According to reports Lloyds Banking Group PLC announced on Tuesday that it is set to acquire Bank of America Corp.’s U.K. credit-card business MBNA Ltd., for GBP1.9 billion or $2.35 billion, the lenders first major purchase since its bailout during the financial crisis.
Lloyds, has been trying to grow its credit-card business as it looks to spread away from its key mortgage business and improve its bottom line.
Meanwhile Bank of America planned to sell the unit, which has about five million customers and a loan book of around GBP7 billion, in 2011 as it discarded several international credit-card trades to bolster its balance sheet.
This transaction is a further evidence to Lloyds’s return to health. The bank had been barred from acquirements following its GBP20 billion taxpayer bailout during the fiscal crisis. The U.K. government is in the middle of gradually selling off its outstanding 6.9% stake in the bank.
However some analysts were skeptical over deal especially due to vagueness over Brexit looms over the U.K. economy. “The risk cannot be ignored,” said Shore Capital analyst Gary Greenwood, adding that the deal will likely boost Lloyds’s share of the U.K. credit-card market from around 15% to 26%.
In the meantime Lloyds, which is still partly owned by the U.K. government, said it expects the takeover to surge group revenue by GBP650 million a year and enhance its net interest margin by 0.1% point. Despite the price of the deal, Lloyds said it expects to be able to continue paying a progressive dividend.
Moreover the agreement is likely to be completed by the end of the first half of 2017, subject to competition and regulatory approval, the bank said. Lloyds is also looking at other potential purchases, including in insurance.