British internet bank Egg may soon fulfil its promise of European expansion.

The bank said it was in exclusive talks with the French Groupe Arnault, the owner of online Zebank.

Egg, 80%-owned by life insurer Prudential, has been seeking a deal in France, Italy or Germany for more than a year.

Zebank, launched by Mr Arnault's Europatweb holding in February 2001, has around 100,000 customers, far fewer than Egg's almost 2 million accounts.

Egg, which last month unveiled its first monthly profit, will take its first international steps this summer, when an alliance in Germany and France with Microsoft's MSN is launched.

Offloading operations

Egg confirmed the reports on the talks, but stressed that there was no certainty a deal would be struck.

Bernard Arnault - one of France's richest men and chairman of the LVMH luxury goods group - had been looking to offload Zebank since the bursting of the dotcom bubble last year.

According to reports, Mr Arnault would like to retain a stake in the online bank.

Zebank, which is 20% owned by Franco-Belgian bank Dexia, said in October that a tie-up with a larger financial institution would make strategic sense.

Investors were unimpressed, however; Egg shares fell almost 5% on the news.