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TSB share sale rumoured to be better than expected

Published: 00:56 20 Jun 2014 AEST

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Lloyds’ (LON:LLOY) TSB spin-off is believed to have gone better than previously anticipated.

The details of the retail banking IPO are due tomorrow but reports suggest that Lloyds may be selling a larger stake in the unit, with the Government backed banking group selling a 35% stake rather than 25%.

It is also speculated that the offer price has pitched in the upper half of the anticipated range, with reports saying it will be at least 260p per share (the range was set at 250-270p). 

Such a price would value TSB at around £1.3bn, but despite the apparent demand that would still mean Lloyds’ stake was sold for less than the book value.

Given the somewhat exhausted market for IPOs and that the treasury is involved (albeit indirectly via its near 25% stake in Lloyds), the TSB spin off is closely watched by investors.

Royal Mail’s privatisation, the last time treasury assets were sold, was the high water mark for what had been a buoyant market.

But, recent high profile floats have performed poorly after making their debuts. Indeed, the initial range for the TSB float, set at a rather wide 220p to 290p, reflected the uncertain mood.

Nevertheless demand from institutions and retail investors is said to have been high – though that, like with Royal Mail, may be an inevitable response to an offer that’s too good to refuse.

That said, there will be no bumper cash pay-outs for new investors. 

TSB has already said it does not expect to pay out a dividend until 2017 and commentators have highlighted the fact that Lloyds having to sell its remaining stake by the end of next year means that this latest offering won't be the last chance to get shares.

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.

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