A year after it began, the turmoil in the financial markets
shows no sign of abating and it has now claimed some of the
best-known global banking names, who have been left with no option
but to merge with larger rivals in order to ensure survival.

In the US, global investment brokerage Merrill Lynch was
acquired by Bank of America (BofA) to create a banking powerhouse,
after BofA turned away from acquiring Lehman Brothers, which
announced its bankruptcy shortly after. The acquisition of Merrill
Lynch gives BofA its long-sought-after goal of building up its own
retail brokerage business, but it will also bolster BofA’s cards
business, most notably in the high-end elite card and debit card

Merrill Lynch’s card offerings include deferred debit cards as
part of its cash management account proposition, and it also has a
sizeable number of high net worth card customers. This will
complement BofA’s primarily consumer-orientated cards business,
according to Brian Riley, research director at US payments
consultancy TowerGroup.

Lloyds/HBOS overtakes Barclaycard

“Bank of America’s acquisition of the Merrill Lynch card
business brings more innovation than scale,” he said. “Merrill
Lynch built its debit and credit card business into the top 20
rankings by addressing a sole market: high net worth. This added
dimension offers Bank of America the opportunity to step into the
top-tier of global private banking, putting it on an equal footing
with high-end card product offerings from global banks such as Citi
and JPMorgan Chase.”

Meanwhile, in the UK, Lloyds TSB announced plans to acquire
HBOS, following a dramatic fall in the value of HBOS stock – which
in itself partly came about due to worries over HBOS’s funding
capabilities following the collapse of Lehman Brothers.

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The proposed merger will see the emergence of a challenger to
Barclaycard’s domination of the UK card market. According to their
respective 2008 interim results, Lloyds TSB and HBOS had combined
UK credit card balances of £13.3 billion ($24 billion), surpassing
Barclaycard’s £9.3 billion in average outstanding UK balances in
the same period.