Starling Bank will buy a mortgage book worth about £ 1bn early next year for turbocharged growth


Starling Bank to buy mortgage book worth £ 1bn for turbocharged growth before floatation early next year


Starling Bank bought a mortgage book worth about £ 1bn early next year for turbocharged growth.

The start-up, founded by Annie Boden in 2014, is thought to have bought the home loans portfolio from specialist lender Kensington Mortgages.

Kensington focuses on mortgages for customers who do not get good deals elsewhere and those that are ignored by high street banks such as the self-employed.

Finger on the pulse: Starling is thought to have bought a home loan portfolio from Kensington Mortgages

Kensington – which is owned by private equity firms Blackstone and Sixth Street – recently hired Morgan Stanley to lead the sales process.

The deal is part of Newbank’s big push to grow ahead of its stock market listing next year or 2023.

This follows Starling’s first acquisition in July, which bought Fleet Mortgages for £ 50 million in shares and cash.

Fleet Mortgages, based in Hampshire, focuses on lending to professional landlords through consultants.

Boden said at the time that ‘the acquisition … was the beginning of our move to mortgages’.

Starling is one of a clutch of new digital banks with no branches offering services through mobile phone apps. Analysts say these banks have helped shake up the poor services offered by high street banks.

But some have grown to the size of the big four – poses a meaningful challenge to Barclays, HSBC, NatWest and Lloyds Banking Group.

The new banks are under pressure to make a profit after the Financial Conduct Authority last year warned that start-ups would want to reach profitability within five years of being sustained.

Starling recently said it was on track to post its first annual profit for the year ending March 2022. The bank has been posting monthly profits since October.

Boden set up the bank with Tom Bloomfield, who later left to set up rival Monzo.

It was initially supported by the mysterious billionaire investor Harold McPike, who invested £ 150 million.

Boden told The Mail on Sunday that this is the right time to start a bank early this year as regulations are loosened to pave the way for new lenders and high-street banks are not investing in digital customer services.

Starling has since attracted a string of top investors, including Jupiter, Fidelity and Goldman Sachs.

It raised £ 272 million in March in a Fidelity-led fund round involving support from the Qatar Investment Authority, the railway pension scheme and the investment arm of the fund group Millennium Management.

Starling is worth around £ 1.1bn.

The bank has accumulated more than 2.3 million accounts. In its last financial update, Starling said the after-tax loss for the 16 months to March was down by half to £ 23.3 million. Revenue rose 600 per cent to £ 97.6 million.

Starling’s deposits have grown to £ 5.8 billion, but its total debt has fallen back to £ 2.2 billion.

Kensington and Starling declined to comment.

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