Prudential sees fall in Egg price tag

The saga over Prudential’s sale of internet bank Egg took a final twist today when it emerged the Pru netted less than expected for the firm.

Following two years of disappointing performances from the world’s largest internet-only bank, Pru agreed to sell the business to banking group Citi in January for £575m (€844m).

However, a further slide in the net asset value of the bank between December 31 and the completion of the sale left the online banking giant with a price tag of £546m (€801m).

Egg was set up by Prudential in 1998 and after failing to sell the business the Pru took full control of Egg in 2005 by buying out minority shareholders in a deal that valued the firm at more than £900m (€1.3bn).

However, the bank has since struggled from a deteriorating performance and last year reported losses of £145m (€212m) on the back of difficult trading conditions in the UK personal loans market as customers cut back on spending due to spiralling levels of personal debt.

As well as lower borrowing levels Egg also suffered from a rise in bad debts as consumers increasingly turned to individual voluntary arrangements, debt management companies and in some cases bankruptcy to alleviate their debt burden.

The sale of Egg formed part of revival plans for Prudential, which has struggled in recent years to keep pace with its British competitors, leading to the ousting of former chief executive Jonathan Bloomer in 2005.

Today’s announcement regarding the price for the Egg business will turn up the pressure on his replacement Mark Tucker, who has faced criticism from the City for delays in the turnaround of the group’s UK business.

The combined Egg and Citi business will have more than four million customers and a “substantial” share of the UK credit card market. Citi’s consumer branch in the UK has five retail banking and 49 consumer finance branches offering current accounts, offshore banking and mortgages.

The businesses complement Egg’s online payment and account services, credit cards, personal loans, savings accounts and insurance products.

Citi said it is currently working on a strategy to integrate the two businesses but said that it was too early to comment on the prospects for jobs.