Lloyds to float 25% stake in TSB

Tuesday 27 May 2014 16.36
A 25% stake in TSB is to be floated on the stock market next month
A 25% stake in TSB is to be floated on the stock market next month

Lloyds Banking Group expects to float about 25% of its TSB business on the London Stock Exchange next month, with the remainder to be sold before the end of 2015, the bank said today.

Banking industry sources said last week they expect TSB to be priced at less than its book value of £1.5 billion, meaning Lloyds would make a loss on the sale of the 200-year old brand. 

Lloyds is required to sell the 631 branches making up TSB because of a European Union requirement that Lloyds creates more competition in the UK market after receiving state aid in the financial crisis. 

"TSB has a national network of branches, a strong balance sheet and significant economic protection against legacy issues," Lloyds' chief executive Antonio Horta-Osorio said in a statement.

The offer is expected to take place in June, with the publication of a prospectus mid-June.

Industry sources said last week the pricing of the TSB offer is expected to be at the bottom end of guidance on how much the bank would sell, reflecting a cooling of investor interest in UK company flotations after a flurry of activity earlier in 2014. 

TSB has 4.5 million high street customers, making it Britain's seventh largest retail banking group by branch network, equivalent to 6% of Britain's retail bank branches. 

Lloyds said TSB has a core Tier 1 capital adequacy ratio of about 17% of its assets, which Lloyds said is the strongest of the major high street UK banks. 

The TSB board is aiming to expand the bank's balance sheet by 40-50% over the next five years and pay an inaugural dividend in respect of the 2017 financial year. 

TSB had £23.3 billion of deposits and £19.7 billion of assets at the end of March.