Prudential sells Egg to Citigroup

UK insurer Prudential has sold internet bank Egg to Citigroup for £575 million, £375 million less than the value assigned it by Prudential when it bought out minority shareholders a year ago. Prudential decided to sell due to growing losses for Egg. The bank lost £145 million last year, higher than previous estimates.

Citigroup purchased the internet bank for 40 percent less than the business had been valued a year ago. Prudential has defended the low selling price by citing losses due to growing bad debts on personal loans. The sale is part of a review of Prudential’s business which has been interpreted by some analysts as ripe for break-up.

Analysts said that Prudential’s decision to sell now, and at this price, was a good one and that the insurer could not have gotten a better price. They argue that waiting for a better price would have required an additional infusion of capital that might not have gone over well with shareholders.

In announcing the purchase, Citigroup says it plans to retain the bank’s name and will offer a wider range of services to UK customers than Prudential had provided. Citigroup also says that it expects to make Egg profitable in short order, using its experience in lending to consumers with less than ideal credit histories.

As part of the sale, Prudential will continue to provide Egg customers with pensions and life assurance products for five years and Citigroup will distribute Prudential life assurance products in parts of Asia.

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