Credit card provider MBNA is to be sold by Bank of America to Lloyds Banking Group, in a move costing £1.9 billion.
The transaction is expected to complete by the end of the first half of 2017, although it is subject to competition and regulatory approval.
MBNA has assets of £7 billion and on completion of the transaction, Lloyds Banking Group’s market share in credit cards will increase from circa 15% to about 26%.
The banking group says the deal is “expected to deliver strong financial returns and create significant value for shareholders”.
Lloyds Banking Group’s share price has risen from 62.55p at close yesterday to 63.59p at the time of writing today.
The £1.9 billion purchase price includes a £240 million provision for future payment protection insurance (PPI) claims. But this is a cap, and if claims exceed this amount, MBNA’s current owner, Bank of America, will have to foot the remaining bill.
I’m an MBNA customer. What does this mean for me?
Lloyds Banking Group says the MBNA brand will be “maintained as a challenger brand”, and adds that there is no immediate change for either new or existing MBNA customers.
It adds that customers should continue to manage their accounts as normal, and that all queries should be directed to the MBNA customer services team as per usual.
PPI complaints about MBNA should also continue to be made to MBNA’s customer services team.
António Horta-Osório, Lloyds Banking Group CEO, says: “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.”