Atom Bank spells end to IPO ambitions with talks about potential sale

Atom Bank, one of the consumer lenders set up to challenge Britain’s high street banking giants, is in talks about a potential sale that would herald the end of its long-held ambition to float on the London stock market.

MEZIESBLOG has learnt that Atom Bank is working with advisers at Jefferies on the early stages of a sale process which has included preliminary discussions with a range of potential trade bidders.

Founded in 2016 and headquartered in Newcastle, Atom Bank has about 250,000 customers and has built a substantial presence in the mortgage and savings markets.

It was set up as Britain’s first digital-only bank by Anthony Thomson, the co-founder of Metro Bank and one of the UK’s most prominent fintech entrepreneurs.

Mr Thomson has since embarked on a number of other ventures in the sector, and is currently raising funds for a new Jersey-based business called Velorai, aimed at wealthy families.

Since he left Atom Bank in 2018, its performance has consistently lagged that of rival ‘neobanks’ which launched in the decade after the 2008 financial crisis, such as Monzo, Zopa and Starling Bank.

A prospective sale of Atom Bank comes soon after Revolut finally won its battle to secure a UK banking licence, adding to competition in the market.

It also comes as Aldermore Bank, another UK challenger bank, is being put up for sale amid anger from its parent, South Africa’s FirstRand, at the approach to compensating customers who were mis-sold motor finance products.

This weekend, one banking analyst suggested that it might command a price tag in a sale of somewhere between £600m and £1bn, although they cautioned that a valuation would ultimately depend on the appetite shown by potential buyers.

An executive at one of the parties contacted by Atom Bank and its advisers in recent weeks said the company hoped to secure an outline agreement with a potential purchaser within months.

Atom Bank, which employs about 600 people, has raised capital from investors on a number of occasions since it was founded, with the most recent fundraisings described as pre-IPO rounds as it prepared to list its shares publicly.

Its major shareholders are the Spanish banking giant BBVA, Toscafund and Infinity Investment Partners, a London-based investment firm.

Neil Woodford, the now-disgraced former fund manager, was previously a shareholder in the company through Woodford Investment Management.

The company also has a number of smaller shareholders, including Lexham Partners, an investment firm founded by Dominic Perks.

Atom Bank has been in talks with regulators for some time about being allowed to adopt a more capital-efficient Internal Ratings-Based model, with work on this understood to be continuing.

At its last quarterly update, the company had customer deposit balances of about £8.2bn, and outstanding mortgage loans worth about £4.5bn.

“Our total loan balances increased by 29% to £5.3bn, a stark contrast to some of the UK’s biggest banks whose loan books, despite their dominance, have struggled to grow at more than 2% annually over the past four years,” chief executive Mark Mullen said at the announcement of its latest annual results.

“Customer numbers are up 19%, helped in part by the fact that we have offered UK savers 52% more interest on their instant access savings than the market average.”

In 2021, Atom Bank began allowing employees to work a four-day week, becoming one of the biggest UK companies to embark on such a radical shift in its working practices.

Its new Newcastle headquarters were opened last year by Lucy Rigby, the City minister.

Atom Bank declined to comment.