The Effects Of Lloyds Acquisition Of Credit Card Manufacturer MBNA On Customers
The acquisition of the American-owned and United Kingdom’s leading credit card manufacturer MBNA by the Lloyds Banking group is no longer a secret. In a recent statement to newsrooms, Lloyds announced that it would be buying off the card manufacturer for £1.9 billion in a deal that’s expected to complete by the end of the first-half of 2017. The deal is not only projected to bolster Lloyd’s revenues in the UK but will also significantly increase the banking group’s card market influence. Nonetheless, what impact will such a deal have on the current and future MBNA customers locally and Lloyd’s international investors?
Impact on MBNA card holders
Though the deal contents remain scanty, Lloyds management has moved in to reassure the MBNA card holders that there won’t experience an immediate impact during the transition period. The reassurance also extends to all other Lloyds affiliated card holders all over Europe. These traders have been advised to continue managing their accounts as usual. As expected, the Lloyds hinted on running the MBNA franchise as a challenger brand against its other credit cards operating in the country and other European markets such as the Halifax.
Impact on local and international investors
In what analysts term as the banking group’s biggest comeback deal since the 2008/2009 economic crisis, Lloyds will have a 26 percent card market share of the UK’s card market upon completion of this deal. The move is quite welcomed by both the local and international investors as it serves as a major indicator of the group’s future financial standing. The government and the group’s management have also been keen on the completion of the deal as both seek to fully recover the bailout funds advanced by the latter to the group during the last economic crisis.
The banker’s steady recovery has seen them reduce government's stake in its ownership from 43 percent in 2009 to below 7 percent by the end of this year. The management hopes to return to full privatization by the time the deal sails through.
If the prepaid and credit card fourth quarter market report released by the Bank of England are anything to go by, the deal couldn’t have come at a better time. The report indicates that gross cards use in the country hit an all-time high this October closing at £15.98 Billion. According to the banking industry regulator, this reflected a significant shift from the use of hard cash and embracement of the card technology.
Therefore, if the acquisition deal sails on smoothly, it will be a win-win situation for both the banking group’s management as well as its investors. If you are a futuristic investor, this is the right time to invest in the Lloyds.
Effect on United Kingdom’s card market and transactions
If you anticipate the card market dissolutions with the close of the deal, you might be wrong. Apart from the fact that Lloyds would have the upper hand with a quarter market influence, the group is known to maintain several challenger brands thereby ensuring healthy competition and smooth transition. Nonetheless, the close of the deal and the much-awaited privatization are expected to trigger a share market rush as different institutions seek to take up the government’s stake in the company’s ownership.