Lloyds share price: Bailed-out lender interested in buying MBNA

on May 30, 2016
Updated: Oct 21, 2019

Lloyds Banking Group (LON:LLOY) is among several banks interested in a bid for Bank of America’s (BoA) £7-billion credit card business in the UK, media have reported. The potential deal would mark the lender’s first acquisition since its taxpayer-funded bailout during the financial crisis.

Lloyds’ share price closed little changed on Friday, shedding 0.49 percent to 72.45p. The shares are trading slightly below the taxpayer’s break-even price of 73.6p, having closed about that level earlier during the week for the first time this year.
Sky News revealed on Friday that BoA had initiated plans for an auction of MBNA, which has a loan book of about £7 billion, or equivalent to roughly 11 percent of the UK credit card market. Insiders told the newswire that a deal to buy the business which issues cards under the brands of partners such as Premier League football clubs Arsenal and Manchester United, would be likely to value it at hundreds of millions of pounds and possibly more.

Sky News also quoted analysts as commenting that they were expecting Lloyds and Virgin Money to be interested in exploring bids for the credit card group. The Financial Times meanwhile noted in its coverage of the news that MBNA, based in Chester, fits with the FTSE 100 lender’s search for acquisitions to accelerate its planned expansion in niche areas, such as unsecured consumer loans, car finance, leasing and fleet management.
A potential deal would mark Lloyds’ return to acquisitions after the lender was rescued by the UK government during the financial crisis. The FT notes that while the bailed-out lender has been prevented from making acquisitions, its return to profit and renewed dividends have prompted analysts to speculate that it will have excess capital, which needs to be spent or returned to shareholders.
As of 07:07 BST, Monday, 30 May, Lloyds Banking Group share price is 72.45p.