All Not Well At Egg

Egg’s decision to shed 161,000 of its credit card holders was obviously made in the knowledge that its losses for 2007 were going to be bad news. They are.

Losses at the financial services firm jumped to around £250m – mainly due to ongoing problems with customers’ bad debts. The new owners of Egg, Citigroup, wrote to 161,000 customers earlier this month to tell them that they would not be able to spend any more on their cards.

This mainly went to customers showing signs of having problem repaying their debts. However, some recipients claimed they were being shifted because they made no money for Egg rather than because they were a bad risk.

Analysts do judge Egg’s portfolio of customers to be of lower quality to many other card providers, and it has suffered before with customers’ bad debts. Prudential sold Egg to Citigroup in May 2007, saying Egg had lost £145m in 2006. The Pru set up Egg in 1998 as a less formal brand services over the telephone and the internet – a long way from “the man from the Pru” calling at the door.

However, as Egg floundered with mis-priced products and heavy losses the Pru attempted to sell Egg for many years before Citigroup finally bought it for £546m. The announcement that Egg was to write to the customers responsible for about £2bn worth of debt confirms that all is still not well.

In terms of credit card market share Egg languishes down in about tenth place with about a 3% share. Market leaders are Barclaycard with 16% of the market, followed by Lloyds TSB with 10%. Halifax, NatWest and HSBC all have about 7%, and Capital One and MBNA have about 6% and 5% respectively. In equal eighth place Tesco and Marks and Spencer have about 4% of the market each.