Starling Bank Profits Fall 3% as Engine SaaS Unit Grows 25%

Interest income at Starling Bank fell by £123 million in the fiscal year ending March 2026, squeezed by Bank of England rate cuts averaging 91 basis points across the year. Pre-tax profit came in at £217 million, down three per cent, as group revenues slipped from £940 million to £887 million.

Over the same period, Engine by Starling, the software-as-a-service (SaaS) unit the group spun out as a standalone subsidiary in 2022, grew its revenue 25 per cent to £10.9 million and doubled its active client base from two to four, signing a 10-year core banking migration deal with Tangerine Bank in Canada, Engine’s largest contract to date and its first North American client.

How the Interest Rate Tide Went Out

Core retail banking earns its income on the spread between what it pays depositors and what it charges borrowers. When central bank rates are elevated, that spread is generous. When they fall, the Bank of England’s declining base rate compresses the same margin with equal efficiency. Over the fiscal year, cuts averaging 91 basis points pushed Starling’s interest income from £882 million to £759 million, a reduction no volume growth was going to fully offset.

The group compounded the pressure with two more structural factors. Total drawn small-business lending fell nearly 50 per cent to £222.3 million, down from £441.4 million the prior year, as the bank wound down the last of its legacy UK government-backed Covid-19 loan portfolio. Controlled account closures added drag: Declan Ferguson, the group’s chief financial officer, said in commentary accompanying the results that the bank had prioritized addressing historical control gaps and economic crime exposure, which constrained UK customer base growth in the short term.

Neither factor reversed the group’s underlying customer engagement direction. Accounts grew from 5.3 million to 6.2 million. Average deposit balances per customer climbed to £4,241. Transaction volumes reached £216.7 billion, up from £197.1 billion the prior year. The interest income story belongs to the rate cycle; the customer engagement story moved the right way.

Engine Grows Revenue 25% and Doubles Its Client List

Starling directed £20 million of group capital into Engine during the year, a commitment the bank acknowledges as one of the contributing factors to the overall profit reduction. In return, Engine grew its annual revenue 25 per cent to £10.9 million and doubled its active institutional client count from two to four.

• £10.9m — Engine’s revenue for the year ending March 2026, up 25% on the prior year
• 4 — active SaaS clients, doubled from two at the prior fiscal year end
• £20m — group capital invested into Engine during the fiscal year
• ~300 — people employed at Engine by Starling

Engine’s confirmed client roster for the year spans four markets: Salt Bank, Romania’s cloud-native challenger; AMP Bank GO, the digital banking arm of Australia’s AMP; Tangerine Bank in Canada, signed in November 2025 as Engine’s largest single deal; and SBS Bank in New Zealand, signed in February 2026 as Engine’s first mutual client. At £10.9 million against group revenues of £887 million, Engine accounts for under two per cent of the group total. The trajectory and the contract pipeline, rather than the current absolute revenue figure, are the investment argument the unit is building.

Tangerine and the North America Foothold

The Canada Agreement

Tangerine Bank, a wholly-owned subsidiary of Scotiabank, one of Canada’s Big Five lenders with approximately $1.4 trillion (US dollars) in assets, serves more than two million Canadians through a fully digital model. In Engine by Starling’s joint announcement with Tangerine in November 2025, both parties confirmed a 10-year agreement under which Tangerine will migrate its entire core digital banking system to Engine’s cloud-native platform. Sam Everington, chief executive of Engine by Starling, called it publicly the largest deal his unit had signed to date.

Engine’s technology and operating model is a tried and tested blueprint for building market-leading digitally-native banks. This agreement with Tangerine is a major milestone and the largest deal we have signed to date, showing just how scalable and adaptable Engine is.

Sam Everington, chief executive of Engine by Starling, in the joint announcement with Tangerine, November 2025.

SBS Bank and the US Push

Breaking into North America had been an explicit priority. Offices in New York and Toronto opened ahead of the Tangerine signing, and Engine hired Jody Bhagat, a former McKinsey partner, as its US president to lead a wider push targeting mid-tier American banks and credit unions with assets between $5 billion and $50 billion. No US client has been confirmed yet, but Tangerine gives Engine a concrete North American reference point. Winning the digital subsidiary of a Big Five Canadian lender carries weight in sales conversations across a market where legacy core banking infrastructure is widespread and replacing it is expensive.

Three months after Tangerine, SBS Bank, a New Zealand mutual bank with more than 156 years of history, became Engine’s fourth international client and its first in a mutual structure. The implementation is being delivered with Deloitte as a partner, a model that lets Engine grow its client base without building a proportionately larger in-house delivery operation for each new market.

