Atom Bank to tap private equity for final £50mn funding round next year

Atom Bank is planning a final private capital raise of at least £50mn next year after being forced to delay its stock exchange debut.

The digital bank, which launched in 2016, is seeking to raise money from new investors and is currently in discussions with a number of interested companies, including private equity firms, according to a person familiar with the situation.

The fundraising, which is expected in the first half of next year, is likely to be the last round before the mobile app-based bank floats on the London Stock Exchange.

Atom, headquartered in Durham, England, has been forced to delay its initial public offering this year as a result of a tough market environment, which has led to a number of companies shelving their IPOs.

Atom is hoping to float in 2024 once the new shareholders are on board, the person familiar with the bank’s plans said. Atom declined to comment.

The bank, which has yet to turn an annual profit, on Friday announced a £30mn funding round from existing investors to support growth, until the larger fundraising next year.

BBVA, one of Spain’s largest banks, private equity firm Toscafund and London-based Infinity Investment Partners were part of the £30mn raise, valuing the bank at about £460mn.

Mark Mullen, chief executive of Atom Bank, said: “In recent weeks we surpassed £4.5bn in retail deposits having made waves with the pricing of our fixed and instant savers, opening up a void between banks such as Atom that pay a fair return on savings and those that are simply unresponsive to the market.”

Atom was one of the first mobile phone-only banks to launch in the UK, gaining its banking licence ahead of rivals Monzo and Starling.

However, it has not grown as fast as its digital peers. Atom’s original plan to launch a current account was thwarted after it was hit by numerous delays.

Gary Greenwood, an analyst at Shore Capital, said: “They can make the business work with deposits. They also have an operational advantage in terms of costs, being digital-only without a branch network.”

Digital banks are also grappling with tough capital demands from regulators, which they have argued stifles their ability to lend.

Atom reported an operating loss last year of £2mn, but has started to turn a profit on a monthly basis since June 2021.

The bank was founded by Anthony Thomson, who inspired the name, and Mullen, who was previously chief marketing officer at First Direct.

Atom provides savings, mortgages and loans to small businesses. According to its latest annual report, the bank has lent £3.3bn.