United Kingdom neobank Starling saw revenues and profits fall last year as interest income dropped.
The lender released its annual report Thursday (May 21), which showed revenues down 6% to 887 million pounds (about $1.2 billion) and pre-tax profits falling 3% to 217 million pounds (about $291 million).
Starling Chief Financial Officer Declan Ferguson characterized the interest rate cuts as a “headwind that pretty much all banks will face,” the Financial Times reported Thursday.
Starling’s growth has also been hindered by restrictions placed on it by the Financial Conduct Authority in 2021 due to failings in its financial crime controls, the report said. These limits blocked Starling from opening new accounts for high-risk customers.
Then in 2024, the regulator accused Starling of maintaining “shockingly lax” crime controls and fined it 29 million pounds (about $39 million).
Starling CEO Raman Bhatia said the bank completed a remediation program with the FCA, according to the report.
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Starling is still formally under the restrictions but will soon begin talks with the authority about lifting them, the report said.
“Certain restrictions meant that we decided not to actively advertise Starling’s franchise in the UK… now we are back, we are investing heavily, and growth is following,” Bhatia said, per the report.
Ferguson appeared to reference the FCA as well in the company’s earnings announcement, saying that “certain regulatory restrictions” moderated Starling’s ability to expand its customer base.
“However, the bank has now returned to growth, with [small- to medium-sized business (SMB)] account openings more than tripling in April compared to the same period last year,” he said in the annual report. “Customer quality, as measured by activity levels and average balances, remains high.”
Starling is also reportedly considering entering the banking space in the United States, either by applying for a banking license or acquiring a licensed American lender.
“We’re considering both paths, although we are probably more inclined towards acquisition,” Ferguson said in September.
There is demand for digital banking in the U.S., shaped by young users. Research from PYMNTS Intelligence showed that 13.8% of consumers now use a digital bank as their main financial institution.
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