finance

Fidelity Leads a $376 Million Investment in Starling, Valuing the UK Digital Bank at $1.5 Billion

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  • British digital bank Starling said it's raised $376 million in an investment round led by Fidelity Investments.
  • The round values Starling at $1.5 billion, lifting it into the ranks of Europe's unicorn companies.
  • Starling said it would use the money to expand into Europe, and for anticipated mergers and acquisitions.

LONDON — Starling Bank, a digital-only challenger bank in the U.K., said Monday that it's raised £272 million ($376 million) in an investment round.

The fresh cash injection, led by Fidelity Investments, values Starling at £1.1 billion, or $1.5 billion. That lifts it into the ranks of Europe's unicorn companies — privately-held firms valued at $1 billion or more.

Qatar's sovereign wealth fund, the Qatar Investment Authority, also invested in Starling, along with U.K. pension scheme Railpen and hedge fund Millennium Management.

"Digital banking has reached a tipping point," Anne Boden, Starling's CEO, said in a statement Monday. "Customers now expect a fairer, smarter and more human alternative to the banks of the past and that is what we are giving them at Starling as we continue to grow and add new products and services."

Boden added: "Our new investors will bring a wealth of experience as we enter the next stage of growth, while the continued support of our existing backers represents a huge vote of confidence."

Starling said it would use the money to expand into Europe, and for anticipated mergers and acquisitions. The company last year restarted talks to secure a banking license in Ireland, after having initially put international expansion plans on hold due to the coronavirus pandemic. Meanwhile, Boden has previously expressed interest in buying a rival lender.

"We are probably going to acquire something during 2021," Boden said in an interview last year. "Lots of lenders are going to reevaluate their future and we are growing very, very fast. We're always looking for opportunities."

Boden denied a report claiming that JPMorgan and Barclays had shown an interest in buying Starling. She has previously indicated the start-up would seek an initial public offering.

Starling is one of Europe's most prominent digital banks. Founded in 2014 by Boden, a former banking executive, the firm has attracted 2 million users and now accounts for 5% of the U.K.'s small business banking market, with 300,000 small business clients.

While domestic rival Monzo has floundered, with its valuation dropping 40% last year amid the coronavirus pandemic, Starling has managed to achieve something many fintechs have struggled with: to reach profitability. The company eked out a profit of £800,000 in October and says it's been consistently profitable since, with net income now exceeding £1.5 million per month. The company says it's now on course to report its first full year of profit.

Starling got a big boost from the U.K.'s coronavirus lending schemes, becoming one of several fintech firms to offer government-backed loans to businesses during the pandemic. It now has gross lending of more than £2 billion and deposits of £5.4 billion.

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