According to unconfirmed reports, Lloyds bank – who were the biggest mis-sellers of payment protection insurance are the first in line to purchase Bank Of America’s MBNA credit card operations in the United Kingdom.
The news that Lloyds is in prime position to purchase MBNA’s UK’s operations, comes after a change in stance from Bank Of America who earlier were reported to be balking at the thought of selling of MBNA to Lloyds because of the London based bank’s exposure to having to pay out billions of pounds to people who were mis-sold ppi and future PPI claims due to be made before the June 2019 deadline.
Other banks who have been reported to be fighting to buy MBNA include: Cerberus, Spain’s Santander and Advent International an American private equity firm, based in Boston, Massachusetts.
Barclays was reported to have been a previous front runner for MBNA, but the bank was forced to exit negotiations, because of concerns of the clash of interests with their Barclaycard business and the potential of the UK government sanctioning down the line, due to one company controlling a majority of the UK’s credit card market.
However, the Financial Times reported potential problems which may arise due to the buy-out of MBNA by Lloyds.
The MBNA deal would raise its credit card market share from 15 per cent to more than 25 per cent.
You might expect the market to applaud such a rare sign of ambition from a European bank. Many of the region’s lenders are on the back foot, thanks to years of new rules, mis-selling penalties and an uncertain economic outlook, now further rattled by Brexit.
But Lloyds’ shares dipped slightly. Analysts expressed doubts about the merits of a deal. The price tag would absorb between 0.4 and 0.7 percentage points of Lloyds’ capital, although this is small compared with the bank’s 1.6 percentage points of annual organic capital generation. They also signalled a concern that the bank would inherit liabilities connected to payment protection insurance (a sore point for Lloyds, which has the biggest PPI bill of all, currently £17bn), although apparently BofA would underwrite this risk.