A&L unloads credit card business

MBNA has emerged as the buyer of the credit cards operation of Alliance & Leicester, paying about £1.2bn, including £793m in customer credit balances.

A&L will continue to service new and existing customers until the end of March 2003, and its brand will remain on all new and existing cards. But MBNA will underwrite the whole operation with immediate effect. Under an initial seven-year partnership agreement, A&L will receive commission payments each year that reflect customer growth.

Credit cards were once seen as the growth engine of A&L, which now has about 1.4m cards in issue. But although its innovative 'money back' card proved popular, growth has stalled in the past two years.

The bank believes that it will now be able to concentrate on its core banking services - current accounts, mortgages, personal loans and savings.

The move could spell job losses for A&L's 350 credit card staff, though the bank is seeking to redeploy staff. A&L said the deal would reduce its bad debt charges and cut costs by £20m a year from 2004. It should lift profits from 2003.