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Starling Bank’s Fourfold Profit Increase Despite Irresponsible Lending During the Pandemic

Starling Bank is on the rise, with expectations of a fourfold increase in profit by 2023. The British digital bank had already produced a pre-tax profit of 250 million pounds on revenues of 600 million pounds last year.

But, this year may bring new highs for the bank as it continues to grow in popularity among the population and the SME sector.

One of the key achievements of Starling is its 8.9% of the UK SME banking market. The bank is also continuously gaining strength in the residential segment, and further market acquisition is expected here as well. The total value of deposits has also jumped significantly, now reaching 10.7 billion pounds.

However, with this growth comes the question of whether Starling’s good results are overshadowed by its irresponsible lending during the pandemic. 

Questionable or clever?

During the epidemic that broke out in 2020, the British government launched a loan program to revive the economy, during which they covered the costs of customers who became insolvent. In other words, the participating banks could lend without realizing the associated risks. Starling significantly fattened its loan portfolio during this period.

A former British minister accused the digital bank of almost lending to companies indiscriminately, whistling if a customer posed too much of a risk. Starling itself reported to a British authority that a third of its loans disbursed during the epidemic was at risk of insolvency. This certainly shades the previously formed image of Starling, according to which they achieved their results with conscious construction.

Despite this, the digital bank continues to provide high-quality services and is growing in popularity among the population and the SME sector. The number of employees has continued to increase accordingly. At the end of the previous year, there were still 1,000, and today the company has 2,300 employees. In addition, an additional thousand jobs will be created in Manchester alone this year, meaning that the pace of team expansion is not slowing down.

Customer growth unhindered 

The number of customers shows a similarly dynamic rise. The digital bank now has more than 3 million account management customers, including 520,000 SMEs. These are particularly great results, considering that a few years ago they were still considered a small player in the British market. In terms of growth, the target 15% market share on the SME front does not seem unrealistic either.

“We have to get used to the fact that we have become a leading player in the banking sector, and this brings new challenges.”

“Many startups are currently struggling to secure external funding. The valuation of privately held companies has skyrocketed, which has had tangible consequences,” says Anne Boden, founder and CEO of Starling.

Putting the ‘star’ in Starling 

It has been a really difficult year for the FinTech sector, and Starling is one of the exceptional companies that managed to avoid the difficulties. In addition to revenues and profits, the number of customers and employees is also on the rise. 

As Starling continues to grow, it will be important for the bank to address the concerns about its lending during the pandemic in order to maintain its reputation as a socially conscious and responsible company.

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