Lloyds Bank to price TSB stake sale below book value

 09 Jun 2014 - 0:00

A view of the sign board outside a branch of TSB bank in London.

LONDON: Lloyds Banking Group will today price the sale of a 25 percent stake in its TSB business at below its book value, according to industry sources.
Lloyds will publish the pricing and prospectus for an initial public offering of TSB shares today, the sources said. 
The sale, which will take place before the end of June, will value TSB at between 0.7 times and 0.9 times its book, or net asset value of £1.6bn ($2.7bn), the sources said, giving it a valuation of between £1.12bn and £1.44bn.
Lloyds Banking Group and TSB both declined to comment.
Lloyds, 25 percent-owned by the government, is obliged by European competition regulators to sell the 631 branches which now form TSB as a condition of receiving state aid during the financial crisis five years ago and therefore must now sell the whole of TSB by the end of 2015.
Banking industry sources expect Lloyds to sell TSB in three or four tranches, just as part-nationalised rival Royal Bank of Scotland did with the sale of its Direct Line insurance business, which was sold off in stages with each tranche priced higher than the previous sale.
The initial offer price for TSB reflects a cooling of investor interest in UK company flotations in recent weeks following a rush of activity earlier in 2014. Clothing chain Fat Face pulled its planned London listing last week while shares in insurance to holidays firm Saga have fallen below their IPO price.
Nevertheless, Saga’s private equity owners are pressing ahead with plans to float its sister firm, roadside recovery services and insurance firm the AA.
And TSB’s public share sales will still fetch more than Lloyds’ initial plan to sell the branches to the Co-operative Bank for £750m. 
That deal collapsed when a 1.5 billion-pound funding gap at the Co-op emerged.
The bank already has 4.5 million customers and six percent of bank branches in the UK, making it Britain’s seventh-largest retail bank and giving it a headstart over other new entrants.