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Starling Bank breaks even, on course to become profitable

By Sunniva Kolostyak

November 20, 2020

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Starling Bank, the UK challenger, is on track to become the first retail neobank to turn a profit after it breaks even in October, boasting a lending catalogue of £1.5 billion.

Anne Boden CEO of Starling Bank
Anne Boden, CEO and Founder of Starling Bank

Announcing the milestone achievement, Anne Boden, the CEO and Founder of Starling, revealed that the bank broke even in October, with nearly 1.8 million accounts, £4 billion in deposits and £1.5 billion of lending. Moreover, the bank expects to be monthly profitable from now on.

On the bank’s blog page, Boden wrote that Starling generated £9 million of revenue for the month of October 2020, which represents an annualised run rate of £108 million. This provided a positive operating profit of £0.8 million for the month of October 2020, or £10 million on an annualised basis.

This is a milestone which is yet to be reached by other retail challenger banks, including Monzo and Revolut.

In her blog, Boden said: “Five years ago, I stood in front of numerous investors to outline my vision of a new sort of bank. It would be a technology-led bank like no other and a profitable business, I announced, perhaps quite boldly because I didn’t even have a banking licence at the time. My pitch was, in the main, greeted with the healthy scepticism that many start-ups encounter. Today, I’m pleased to say that Starling has become the first of the new breed of digital banks to become profitable.”

Starling’s revenue is split between net interest income (£5.5 million) and gross fees and commissions income (£3.5 million) – a four-fold increase in 12 months and a third higher than three months ago. The growth in interest income comes in large parts due to Covid-related lending, particularly the government-backed Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS), which have both been extended.

Interchange income has also increased, with a 20 per cent growth in the third quarter. The average balance in retail accounts stands at £1,625, with £14,900 for business accounts and £3,100 for sole trader accounts.

Operating costs increased by 30 per cent over the past year, while customer accounts almost doubled and fixed costs broadly remained flat.

Boden added: “The reason Starling keeps powering on is that we don’t think like a bank. As per my original pitch, we are a technology company. Today, banking is seen as a tech business. Starling has played a huge part in making that happen.”

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