Egg seeking partner to share French pain

Click to follow
The Independent Online

Egg yesterday announced it was in talks with several potential partners to share the pain of its investment in France, which has cost the UK internet and telephone bank €173m (£120m) in a year and a half. Egg made it clear that if the talks - which are with several parties from a number of countries - fail, the business would be sold.

Paul Gratton, the chief executive of Egg, set a deadline of the end of December for talks, which are thought to be at an early stage, to be concluded. There had been mounting speculation Egg would cut its losses completely on its foray into France, which dragged the group to a £24.6m loss in the nine months to 30 September, from £3.9m at the same time last year. Its shares fell 6.25p to 145p.

However, Mr Gratton remained optimistic that Egg could still salvage some business opportunities from the millions of pounds it has invested in France.

"French consumers are paying a ridiculously large amount for unsecured credit and, since we launched in France, about eight other credit cards have been launched, which shows there is a market there," Mr Gratton said.

The bank could point to some encouraging signs that it has finally had an impact on French consumers, after launching its "La Carte Egg" there in May last year when it bought the internet bank Zebank. Balances on its cards nearly doubled to €126m from the previous quarter and it issued 16,000 cards in the three months to the end of September - including the quiet August period when many people go on summer holidays - compared with 14,000 cards over the two previous quarters. However, the bank said it would not carry on investing in the French market indefinitely and said it did not want to pour more than £300m into the project.

Egg's partial capitulation over its ambitions in France is a blow for the business, which had huge ambitions to export its successful British format around the world. It is disbanding the international team in Britain with the loss of about 70 jobs. The bank employs about 2,000 people in the UK.

"They rather charged into it when they went in [to France]," said Alan Harris, a fund manager at Charles Stanley. "It's a question of salvaging what they can from the wreckage."

However, Egg could point to strong growth in the UK, where it now has more than 3 million customers. While the French business posted a £20.8m loss in the third quarter, pre-tax profits at the main UK business rose to £20m, compared with a profit of £9.4m a year earlier.

Egg, which is 79 per cent-owned by UK insurer Prudential Plc, added €140m of spending to its French budget in April, taking expected investment to about €300m. Gratton said at the time there was no threat to expansion plans in France or the investment being made there.

Comments