Friday 24 October 2014

Lloyds to domicile TSB in England as Scottish fears mount

James Quinn

Published 20/02/2014 | 12:35

A Lloyds Bank branch in London.
A Lloyds Bank branch in London.

Lloyds Banking Group has opted to domicile TSB in England rather than Scotland ahead of the new bank’s £1.5bn stock market float.

In a move which will be taken by some as another sign that big business is increasingly concerned about the prospect of an independent Scotland, the bank is to place its 631-branch subsidiary into a new holding company registered in London.

Lloyds is set to sell a stake of as much as 50pc in TSB an initial public offering (IPO) to be held as early as May, the result of a European state aid diktak following the Government’s £20bn bail-out of the bank at the height of the financial crisis.

TSB, will be placed in TSB Banking Group plc, which was registered at Companies House earlier this month. It is incorporated in England and Wales.

It is a marked change from TSB’s current ownership structure. Both TSB Bank plc, in which the bank itself sits, and Lloyds Banking Group plc, are incorporated in Scotland.

Although highly similar in form, companies registered in England and Wales are subject to English law, while those registered in Scotland are subject to Scots law.

Were the Scots to vote in favour of independence in September’s referendum, companies registered north of the border – including Lloyds and the Royal Bank of Scotland – will have to choose their fate.

Ross McEwan, the chief executive of RBS, has said the bank could adapt to a “Yes” vote while Antonio Horta-Osorio, his opposite number at Lloyds, said that the 18 months between the vote and any separation would give the bank “more than enough time to assess the consequences.”

The change of domicile for TSB’s holding company will appease investors being asked to back the upcoming IPO.

The Telegraph reported last month that chief executive Paul Pester has already begun courting investors, explaining the TSB story and highlighting its key selling points.

Ahead of news of the changes, one former senior banking executive told this newspaper of his concerns around the Scottish issue and the pending float.

“I don’t see how they can float as a Scottish company. To my mind, that will too many issues with investors given the potential impact of the independence vote,” he said.

“The risk factors around independence are huge for banks and anyone looking at putting their money into the TSB is going to be looking at that section of the prospectus particularly carefully.”

The news will be seen as the latest signal that the business community is somewhat uneasy about the potential for a “Yes” vote in September’s referendum.

The former prime minister, Gordon Brown, waded into the debate earlier this week warning that independence would lead Scots to lose the British state pension.

At the weekend, The Telegraph reported that chairmen at the UK’s largest retailers are “consistently negative” on independence and warned that prices could rise if Scotland votes for separation.

Among Scotland’s business community, particularly its Edinburgh-based financial services fraternity, there is known to be considerable support for Alistair Darling’s “Better Together” campaign, but few have been willing to place their heads above the parapet for fear of alienating pro-independence customers.

Despite the changes to the holding company, whose board will mirror that of TSB Bank, customers are unlikely to be affected by the changes, which are still subject to regulatory approval.

Customers will be served by TSB Bank plc, which will retain its Scottish registration, and be covered by the Financial Services Compensation Scheme.

A TSB spokesman said: “Establishing new companies as part of a listing or IPO process is standard practice… The completion of the restructure is subject to regulatory approval.”

A Lloyds spokesman stressed that despite the change in reporting lines of its holding company, TSB “will remain a Scottish bank” because that is where it is licensed.

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