However, the bank was upbeat about its prospects, and remained confident about the credit quality of customers using its credit cards.

While UK online rivals such as Smile, Cahoot and Intelligent Finance are not doing badly by any means, they have not achieved the scale that Egg has done

Alex Boorman Datamonitor

Egg, 79% owned by insurer Prudential, reported a loss of �1.2m ($1.9m) during the three months to 30 June, down from a loss of �25.5m in the same period a year ago.

The second quarter loss meant Egg had dipped back into the red after a first quarter profit of �2.4m before tax.

The company blamed the slower pace of growth on higher marketing costs to bring new customers on board.

Profits for UK business

But the company said that its main UK business remained profitable with a �4.6m profit before tax for the second quarter.

"While UK online rivals such as Smile, Cahoot and Intelligent Finance are not doing badly by any means, they have not achieved the scale that Egg has done," said Alex Boorman, Datamonitor financial services analyst.

Egg's international business experienced a �5.8m loss, giving the company its overall second quarter loss.

"Whilst we continue to monitor credit performance closely, we are happy with the credit quality of our card portfolio and our proposition continues to attract upmarket customers," said chief executive Paul Gratton.

Low interest rates in the UK has helped Egg's credit card business, although a deteriorating economic environment has raised concerns about banks' exposure to bad debts.

Increase in market share

During the first half of the year, the company also acquired 362,000 new customers, taking its total to more than 2.3 million.

Datamonitor's Mr Boorman said the company now has a 5% market share of card balances in the UK.

He added: "It's also improved its cross-selling efforts, signing up its credit card consumers to higher-margin products."

Egg's shares were up 3.5p at 146.5p at 1145 GMT.