The firm said the acquired MBNA business, which comprises gross assets of around £7 billion, is expected to deliver strong financial returns and create significant value for shareholders. On completion of the transaction, Lloyds’ market share in credit cards will increase from 15 per cent to 26 per cent per cent.

The transaction is expected to complete by the end of the first half of 2017, subject to the receipt of competition and regulatory approval.

Lloyds said the transaction will deliver a £650m per annum (around 4 per cent) increase to its revenues and will enhance the group’s net interest margin by around 10bps per annum. There is also significant opportunity for cost synergies, currently expected at around £100m run rate per annum within two years, representing around 30 per cent of the 2015 MBNA cost base.

In the first half of 2016 the gross assets acquired delivered post-tax profits of £123m and are being acquired for cash consideration of £1.9bn. The purchase price includes £0.8bn of acquired equity and assumes £240m for future PPI claims, with the group’s exposure to PPI liability capped at this amount.

The transaction is being funded through organic capital generation and is currently expected to utilise approximately 80 basis points of Common Equity Tier 1 (CET1) capital, which through this acquisition will further enhance future earnings and capital generation.

António Horta-Osório, chief executive of Lloyds Banking Group, said: “The acquisition, funded through strong internal capital generation, increases our participation in the expanding UK credit card market with a multi-brand strategy and advances our strategic aim to deliver sustainable growth as a UK focused retail and commercial bank.

“The MBNA brand and portfolio are a good fit with our existing card business and we will focus on providing its customers with excellent service and value. Our low cost to income ratio and proven integration capabilities will deliver significant synergies and value to our shareholders.”