Atom bank's latest annual report shows it has delivered it's first ever underlying operating profit
22 July 2023
Atom bank delivers first annual operating profit, demonstrating the potential of its cost efficient and scalable model
- Following a year of enormous progress, Atom delivered its first ever underlying operating profit of £4m1, with momentum continuing into the next quarter
- Revenue growth of 62% hugely outstripped rise in operating costs, validating the strength of Atom’s customer-centric and cost-efficient model
- Savings deposits reached £6.6bn, more than double the previous year, as Atom offered savers better value than incumbent banks
- A keen focus on the customer experience, and treating them fairly, saw customer numbers almost double to 224,000.
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 £4m (FY22: £2m 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.
Low-cost model works
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 £76m (FY22: £47m) off the back of strong and profitable balance sheet growth. Total operating costs rose to £59m (FY22: £51m), 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 +£100m of annualised NII and +£25m of operating profit.
Driving value into the savings and lending markets
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 £6.6bn (FY22: £3.2bn), while loans under management slightly increased to £3.4bn (FY22: £3.3bn).
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.”
1Year to 31st March 2023
Notes to editors
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About Atom bank
Atom bank is the UK’s first app-based bank, on a mission to make the experience of borrowing and saving faster, simpler and better value than anyone else.
The bank launched operations in April 2016, and offers award-winning mortgages and savings through its app, alongside secured business lending for small and medium-sized enterprises.
Based in the North East of England with a team of nearly 500 people, Atom is here to change banking for the good, for the better, and for everyone. This means focusing on customers’ needs, delivering better value than the incumbents, providing an exceptional app-based experience and offering award-winning customer support via phone, chat, email and social channels. The bank has some of the best customer service credentials in the UK, having achieved 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.
Based in Durham, Atom is an engaged and active member of the North East Community. In 2022 Atom signed a five-year Memorandum of Understanding with Durham University to progress key research and diversity initiatives. The region has one of the highest levels of youth unemployment in the UK and Atom is passionate about addressing the critical digital skills gap and helping develop young people and other groups that are under-represented within the industry. As of November 2021, all employees enjoy a four-day working week, after Atom became the largest company - and only bank - in Britain to introduce the policy, with no reduction in salary.
The Atom executive team are highly experienced, having built and run some of the most well-respected banks in the UK. CEO Mark Mullen has 30 years’ experience in the sector and was previously CEO at the multi- award-winning telephone and internet bank first direct. The team is supported by a strong non-exec board, chaired by Bridget Rosewell CBE.