Lloyds sells bigger stake in ‘oversubscribed’ TSB IPO

Lloyds has had to sell more of its stake in TSB than anticipated in a highly successful IPO.

Lloyds Banking Group has actually had to sell a bigger stake in TSB than it originally planned after a huge wave of interest for the bank’s initial public offering (IPO) in the London Stock Exchange.

The bank’s flotation was as many as 10 times oversubscribed, as institutional investors and members of the public all sought to secure a stake in one of the UK’s newest challenger banks. Overall, Lloyds has sold a stake of 35 per cent in the bank on 20 June – despite having intended to sell off a quarter of the company. After the success of this flotation, the next share sale could even take place as early as September.

Shares were priced at 260p each, valuing the company at £1.3 billion. This was actually less than Lloyds had on its books, but effectively clears the way for the banking group to sell its remaining 25 per cent stake.

It has to completely divest itself of its stake in TSB by the end of next year under an order from the EU as a condition of its huge government bailout.

Given the extremely high demand for shares in TSB, it may not be surprising that their value has leaped in early trade. At one point they even reach a high of 299.75p, representing a very healthy 15 per cent rise on their starting point.

It isn’t difficult to see why TSB has been so popular. It’s a small bank with big potential that hasn’t suffered any reputational damage from issues such as the Libor scandal, or any of the other controversies to have rocked the banking sector.

What’s more, if an interest rate really is likely to come sooner rather than later, all lenders could soon become more profitable.

There’s also plenty of potential for growth on the horizon. As the Wall Street Journal reports, the bank has a balance sheet of around £23 billion and is expecting to increase it by anything from 40 to 50 per cent in the next five years. It may not pay dividends for a couple of years as it seeks to reinvest, but TSB seems to have a promising future ahead.