Starling Bank is increasingly looking to work with other lenders following its partnerships with peer-to-peer lending platforms Zopa and Funding Circle.
The bank has a forward flow arrangement with Zopa and a deal with Funding Circle to lend £300m through the coronavirus business interruption loan scheme (CBILS) to small firms through its platform.
Declan Ferguson, chief strategy officer at Starling Bank, praised these deals and told brokerage Goodbody the bank is on the search for more partnerships.
“We use the forward flow arrangements, it’s a way for us to manage our balance sheet growth to leverage the experience of non-bank lenders who are very good in the niches they chose,” he said to John Cronin, an analyst at Goodbody.
“Funding Circle and Zopa are very good in the consumer and unsecured small- and medium-sized enterprise (SME) lending space because they’ve been doing it for years. These partnerships have worked really well for us, in particular with Funding Circle because we funded a good proportion of their CBILS loanbook.
“We are increasingly searching for other relationships like the forward flow type of situation we have done with Funding Circle.”
Ferguson also forecasted more consolidations among banks and “strong lenders”.
This follows Metro Bank’s high-profile acquisition of RateSetter which was completed last month.
“We also think there will be consolidation in the sector and a number of opportunities for banks without asset generation capabilities, or smaller asset generation capabilities like ourselves, to combine with other businesses that have lending franchises and are strong lenders,” he told Cronin.
As of the end of July, Starling Bank had delivered £2.4m through CBILS itself, and £673m through the bounce back loan scheme. However, a further £227.75m in CBILS lending was deployed through Funding Circle.
Starling has grown its deposits from £600m to £3.5bn over the past 12 months, driven by customer growth and increasing customer engagement.
According to Ferguson, the challenger bank hopes to gain its Irish banking license next year after putting the plan on hold in 2020 due to Covid-19.