June 28, 2019 / 7:13 AM / 19 days ago

UPDATE 1-Bank of Ireland sells UK credit cards for $672 mln

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LONDON, June 28 (Reuters) - Bank of Ireland has sold its British credit card portfolio to digital finance company Jaja Finance for around 530 million pounds ($671.62 million), the company said on Friday.

The portfolio comprises existing Bank of Ireland UK, the AA and Post Office-branded credit cards.

Bank of Ireland said the group had entered into a separate long-term agreement under which Jaja will become the issuer for the AA and Bank of Ireland UK’s consumer credit cards.

Jaja bought the cards as part of a consortium of investors including major U.S. private equity funds Centerbridge Partners and KKR, the finance company said.

It said the acquisition was part of a strategy to become a major player in the UK credit card market.

Customers will be notified in writing prior to the transfer of their credit card accounts to Jaja in 2020, it added.

BoI said that in 2018 the credit card business contributed 35 million pounds of total income and had operating expenses of 36 million pounds.

The sale is expected to generate around a 70 basis point improvement in the return on tangible equity of BoI’s UK business, and contribute around 10 basis points towards the group’s core capital ratio.

The deal excludes BoI’s Northern Ireland commercial credit card portfolio and does not impact the lender’s credit cards in the Republic of Ireland.

Bank of Ireland put the credit card business under review a year ago as it sought to address its underperforming British business, where overall returns are below the cost of capital, generating low single-digit returns on tangible equity.

The portfolio was put on the end-2018 balance sheet under “assets classified as held for sale”.

The refocus in Britain is part of a medium-term plan under new boss Francesca McDonagh for Ireland’s largest lender by assets to boost its loan book by around 20% by 2021 and invest in front-end technology to improve profitability and efficiency. ($1 = 0.7891 pounds) (Reporting by Iain Withers in London and Padraic Halpin in Dublin; Editing by Jan Harvey)

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