UK’s Starling Bank Investor Eyes £10B Valuation for Digital Banking Business

UK digital bank Starling might reach a valuation of nearly £10 billion within the coming years as it introduces its banking software internationally for competitive fees. This, according to one of its key investors.

Investment trust Chrysalis, which is reportedly Starling’s second-largest investor, told the FT that the app-based Fintech may supercharge its revenue by licensing its so-called Engine service. This product is basically software which enables firms to provide their own virtual banking solutions.

Richard Watts, co-manager at Chrysalis, said:

“We’ve been pushing for Engine to be developed to drive Starling’s growth, as this proposition opens up a global market for bank infrastructure.” 

He noted that while Starling’s customer deposits and loans increased, the expansion of Engine may lead to “a valuation approaching £10bn” for the Fintech.

Starling has been founded by Anne Boden back in 2014 as a digital bank offering retail current accounts. This was prior to the Fintech firm further expanding services into business lending as well as mortgages.

Starling Bank this past year signed Salt Bank in Romania and AMP Bank in Australia as its Engine clients.

However, Watts thinks Engine has a “strong pipeline” of clients and noted that the market was quite “significant” for growth.

He remarked:

“We think Engine could grow to 40-50 clients over the next few years, which could equate to a revenue opportunity of many hundreds of millions of pounds per annum.” 

But there are certain concerns regarding Engine’s growth potential because the banking as a service or BaaS platform has not been awarded any contracts to work with larger lenders.

Starling also made headlines this past year after a dispute with investors regarding its valuation.

Boden, who has now left her CEO role at Starling, had argued with investors regarding asset manager Jupiter’s move to sell its holding at a value that reduced Starling’s valuation from £2.5 billion to £1 billion – £1.5 billion. This, according to sources claiming to be familiar with the matter.

The UK based bank is now looking to list the business, however, it has not provided a definitive or set timeframe for doing so.

Starling reportedly recorded a pre-tax profit of £195 million last year, which is notably 6x greater than the past financial year, meanwhile, revenues surged to £453 million from a more modest £216 million.

Declan Ferguson, CFO, stated that the firm was really “excited” about the software part of the business model because it provides significant global potential for them “to bring the best of British technology to banks around the world.”

The fintech firm has recruited Raman Bhatia, the head of energy supplier Ovo, in order to serves as its new chief executive officer.

Bhatia, an ex- head at HSBC’s digital bank in the United Kingdom and Europe, is now expected to begin his role this summer.

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