Starling Bank to buy £500mn Masthaven portfolio

Starling Bank to buy £500mn Masthaven portfolio
[Simon Dawson/Bloomberg] Starling's chief executive, Anne Boden

Starling Bank has agreed to buy a loan portfolio from specialist lender Masthaven worth about £500mn.

The deal follows its acquisition of Fleet Mortgages nearly a year ago, making Masthaven the challenger bank’s second lender acquisition.

In February, Masthaven announced plans to wind down its services over the next two years with the aim of selling its mortgage book by 2023.

Having acquired its banking licence in 2016, Masthaven said in the announcement it has since struggled to continue securing the level of investment necessary to grow the bank.

Its sale, reported by the Financial Times, will see Starling further diversify its loan book, which has grown from the government Covid-19 loan schemes.

Of the £2.3bn it had lent as of last June, the vast majority (£2.2bn) was made up of bounce-back loans and the coronavirus business interruption loan scheme.

As well as buying Masthaven, Starling also reportedly had its eye on specialist lender Kensington’s £1bn mortgage book, which is currently in the process of being sold.

Its £50mn acquisition of Fleet Mortgages last year saw the bank inherit £1.75bn in mortgages under management. 

At the time, the UK challenger bank said the acquisition was part of “a wider plan” to expand its lending “through a mix of strategic forward-flow arrangements, organic lending and targeted M&A activity”.

Starling’s chief executive, Anne Boden, called the acquisition the start of its move into mortgages as an asset class.

Brokers also weighed in on the bank’s first buy, dubbing it a “modern, forward-thinking challenger bank planting a flag in the intermediary lending world” the industry would be “foolish to ignore”.

Starling had lent just £54mn when the pandemic hit. But after the introduction of the government’s various coronavirus loan schemes, this figure shot up to £2.3bn.

In April 2021, Starling landed a £50mn investment from Goldman Sachs' growth equity arm.

The capital injection took the bank’s Series D round to £322mn and gave it a pre-money valuation in excess of £1.1bn.

Having made its first profit in October 2020, Starling has previously said it is eyeing a potential initial public offering as early as 2023.

Masthaven refused to comment and Starling did not respond to requests for comment.