We are confident that our UK business is now sustainably profitable

Paul Gratton chief executive Egg

During the year as a whole, Egg slashed its pre-tax losses to �88m in 2001 from �155m a year earlier, in line with expectations.

Egg also reported a 103% rise in operating income.

Last year, the bank's income reached �189m compared with �93m a year earlier.

"We have fulfilled our published commitments at time of flotation to bring the UK business into profitability during the fourth quarter of the year and we are confident that our UK business is now sustainably profitable," said chief executive Paul Gratton.

Entering Europe

Mr Gratton said that 2002 "will be an important year for Egg".

"We are now developing our international business, in France through the acquisition of Zebank and associated distribution partnerships," he said.

In addition, Egg has entered a deal with the software giant Microsoft to "offer digital payments services to their 10 million Hotmail users in the UK", Mr Gratton said.

But Egg's expansion plan relies on support from investors.

They had been keen to see strong performance in the UK towards the end of 2001 before investing more in Egg's international business, analysts said.

Some were concerned about a near doubling in Egg's bad debt provisions to �68m from �37.2m a year earlier.

But Egg insisted its credit quality was "strong, with low and stable arrears levels".

Shares in Egg ended up 3.25p at 143.25p at the close of Monday's trade.