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The BBC's Sarah Pennells
"There's a big difference between the levels of service offered by the internet banks"
 real 56k

Monday, 19 February, 2001, 09:26 GMT
Egg's losses deepen

UK internet bank Egg made losses of 155.3m last year, but insists that it is "bang on track" to break even during the last three months of this year.

The losses in 2000 showed no improvement over the previous year, when the online bank lost just under 149.7m.

Egg said the financial results were in line with expectations and that the losses reflected investments in new products such as Egg insure and Egg invest.

"We have the strength of proposition, speed of delivery and stamina of management team to ensure Egg will be a winner in the digital economy," said chief executive Paul Gratton.

Profit concerns

Egg in 2000
pre-tax loss - 155.3m
operating income - 93.2m
Loss per share - 15.1p
Number of customers - 1.35 million
But some analysts are sceptical whether Egg can achieve its goals.

The company told BBC News Online that it would achieve its goals by widening its margins on existing products, while keeping its operational costs under check.

And the bank claimed that it had already hit the peak of its development costs.

But its expansion plans still seem to require a great deal of investment, as it seeks opportunities abroad.

"We fully intend to become a global business," Mr Gratton said, adding that the bank was currently exploring commercial partnerships with a number of significant European businesses.

Growing customers

The number of customers using Egg is undoubtedly growing.

Last year, the online bank attracted 559,000 new customers, bringing its total to 1.35 million users.

It said 140,000 new customers signed up in the last three months of the year.

Egg's new products
Egg Insure
Egg Invest
Egg Boots card
coming soon....
Egg mortgage supermarket

And a further 100,000 have been added in the first six weeks of the year.

Egg is now prioritising cross-selling to take full advantage of this growing number of subscribers.

Cross-selling means marketing the full spectrum of Egg's products to existing users.

Last year, Egg launched an insurance service for cars, homes and contents, and a supermarket for investors which includes a full online share trading capability, and the Egg-Boots card.

A mortgage supermarket is to be launched imminently.

Increased competition

Egg is banking on its "first mover advantage" to carry it through a new wave of competition from established banks that now offer online banking such as Co-op's Smile, Abbey National's Cahoot and Halifax's Intelligent Finance.

Being a "first mover" has been touted as a vital ingredient for success in the world, on the assumption that by being first, companies can secure a healthy chunk of the market share.

But experience shows that this is not always the case.

Pure online shops, for example, are beginning to lose market share to traditional brands that have entered the internet market much later on.

The tie-up with UK chemist Boots is a step towards using an existing brand name as an on-the-ground channel for internet ventures.

But Paul Gratton denies that this is a growing trend for Egg, and is confident that "the online market is set to explode".

Egg floated on 12 June 2000. Parent bank Prudential still holds 79% of the share capital. Its share price stood unchanged at 133p at 1000 GMT.

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See also:

12 Oct 00 | Business
Barclays plans shopping portal
02 Oct 00 | Business
Consumers shy away from e-banking
02 Oct 00 | Business
Halifax's web banking trouble
21 Aug 00 | Business
Online banking gets poll boost
03 Aug 00 | Business
Egg to create 1,500 jobs
26 Jul 00 | Business
Egg shares slip on loss
26 May 00 | Business
Online banks scramble for customers
16 Oct 00 | Business
Egg adds customers and losses
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