Is Starling Bank about to leave the nest ? - FinanceFeeds

Is Starling Bank about to leave the nest ?

Darren Sinden

Between October 2019 and October 2020 gross lending at the bank grew from £37.0 million to £1.50 billion

banks

Starling Bank is one of the UK’s most high profile fintech startups the challenger bank was founded back in 2014 by CEO Anne Boden.

Ms Boden had previously worked at Lloyds, Standard Chartered UBS before joining ABN Amro, subsequently taken over by RBS where she served as head of EMEA and head of the bank’s global transaction business, overseeing operations in as many 34 countries. Anne Boden also served as COO of Allied Irish Bank from 2012.

Starling bank seems to have been on an upward trajectory since it was formed 6 years ago and has raised more than £360.0 million in external funding over that time.

It now boasts more than 2.0 million customers and holds some £3.60 billion in deposits, and is rumoured to approaching profitability in what is a notoriously challenging sector.

However, it now seems that the bank is keen to grow through acquisition and not just organically and that Anne Boden’s team are actively on the lookout for European lender that they can purchase. The bank is interested in buying a non-bank lending business and that could include peer to peer lending operations.

Starling Bank believes that the time is right and that buying a lending business will allow it to capitalise on the relationships formed during the lockdowns.

The bank has been one of the most active participants in the UK governments emergency loans programs for businesses. Bolting a specialist lender onto these operations would be a good strategic fit.

In the 12 months between October 2019 and October 2020 gross lending at the bank rose from £37.0 million to £1.50 billion. Much of the growth coming in the form so-called bounce back loans which are guaranteed by the UK Treasury.

A chunk of that lending has been facilitated through peer to peer platforms such as Funding Circle and Zopa which presumably could be on any shortlist of acquisition candidates that Starling may draw up in the coming months.

In an interview with start-up blog Sifted Anne Boden said that: “ The company is actively for lending businesses to buy” Echoing comments made by the banks Chief Strategy Officer, Declan Ferguson, to AltFi in October last year.

Mr Ferguson also noted how well loans that the bank had made through Zopa had performed and that Starling’s deposit base was a cost-effective source of funding for the collaborations with peer to peer lenders. Starling is believed to have advanced around £300 million to both Zopa and Funding Circle.

Rivals Metro Bank bought peer to peer lender RateSetter in the summer of 2020 for just £2.50 million down, with another £9.50 million payable over the following three years subject to certain conditions being met.

Starling Bank probably has its sights set on a bigger deal than that, and given its track record of raising funds presumably, it wouldn’t find it too difficult to secure the funding for it.

However, the Bank has been conservative in its approach to business to date, so it will no doubt weigh all the options open to it before making its first flight.

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