Egg has achieved the target it set when it went public in June 2000, reaching breakeven point by the end of 2001. The major contribution to profitability comes form its credit card business. Although understandable skepticism remains concerning Internet banking, Egg certainly seems to have found a winning formula.
UK online bank Egg has turned a profit for the first time.
It has taken Egg (LSE:EGG.L) less than two years to achieve profitability, which is something to be proud of in the turbulent online world. Not only did the UK online bank make a profit in November, it has also increased its total net customer base to 1.92 million, acquiring 569,000 new customers so far in 2001. But Egg is most pleased with is its credit card operation, which has been making a positive contribution to the business since October 1.
However, the bank – 80% owned by insurer Prudential (LSE:PRU.L) – has no plans to rest on its laurels. It is now taking its first steps into the European market with distribution deals with MSN, the Microsoft division, in France and Germany.
Even though Egg appears to have ‘hatched’ success, some not unfounded sceptism remains surrounding Internet banking. Datamonitor has found that 63% of UK consumers say a personal visit is their preferred method for dealing with banking products, a figure which rises to as much as 88% elsewhere in Europe. Only 5% of UK consumers prefer dealing with banking products online.
So what is behind Egg’s success? One of its key strengths is an attractive customer proposition. Its credit card, for example, still offers 6 month 0% APR both for balance transfers and new purchases. Effective marketing is another component of Egg’s successful formula. Egg recently won the Royal Mail Tank People’s Choice Award for its Egg card and ISA direct marketing campaigns. It’s ‘brain’ pack promotion for its credit card was recognised as being ‘creative, engaging and convincing’.
The online bank therefore seems in good shape to face up to the future. Time will tell how much more the Egg can grow.