Starling bank continues to grow as it receives further funding
Starling Bank has announced that it has raised £272m in its latest fundraising round, which places the value of the bank now at £1.1 billion.
It comes after another successful period for the bank, with the four months from October 2020 to January 2021 showing successive profits. The bank has confirmed that an initial public offering is now going to take place at “the very, very earliest at the end of 2022”.
The bank has attributed much of its recent success to the lending driven by the government-backed schemes designed to support businesses through the Coronavirus pandemic. Starling now has over £2bn gross on loan to businesses and customers – a 33% increase since October – and has almost £5.5bn in deposits.
Plans for a post-COVID market
The new funding has been earmarked to help grow Starling’s consumer lending business as the support for the government schemes begins to wind down over the coming months. The bank also reaffirmed its commitment to expanding into Europe, to help grow its customer base beyond the UK.
Speaking to the FT, the chief executive of the bank Anne Boden said that the Bounce Bank Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS) had been a “defining moment” for the bank in its growth but profitability had to now be secured.
What we now need to do is transition into other forms of lending and move away from government-backed lending. We’re now in the situation where we are raising capital to build up our balance sheet, do more lending, support our expansion into Europe and plan for M&A.
Anne Boden, Starling Bank chief executive
The government has confirmed that as of 21st February 2021, more than £67bn had been lent to businesses as part of the BBLS and CBILS schemes. £2bn of that has come from Starling Bank. Starling has 2m accounts but only 300,000 of these are business banking accounts – the corporate lending is a disproportionally high part of its money lending.
The latest round of £272m investment has been raised from funding partners Fidelity, Qatar Investment Authority, Railpen and Millennium Management. These global financial investment funds signify the value and importance being placed on Starling, with Boden saying that the specific backers are an “affirmation of Starling’s success” and that they demonstrate that people see Starling as “among the HSBCs and Barclays of the world.”
The popularity of challenger banks has grown significantly over the course of the pandemic, as more customers begin to shift their behaviour online and we see the changing attitudes to loyalty brought on by a more digitally savvy young consumer base, and the lasting effects of the banking crisis that have created mistrust with some of the larger institutions.
Digital banking has reached a tipping point. Customers now expect a fairer, smarter and more human alternative to the banks of the past and that is what we are giving them at Starling as we continue to grow and add new products and services. Our new investors will bring a wealth of experience as we enter the next stage of growth, while the continued support of our existing backers represents a huge vote of confidence.