Lloyds Banking Group has agreed to acquire a UK-based credit card firm MBNA from Bank of America’s subsidiary FIA Jersey Holdings for £1.9bn ($2.3bn).

The acquisition will allow Lloyds to enhance its position and offering within the UK prime credit card market.

MBNA business, which comprises gross assets of nearly £7bn, is expected to deliver strong financial returns.

It is expected to increase Lloyds’ revenue by £650m annually.

Lloyds Banking Group chief executive António Horta-Osório said: “The acquisition, funded through strong internal capital generation, increases our participation in the expanding UK credit card market with a multi- brand strategy and advances our strategic aim to deliver sustainable growth as a UK focused retail and commercial bank.

“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 low cost to income ratio and proven integration capabilities will deliver significant synergies and value to our shareholders.”

The transaction is expected to close by the end of the first half of 2017, subject to the receipt of competition and regulatory approval.

Lloyds plans to fund the transaction through organic capital generation.

After the completion of the transaction, Lloyds’ market share in credit cards is estimated to increase to 26% from 15%.

UBS is acting as financial advisor for Lloyds Banking Group on this transaction.

Lloyds said: “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.”

Image: Lloyds Bank branch. Photo: courtesy of Lloyds Banking Group.