Barclays Bank is buying the British credit card assets of the online lender Egg from Citigroup to boost its retail banking business. The deal, agreed for an undisclosed sum, will give Barclays 1.15 million credit card accounts with about £2.3bn of outstanding balances.
The British bank will integrate the Egg accounts into its Barclaycard credit card business after the deal, which is expected to be completed in the first six months of this year.
Egg's credit card accounts are the biggest part of its business. The formerly cutting-edge brand will stay with Citigroup after taking a severe beating in recent years.
Citi bought Egg from its founder, the insurer Prudential, for £575m in 2007 – just before the financial crisis – in what proved to be a badly-timed push into UK consumer lending.
The business went through various bosses and caused uproar when it cancelled 161,000 accounts without notice in 2008. Many rejected customers claimed that they had spotless credit records.
Egg racked up big losses for Citi and was an extra headache for the US banking giant as it battled to avoid collapse during the credit crunch.
Egg's recent miserable history is a far cry from its launch in 1998 as the UK's first internet bank. Its quirky name and marketing gave it a high profile but after a botched move into France, the Pru tried unsuccessfully to sell its stake and the company began a long decline.
Chris Lucas, the finance director at Barclays, said yesterday: "The acquisition of Egg's UK credit card accounts has been priced at a significant discount to gross receivables. Based on current projections, we expect the transaction to exceed the financial return targets set out at our recent results announcement."
Last month, Barclays said it was aiming for a return on equity of 13 per cent. Britain's biggest credit card lender has snapped up other card businesses in the wake of the financial crisis, including Goldfish from the US lender Discover. Citigroup put Egg on the block two years ago as part of its disposal plans after it was bailed out by the US government. Egg is left with savings and insurance businesses which remain for sale.
Citi said the deal was expected to result in an after-tax gain, which would not be material to its net income.
Start as you mean ... new lloyds chief speeds up disposals
The new boss of Lloyds Banking Group is speeding up the bank's asset-disposal plan including the sale of 600 UK retail branches under orders from the European Commission.
Antonio Horta-Osorio announced a strategic review on his first day as chief executive at Britain's biggest retail bank after joining from rival high-street lender Santander.
All branch closures have been put on hold until the end of the year. The bank intends to announce the results of the strategic review in the summer.
Mr Horta-Osorio said: "As the integration of our business comes to a close in the coming months we have a unique opportunity to redefine our future and demonstrate how we will drive long-term value for our customers, shareholders and employees."
The Portuguese banker arrived with a reputation as a formidable operator and dealmaker but his record on customer service at Santander was less glowing.
Lloyds has slashed thousands of jobs after agreeing to rescue HBOS in a government-backed deal in 2008.