Digital banking pioneer Starling has seen its annual profits plummet by 25% after acknowledging that poor internal controls led to £28 million in losses from government-backed Covid loans. The bank’s leadership has made the unprecedented decision to forgo government guarantees on these loans, effectively absorbing the full cost of what they admit were improperly vetted applications.
Chief Executive Raman Bhatia revealed during a conference call that the bank had conducted an internal review of its bounce back loan portfolio and discovered that numerous loans were approved without meeting proper verification standards. This admission reignites long-standing criticism about Starling’s aggressive expansion during the pandemic, when it grew its business customer base from 87,000 to 330,000 clients.
The financial blow comes on top of a £29 million regulatory fine for “shockingly lax” financial crime controls, bringing Starling’s total profit down to £223 million from the previous year’s £301 million. The bank’s executives may face pay cuts as the institution works to rebuild trust and strengthen its compliance frameworks moving forward.
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