Recipe of no frills and top rates proves hard to beat

Opportunities for punning headlines were legion when the Prudential began its Egg direct banking operation last October. But now serious consideration has replaced the wisecracks.

Egg has hit its original three-year deposit target of ?5bn in six months, thanks to a simple recipe. It offers a no-frills account with the highest interest rate. Every week Egg tops the Moneyfacts tables for no-notice accounts.

That is reinforced by Prudential-backed promises to offer at least 0.5% above the Bank of England base rate until December 31, 1999 and to at least equal the base rate until the end of 2000. These promises are designed to head off fears that rates will drop once savers are lured in.

At present it pays 6% for sums from ?1 upwards - more than many rivals pay for ?100,000 deposits on 90 days' notice. It is a quarter-point or more ahead of rivals such as Virgin and Standard Life bank.

It is also more than savers collect from Prudential Banking, the Pru's bank for customers who want to deal face to face.

Egg's internet and phone-based approach is designed to appeal to the young. To be profitable eventually, Egg has to 'cross-sell' - ensure savings customers also buy other financial products such as home loans and insurance policies. It knows elderly savers, who hold the majority of high-interest accounts, need neither.