Partly Cloudy

Partly Cloudy

max temp: 17°C

min temp: 13°C

ESTD 1874 Search

Banking: Lloyds floats bigger than expected share of TSB amid strong demand

09:16 20 June 2014

More than 600 branches and eight million accounts have been split from Lloyds under the TSB brand in order to meet European competition rules.

More than 600 branches and eight million accounts have been split from Lloyds under the TSB brand in order to meet European competition rules.

State-backed Lloyds Banking Group has floated a larger-than-expected 35% chunk of TSB on the stock market.


The offer, at 260p per share, values the business at £1.3billion and will see approximately 30% of the stock allocated to around 60,000 ordinary retail investors.

It raises £455million and sees TSB return to the market for the first time since 1995 when it merged with Lloyds.

The bank, which has 631 branches, has been re-launched after Lloyds was forced to offload the sites under European rules on state aid following its bail out during the financila crisis. It must dispose of its holdings in the business by the end of next year.

Lloyds said that, due to “significant investor demand” for TSB shares, the offer had been set above the initial size of 25%.

Increasing expectations of an interest rate rise in the wake of remarks by Bank of England governor Mark Carney are thought to have spurred the demand as it would mean better profit margins for TSB.

The valuation is just above the mid-point of the 220p-290p expected price range announced earlier this month, and makes the brand worth 82% of its book value on the Lloyds balance sheet.

Lloyds chief executive Antonio Horta-Osorio said: “The successful initial public offering of TSB is an important further step for Lloyds Banking Group as we act to meet our commitments to the European Commission.

“The significant investor demand for shares in TSB, which reflects investors’ confidence in the prospects for the business, has meant that we have been able to set the offer size at 35%.

“TSB has a national network of branches, a strong capital base, robust liquidity and significant economic protection against legacy issues.

“It is already operating on the UK high street and is proving to be a strong and effective challenger, further enhancing competition in the UK banking sector.”

Lloyds Banking Group, which also includes Halifax and Bank of Scotland, remains 25% owned by the Treasury after it was rescued by the taxpayer during the financial crisis.

Lloyds had previously been preparing to sell the branches to the Co-operative Bank before the discovery of a £1.5billion hole in the mutual’s balance sheet caused the deal to collapse in April 2013.

The TSB offer comes amid the disappointing performance of other recent stock market flotations, with over-50s insurance and holidays group Saga among those to have seen shares declined while fashion retailer FatFace shelved its float plans.

Retail investors in the bank have been offered the sweetener of one free share for every 20 acquired, up to the value of £2,000, and held for a year after the float.

TSB, which has 4.5million customers, is the seventh largest retail banking group in the UK. It is aiming to become a larger player in the current account market, growing from 4.2% to 6% over the next four to five years.

In its prospectus for potential investors, TSB said it did not expect to pay a dividend until the 2017 financial year. It reported profits of £172m for 2013 and a figure of £60m for the first three months of 2014.

The bank this month announced that staff were to be handed free shares worth £100 as part of a John Lewis-style reward scheme.

TSB, famous for its 1980s slogan “The bank that likes to say yes”, traces its history back more than 200 years. It was first floated in 1986 before being swallowed up in the Lloyds merger nine years later.

Shore Capital said the implied pre-tax loss to Lloyds relative to the book value on the sale was £113m.

The analysts have described the shares as “enticing” and “priced to go” with potential to take current account market share and expand mortgage distribution.

There was also potential for profitability to improve as the loan book builds and as interest rates rise, while Lloyds has offered an indemnity against past “legacy” issues.

Shares rose by as much as 13% as conditional trading began, adding more than £170 million to TSB’s market value.



Welcome , please leave your message below.

Optional - JPG files only
Optional - MP3 files only
Optional - 3GP, AVI, MOV, MPG or WMV files

Please log in to leave a comment and share your views with other East Anglian Daily Times visitors.

We enable people to post comments with the aim of encouraging open debate.

Only people who register and sign up to our terms and conditions can post comments. These terms and conditions explain our house rules and legal guidelines.

Comments are not edited by East Anglian Daily Times staff prior to publication but may be automatically filtered.

If you have a complaint about a comment please contact us by clicking on the Report This Comment button next to the comment.

Not a member yet?

Register to create your own unique East Anglian Daily Times account for free.

Signing up is free, quick and easy and offers you the chance to add comments, personalise the site with local information picked just for you, and more.

Sign up now

A queue outside of a Greggs store.

Baker Greggs warned the new national living wage will put pressure on the group to raise the prices of its pasties and sausage rolls.

Home Secretary Theresa May arrives to deliver her speech at Manchester Central during the Conservative Party conference.

Theresa May faced an angry backlash from business leaders and refugee charities for falsely “vilifying” immigrants in a bid to boost her own political career.

Amanda Bond, Visit Suffolk brand manager

The value of Suffolk’s tourism industry has grown to £1.85billion a year, according to new figures, with the total, for the 2013 season, represents a rise of £50million over 2012.

Pigs Gone Wild campaign project leader  Norman Lloyd with the organisation's own pig sculpture.

Businesses are being urged to get behind a public art initiative which aims to raise £100,000 for the St Elizabeth Hospice in Ipswich.

The presentation of the Gold award in the Community Relations Campaign category to Essex County Council at the CIPR Anglia Thames & Chiltern Pride Awards 2015

Photo:  Steve Pope - FOTOWALES

Public relations professionals across East Anglia have received recognition in the regional round of the 2015 PRide Awards.

Dr Aled Jones, Anglia Ruskin University.

The director of Anglia Ruskin University’s Global Sustainability Institute (GSI) is in the running to be named the greenest academic in the UK.

New report on prosperity in seaside towns

New research has highlighted the importance of entrepreneurs in helping to revive seaside towns that have fallen into decline and unlock further potential in those already prospering.

Dan Poulter with employees at B&Q

A Suffolk MP has said he will do what he can to try and prevent a B&Q store closing down with the potential loss of around 100 jobs.

Helen Drage,  co-founder of Drage & Tozer Opticians.

Sudbury opticians firm Drage and Tozer, founded in 1995 by Helen Drage and Sandra Tozer, has celebrated 20 years in business by expanding into new premises.

Val Carrol, director of healthcare at Beckett Financial Services, receives the company’s Commendation at the Investment Life & Pensions Moneyfacts awards from comedian Tim Vine.

Bury St Edmunds-based Beckett Financial Services has been recognised by a national financial services publication for delivering outstanding levels of customer satisfaction to its healthcare clients.

Most read

Most commented

Topic pages