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Digital lender Atom banks on £150m fundraising

Written by on 18/08/2020

Atom Bank, the digital lender, is plotting its biggest equity fundraising to date aimed even as some of its rivals struggle to maintain their previously stellar valuations.

Sky News has learnt that the company, which was the first so-called “neobank” to be built in the UK exclusively for mobile use, plans to launch a share sale in the autumn that could raise up to £150m.

Citi, the investment bank, is advising on the fundraising.

Sources said that Atom Bank was considering raising between £50m and £150m, depending on demand, as it seeks to accelerate its expansion.

Launched in 2016, the company said recently that it had taken £1.8bn in customer deposits and lent £2.4bn.

Will.i.am attends a dinner to celebrate the launch of the 4th Business of Fashion (BOF) index, at the London Edition
Image: Will.i.am has been a consultant for Atom since 2017

It has raised £450m from the sale of shares during the five years since it secured its banking licence, and last month completed its third securitisation of residential mortgage-backed securities.

Like other challenger banks, its margins have been hit by a price war in the UK mortgage market, but Atom Bank’s board is said to be confident about its prospects.

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If it succeeds in raising money at the upper end of its target range, it would take the total sum secured from shareholders to about £600m – a substantial sum for one of Britain’s new breed of digital banks.

Competitors including Revolut have also raised huge sums, although signs of fragility in investor appetite for digital banks amid the coronavirus pandemic were apparent recently when Monzo sold shares at a sharply reduced valuation.

A number of other digital banks, including N26, have pulled out of the UK, citing Brexit-related uncertainty.

Atom Bank was set up by a team led by Anthony Thomson, one of the architects of the high street lender Metro Bank.

Anthony Thomson, the entrepreneur behind Atom Bank, is stepping down. Pic: Atom Bank
Image: Anthony Thomson. Pic: Atom Bank

It has told investors, who include the Spanish bank BBVA, of its plan to pursue an initial public offering in around 2022.

Spain’s second-biggest lender could lodge a takeover offer for the business in future.

If it did so, it would become the latest financial institution from the country to control a major UK consumer lender.

Santander snapped up Abbey National, Alliance & Leicester and parts of Bradford & Bingley prior to and during the financial crisis to forge Britain’s fifth-biggest bank.

Banco Sabadell has had a rocky time since its takeover of TSB, which was hit hard by severe IT systems issues.

In 2017, Atom signed a deal with the rapper and producer Will.i.am to act as a technology consultant and spokesman for it.

The tie-up represented an attempt by Atom Bank to distinguish itself in a market inundated with new entrants.

Under the deal, Will.i.am had an option to acquire up to 3.55 million shares in Atom Bank at a price of £1.15-per-share during a three-year period, although it is unclear whether he has done so.

While Atom’s board believes there is a significant opportunity for a service-led bank with few of the overheads associated with high street branch networks, its emergence has also highlighted some of the growth challenges confronting challenger banks.

An Atom spokeswoman declined to comment on its latest fundraising.

 Sky News

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