Core Bank vs. Engine: Financials Side by Side

The two segments of Starling’s group present starkly different financial profiles for the year ending March 2026.

The percentage contrast is sharp; the absolute contrast runs the opposite way. A unit generating £10.9 million does not offset a £53 million group revenue decline in isolation. But the structural difference matters when reading the business forward rather than backwards. Net interest margin, Starling’s primary retail banking income driver, is directly exposed to the Bank of England’s rate decisions. Under Tangerine Bank’s 10-year migration agreement, Engine’s contracted revenue from that client is insulated from whatever the Monetary Policy Committee decides at its next scheduled meeting. The same logic applies to Salt Bank, AMP Bank GO, and SBS Bank.

That insulation from rate cycles is the structural argument Starling is making by investing heavily in Engine at a moment when core banking income is compressing. If the rate environment stays soft for several more years, the case for a non-NIM revenue stream compounds with each passing quarter.

Starling’s management has also been explicit about why the SaaS licensing route is commercially preferable to direct international consumer banking expansion. The group withdrew from efforts to secure a European banking licence in 2022. Licensing technology to regulated institutions means Engine does not need to hold a banking licence in each jurisdiction it enters, removing a significant capital and regulatory barrier to growth.

The £100 Million Target in the Pipeline

At four clients and an annual revenue figure now under £11 million, Engine is some distance from the scale Starling’s management has publicly framed as the unit’s medium-term potential. Commentary from the group has pointed to a sales pipeline capable of delivering more than £100 million in annual recurring revenue within the short to medium term, roughly a tenfold increase from the current run rate. Reaching that target requires converting more large established banks with legacy core systems at a pace Starling has not yet demonstrated. But the SaaS cost structure makes the progression plausible: a cloud-native platform certified across multiple jurisdictions can be extended to additional clients at a marginal cost well below its original build outlay. Engine’s workforce of approximately 300 does not need to triple to serve eight or ten clients. The Tangerine migration deploys a dedicated Toronto team; the underlying codebase shipped to Canada is the same one running in Romania, Australia, and New Zealand.

Adjacent moves have added weight to the broader commercial proposition. Starling acquired Ember, a tax and bookkeeping software provider used by businesses that bank with HSBC, Revolut, Barclays, and Lloyds, with the product becoming exclusive to the Starling group. That acquisition targets the SME segment directly, where the bank already counts a majority of its business customers as primary-account users. Across the UK neobank market, the competition for those primary relationships has sharpened: Revolut’s AI financial assistant for UK customers is among several product expansions from rivals that have raised the baseline for financial software differentiation. In the US, Engine would face entrenched competitors including Jack Henry, Finastra, and Fiserv in any eventual sales effort; no US client has been confirmed yet, though a Delaware subsidiary is in place and Jody Bhagat leads the North American operation. Starling has stated an intention to list on the London Stock Exchange, with Engine by Starling’s global client platform central to the growth narrative; no firm timetable has been set.

A Fifth Profitable Year Built on Two Trajectories

Raman Bhatia, chief executive of Starling Bank, framed the year as the group’s fifth consecutive profitable result, delivered while investing in both UK customer relationships and the international scaling of Engine. Pre-tax profit of £217 million extends that streak even as the figure represents a three per cent retreat from the prior year’s £223 million.

Core customer metrics reinforced the banking business’s underlying health. Transaction volumes rose to £216.7 billion from £197.1 billion. Total deposits grew 5.2 per cent to £12.7 billion. Average deposits per customer reached £4,241, a 7.9 per cent year-on-year increase.

56 per cent of Starling’s small and medium-sized enterprise (SME) customers cited the bank as their primary account, while 32.5 per cent of retail customers reported the same. Neither figure is headline-grabbing in a year with a profit decline on the front page, but for a bank in its fifth consecutive profitable year, primary account depth is the metric that sustains a business through a rate compression cycle.

Whether Engine becomes the growth driver Starling’s management has positioned it as depends on two clocks running at different speeds. One tracks the Bank of England’s rate path: if cuts persist, pressure on core interest income deepens and Engine’s contribution becomes more significant than its current sub-two per cent revenue share suggests. The other tracks Engine’s own pipeline: four clients across four markets is a credible start, but a £100 million recurring revenue target requires converting that North American beachhead into multiple further institutional deals. Both clocks are running, and the gap between them is where Starling’s next chapter will be written.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Figures reflect Starling Group’s published results for the fiscal year ending March 2026 and are accurate as of the date of publication. Readers should consult a qualified financial professional before making any investment or financial decisions.