Lloyds Banking Group (LON:LLOY) has completed the £1.9bn acquisition of the UK credit card business of MBNA after receiving regulatory and competition approvals.
The bank is buying the business from FIA Jersey Holdings Limited, a wholly owned subsidiary of Bank of America, in its first major acquisition since the financial crisis.
The group said MBNA would deliver strong financial returns, including 3% statutory earnings per share accretion in the first year and 5% the following year.
READ: Lloyds plays catch up with Barclays as it boosts share of credit card market with MBNA takeover
MBNA, which holds assets of £7bn, will also boost revenue by £650mln per year, while lifting the net interest margin by 10 basis points per year.
The underlying return on investment exceeds cost of equity in the first full year and will increase to about 17% in the second year after the acquisition.
Chief executive Antonio Horta-Osorio said: "The acquisition, which is funded through strong internal capital generation, increases our participation in the UK prime credit card market, where we were underrepresented, and strengthens our position as a UK focused retail and commercial bank.
He added: “The MBNA brand and portfolio are a good fit with our existing card business and we will focus on providing its customers with excellent service and value. Our proven integration capabilities and low cost to income ratio will deliver significant synergies and value to our shareholders."
Lloyds is targeting cost savings of about £100mln per year within two years at MBNA, accounting for 30% of the division’s cost base.
MBNA reported post-tax profits of £123mln in the first half of 2016. It will remain as a challenger brand and lift Lloyds’ market share in credit cards from 15% to 26%.
The announcement comes shortly after Lloyds returned to private hands on 16 May when the government sold its remaining shares in the lender.