Egg takes a beating over failure to cut French connection

EGG, the telephone and internet bank, yesterday suffered another setback over its loss-making foray into the French credit card market when it admitted it would not be able to announce a solution to the problem until the New Year.

EGG, the telephone and internet bank, yesterday suffered another setback over its loss-making foray into the French credit card market when it admitted it would not be able to announce a solution to the problem until the New Year.

The move caused Egg's shares to slump 6 per cent to 129.25p, on disappointment that the company was no longer sticking to its deadline of the end of this year for capping losses in the French business, which have cost Egg bank €173m (£121m) in a year and a half.

Egg said in October it was pursuing a number of options, including talking to several parties about entering into a joint venture, to try to see the French business through to profitability. At the same time, it made it clear that if the talks failed, the business would be sold.

There was speculation yesterday that Egg was finding it difficult to find a partner in France. But the bank, which is majority-owned by Prudential, insisted negotiations were still "ongoing".

"We are considering a number of options but we no longer expect to be able to announce the conclusion of this process prior to the end of the year. We now expect to make an announcement in the New Year," Egg said in a statement.

In the nine months to September, the French side of Egg lost £69.5m against £19.4m in the first three quarters of 2002. It employs some 450 people and closure would involve heavy redundancy costs under French law.

Egg bought ZeBank for €36m from billionaire Bernard Arnault in 2002 to export its formula of attracting customers to its banking services via attractive credit card offers. France was thought to be a ripe market as credit card use is low and consumers pay hefty fees on unsecured lending.

However, take-up of Egg's cards was far lower than the bank had anticipated, leading to heavy losses.

In recent months Egg has been able to take some encouraging signs that it has finally had an impact on French consumers, after launching there in May last year.

Balances on its cards nearly doubled to €126m in the third quarter from the previous three months.

However, the bank said in October it would not carry on investing in the French market indefinitely and made clear it did not want to pour more than £300m into the project.