The British neobank Starling experienced a downturn last year, with both sales and profits taking a hit largely due to a fall in interest income.
In its annual report released on Thursday (May 21), the company revealed that sales had decreased by 6%, totaling 887 million pounds (around $1.2 billion). Meanwhile, pre-tax profits fell by 3% to 217 million pounds (approximately $291 million).
Declan Ferguson, Starling’s Chief Financial Officer, noted that the reduction in interest rates has been a challenge for banks across the board, as reported by the Financial Times.
The bank’s growth has also faced hurdles from regulations imposed by the Financial Conduct Authority (FCA), which had previously declared Starling bankrupt in 2021 due to insufficient financial crime controls. As a result, Starling was unable to open new accounts for higher-risk customers.
In 2024, the FCA accused Starling of having “alarmingly lax” policies regarding financial crime and subsequently fined the bank 29 million pounds (nearly $39 million).
Starling’s CEO, Raman Bhatia, mentioned that the bank has completed an improvement program with the FCA. Although still under regulatory restrictions, Starling is expected to begin discussions soon about lifting these limitations.
Bhatia commented, “Given the existing restrictions, we chose not to actively promote Starling in the UK… However, we are now making significant investments and continuing to expand.”
Ferguson echoed this sentiment in the company’s earnings call, stating that these regulatory constraints have been impacting Starling’s capacity to grow its customer base.
Despite the challenges, he noted that the bank is returning to growth. In fact, during April, account openings surged more than threefold compared to the same month last year, with customer activity and average balances remaining robust.
Additionally, Starling is reportedly exploring the possibility of entering the U.S. banking market by either applying for a banking license or acquiring an existing U.S. lender. Ferguson mentioned, “We’re considering both paths, but we’re probably leaning more towards acquisition,” when discussing this in September.
The demand for digital banking is rising among younger consumers in the U.S., with a PYMNTS Intelligence study indicating that 13.8% of users now consider a digital bank as their primary financial institution.
