TIDMLLOY
RNS Number : 3261S
Lloyds Banking Group PLC
20 December 2016
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION WHICH IS
DISCLOSED IN ACCORDANCE WITH THE MARKET ABUSE REGULATION
20 December 2016
LLOYDS BANKING GROUP TO ACQUIRE MBNA LTD FROM
BANK OF AMERICA
Lloyds Banking Group ('the Group') today announces that it has
agreed to acquire MBNA Ltd (MBNA), a UK consumer credit card
business, from FIA Jersey Holdings Limited, a wholly owned
subsidiary of Bank of America. The transaction is consistent with
the Group's stated strategic ambitions of growing in Consumer
Finance and will enable the Group to enhance its position and
offering within the UK prime credit card market.
The acquired MBNA business, which comprises gross assets of
c.GBP7bn, is expected to deliver strong financial returns and
create significant value for shareholders. The transaction is
expected to complete by the end of the first half of 2017, subject
to the receipt of competition and regulatory approval, and is
expected to deliver:
-- an underlying Return on Investment that exceeds Cost of
Equity in the first full year and increases to c.17% in the second
full year following the acquisition
-- c.3% and c.5% statutory EPS accretion in the first and second
full years following the acquisition
The transaction will deliver a GBP650m per annum (c.4%) increase
to Group revenues and will enhance Group net interest margin by
c.10bps per annum. There is also significant opportunity for cost
synergies, currently expected at c.GBP100m run rate per annum
within 2 years, representing c.30% of the 2015 MBNA cost base.
In the first half of 2016 the gross assets acquired delivered
post-tax profits of GBP123m(1) and are being acquired for cash
consideration of GBP1.9bn. The purchase price includes c.GBP0.8bn
of acquired equity and assumes GBP240m for future PPI claims, with
the Group's exposure to PPI liability capped at this amount.
MBNA is a UK credit card business with a high quality customer
base founded upon sound underwriting principles and credit
management, which aligns well with the Group's strategy to deliver
sustainable growth through a multi-brand strategy. 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. On completion of the
transaction, the Group's market share in credit cards will increase
from c.15% to c.26%.
The transaction is being funded through organic capital
generation and is currently expected to utilise approximately 80
basis points of Common Equity Tier 1 (CET1) capital, which through
this acquisition will further enhance future earnings and capital
generation.
(1) post-tax profit of GBP166m for the full year 2015.
The Group continues to deliver strong underlying and statutory
performance with strong capital generation. As a result the Group
remains confident in delivering a progressive and sustainable
ordinary dividend in 2016 and continues to target a payout ratio of
at least 50 per cent of sustainable earnings over the medium term.
In line with our policy, the Group's approach to surplus capital
distribution at the end of the year will give due consideration to
the Board's view of the current level of capital required to meet
regulatory requirements, cover uncertainties and grow the business,
which will include the capital impact of this transaction.
Commenting on the transaction, António Horta-Osório, Group Chief
Executive, 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. 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."
- END -
UBS is acting as financial adviser for Lloyds Banking Group on
this transaction.
For further information:
Investor Relations
Douglas Radcliffe +44 (0) 20 7356 1571
Group Investor Relations Director
Email: douglas.radcliffe@finance.lloydsbanking.com
Corporate Affairs
Matt Young +44 (0) 20 7356 2231
Group Corporate Affairs Director
Email: matt.young@lloydsbanking.com
FORWARD LOOKING STATEMENTS
This document contains certain forward looking statements with
respect to the business, strategy and plans of Lloyds Banking Group
and its current goals and expectations relating to its future
financial condition and performance. Statements that are not
historical facts, including statements about Lloyds Banking Group's
or its directors' and/or management's beliefs and expectations, are
forward looking statements. By their nature, forward looking
statements involve risk and uncertainty because they relate to
events and depend upon circumstances that will or may occur in the
future. Factors that could cause actual business, strategy, plans
and/or results (including but not limited to the payment of
dividends) to differ materially from the plans, objectives,
expectations, estimates and intentions expressed in such forward
looking statements made by the Group or on its behalf include, but
are not limited to: general economic and business conditions in the
UK and internationally; market related trends and developments;
fluctuations in interest rates (including low or negative rates),
exchange rates, stock markets and currencies; the ability to access
sufficient sources of capital, liquidity and funding when required;
changes to the Group's credit ratings; the ability to derive cost
savings; changing customer behaviour including consumer spending,
saving and borrowing habits; changes to borrower or counterparty
credit quality; instability in the global financial markets,
including Eurozone instability, the exit by the UK from the
European Union (EU) and the potential for one or more other
countries to exit the EU or the Eurozone and the impact of any
sovereign credit rating downgrade or other sovereign financial
issues; technological changes and risks to cyber security; natural,
pandemic and other disasters, adverse weather and similar
contingencies outside the Group's control; inadequate or failed
internal or external processes or systems; acts of war, other acts
of hostility, terrorist acts and responses to those acts,
geopolitical, pandemic or other such events; changes in laws,
regulations, accounting standards or taxation, including as a
result of the exit by the UK from the EU, a further possible
referendum on Scottish independence; changes to regulatory capital
or liquidity requirements and similar contingencies outside the
Group's control; the policies, decisions and actions of
governmental or regulatory authorities or courts in the UK, the EU,
the US or elsewhere including the implementation and interpretation
of key legislation and regulation; the ability to attract and
retain senior management and other employees; requirements or
limitations on the Group as a result of HM Treasury's investment in
the Group; actions or omissions by the Group's directors,
management or employees including industrial action; changes to the
Group's post-retirement defined benefit scheme obligations; the
provision of banking operations services to TSB Banking Group plc;
the extent of any future impairment charges or write-downs caused
by, but not limited to, depressed asset valuations, market
disruptions and illiquid markets; the value and effectiveness of
any credit protection purchased by the Group; the inability to
hedge certain risks economically; the adequacy of loss reserves;
the actions of competitors, including non-bank financial services,
lending companies and digital innovators and disruptive
technologies; and exposure to regulatory or competition scrutiny,
legal, regulatory or competition proceedings, investigations or
complaints. Please refer to the latest Annual Report on Form 20-F
filed with the US Securities and Exchange Commission for a
discussion of certain factors together with examples of forward
looking statements. Except as required by any applicable law or
regulation, the forward looking statements contained in this
document are made as of today's date, and Lloyds Banking Group
expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward looking
statements. The information, statements and opinions contained in
this document do not constitute a public offer under any applicable
law or an offer to sell any securities or financial instruments or
any advice or recommendation with respect to such securities or
financial instruments.
UBS Limited is authorised by the Prudential Regulation Authority
and regulated by the Financial Conduct Authority and the Prudential
Regulation Authority in the United Kingdom. UBS Limited is acting
as financial adviser to Lloyds Banking Group and no one else for
the purpose of the transaction described herein and will not be
responsible to anyone other than Lloyds Banking Group for providing
the protections offered to clients of UBS Limited nor for providing
advice in relation to such transaction.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQFEESMSFMSEIE
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December 20, 2016 02:17 ET (07:17 GMT)
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