Valuing a digital bank isn't so Simple

That $60 million goodwill impairment charge BBVA Compass booked in the fourth quarter was related to its 2014 acquisition of the neobank Simple.

The U.S. banking unit of Banco Bilbao Vizcaya Argentaria paid $117 million for the digital banking startup. To date, the company has taken nearly $90 million in goodwill impairment charges related to Simple, a BBVA spokeswoman confirmed to American Banker.

The company disclosed on Feb. 1 that its fourth-quarter results included the $60 million charge, but it did not specify the reason. The Portland Business Journal subsequently reported it was related to Simple.

Angel Navarrete/Bloomberg

Despite the charge, which reflects how the company and its accountants assess the fair market value of Simple, BBVA has continued to ramp up the digital business, which operates as a stand-alone unit.

For instance, BBVA has expanded the employee base from 90 people at the time of acquisition to 350 currently, a Simple spokeswoman said.

“BBVA is continuing to invest in Simple, which shows the value they see in our business, tech and culture,” the spokeswoman said.

Fintech and banking observers have questioned the price BBVA paid for Simple: more than $1,100 per customer since Simple had 100,000 customers at the time of the acquisition.

Indeed, several analysts cited that statistic recently in discussing the difficulty in predicting the price that Customers Bancorp might fetch for BankMobile, its two-year-old neobank.

It is selling BankMobile as it grapples with crossing the $10 billion-asset threshold, where additional regulations kick in and interchange fees are capped.

Customers CEO Jay Sidhu said in late January during a conference call to discuss fourth-quarter earnings that it expected to announce a deal this quarter. Analysts expect BankMobile's sale price to be at least $100 million.

That unit has more than 2 million customers and, through its acquisition of the student loan disbursement company Higher One, has a steady pipeline of college students that it aims to make lifetime customers. At $100 million, that would mean BankMobile is selling for $50 per customer.

“That’s a bargain compared to what Simple sold for on a per-customer basis, if they truly have two million customers,” Ron Shevlin, the director of research at Cornerstone Advisors, said in an interview this week.