Lloyds Buys Bank of America's Credit Card Unit MBNA for $2.4 Billion -- Update

By Max Colchester

LONDON-- Lloyds Banking Group PLC said Tuesday it is buying Bank of America Corp.'s U.K. credit-card business MBNA Ltd., for GBP1.9 billion ($2.35 billion), the British bank's first major acquisition since its bailout during the financial crisis.

Lloyds, which is still partly owned by the U.K. government, has been trying to expand its credit-card business as it looks to diversify away from its main mortgage business and boost its bottom line.

Bank of America decided to sell the unit, which has about five million customers and a loan book of around GBP7 billion, in 2011 as it ditched several international credit-card businesses to bolster its balance sheet.

The deal is a further testament to Lloyds's return to health. The bank had been banned from acquisitions following its GBP20 billion taxpayer bailout during the financial crisis. The U.K. government is in the process of slowly selling off its remaining 6.9% stake in the bank.

But some analysts questioned whether it makes sense to buy a large credit-card portfolio when uncertainty 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%.

Lloyds said it expects the acquisition to increase group revenue by GBP650 million a year and enhance its net interest margin by 0.1 percentage point. Despite the cost of the deal, Lloyds said it expects to be able to continue paying a progressive dividend.

The transaction is expected 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 acquisitions, including in insurance.

Write to Max Colchester at max.colchester@wsj.com

(END) Dow Jones Newswires

December 20, 2016 04:02 ET (09:02 GMT)

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