Online bank Egg yesterday reported ballooning losses at its now-defunct French offshoot and a sharp increase in the amount set aside to cover bad debts in Britain.
The bank's shares dipped on the news and appeared to drag down its majority owner Prudential with them.
The bad debt worries overshadowed news of a small rise in profits at Egg's core British business, which has more than 3 million customers, most of them Egg credit card holders.
Egg admitted it had been distracted by the failure of its plans to crack the market in France and by months of takeover talks that came to nothing.
It is now concentrating its attention on Britain, where it wants to launch new products. The bank could link up with other companies to offer current accounts and a wider range of mortgages.
Egg, which is 79% owned by Prudential, said group pre-tax losses for the 12 months to December 31 had trebled to almost £107m.
This was almost entirely due to its operation in France, where losses hit £148m, compared to £89m last time.
Launched in late 2002, the French business encountered a number of problems, including the length of time required to take out a credit card in France.
There was also bad publicity from its decision to close some dormant accounts after it took over another bank, and it offended some with a controversial advertising campaign. Prudential ordered Egg to close the business last summer.
The last few French accounts were shut down last week and all that is left to do is some "tidying up," said Egg chief executive Paul Gratton.
Asked if he wished the company had never ventured across the Channel, he said: "Hindsight is a wonderful thing. With the benefit of hindsight, yes."
The bank also reported a 48% rise in bad debt provisions, up to £203m from £137m at the end of 2003.
Some analysts suggested this was the result of having expanded too rapidly into personal loans. During the last three months of 2004 it notched up record sales of personal loans, mainly to its own credit card holders.
The firm said it would tighten up its lending criteria, which would reduce the numbers of personal loans sold.
Mr Gratton said it was keeping a tight rein on costs and that credit quality remained good, adding that it was predominantly selling the loans to people who had held Egg's credit cards for a period of time, whose credit histories it knew.
The increased provisions reflected "the stage in the life cycle of the card and loan books, and the increasing proportion of personal loans in the book".
Egg generated operating profits of £74m at its British business, compared with £73m the previous year. It said the strong second half had continued into January, when it opened 75,000 new credit card accounts, a new monthly record for the bank.
As part of its efforts to concentrate on its successful core businesses, Egg recently sold its investment arm, Egg Invest, to fund management group Fidelity "at a small loss".
Last year, Prudential failed to sell its stake in Egg, despite receiving expressions of interest from a number of companies. In recent weeks its shares have risen sharply on talk that a buyer may at last have emerged.
Egg shares ended yesterday down 1.5% at 113.25p. At one point they were down 9%. Shares in Prudential were down almost 1.7%.
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