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UPDATE - Lloyds unveils cut price TSB float

Published: 10:45 09 Jun 2014 EDT

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The stock market float of TSB is being priced between 220p and 290p per share, meaning the City values the Lloyds  Bank (LON:LLOY) spin off at just £1.275bn.

It pitches the newest addition to the UK banking sector at a discount to its book value, which is estimated at about £1.6bn.

The cut-price offer reflects increasingly tepid demand for new IPO’s (initial public offerings) generally, as well as a lack of genuine excitement towards what is viewed as a less than inspiring fringe asset from the Lloyds business that it has struggled to sell.

Today’s prospectus showed the bank made a £172mln profit last year, according to the prospectus  and when it is able to would pay out dividends equal to 40-60% of underlying earnings.

To build up its capital base the bank has already said it will not pay dividends until 2017 financial year, though it will consider acquisitions.

TSB wants to grow its balance sheet by 40 to 50% over the next five years and boost its return on equity towards double digits.

The flotation follows the botched sale of the 630 branches, known as ‘Project Verde’, to the Co-op Bank, after which Lloyds was forced to demerge and float the group.

Lloyds has to sell to meet the rules imposed by the European Commission following its taxpayer-funded  bail-out in 2008.

The IPO will see Lloyds sell 25% of the TSB business with future divestments likely to reduce this stake further.

Mike van Dulken, head of research at Accendo Markets, said: “Either it’s a bargain or it’s a sign.”

“After Fatface pulled out of its recent IPO, Travelex opted for a private sale, and both Saga and Game Digital disappointed with muted debuts, has the sheer volume of 2014 London listings (many clearly overvalued) dented demand for further issuance?”

Lloyds shares fell 2% to 78.7p.


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