US firm 'set to win internet bank auction'

US credit card firm MBNA is believed to be winning the auction to buy internet bank Egg, it was reported today.

The group is expected to table an offer for insurance giant Prudential’s 79% stake in the business of slightly above Egg’s 160p a share flotation price.

If MBNA does go ahead with an offer above this level, it would value Egg at more than £1.4bn (€2.1bn).

Egg’s shares closed at 155p on Friday, valuing the company at £1.27bn (€1.9bn).

The auction was launched in January this year after Prudential announced it was in talks to sell its stake in the business and had received a number of approaches.

Royal Bank of Scotland, Capital One and Lloyds TSB were all reported to have been interested in buying the group.

Egg, which employs around 2,000 people in the UK in Derby, Dudley and London, reported a fall in first quarter pre-tax losses to £4.9m (€7.3m) last month from £15.7m (€23.3m) during the same period of 2003.

The group said operating income rose by 26% to £120.3m (€178.3m) in the three months to March 31, boosted by an additional 148,000 customers using its services, although operating profits in the UK were 12% lower at £15.2m (€22.5m).

Egg’s French business, the losses from which wiped out profits at its UK operations last year, cut its losses in the first quarter to £15.8m (€23.4m) from £19.6m (€20m) in the fourth quarter of 2003 as the group tightened cost controls.

MBNA, which has its UK base in Chester, issues its own credit cards as well as affinity cards for other financial services groups, charities and sports clubs, including Manchester United.

The group has around £8b (€11.8bn) outstanding on credit cards in Europe.

No one from MBNA was available to comment and Prudential declined to comment on the speculation.