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Egg drags on Prudential's results

31st July 2006
By Nick Kingsley

The UK's second largest listed insurance and investments group, Prudential, has unveiled a raft of changes ahead for its UK operations as they took some of the shine of otherwise strong H1 results.

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For the six months to the end of June, operating profit before restructuring costs reached GBP980 million, a 17% rise, largely driven by strong performances from its US and Asian operations.

More worryingly, the company's online banking arm, Egg, made a surprise GBP39 million loss in the first half, and the Pru's CEO Mark Tucker made it clear that cost savings needed to be made at both the banking and insurance divisions of the domestic operation. Mr Tucker is targeting up to GBP150 million in savings in the UK over the next three years, prompting fears that job losses may be on the horizon.

The company admitted that bad debts had hurt the Egg business, but that is a theme likely to be repeated by most UK retail banks over the reporting season.

Egg's card book is performing well and 153,000 new cards were sold during a successful marketing campaign in the first quarter. Egg has grown its card book by 3% at a time when the UK card market has contracted by 2%, Prudential says.

"Conditions in the personal loans market, which had begun to deteriorate in 2005, continued to be difficult in the first half of the year. In current market conditions we do not see attractive returns. We have taken action to lower our exposure to personal lending and we expect this to continue for some time," the firm added.

Commenting on the results, Mr Tucker said: "Our clear focus continues to be to drive profitable growth across each of our businesses as well as leveraging opportunities within each region and across the group. There remains tremendous scope to increase value for our shareholders and I am confident of the outlook for the group."

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