Starling Bank Profits Fall: Covid Loan Issues
- Starling Bank, the digital bank, reported a profit decline of more than 25% for the past year.
- The neobank announced Wednesday that its profit before tax fell to £223 million for the year ending in March.
- Starling Bank acknowledged that some loans extended under the government-backed scheme during the COVID-19 pandemic might not have met guarantee requirements.
Starling Bank’s profits took a hit, declining over 25% due to COVID-19 loan issues, including £28 million set aside for potential compliance failures. A significant fine for inadequate financial crime controls also impacted the digital bank’s earnings. The bank’s proactive stance involved voluntarily removing government guarantees on some “bounce back” loans. This strategic move addressed non-compliance concerns, revealing the impact of rapid lending during the pandemic. While revenues increased, the primary_keyword faced pre-tax profit pressures despite a new CEO taking the helm. Moreover, the bank is addressing legacy matters. Stay informed with News Directory 3 for the latest updates. Discover what’s next for Starling Bank as it navigates regulatory scrutiny and adapts its financial strategies.
Starling Bank Profit Dips Amid Loan Compliance Issues, Financial Crime Fine
Updated May 28, 2025
Starling Bank, the digital bank, reported a profit decline of more than 25% for the past year. The decrease stems from setting aside £28 million to address potential compliance problems related to its government-backed COVID-19 loans. Additionally, the bank faced a fine for inadequate financial crime controls. This news impacts the bank’s overall financial performance and its reputation in the competitive neobank market.
The neobank announced Wednesday that its profit before tax fell to £223 million for the year ending in March. This is down from £301 million in the previous 12 months, despite a 4.7% increase in revenues. The bank’s earnings took a hit from a £29 million penalty imposed by the UK financial regulator late last year. The penalty was for what was described as “shockingly lax” measures against financial crime. The bank also disclosed provisions for issues related to some of its COVID-19 loans. These factors combined to considerably impact Starling Bank’s financial results.
Starling Bank acknowledged that some loans extended under the government-backed scheme during the COVID-19 pandemic might not have met guarantee requirements. The bank had faced criticism for aggressively pushing lending during the crisis. It built a portfolio of loans to new customers, backed by a 100% guarantee from the British Business Bank, subject to eligibility. These “bounce back” loans, designed to quickly support struggling businesses, became a significant part of Starling’s lending portfolio. The bank’s rapid expansion in lending during the pandemic has now led to compliance and financial repercussions.
The bank communicated its finding of potential non-compliance to the British Business Bank. It volunteered to remove the government guarantee on those loans,resulting in a £28.2 million provision, equivalent to about 2% of its lending under the government scheme. Starling Bank acknowledged it “might potentially be exposed to further risks resulting in non-compliance with the eligibility requirements” that could affect its ability to claim under the guarantee contract or “retain payments already claimed under the guarantee contract.” The bank’s proactive approach to addressing these issues aims to mitigate further financial risks.
Raman Bhatia, chief executive of Starling Bank, who succeeded founder Anne Boden last year, addressed the situation. “In the last year we demonstrated our commitment to addressing legacy matters, investing in our people and capabilities so we now move forward from a position of strength,” Bhatia said. His statement underscores the bank’s focus on resolving past issues and strengthening its operations for future growth.
What’s next
Starling Bank will likely focus on strengthening its compliance measures and resolving the issues related to its COVID-19 loans. the bank aims to reassure regulators and the public of its commitment to responsible lending and financial crime prevention. Further scrutiny from regulators and potential adjustments to its lending practices are anticipated as starling Bank navigates these challenges.