Veteran UK fintech Starling saw its annual profit decline in the last financial year, facing stiff competition in the fintech sector and increasing costs.
The neobank’s pre-tax profit came in at £223m, down from £301m the previous year. Operating costs surged to £403m from £332m, offsetting a modest £32m increase in revenue to £714m, as reported by City AM.
Starling attributed the rising costs to a significant increase in staff expenses, which jumped 31.8% to £303.7m. The fintech’s average headcount rose by 708 to 3,939, with its software-as-a-service (SaaS) subsidiary, Engine, being a major driver of the staff expansion.
Engine contributed £8.7m to the group’s fee income, representing a 284% year-on-year increase.
‘Shockingly lax’ regulation haunts Starling
However, the group’s profit was also impacted by “legacy matters” resolved over the past 12 months, resulting in an underlying profit of £281m, down from the prior year.
Additionally, Starling was fined £29m by the Financial Conduct Authority (FCA) in 2024 for failing to adequately address financial crime risks during its rapid growth. The FCA described the firm’s shortcomings as “shockingly lax.”
The regulator found that Starling had opened over 54,000 accounts for 49,000 “high-risk customers” between September 2021 and November 2022.
The fine was reduced from £40.96m after Starling agreed to rectify the issues.
In its report, Starling announced the appointment of Darren Pope to its board, citing his profound expertise in financial and risk affairs, a skillset honed at both Lloyds Banking Group and TSB Bank.
The organisation’s finance head, Declan Ferguson, commented: “We continue to make significant investment into our financial crime resource to ensure our risk management and compliance capabilities are commensurate with the high growth experience.”
Starling’s momentum slows
David Sproud, the chair of Starling, underscored the company’s robust fiscal health amidst tough market conditions.
The fintech marked a new zenith with 4.6 million open accounts, representing a 10% surge from last year, however, the figure indicates a slowdown from the previous year’s 20% jump in new accounts.
Deposits from customers reached an unprecedented peak of £12.1bn, climbing from £11bn.
Raman Bhatia, the group chief executive, stated: “These results represent an important milestone, marking the Group’s fourth consecutive year of profitability and revenue growth.”
He elaborated on the achievement by saying, “This performance derives from our commitment to providing customers with innovative banking solutions and exceptional service. We are particularly pleased with Starling Bank’s success in attracting new customers, as evidenced by the continued growth in our deposit base and open accounts.”
