Egg is to buy Zebank for E8 million (£5 million) in cash and expand its online banking business into France.

The UK ebank will go live in France – which has the third largest financial services market in Europe - later this year.

And it also intends to spend an additional £50 million in marketing and building up its brand.

Egg reckons it will attract one million punters in the first three years and predicts it will make a profit by the end of 2004.

Zebank – owned by Groupe Arnault and Dexia – was France's first e-bank when it launched in February 2001. A year on and it has 70,000 customers and 120,000 accounts.

According to Egg, Zebank customers are "up-market and metropolitan" with the majority of them living around Paris.

Zebank employs around 300 staff, although this is expected to grow as the business increases.

Last week, Egg confirmed it was in talks with Zebank after originally refusing to comment on newspaper reports that a deal was on the cards.

By late morning shares in Egg were up 9.5p (6.5 percent) at 155p. ®

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