Egg, the internet bank, has broken into continental Europe by buying Bernard Arnault's French online operation, Zebank, for €8m (£5m).

The British firm, 79% owned by the insurance group Prudential, aims to win 1m new customers in France over the next three years and believes it can break even by the end of 2004.

Egg also announced distribution deals with the French retailers Sephora and La Samaritaine, and an extension of its tie-up with Microsoft to offer products through MSN France.

The deals are the result of more than 12 months' planning since Egg said it was aiming to expand on to the continent through France, Germany and Italy.

"We are excited about the opportunities that these moves give us in France, building our international presence and broadening the Egg offer in line with our stated plans," said Paul Gratton, chief executive. "[These moves] give us a powerful platform to develop a significant business in this attractive growth market."

Egg, which claims to be Britain's leading provider of online banking and financial services, with 2m customers, will spend £50m on marketing spend plus £15m to support the launch of the enlarged operation. France is the third largest financial services market in Europe.

Zebank has 70,000 customers with 120,000 accounts and its majority shareholder is Group Arnault, controlled by, Mr Arnault, the French billionaire who is head of luxury goods firm LVMH. A further 20% of Zebank is owned by Franco-Belgian bank Dexia.

Egg shares have outperformed the British bank sector by 11% this year and yesterday put on another 7.5p to close at 153.25p.

The shares were boosted by a strong buy recommendation from investment bank Merrill Lynch, which has a price target of 200p.

Analysts said the deal gave Egg a firm footing for further growth in mainland Europe.