Atom Bank hires advisers ahead of potential Spanish bid

One of Britain’s leading digital-only lenders is drafting in heavyweight advisers to steer it through a crucial period that could lead to its takeover by one of Spain’s biggest banks.

Sky News has learnt that Atom Bank is in talks to appoint Citi to advise its board on options for the business.

The appointment, which is expected to be confirmed shortly, comes nearly a year after Atom Bank raised almost £150m from investors led by BBVA, Spain’s second-biggest lender.

Under the terms of its shareholder agreement, BBVA, which owns nearly 40% of the Durham-based digital bank, has an option to acquire the remainder of the shares.

Sources close to Atom denied that hiring Citi represented a “sale mandate” although they conceded that either a takeover, further equity fundraising or stock market listing was likely during 2019.

If it did acquire Atom, BBVA would be the latest big Spanish bank to enter the UK consumer banking market in a meaningful way.

Santander snapped up Abbey National, Alliance & Leicester and parts of Bradford & Bingley to forge Britain’s fifth-biggest bank, while Sabadell has had a rocky time since its takeover of TSB, which has been hard-hit by severe IT systems issues.

If BBVA does not exercise its option to acquire Atom in the coming months, a further private fundraising or stock market listing is likely by the autumn, according to insiders.

Atom has made steady, if unspectacular, progress since its launch in 2016, with well over £1.3bn in customer deposits taken.

The company has raised hundreds of millions of pounds from investors and has high hopes of becoming the UK’s leading digital-only lender amid stiff competition from the likes of Monzo and Starling Bank.

Atom was founded by Anthony Thomson, who co-founded Metro Bank, and Mark Mullen, a former First Direct executive.

Mr Thomson, who stepped down as chairman last year, is establishing a new digital bank in Australia.

He was replaced at Atom by Bridget Rosewell, one of the company’s non-executive directors, and a board member at Network Rail.

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 has 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.

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.

Atom has opted to stay out of the personal current accounts market for an indefinite period because of the poor returns and high costs involved in offering the products.

Lenders such as HSBC, Lloyds Banking Group and Barclays are in the process of closing hundreds of branches, citing data which has highlighted an explosion in the use of mobile banking services.‎

Among the industry’s other new players are Tandem Finance, which now owns Harrods Bank and is reported to be targeting a public listing within three to five years.

A number of other financial technology companies, including Zopa, have obtained banking licences as they add to the competition in the sector.‎

Atom declined to comment on the appointment of Citi.

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