Bank of America’s $2.5 billion mortgage to buy Walmart’s $3.3 billion payday loan company
Bank of American has struck a $2 billion deal with Walmart to buy its payday lending arm, a deal that will make it the largest lender in the United States.
Wal-Mart is one of the nation’s largest payday lenders and one of its largest buyers of auto loans.
The deal, announced Monday, would give Walmart’s payday lending business access to a $3 billion cash injection.
Walmart has already secured financing from other big lenders, including JPMorgan Chase and Bank of New York Mellon, and has already invested $600 million into the company.
Bank of Americas said in a statement that the deal with Wal-Martin “will help us grow the business in the U.S. and internationally, which will provide the flexibility and support needed to meet our long-term growth objectives.”
Bank of Americas CEO David Tullo, a former chief executive of Chase, said in an interview Monday that Wal-mart’s acquisition of payday lending is part of the bank’s broader strategy to focus on lending and help consumers better manage their finances.
He said the payday loan business has become a significant part of Walmart’s overall financials, and he said Wal- mart “is looking for the next big thing” in the industry.
BankAmericas has been a pioneer in the business of payday loans, having opened its first bank in New York City in 2004.
WalMart, which has about 2.4 million stores in 35 countries, has been investing heavily in the lending business.
Walmart reported quarterly earnings of $6.15 billion for the fiscal fourth quarter, up 13% from the same quarter a year ago.
The company reported its biggest quarterly revenue gain in nine years, thanks to a surge in its spending on products like its “PowerUp Rewards” rewards program, which gives shoppers the chance to earn rewards on purchases.
The payday loan industry is expected to generate $1.5 trillion in gross profits in 2019, according to Bank of Americans projections.
Bank Of America said that its $2,829 million cash infusion will be used to fund the business, which now operates in 16 states and more than 150 cities.
Walmart is expected soon to announce the launch of a new brand and product line.
Bank America has been one of Wal- Mart’s most aggressive buyers of credit-card debt.
The bank said that it plans to add $1 billion in credit-union credit lines and credit lines of its own to help customers with lower interest rates.
In addition, Bank Of Americas said it will use $2 million of its $3,300 million in cash on Monday to help fund the new business, the company said.