Is BBVA eyeing Atom takeover?

UK based challenger bank Atom has got the finance sector talking after Sky news revealed it has hired Citi to give it business advice.

It seems the feeling is it is about to be taken over.

The Sky news report names Spanish bank BBVA, which invested heavily in UK focused Atom last year, as potentially looking to take over the mobile app based bank.

BBVA already owns about 40% of Atom and has an option to buy the rest of the shares.

BBVA has good digital credentials, with over half or 26.4 million of its overall global customer base are now consuming services via smartphones, PCs and mobile devices compared to 22.2 million a year earlier. But it doesn’t have a UK retail banking business. This could give it a digital only retail business in the UK which could have all the advantages of the neo banks without the legacy challenges of the big traditional players. This will help it expand internationally and grow its digital user base.

Sounds good right? But buying a digital challenger bank outright is a challenge. Cultural differences emerge when traditional banks get their hands on a shiny new toy.

For example French banking giant BCPE is already selling challenger bank Fidor which it acquired In July 2016, to accelerate its digital transformation.

This reflects the challenges faced by traditional banks that try and buy their way into the digital banking, without a compelling business strategy.

One source said BCPE never really had a strategy on how to take Fidor forward.

BCPE is the result of a merger of two centuries old French banks, and as a result its culture was not able to truly integrate a company like Fidor.

BBVA’s digital achievements such as reaching the tipping point of over half its customers using digital channels, as well as its wide investments in other digital banks could make it a success.

If it did take over Atom it would mean another Spanish bank in the UK. It would join Sabadell, which acquired TSB, and Santander which acquired UK banks including Abbey.