UK digital bank Atom delivers first ever operating profit

Atom Bank, the UK’s first app-based bank, has hit has hit a significant milestone in reaching its first ever annual operating profit of £4 million (FY22: £2 million loss) despite a volatile economic backdrop, as it focuses on delivering speed, ease and better value for its customers.

The quality level of service and value Atom provides is reflected in customer growth and satisfaction, with customer numbers almost doubling to 224,000 during the period (FY22: 123,000). Atom’s impressive growth has not come at the expense of the customer, with this year being the first time the bank has achieved the triple crown of 5-star ratings on both the IOS and Android App Stores, and on Trustpilot, whilst consistently delivering Net Promoter Scores (NPS) in the high 80s.

Atom remains focused on developing its business model efficiency as a core differentiator in the market. In time this will become a real game changer, exposing the operational costs and inefficiency of the legacy banks. This focus on cost and efficiency already has tangible benefits for customers; Atom’s mortgage application-to-offer time of less than 5 days during the final quarter compares to an average of 23 days for the industry.

Customer net interest margin (NIM) remained strong at 2.84% (FY22: 2.93%), and net interest income (NII) increased by 62% to £76 million (FY22: £47 million) off the back of strong and profitable balance sheet growth. Total operating costs rose to £59 million (FY22: £51 million), as the Bank continued to invest in its people and capabilities, but this was hugely outstripped by revenue growth (62%) highlighting the scalability of the operating model.

Atom has now achieved three consecutive quarters of double digit return on tangible equity (ROTE) to the end of Q1 FY24. Current quarterly run-rate is generating +£100 million of annualised NII and +£25 million of operating profit.

Atom’s business performance and customer growth comes during a period in which the Bank has campaigned for incumbents to offer fairer rates on saving products. Atom passed on the majority of the base rate rises to its savings customers, unlike big banks who have continually dragged their heels. Fixed Rate Saver products ranked top-5 by Moneyfacts for 47 weeks in FY23, while the Instant Access Saver was top-5 for 25 weeks. As a result, total savings deposit balances doubled to £6.6 billion (FY22: £3.2 billion), while loans under management slightly increased to £3.4 billion (FY22: £3.3 billion).

Atom is also conscious of the pressure rising interest rates are having on borrowers, and is proactively identifying customers who may be struggling with repayments to offer them assistance in the form of personal ‘income and outgoings’ reviews and budgeting. Also, unlike the established banks, Atom chose to not pass on the June base rate increase to its Standard Variable Rate (SVR) mortgage customers, in order to better support them and reduce the financial strain they may be facing.

Atom has been able to support savers and borrowers due to its cost-efficient, scalable operating model. This contrasts with the largest UK banks, who have used rate rises as an opportunity to squeeze further profits from customers who fund an expensive legacy model.

Mark Mullen, Chief Executive Officer at Atom, said, “It has been an important year for Atom. We’ve grown strongly, kept our costs tight and delivered our first annual operating profit. We’ve also passed on more than 70% of the Bank of England’s base rate increases to our savers but only 70% of them to our Standard Variable Rate mortgage borrowers. And we’ve done it while maintaining our 5-star Trustpilot and App Store ratings.

“Over the course of the year Atom has shown that banks can provide exceptional customer service and offer customers better value for money. We never allow ourselves to forget that ultimately, the customer pays for everything.

“We believe that the lowest cost wins. Lowest cost and highest quality wins every time. If that isn’t the new banking paradigm, then it ought to be.”