Starling Bank reaches profitability as it eyes European expansion

UK-based neobank Starling has just cut even and expects to remain profitable as it plans to roll out its services across Europe.

The news came as the bank unveiled its result for the third quarter of 2020, having generated £9m in revenue for the month of October, representing an annualised run rate of £108m. This means its operating profit for that month was £0.8m, or roughly £10m for the an entire year.

Moreover, its revenue is split between £5.5m of net interest income and £3.5m of gross fees and commissions income. As of October, the bank has  almost 1.8 million accounts, £4bn in deposits and £1.5bn of lending.

“Five years ago, I stood in front of numerous investors to outline my vision of a new sort of bank,” Anne Boden, founder and CEO of Starling 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.”

Earlier this year, Starling was authorised to offer customers loans from the government-backed Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS). These schemes support the bank’s interest income heavily. “So far, we’ve loaned £1.4bn to customers under the government-backed schemes,” Boden said.

“We’ve learned new and better ways of working in this most unusual and difficult of years,” Boden said. “I fully expect there will be long-term improvements to the world of work in banking and elsewhere once a new kind of normality resumes.

“I’m equally certain that we will become a formidable competitor in the European banking market as we gear up to scale across Europe. We know that our technology is hugely scalable because our tech team runs a constant simulation at around ten times our current capacity. We’re prepared for a sudden influx of customers and transactions. In fact, we’re prepared for pretty much anything.”

The news comes after Starling reported in August that it had made £53.6m in losses over the previous year.

While the news puts Starling ahead of its immediate rivals Monzo and Revolut, it is not the first UK challenger bank to make a profit. SME-focused UK-based neobank OakNorth has been profitable for years.

This story has been updated to make it clear that OakNorth has been profitable for many years.

Copyright © 2020 FinTech Global

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