Starling Bank makes a profit on mortgage growth

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British digital bank Starling reported its first full-year profit after entering the mortgage market with a series of portfolio acquisitions.

The app-based bank posted a pre-tax profit of £32.1m for the year to the end of March, reversing a loss of £13.7m in the same period a year earlier. early.

Revenue was boosted by the bank’s move into the residential property lending business, rising more than 90% to £188.1m.

The results reflect Starling’s strategy to diversify away from government-backed lending programs, with rebound loans making up the bulk of its small business lending.

The bank, whose investors include Goldman Sachs and Jupiter Asset Management, originally courted primarily retail clients but turned to target companies early in the pandemic.

These bailout loan schemes have helped Starling increase its small business loans to over £2.2billion, although the balance has shrunk to £2billion as customers have started repaying their loans.

However, concerns are growing over the scale of fraudulent loan claims. Former anti-fraud minister Lord Agnew complained the government had poor oversight of the scheme, which offered up to £50,000 to struggling small businesses during the pandemic with customer checks that are lighter than traditional loans.

Lord Agnew chose Starling, saying the bank had acted against the interests of government and taxpayers.

“Lord Agnew is simply wrong,” Anne Boden said Thursday. “Starling did a fantastic job ensuring we did all the necessary checks and more.”

Starling said mortgages had reached £1.2billion. Last July, the bank reached a £50million deal to acquire the mortgage-to-let group Fleet Mortgages. In June, he made another acquisition of a portfolio of loans from specialist lender Masthaven, worth around £500million.

Starling’s valuation doubled to over £2.5bn in April, although it lags behind fintech Revolut, which was valued at $33bn in a funding round last July.

On Monday, the challenger bank announced that it was withdrawing its bid to do banking in Ireland. Boden said Starling is instead focusing on its Engine cloud banking platform, which it licenses to other companies seeking to process payments, card transactions and open customer accounts.

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