High hopes for TSB as Lloyds prepares flotation
Lloyds Banking Group expects to float about 25pc of its TSB business on the London Stock Exchange next month it said yesterday, kicking off a process regulators hope will create a vibrant challenger to Britain's dominant high-street lenders.
Lloyds was forced by European regulators to sell the 631 branches that now form TSB as a condition of receiving state aid during the financial crisis five years ago and it must therefore now sell the whole of TSB by the end of 2015.
However, the number of shares being sold in the initial offer is at the bottom end of expectations and banking industry sources said last week they expect them to be priced at less than TSB's book value of £1.5bn (€1.8bn), meaning Lloyds will make a loss on the sale of the 200-year-old brand.
That reflects a cooling of investor interest in UK company flotations in recent weeks following a rush of activity earlier in 2014.
Lloyds had planned to sell the branches to the Co-operative Bank but that sale fell through last year.
It subsequently revived the TSB brand, last seen on British high streets in the 1990s, with a view to a stockmarket sale.
MPs and banking regulators are keen to see new banks emerge to break the dominance of Britain's biggest five lenders, and TSB is seen as a viable challenger.
The bank already has 4.5 million customers and 6pc of bank branches in the UK, making it Britain's seventh-largest retail bank and giving it a head start over other new entrants.
"We have the mindset and growth potential of a challenger but with the scale and capabilities of an established player," chief executive Paul Pester said yesterday.
The share sale is expected to be completed by the end of June, with a prospectus due to be published in just over two weeks.