Bank of America is No.1 Credit card issuer after MBNA acquisition
The Bank of America Corporation officially became the US's number one credit card issuer after it finished the acquisition of the MBNA Corporation. This acquisition is slated to have caused the BOA $34.2 billion.
Overall the second largest US bank in terms of assets, the Bank of America, completed the purchase after it received the go ahead from its shareholders as well as the various regulators.
The bank in a statement issued yesterday mentioned that Bruce L. Hammonds, MBNA's CEO, would head the BOA card division from Wilmington, Del, which is MBNA's former headquarters.
This purchase has given BOA a combined outstanding credit card balance of $140 billion and pushed it above American Express and J P Morgan Chase.
The benefit of the acquisition for the Charlotte, NC based Bank of America, which is the nations top debit card issuer, would be that its product line would be pushed to account holders of MBNA accounts. They are also expected to use their affinity marketing programs to retain their existing customers.
An analyst Richard Bove, with the Punk Ziegel & Co. of Pinellas Park, Fla said, "The ability to utilize those marketing programs is going to be enormous for Bank of America. You'll see a significant increase in the bank's credit card activity now that they have MBNA."
As it stands now, five companies control the credit card industry: Bank of America, JP Morgan, American Express, Citigroup and Capital One Financial. According to figures compiled by The Nilson Report in 2004, these five collectively control around three-quarters of the $700 billion of outstanding balances on credit cards.
For every single share of MBNA, Bank of America will give out 0.5009 share along with a $4.125 in cash. This is based on the $46.15 closing price of BOA stock on Dec. 30. MBNA shares had closed on $27.15.
Bank of America expects to record $1.3 billion in reorganization costs, according to a statement released by them. After announcing the deal on June 30th, the bank had mentioned that it would cut $850 million per annum on combined costs by end of 2007. This would mostly be done by eliminating 6000 jobs.
Last month, Kenneth D. Lewis, Chief executive of Bank of America has stated in a conference held by Goldman Sachs that the bank was on the path of its original forecast about the merger.
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