Lloyds buys Chester based MBNA credit card business for £1.9bn

Lloyds Banking Group has snapped up Chester-based consumer credit card business MBNA.

The bank announced plans to purchase the Chester Business Park firm from FIA Jersey Holdings Limited, a subsidiary of Bank of America, for £1.9bn.

Lloyds, Britain’s biggest mortgage lender is 7% tax payer owned following a government bailout during the financial crisis in 2008.

Speculation has been rife that MBNA and Lloyds were set to do a deal, ahead of bids from Santander UK and HSBC

The deal will see Lloyds credit card market share rise from 15 per cent to more than 25 per cent in the UK.

Lloyds says the acquisition will grow group revenue by £650mln per year, the MBNA business has around £7bln in gross assets on its books.

Antonio Horta-Orosio, the chief executive of Lloyds, said:

“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.”

He added:

“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. Our low cost to income ratio and proven integration capabilities will deliver significant synergies and value to our shareholders.”

The deal is expected to complete by the end of the first half of 2017, subject to competition and regulatory approval.

Deal could save £100m a year through ‘cost synergies’

Lloyds anticipates it will be able to deliver £100m in annual ‘cost synergies’ from the integration within two years, around 30% of the total cost base for MBNA in 2015.

A Financial Times article in November about a possible deal between Lloyds and MBNA cast a shadow over the future of jobs in Chester.

It claimed a ‘source’ had told them:

‘A sale to Lloyds could be bad news for the town of Chester, where the MBNA business is based. The UK bank is likely to transfer MBNA’s customers to its own systems and lay off many of its 1,700 staff, mostly based in the town,

Though that claim was later slapped down by MBNA as ‘speculation’