Potentially very bad news to an area already struggling with unemployment
Risk to 700 MBNA jobs[/b]
More than 700 jobs are at risk in Carrick-on-Shannon following the decision by US financial institution Bank of America to exit its Irish and UK credit card businesses.
The bank’s decision to sell MBNA is part of a wider effort to boost its balance sheet and improve its capital ratios by divesting of non-core assets.
MBNA is one of the largest credit card providers in Europe, employing some 4,000 people with $19 billion (€13 billion) in credit card loans. It has been operating in Ireland since March 1997 and it offers extensive consumer credit card services under its own brand, as well as in the affinity market.
The company provides cards for companies and associations such as Ryanair, EBS, An Post One Direct, Irish Nurses and Midwives Organisation and Munster Rugby.
Bank of America entered the market in 2006 when it acquired MBNA for $35 billion, later rebranding the US operations as Bank of America Card Services. In Europe and Canada the MBNA name was retained.
The bank now has a strategy of “building a fortress balance sheet”, according to Brian T. Moynihan, chief executive of Bank of America, which means selling off non-core functions.
Most staff got their first inkling that something was amiss when relatives in the US started to phone them about lunchtime yesterday, having heard media reports there about the company’s plans.
A short time later managers were summoned to a meeting and, at about 3pm, e-mails landed on the computer screens of all workers. There was no meeting called and, according to workers, the only information was what was released to the media about the same time.
“While the credit card remains a fundamental core product for our US customers, an international consumer card business under another brand is not consistent with that strategy,” Mr Moynihan said yesterday, following the announcement that it had sold its Canadian credit card unit to the Toronto-Dominion Bank (TD Bank) for $8.6 billion.
TD Bank said it had paid a “modest premium” for the business.
This follows Bank of America’s agreement earlier this month to sell its Spanish card business to Apollo Capital Management, while it sold its $200 million portfolio of small business card loans to Barclays in April of this year, and it is also exiting the depository institution affinity credit card business.
A spokesman for Bank of America said it now had a “stated desire” to exit its Irish and UK MBNA business. As it was not branded Bank of America, the business had “ little connection” to the rest of what the bank could offer, he said.
However, a buyer has not yet emerged. According to the bank spokesman, there was no timeframe for the exiting of the business, and the process was still in the “early stages”. It is not yet clear whether or not the UK and Ireland business will be sold together, or separately, and he was unwilling to say what might happen if no buyer could be found, given the current market turmoil.
He said the bank would now focus its international business on the core areas of wealth management, commercial and corporate banking. As such, the bank’s Dublin operation, Bank of America Merrill Lynch, which employs about 1,000 people, is not expected to be affected.
The most recent accounts for MBNA’s Irish operation show that it reported a profit before tax of € 3.5 million in 2009, based on turnover of € 37.5 million. Earlier this year it was fined €750,000 by the Central Bank for overcharging its customers almost € 17 million.
Following the announcement, Minister for Jobs, Enterprise and Innovation Richard Bruton met the company to commit the resources of IDA Ireland to finding a buyer for the company. The IDA will now look for a buyer through its global network, where it already has had some success. Earlier this year it secured 280 jobs at Pfizer’s operation in Dún Laoghaire when it assisted in the sale of the plant to biotechnology company Amgen.
Fianna Fáil Senator Terry Leyden today called on Taoiseach Enda Kenny to take the lead in negotiations to save the jobs, saying it was a “major blow” to Co Leitrim and the entire region.
“The Government must do everything in its power to find a buyer for the firm in order to save as many jobs in Co Leitrim as possible,” Mr Leyden said.
He said MBNA was leaving behind a “highly-skilled and well trained workforce that would be an excellent asset to any potential buyer”.