Looser insolvency rules 'threat to Egg'

THE entire UK profits of online bank Egg could be wiped out by a change in the personal bankruptcy laws, a top City analyst has warned.

Mark Thomas of Fox-Pitt Kelton said Egg was the bank most exposed to a loosening of personal insolvency rules that will allow bankrupts to walk away from their liabilities after only 12 months.

He said Royal Bank of Scotland was also vulnerable, having taken on a lot of unsecured debt, while for Lloyds TSB and Barclays the impact could be as much as 10% of profits.

The relaxation is expected to lead to more people mired in debt declaring themselves bankrupt. Already personal bankruptcies are rocketing.

The view comes at a sensitive time for Egg, which has put itself up for sale. It rejected the suggestion, saying its borrowers were upmarket and made payments by direct debit, which acts as an early warning system. Egg's UK profits reached £56.7m in the first nine months of 2003.

General Charles Krulak, head of MBNA in the UK, today launched an outspoken attack on the new rules, warning that bankruptcy was losing its stigma. 'Now you can pick up a Sunday paper and read about how proud someone was that they solved their financial problems by declaring bankruptcy.'

The warning came as Barclays reported record profits of £3.85bn, up by a fifth and boosted by a £722m contribution from Barclaycard.