Internet bank Egg scrambles boardroom in drive to achieve £12m cost savings

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The Independent Online

The internet bank Egg is cutting several senior management roles in a radical attempt to achieve annual cost savings of £12m, leading to the departure of the finance director David Doyle and the executive vice-chairman Mike Harris.

The internet bank Egg is cutting several senior management roles in a radical attempt to achieve annual cost savings of £12m, leading to the departure of the finance director David Doyle and the executive vice-chairman Mike Harris.

Both will leave at the annual meeting on 16 May. Paul Gratton, the chief executive, said yesterday it was time to get rid of Egg's group structure after it pulled out of France to focus on its core UK operations. Mr Doyle, who joined Egg as finance chief in October 2003, will be replaced by Mark Nancarrow, the chief operating officer. The changes mean the number of executive board members will be halved, with only Mr Gratton and Mr Nancarrow left. Mr Doyle will get a pay-off "consistent with his contract", Mr Gratton said.

The bank also unveiled first-quarter operating profits of £9.9m, which took a double hit from a fall in lending income under new accounting rules, combined with a drop in loan sales due to tighter lending criteria. Operating profits were down from £20.4m in the fourth quarter of last year and £15.7m a year ago, as restated under the new IFRS rules.

Jonathan Pierce, an analyst at CSFB, said: "The figures were, as we expected, fairly negative. We believe consensus for the full year at about £84m pre-tax profit is far too high and expect cuts towards our number, which remains unchanged, of £68m."

Egg was the first UK bank to report results under the accounting rules, which were introduced in January to make it easier to compare corporate earnings internationally. Under them lending income is initially reduced because fee income from loans is spread over the life of the product while costs, such as incentives offered on credit cards, are recognised upfront.

Mr Gratton was undaunted. "We're exactly where we said we would be in February," he said. "We're comfortable with the growth we've seen in the first quarter and we're well positioned to grow in the latter half of the year."

Egg shares rose 3 per cent to 99p as investors speculated that its majority shareholder Prudential, under its new chief executive Mark Tucker, might have another stab at a sale after failing to sell the online bank last year. Egg's revenues were £125m in the first quarter compared with £140m in the fourth as restated under IFRS. Sales suffered because of the bank's decision to tighten up lending criteria for personal loans.

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