Neil Woodford has become the biggest shareholder of the new Durham-based challenger bank Atom, bringing the total equity invested so far to £25m.
The fund manager has joined high-profile investors such as venture capitalist Jon Moulton, businessman Sir Peter Vardy and investment management company Polar Capital to offer a full retail banking service digitally.
The new company is expected to launch next year once it has been granted a licence by the Bank of England.
Atom was the brainchild of Anthony Thomson, founder of another challenger, Metro Bank, and Mark Mullen, former chief executive of First Direct. It is set to offer products through mobile applications and online.
Mr Thomson has said that the challenger bank will use money raised to create new and innovative technologies that use, for instance, biometrics.
Earlier this year Mr Woodford sold his stake in HSBC over fears about impending fines.
Sebastian van Mook, financial adviser at Shropshire-based Abacus Associates, said: “It is great to have a challenger bank, it is right for the bank industry. The problem is the regulatory hoops they need to jump through, which makes it hard for them to compete. What is great is that they are clean and do not have investment banking arms.
“It is a small drop in the ocean for Neil Woodford. He sold his HSBC holding and has now had an about-turn. I think the sector has a lot of mileage and is undervalued, and there is money to be made.”