App-based lender Atom embarks on £100m fundraising drive

Britain's first app-based bank will this week kick off efforts to raise £100m in fresh funding from investors as it seeks to accelerate a drive to become one of the industry's most successful start-ups.

Sky News has learnt that Atom Bank plans to approach potential backers on both sides of the Atlantic (Shanghai: 600558.SS - news) as part of a fundraising that will enable it to grow its balance sheet.

The bank, which has been set up by two of the industry's most prominent executives, already offers savings accounts and intends to diversify into mortgage products in the coming months.

It has yet to begin a concerted marketing push, but has already attracted customer registrations running into the tens of thousands.

Sources said that if successfully completed, Atom's latest £100m fundraising would take the total amount of capital raised to date to £235m - a significant sum for a British technology company.

Atom has already attracted strategic interest, with the Spanish bank BBVA (LSE: 931474.L - news) committing £45m to a previous funding round in return for a stake of close to 30%.

The new capital will be used to fund anticipated early-year losses at Atom, as well as increasing regulatory capital to enable the bank to build its balance sheet.

Atom's founders, the Metro Bank (Other OTC: MBNKF - news) co-founder Anthony Thomson and Mark Mullen, who previously ran First Direct, the well-regarded lender owned by HSBC, believe there is a significant opportunity for a service-led bank with few of the overheads associated with high street branch networks.

The company has already attracted a list of blue-chip shareholders, most notably including Lord O'Neill, the Treasury minister and former Goldman Sachs (NYSE: GS-PB - news) chief economist, and Neil Woodford, the prominent fund manager who has indicated a general antipathy towards bank shares because of ongoing compensation and legal costs related to past misconduct.

Sources said that many of the existing investors in Atom Bank, which is based in Durham, were likely to follow their money and commit to the new capital-raising.

Mr Thomson, who spearheaded Metro Bank's launch as the first new high street lender in more than a century, believes Atom will be well-placed to exploit the fast-growing demand for digital banking.

Lenders such as Lloyds Banking Group (Other OTC: LLOBF - news) and Barclays (LSE: BARC.L - news) are in the process of closing hundreds of branches, citing data from the British Bankers' Association which has highlighted an explosion in the use of mobile banking services.

Atom could not be reached for comment on its new round of funding, discussions about which will include US-based investors for the first time.

So far, efforts to encourage a new wave of challenger banks have resulted in a number of licences being approved by watchdogs, but new players have yet to make a significant impact on the industry.

Atom is due to holds its annual shareholder meeting this week.