Yorkshire Building Society has bought the remains of the internet bank Egg from Citigroup. Egg's credit card business was sold to Barclaycard earlier this year and the building society will take over the mortgage and savings business in the autumn, subject to court approval.
Yorkshire has also acquired the Egg brand but refused to say how much the deal is worth or what plans it has for the brand. It has essentially bought a £2.5bn savings book – which will increase its savings business by 9 per cent – and a £430m mortgage book.
The mutual has in the past two years developed a multi-brand strategy, snapping up struggling rival building societies but maintaining their names. The Barnsley and Chelsea societies are already owned by Yorkshire, with Norwich & Peterborough set to become part of the group next month, subject to a member vote. Yorkshire now has 2.6 million members and 178 branches.
For Egg's 540,000 savings and 12,000 mortgage customers, the deal could be good news. Once the transfer goes through, they will become members of the Yorkshire mutual society, giving them full voting rights, even so far as to be able to vote to remove the board. However, in the currently remote event of Yorkshire demutualising, any windfalls would have to be handed over to charity.
The deal will not be such good news for Egg's remaining 600 staff, based in Derby. Yorkshire said it would not take on the worforce, although it will sub-contract the servicing of the Egg accounts to Citi for another year.
Commentators said the deal would be good for savers and borrowers. Andrew Hagger of Moneynet said: "This looks like a smart move from the Yorkshire. The acquisition of a new £2.5bn savings book will enable one of the most competitive mortgage providers in the UK to expand its lending activities to a much wider audience."
Kevin Mountford of Moneysupermarket said: "This is a decent chunk of deposits at a time when banks have to increase liquidity. Yorkshire is already a multi-brand lender, which allows it to be tactical and change rates for one provider but not necessarily across the whole range, and that helps it stay at the top of the best buy tables."
Yorkshire said it would announce plans for the Egg brand by the time the High Court process was completed in the autumn.
Egg has had a chequered history, after being set up as the UK's first internet-only bank by Prudential in 1998. When it was partially floated in 2000 it had a £1.3bn valuation, but it was sold by the Pru to Citigroup in 2007 for just £575m.
Citi bought Egg as part of a strategy to become a significant player in UK financial services. But buying a UK bank in 2007, just before the credit crunch, proved a tough proposition and Citi finally put Egg up for sale last summer, after controversially cancelling the credit cards of 161,000 customers in 2008.
It was unable to find a buyer for the whole bank, and sold 1.15 million Egg credit card accounts to Barclaycard in March and the remaining 550,000 savings and mortgage customers to Yorkshire yesterday. Egg credit card customers will be transfered across to Barclaycard later this year.