Goldman-backed Starling Bank profit drops amid Covid loan issue

Starling Bank, a British online lender known for its fee-free current accounts and lending services through a mobile app, recently reported a significant decrease in annual profit. The bank cited issues related to Covid-era business loan fraud and a regulatory fine for financial crime failings as the main reasons for the decline in profits.

For the fiscal year ending on March 31, 2025, Starling Bank reported a profit before tax of £223.4 million, which represented a decrease of almost 26% compared to the previous year. Despite the drop in profits, the bank’s revenue increased to £714 million, up approximately 5% from £682 million in the previous year. However, the revenue growth rate slowed down significantly compared to the more than 50% growth seen in the bank’s 2024 fiscal year.

One of the factors impacting Starling’s profits was a £29 million fine imposed by the U.K.’s Financial Conduct Authority due to failings in the bank’s financial crime prevention systems. Additionally, Starling highlighted an issue related to the Bounce Back Loan Scheme (BBLS) designed to provide firms with access to cash during the Covid-19 pandemic.

As an approved lender under the BBLS, Starling Bank was responsible for providing loans to businesses with a 100% government guarantee in case of borrower default. However, the bank identified a group of BBLS loans that did not comply with guarantee requirements due to weaknesses in historic fraud checks. As a result, Starling voluntarily removed the government guarantee on those loans and took a provision of £28.2 million in its accounts.

Despite these challenges, Starling Bank remains optimistic about its future. The bank 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. Starling’s Chief Financial Officer, Declan Ferguson, emphasized that the bank addressed these issues transparently and cooperated fully with the British Business Bank.

Since becoming a licensed bank in the U.K. in 2018, Starling has attracted notable shareholders such as Goldman Sachs, Fidelity Investments, and the Qatar Investment Authority. Valued at £2.5 billion in 2022, the bank faces stiff competition from traditional banks and other fintech companies like Monzo and Revolut.

Overall, despite the challenges faced in the past year, Starling Bank remains committed to providing innovative financial services to its customers while maintaining transparency and compliance with regulatory requirements.