Bank of America Sells Non-U.S. Credit Card Business With Sale Of MBNA U.K. To Lloyds

Bank of America (NYSE:BAC) recently inked a deal to sell its last remaining international card unit, MBNA U.K., to the U.K.-based Lloyds Banking Group – concluding the U.S. banking giant’s efforts to exit all non-U.S. card operations five years after it first announced the decision in August 2011. ^[1] The deal will reduce the size of non-core assets held by Bank of America in its ‘All Other’ reporting division by about £7 billion ($8.7 billion) when it finalizes early next year. The bank will receive £1.9 billion ($2.4 billion) in cash for MBNA – a figure that is at a premium to the unit’s book value thanks to its strong market share in the U.K. card industry. ^[2] This will allow Bank of America to realize a small one-time gain once the sale closes.

We do not expect the sale to have a material impact on Bank of America’s value. We are currently in the process of updating our price estimate for the bank’s stock to factor in the impact of a faster-than-expected rate hike plan by the Fed for 2017.

See our full analysis for Bank of America’s stock here

Bank of America’s decision to focus its card lending efforts entirely in the U.S. was one of many steps detailed by the banking giant over 2010-11 to streamline its bloated business model. ^[3] In early 2011, Bank of America’s international card operations included a sizable presence in Canada, Spain, Ireland and U.K. – the result of its acquisition of MBNA in 2006. ^[4]

The bank started getting rid of all non-U.S. card units beginning with the sale of its Spanish unit to private equity firm Apollo Capital Management and the sale of MBNA Canada to TD Ameritrade in August 2011. ^[3] But Bank of America was forced to end the sale of MBNA Europe – which included the card operations in U.K. and Ireland – in February 2012, as stricter regulatory requirements in the region led to poor valuation for the unit by potential suitors. ^[5] The bank then sold the card operations in Ireland to Apollo Capital Management in March 2012, leaving only the U.K unit as a part of its non-core operations. ^[6]

With the situation in the U.K. improving over recent years, Bank of America put MBNA U.K. on the block again this May. ^[7] The bank got several bids for the unit, with Lloyds finally closing the deal. Notably, MBNA U.K. has an 11% share of the country’s card market, and Lloyds has a market share of ~15% – making the combined entity the second largest player in the U.K. card industry after Barclays (NYSE:BCS).

As MBNA U.K. is reported as a part of Bank of America’s ‘All Other’ division, the division’s fee revenues will see a small one-time gain once the deal is completed.

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1. Acquisition of MBNA, Lloyds Banking Group Website, Dec 20 2016 [↩]
2. Bank of America to Sell U.K. Consumer Credit Card Business MBNA Ltd., Bank of America Press Releases, Dec 20 2016 [↩]
3. Bank of America to Exit International Credit Card Businesses, Bank of America Press Releases, Aug 16 2011 [↩] [↩]
4. Bank of America to Acquire MBNA, Bank of America Press Releases, June 30 2005 [↩]
5. BofA Ends Sale of MBNA Europe, The Wall Street Journal, Feb 6 2012 [↩]
6. Acquisition Extends Apollo’s European Consumer Credit Receivables Platform, Apollo Capital Management Press Releases, Mar 12 2012 [↩]
7. Bank of America Revives Sale of Credit-Card Issuer MBNA, The Wall Street Journal, May 27 2016 [↩]