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Up and Atom

24 November 2015 By Dominic Elliott

BBVA’s small Atom Bank deal could presage a big future for digital finance. The Spanish lender on Nov. 24 snapped up a 29.5 percent stake in mobile-only UK player Atom for 45 million pounds. That’s striking given Atom has yet to launch and was only granted a banking licence in June.

The investment fits with BBVA Chief Executive Francisco Gonzalez’s desire to back flashy new technologies. In February 2014, BBVA paid $117 million for Simple, another digital-only bank. It has also made less strategically coherent investments, including into a Big Data startup, a web-design company and a Bitcoin wallet called Coinbase.

With Atom, BBVA finds itself in good company. Atom has raised 135 million pounds in 18 months from backers including Toscafund, Woodford Investment and private equity dealmaker Jon Moulton. And its co-founders have pedigree: Chairman Anthony Thomson launched Metro Bank and Chief Executive Mark Mullen ran First Direct.

As with several other Spanish banks, BBVA seems to have fervent faith in the UK market. BBVA points to the 1 million UK customers that change bank accounts each year as a chance for Atom to grab market share. But the UK’s seven-day account-switching service was meant to prompt double that number to look elsewhere. Atom may find it hard to crack the market, despite its digital prowess.

That said, BBVA’s outlay is small, especially relative to the 1.7 billion pounds Sabadell paid to buy TSB. BBVA should keep future investments modest since it looks undercapitalised. As of the end of September, it had a measly 9.8 percent Tier 1 capital ratio, well below the 11.8 percent European average cited by Morgan Stanley. And its track record as an investor is also unclear. It has yet to disclose separate figures for Simple.

Other big banks are pushing into mobile and online, and specialist digital banks are finding traction. Germany’s Fidor is an online-only current account provider, while Finland’s Holvi is an online-only banking service for businesses. BBVA can’t afford to splash out too much. But there’s a wider point. Digital banking is on the up.


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