Lloyds prices TSB below book value ahead of IPO

Lloyds Banking Group has announced that shares in TSB will be sold at between 220p and 290p, below its book value. The midpoint of the price range values TSB at £1.275 billion, although its book value – the assets on TSB’s balance sheet minus its liabilities – is more than £1.5 billion.

Lloyds revealed that it was set to sell a 25% stake in its TSB initial public offering (IPO) last month. The bank also announced that ordinary investors would be given one free share for every 20 they buy – up to the value of £2,000 – and hold for a year, in order to encourage investors to take a long-term view.

By pricing the share below book value, the bank is hoping that the IPO will act as a loss leader and increase interest in future share sales by Lloyds. The final price of the shares is expected to be announced around June 20, with initial dealings also starting at this time.

TSB is Britain’s seventh largest retail bank with 4.5 million customers, accounting for around 6% of bank branches in the UK. TSB returned to the high street last year after almost two decades, following a merger with Lloyds in 1995, and pledged to go back to its local banking roots and focus on local communities.

Following Lloyds being bailed by the taxpayer during the financial crisis, it is required to sell TSB by the end of 2015 to meet European commission competition rules.

The Co-operative Bank previously struck a deal to purchase 630 TSB branches for an initial sum of £350m, rising to £750m depending on performance. However, the deal collapsed after the Co-operative revealed loses for 2012.

It is now thought that ‘activist fund’ Crystal Amber is moving to take legal action against Lloyds Bank because the Co-operative was selected over NBNK Investments. It was decided that the Co-op represented better shareholder value and certainty for investors, however, claims have been made that the Treasury backed the Co-op because it was a mutually owned bank.

Photo: Dan Foy via Flickr

Further reading:

Lloyds to launch TSB share offer for retail investors

TSB is back – but is it an ethical banking option?

TSB returns to the high street with renewed focus on local communities

Big five’s banking monopoly at risk, with 2.4m closing account in 2012

Challenger banks considering stock market listings to boost high street alternatives