Egg retreats as French shun card

INTERNET bank Egg is expected to announce next week that it plans to close its troubled French venture, only 11 months after launching La Carte Egg with a series of outrageous advertisements.

The board has decided to pull out after learning that shareholders were unwilling to agree further investment in La Carte Egg. About £100m has already been ploughed into the French operation.

Egg had initially budgeted to break even in France by the end of 2004 with one million customers. But only 115,000 people had signed up by July, with fewer than 42,000 credit cards in regular use.

Egg is believed to have held talks with several financial institutions in recent weeks to discuss setting up a joint venture to take over the French business, but these have proved fruitless.

A report from consultant Datamonitor claims the move might have been driven by Prudential, Egg's majority shareholder.

There have been persistent rumours that the insurance giant would like to sell and Datamonitor said: 'Its stake in the internet bank would be far more attractive without the loss-making French arm.'

Egg's problems began when a TV advertising campaign featuring a cat being thrown from a building had to be revamped after it upset viewers.

Egg was prevented by French law from offering new customers an introductory offer of zero% interest. Instead, La Carte Egg offers cashback. Chief executive Paul Gratton has attributed Egg's slow progress in France to three factors. It had to develop a new credit scoring system and was forced to offer low credit limits to potential customers, which then put them off.

Egg was also obliged to follow French banking procedures to sign up customers, which proved more time-consuming than UK rules.

The announcement that Egg is pulling out will be made as third-quarter results are unveiled on October 22.

Datamonitor added: 'Though Egg struggled, it made its presence felt and cultivated strong brand awareness.'