US giant Fidelity in talks to take £100m stake in Starling Bank
The US-based fund management giant Fidelity is in talks to take a £100m stake in Starling Bank, a big vote of confidence in the fast-growing digital lender despite growing scepticism about valuations across the sector.
Sky News has learnt that Fidelity Management & Research (FMR), which manages trillions of dollars in assets, is in advanced negotiations to lead a £200m fundraising for Starling.
City sources said on Friday that the deal had yet to be concluded and could still be some way off.
One added that a number of other blue-chip external investors were also in discussions about taking part in the fundraising.
Starling, which was founded in 2014 by Anne Boden, embarked on an attempt to raise £200m last autumn when Rothschild, the investment bank, was hired to canvass interest from investors.
The valuation attached to Starling by the latest injection of capital was unclear on Friday.
The bank now has more than two million accounts, of which just over 300,000 are small business customers. Starling has about £4.7bn of deposits and a lending book of just under £2bn.
It recorded its first monthly profit last October, having been a big player in some of the emergency government lending schemes established when the coronavirus pandemic hit Britain last March.
Last November, The Times reported that Lloyds Banking Group and JP Morgan Chase had expressed an interest in acquiring Starling outright.
The digital bank’s board, chaired by City grandee Oliver Stocken, is understood to have evaluated that interest and opted to pursue a private financing ahead of a possible stock market listing in the next couple of years.
If Fidelity does lead the funding round, it will be interpreted as a major boost for Starling’s ambitions at a time when investors have become warier of the valuations sought by “neobanks”.
Atom Bank and Monzo are both in the process of raising additional capital, while the biggest stride towards reshaping the industry landscape may have emerged this week with confirmation that JP Morgan is to launch a full-service digital bank in the UK this year.
Ultra-low interest rates have depressed banks’ returns for years, prompting the owners of many lenders to examine whether to offload them.
TSB is being put up for sale by its Spanish owner, Sabadell, while J Sainsbury, the supermarket chain, has approached prospective buyers of its banking arm.
Starling has already raised more than £350m since it was founded, large chunks of which have come from Bermuda-based investor Harald McPike and Merian Chrysalis, which is now owned by Jupiter Fund Management.
FMR and Starling both declined to comment on Friday.