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Lloyds buys MBNA credit card business for GBP1.9bn

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Lloyds has bought the MBNA credit card business from Bank of America for GBP1.9 billion. MBNA holds GBP7 billion of UK credit card debt. The company says the purchase will boost Lloyds’ presence in this market to GBP16 billion, taking it from a 15 per cent to 26 per cent market share.

The deal price assumes GBP240 million of future PPI claims on the MBNA credit card book, which Lloyds says is the maximum it will be liable for under the terms of the deal. As a result of the announcement, Lloyds’ shares rose 1 per cent in early morning trading.

Commenting on the deal, Laith Khalaf, (pictured) Senior Analyst, Hargreaves Lansdown, says: “Lloyds is backing itself despite the uncertain economic outlook, and this deal will mean the bank has now cornered a quarter of the UK credit card market.

“This does mean a special dividend for 2016 has become less likely, but at the same time the additional earnings from the credit card book bolster the dividend-paying prospects of the bank in years to come.

“The acquisition will allow Lloyds to boost its net interest margin, which is pretty valuable against a backdrop of such low interest rates.

“The deal owes some thanks to the FCA deadline on PPI claims, which has given some measure of certainty to the level of compensation MBNA will have to pay out, providing both parties with a more solid platform for negotiation.”

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