Egg Banking

Egg Banking plc is a British internet bank, with headquarters in Derby, Dudley and London, England. Formerly called Prudential Banking plc, Egg was established in 1996, and is now the world's largest internet bank in that it is only possible to operate an Egg account over the internet, or via their call centre. Egg specialises in savings, credit cards and loans but also offers mortgage and insurance products.

History

Egg was established as a division of UK life assurance company Prudential. Prudential Banking was involved in direct selling of savings and mortgage products. In 1998 the division was renamed Egg and relaunched as the UK's first Internet bank. The service gained in popularity, and soon the bank had more than 2 million customers. In 2000 Prudential cashed in on its stake and floated 21% of the company on the London Stock Exchange, retaining 79%. In 2003 Prudential announced its intention to sell its remaining stake in Egg to a third party. Despite rumours of interest from the likes of Royal Bank of Scotland and HSBC, no formal offers were made public, and Prudential dropped its plans in 2004.

Subsequently Prudential bought back the remaining minority share in January 2006 and de-listed the organisation from the London Stock Exchange. Chief Executive Officer Paul Gratton left the organisation in March 2006 to be replaced by then Chief Operating Officer Mark Nancarrow. Mark was subsequently replaced by Ian Kerr, formerly of HBOS, in November 2006.

On 29 January 2007 Prudential announced that it had agreed to sell Egg to Citigroup for a consideration of £575 million subject to approval by the Financial Services Authority.^[1]

On 1 May 2007 the sale of Egg to Citi was completed and Egg CEO Ian Kerr was appointed head of Egg and Citi UK Consumer.^[2]

In November 2007 approximately 350 non-specialist roles were moved from the Dudley centre to Derby resulting in redundancies and relocation packages.

La Carte Egg

Capitalising on its British success, Egg launched in France in mid 2002. However, despite investing heavily in the French market, the services were never popular with the French, who generally hold fewer credit cards than the British. In 2004, Egg decided to close its French operations, selling the business to ING of the Netherlands.

Controversy

On 2 February 2008, Egg decided to cancel the credit cards of 161,000 (7%) of its customers. The bank gave customers 35 days' notice, after which they would not be able to spend more on their cards.^[3] While publicised as an attempt to purge "risky" customers from their books, many affected customers came forward with claims that they had excellent credit histories. This led to speculation that the move was an attempt to remove customers who did not accumulate interest on their accounts and therefore did not generate profit for the bank.^[4]

In December 2008, Egg was fined £721,000 by the Financial Services Authority for persistent misselling of payment protection insurance (PPI) on its credit cards.^[5] "Margaret Cole, director of enforcement at the FSA, said: 'Egg used inappropriate sales techniques to try to persuade customers to buy payment protection insurance on their credit card, even when they asserted they did not want the cover.'"

As of September 2009, Egg has begun to use more sophisticated methods to dispose of insufficiently-profitable customers, notably by increasing interest rates to the maximum legally permissible while offering the customer an 'opt-out' - the opportunity to continue paying the standard interest rate on the condition that the customer immediately gives up his card. In particular, this technique is being deployed as a reprisal against customers who cancel their PPI. Less publicised methods included the wholesale withdrawal of their ATM Savings Cards, as of July 1st 2009.

References

See also

• Citigroup
• Security First Network Bank

External links

• Egg Card
• Egg's web site