Santander, the Spanish owner of Abbey National, is considering taking control of the UK bank’s credit card operations in a move that could cost it at least £289m.
Abbey outsourced the business in 2001 to MBNA, the US credit card operator, in a £289m deal. But Santander, which acquired Abbey in 2004, is considering severing links with MBNA and bringing Abbey’s credit card operations back in-house. It is thought the Spanish bank, which issues 15m cards worldwide, wants to expand the Abbey business through its own global cards unit.
However, it is understood that if the Spanish bank decides to press ahead, it might have to buy back the credit card assets from MBNA. Under the terms of the original deal, MBNA now owns the assets and the customer base.
Abbey National sells cards designed and produced by MBNA, and which are branded with the Abbey logo, in return for a commission on each sale.
To take the operations back in-house, it is understood that Santander could have to pay MBNA at least £289m. Credit card books are normally sold for the value of the loan book assets, called receivables, plus a premium that can range between 15 per cent and 30 per cent. At the time Abbey sold the credit card book, it had 500,000 customers and a loan book of £244m. MBNA paid a £45m premium.
Since then the number of customers covered by the agreement has more than doubled to 1.27m, though MBNA has not disclosed the size of the current loan book.
Morgan Stanley last week paid Lloyds TSB £1bn ($1.7bn) to buy credit card business Goldfish, which had a £800m loan book, representing a 22 per cent premium for the brand and customer base.
Santander and Abbey said yesterday the credit card operation with MBNA was still under review. Negotiations were continuing and a straight buy-back of the business was one option being considered, though a decision was not likely until the first quarter of 2006.
While there have been few cases of a credit card book being sold back to the original owner, there are some recent precedents. Wachovia, the US bank, said this month it was ending its five-year outsourcing pact with MBNA and would start issuing its own credit cards next year.
MBNA said: “MBNA has operated and serviced credit cards under the Abbey National brand since 2001. Credit cards are an important part of Abbey’s business and MBNA is discussing future plans with them.”