Starling IPO: Everything you need to know about Starling Bank

Starling Bank IPO
Rebecca Cattlin
By :  ,  Senior Financial Writer

What do we know about the Starling IPO?

CEO Anne Boden stated that the Starling Bank IPO is one or two years away – which puts it at some time in late 2022 or 2023. Boden also said the listing would likely take place in London, which would be the default option given it’s a UK-based company.

A Starling IPO would be one of a few big listings potentially coming to the LSE this year, with Monzo and Huel weighing up their options too.

How to trade the Starling Bank IPO

Once Starling Bank has been listed, you’ll be able to trade its shares in the same way as any other stock on the market.

In the meantime, you can trade shares with City Index in these easy steps:

  1. Open a City Index account, or log in if you’re already a customer
  2. Search for the company you want to trade in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade

Alternatively, you can practise trading shares in a risk-free demo account.

What does Starling Bank do?

Starling Bank is a UK challenger bank that was founded in 2014 as a fee-free checking account via an app. It’s since sought to change the way consumers manage their finances by providing all the services that individuals and businesses need without any of the ‘faff’ of traditional banking.

There are no physical branches as the Starling Bank platform is primarily accessed via its mobile app but users can also view their account on the company’s website.

To open an account applicants just need a smartphone and UK valid ID. Then, customers will get a debit card, management tools and an optional overdraft, without interacting with a single human.

Initially, Starling was a one-trick pony, focused only on its current account. But the company quickly expanded to offer direct access to a selection of third-party financial services via the Starling Marketplace – partner providers include TransferWise, PensionBee and Wealthify.

In 2018, Starling also launched its business accounts with bookkeeping and accounting features. It also launched its lending services. Starling’s gross lending reached £2.2 billion in 2021, while the total deposits hit £5.8 billion.

Starling has also been busy adding new features to its repertoire, including the Bills Manager, a new feature that enables customers to have a direct debit or standing order taken from money in any of their ‘Savings Spaces’.

Thanks to its range of offerings, Starling boasted the highest net gains for current account switchovers of any bank in the UK, as of Q1 2021. It has over 2.14 million open accounts, comprised of 1.67 million GDP personal accounts, 336,000 GDP business accounts and over 100,000 EU accounts.

How much is Starling worth?

Starling was worth £1.1 billion (or $1.5 billion) as of its last valuation in March 2021. It reached the valuation after receiving £272 million ($375 million) in a Series D funding round led by Fidelity Management & Research.

The cash injection not only meant Starling achieved unicorn status, but it became one of Europe’s largest unicorns.

How does Starling Bank make money?

Starling makes money via subscriptions, interchange fees, interest payments and other fees – including overdraft, transfer, referral and licencing fees.

The bank’s personal, business and sole trader accounts don’t have fees associated with them, but charges do apply if a user opens a second current account (£2 per month), a Kite account (£2 per month) or a USD business account (£5 per month). Starling does also charge a monthly subscription of £7 per month for its Business Toolkit, which comes with additional bookkeeping support, invoicing and VAT features.

Most of its revenue comes from the interchange fees it charges on transactions. Starling’s standard fee is 1% of the total card payment. The fee is paid by the merchant that receives the payment and is shared between Starling and Mastercard.

Is Starling profitable?

Starling first reached profitability in October 2020, and according to its 2021 annual report – which covered 2019 to 2021 – has maintained profitability each month since. It is the most profitable UK challenger bank.

The report stated that Starling had not only halved its losses from the 16-months prior but that its revenues had jumped 600% from £14 million in 2019, to £97.6 million in 2021. Considering that in 2020, Boden expected revenues to reach approximately £80 million a year, the bank is already coming in above its own expectations.

Learn how to read a company earnings report.

Starling has not yet proposed a dividend for its common shares, but an official dividend policy will be released in any IPO prospectus given.

What is Starling Bank's business model?

Starling’s business model is built around the ‘smart use of modern technology’ according to Boden. While competitors, like Monzo, have relied on outsourcing or buying systems, Starling has brought its expertise in house. Its proprietary tech resources have allowed them to scale products quickly and reduce costs associated with suppliers. This model is what the business attributed its success throughout Covid-19.

Starling has positioned itself as a sustainable bank, that’s committed to fighting climate change and becoming a net-zero company. The company’s ethos is also vastly popular among the younger generations who have criticised the investment choices of traditional banks for funding arms production, environmentally damaging practices and human trafficking.

Learn more about ESG investing.

So far, Starling has focused on the UK, strengthening its main base and only dabbling in the Irish banking landscape. But one of the main moves we’ll see Starling make over the next couple of years is the company’s expansion across Europe, which it aims to kick start in the first half of 2023 in September.

It was also reported in December 2021 that Starling was looking to move into the lending space via acquisitions. Boden told the Daily Mail that the bank would buy at least one lending platform in H1 2022.

The company already owns Fleet Mortgages – a professional and semi-professional buy-to-let focused lender – which it bought in July 2021. If the digital bank can be the first to offer user-friendly, app-based mortgages, it could rapidly boost its popularity and firmly place it ahead of the competition. The service would also bring Starling in line with more traditional banks.

Who are Starling’s competitors?

Starling’s most direct competitors are usually listed as other digital challenger banks, Monzo and Revolut. But more than ever, CEO Anne Boden regards traditional banks like NatWest and Barclays as the main competition when it comes to market share.

The company aims to take on the Big Five over the next five years, however, Starling is still a long way off the revenue and user figures that traditional lenders bring in.

Research conducted in 2020 showed that in terms of the market share of UK current accounts, Starling is gaining some ground. While Barclays has a 15% share, Starling’s had grown from 3% to 7% over the previous 18 months.

In terms of challenger banks, Revolut has more app downloads than the other digital banks as of 2020. That’s because Revolut is far more Euro-centric and has also managed to secure permits to launch Singapore and the US, whereas both Starling and Monzo are UK-focused. Revolut re-applied for a UK license in 2021, which could shake up the domestic banks.

That being said, Starling’s business strategy has proven more robust than both its main competitors. While Monzo and Revolut had to lay off significant numbers of staff during the pandemic, Starling didn’t furlough any staff and became the most profitable challenger bank in the UK.

Monzo is also expected to list in 2022. Take a look at our guide to Monzo’s IPO.

Who owns Starling Bank?

Starling is currently a privately-owned company. Some of the bank’s largest investors include Goldman Sachs, Fidelity Investments, Qatar’s sovereign wealth fund, Qatar Investment Authority and the British pension scheme Rallpen.

There were rumours Barclays and JP Morgan Chase were reportedly planning to acquire Starling, but the bank declined the offers.

Starling’s board of directors

Starling Bank’s board of directors between 2019 and 2021 was listed as follows:

  • Oliver Stocken CBE, Independent Non-Executive Chairman
  • Carolyn Clarke, Independent Non-Executive Director
  • Tracy Clarke, Independent Non-Executive Director
  • Steve Colsell, Independent Non-Executive Director
  • Marian Martin, Independent Non-Executive Director
  • Victoria Raffé, Independent Non-Executive Director
  • Mark Winlow, Independent Non-Executive Director
  • Lazaro Campos, Non-Executive Director
  • Marcus Traill, Non-Executive Director
  • Anne Boden MBE, Chief Executive Officer
  • Tony Ellingham, Chief Financial Officer

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