Starling Considering Fresh Funding, Buying Mortgage Platform

Sources close to Starling Bank have suggested that the organisation is considering a new round of funding that would value the business at around £2.5 billion ($3.4 billion).

The challenger bank hasn’t committed to the decision yet, but would likely seek to raise money from its existing backers, such as the Goldman Sachs Group, instead of seeking new partners.

In its last round of funding last March, the bank raised £272 million from investors such as the Qatar Investment Authority, Millennium Management, and Fidelity Management & Research Co.

The discussions around whether to trigger the new funding round are still at the early stages, according to the unnamed sources, and no final decisions have been made on the timing of the round or the expected size.

Mortgage Expansion

Part of the reason Starling may be looking to generate new funds is the current bidding battle it is involved in for mortgage platform Kensington.

Kensington is a mortgage provider backed by Blackstone and Sixth Street that offers home loans to the self-employed and over 55s, two of the more specialist niche markets for mortgage customers. It was listed for sale at the end of 2021 after being owned privately for seven years.

Kensington is not being sold as a complete package. The mortgage assets are being looked at by organisations such as M&G and Pimco, while Starling is up against Barclays and at least one other high street lender in bidding for the platform.

Starling has already made moves into the mortgage market having bought Fleet Mortgages last year. The new deal could be worth up to £1 billion but would see Starling’s loan book expanded and a higher valuation of the business.

UK Listing Looming?

Starling could make further moves this year to expand its financial portfolio as it seeks the best value possible before listing, which could come as soon as the end of 2022.

Anne Boden, Starling’s chief executive officer and founder, said last year that an IPO could happen in late 2022 or early 2023, with London seen as the preferred venue.

The UK is hoping that Starling does commit to a London listing as the intense battle to secure the next generation of major public technology companies ramps up between the markets.

Earlier this year, Starling announced that it was launching banking-as-a-service, which would enable other banks and financial institutions to make use of Starling’s tech.