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Bank of America

MBNA is the largest player in the credit industry worldwide. By acquiring MBNA, the Board of Bank of America would be able o acquire a majority market share of 20.2% in the $1.2 trillion credit card business. For this reason, the Board of America has taken a strategic decision to buy out MBNA for $35 billion. The advantages of the acquisition include access to a large share of the worldwide credit card markets (Kumar, 2012, p.37). The Bank of America could make use of its large network of 5800 branches in the US for providing financial services. The customer portfolio of MBNA also comprises of low risk borrowers which would be advantageous for the bank of America. The buyout also involves certain disadvantages. The buy out decision of MBNA has come at a time when the credit card market is saturated and there is a turn-around in the consumer behavior in the credit cards industry. Thus the growth prospects of venturing into the credit card business are likely to be decided with time. ...
Considering the slow down of the credit card business, the shareholders would still expect the bank to leverage on the resources of MBNA. The shareholders view this buyout to have been taken place at a higher value than the market price. The acquisition of MBNA by the Bank of America would tend to kill the competition in the market and the Bank of America would increase its market share. The vigorous strategies of American Express by persuading banks to advise customers to use their credit cards could also be challenged and the Bank of America is likely to move to the higher position in terms of market capitalization (WetFeet, 2008, p.46). An increase in the gamut of financial services would make the shareholders believe that the company is looking to expand its operations and the volume of revenues and earnings would also tend to increase. A high earning for the Bank of America after the buyout and exploring the potentials of the credit card business would mean that the earnings per share for the shareholders would increase. The dividend payout of the bank is also likely to increase and it is viewed positively by the shareholders. The shareholders also foresee a rise in valuation of the shares due to the strategic buyout of MBNA by the Bank of America (Kunitzky, 2010, p.78). Perspective of the shareholders of MBNA The shareholders of MBNA were supposed to be skeptical about the future of business of credit cards of MBNA. This is due to the facts that the credit market has saturated at this point of time and there is change in the consumer behavior in the credit card industry. Due to huge competition in the credit card market, the consumers expect a term of ...Show more

Summary

Bank of America Table of Contents Perspective of the Board of Bank of America 3 Perspective of the shareholders of Bank of America 4 Perspective of the shareholders of MBNA 5 Perspective of the hedge fund 5 Perspective of the US Federal Trade Commission 6 References 8 Perspective of the Board of Bank of America The acquisition of MBNA by the Bank of America reflects the strategic issues in the credit card business for the Board of Bank of America…
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