British online lender Starling Bank has reported a significant decrease in annual profit, attributing the decline to issues with Covid-era business loan fraud and a regulatory fine related to financial crime failings. The mobile app-based bank posted a profit before tax of £223.4 million for the fiscal year ending March 31, 2025, a drop of almost 26% compared to the previous year.
While revenue increased to £714 million, up about 5% from £682 million in the previous year, the growth rate slowed down significantly from the more than 50% revenue increase seen in the bank’s 2024 fiscal year. The decrease in profits was primarily driven by a £29 million fine imposed by the U.K.’s Financial Conduct Authority for shortcomings in Starling’s financial crime prevention systems.
Starling Bank also highlighted an issue with the Bounce Back Loan Scheme (BBLS), which aimed to provide cash access to businesses during the Covid-19 pandemic. As one of the approved lenders under the scheme, Starling identified a group of BBLS loans that did not comply with guarantee requirements due to weaknesses in its historic fraud checks. The bank voluntarily removed the government guarantee on these loans, resulting in a £28.2 million provision in the accounts.
Additionally, Starling disclosed an Expected Credit Loss provision of £800,000 as of March 31 for certain BBLS loans where the guarantee may no longer be available. Declan Ferguson, Starling’s chief financial officer, emphasized that the bank addressed this legacy issue transparently and cooperated fully with the British Business Bank.
Established as a licensed bank in the U.K. in 2018, Starling Bank boasts prominent shareholders including Goldman Sachs, Fidelity Investments, and the Qatar Investment Authority. Despite being valued at £2.5 billion in 2022, the bank faces stiff competition from traditional banks and fintech rivals like Monzo and Revolut.
In conclusion, while Starling Bank experienced a decline in annual profit due to regulatory fines and issues with the BBLS, the bank remains committed to transparently addressing these challenges and collaborating with regulatory authorities to ensure compliance and integrity in its operations. As a key player in the digital banking landscape, Starling continues to navigate the competitive market and drive innovation in the financial services industry.
