BBVA-Backed Atom Bank Plans $131 Million Capital Raise in 2017

  • Smartphone lender preparing to raise funds in first quarter
  • Atom chairman says BBVA will probably keep stake at 29.5%

Atom Bank, the British digital-banking startup backed by Banco Bilbao Vizcaya Argentaria SA and fund manager Neil Woodford, plans to raise about 100 million pounds ($131 million) in the first quarter of next year.

The Durham, England-based lender plans to seek the additional funds from institutional investors to meet regulatory capital requirements and to grow lending, Chairman Anthony Thomson said in an interview. Spanish lender BBVA will probably maintain its 29.5 percent shareholding in the bank as part of the capital increase, he added.

Anthony Thomson

Source: Atom Bank

“I would imagine they would follow their money and maintain their stake,” Thomson said of BBVA. “If you launch a business and it’s doing really well, shareholders typically expect you to be returning you the money. With banks, we say, ‘we’re doing really well, but give us more money, as we need increasing amounts of regulatory capital in order to scale up.’”

Atom started offering savings accounts to U.K. consumers via their smartphones and small business loans through brokers in April after gaining regulatory approval from the Bank of England. Spain’s second-largest lender purchased its stake in the firm for 45 million pounds in November, as part of efforts to expand its global reach and defend its market position by acquiring startups. Woodford Investment Management, Polar Capital and private-equity investor Jon Moulton are among about 40 investors in the new bank.

Preferential Rights

BBVA has preferential rights to buy more shares in Atom and can block rival banks from buying stock for three years, company filings show. The Spanish lender has two seats on the board and Woodford, one of Atom’s biggest investors, is allowed to have an observer at board meetings, though that person isn’t permitted to vote, according to the filings.

BBVA has spent more than 3 billion euros ($3.3 billion) on technology since 2011, buying U.S. digital banking company Simple in 2014. An official for BBVA declined to comment.

“They may wish to make an offer for the company at some stage,” Thomson said referring to BBVA and Atom. However a full takeover isn’t likely just now because the bank “bought into the business plan that we presented, which was in roughly three years we would IPO the business,” he said. BBVA can’t increase its stake to 30 percent without making an offer for the entire company under U.K. rules.

Thomson has raised about 135 million pounds since Atom was created. It’s his second British startup lender after helping former Commerce Bancorp Inc. founder Vernon Hill to build Metro Bank Plc. He has previously said he plans an initial public offering of Atom in 2018.

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