Starling Bank Reports a 26% Pre-Tax Profit Drop Amidst Technological Growth

UK digital lender Starling Bank has reported a dip in its yearly profit, CNBC reported. Starling’s bank profit drop has been attributed to the business loan fraud issue experienced during the Covid pandemic and a regulatory fine due to financial crime failure. Starling provides lending services and fee-free current services through a mobile application.

Year-on-Year Performance

The UK bank reported annual revenues totaling £714 million for the year ending March 31, 2025. This was a 5% increase from the £682 million generated in the previous year. However, this was a drop from the 50% revenue growth the bank recorded in 2024.

Despite the slight increase in annual revenues, Starling Bank’s profit margins dropped significantly. The bank reported a $301.9 million in pre-tax profit for the year ending March 31. This is close to 26% less than the previous year’s profit.

Bank profits were affected by a £29 million fine levied by the UK Financial Conduct Authority (FCA) due to failures in Starlings’s financial crime prevention systems. The UK watchdog described Starling’s financial crime screenings as incredibly lax and vulnerable to criminals and other entities that are subject to sanctions.

The regulator also established that the bank had breached requirements relating to account opening for high-risk customers. Starling says it has leveraged lessons from the FCA investigation to strengthen its framework. However, it still experiences restrictions when it comes to serving high-risk customers.

Starling Bank Covid Loan Impact

Starling’s profits were also affected by the £28.2 million set aside to cater for bounceback loans that the bank said failed to comply with a guarantee requirement. During the Covid pandemic, Starling was among UK banks that received approval to provide loans to struggling businesses as part of a government-backed lending scheme called Bounce Back Loan Scheme (BBLS).

The government guaranteed lenders that it would cover any losses accruing from defaulters. Starling said it had identified a group of BBLS loans that failed to comply with the guarantee requirement as a result of fraud check weaknesses and had “volunteered to remove the government guarantee on those loans.”

After making provision for the Covid loan fraud UK loans in its annual accounts, Starling reported that as at March 31, it held an Expected Credit Loss provision of £800,000 as in relation to specific BBLS loans. These are loans whose guarantee may not be available to the bank.

“This is a legacy issue which we dealt with transparently and in full cooperation with the British Business Bank,” Starling CFO Declan Ferguson said.

Tech-Driven Growth

Despite the dipping profits, Starling bank reported growth in its banking software platform, Engine. According to the bank, this growth was driven by new investments and onboarding of two initial corporate customers namely AMP Bank in Australia and Salt Bank in Romania.

“In the last year we demonstrated our commitment to addressing legacy matters, investing in our people and capabilities so we now move forward from a position of strength. We will leverage our robust capital position to continue to scale our growth in the UK by helping our customers become better with money. We will also make great strides in turning Engine by Starling into a global success,” Starling Bank CEO Raman Bhatia said.

The UK bank has offices in Manchester, Cardiff, and Southampton. In 2024, the bank hired 3,940 employees and had hired another 700 in 2023. This huge workforce increased staff costs by close to a third. Its marketing budget reduced significantly last year as the management directed investment to financial crime controls.

Starling has been operating in the UK since 2018. Some of its largest shareholders include Fidelity Investments and Goldman Sachs. As a digital lender, Starling faces stiff competition from rival fintechs such as Revolut and Monzo.