UK insurance group Prudential has confirmed that it is keeping its 79% stake in Egg, ending months of uncertainty over the future of Britain biggest Internet bank.
Prudential originally put Egg up for sale in January 2004 following speculation that it had received a bid from US credit card company MBNA. Since then a plethora of other companies have been rumoured to be interested in the Web bank, including Citibank, HSBC, Lloyds TSB, Royal Bank of Scotland, Capital One and JPMorgan Chase.
But in today's statement Prudential's new chief executive Mark Tucker says the firm will keep hold of Egg as part of a wider strategy to target business opportunities outside of its core insurance markets.
"Egg has built a strong customer franchise with over three million younger, more affluent customers - and these customers are a good and very different complement to Prudential's multi-million UK customers," says Tucker. "Egg also provides the expertise and infrastructure as our entry point into the highly profitable personal savings and loans market."
As well as keeping the 79% stake, Tucker says Prudential is also considering retaking full control of the Internet bank: "We will be considering whether there is a financial and commercial case for bringing Egg fully into the group through a share exchange or whether to retain the existing structure. No decision has been made as yet."
Egg CEO Paul Gratton welcomed the news as ending uncertainty over the company's future and pointed to potential cost savings from closer collaboration with Purdential through joint purchasing, and through sharing expertise in call centre and online operations.
News of Prudential's decision comes as Egg reports UK operating profits for the third quarter ending 30 September 2005 of £17.9m, 29% higher than £13.1m last year.
But UK profit for first nine months of 2005 was down 18% to £41m, compared to £50m in Q3 2004.
Despite this Egg says the results represent "a solid performance" at a time when the unsecured lending market is seeing much lower levels of growth and increased levels of bad debts emerging at this point in the cycle.
Egg shares were down 2.20% in mid-morning trading to 98.00 pence.