Atom Bank boss Mark Mullen: 'Banks in a hurry are taking risks or cutting corners'

By Roger Baird on Thursday 22 August 2019

Digital Banking

Chief executive Mark Mullen says the UK's competitive mortgage market is cooling, allowing him to launch other services.

 Atom Bank boss Mark Mullen: 'Banks in a hurry are taking risks or cutting corners'
Image source: Mark Mullen/Atom Bank.

British mortgage price pressure meant Atom Bank saw losses increase last year, but chief executive Mark Mullen is determined that Britain’s first mobile lender pushes ahead with a raft of new products over the coming 12 months.

Banking veteran Mullen (pictured) also described the mortgage market as “challenging . . . for new and smaller banks” as it proved a tough battleground with big lenders led by HSBC driving a price war, which has forced smaller groups such as Tesco Bank to halt new lending and abandon the sector.

Mullen says: “We took a decision to stay in this market when others got out. We took losses on some of the mortgages we wrote. But we thought it was right to build a presence in this market, because we want to offer our customers a full range of financial products.”

The Bank of England enforced ringfence regulations at the start of the year — meaning that large banks separated their domestic retail banks from their investment banking operations. This left high street banks such as Barclays and HSBC, with large customer deposits that they put to use in the mortgage market, resulting in prices being driven down.

New mortgages

Durham-based Atom saw pre-tax losses widen to £80m in the financial year to the end of March compared with £53m a year ago, with the increase largely driven by a £19m mixture of investments in new technology and impairments to its existing platform.

The lender said total assets rose by 40 per cent to £2.8bn over the period with loans and advances doubling to £2.4bn, while deposits lifted 23 per cent to £1.8bn. 

Mullen says mortgage prices are beginning to “normalise now”, adding that Atom will be more “cautious” this year. It is slowing its lending for homes, the lender’s largest market, and focusing on higher loan-to-value deals to minimise losses.

He said the business will approve between 50 to 60 mortgages a week, this compares with 2017 when, at times, it approved 300 new home purchases a week.

Bank models

The mortgage market is important to Atom, because the lender, founded in 2014, has a very traditional model.

It focuses on building a classic savings and mortgage and small business lending model, which simply relies on receiving higher interest in loans than it pays out in savings rates. It writes business loans between £380,000 to £1m in value.

This is unlike peers such as Monzo and Revolut, which base revenues around subscription services and in-app marketplaces. 

However, Atom’s Mullen plans to extend the number of services the bank offers over the coming year.

New products

It will launch instant access savings for personal account holders, which the bank expects will be beta tested with small sample groups in October.

The lender also expects to launch Individual Savings Accounts and unsecured personal loans in 2020, followed by a full current account at the end of next year, or the start of 2021.

“We want to offer our customers a full suite of credible products,” said Mullen. “We are a savings and loans business that allows customers to borrow money to buy houses and finance life. That is an important part of banking in this country, or any other country.”

In May, it was widely reported that Atom’s largest shareholder Spanish lender BBVA, which owns a 39 per cent stake in the business, shelved plans to buy the UK bank due to ongoing Brexit uncertainty, leaving Atom to search for additional backing ahead of a hoped-for initial public offering in 2022. 

Options to buy

But Mullen says the banking giant has never had designs on the lender he runs.

“BBVA has never had an option to buy this bank,” says Mullen. “They are very committed and supportive.”

Nevertheless, Atom did have to raise £50m from investors in July, including  £10m from under-fire star fund manager Neil Woodford’s Patient Capital Trust. The star investment manager Woodford came under fire in June when his £3.7bn Equity Income fund was closed following billions of pounds of withdrawals by investors, amid concerns over the proportion of unlisted stocks in the fund. 

However, the Atom boss welcomes Woodford’s 18 per cent holding in the bank. 

“Neil was one of our first institutional backers,” says Mullen. “Without him, there would be no Atom Bank. Also, the amount with which he backed us in the last funding round, was more than the previous round. So he remains committed to the bank.”

The bank has raised around £450m since it was founded five years ago, valuing the business at £530m. The lending boss expects to raise further capital from investors next year. 

‘Cutting corners’

The boss of the lender does not expect Atom to turn a profit for 18 months to two years, but that is only on a run-rate basis, of extrapolated earnings across a financial year.

“We are not in a great hurry,” says Mullen. “Making money in a hurry in banking means you are either taking risks or cutting corners.”

Atom is celebrating a £10m win earlier this month from the Banking Competition Remedies (BCR) fund, set up as a European union condition of the Royal Bank of Scotland’s 2008 government bailout.  

The cash is awarded in a bid to boost funds available to small businesses. Atom has pledged to deliver an extra £3bn of funding to small firms by March 2024, by setting up new unsecured, asset-backed and invoice lending facilities. The bank said it will spend £15m of its own cash and create 70 new jobs as a result of the win.

‘Extra capacity’

“We felt qualified to be able to bid for this award,” says Mullen. “As a start-up, we are constrained by the number of things we can do simultaneously. This gives us extra capacity.”

Mullen worked in banking for 30 years, including a period as UK head of marketing for HSBC and a three-year stint as chief executive of its phone and online bank First Direct from 2011.

Atom appointed Black Eyed Peas rapper as a board advisor, expected to raise the profile of the bank two years ago.  Critics sneer the move is a way for a complex firm to appeal to young consumers. 

But Mullen says the musician brings new things to the table when he attends board meetings three or four times a year.  

‘Changing conversations’

Mullen says: “I think about banking all day, every day. That goes for the rest of the board. changes conversations around the table. He talks to different sets of people, has access to different sets of people and gives us different insights. It very useful to hear what he has to say.”

From US rappers, disgraced star fund managers, to young couples buying their first home, Atom’s Mark Mullen runs with a mixed crowd.

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