According to the Wall Street Journal, the Bank of America Corp has put up MBNA, Britain’s largest credit card company, for sale again. Analysts cited that the MBNA is surrounded by buyers—and Lloyds Banking Group is the top one.
Several buyers are also attracted to acquiring the credit card firm such as Barclaycard and Virgin Money.
In the UK, MBNA has 11% share in the credit card business, in the topic of credit balances.
The credit card company was put up for sale five years ago; however, BAC opted not to sell it despite many offers. It was sold in other European countries though, like Spain and Ireland.
MBNA has an estimated amount of 5 million clients, a total loan book worth 7 billion pounds, and the total value is worth more with premiums as it generated income of 166 billion pounds in 2015. Sources said the value can be pushed to even 8 billion pounds.
To offset profit from investment banking and other forms of lending, several banks are depending on their credit card business. Investment banking has been harmed by volatile markets due to minimal client activity. Lower interest rate environment has made banks struggle with squeezing margins from net interest income. The credit card debt has hit around a trillion dollars of balance, since the 2008 financial crisis.
With banks looking to offer higher limits, assertive discounts and minimal qualifying requirements, the competition in credit card market has rocketed.
Lloyd has been coincidentally planning to expand its credit card business, according to its executives, and will avail any open acquisitions. CEO António Horta-Osório intends to offset the pressure from lower interest rates on its mortgage books like other banks.
The firm already possesses 15% of the market share in Britain for credit card business with 10 billion pounds on loan books. If Lloyd succeeded in acquiring MBNA, it will be its first acquisition since 2008, where 20 billion pounds in bail out were paid for the firm as it was constrained to make acquisitions.
BAC seems to direct its attention on its core investment banking in the UK, as the fear and uncertainty from the possible Brexit may also be one of the causes for sale. Should Brexit happen, foreign banks will lose accessibility to European markets and may be required to submit with extra regulations and costs.