Starling CEO Anne Boden: ‘We have fewer customers, but we have profitable customers’ © Simon Dawson/Bloomberg

Starling Bank is set to break even by the end of the year after customers started using its cards again, the digital lender said on Thursday.

Speaking ahead of the release of the company’s annual report, Anne Boden, Starling chief executive, said: “This crisis has been difficult . . . but we have launched new products, listened to what customers said, and we are actually now making huge progress towards being a profitable business.”

Starling said customer activity dropped sharply earlier in the year as the Covid-19 crisis hit, with card transactions down between 15 and 20 per cent compared with pre-pandemic levels.

However, average monthly spend on both retail and business accounts had completely recovered by July.

The company’s international expansion plans were also delayed by the pandemic, with efforts to apply for an Irish bank licence resuming this month.

The report showed Starling’s pre-tax losses doubled in the 12 months to November 30, from £27m to £54m.

However, revenues of £14m were more than 18 times higher than the previous year, and the company said it had made further progress since the start of 2020.

Starling was slower to launch than digital banking rivals such as Revolut and Monzo, which was founded by a breakaway group of former Starling employees.

Its total customer numbers, about 1m consumers and businesses at the end of 2019, remain lower than its competitors, but the company has been more successful in encouraging them to use Starling as a primary bank account. 

It has also developed a more significant lending business, including directly providing more than £670m of government-backed small business loans since the start of the pandemic.

“We have fewer customers, but we have profitable customers,” Ms Boden said. “This is all about building both sides of the balance sheet and ensuring that we can build a viable business model . . . We’ve never sought customers just for the sake of customer numbers.”

The Bank of England has been putting pressure on some smaller banks to improve governance and capital planning after growing concerns that some start-ups had “underestimated the development required to become a successful established bank”. 

Ms Boden said Starling’s capital requirements had been lifted slightly in recent months, but remained relatively low at 9.3 per cent of risk-weighted assets plus a fixed £3m overlay. Monzo’s equivalent capital requirement was lifted from 9 per cent to 13.65 per cent, with a fixed £21m on top.

Ms Boden said “the consultation that the PRA [Prudential Regulation Authority] is currently issuing is all about wanting banks to have sustainable models”, which she said Starling was demonstrating. 

The company has raised £100m since the start of the year from its two main backers — Austrian-born investor Harry McPike and Merian Global Investors — and Ms Boden said the groups had committed to providing further support.

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