Starling's profit for FY26 declines once more as the neobank sets aside more funds for potential credit losses.

      The UK challenger bank backed by Goldman Sachs has recorded a second consecutive annual decline as it increases its provisions for expected credit losses. This comes in addition to the fallout from the compliance issues related to the BBLS Covid loan and the Financial Conduct Authority's £29 million fine for anti-money laundering. Bloomberg reported that Starling Bank's annual profit fell again for the year ending 31 March 2026, as the neobank took extra provisions for expected credit losses in its retail lending portfolio.

      This marks the company's second annual decline, following a 26% drop in pre-tax profit reported in May 2025. For FY25, the baseline against which the newest results are assessed was a pre-tax profit of £223.4 million on £714 million in revenue, which had decreased from £301 million in the previous year due to the FCA fine and initial provisions for BBLS Covid loan exposure. Starling pointed out a set of BBLS loans that might not have met a guarantee requirement due to prior weaknesses in fraud checks and voluntarily relinquished the government guarantee, making the bank responsible for any losses from that segment.

      The latest FY26 results carry forward those provisions, and the Bloomberg article's framing of "presumes more credit losses" indicates that management has set aside additional expected credit loss reserves rather than utilizing existing provisions. This accounting reflects the IFRS 9 forward-looking loss approach, aligned with management’s assessment of the BBLS tranche's performance over the remaining loan duration.

      Starling’s investor materials describe the lending portfolio as including retail mortgages, legacies from the BBLS, and an expanding commercial-SME section, with the BBLS loans being the main driver of provisioning changes. Customer and deposit metrics showed some resilience against the FY25 baseline, with customer accounts increasing by 10% year-on-year to 4.6 million and deposits growing to £12.1 billion, alongside revenue climbing from £682 million to £714 million.

      Although the Bloomberg report on FY26 highlights ongoing customer growth, credit loss provisions have overshadowed the main figures. Raman Bhatia, who became group CEO in March 2024 after his tenure at OVO and previously leading HSBC’s digital retail bank in the UK and Europe, has been managing the bank through the BBLS clean-up and FCA fine impacts for two consecutive reporting periods.

      The FY26 results are the first to reflect decisions made entirely under his leadership, following founder Anne Boden's resignation from the board in 2024. Bhatia’s prepared comments, as reported by Bloomberg, characterize the additional provisions as a singular legacy adjustment, not indicative of a fundamental weakening of the core lending portfolio.

      In the broader context of the UK banking sector, the FY26 release is situated amidst HSBC's recent £4 billion clean-tech lending initiative in China and Standard Chartered's announcement of 7,000 job cuts driven by AI, both of which indicate how traditional UK banks are preparing for the next economic cycle. Starling, recognized as the most successful UK neobank transitioning from a challenger to a profitable entity, continues to navigate the same regulatory and customer landscape but with a significantly smaller balance sheet and legacy loan issues that larger banks resolved earlier in the post-Covid recovery phase.

      Starling did not disclose specific details in the Bloomberg report, such as the headline pre-tax profit for FY26, the amount of additional credit-loss provisions compared to last year's £800,000 BBLS reserve, customer and deposit growth for the year, or whether BBLS-related provisioning will extend into FY27. The full FY26 annual report is expected to be published soon on the Starling investor page and will include a detailed breakdown by segment. Sacra’s database typically captures the headline metrics shortly after their release. The next key point of interest will be how the FY26 report delineates credit-loss provisioning between BBLS legacies and new flows from the current retail mortgage book, which has faced challenges from rate and affordability pressures experienced by UK banks over the past year.