Starling Bank's Profits Take a Dive: Is the Government Guarantee a Joke?

Houston We Have a Problem (and a Profit Loss!)

Alright folks Saul Goodman here your favorite attorney at law and occasional financial guru – because let's face it who else are you gonna trust with your money? Even I know there is more to the law than just money. Anyway so I'm reading this article about Starling Bank this hip online lender across the pond and apparently they've hit a bit of a snag. A 'snag' being a 26% drop in profits. Ouch! I've seen better numbers on a losing lottery ticket. They are talking about a profit before tax of £223.4 million which let me tell you sounds like a lot but not when you're supposed to be swimming in cash Scrooge McDuck style! Revenue is up a bit like 5% but that’s like bringing a squirt gun to a machine gun fight!

The Fine Print? More Like a Financial Crime Scene!

Now the article says the problem stems from two things: a regulatory fine and some shenanigans with Covid era business loans. First they got slapped with a £29 million fine from the U.K.'s Financial Conduct Authority. Apparently their financial crime prevention systems were about as effective as a screen door on a submarine. I mean come on people! You gotta keep those pesky criminals out! That's kind of the whole point of being a bank. It is like letting Badger and Skinny Pete handle your security! What were they thinking?

Bounce Back? More Like Bounce *Out* of Your Pocket!

Then there’s this Bounce Back Loan Scheme (BBLS). Sounds innocent enough right? It's all about helping businesses survive the pandemic. But here's where things get interesting. Starling 'identified a group of BBLS loans which potentially did not comply with a guarantee requirement'. Translation: They messed up big time. The government guaranteed these loans meaning taxpayers were on the hook if the businesses defaulted. But Starling in a rare moment of corporate responsibility – or maybe just to avoid jail time – decided to 'volunteer to remove the government guarantee on those loans.' Which sounds noble but cost them £28.2 million in provisions. Better Call Saul right? I am always here to clean up messes.

Transparent? Or Just Trying Not to Get Arrested?

Declan Ferguson Starling's CFO says they dealt with this whole mess 'transparently and in full cooperation with the British Business Bank.' Right because transparency is always the best policy… unless you're trying to hide a meth lab in the desert. In that case opacity is your best friend. Anyway Starling is trying to spin this as a 'legacy issue.' But you know what they say: 'The past is never dead. It's not even past.' – Faulkner and probably someone I defended once.

Goldman Sachs? More Like Golden Showers of Problems!

Starling's got some big name shareholders like Goldman Sachs Fidelity Investments and the Qatar Investment Authority. Which on paper sounds impressive. But I've learned in this business that even the biggest names can be involved in the dirtiest deals. Remember AIG? Sometimes it is better to have a small bank. Remember when I was managing money? Great times.

Competition? More Like a Cutthroat Cage Match!

And to top it all off Starling's facing stiff competition from other fintechs like Monzo and Revolut. It's a dog eat dog world out there folks. Just like in the court room. You either win or you end up wearing orange. So what's the takeaway here? Starling Bank's having a rough time. But hey every cloud has a silver lining. And if that silver lining involves me getting a fat retainer fee then I'm all in! After all I am known for fixing problems... for a price.