Starling Bank Trading Update - October 2020

20th November 2020

London, 20th November 2020: Starling Bank today publishes a trading update for the three months to 31 October and announces that it has become the first of the new breed of digital banks to break even, thanks to strong momentum in customer accounts and revenues, coupled with a stable opex base. With nearly 1.8 million accounts, c.£4 billion in deposits and c.£1.5 billion of lending, Starling expects to be profitable on a monthly basis going forward as it continues to grow and gears up to scale across Europe. Read the CEO’s latest blog.

Number of Accounts - Retail

October 2019

827k

Last trading update (July 2020)

1.25m

October 2020

1.42m

Number of Accounts - Business

October 2019

74k

Last trading update (July 2020)

200k

October 2020

256k

Number of Accounts - Other Currency (EUR and USD)

October 2019

39k

Last trading update (July 2020)

90k

October 2020

100k

Average Deposits - Business

October 2019

£11,250

Last trading update (July 2020)

£15,250

October 2020

£14,900

Average Deposits - Sole Trader

October 2019

£1,700

Last trading update (July 2020)

£2,850

October 2020

£3,100

Average Deposit - Retail

October 2019

£900

Last trading update (July 2020)

£1,500

October 2020

£1,625

Deposits

October 2019

£897m

Last trading update (July 2020)

£3.1bn

October 2020

£4.0bn

Gross Lending

October 2019

£37m

Last trading update (July 2020)

£1.0bn

October 2020

£1.5bn

Annualised Run Rate Revenue

October 2019

£26m

Last trading update (July 2020)

£80m

October 2020

£108m

Operating Costs (annualised)

October 2019

£74m

Last trading update (July 2020)

£85m

October 2020

£98m

Operating Profit (annualised)

October 2019

(£48m)

Last trading update (July 2020)

(£4m)

October 2020

£10m

Key Metrics

October 2019

Last trading update (July 2020)

October 2020

Number of Accounts - Retail

827k

1.25m

1.42m

Number of Accounts - Business

74k

200k

256k

Number of Accounts - Other Currency (EUR and USD)

39k

90k

100k

Average Deposits - Business

£11,250

£15,250

£14,900

Average Deposits - Sole Trader

£1,700

£2,850

£3,100

Average Deposit - Retail

£900

£1,500

£1,625

Deposits

£897m

£3.1bn

£4.0bn

Gross Lending

£37m

£1.0bn

£1.5bn

Annualised Run Rate Revenue

£26m

£80m

£108m

Operating Costs (annualised)

£74m

£85m

£98m

Operating Profit (annualised)

(£48m)

(£4m)

£10m

Revenue

Starling generated a total operating income of £9.0m for the month of October 2020, which represents an annualised revenue run rate of c.£108m. This figure is split £5.5m of net interest income and £3.5m of gross fees and commissions income.

This is a >4x increase in revenue compared to 12 months ago, and a c.30% increase from Starling’s last trading update 3 months ago. Interest income continues to be supported by strong growth in lending volumes, particularly the extension of government-backed lending schemes.

Interchange income continues to perform well, having increased over 20% between July and October 2020, despite the increased COVID-19 restrictions put in place around the country in recent months. This is the result of strong primary account growth, as well as increased customer engagement and card spend. The vast majority of our transactions continue to occur domestically with international spend declining after a strong recovery over the summer months.

Starling continues to launch new products to the market, including chargeable subscription features such as the SME Toolkit and Kite card. While there has been strong uptake of these products, they are still a small contribution to operating income relative to interest income and present further upside to revenues and profitability in the future.

Interest Income

October 2019

£1.0m

October 2020

£5.5m

Annualised (October 2020)

£65.7m

Interest Expense

October 2019

(£0.1m)

October 2020

£0.0m1

Annualised (October 2020)

£0.0m

Net Interest Income

October 2019

£0.9m

October 2020

£5.5m

Annualised (October 2020)

£65.7m

Fees and Commissions Income

October 2019

£1.3m

October 2020

£3.5m

Annualised (October 2020)

£41.9m

Total Operating Income

October 2019

£2.2m

October 2020

£9.0m

Annualised (October 2020)

£107.7m

Operating Income

October 2019

October 2020

Annualised (October 2020)

Interest Income

£1.0m

£5.5m

£65.7m

Interest Expense

(£0.1m)

£0.0m1

£0.0m

Net Interest Income

£0.9m

£5.5m

£65.7m

Fees and Commissions Income

£1.3m

£3.5m

£41.9m

Total Operating Income

£2.2m

£9.0m

£107.7m

Operating expenses

Operating costs for October were £8.1m, with only a 30% increase in the past year while customer accounts have almost doubled. Fixed costs have increased by c.15% in the past year whilst revenue has increased >400%.

Operating Expenses

October 2019

£(6.2)m

October 2020

£(8.1m)

Annualised (October 2020)

£(97.6m)

October 2019

October 2020

Annualised (October 2020)

Operating Expenses

£(6.2)m

£(8.1m)

£(97.6m)

Profit

Starling generated a positive operating profit of £0.8m for the month of October 2020, which represents £10.1m on an annualised basis.

Customer Accounts

Customer numbers continue to see strong traction, particularly SME accounts which have increased >3x in the past year. Starling has now over 1.7 million accounts in total, including almost 1.42m retail accounts and over 256,000 SME accounts in addition to more than 100,000 multi-currency accounts.

Current Account Switch Service and Which?

Starling is winning more customers than any other UK Bank through CASS. In Q2 2020, Starling recorded the highest net switching gains of any bank in the UK with nearly 12,000 customers switching to Starling on a net basis2 and has topped the Which? Customer satisfaction table for 2020. Starling received an overall customer score of 88% and recommended provider status for the second year in the row.

Customer Deposits

As at the end of October, Starling had total customer deposits of c.£4bn. Starling continues to see strong growth in customer deposits, particularly for business customers with SME deposits increasing >5x over the last twelve months.

Total Deposits

October 2019

£897m

October 2020

£3,957m

October 2019

October 2020

Total Deposits

£897m

£3,957m

Lending

As of the end of October 2020, Starling had c.£1.5bn of lending on balance sheet, with £86m being retail customer lending and the remaining £1,379m being SME lending. We continue to serve small business customers through these difficult times via the Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS).

BBLS

Value (£)

£1,021m

CBILS

Value (£)

£358m

Government-backed lending3

Value (£)

£1.4bn

Value (£)

BBLS

£1,021m

CBILS

£358m

Government-backed lending3

£1.4bn

1 Net of hedging

2 For Q2 2020, Starling recorded 12,786 gains and 788 losses

3 Includes £373m originated via forward flow arrangements


About Starling Bank

Starling is a leading digital bank, founded in 2014 and voted Best British Bank in 2018, 2019 and 2020. Its retail banking app offers personal, business, joint, Euro, USD, child and current accounts on Android and iOS. The Starling Marketplace offers customers in-app access to third party financial services. Starling also offers ground-breaking B2B banking and payments services.

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