Lloyds Banking Group, the UK’s biggest retail bank by market share, will pay £1.9 billion ($2.34 billion) to acquire Bank of America’s credit card business in Britain. Lloyds said it will buy the credit card outfit MBNA, which is owned by Bank of America Merrill Lynch, marking its first acquisition since the UK lender was rescued by the taxpayer in 2009.
Lloyds wasn’t allowed to make acquisitions since its takeover of failing rival HBOS during the financial crisis. But the lender returned to profit in 2015, while the government has sold more than three-quarters of its stake in Lloyds. The UK Treasury has reduced its holding from about 43 percent to below 10 percent.
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Meanwhile, the Chester-based company was put up for sale by Bank of America, although it has five million customers and a £7 billion credit card business, giving it about 11 percent of the UK market. It has about 1,800 employees and made a net profit of 166 million pounds last year.
Lloyds has also managed to obtain protection from Bank of America against future PPI redress, as the US bank assumes £240 million for future PPI claims, with Lloyds’ exposure to liability capped at this amount. The PPI scandal in the UK saw insurance wrongly sold by Britain’s major lenders to customers who didn’t want or need it. MBNA took a £211 million charge for PPI last year and has set aside more than £1.6 billion since 2010.
Commenting on the deal, Lloyds said: “The MBNA brand will be maintained as a challenger brand further enhancing our customer offering. MBNA’s diversified distribution model, along with its data analytics capability, digital strength and well-recognised brand, will be complementary to the Group’s existing capabilities and provides further opportunities for growth and delivering excellent customer service.”