After losses hit £49m, will Egg bid adieu to France?

The internet bank Egg refused to comment yesterday on growing speculation that it is about to close or sell its troubled 11-month-old French operation. The company, created and 79 per cent-owned by Prudential, has admitted that it was finding the French market harder to crack than expected but is continuing to insist that it is doing no more than monitoring the situation.

The company has tried to export its successful low-cost credit card offering to France, where credit cards are not so widely used. So far it has spent nearly £100m setting up the business, but customers have proved hard to come by, and word is the company could earmark the rest of the £200m investment for redundancies and other shutdown costs.

The arrival of David Doyle as finance director this week could prompt what investors believe is an overdue review of the business, but Egg claimed his arrival was unconnected with the French question.

The one remaining option is that Egg will find a French joint venture partner to spare the blushes of the chief executive, Paul Gratton, and it is understood that talks with possible partners have taken place during the summer.

In July, Egg said that the French losses jumped from £5.5m to £48.7m in the first half of the year. Mr Gratton said: "Sales volumes have been slower than expected and we continue to monitor progress closely, but we are controlling costs and we still think there is a viable business in France."

When Egg went into France last October it said it was aiming at 1 million customers by the end of next year, a target it has abandoned - by July this year, only 115,000 customers were sharing 42,000 cards. The company is due to announce third-quarter figures in three weeks, but because it is in the closed period it could not update these figures.

A spokeswoman said yesterday: "It is no secret sales in France have been slower than anticipated, and we are well aware of our duties to shareholders and staff. We would not rule out any opportunities, but we are still only 11 months into what was from the outset a three-year plan."

Mr Gratton said: "Encouragingly, behavioural data shows our French customers continue to have a high usage rate, indicating that la Carte Egg is their primary card. And importantly, the percentage of balances revolving has risen from 41 per cent during the first three months of the year to 70 per cent in June."

Card balances at the end of June were €68m (£47m), up from €34m at the end of the first quarter.

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