The UK Internet bank has announced pre-tax losses of GBP115 million.
Egg’s GBP115 million pre-tax loss for the nine months ending September 30, revealed today, comes against a backdrop of increasing pressure on margins within the UK banking sector. Last week, Halifax announced it would be raising rates offered on its current accounts to a mammoth 4%, and launching a low-rate credit card product in moves seen in some quarters as unsustainable, in others as the latest step in a full-scale UK price war.
Either way, Egg remains focused on the long term. The bank has 1.2 million customers, of which 120,000 have been added over the last nine months, signaling the strength of its customer acquisition strategy. High interest rates on savings accounts pre-date the moves of its more established rivals, and a credit card partnership with Boots offers potential access to over eight million regular loyalty card users.
Yet competition remains fierce. High street banks have now launched their own Internet services, and are gaining ground fast. Both Barclays and Lloyds TSB now lie ahead of Egg in attracting Internet users to their sites.
So where next for Egg? The answer, it appears, is Europe. After years of blinkered domestic thinking, cross-border moves within retail banking are an emerging trend. SEB of Sweden has already expanded south, into Denmark and Germany, and east, into Estonia and Latvia. Its intention to enter the UK has been made known for some time. First-e began servicing German customers earlier this year. Egg wants to follow suit. The question is where, and how?
Scandinavia appears too tough to crack, given its well-established online banking industry. More attractive is Southern Europe, where online banking is less developed. Egg has confirmed it is in negotiations with a number of retail banks, and yet every major European player already has an online presence. It would seem that the offer of a stake in a pan-European Egg in return for investment funds is most likely, but it is hard to tell who its partner will be.
