Egg under pressure to crack online banking

With its first-quarter financial results being released this Friday Internet bank Egg must show that it is still on course to achieve profitability, and doing more than just offering better saving rates than its high street rivals.

Since last October Egg has been promising that it would break even by the end of 2001. The company claims to have over 1.35 million customers, but made a loss of £153.3m in 2000. Investors will be looking at its Q1 figures for evidence that Egg is still on the path to profitability.

According to Benjamin Ensor, analyst at Forrester Research, Egg must prove that it is selling a range of financial products to its customers -- a technique known as "cross-selling".

"The challenge facing Egg is to succeed at cross-selling a range of financial products to its credit-card and savings account customers. Cross-selling is an important driving force towards Egg's profitability because it is cheaper to sell additional products to your existing customers," Ensor explained.

Ensor believes that to be profitable, Egg must succeed in selling a wide range of best-of-breed products from other financial institutions. "It must become the place where its customers buy all their financial products," he said.

Egg was launched in 1998 by financial group Prudential. It initially offered very generous savings rates in an attempt to build up a customer base, some of whom later moved their accounts in search of a better deal when Egg narrowed the gap between its rates and those of rival banks.

Egg was floated on the stock market in June last year at 160p per share, which valued the company at £1.3bn. Gloom in the dot-com sector soon forced its share price below the flotation price, and it is currently around 140p.

In a climate of dot-com depression, and amidst tens of thousands of job cuts across the technology sector, Egg must show that it will soon be profitable -- as it has promised in the past. "Investors are looking for results much more than they were a year ago and Egg, like any business, is under pressure to turn a profit," said Ensor.

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