MBNA Cuts Price Tag Amid Fears Over Brexit

The owner of one of Britain’s biggest credit card issuers has slashed its profit forecasts - and its price tag - in an attempt to entice suitors in the wake of the UK’s decision to leave the European Union.

Sky News has learnt that MBNA, which is owned by the giant US lender Bank of America (Swiss: BAC.SW - news) , has informed prospective bidders in the weeks since the EU referendum that it intends to proceed with a sale in the coming weeks.

A pack of private equity firms and high street lenders are interested in buying MBNA, which has a receivables portfolio worth about £7bn.

Contrary to reports in the immediate aftermath of the referendum, the auction has not been put on hold, with BoA said to be keen to agree a sale of MBNA by the early autumn.

Lloyds Banking Group (Other OTC: LLOBF - news) , which has declared its intention to grow its credit card business, is seen by City analysts as the likeliest buyer, although it declined to comment on its interest when it reported half-year results on Thursday.

Advent International, BC Partners, Cerberus, Cinven, Hellman & Friedman and TPG are among the private equity firms said to have expressed an appetite to buy the business.

Cerberus last year acquired a £13bn portfolio of Northern Rock loans from the Government and has since been looking to acquire further financial assets in Britain.

Sources said on Friday that MBNA's revised profit forecasts were contained in updated information about the company presented by the company's advisers at Bank of America Merrill Lynch.

An initial freeze in financing markets after the June 23 poll had led BoA to consider aborting the auction, but recent liquidity in debt markets has provided confidence to both MBNA's owner and prospective bidders that they can fund a takeover.

MBNA has a loan book of about £7bn - equivalent to roughly 11% of the UK credit card market - but sources said that any downturn in consumer spending or rising bad debts if the economy weakens would prompt bidders to offer a significant discount to the pre-referendum price.

MBNA employs well over 1,500 staff at its base in Chester and has more than five million UK customers.

A deal to buy the business, which issues cards under the brands of dozens of partners such as Premier League football clubs Arsenal and Manchester United (NYSE: MANU - news) , would be likely to cost a purchaser of MBNA a premium to the £7bn portfolio value.

A successful exit for BoA would underline the ongoing efforts of global banks to dispose of non-core operations amid regulatory reforms introduced since the financial crisis of 2008.

MBNA says the company, which also issues cards branded with charities such as the British Heart Foundation, made a profit of £166m in 2015.

Its parent's plan to sell the business comes as demand for contactless payment products soars, with card-issuers scrambling to develop sophisticated mobile wallet services.

MBNA, which sponsors the rugby union team Sale Sharks, announced in March that it would begin offering Google's Android Pay service to consumers when it launches later this year.

A previous sale process in 2012 attracted interest from Barclays (LSE: BARC.L - news) , which owns Barclaycard, the UK's biggest credit card provider, and Virgin Money.

It is unclear whether a takeover of MBNA by Barclays would now be approved by competition regulators

In 2013, Virgin Money acquired a £1bn portfolio of credit card assets operated under its own brand from MBNA, two years after it also bought Northern Rock's "good bank" from the Government.

None of the suggested bidders would comment, while MBNA said it did not comment on speculation.