LONDON: Shares in TSB rose sharply following its debut on the London Stock Exchange after Lloyds Banking Group sold more of the offshoot business than originally planned, raising the prospect of a further sale this year.
Lloyds said yesterday it had sold a 35 percent stake in TSB, Britain’s 7th-largest lender, at 260 pence a share. That valued the business at £1.3bn ($2.22bn), less than the figure on Lloyds’ books.
The TSB share sale is another step on the recovery path for Lloyds following its £20bn state bailout in 2008 and will help clear the way for the government to sell its remaining 25 percent 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.
TSB shares hit a high of 299.75 pence on Friday, up 15 percent on the initial public offering (IPO) price. That pushed the bank’s market value up to £1.5bn, or 0.95 times book value.
“Success here is helpful to Lloyds with a potential follow-on rally in the TSB shares encouraging the market to think about an exit closer to book value than had been feared,” said Deutsche Bank analyst Jason Napier.
Sources with knowledge of the transaction said the shares were 10 times oversubscribed, after attracting strong demand from British and US investors and interest from Asia.
Lloyds said financial institutions such as pension funds and insurers and private retail investors had bought the TSB shares, which were priced above the mid-point of a range set earlier this month.
Thirty percent of the shares were sold to 60,000 retail investors with those that applied for up to £2,000 worth of shares receiving their full amount.
Another 3.5 percent is expected be taken by JP Morgan Cazenove as part of its role as underwriter on the initial public offering (IPO).
Lloyds has agreed not to sell any more TSB shares for 90 days but the strong debut will increase the likelihood of the bank looking to offload its remaining stake significantly ahead of the end of 2015 deadline set by regulators.
It is expected to sell the remaining shares in two further stages, employing a similar strategy to that of Royal Bank of Scotland when it sold its Direct Line insurance business, with each tranche priced higher than the previous sale.
The next sale could happen as early as September, the sources said, although that may depend on whether the British government decides to sell more of its remaining 25 percent stake in Lloyds that month as the bank’s advisors would not want the two sales to compete against each other.
Reuters
