The business, which bought specialist lender Fleet Mortgages for £50m in cash and shares last July, says its lending jumped as a result of the acquisition.
It says customer loans lifted by 45% to £3.3bn “mostly as a direct result of new mortgage lending” which was offset by reductions in small business lending under the government-backed bounce back loan scheme and coronavirus business interruption loan scheme pandemic programmes as firms began making repayments.
The bank, founded in 2014, says: “The group’s new mortgage lending has been achieved through a combination of acquisition of existing mortgage portfolios, acquiring a new subsidiary, Fleet Mortgages and forward flow agreements with third-party mortgage originators.”
The acquisition of Fleet Mortgages took the digital bank’s home loan lending to £2.1bn in June from £40m a year ago. Overall, the bank’s lending jumped to £4bn in June from £2.3bn a year ago.
It says its pre-tax return on tangible equity was 17.5% in June from 8.7% a year ago.
The group’s impairment provisions for expected credit losses were slashed by 27% to £9.8m, mainly driven by lower-than-expected losses from small businesses and “the removal of the uncertainty that surrounded the impact of the pandemic in the prior period”.
The bank says its operating efficiencies meant that its growth in customer numbers and transaction volumes did not lead to a similar increase in costs. It says its cost-to-income ratio was 77% for the year, compared to 116% a year ago, “mostly due to increased revenue but also constant monitoring of the cost base”.
Starling Bank founder and chief executive Anne Boden writes in the bank’s annual report: “In 2021 we focused on diversifying our asset base into new asset classes in order to bolster our resilience and bring in new revenue. This included the acquisition in July 2021 of Fleet Mortgages, a specialist buy-to-let mortgage lender.
“Starling continues to build on the mortgage capability it gained through Fleet, with more than £2bn of mortgages now on the balance sheet as of June 2022. This growth in lending has been funded by our growing deposit base, which increased by a further £600m in the three months to the end of June 2022.
“This type of lending now accounts for the majority of our loan book and in the current financial year the government-backed BBLS and CBILS schemes represent around 44%. This proportion will shrink further as we continue to diversify our lending portfolio.
“I’ve made no secret of our M&A ambitions and you can expect targeted acquisitions in the lending space to play a key role in the year ahead, but only at the right price and in the right market conditions.”
