News Column

Lloyds Prices TSB Banking Flotation About 15% Below Book Value

June 9, 2014

Samuel Agini

LONDON (Alliance News) - Lloyds Banking Group PLC Monday set the price range of the initial public offering of TSB Banking Group PLC on the London Stock Exchange at between 220 pence to 290 pence per share, which would value the spun-off retail bank at about GBP1.28 billion at the mid-point of the range.

In a statement, Lloyds said it expects to offer 125.0 million TSB shares to investors, representing a quarter of the bank's shares. However, with TSB's book, or net asset value, at about GBP1.50 billion, Lloyds is set to sell the shares at at least a small discount - 15% at the mid-range of the proposed pricing - amid signs of cooling investor appetite for IPOs.

A slew of companies have gone public in London in recent months, but there have been some wobbles along the way. Over-50s insurance provider Saga PLC, which listed on May 23, is trading below its 185 pence IPO price at 172.38 pence, while on May 22, Fat Face Group Ltd pushed its own plans to float to later this year, citing weak conditions in the UK equity market as the main reason for backing out. Nevertheless, roadside assistance company AA Ltd on Friday said it plans to float on the LSE in an IPO valuing it at GBP1.39 billion by market capitalisation.

Lloyds is selling off TSB, which has 632 branches, in response to European Commission demands made as a condition of Lloyds receiving state aid in the midst of the financial crisis.

TSB has 4.5 million retail customers and a national distribution model through its branches, making it the seventh largest retail banking group in the UK by branch network. Its balance sheet is primarily made up of UK retail mortgages, funded by customer deposits. Moreover, it is protected by a guarantee from Lloyds in respect of the mis-selling scandals that have cost the banking sector billions of pounds in fines and associated costs since the crisis.

Lloyds said it expects the final pricing of the offer to be announced on or around June 20 - Friday next week - with conditional dealings to begin on the London Stock Exchange on the same day.

Lloyds shares were Monday quoted at 78.92 pence, down 1.5%.

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Source: Alliance News

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