Starling Bank: Digital bank reports drop in annual profits, what it means for consumers
Digital challenger bank Starling has reported a 25% drop in annual profits after a turbulent year.
The bank announced it would forgo government guarantees on £28m worth of Bounce Back Loans (BBLs) issued during the pandemic, admitting its own internal checks were too weak to meet the scheme’s criteria. This move follows a separate £29m fine issued by the Financial Conduct Authority (FCA) for what the regulator described as “shockingly lax” financial crime controls.
Together, the fine and the voluntary forfeiture of taxpayer support on the loans contributed to a significant decline in profits, down to £223m in the year to March 2025 from £301m a year earlier.
“In some cases, we think we may not have met all the procedures, all the requirements, of the scheme,” Starling CEO Raman Bhatia said during a conference call with journalists. He declined to confirm whether fraud or financial crime had occurred within the affected tranche of loans but acknowledged the controls in place at the time had been insufficient.
The Bounce Back Loan Scheme was launched in 2020 to support small businesses during Covid lockdowns, offering loans of up to £50,000 with 2.5% interest and full government guarantees in case of default.
Starling’s approach to the scheme, which included opening applications to new customers, led to a rapid expansion of its business banking base, from 87,000 to 330,000 clients in under two years. By March 2021, Starling had issued £1.6bn in BBLs, despite having only distributed £23m in loans before the pandemic.
Starling’s handling of the scheme has drawn criticism since 2022, when former minister Lord Theodore Agnew accused the bank of using the programme as a “cost-free marketing exercise” and failing to vet borrowers properly. At the time, Starling’s then-CEO and founder Anne Boden rejected the claims outright. Boden stepped down in 2023, citing a conflict of interest due to her significant shareholding in the company.
Asked about executive accountability over the recent losses and fines, Bhatia said the board had reviewed remuneration outcomes. “We have discharged our duties to consider any impact on [remuneration] where appropriate. I can’t share any further details,” he added.
The regulator’s fine earlier this year stemmed from failures between 2021 and 2022, when Starling opened more than 54,000 accounts for 49,000 high-risk customers without scaling its anti-money laundering systems to match rapid growth.
Starling’s chief financial officer, Declan Ferguson, said the bank was investing heavily in financial crime resources to strengthen its compliance capabilities: “Working closely with both the FCA and the British Business Bank, we have also sought to limit the impact of these issues and ensure they remain one-offs. But we are now more confident we are moving forward into the next stage of our growth on much stronger foundations.”