Egg, the internet bank, announced yesterday that it had delayed indefinitely its plans to launch a current account and reported a widening of its losses.
The company, majority owned by Prudential, insisted it would break even later this year for the first time despite losses worsening by £6m to £155m in 2000.
Customer "inertia" in the current account market, where more than 70% of the business is controlled by Lloyds TSB, NatWest, HSBC and Barclays, deterred Egg from launching a new account. "We've built the capability for a current account. If new entrants are able to smash the inertia we'll launch it. I don't think any of them have yet," Paul Gratton, the chief executive, said.
He said Egg wanted to be a "fast follower" and capitalise upon any success achieved by the Halifax in trying to shake-up the current market where only 500,000 customers a year out of 30m move their account.
"We smashed the savings and credit card markets," Mr Gratton said. But the current account market appears too tough for Egg to crack. He said advertising for current account customers "seemed an expensive way to blow a lot of money".
Last year Egg, which has "global ambitions", spent £50m developing its brand through another series of quirky adverts. According to Nielsen/NetRatings, Egg's website - egg.com - was busier than any other financial services site in January, reaching almost 6% of active users.
Egg will only start to make profits once it has sold more than one product to each of its 1.3m customers and is expected to start concentrating on achieving that this year.
Last year Egg's "cross-sales" were 1.29 products per customer last year. To reach breakeven, that figure needs to rise to 1.5 by the end of the year - a target Mr Gratton said Egg could achieve.
Analysts at Fox-Pitt, Kelton said they remained sceptical about Egg's plans. "The critical issue is can Egg cross-sell and the fourth quarter is frankly very disappointing," the analysts said, predicting Egg would fail to achieve its aim of breaking even this year.
Egg, which was swamped by new business when it was launched two years ago, claimed January was its busiest month ever when 100,000 customers took out new products, particularly its credit card. This rate of new customers was another reason why Egg had decided not to advertise for current account business. "You don't kill a campaign when it's going well," said Mr Gratton.
He also pointed to the prospects of breaking even by highlighting the quadrupling in revenues to £93.2m and the fact that Egg would be spending less than the £34m it spent last year on developing new products and facilities.
Egg's first product, its saving account, suffered a £850m outflow of money as customers chased better rates although the outflow slowed between the third and fourth quarters.
The company said it had plans to be global and is talking to a number of companies in Europe, in particular, about forming partnerships similar to the one it has with Boots for its credit card. It also has a loans and mortgages business as well "supermarket" sites for investment and insurance products and will launch one for mortgages later this month.
The company's shares ended the day at 132.5p, down 1p - still below the 160p at which they made their debut in May last year.
