Atom Bank raises £50m from investors including Neil Woodford

Neil Woodford is among the investors to have ploughed another £50m into Atom Bank, as the first of Britain’s mobile-focused challenger lenders steps up its investment in an increasingly competitive market.

The investment by Mr Woodford’s Patient Capital, a trust focused on early-stage companies and one of Atom’s original backers, comes as the UK bank said it faced pressure from the ringfencing rules that have come into force across the sector.

The rules, which are designed to prevent UK taxpayers having to rescue “too big to fail” banks if they fall into trouble, have stiffened the competition for challenger banks by leaving big lenders with more capital to use in their retail operations.

“All ringfencing is going to do is essentially reinforce the grip of the established banks,” said Mark Mullen, Atom’s chief executive. “In common with Santander, with Nationwide, with banks up and down the land, we have had to adjust.”

The fundraising, which values Atom at £530m, will see its biggest shareholders broadly retain the size of their current stake, with Spanish lender BBVA at 39 per cent, Toscafund at 29.7 per cent and Woodford at 18 per cent.

Atom expanded its total lending by 76 per cent in the past year to £2.4bn, with deposits rising from £1.4bn to £1.8bn. It is currently lending about £30m a week, on average.

It was the first of a wave of digital lenders, including Monzo, Revolut and Starling, which have seen an opportunity to break the stranglehold of the country’s largest banks by wooing younger, web-savvy customers.

Mr Woodford, whose flagship Equity Income fund has been suspended since early June, was the first institutional investor to back Atom, in 2014. “Without Woodford’s support, we wouldn’t be here. They helped us get going and they helped us grow,” said Mr Mullen.

Patient Capital’s 18 per cent stake in Atom was among its top-10 holdings at the end of June, according to the trust’s website.

It announced last month it had invested a further £20m into another holding, Proton Partners, a Hereford-based company that offers “proton beam therapy” treatment for cancer. Proton Partners was the second-largest holding in the fund at the end of June.

The trust has revamped its board and announced it is reducing its levels of debt, having come close to maxing out a £150m overdraft facility the fund has with its depositary, Northern Trust, at the end of December.