Lloyds Banking Group is buying the MBNA UK credit card business from Bank of America for 1.9 billion pounds ($2.4 billion) in an effort to increase profit and reduce its reliance on mortgage lending. The move represents the first major acquisition for Britain's biggest mortgage lender, which is part-owned by the government, since it was bailed out during the 2007-09 crisis.
Lloyds said the deal, which is expected to close in the first half of 2017, includes around 800 million pounds of acquired equity and assumes 240 million pounds for future claims for mis-sold loan insurance (PPI). Analysts said the move represented a good use of the bank's excess cash, but warned it carried some risks given Britain's uncertain economic outlook following the country's vote to leave the European Union in June.
"Lloyds will be broadly doubling up its exposure to credit cards at a particularly benign point in the bad debt cycle and ahead of a potential slow-down...once the terms of the UK's exit from the EU are reached," Gary Greenwood of Shore Capital said. The British lender said it would pay through cash generated by its ordinary business operations.
Comments
Comments are closed.