Starling Bank has reported a 26% fall in annual pre-tax profit, reflecting what executives described as a “difficult time” marked by legacy compliance issues and higher operating costs. The UK neobank, founded in 2014 by fintech pioneer Anne Boden, posted a profit of £223 million for the year ending March 2025 — down from £301 million the previous year.
The decline comes as Starling absorbs the impact of a £29 million fine over failures in its anti-money laundering (AML) controls, alongside a £28.2 million provision related to the government’s Bounce Back Loan Scheme (BBLS).
Despite the setback, the bank continued to grow its revenue, rising to £714 million from £682 million a year earlier. Customer deposits also held strong, totalling £12.1 billion across more than 4 million retail and SME customers, cementing Starling’s place as one of the UK’s leading digital banks.
New leadership, rising costs
The year also marked a transition at the top. Anne Boden stepped down as CEO in 2023 and later exited the board in 2024. She was succeeded by Raman Bhatia, previously of energy firm OVO, who now faces the task of navigating Starling through regulatory headwinds and scaling its growth strategy.
Operating costs surged to £403 million, up from £332 million, as the bank invested in expanding its workforce. CFO Declan Ferguson noted during the earnings call that the rise was part of a broader effort to support growth and product innovation.
Engine delivers global traction
Starling’s banking-as-a-service arm, Engine, has emerged as a bright spot. The platform licenses Starling’s proprietary banking software to third-party institutions, and it’s already showing promising results.
In the past year, Romanian challenger Salt Bank and Australia’s AMP Bank both launched digital platforms powered by Engine. Fee income from these partnerships climbed to £8.7 million, up from £2.3 million the previous year — a sign the SaaS side business may become a more meaningful revenue stream in the long term.
“Engine continues to outperform expectations,” Ferguson said, highlighting the growing demand from global banks seeking to modernise their infrastructure.
Legacy issues weigh on profits
The two main drivers behind the profit dip were historic issues. First, the £29 million AML fine issued by the UK Financial Conduct Authority. The regulator said Starling’s compliance systems failed to keep pace with its rapid growth between December 2019 and November 2023.
Chairman David Sproul addressed the penalty in the financial statement, saying, “This was a very difficult time for everyone at Starling. I apologised to our customers and stakeholders on behalf of the Group. We have learned important lessons and emerged stronger as a result.”
Second, Starling uncovered a batch of BBLS loans issued before April 2021 that may not have met government guarantee requirements. The bank proactively reported the issue to the British Business Bank and chose to waive the government guarantee for these loans — adding a £28.2 million provision to its books.
Starling isn’t alone in facing AML-related costs. Fellow UK neobank Revolut was fined €3.5 million in April over money laundering concerns, and Klarna, the Swedish BNPL giant, was hit with a $46 million fine late last year for similar violations.
As regulatory scrutiny intensifies, fintechs are under mounting pressure to beef up compliance, particularly in the wake of rapid growth and product diversification.
For Starling, the focus now turns to rebuilding investor confidence, expanding Engine’s global footprint, and maintaining momentum in a market where profitability remains elusive for many digital challengers.
