The group is to accelerate the launch of five Internet products including a credit card, a unit trust supermarket with on-line share dealing. The group is also looking at bundling insurance, loan, investment and mortgage products together in a new family of products of Internet-ready products
Prudential's chief executive Sir Peter Davis, himself one of Egg's very first customers, said yesterday that the decision to speed up the roll out would mean losses from Egg this year would rise to pounds 140-pounds 150m from the pounds 100m. However, the group is still aiming at break-even for Egg in 2001.
However, he said that it was important to keep the first-mover advantage Egg had gained in the market place. "It is a bold move. It is quite an aggressive strategy to accelerate costs. But we have decided that there is a tide and we have to catch it."
He added: "What we are acquiring is customers. It would be much more competitive to acquire those customers at a later date." He pointed out that the cost of Egg's controversial interest-rate guarantee was only pounds 14m, reasonable, he said in relation to the cost of an ad campaign. The total loss of Egg and Prudential banking was pounds 69m in the first half.
Sir Peter said that Egg had taken pounds 500m in June alone, testifying to the appeal of Internet banking in the UK. Sir Peter said that had attempts not been made to choke off demand, Pru would have had to open another call centre. "That is not the way we want to go." The priority now is to build up sales of mortgages and other products to Egg's 550,000 customer base.
Pru's shares rose 15p to 865.5p as enthusiasm about its plans for Egg took the sting out of the 18 per cent fall in half-year profits to pounds 369m, mainly due to a pounds 55m charge to cover the restructuring of the UK operations which had already been announced.