Lloyds banking Group has agreed to pay £1.9 billion for Bank of America’s credit card firm, MBNA, in the first acquisition by a UK bank since the 2008 financial crisis.
In a statement, the bank said the acquisition of MBNA, which has assets of $7 billion, would increase its annual revenues by £650m and its credit card market share in the UK by more than 10%, from 15% to 26%. The deal is expected to be completed in the first half of 2017 and will be funded through organic capital generation.
The purchase price includes c.£0.8bn of acquired equity and assumes £240m for future PPI claims, with the Group’s exposure to PPI liability capped at this amount.
The bank said that the MBNA brand “will be maintained as a challenger brand,” citing its high quality customer base and “diversified distribution model” as being complementary to the Group’s existing capabilities.
“The acquisition, funded through strong internal capital generation, increases our participation in the expanding UK credit card market with a multi-brand strategy and advances our strategic aim to deliver sustainable growth as a UK focused retail and commercial bank,” said António Horta-Osório, Lloyds Banking Group chief executive.
He added that MBNA’s brand and portfolio would be a good fit with the bank’s existing card business and that the group’s “low cost to income ratio and proven integration capabilities will deliver significant synergies and value to our shareholders.”
A further £2.5m is expected to be raised from crowdfunding on Tuesday.
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