Lloyds sells Goldfish to Morgan Stanley for £1bn

Lloyds TSB has sold its Goldfish credit cards business to Morgan Stanley for almost £1bn.

The country's fifth-biggest bank expects to pocket profits of about £70m this year from the £975m cash sale of the Goldfish brand, balances and loyalty programme.

The US investment bank stumped up a 22 per cent premium to the £800m sitting on Goldfish cards, which is substantially more than the 14 per cent premium Lloyds paid for a 70 per cent stake in 2003.

The bank wants to concentrate on building its own-brand credit-card business instead.

Terri Dial, Lloyds' new head of UK retail banking, said: "I am convinced that our strategy going forward should focus on growing our core franchise.

"As customers increasingly use credit and debit cards as tools to help them manage their cash flow, we strongly believe there are substantial growth opportunities."

Goldfish's 800,000 customers and most of its 345 staff will be shifted to Morgan Stanley. Lloyds is looking to find jobs for 25 Goldfish workers within the bank.

Lloyds took full control of the Glasgow-based Goldfish from Centrica, the former British Gas, two years ago after a loss-making joint venture set up in 2000 failed to deliver the sales the bank had hoped for.

Lloyds had wanted to sell its financial services to Centrica's 9 million gas customers, and to integrate Goldfish into its existing credit card platforms.

Experts reckoned that the bank had failed to grow the business since then, with Goldfish - advertised by the comedian Billy Connolly - expected to contribute only an estimated £8m to group pre-tax profits of £3.3bn this year.

Profits margins on Goldfish cards were historically narrower than on other Lloyds cards, and are thought to have contributed disproportionately to bad debts at the bank.

The City welcomed the sale, which was seen as insignificant to the bank's overall strategy. Lloyds TSB shares closed down 1.75p at 484.75p .

Ian Gordon, a sector analyst at Dresdner Kleinwort Wasserstein, agreed. He said: "This is a small but good deal. It neatly wraps up a messy situation for Lloyds TSB that has been running since 2000, at a good one-off price."

The Goldfish acquisition underlines a commitment from John Mack, Morgan Stanley's chief executive, to build a credit-card business that his predecessor Philip Purcell, and some shareholders, reckoned should be sold.

The US bank has more than 1.5 million credit-card customers in the UK.

Separately, Abbey, the Spanish-owned mortgage bank, is poised to end its credit-card deal with the US lender MBNA and bring its cards operation back in-house.