LLoyds finalises BoA UK credit card buyout
(1 June 2017 – United Kingdom) Lloyds Banking Group has completed its £1.9 billion acquisition of Bank of America's UK credit card business, MBNA.
The Competition and Markets Authority (CMA) cleared the way for the transaction in early May after deciding not to refer the deal to a Phase 2 investigation based on the information “currently available to it”.
Lloyds Banking Group announced the MBNA deal last December in what it its first acquisition since its £20.5 billion bailout during the 2008/09 financial crisis.
The deal for MBNA, one of the UK's largest credit card issuers with £7 billion in gross assets, will give Lloyds a 26 percent share of the UK credit card market, up from around 15 percent at present, adding around seven million customers and giving it a market share a point behind Barclaycard, which has 27 percent of the market.
Lloyds has agreed a cap with Bank of America of £240 million on potential payment protection insurance (PPI) claims, a scandal which Lloyds has already booked £17.4 billion in provisions to cover.
Bank of America will meet any additional provision above the £240 million (PPI) cap.
In a market update on Thursday, Lloyds, which was returned to the private sector last month, nine years after its taxpayer bailout, said the MBNA deal has now received regulatory and competition approval.
Lloyds had previously stated it would finance the deal from reserves and forecast MBNA would deliver £650 million a year in revenue and deliver around 100 million in cost savings within two years.
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Lloyds and MBNA each have operations in Chester together employing around 2,700 people, with MBNA employing around 1,700 and Lloyds employing around 1,000.
In a market update on Thursday, Lloyds said the purchase will “deliver strong financial returns”, including an underlying return on investment which exceeds the equity outlay in the first year, increasing to a 17 percent return on investment in the second year following the acquisition.
Lloyds said the MBNA deal is expected to deliver earning per share growth of between three and five per cent in the first and second full years following the acquisition.
Lloyds Banking Group chief executive, António Horta-Osório, said: “The acquisition, which is funded through strong internal capital generation, increases our participation in the UK prime credit card market, where we were underrepresented, and strengthens our position as a UK focused retail and commercial bank.
“The MBNA brand and portfolio are a good fit with our existing card business and we will focus on providing its customers with excellent service and value.
“Our proven integration capabilities and low cost to income ratio will deliver significant synergies and value to our shareholders.”
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