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BofA Inks Deal to Sell U.K. Credit Card Business for $2.4B
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Bank of America Corporation (BAC - Free Report) is finally selling its last remaining international credit card business. The bank has announced a deal to offload its U.K. consumer credit card operations, MBNA Ltd. to Lloyds Banking Group plc (LYG - Free Report) for $2.35 billion.
The transaction concludes BofA’s efforts to exit all international consumer card operations as part of its strategy to focus on core domestic business. The deal, expected to close by the first half of 2017, is subject to regulatory approvals.
Upon closure, the transaction is anticipated to result in a marginal one-time after-tax gain for BofA’s All Other division. Further, it will likely lower non-core assets in the division by approximately $8.7 billion. Nonetheless, the deal will not impact the company’s global commercial card business.
Following the announcement of deal, BofA’s shares rose more than 1%. Notably, the company has been witnessing unprecedented surge in its share price since the Presidential election results in November. The company’s shares jumped 33.5% since the results compared with the Zacks categorized Major Regional Banks industry’s growth of 21.8%.
BofA had acquired the U.K. card business through its purchase of MBNA Corp. for $35 billion in 2006. However, following the 2008 crisis, the bank began its efforts to strengthen its balance sheet and simplify operations through offloading non-core assets.
Further, BofA is putting more emphasis on consumer business. However, with no retail branches in the U.K., the company had been facing tough time enhancing its consumer banking business there. In addition, stringent regulations and rise in borrowers defaults added to the woes.
Therefore, BofA put the entire consumer credit card operations on the block. In 2011, the company sold its Spanish unit to Apollo Global Management, LLC (APO - Free Report) and its Canadian division to The Toronto-Dominion Bank (TD - Free Report) .
Nonetheless, the company involuntarily stopped the sale of its entire Europe card business (Ireland and U.K.) owing to poor valuation for the unit. Thereafter, it separately sold its Irish card operations to Apollo, while the U.K. business continued to remain in its books.
As the economic situation gradually improved in the U.K., BofA again put its U.K. business up for sale in May 2016. The division has around 11% share in the country’s card market. Therefore, Lloyds expects its market share to rise 26% from the present 15%.
Further, Lloyds’ projects annual 4% revenue growth and 10 basis points rise in net interest margin, following the completion of the deal. Moreover, the deal is expected to lead to cost synergies for the company.
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BofA Inks Deal to Sell U.K. Credit Card Business for $2.4B
Bank of America Corporation (BAC - Free Report) is finally selling its last remaining international credit card business. The bank has announced a deal to offload its U.K. consumer credit card operations, MBNA Ltd. to Lloyds Banking Group plc (LYG - Free Report) for $2.35 billion.
The transaction concludes BofA’s efforts to exit all international consumer card operations as part of its strategy to focus on core domestic business. The deal, expected to close by the first half of 2017, is subject to regulatory approvals.
Upon closure, the transaction is anticipated to result in a marginal one-time after-tax gain for BofA’s All Other division. Further, it will likely lower non-core assets in the division by approximately $8.7 billion. Nonetheless, the deal will not impact the company’s global commercial card business.
Following the announcement of deal, BofA’s shares rose more than 1%. Notably, the company has been witnessing unprecedented surge in its share price since the Presidential election results in November. The company’s shares jumped 33.5% since the results compared with the Zacks categorized Major Regional Banks industry’s growth of 21.8%.
BofA had acquired the U.K. card business through its purchase of MBNA Corp. for $35 billion in 2006. However, following the 2008 crisis, the bank began its efforts to strengthen its balance sheet and simplify operations through offloading non-core assets.
Further, BofA is putting more emphasis on consumer business. However, with no retail branches in the U.K., the company had been facing tough time enhancing its consumer banking business there. In addition, stringent regulations and rise in borrowers defaults added to the woes.
Therefore, BofA put the entire consumer credit card operations on the block. In 2011, the company sold its Spanish unit to Apollo Global Management, LLC (APO - Free Report) and its Canadian division to The Toronto-Dominion Bank (TD - Free Report) .
Nonetheless, the company involuntarily stopped the sale of its entire Europe card business (Ireland and U.K.) owing to poor valuation for the unit. Thereafter, it separately sold its Irish card operations to Apollo, while the U.K. business continued to remain in its books.
As the economic situation gradually improved in the U.K., BofA again put its U.K. business up for sale in May 2016. The division has around 11% share in the country’s card market. Therefore, Lloyds expects its market share to rise 26% from the present 15%.
Further, Lloyds’ projects annual 4% revenue growth and 10 basis points rise in net interest margin, following the completion of the deal. Moreover, the deal is expected to lead to cost synergies for the company.
Currently, BofA carries a Zacks Rank #2 (Buy), while Lloyds has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>