Lloyds pays £1.9bn for MBNA’s credit card business

Lloyds Banking Group is paying £1.9 billion for MBNA, one of Britain’s biggest credit card issuers, to strengthen its position in the market.

Britain’s biggest retail bank has only 15 per cent of the UK market by credit balances and the deal will boost this to about 26 per cent, close to market leader Barclays.

António Horta-Osório, Lloyds’ chief executive, said: “The acquisition 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.”

MBNA, which is based in Chester and owned by Bank of America Merrill Lynch, has five million credit card customers. It has about 200 affinity brands, issuing cards for airlines such as Emirates, Virgin Atlantic and Etihad and football clubs such as Liverpool, Chelsea and Arsenal.

As part of the deal Lloyds will assume £240 million for future claims for mis-sold payment protection insurance. Lloyds said that its exposure to PPI liability would be capped at this amount.

The PPI liabilities had been seen as a possible dealbreaker for Lloyds, which has already set aside about £17 billion to compensate customers for its role in Britain’s costliest mis-selling scandal. Lloyds sold nearly half of all PPI policies.

The deal is the bank’s first since being bailed out with £20 billion of taxpayers’ money during the financial crisis.

MBNA reported post-tax profits of £123 million in the first half of the year. Lloyds said the the acquisition, which is expected to be completed by July, will increase revenues at Lloyds by around £650 million a year.

Shares in Lloyds edged up 0.7 per cent to 63p in early trading.

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