Starling's profits dip 25% as bank takes blame for Covid loan losses

Digital bank Starling has suffered a 25% drop in annual profits and announced it would turn down government guarantees on £28m of Covid loans losses after conceding its own weak controls were to blame.
The admission stirs up a long-running controversy over Starling's handling of the government-backed bounce back loan (BBL) scheme, which was built to get money quickly to small businesses during lockdown. The scheme offered loans of up to £50,000 at 2.5% interest but carried little risk, with taxpayers picking up 100% of losses if the companies defaulted.
On Wednesday, Starling's chief executive, Raman Bhatia, said the bank had proactively reviewed some of the BBLs on its books, and conceded that a tranche of loans had been granted to applicants without proper checks. That meant they were unlikely to qualify for government guarantees, which might have otherwise seen taxpayers foot the £28m bill.
'In some cases, we think we may not have met all the procedures, all the requirements, of the scheme,' Bhatia told journalists during the conference call. He did not confirm whether Starling had discovered fraud or financial crime within that tranche of loans.
It comes just months after Starling was hit with a separate £29m fine for 'shockingly lax' financial crime controls, which the City regulator said had left the financial system 'wide open to criminals and those subject to sanctions'.
Together, the fine and BBL loss reduced Starling's profit for the year to March to £223m, down 25% from £301m a year earlier.
Bhatia said the bank may consider cutting or clawing back pay from executives if appropriate. 'We have discharged our duties to consider any impact on [remuneration] where appropriate. I can't share any further details.'
It is not clear whether that might impact Starling's founder and former chief executive, Anne Boden, who stepped down in 2023 citing a 'conflict of interest' between being a boss and a large shareholder in the lender.
Starling's distribution of Covid loans gained heightened attention in 2022 when former minister Theodore Agnew accused Starling of using the BBL scheme as a 'cost-free marketing exercise to build their loan book and so their company valuation', and failing to properly review borrowers before handing out taxpayer-backed loans.
Boden at the time vehemently denied Agnew's claims.
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Unlike large lenders, Starling opened BBL applications to new clients and saw its client base swell as a result. Its business customer base grew from 87,000 to 330,000: equivalent to adding 15,000 a month. And while the bank had only issued £23m of its own loans before the pandemic in November 2019, it had distributed £1.6bn in BBLs by the time the scheme closed in March 2021.
Commenting on the Financial Conduct Authority (FCA) fine and the BBL loss on Wednesday, Starling's chief financial officer, Declan Ferguson, said: 'We continue to make significant investment into our financial crime resource to ensure our risk management and compliance capabilities are commensurate with the high-growth business and experience.
'Working closely with both the FCA and the British business bank, we have also sought to limit the impact of these issues and ensure they remain one-offs, but now we are now more confident we are moving forward into the next stage of our growth on much stronger foundations.'

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Fig & Sparrow A couple of minutes' walk away from the alternative shopping emporium Affleck's Palace, at the heart of the Northern Quarter, this small independent coffee shop has been a staple in the area since 2013. Along with excellent coffee by local roastery Heart & Graft, you can order good value brunch dishes, sandwiches, soups and cakes by Stockport's Silver Apples bakery. It's a laid-back space with wooden floorboards, sage green chairs, pillars and exposed beams. Nab one of the three seats in the window to watch life on Oldham Street while you sip. Fort In the Great Northern Warehouse, next to its rainbow staircase up to Deansgate Mews, this slick coffee shop has its own roastery and takes making the perfect flat white or pourover seriously. Its minimalist interiors with pale grey walls, black tables and a wooden counter are flooded with light from huge windows onto Deansgate and upbeat music plays while you sip. There are accompanying pastries available to buy from Sticky Fingers bakery in Stockport – but look out for food and location changes due to an imminent move. Siop Shop This small café, in a former weavers' cottage on Tib Street, has all of the ingredients to make you smile: some of the best doughnuts in Manchester in creative flavours and designs, cheerful décor with tangerine orange, tomato red and sunflower yellow seating; and excellent coffee that is roasted in-house. Order one of its classic doughnut favourites, such as lemon meringue, or go for a sandwich baked in house. Looking for more reasons to love it? Siop Shop runs a gardening club every other Wednesday evening, too. Area: Northern Quarter Nearest Metrolink: Shudehill Website: Price: £ ManCoCo You can smell the coffee roasting in ManCoCo in the morning, as you pass by this roastery and coffee house tucked away under some railway arches near Deansgate station. 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There's a small menu of bagels and pastries if you're after more than a caffeine fix. Federal In its three central Manchester cafés, Federal aims to 'offer the city's sunniest welcome'. It does this through the combination of consistently warm and friendly service, a buzzy atmosphere, a tempting brunch menu and fantastic coffee by roasters Ozone. Peruse its coffee menu in its Oxford Road site, checking what the weekly batch brew is, and choose a seat next to its plant-lined windows or outside next to Circle Square. You can't book and there's often a queue – but these tend to go down quickly as the service is speedy. There are cakes and pastries by Stockport bakery Sticky Fingers for a sweet treat with your drink, too. Area: Oxford Road Corridor Nearest Metrolink: St Peter's Square Website: Price: £ Idle Hands Idle Hands first launched on Piccadilly Approach in 2015 before it moved to its current Northern Quarter base in 2018. 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Head to its industrial chic, light-filled Kampus space, for a coffee by Old Trafford based roasters Blossom and watch its pastry team making all of the treats on the counter behind a glass screen. You'll find it hard to resist taking some home. Foundation Designed by Manchester studio NoChintz, Foundation has sleek monochrome interiors, exposed brick and pays attention to detail in everything from lighting to hanging plants. When it launched in 2015, the aim was to create a flexible space for those who appreciate quality, with the motto 'coffee is everything'. Foundation's formula has proved to be a winner with five sites now open in Manchester. Its Whitworth site is attached to the hip of Whitworth Locke Hotel and has an extensive drinks menu featuring coffee classics, as well as some more unusual options such as the Kevlar – an Americano with butter and coconut oil. Haunt On the corner of central Peter Street and Mount Street, with large windows to gaze out of, Haunt is a popular spot to work during the day while it slips into a place to sip an aperitivo in the evening. There are speciality coffees by Leeds-based North Star Coffee Roasters, its own homemade chai lattes, bagels and sandwiches, and a brunch menu that includes a tiramisu French toast. The classy space is inspired by all-day Mediterranean cafés and bars with a chequerboard floor, marble tables and metro tiled bar. Area: Petersfield Nearest Metrolink: St Peter's Square Contact: Price: £ How we choose Every restaurant in this curated list has been tried and tested by our destination expert, who has visited to provide you with their insider perspective. We cover a range of budgets, from neighbourhood favourites to Michelin-starred restaurants – to best suit every type of traveller's taste – and consider the food, service, best tables, atmosphere and price in our recommendations. We update this list regularly to keep up with the latest opening and provide up to date recommendations. About our expert Cathy has lived in Manchester all of her life and still feels spoilt by the culture and varied dining options on her doorstep. You'll find her chasing her children around the Whitworth or sipping G&Ts in The Refuge.