Lloyds Bank to float TSB

IPO of 25% of TSB may struggle to achieve £1.5bn book value

Lloyds Bank to float TSB

Lloyds Bank has announced it is to float 25% of its TSB subsidiary next month with small investors offered free shares for investing.

Private investors are being offered one free share for every 20 shares bought (up to £2,000) and held for a continuous period of one year after the initial public offering (IPO). It’s expected that 15-20% of the initial IPO will go to the public although the bank isn’t expected to pay a dividend until the 2017 financial year.

The offer price hasn’t been fixed yet, but the media reports have indicated that Lloyds is expected to fix the market capitalisation of TSB as a whole at around £1.5bn.

However, analyst Shailesh Raikundlia at Espirito Santo Investment Bank has reiterated his sell stance on Lloyds despite the float. He told Every Investor: “The tangible book value of TSB on Lloyds’ books is £1.5bn but it struggled to get this last time as around £750m was offered by the Co-operative Bank.” Thus, for Lloyds itself he doesn’t see a huge amount of additional upside from the sale.

Lloyds has been told to divest itself of the TSB by the European Commission to meet EU rules regarding state aid (Lloyds was bailed out by the UK taxpayer in 2008) and plans to sell its remaining stake before 31 December 2015.

Lloyds is currently taking part in EU-wide bank stress tests and denied it needed to strengthen its balance sheet. A spokesperson said: “We are strongly capital generative and have a Core Equity Tier 1 Capital Ratio of 10.7%, which is among the strongest among the UK banks.”

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Categories: News
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About Author

Christopher Menon

Every Investor Editor Chris Menon is a financial journalist who has written regularly for national newspapers, magazines and websites about personal finance, with particular emphasis on investing.