HSBC Joins Three-Way High Street Tussle For £7bn MBNA

HSBC is poised to become the third of Britain's five biggest high street banks to enter an increasingly competitive bidding war for MBNA, the credit card issuer whose partners include top Premier League football clubs.

Sky News can reveal that HSBC is drawing up plans to make an offer for MBNA ahead of a deadline set by the company's advisers next week.

If it does so, it will join Lloyds Banking Group (Other OTC: LLOBF - news) and Santander UK (LSE: 44RS.L - news) among the suitors for the business, interest in which has revived since initial indications after the UK's referendum vote to leave the European Union suggested that MBNA's price tag would have to be slashed.

The competitive nature of the auction will stir hopes at Bank of America (Swiss: BAC.SW - news) (BoA), MBNA's owner, that it may yet attract a bumper valuation for the business, which is one of the biggest credit card groups in the UK.

Details of HSBC's prospective bid, and the strategic rationale underpinning it, were unclear on Thursday, although sources close to the sale process confirmed its interest.

Sky News revealed Santander UK's involvement in the auction earlier this week, with the Spanish-owned bank keen to strengthen its plans to deal with far-reaching industry reforms due to be implemented in 2019.

Santander UK is said to be looking at MBNA as a takeover target with a view to strengthening the balance sheet of what will become its non-ring-fenced bank under Government reforms designed to protect taxpayers and savers against a future financial crisis.

MBNA's £7bn credit card book would sit within the non-ring-fenced bank, potentially making it easier for it to attract an investment grade credit rating, according to insiders.

Sources suggest that such a move on MBNA could cast doubt on Santander UK's interest in buying a separate set of assets from the state-backed Royal Bank of Scotland (LSE: RBS.L - news) (RBS).

Lloyds is also intent on making an offer for MBNA, although some analysts have warned that such a substantial acquisition could undermine its desire to pay a special dividend to shareholders at the end of the year.

Several private equity firms, including Cinven and CVC Capital Partners - which have teamed up to make an offer - are also expressing interest in MBNA, which has a receivables portfolio worth about £7bn.

BoA is said to be keen to agree a deal within months.

MBNA presented reduced profit forecasts in July, after an initial freeze in financing markets after June's EU referendum had led BoA to consider aborting the auction.

A revival in debt markets has, though, provided confidence to both MBNA's owner and prospective bidders that they can fund a takeover.

MBNA's loan book is equivalent to roughly 11% of the UK credit card market, and it employs well over 1,500 staff at its base in Chester.

The company has more than five million UK customers, and issues cards under the brands of dozens of partners such as Virgin Atlantic Airways and the Premier League football clubs Arsenal and Liverpool.

It has sought to raise its profile through sponsorships of the Thames Clippers and Chester races.

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 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.

HSBC and MBNA declined to comment.