Lloyds announces TSB listing with ‘buy 20, get one free’ offer

The long-awaited TSB flotation will happen next month.

Lloyds Bank (LSE: LLOY) today announced plans to sell off 25% of TSB in an initial public offering (IPO) in June. Shares will be made available to both institutional and retail investors.

Under the terms of the sale, retail investors will receive one ‘bonus’ share for every 20 shares bought, up to £2,000, on the condition that the shares are held for a continuous 12 months.

The sale is prompted by an EU ruling after the government bailed out Lloyds back in 2008. The EU insisted that the TSB should eventually be sold off, with all Lloyds shares sold by the end of 2015.

With 4.5 million customers, TSB is currently the UK’s seventh biggest retail bank. It has 631 branches across the country, and emphasises responsible ‘local’ banking. In March this year, it launched its TSB Plus current account offering a 5% interest rate.

According to its chief executive, Paul Pester, TSB has “the mindset and growth potential of a challenger, but with the scale and capabilities of an established player”. Pester also said that the business has got off to a strong start as a separate bank – it’s been opening four to five times as many current accounts in its braches as it had done when the banks were branded as Lloyds TSB.

Pester, however, warned  that the TSB wouldn’t pay any dividends until 2017.

We can also expect further share sales from Lloyds over the next year. The government reduced its 39% holding to 33% when it sold shares last September.

James Ferguson covered Lloyds in his cover story from March, when he looked at the recovery of Britain’s banking sector. He noted that “there is a lot of pressure on the bank to look good”, but its large exposure to the housing market makes it look risky.

We won’t know the full details of the float until the prospectus is published in mid-June. Until then, it’s probably too early to say whether TSB shares are worth buying – with or without the ‘bonus’ share offer.

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