Starling Bank swings to a profit

Starling Bank announced Thursday that it swung to a profit in its latest fiscal year, marking the first time the London-based neobank has done so since launching in 2017.

Why it matters: Amid all of the doom and gloom in fintech, Starling’s turn to profitability represents a rare bright spot.

By the numbers: For the financial year ending March 31, the firm reported a pre-tax profit of £32.1 million, compared to a pre-tax loss of £31.5 million a year earlier.

• Much of Starling’s growth was driven by its acquisition of Fleet Mortgages a year ago, which bolstered its lending capabilities and helped the company grow mortgages on its balance sheet to £2 billion.

The other side: “I’m often asked if we’re planning to move into the Buy Now Pay Later lending space,” Starling Bank chief executive Anne Boden wrote in a letter from the CEO. “The answer is easy. No.”

• She added: “BNPL lenders, just like many cryptocurrency players, have been engaging in regulatory arbitrage and exploiting the fact that this type of activity is still largely unregulated … I don’t doubt that there is a clear need for new types of lending, but there’s nothing clever about lending without regulation.”

What’s next: After the successful integration of Fleet Mortgages into its business, more acquisitions could be on the way, Boden wrote.

• “I’ve made no secret of our M&A ambitions and you can expect targeted acquisitions in the lending space to play a key role in the year ahead, but only at the right price and in the right market conditions,” she wrote.
• The company has raised £450 million in funding over the past year.