Starling Bank has revealed its annual profit fell by a quarter after being hit with a fine for weak financial crime controls and setting aside cash to cover issues with Covid bounceback loans.
The bank reported a pre-tax profit of £223 million for 2024, down 26% from the £301 million made the prior year.
It marks the company’s fourth year in a row of profitability since launching a decade ago.
The drop in profit was partly driven by Starling being fined £29 million by the UK’s Financial Conduct Authority last year.
The regulator described the bank’s financial crime screenings as “shockingly lax”, leaving the system “wide open to criminals and those subject to sanctions”.
It was also found to have repeatedly breached a requirement not to open accounts for high-risk customers.
Starling said it has learned lessons from the investigation and has built a stronger framework – but it still faces some restrictions in relation to banking with higher-risk customers.
Profits were also dragged lower by the bank putting aside £28.2 million to cover a group of bounceback loans which it said “potentially did not comply with a guarantee requirement”.
Starling offered the loans to struggling businesses during the Covid pandemic as part of the Government-backed lending scheme, which guaranteed to cover any losses incurred by lenders.
The bank said it agreed to remove the Government guarantee on the group of loans that had potential issues.
Meanwhile, Starling revealed its revenues rose to £714 million, from £682 million in 2023, with the amount deposited by customers topping £12 billion.
It also highlighted growth of its banking software platform Engine after ramping up investment and signing Salt Bank in Romania and AMP Bank in Australia as its first two customers.
The London-based bank, which also has UK offices in Cardiff, Manchester, and Southampton, hired about 3,940 people on average last year – some 700 more than in 2023.
This drove up staff costs by nearly a third year-on-year, while marketing spending reduced as bosses focused investment on financial crime controls.
Chief executive Raman Bhatia said: “In the last year we demonstrated our commitment to addressing legacy matters, investing in our people and capabilities so we now move forward from a position of strength.
“We will leverage our robust capital position to continue to scale our growth in the UK by helping our customers become better with money.
“We will also make great strides in turning Engine by Starling into a global success.”
