Lloyds snaps up MBNA for £1.9bn www.theguardian.com
Lloyds Banking Group is to spend £1.9bn on MBNA, a credit card business owned by Bank of America, as the bailed-out lender continues its recovery from the financial crisis.
The UK bank’s first major acquisition since its £20bn rescue by the taxpayer during the 2008 crisis will give it a 26% share of the credit card market and allow it to produce £100m annual savings within two years.
Lloyds, 7% owned by the taxpayer, would not comment on the implications for the workforces of the two operations, which employ a combined 2,700 in Chester.
MBNA – one of the UK’s largest credit card issuers, with 7 million customers including its own brands and the official cards of several major football clubs – has been on the market for some time. Lloyds had been battling against US private equity group Cerberus, HSBC and Santander UK for the operation.
A firewall against claims for payment protection insurance (PPI) was thought to be crucial in securing the deal. The misselling scandal has already cost Lloyds £17bn – more than any other bank – and Lloyds said its exposure to MBNA’s bill was capped at £240m, indicating Bank of America will pick up the tab for anything above that threshold.
The deal is expected to complete in the first six months of 2017, during which time the government is expected to sell the last of its shares in Lloyds.
Lloyds was the biggest riser on the FTSE 100 by mid-afternoon, up about 2.5% to 64p. The government is selling off its remaining stake at prices below the 76.3p average price at which taxpayers paid to take a 43% stake during the crisis.
António Horta-Osório, the Lloyds chief executive, said the MBNA name would be retained as part of the bank’s multi-brand strategy. Among its brands are Halifax, Bank of Scotland and car finance lender Black Horse. It also, he said, “advances our strategic aim to deliver sustainable growth as a UK-focused retail and commercial bank”.
Lloyds paid for the business out of its reserves, which sparked some concerns that it might not be able to pay a special dividend to shareholders. The bank insisted its payout policy was not altered. “Nothing has changed,” said George Culmer, Lloyds’ finance director.
The transaction further focuses Lloyds on the domestic market at time when the UK is preparing to exit the EU. Joseph Dickerson, a banking analyst at Jefferies, said the deal was “a very good use” of Lloyds’ excess capital and that the terms looked attractive.
Dickerson said that a special dividend “is now unlikely but the MBNA acquisition looks a better use of excess to us”.
The deal will increase Lloyds’ market share of credit cards from 15% to 26%, making it second only to Barclaycard in terms of size.
Culmer acknowledged the deal was subject to competition approval but he said a recent study had found the credit card market was “healthy and competitive”.
The bank has a 25% share of current accounts, 22% of retail deposits and 21% of mortgages.
Published Date:2016-12-21