Starling Bank reported that its gross loan book was down 4.1% to £4.7bn compared to a year ago, due to reductions among closed mortgages and government-backed pandemic-era business loans.
However, the loan book at its landlord business, Fleet Mortgages, jumped 50.7% to £2.3bn in the 12 months to the end of March, despite “contractions” in the buy-to-let market and “a turbulent interest rate environment”.
The digital bank said this rise was offset by a fall of 28.2%, or £0.9bn, at its closed mortgage portfolios and the run-off of government-backed Covid-era lending programmes, such as the Coronavirus business interruption loan scheme.
Mortgages account for 81.7% of lending at the group, up from 70.5% a year ago, in its annual accounts published today.
However, the bank said pre-tax profit jumped 54.7% to £301.1m, driven by growth in revenue, deposits, active customers and customer transactions.
Revenue lifted 50.6% to £682.2m, while total deposits were up 4% to £11bn.
But the bank, led by interim chief executive John Mountain, added it continued to be “pessimistic about the economic outlook for the UK”.
It said: “The outlook remains challenging in the UK due to ongoing uncertainty regarding the residual impact of the cost of living on affordability, which is anticipated to lead to increasing loan balance arrears and low growth.”
The business pointed out that its “modelling is more pessimistic than the prior year with expected muted gross national product growth, higher interest rates for longer, and stickier core inflation”.
The lender is understood to be committed to a future London Stock Exchange flotation, but has not set out a timeframe for publicly selling its shares.
Starling bought Fleet Mortgages in July 2021 for £50m in cash and shares.
