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Digital banking 14 Feb 2022

BBVA to invest $300 million in Brazilian digital bank Neon

BBVA has reached an agreement to invest $300 million (about €263 million¹) in Neon, a Brazilian digital bank founded in 2016 that aims to improve access to financial services for individuals, self-employed and small businesses in its country. Neon has 15 million registered accounts. The investment takes place in a context of unprecedented technological disruption, with solid growth of digital and innovative models, particularly in financial services. In addition to a clear commitment to innovation, this investment allows BBVA to gain exposure to retail banking in Brazil, a market with one of the highest potential in the world.

BBVA invierte en el neobanco brasileño Neon

With this new investment, BBVA acquires a 21.7 percent² stake in Neon. The Group already held a stake since 2018 through its venture capital fund Propel. Following this transaction, BBVA’s stake will total 29.7 percent³ of Neon.

Neon represents a new step in  BBVA’s strategy to enter new markets through investments in digital platforms. Brazil is a very attractive market given the size of its economy (8º in the world and 1º in Latin America), its large population (more than 210 million people) and the development of interesting propositions in the digital financial services arena.

“The commitment to innovation is part of BBVA’s DNA, and digital is opening new ways for us to grow in very attractive markets,” BBVA Chair Carlos Torres Vila said. “Neon’s value proposition connects with the financial needs of Brazilians serving as a platform to continue to grow rapidly in a market with great potential.”

The deal with Neon adds up to other investments by BBVA in digital platforms, such as Atom Bank in the U.K. and Germany’s Solarisbank. Additionally, BBVA recently entered the Italian retail banking market with a 100% digital offer, based on its award-winning app, which has been recognized as a leader in digital experience in Europe for five years in a row.

Neon was founded in 2016, aiming to offer a simple, and competitive alternative compared to the traditional Brazilian banks. Through a unique product offering –including free checking accounts, debit and credit cards, payroll loans and specialized products for small businesses– Neon has set itself apart from the competition with a focus on the individuals, self-employed and small businesses.

Since its creation in 2016 and prior to BBVA’s investment, Neon had raised $423 million from investors through several financing rounds. Its shareholders include General Altlantic, Vulcan, BlackRock, Paypal and Banco Votorantim. Neon’s management team includes founder and CEO Pedro Conrade and executive managing partner Jean Sigrist, who will continue to lead the company.

“BBVA’s investment and global expertise will allow Neon to offer loans in a more simple, sustainable and inclusive way. We want to reach more Brazilians, contributing to reducing inequalities and making a difference in their lives. Neon will continue to grow rapidly, while delivering on its purpose,” Neon founder Pedro Conrade said.

Share subscription and payment are expected to take place in February. The transaction will have a capital consumption of about 10 bps in BBVA’s fully-loaded CET1 capital ratio⁴.

1 Exchange rate of 1,14 dollars perIndividuals euro, as of February 11, 2022.
2 Equivalent to approximately 18.8 percent of the share capital on a fully diluted basis (this is, assuming the issuance of all the shares under all the current share options granted by the Company).
3 Equivalent to approximately 25.6 percent of the share capital on a fully diluted basis (this is, assuming the issuance of all the shares under all the current share options granted by the Company)
4 Calculation considering the consolidated financial statements for BBVA Group as of Dec 31, 2021.