Banks battle it out to snap up £7bn card giant MBNA
A DAVID and Goliath bidding war could be about to break out between Lloyds and Virgin Money over credit card firm MBNA.
Both the High Street giant and the relative newcomer are thought to be keen to buy the lender from Bank of America.
Debt-fuelled spending continues to boom in Britain, with the amount UK consumers owe on loans and credit cards up £1.9bn in March – the highest figure for 11 years.
It makes the £7bn MBNA business a hugely attractive proposition, as any buyer will immediately have a larger loan book and more growth opportunities.
And a deal would also deprive the winning bank’s competitors of a chance to expand, making it doubly interesting.
Virgin Money has been growing rapidly since the financial crisis and credit card balances jumped 15pc to £1.8bn in the first quarter of 2016. It has been pursuing an aggressive growth strategy, slashing interest rates on cards and offering lengthy interestfree periods.
It has pledged to ‘ shake up banking’, even offering customers credit cards with pictures illustrating a punk band, the Sex Pistols. But despite rapid growth and bold ambitions, the company has a £1.6bn value on the London Stock Exchange – making it a minnow compared to the giant High Street lenders.
For Lloyds, the acquisition would be a milestone – its first takeover since the bank was forced to beg for a £20.5bn bailout at the height of the financial crisis. Lloyds was barred from buyouts after that humiliation forced it to its knees.
The Government has now sold all but 9.2pc of its stake and aims to offload this final tranche of shares in the next year.
The bank itself is back in profit and delighted investors with a higher-than-expected £2bn dividend bonanza earlier this year.
MBNA has 5m credit card customers and an 11pc market share. It made a £166m profit last year and analysts predict the sale will raise around £8bn.
Ian Gordon of Investec said: ‘Returns in card businesses are higher than in any other UK banking business. It’s certainly a not- illogical possibility for either business.’