Bank of America struck a deal to buy MBNA for about $35 billion (€28.93 billion) in cash and stock yesterday, making it one of the top US credit card issuers.

The purchase will create a formidable competitor for JP Morgan Chase and Citigroup, the financial services giants that dominate the US credit card industry, according to analysts.

Based in Wilmington, Delaware, MBNA has grown from a small regional player to an industry giant in little more than 20 years. It built its identity on the issuance of "affinity cards" - linked to brands such as Major League Baseball - that allow it to claim a loyal customer base.

MBNA employs around 1,000 people in the Republic, based in Dublin and Carrick on Shannon, while Bank of America (BofA) has an operation in the International Financial Services Centre.

The two companies, which combined will have $143 billion in managed outstanding balances, would not be drawn on how the deal would affect their relationships with Visa, Mastercard, the credit card associations or American Express.

MBNA shareholders will receive $27.50 per share, or a 29 per cent premium over its share price on Wednesday.

BofA, whose shares fell 2.3 per cent to $45.83 in morning trade, is believed to have faced competition in the bid from Wachovia.

The deal is expected to create cost savings of $850 million over two years.

The deal also highlighted the challenges that independent credit card issuers such as MBNA were facing to expand their businesses as US consumers pay off credit card debt. For BofA, the agreement comes on the heels of its move to take a 9 per cent stake in China Construction Bank for $3 billion.

In a conference call with analysts yesterday, Ken Lewis, BofA's chief executive, said he had already received messages from CCB executives "excited" about possible opportunities from the acquisition.

Mr Lewis said: "First, I thought of [ MBNA] as a credit card company. Then more and more I thought of them as great marketers."

"MBNA was having limited success in selling other products," he said. "We're going to be much more effective."

Bruce Hammonds, chief executive of MBNA, said the sale to BofA would give it "new marketing channels, customers, products, and opportunities for further expansion".