision to “change course” on its Irish banking licence application, Boden told AltFi that she would now consider acquiring a European bank in order to secure a licence to offer services across the whole of Europe.

“I think that if a bank came up in Europe that allowed us to launch Starling in Europe, we would look at it seriously. Because we have sufficient resources to do it, but I think it would have to be in a bigger country,” Boden explained.

The CEO also confirmed that Starling had been “approved to go through to the final stage” of its licence approval in Ireland, however, after a nearly four-year process, Boden decided that the more “strategically valuable” option was to focus for now on expanding Starling’s banking-as-a-service Engine proposition.

“I was the COO of AIB and… I love the country and I think the people are absolutely fantastic and I would love to go back,” Boden told AltFi. “But this has to be a really, really hard business decision… I’d love to have the opportunity to serve Ireland. But strategically, it was the wrong decision.”

On the topic of future products, Boden also confirmed to AltFi that Starling’s SME credit card remains “in testing” with no update on timelines and that Starling one day offering its own mortgages is “inevitable” but that given the bank’s prime customer base “It has to be superb”.

In her annual letter to customers, published today, the CEO also commented on Starling’s interest in entering the buy now pay later space, writing “The answer is easy. No.” and comparing the sector to crypto in its use of “regulatory arbitrage”.