Strong TSB debut lifts prospects for future share sales

Lloyds sells 35 per cent stake in lender at 260 pence per share

Lloyds was ordered to sell the 631 TSB branches by European regulators by the end of 2015 as a condition of its state  bailout. Photograph: Matthew Lloyd/Bloomberg

Lloyds was ordered to sell the 631 TSB branches by European regulators by the end of 2015 as a condition of its state bailout. Photograph: Matthew Lloyd/Bloomberg

 

Shares in TSB rose sharply following its debut on the London stock market after Lloyds Banking Group sold more of the offshoot business than originally planned, raising the prospect of a further sale this year.

Lloyds said today it had sold a 35 per cent stake in TSB at 260 pence a share. That valued the business at £1.3 billion pounds (€1.63 billion), less than the figure on Lloyds’ books.

The TSB share sale is another step on the recovery path for Lloyds following its £20 billion state bailout in 2008 and will help clear the way for the British government to sell its remaining 25 per cent Lloyds stake.

Lloyds was ordered to sell the 631 TSB branches by European regulators by the end of 2015 as a condition of the bailout, and initially planned to sell one quarter of the business.

Shares in TSB hit a high of 299.75 pence today, up 15 per cent on the initial public offering (IPO) price. That pushed the bank’s market value up to £1.5 billion , or 0.95 times book value.

TSB attracted investors looking to tap into the UK’s economic recovery through a bank that was untainted by the scandals such as interest-rate rigging that have dogged the sector since the financial crisis.

Demand was also boosted by comments from Bank of England governor Mark Carney last week, who indicated that UK interest rates could rise sooner than financial markets expect, potentially boosting TSB’s profitability.

“One element of investor interest has centred on the rate sensitivity of the name but you’ve also got a general recovery in the UK economically,” said Jefferies analyst Joe Dickerson.

TSB is seen to be a “clean” bank, having reached an agreement with Lloyds ensuring it will not have to pay for past errors. That means, for instance, that it won’t have to compensate customers mis-sold loan insurance, a scandal that has cost British banks more than £20 billion.

Lawmakers are keen for new banks to break the dominance of Britain’s “Big Four”, which includes HSBC, Royal Bank of Scotland and Barclays alongside Lloyds.

Reuters