Barclays to buy Egg credit card customers

By Lee Boyce
Updated: 11:16 EDT, 1 March 2011

Barclays has stuck a deal to obtain more than one million credit card accounts belonging to internet bank Egg, it announced today.

Barclays deal: Egg credit card customers will switch to Barclaycard

The banking giant is to buy the British credit card assets from Egg's owner, US lender Citigroup, for an undisclosed price.

Egg credit card customers will switch to Barclaycard, if the deal receives regulatory approval, as Barclays looks to boost its retail banking business.

Customers are also in the dark about whether the terms of their accounts will change if the proposed takeover by Barclaycard goes ahead.

Barclays has refused to say whether it plans any changes to the terms and conditions of existing customers.

Under the current scheme black Egg Money card customers, spending between £500 to £20,000 a year, get 1% cashback - it is unclear if this perk will remain if the acquisition goes forward.

The portfolio consists of 1.15m accounts with approximately £2.3bn of gross receivables.

It hopes to have the deal completed during the first half of this year.

Last month, Barclays said it was targeting a return on equity of 13% and planned to cut annual costs by £1bn by 2013.

Chris Lucas, Barclays finance director, said: 'The acquisition of Egg's UK credit card accounts has been priced at a significant discount.

'Based on current projections, we expect the transaction to exceed the financial return targets set out at our recent results announcement.'

Citi acquired Egg from Prudential for £575m in early 2007 before the credit crunch and recession struck.

The American bank is said to have been looking to sell the Egg branch of its business for some time.

Egg has been squeezed by the downturn and heavy online competition, while Citi has been under pressure to shrink its balance sheet after a huge bail-out put a third of the business into public ownership.

Citi said the Egg sale was expected to result in an after-tax gain, which would not be material to its net income.

The transaction will not affect Citibank's retail offering in the UK or any other Egg products which remain with Citi.

Egg employs around 1,500 people, with the majority based in Derby and Citi is said to be committed to work with Barclays on a smooth transfer of customer accounts.

Valerie Soranno Keating, chief executive of Barclaycard, said: 'Barclaycard has a long history of providing simple and innovative payment solutions for our customers since launching the first UK credit card 45 years ago.

'We are very pleased to welcome over a million Egg customers and to provide them with access to our mainstream capabilities in areas such as mobile and contactless payments, digital servicing and instant rewards.'