Prudential, Britain's biggest life insurance group, today announced plans to cash in on the success of its pioneering internet bank, Egg, by selling part of it to the public. The sale of a minority stake is expected to raise between £1.5bn and £4bn.
Jonathan Bloomer, Prudential's chief executive designate, said the group had not yet decided how much of Egg to float, but the London stock exchange typically regarded a "minority" stake as something between 15% and 25%.
He said the exact value would be determined at flotation both by Egg's progress and the state of the market.
The launch of Egg in 1998 started a trend in internet banking in Britain. Egg has signed up 800,000 customers by offering attractive interest rates. It had deposit funds of £7.6bn at the end of 1999, and the number of customers is expected to top 1m next month. Prudential said customers who had signed up with Egg before midnight on February 22 were expected to be eligible to participate in the initial public offering.
Egg's success has prompted other banks to jump on the internet bandwagon. Recent research predicts that the number of people in Europe who are banking online will quadruple to 21m by 2004.
Abbey National and Halifax unveiled stand-alone online banks last week, some of which may also be floated. This competition could cause problems for Egg, and shares in the Pru have fallen in the past few weeks. News of the planned float came as Prudential reported a 10% drop in annual operating profits for 1999 to £776m.
Egg and Prudential banking made a loss of £150m last year, compared with £77m in 1998. Prudential said it expected Egg to break even in the latter part of 2001, adding that investment in the concern would be similar to the £150m spent in 1999.
Mr Bloomer ruled out a large-scale merger such as that announced this week by the insurance companies CGU and Norwich Union. However, he said Prudential would look to make acquisitions in Europe to enable it to compete with the likes of Allianz, Axa, Aegon and Generali, as well as the merged CGNU.
Mr Bloomer takes over from Sir Peter Davis as chief executive next month. Sir Peter, who is credited with having transformed Prudential during his tenure, is moving to Sainsbury's, the retail group.
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