Egg sells French card venture

EGG finally agreed the sale of its ill-fated French credit-card business today, marking the beginning of the end of a disastrous two-year foray into the Gallic market.

The venture has wiped out profits of what had been a successful British internet bank.

Banque Accord, the financial arm of supermarkets chain Auchan, is buying the business for up to €140m (£97m). Egg will take a loss on the sale of €65m, which is already covered by the £113m it set aside to cover its exit from France.

The French Works Council, which has to clear employees' rights and redundancy terms, today gave its go-ahead for the deal, which is expected to be completed before the end of the year.

Egg won just 66,000 French credit card customers, who between them have €204m of debts. The French market has proved resistant to branded credit cards, with most people using bank debit cards or store-based credit cards. This was despite the fact that Egg charged much lower interest rates than the 17% to 20% typically levied by French store cards.

Today's deal will save the jobs of about 100 of Egg's 450 staff in France, with most expected to transfer to Banque Accord.

The deal has some minor regulatory hurdles to clear and the final price of the transaction may be adjusted to reflect any extra costs borne by Banque Accord, and changes in the value of the French credit-card balances.

Egg is still in negotiations with ING to sell its savings and online broking business in France. Analysts expect this to be a much smaller deal, worth about €4.5m. That would leave just Egg's current account business in France.

Egg bought online French finance business Zebank from Bernard Arnault for £5m in May 2002.

The British internet bank has lost a total investment of £280m through its French failure. In the year to December 2003, the French operating loss was £89.1m. In the latest nine months, Egg's total losses came in at £103m against losses of £25m in the whole of the previous year.

Prudential owns 78% of Egg and this week launched a £1.3bn rights issue. Chief executive Jonathan Bloomer said at the time that Egg would not require any further cash injection.