Lloyds launches TSB float, brushes off IPO fatigue fears

TSB, formed last year out of 467 Lloyds branches and 164 Cheltenham & Gloucester properties, has an indemnity arrangement with Lloyds that means it is not liable for any historical fines related to misconduct.

The retail bank will not pay a dividend until the 2017 financial year as it invests in growing its balance sheet by up to 50pc, although shareholders will benefit from a bonus scheme that pays out one share for every 20 held, up to a value of £2,000.

“For strong long-term businesses there’s a real appetite. We have a very simple, straightforward banking model. We are protected and that’s very attractive to an investor, because they are not sure what’s going to come out of the woodwork,” Mr Pester said, when asked whether challenging market conditions were an issue.

Saga, the over-50s life insurer and cruise operator, was forced to price shares at the bottom of its range in last Friday’s flotation, while the clothing retailer Fat Face abandoned its IPO in the same week.

However, Mr Pester, the former boss of Virgin Money, said that two rounds of premarketing meetings this year had shown strong interest from investors in the US and the Far East. “We have a real exposure to the UK economy, and the economy is going well,” he said.

Lloyds, 24.9pc owned by the taxpayer, was forced to dispose of branches under European state-aid rules, had previously agreed to sell them to the Co-operative Bank for £750m, half TSB’s anticipated market capitalisation of around £1.5bn.

The deal for what was previously known as the “Project Verde” branches fell through amid the exposure of a £1.5bn black hole in the Co-op Bank’s accounts and Lloyds now has until the end of 2015 to sell the business.

“The decision to proceed with an initial public offering of TSB is an important further step for the Group as we act to meet our commitments to the European Commission,” said Antonio Horta-Osorio, Lloyds’ chief executive.

Around 15-20pc of the initial sale will go to retail investors, and staff are also likely to be encouraged to hold shares, with the bank unveiling incentives in the next two weeks.

TSB is expected to float next month, with the publication of the prospectus in mid-June.

Lloyds shares were up 1.4pc at midday on Tuesday.

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