CREDIT card giant MBNA has bounced back into profit on news that raised hopes that the business could be successfully sold, with the preservation of thousands of jobs.
The Chester group was put up for sale in August by its parent, Bank of America, in a move that sparked fears for the future of the site and its 3,500 employees. But LDP Business can reveal that Chester Business Park- based MBNA Europe group posted a pre-tax profit of £348m in 2010 – up from a loss of £213m in 2009.
And Professor Steve Broomhead, who is leading a task force set up to secure the future of the site, says the news will show potential buyers that MBNA is a strong business that is worth preserving in Chester.
Accounts newly filed at Companies House show MBNA Europe reported operating income – including interest from loans as well as fees and commission income – of £1.6bn in 2010, down from £2bn in 2009.
But the group still managed to post its first profit since 2007 as it focused on its core products in the UK and Ireland and reduced its exposure to bad debts.
Total loans and advances to customers stood at £12.4bn, down from £13.8bn in 2009.
Provisions for “bad and doubtful debts”, meanwhile, stood at £835m, down from £1.4bn in 2009. The group said: “Following the improved economic outlook and tightened credit risk strategies, the provision has started to reduce from the peak in 2009.”
It added: “MBNA Europe continues to operate in a very challenging market environment. The continued use of credit risk mitigating strategies across all territories has contributed to a reduction of 10% in loans and advances to customers.
“However, the group maintains a significant share of the UK credit card market at 18%.” Bank of America is selling MBNA as part of its strategy to focus on its core US business.
When the sale was announced, fears were raised that any buyer could buy MBNA’s customer base and merge it into its own, meaning fewer jobs would be needed in Chester.
Earlier this month, Chester Renaissance Prof Broomhead was named chair of a local task force whose job is to persuade Bank of America to sell MBNA to a company that will keep the business and its employees.
He said: “This is a strong business, as evidenced by these results.
“This was a strategic decision by Bank of America to sell the credit card business in Europe, rather than anything to do with business difficulties.
“It’s a confident business. It’s one we’re very happy to support.
“It’s a rather difficult market. The financial services sector is fragile.
“But, at this point, I’m very optimistic about a sale and the retention of 3,500 high-value jobs in Chester.”
Prof Broomhead said the task force would hold its first meeting within weeks, once the bank had finalised the sales process for MBNA.
