MBNA to Buy AmSouth Credit Portfolio
Financial services giant MBNA Corp. reported Monday it agreed to buy the $550 million credit card portfolio of regional bank holding company AmSouth Bancorp.
MBNA did not disclose a purchase price, but Birmingham, Ala.-based AmSouth said it expects a pretax gain of about $170 million on the sale.
Under the agreement MBNA will manage the portfolio's 390,000 accounts under the AmSouth brand and will be responsible for all credit, customer service, customer assistance and operational decisions for the portfolio.
The companies expect the transaction, which is subject to regulatory approval, to close by the end of the year.
"While AmSouth's credit card business is strong, it is noncore and lacks meaningful scale," said AmSouth chairman, president and chief executive C. Dowd Ritter in a statement. "Given the increasingly competitive credit card environment, substantial additional resources would be required to continue to effectively participate in this market. We believe we can better deploy our capital, while at the same time continuing to benefit from an additional revenue stream as a result of the agent-bank agreement."
AmSouth also said it plans to replace about $1.4 billion in Federal Home Loan Bank loans with lower cost financing at a savings of 240 and 250 basis points while not changing its interest rate sensitivity, adding that the company expects to incur prepayment expenses. However, AmSouth expects the transactions to boost earnings in 2005. Analysts surveyed by Thomson First Call estimate AmSouth's fiscal 2005 earnings at $2.01 per share.
The agent-bank agreement also gives MBNA exclusive marketing rights to AmSouth credit card customers, as well as the bank's online and branch customers, the companies said.
Goldman Sachs & Co. served as AmSouth's adviser in the MBNA transaction.
Shares of MBNA rose 14 cents to $25.77, and AmSouth shares rose 6 cents to $26.45 in afternoon trading. Both companies trade on the New York Stock Exchange.
This is not a commitment for a loan or an ad for credit as defined by paragraph 226.24 of regulation Z.