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British digital bank Starling on Thursday reported its debut annual profit as revenues at the firm almost doubled.
The lender swung to a pre-tax profit of £32.1 million ($38.3 million) in its fiscal year ending March 2022, having lost £31.5 million a year earlier.
Revenues at the start-up reached £188 million, up nearly 93% from 2021.
It marks a rare show of strength in the fintech sector at a time when some firms in the space are dealing with reduced valuations and racking up hefty losses.
Klarna, the Swedish buy now, pay later firm, recently saw its valuation nosedive 85%, while publicly-listed rival Affirm has fallen 69% year-to-date.
“What we’re seeing is that there is a correction in fintech stocks that are not profitable,” Starling CEO Anne Boden told reporters on a call Thursday.
“If you look at the listed markets and certain entities such as buy now pay later and such like, we see a huge correction going on there.”
Some fintechs are also pushing back their initial public offering plans as fears of a possible recession around the corner put the markets on edge.
In Starling’s case, the company likely won’t list its shares publicly until 2023 or 2024, Boden said.
Based in London, Starling is one of a multitude of digital-only banks that flooded the U.K. in the past decade. Start-ups in the space have gone on to attract millions of customers and lofty valuations, with Revolut now valued at $33 billion and Monzo worth $4.5 billion.
Starling itself was last privately valued at £2.5 billion in a funding round closed earlier this year. The firm’s shareholder base includes the likes of Goldman Sachs, Fidelity and the Qatar Investment Authority.
The firm benefited from a sharp increase in mortgage lending after the acquisition of specialist lender Fleet Mortgages. Its loan book increased 45% to £3.3 billion in its 2022 financial year.
As of June 2022, Starling’s total gross lending stood at £4 billion, £2 billion of which was made up of mortgages.
Starling had also been boosted by government-backed lending schemes introduced in the wake of the coronavirus pandemic, in particular the Bounce Back Loan Scheme.
Lord Agnew, the former U.K. anti-fraud minister, accused the bank of not doing enough to tackle exploitation of the scheme by fraudsters.
Boden said Starling had written to Agnew requesting a meeting, but said he had declined.
“He is just wrong,” she said Thursday. “Starling has done a fantastic [job] in making sure we did all the checks necessary and more.”
On Monday, Starling scrapped plans to get a banking license with the Irish central bank, four years after applying. The move would have allowed Starling to offer its services to customers across the European Union.
Boden said the U-turn was “tough” but that, strategically, launching in Ireland in the near term would have been the “wrong decision.”
Starling is still open to the idea of expanding by taking over a European lender, she added however “it would have to be in a bigger country.”