Lloyds Banking Group is considering taking on Bank of America’s liabilities in the British payment protection-insurance scandal as it looks to beat private-equity firms in the bidding for the MBNA credit-card business, according to sources.
Britain's largest mortgage lender is vying with private-equity firms including Cerberus Capital Management and Advent International for Bank of America's MBNA card business in the United Kingdom, which has about £6.7 billion pounds ($8.5 billion) of assets, said the sources.
Barclays Plc is no longer interested in the assets due to antitrust concerns, given its own Barclaycard division controls about 27 per cent of the British card market, said one of the sources.
While Lloyds is attempting to negotiate protection from Bank of America against future PPI redress, the US bank has told bidders it wants a clean break from the scandal and won't indemnify them against potential future charges, the sources added.
Lloyds has had £16 billion pounds of charges for PPI, more than any other British lender. Lloyds may have an advantage over the private-equity bidders because regulators trust how it has handled PPI customer redress and the bank has experience valuing the size of the potential claims, two of the sources said.
Although the bank was fined £117 million last year for failing to treat customers making PPI complaints fairly, British regulators may prefer the lender to take on MBNA’s exposure over a private-equity firm with limited experience of the scandal, the sources added.