JP Morgan and Lloyds considering acquisition of UK challenger Starling Bank

Written by Ruby Hinchliffe
30th November 2020

Starling Bank, having grown its user base to 1.9 million UK customers, has sparked acquisition interest amongst major high street banks.

Anne Boden, Starling

Whilst JP Morgan has its eyes on the start-up’s customer base, Lloyds wants its technology, according to The Times.

But Starling’s CEO and co-founder, Anne Boden, has made it clear she does not intend to sell up.

“I didn’t do all of this to sell out to a big bank,” Boden said in January, pointing instead to an initial public offering (IPO) in the next few years.

But having turned a profit a whole year earlier than it planned to, Starling’s IPO might be on the horizon.

Taking advantage of the Bounce Back Loan Scheme (BBLS), the challenger bank has built up its balance sheet to profitability. It also boasts customer deposits of £4 billion – more than rival Monzo, whose valuation dipped 40% this year.

A sign of UK bank consolidation?

Whilst Boden has made her intentions clear when it comes to Starling, the CEO could still change her mind.

And as The Times points out, despite Boden’s own wishes for Starling, its investors Harry McPike and Merian Global Investors may prefer to sell.

News of lender interest in Starling comes as high street bank TSB could be potentially shelved by its Spanish owner Sabadell.

If either or both players gained new owners, it could spark consolidation in the UK bank sector. The last major deal took place in 2018. The UK’s “first” challenger bank Virgin Money sold to Clydesdale and Yorkshire Banking Group for £1.7 billion.

What this means for Starling

For JP Morgan, a US bank looking to launch a digital challenger in the UK market next year, purchasing Starling would fast-track its expansion.

But this buyer would make less strategic sense for Starling, especially if you look at what Lloyds can offer the fintech.

The UK’s largest retail bank serves 30 million users. This means the challenger could choose between scaling its technology or acting as a steppingstone for a foreign player.

Being acquired by either could hamper Starling’s start-up culture. That’s something Boden will have to weigh up if she considers any future bids.

The Times says talk of an acquisition follow the launch of Starling’s “data room” and its current £200 million funding raise.

To date, it has raised £363 million, but has shrouded its valuation in mystery for some time.

A spokeswoman for Starling reiterated the CEO’s plans in response to The Times’ reports. “Anne has always said she will never sell to a big bank. An IPO is still in our sights.”