The banking giant said MBNA, which holds assets of £7 billion, would deliver strong financial returns and bolster its position in the UK prime credit card market.
Antonio Horta-Osorio, group chief executive of Lloyds, said MBNA was a “good fit” with the bank’s current credit card business.
He added: “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 deal will provide a £650 million-a-year boost to Lloyd’s group revenues, while enhancing the bank’s group net interest margin by around 10 basis points per year.
Once it is given the green light by regulators, the tie-up is expected to be complete by the end of the first half of 2017.
The move will see Lloyds buy MBNA from Bank of America subsidiary FIA Jersey Holdings Limited, delivering cost savings of around £100 million per year within two years.
The savings would represent around 30% of MBNA’s cost base in 2015, Lloyds said.
The announcement comes after Lloyds took another step towards privatisation last week when the Government announced it had sold off a further chunk of the bank, taking its stake down to less than 7%.
It means more than £17.5 billion has been returned to Government coffers since the lender’s £20.3 billion bailout at the height of the financial crisis.
In October, Lloyds said it had set aside another £1 billion to meet compensation claims for the mis-selling of payment protection insurance (PPI) as it attempts to draw a line under the scandal.
On the MBNA deal, the bank said its purchase price includes £240 million for future PPI claims, adding that its “exposure of PPI liability” would be “capped at this amount”.
MBNA, which booked post-tax profits of £123 million in first half of 2016, will be kept as a challenger brand and help Lloyds strengthen its credit cards market share from 15% to 26%.
The bank said its underlying and statutory performance was strong and it remains on track to deliver “a progressive and sustainable ordinary dividend in 2016”.
Lloyds announced in October that statutory pre-tax profits had fallen 15% year on year in the third quarter at £811 million, as it revealed more provisions for PPI mis-selling.
Underlying profit for the third quarter came in 3% down at just under £2 billion.