Citigroup Inc. said Monday it agreed to buy British insurer Prudential PLC’s Egg Banking PLC online bank for 575 million pounds ($1.13 billion) in cash.
The transaction will probably boost earnings in the first year, Citigroup said in a statement.
The combination of Egg and Citigroup’s British consumer operations will create a financial services provider with over 4 million customers, more than quadrupling Citigroup’s 800,000 British credit card base.
“Egg is an excellent strategic fit with our business and we are excited to have the opportunity through this acquisition to broaden our international consumer banking business,” said Ajay Banga, chairman of Citigroup Global Consumer Group - International.
The purchase includes over 3 million Egg customers, and products and services including online payment services, credit cards, personal loans, savings accounts, mortgages, insurance, and investments.
Prudential also agreed to terms with Citigroup to provide life and pensions products to Egg’s customer base for a five-year period.
Citigroup’s British consumer business now serves over 1 million customers primarily in the wealth management and near prime lending markets, and offers current, savings, and foreign currency accounts, credit cards, investments, offshore banking, personal loans, and mortgages.
Prudential said the sale will enhance its earnings per share this year and the proceeds will be used to reduce net debt.
“The sale of Egg to Citigroup realizes greater value for our shareholders than retaining the business within the group,” said Prudential Chief Executive Mark Tucker. “Citigroup is the largest credit card issuer in the world and sees enormous opportunities to develop Egg’s business in the U.K.”
The transaction is subject to regulatory approvals and is expected to be completed by the end of April.
Shares in Prudential rose 1.6 percent to 713.5 pence ($13.98) on the London Stock Exchange.
Prudential PLC is not affiliated with Prudential Financial Inc. of Newark, N.J.
Online banks are boosting interest rates to attract deposits from people who are getting year-end bonuses or expect tax refunds. HSBC Bank USA said Sunday it was raising the interest rate of its online savings account to 6 percent — topping its competitors. UnitedBank of Miami Lakes, Fla., offers a 5.35 percent annual percentage yield.
Other major online banks and their prevailing rates include EmigrantDirect of New York at 5.05 percent, Citibank Direct of New York at 5 percent and ING Direct of Wilmington, Del., at 4.5 percent.
Many of the online banks have minimum deposit requirements, or minimum balances that must be maintained to avoid fees. HSBC is among banks that don’t have minimums.