Internet banking company Egg has reported much improved revenues for its core UK business in 2004, after diversifying away from its troubled credit card operations into loans and insurance.
UK revenues for the year increased by a healthy 20% to GBP497 million on the back of strong sales of loans. However, although the sale of loans helped to increase revenues, operating profit was restrained as bad debt provisions had to increase to cover the unsecured nature of the new products and continued credit card issues.
Bad debt provisions increased by 44% to GBP182.4 million compared with the GBP126.7 million in 2003. This resulted in holding operating profit to have only a modest rise, GBP74 million, compared to GBP73 million in the previous year, although this was above analyst predictions of around GBP69 million.
The improved business environment has seen Egg shares recover of late, reaching a peak of 119p in January. This will fortify major shareholder resolve, although the insurance giant is still believed to be exploring possible opportunities to sell. The company had previously failed to find a buyer this time last year.
A possible stumbling block to a sale remains the dead weight that is Egg’s French operations, although they are in the process of being unloaded. Egg’s French business made a loss of GBP147.8 million for the year.
Reported by the FT, Paul Gratton, chief executive, commented: We will maintain our double digit revenue growth in 2005. Increasing loan and credit card balances will help to boost growth in net interest income as non-interest income slows from its very fast growth rate of last year.