Lloyds Banking Group is to pay £1.9 billion for the acquisition of credit card outfit MBNA from Bank of America.
The deal, the UK bank's first since the 2008 financial crisis, will lead to the transfer of £7 billion of assets and add £650 million to annual revenues. Lloyds says the transaction is consistent with its strategic ambitions of growing in the consumer finance space, raising its market share in credit cards from 15% to 26%.
The purchase price includes £0.8bn of acquired equity and assumes £240m for future PPI claims, with Lloyds' exposure to PPI liability capped at this amount.
In a statement, Lloyds says: "The MBNA brand will be maintained as a challenger brand further enhancing our customer offering. MBNA's diversified distribution model, along with its data analytics capability, digital strength and well-recognised brand, will be complementary to the Group's existing capabilities and provides further opportunities for growth and delivering excellent customer service."
The transaction is expected to present significant cost synergies, wiping 30% of MBNA's cost base in 2015 through savings of £100 million a year.