Starling founder says digital bank reaching profitability paves way for IPO

Starling, one of the UK’s leading digital-only banks, yesterday announced it has been profitable for the past ten months. The 61-year-old founder and chief executive Anne Boden, who previously held senior positions at a number of traditional banks including Standard Chartered, UBS and Allied Irish Banks having started her career as a graduate trainee with Lloyds, intimated profitability would pave the way to an IPO.

Boden started laying down the groundwork for Starling in 2014 before officially launching the online-only bank in 2017. Four years on and steadily growing revenues have now taken the bank into the black. The chief executive yesterday told investors that has set It up for a listing in either late 2022 or 2023, adding:

“As soon as you get to profitability, you break free.”

While the bank reported a £23.3 million loss over the 16 months to the end of March it was a significant improvement on the £52.1 million loss of the previous year. The difference was a period of profitability stretching back to October last year and should mean the next full year is one that yields a surplus. The most recent period reported was four months longer than usual because Starling changed its financial year to finish with the tax year at the end of March.

Revenues grew to £97.6 million for the period from £14 million over the previous year with the bank’s loan book grew to £2.2 billion from a relatively low starting point. Most loans were issued as part of the government-secured scheme for pandemic survival loans issued to small and medium businesses. That allowed Starling to turbo boost the value of its loan book without taking on too much risk because the capital issued is guaranteed by the government in the case of it turning into bad debts.

The three months to the end of June were also very positive for the bank and generated £42.8 million in revenues, taking the annualised figure to £170 million. A major difference has been more customers using Starling as their primary current account. Over the first few years of its existence account holders typically used the digital bank for secondary accounts with their income still being paid into an account with a traditional bank. An increasing number have now built up enough trust, and satisfaction with Starling’s service, to pay their salaries and other sources of income into their app-based accounts.

Boden commented:

“Our customers are real customers with real needs, using us for their weekly shop.”

Starling was valued at £1.1 billion when raising £272 million during its most recent funding round in March of this year. The round was led by Fidelity and also included the Qatar Investment Authority, the hedge fund Millennium Management and the railways pension scheme RPMI Railpen.