The Diplomat
BBVA has reached an agreement to invest $300 million (around 263 million euros¹) in Neon, a digital bank founded in 2016 that facilitates access to financial services for individuals, the self-employed and small businesses in Brazil and which has 15 million registered accounts.
According to the Spanish bank, this investment takes place in a context of unprecedented technological disruption, with a strong growth of digital and innovative models, especially in the financial sector.
In addition to a clear commitment to innovation, the investment gives BBVA exposure to the retail banking business in Brazil, one of the markets with the greatest potential in the world.
Through the new investment, BBVA will acquire an additional 21.7% of Neon. The group already had a stake since 2018 through the private equity fund Propel, and after this transaction, BBVA’s stake will total 29.7% of Neon.
Neon represents a new step in BBVA’s strategy of entering new markets through investment in digital platforms, said the bank, which stressed: “Brazil is a very attractive market due to the size of its economy (the eighth largest in the world and the first in Latin America), its large population (more than 210 million inhabitants) and the development of attractive digital financial services proposals”.
“The strategic commitment to innovation is one of BBVA’s hallmarks and the digital route opens up a way for us to grow in very attractive markets,” said Carlos Torres Vila, Chairman and CEO of BBVA. “Neon has proven to have a value proposition that is connecting with the financial needs of Brazilians and has the capabilities to continue growing rapidly in a market with great potential,” he added.
The investment in Neon adds to those already made by BBVA in other digital financial platforms such as Atom Bank in the UK and Solarisbank in Germany. BBVA has also recently entered the Italian market with a 100% digital offer for retail customers, based on the experience of its app, recognised for the fifth consecutive year as the leader in Europe.
Neon was founded in 2016 with the aim of offering a simpler and more competitive alternative to traditional Brazilian banks. Through a unique product offering – including free current accounts, debit and credit cards, payroll loans and specialised products for micro-enterprises – Neon has managed to differentiate itself from the competition with a focus on individuals, the self-employed and small businesses.
Prior to BBVA’s investment, the company had raised $423m in various rounds of funding since its creation in 2016, and its shareholders include other partners such as General Atlantic, Vulcan, BlackRock, Paypal and Banco Votorantim. Its management team consists of Pedro Conrade, founder and CEO, and Jean Sigrist, executive chairman, who lead the company.
“With BBVA’s investment and global experience, Neon will be able to offer loans in a simpler, more sustainable and inclusive way. We want to reach more Brazilians and further our purpose of reducing inequalities and making a difference in the lives of people in Brazil. Neon will continue to grow rapidly as it meets these goals,” says Pedro Conrade, founder of Neon.
The subscription of the shares and payment of the price is expected to take place this February. The transaction will have an impact of approximately 10 basis points on BBVA⁴’s fully-loaded CET1 capital ratio.
