Egg aims to crack US despite losses in France

Egg, Britain's biggest internet bank, yesterday revealed it is exploring plans to expand in the US despite making a loss on its French business.

The group did succeed in narrowing its losses for the year to £16.6m from £87.8m as a strong performance in the UK offset some of the costs in its French start-up. The bank is now profitable in the UK for the first time since its launch in 1998, posting pre-tax profits of £34.8m from a £75.7m loss in 2001.

The acquisition of the French bank, ZeBank, however, proved a drag on the bank's earnings, and caused it to post a widening fourth-quarter loss of £12.7m, more than double the losses in the same period in 2001. Egg France made a £46.7m loss for the year. The bank, which is 79 per cent owned by Prudential, had enjoyed two successive quarters of profitability before buying ZeBank for £27m in May last year.

Development costs for the group in 2002 were £26.1m, and the bank plans to spend a further £25m in 2003 on improving its UK services. It forked out £8.7m on developing Egg France last year, and has set aside £5m to research the US market.

Analysts have raised concerns that splashing out in the US could be a mistake, where bankruptcy levels are increasing and consumer demand is beginning to wane in the face of war in Iraq.

Paul Gratton, Egg's chief executive, said explorations in the US were at a very early stage and a decision on whether to launch there had not yet been taken. "The highlight of the year has been in the UK where we are still finding it very efficient to acquire customers and cross-sell products," said Mr Gratton. "We have sent a team out to the US to see if there is any opportunity for us to do something there, but we are very focused on driving the UK business and consolidating our start in France."

Mark Thomas, an analyst at Fox Pitt Kelton, yesterday said the loss on Egg's international business was higher than expected and the size of its customer base remained disappointing. The number of customers in France is now 90,000, with just 63,000 joining from ZeBank.

Shares in Egg, which have lost more than a fifth of their value in the past 12 months, closed down 8.4 per cent at 104p. The group took a bad debt charge of £23.7m in the fourth quarter, up 53 per cent on 2001, as more of its business came from unsecured lending.

Egg attracted a further 610,000 UK customers in 2002, mainly through its credit card that offers an initial six-month interest rate of 0 per cent. It now has 2.6 million customers in the UK.